<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                  FORM 10-K/A

                                AMENDMENT NO. 1
                               TO ANNUAL REPORT
                                       
            [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  FOR the fiscal year ended December 31, 1997
                                      OR
            [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR the transition period from ____ to ____

                        Commission file number 0-18160
                                       
                                 4HEALTH, INC.
            (Exact name of registrant as specified in its charter)

                   Utah                           87-046822
        ------------------------   ------------------------------------
        (State of incorporation)   (I.R.S. Employer Identification No.)

                             5485 Conestoga Court
                           Boulder, Colorado  80301
                   (Address of principal executive offices)
                Registrant's telephone number:  (303) 546-6306

       Securities registered pursuant to Section 12(b) of the Act:  NONE
          Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $.01 per share
                    -------------------------------------- 
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.  [ ]

As of February 27, 1998, 11,979,026 shares of the registrant's Common Stock,
par value $0.01, were outstanding.  The aggregate market value of the Common
Stock held by non-affiliates of the registrant (i.e., excluding shares held by
executive officers, directors, and control persons as defined in Rule 405) on
that date was $31,048,738 (computed based upon the closing price for the Common
Stock on the Nasdaq National Market on that date.)

                      DOCUMENTS INCORPORATED BY REFERENCE
                                     None

<PAGE>
                                       
                                4HEALTH, INC.
                              INDEX TO FORM 10-K
   
<TABLE>
<S>                                                                       <C>
PART I.                                                                   Page
-------                                                                   ----
Item 1.   Business                                                          3

Item 2.   Properties                                                        9

Item 3.   Legal Proceedings                                                10

Item 4.   Submission of Matters to a Vote of Security Holders              10

PART II.
--------
Item 5.   Market for the Registrant's Common Stock and Related             10
          Stockholder Matters

Item 6.   Selected Financial Data                                          11

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

Item 8.   Financial Statements and Supplementary Data                      17

Item 9.   Changes in and Disagreements With Accountants on Accounting and  17
          Financial Disclosure

PART III
--------
Item 10.  Directors of the Registrant                                      18

Item 11.  Executive Compensation                                           20

Item 12.  Security Ownership of Certain Beneficial Owners and Management   23

Item 13.  Certain Relationships and Related Transactions                   23

PART IV
-------
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K 24

          Exhibit Index                                                    25

          Index to Financial Statements                                    28

          Financial Statements                                            F-1

          Signature Page
</TABLE>
    
   
    
                                       2

<PAGE>

   
          4Health, Inc. hereby amends and restates in its entirety its Annual 
Report on From 10-K for the fiscal year ended December 31, 1997 as filed with 
the Securities and Exchange Commission on April 15, 1998.  (See Note 2 of the 
Notes to Financial Statements included herewithin.).
    
   
PART I
    
   
          THIS ANNUAL REPORT ON FORM 10-K INCLUDES "FORWARD-LOOKING 
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, 
AS AMENDED (THE "SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE 
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").  ALL STATEMENTS OTHER THAN 
STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS ANNUAL REPORT, INCLUDING, 
WITHOUT LIMITATION, THOSE REGARDING THE COMPANY'S FINANCIAL POSITION, 
BUSINESS, MARKETING AND PRODUCT INTRODUCTION AND DEVELOPMENT PLANS AND 
OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING 
STATEMENTS.  ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN 
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT 
SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.  IMPORTANT FACTORS THAT 
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S 
EXPECTATIONS ARE DISCLOSED UNDER "RISKS RELATED TO THE BUSINESS OF 4HEALTH," 
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS" AND ELSEWHERE IN THE ANNUAL REPORT.
    
   
ITEM 1. BUSINESS
    
   
GENERAL
    
   
          4Health, Inc.("4Health" or the "Company"), a Utah corporation, 
formerly known as Surgical Technologies, Inc. ("Surgical"), is the successor 
to 4health, Inc., a California corporation originally formed in February, 
1993 by R. Lindsey Duncan, which merged into Surgical on July 15, 1996, 
pursuant to which Surgical changed its name to "4Health, Inc."  The merger 
was recorded as a reverse purchase.  (See Note 1 to the Financial 
Statements.)  The Company is a supplier and formulator of vitamins and 
nutritional supplements which are designed and formulated to address the 
dietary needs of the general public.  4Health's products are produced solely 
from natural ingredients and are formulated for the purposes of achieving 
dietary or nutritional goals.
    
   
          In mid-1997, the Company began a search for a strategic partner.  
4Health management believed that the Company's lack of experience in the 
food, drug and mass market was limiting its future sales growth and reducing 
the Company's ability to generate significant economies of scale with respect 
to the cost of goods sold.  As a result of this search, 4Health agreed to 
merge with Irwin Naturals, a California corporation ("IN").  IN was organized 
in August 1995 and formulates and distributes nutritional supplements through 
the food, drug and mass market, internationally and through health food 
stores.  The Company chose IN as a strategic partner because of IN's 
significant international and mass market sales in comparison to other 
potential partners.
    
   
                                       3
    
<PAGE>

   
           On October 13, 1997, 4Health and IN entered into a letter of 
intent setting forth the basic terms of the merger.  On January 7, 1998, 
4Health, IN and Klee Irwin, president of IN, executed a merger agreement, 
dated as of December 24, 1997 and amended and restated on April 2, 1998 and 
May 22, 1998 (the "Merger Agreement"), providing for the merger of IN with 
and into 4Health (the "Merger").  The Merger Agreement was approved by the 
board of directors of 4Health by their unanimous consents dated January 7, 
1998, April 2, 1998, and May 22, 1998.  Under the Merger Agreement, IN will 
be merged with and into 4Health, with the effect that IN will be dissolved 
and 4Health will continue as the surviving corporate entity, with its name 
changed to "Irwin Naturals/4Health, Inc."
    
   
          At the effective time of the Merger (the "Effective Time"), all 
65,250 shares of IN Common Stock outstanding will be converted into an 
aggregate of 15,750,000 shares of 4Health Common Stock (representing 
approximately 56.8% of the issued outstanding capital stock of the surviving 
company) in accordance with the conversion ratio for the Merger, which 
provides that 241.37931 shares of 4Health Common Stock will be issued for 
each share of IN Common Stock outstanding at the Effective Time.
    
   
          As part of the Merger, the articles of incorporation of 4Health 
will be amended to (i) change its name to "Irwin Naturals/4Health, Inc.," 
(ii) increase the authorization of 4Health Common Stock to 50,000,000 shares 
and (iii) adopt various provisions regarding the composition of the board of 
directors, the nominations for and the removal of directors and other 
management related matters.  Pursuant to the Merger Agreement and the related 
Articles of Merger, and subject to shareholder approval, if the Merger is 
consummated the board of directors of the surviving corporation will consist 
of R. Lindsey Duncan, Klee Irwin, Anthony Robbins, Clarke Keough and Jonathan 
Diamond.
    
   
PRODUCTS
    
   
          4Health is of the opinion that its product formulas are proprietary 
and cannot be duplicated without the master recipes, which are secured in 
safekeeping.  The Company attempts to protect its products and formulas with, 
among other things, "non-disclosure/non-competition" agreements with its 
manufacturers and employees and trademark protection.  The formulations of 
4Health's products were developed by the Company's founder and chief 
executive officer, R. Lindsey Duncan, a nutritionist certified by the 
National Institute of Nutritional Education.  The Company trademarks all 
brand line names and most product names.  The Company further protects its 
trademarks by taking prompt action against potential infringements.
    
   
          4Health's products that are sold through health food stores, under 
the proprietary brand name "Nature's Secret-Registered Trademark-", accounted 
for approximately 81% of 4Health's 1997 total sales, 90% of 1996 total sales, 
and 94% of 1995 total sales.  The Company also has a proprietary line of 
products that it sells to health care practitioners under the "Harmony 
Formulas-Registered Trademark-" label.  Sales of Harmony Formulas-Registered 
Trademark- products comprised approximately 7% of the Company's total sales 
in 1997.
    
   
                                       4
    
<PAGE>

   
          In the Fall of 1996, 4Health introduced a line of products directed 
at the mass food and drug market.  These products are currently marketed 
under the name "4Health-TM-."  Sales from the 4Health-TM- line accounted for 
12% of 4Health's total sales in 1997.
    
   
MANUFACTURING AND SUPPLY SOURCES
    
   
          All of 4Health's products are manufactured by third party suppliers 
pursuant to the Company's specifications and proprietary recipes.  Prior to 
selecting a manufacturer to produce its products, 4Health reviews the 
manufacturer's raw material sources, quality assurance procedures, and 
reliability to assure that the proposed manufacturer meets the Company's 
criteria.  All of the companies that manufacture for 4Health are required to 
meet strict manufacturing standards required by the Food and Drug 
Administration ("FDA"), and the Company believes that it benefits from such 
regulation in the overall quality of the products manufactured by such 
regulated entities.  To date, the Company has relied exclusively on domestic 
manufacturers in order to facilitate quality assurance monitoring.
    
   
          4Health places purchase orders with its suppliers for individual 
product manufacturing lots for delivery of packaged and labeled products to 
the Company's distribution center in Broomfield, Colorado.  4Health has no 
long-term manufacturing agreements with any of its suppliers, but purchases 
manufactured lots pursuant to individual purchase orders.  Currently, the 
Company utilizes eight separate manufacturers and believes that there are 
other qualified manufacturers that would meet quality assurance requirements 
if alternative manufacturing sources were required.  4Health maintains an 
inventory of approximately 60 to 90 days of anticipated demand and to date 
has not experienced material shortages of manufactured products for delivery. 
All ingredients in the Company's products are generally available from a 
number of alternative sources, although certain of the ingredients, such as 
those based on agricultural products, are subject to seasonal availability to 
a limited degree.
    
   
MARKETING AND SALES
    
   
          4Health principally markets its products through retail health food 
stores, including vitamin and natural foods grocery stores with vitamin 
aisles, and alternative health care providers such as chiropractors and 
nutritionists.  In 1996, the Company also began marketing a distinct new line 
of products to the mass food and drug market.  
    
   
          Products are introduced to retail outlets through advertising of 
4Health products in national nutrition magazines, trade magazines, and the 
Company's telemarketing staff and outside sales force which contacts retail 
outlet representatives to introduce 4Health's products and to provide 
continuing product education and sales support.  Through product incentives, 
4Health encourages retail outlet employees to utilize 4Health's products 
personally in order to become familiar with their use and benefits as a basis 
for recommending the products to customers.  Traditionally, the Company's 
products have emphasized quality rather than price, especially with regards 
to the health food store market.  The products designed for the mass food and 
drug market have different formulations which allow the products to be priced 
for the more value-conscious buyer.
    
   
                                       5
    
<PAGE>

   
COMPETITION
    
   
          The industry in which the Company operates is highly competitive.  
In the health food stores and practitioners channels, there are many 
relatively small companies which offer products.  4Health's Nature's 
Secret-Registered Trademark- and Harmony Formula-Registered Trademark- brand 
lines have built strong brand loyalty with retailers, practitioners and 
customers through quality products, excellent customer service and an 
emphasis on health through education.  The Company continues to be the leader 
in internal cleansing products and uses this success to launch products for 
other health concerns.  In the food, drug and mass market, the Company faces 
increased competition where many of the competitors are significantly larger 
and have greater financial resources.  The Company believes it will be able 
to compete successfully in the food, drug and mass market because of unique 
formulations and packaging, better quality, and good relationships with 
distributors and store buyers.
    
   
EMPLOYEES
    
   
          4Health has 70 employees, including one executive officer, three 
senior managers, 19 individuals in general administration, 25 individuals in 
sales and marketing, 19 individuals in operations, and 3 individuals in 
research and development.  The Company's employees are not represented by a 
collective bargaining organization, and 4Health is not aware of any efforts 
to organize any such collective bargaining unit.  4Health has not experienced 
any work stoppages or slow-downs. 
    
   
RISKS RELATED TO THE BUSINESS OF 4HEALTH
    
   
          LIMITED OPERATING HISTORY
    
   
          Since 4Health was organized in February of 1993, it has introduced 
a number of its products and established initial marketing outlets through 
health food stores and health care providers.  The Company anticipates 
expanding current distribution channels, introducing new products, entering 
new markets, and in general expanding its activities and operations.  Because 
of the nature of any such expansion, the accompanying results of operations 
for previous periods may not necessarily be indicative of the results of 
operations in the future.  While 4Health has been successful in expanding its 
markets and distributors  to date, it has been in operation for a limited 
amount of time, and there can be no assurance that it will be able to 
successfully continue to expand in the future. Further, there can be no 
assurance that expenditures of funds to expand current distribution channels, 
introduce new products, enter new markets, and in general to expand the 
Company's activities and operations will be successful in generating 
incremental profitable revenue.
    
   
          DIFFICULTY OF STRICT COMPLIANCE WITH GOVERNMENT REGULATIONS
    
   
          The processing, formulation, packaging, labeling and advertising of
4Health's products are subject to regulation by more than one federal agency. 
Congress has recognized the potential 
    
   
                                       6
    
<PAGE>

   
impact of dietary supplements in promoting the health of US citizens by 
enacting the Dietary Supplement Health Education Act of 1994 ("DSHEA") which 
severely limits the jurisdiction of the FDA in regulating dietary 
supplements.  Further, because of the broad language of certain sections of 
DSHEA and the regulations which implement it, it is difficult for any company 
manufacturing or making dietary supplements to remain in strict compliance.
    
   
          On November 24, 1997, the Commission on Dietary Supplement Labels, 
a seven member group appointed by the President of the United States (the 
"DSL Commission"), issued an 84 page report (the "Report") which includes 
many recommendations for the regulation of label claims and statements for 
dietary supplements.  The DSL Commission's conclusions and advice are in the 
form of a series of Findings and Guidelines and its ultimate recommendations 
are called Recommendations.  Section 12 of DSHEA requires the FDA to publish 
in the Federal Register "a notice of any recommendation of the Commission for 
changes in regulations of the Secretary for the regulation of dietary 
supplements and shall include in such notice a notice of proposed rulemaking 
on such changes together with an opportunity to present views on such 
changes."
    
   
          CONCENTRATION OF CUSTOMERS
    
   
          4Health received approximately 6.3% of its revenues from a single 
customer during 1997, General Nutritional Centers ("GNC").  4Health does not 
have any long-term contractual relationship with GNC or any other customers.  
The loss of this customer would have an adverse impact on the business of 
4Health.
    
   
          RELIANCE ON LIMITED NUMBER OF PRODUCTS
    
   
          4Health currently offers approximately 35 products and derived more 
than 12% of its revenues during 1997 from the sale of one product, Ultimate 
Cleanse-Registered Trademark-.  As a result of the limited number of products 
from which the Company derives its revenue, the risks associated with 
4Health's business increase since a decline in market demand for one or more 
products, for any reason, could have a significant adverse impact on the 
Company.
    
   
          STRENGTH OF 4HEALTH'S COMPETITORS
    
   
          Competition in the nutritional supplement industry is vigorous with 
a large number of businesses engaged in the industry.  Operations in the 
food, drug and mass market exposes the Company to increased competition from 
vitamin and other health related products that compete for the same shelf 
space.  Many of these competitors have established reputations for 
successfully developing and marketing nutritional supplement products.  Many 
of such companies have greater financial, managerial, and technical resources 
than 4Health, which may put the Company at a competitive disadvantage.  If 
4Health is not successful in competing in those markets, it may not be able 
to recognize its business objectives.
    
   
                                       7
    
<PAGE>

   
          DEPENDENCE ON MANAGEMENT
    
   
          4Health is dependent on its management, particularly R. Lindsey 
Duncan, founder and president, for substantially all of its business 
activities, including the development of new products and the advancement of 
4Health's identity and recognition in the nutritional supplement industry.  
The loss of the services of Mr. Duncan could have a material effect on the 
business, operations and financial condition of the Company.  4Health 
maintains a key-man life insurance policy on the life of Mr. Duncan in the 
amount of $5,000,000. Except for an intellectual property and non-compete 
agreement with Mr. Duncan, 4Health has no long-term agreement with any 
executive officer or key employee.
    
   
          NO LONG-TERM CONTRACTS WITH MANUFACTURERS OR DISTRIBUTORS
    
   
          4Health purchases all of its products from third-party 
manufacturers pursuant to purchase orders issued from time to time by 4Health 
but without any long-term manufacturing agreements.  In the event that a 
current manufacturer is unable to meet the Company's manufacturing and 
delivery requirements at some time in the future, 4Health may suffer 
interruptions of delivery of certain products while it establishes an 
alternative source.  The selection of alternative manufacturing sources may 
be delayed while the Company completes a review of the proposed 
manufacturer's quality control, raw material sources, and manufacturing and 
delivery capabilities.
    
   
          CUSTOMER GUARANTY OF SATISFACTION; RIGHT OF RETURN
    
   
          In an effort to build customer confidence and satisfaction, 4Health 
warrants satisfaction and grants to its customers the right of return for 
full credit any product that is unsatisfactory to the customer or that is 
shelf-worn or stale merchandise.  Although the Company has had this policy 
since its inception and experienced product returns of only approximately 3% 
of gross sales in 1997, there can be no assurance that such a policy will not 
result in additional product returns in the future as 4Health expands its 
product lines and enters new markets.
    
   
          POTENTIAL TRADEMARK INFRINGEMENT
    
   
          The conduct of 4Health's business, in common with other sellers of 
branded consumer products, may involve from time to time potential liability 
for trademark infringement.  The Company is engaged on a continuing basis in 
developing brand names for its new products, securing trademark protection 
for brand names and copyright protection for associated materials, policing 
its existing marks, and enforcing its legal rights in cases of potential 
infringement by third parties of its legally protected marks and copyrights. 
Prior to commencing advertising and sales of products under a newly developed 
brand name, 4Health seeks to minimize the risks of potentially infringing the 
rights of third parties by conducting trade and service mark searches and 
other inquiries in addition to filing publicly for trademark protection of 
the brand name and copyright protection for associated advertising materials 
and labeling. The Company registers 
    
   
                                       8
    
<PAGE>

   
for its principal product lines as well as its principal products. 
Notwithstanding such efforts, there can be no assurance that the Company will 
not suffer adverse financial consequences as a result of legally established 
third party claims to first use of trade or service marks used by 4Health.
    
   
          YEAR 2000
    
   
          4Health has conducted a review of its respective computer systems 
to identify the systems that could be affected by the "Year 2000" issue.  The 
Year 2000 problem is the result of computer programs being written using two 
digits (rather than four) to define the applicable year.  Any of the 
Company's programs that have time-sensitive software or equipment that has 
time-sensitive embedded components may recognize a date using "00" as the 
year 1900 rather than the year 2000.  This could result in a major system 
failure or miscalculations.  While some upgrades will be necessary, the 
Company presently believes that the Year 2000 problem will not pose 
significant operational problems for the Company's computer systems.  
Additionally, the Year 2000 problem is not expected to have a material effect 
on the cost of operation of the Company.
    
   
          The Company also may be vulnerable to other companies' Year 2000 
issues. The Company's current estimates of the impact of the Year 2000 
problem on its operations and financial results do not include costs and time 
that may be incurred as a result of any vendors' or customers' failure to 
become Year 2000 compliant on a timely basis.  The Company intends to 
initiate formal communications with all of its significant vendors and 
customers with respect to such persons' Year 2000 compliance programs and 
status.  However, there can be no assurance that such other companies will 
achieve Year 2000 compliance or that any conversions by such companies to 
become Year 2000 compliant will be compatible with the Company's computer 
system.  The inability of the Company or any of its principal vendors or 
customers to become Year 2000 complaint in a timely manner could have a 
material adverse effect on the Company's financial condition or results of 
operations.
    
   
ITEM 2. PROPERTIES
    
   
          The Company's principal offices are located at 5485 Conestoga 
Court, Boulder, Colorado in a Company owned building which houses all 
business activities other than distribution and has excess space for growth.  
The following table sets forth information regarding the Company's facilities:
    
   
<TABLE>
          Location                 Size                    Function
          --------                 ----                    --------
<S>                           <C>             <C>
      Boulder, Colorado       28,000 sq. ft.        Corporate headquarters

    Broomfield, Colorado      22,600 sq. ft.  Distribution center and warehouse
</TABLE>
    
   
          During fiscal year 1997, the Boulder facility was re-financed and 
the new mortgage is carried by Standard Insurance Company.  The Broomfield 
distribution center is under a three year lease which became effective 
January 1, 1996 and expires December 31, 1998, at an annual rental of 
$84,750.  The lease has a renewal option for another three years.  4Health 
believes both facilities are adequate in capacity and condition to satisfy 
growth in the foreseeable future.
    
   
                                       9
    
<PAGE>

   
ITEM 3. LEGAL PROCEEDINGS
    
   
          From time to time the Company is a party to legal proceedings that 
it considers routine litigation incidental to its business.  Management 
believes that the likely outcome of such litigation will not have a material 
adverse effect on 4Health's business or results of operations.
    
   
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
   
          No matters were submitted to a vote of security holders during the 
fourth quarter ended December 31, 1997.
    
   
PART II
    
   
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
   
          4Health's Common Stock commenced trading on the Nasdaq National 
Market tier of The Nasdaq Stock Market under the stock symbol HHHH on July 
17, 1996. (Prior to that date, the Company was known as Surgical 
Technologies, Inc. with stock trading under the symbol SGTI. The prior 
trading history of Surgical has not been included herein because it does not 
reflect the results of the merger or the changed nature of the Company's 
business since the merger.)  
    
   
          The market price of Common Stock could be subject to significant 
fluctuations in the future based on factors such as announcements of new 
products by the Company or its competitors, quarterly fluctuations in the 
Company's financial performance, the results of the Company's marketing and 
sales efforts, general conditions in the dietary and nutritional supplements 
industry, changes in analysts' estimates of the Company's financial 
performance, conditions in the financial markets or other factors which are 
currently unforeseen by management.  There can be no assurance that the 
market price for the Common Stock will not decline from current levels, or 
otherwise not be subject to significant fluctuations in the future.
    
   
          The range of high and low stock prices reported for the period 
between July 17, 1996 and the end of the fiscal year on December 31, 1997 
appear in the following table:
    
   
<TABLE>
       Fiscal Year     Quarter            High                Low
       -----------     -------            ----                ---
<S>                    <C>              <C>                 <C>
          1996           3rd            $  13.000           $  5.000
          
          1996           4th            $  7.375            $  5.500
          
          1997           1st            $  5.625            $  5.250
          
          1997           2nd            $  6.1875           $  5.000
                                                               
          1997           3rd            $  6.0625           $  3.250
          
          1997           4th            $  7.250            $  4.250
</TABLE>
    
   
                                       10
    
<PAGE>

   
          As of February 27, 1998, there were approximately 185 stockholders 
of record of the Company's Common Stock, exclusive of stockholders who hold 
title to their shares in street name.
    
   
DIVIDEND POLICY
    
   
          The Company has never paid dividends with respect to the 4Health 
Common Stock.  There are no restrictions on the declaration or payment of 
dividends in the articles of incorporation or bylaws of the Company, however, 
for the foreseeable future, the Board of Directors intends to retain all of 
the Company's earnings for use in the expansion of the Company's business.
    
   
REGISTRAR AND TRANSFER AGENT
    
   
          The registrar and transfer and warrant agent for the Company is 
American Securities Transfer and Trust, 938 Quail Street, Suite 101, 
Lakewood, CO, 80215-5513, telephone number (303)234-5300.
    
   
    
ITEM 6. SELECTED FINANCIAL DATA
   
     The following selected financial data for each of the five years in the
period ended December 31, 1997 (from inception on February 17, 1993) have been
derived from the audited financial statements of the Company included herein
("Financial Statements").  The selected financial data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and notes
thereto included elsewhere in this Annual Report.
    
   
<TABLE>
                                                               Years ended December 31,
                                                         from inception (February 17, 1993)
                                                        (in thousands, except per share data)
                                       -------------------------------------------------------------------- 
                                           1993          1994          1995         1996           1997
<S>                                    <C>           <C>           <C>           <C>           <C>
INCOME STATEMENT DATA
  Net sales                            $      270    $    2,077    $   10,434    $   17,352    $    12,432  
  Gross profit                                182         1,332         6,631        10,427          6,309  
  Operating (loss) income                      (7)         (131)        1,131        (2,653)        (6,540) 
  Other income (expense), net                  (6)           (5)          (63)           38            (89) 
                                       -------------------------------------------------------------------- 
  (Loss)income before income taxes            (13)         (136)        1,068        (2,615)        (6,629) 
  Income taxes                                  1            (2)         (360)           65              -  
                                       -------------------------------------------------------------------- 
  Net (loss) income                    $      (12)   $     (138)   $      708    $   (2,550)   $    (6,629)
                                       -------------------------------------------------------------------- 
                                       -------------------------------------------------------------------- 
PER SHARE DATA
  Net (loss) income per common
    share - basic and diluted          $     -       $    (0.02)   $    0 .08    $    (0.26)   $     (0.57) 

Weighted average common shares
  outstanding - basic                   6,018,680     7,334,729     8,707,214     9,896,822     11,615,004  

Weighted average common shares
  outstanding - diluted                 6,018,680     7,334,729     8,833,047     9,896,822     11,615,004  

<CAPTION>
                                               Years ended December 31,
                                       ---------------------------------------
                                           1995          1996         1997
                                       ----------    ----------    ---------- 
  <S>                                  <C>           <C>           <C>
BALANCE SHEET DATA
  Working capital                      $    2,236    $    3,977    $    1,529
  Total assets                              5,228        12,224         6,363
  Long-term debt                            1,296         1,276         1,298
  Shareholders' equity                      3,043         9,335         3,133
</TABLE>
    
   
                                       11
    
<PAGE>

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

     REFERENCE IS HEREBY MADE TO THE DISCLOSURE REGARDING "FORWARD-LOOKING"
STATEMENTS ON PAGE 2.

     The following table sets forth, for years 1995, 1996 and 1997, certain
items from the Company's Statements of Operations included elsewhere herein,
expressed as a percentage of net sales.

   
<TABLE>
                                                Years ended December 31,
                                           ------------------------------------  
                                            1995           1996           1997
                                           -----          -----          ----- 
<S>                                        <C>            <C>            <C>
Net Sales                                  100.0%         100.0%         100.0%
Cost of sales                               36.4%          39.9%          49.2%
                                           -----          -----          ----- 
Gross Profit                                63.6%          60.1%          50.8%
General and administrative expenses         14.2%          17.8%          24.3%
Sales and marketing expenses                37.1%          55.2%          49.9%
Research and development                     1.5%           2.4%           3.4%
Loss on write-off of intangible assets         -              -           25.8%
                                           -----          -----          ----- 
Income (loss) from operations               10.8%         (15.3%)        (52.6%)
Other income (expense), net                 (0.6%)          0.2%          (0.7%)
                                           -----          -----          ----- 
Income (loss) before income taxes           10.2%         (15.1%)        (53.3%)
(Provision) benefit for income taxes        (3.4%)          0.4%             -
                                           -----          -----          ----- 
Net income (loss)                            6.8%         (14.7%)        (53.3%)
                                           -----          -----          ----- 
                                           -----          -----          ----- 
</TABLE>
    

1997 COMPARED TO 1996
   
     Net sales decreased $4.9 million or 28% from $17.4 million in 1996 to 
$12.4 million in 1997.  Net sales in the Nature's Secret brand decreased $6.3 
million or 37%, from $15.6 million to $9.9 million, due primarily to a large 
sale to a major customer in 1996.  This large sale to a major customer in 
1996 was related to the initial purchase of the Nature's Secret weight loss 
product line, as well as the purchase of products already carried by this 
customer. The customer received discount incentives due to the large volume 
of this order. The customer chose not to continue to carry the weight loss 
line of products and resumed ordering other Nature's Secret products in 1997 
based on normal ordering cycles and sales volume. Sales of the 4Health brand 
increased $.94 million or 142% from $.66 million in 1996 to $1.6 million in 
1997 and net sales in the Harmony Formulas brand decreased $.08 million or 
8%, from $.96 million to $.88 million in the same periods respectively.
    
     Excluding the large sale to a major customer in 1996, overall net sales
were flat in 1997.  The Nature's Secret brand saw an increase in net sales in
the last quarter of 1997 when compared to the same period in 1996.  Management
anticipates this trend to continue throughout 1998 due to its focused marketing
campaign and introduction of new products.  The Company also feels

   
                                       12
    
<PAGE>

that the 4Health and Harmony Formulas brands will experience flat net sales in
1998.  The Company also experienced increased international sales activity at
the end of 1997 and management expects foreign sales to increase significantly
in 1998.
   
     Gross profit decreased 39% to $6.3 million in 1997 from $10.4 million in 
1996.  The gross profit margin in 1997 declined 9.3% from 60.1% in 1996 to 
50.8% in 1997.  Management attributes 6% of this decline to a $.76 million 
write-down of inventory.  This inventory was exchanged for $2.3 million of 
barter credits.  The Company expects to utilize these credits primarily for 
future advertising and travel expenses.  Another 1.0% of this decline was due 
to the scrapping of obsolete inventory primarily related to a packaging 
changeover in the Nature's Secret brand, and the balance of this decline is 
attributable to a shift in sales to products with gross margins less than 
historical averages.
    
     The loss on write-off of assets of $3.2 million was due to the write-off
of the goodwill balance generated in the merger with Surgical Technologies,
Inc.  It was determined under Statement of Financial Accounting Standards No.
121 that this asset had no value at December 31, 1997, and as such was written
off in its entirety.  General and administrative expenses increased 6.5% from
17.8% in 1996 to 24.3% in 1997.   Management attributes this increase to the
expenses related to operating as a publicly held company for an entire year and
legal fees in connection with a dispute with a major customer, now settled,
which significantly exceeded cuts in personnel and other overhead costs.  Sales
expenses decreased $.7 million or 26% from $2.7 million in 1996 to $2 million
in 1997.  Marketing expenses decreased $2.7 million or 39% from $6.9 million in
1996 to $4.2 million in 1997.  As a percentage of sales, sales and marketing
expenses decreased 5.3% from 55.2% in 1996 to 49.9% in 1997.  Reductions in
advertising expenses to support the Nature's Secret brand accounted for most of
this decrease.

     Research and development costs increased slightly from $.415 million in
1996 to $.418 million in 1997.  As a percent of net sales, these expenses
increased 1%.  Continued development of new products and ongoing clinical
studies related to new and existing products accounted for this spending.
Management expects this department to decrease its expenditures in 1998 as
there are no clinical studies planned for the coming year.

     Management implemented an expense reduction program in the second half of
1997 which resulted in a drop in operating expenses of approximately $1 million
in the second half of the year when compared to the first half.  The expense
reduction program is still in place in 1998, and management intends to continue
to look for ways to cut costs in the coming year.

1996 COMPARED TO 1995

     Net sales increased $6.9 million in 1996 or 66%, from $10.4 million in
1995, to $17.3 million.  Net sales in the Nature's Secret brand increased $5.7
million in 1996 or 37%, from $9.8 million in 1995 to $15.5 million, due
primarily to a large sale to a major customer.  Sales of the 4Health brand into
the food, drug and mass market amounted to $.65 million of new business in 1996
and net sales in the Harmony Formulas brand increased $.3 million or 31%, from
$.66 million in 1995 to $.96 million in 1997, due primarily to increased sales
and marketing efforts.

   
                                       13
    
<PAGE>

     Gross profit increased 57% to $3.8 million from $6.6 in 1995 to $10.4
million in 1996.  The gross profit margin in 1996 declined 3.5% from 63.6% in
1995 to 60.1%.  Management attributes this decline to introduction of new
products with gross margins less than historical averages and aggressive
discounting on large sales to a major customers.
   
     General and administrative expenses increased 107% to $3.1 million in 
1996 compared to $1.5 million in 1995.  As a percent of net sales, these 
expenses increased 3.5% from 14.2% in 1995 to 17.7% in 1996.  Management 
attributes these increases to the Company's decision to build the corporate 
infrastructure by adding new executives and managers, expenses related to 
operating as a publicly held company and legal fees in connection with a 
dispute with a major customer. Additionally, sales and marketing expenses 
increased $5.7 million or 148% from $3.9 million in 1995 to $9.6 million in 
1996.  As a percentage of sales, sales and marketing expense increased 18.4% 
from 37.1% in 1995 to 55.4% in 1996. Increased selling and advertising 
expenses to support the Nature's Secret and 4Health brands accounted for 38% 
of this increase.  The build-up of the outside sales forces, sales management 
and the addition of new marketing management for both brands accounted for 
another 35% of the increase.  Television advertising related to the large 
sale to a major customer explained another 23% of the increase.
    
     Research and development costs increased 178% from $149 thousand in 1995
to $415 thousand in 1996.  As a percent of net sales, these expenses increased
less than 1%.  Development of new products and clinical studies related to new
and existing products accounts for this increase.

1995 COMPARED TO 1994
   
     Net sales, for the year ended December 31, 1995, increased 402% to $10.4 
million from $2.1 million for the year ended December 31, 1994.  This 
increase was primarily due to a significant market penetration of health food 
stores from approximately 2,000 in 1994 to 5,400 active accounts by the end 
of 1995. Included in these stores, is a large chain of approximately 1,600 
health food stores which carries only one of the Company's products. Sales to 
this customer accounted for 12.8% of total revenues in 1995. An additional 
contributor to 4Health's revenue growth was the launch of its Ultimate Multi 
product in July of 1995 which accounted for 7.5% of total sales to health 
food stores.
    
     Gross profit for the year ended December 31, 1995 increased 398% to $6.6 
million from $1.3 million for the year ended December 31, 1995.  Gross margin 
declined .5% to 63.6% in 1995 from 64.1% in fiscal 1994.  Management 
attributes this decline to its automation and building up of infrastructure, 
primarily in its distribution center, to prepare for higher volumes.  Most 
customers orders are fulfilled and shipped within 24 hours of receipt.

     General and administrative expenses increased 143% in the year ended 
December 31, 1995 compared to the same period for 1994, however, as a 
percentage of sales, general and administrative expenses declined to 14.2% of 
net sales in 1995 compared to 29.3% in 1994.  Management attributes this 
increase in spending to building infrastructure to remain competitive and to 
provide superior customer service.  Sales and marketing expenses increased 
374% in 1995 to $3.9 million up from $.8 million in 1994, however, as a 
percentage of sales, this spending declined to 37.1% in 1995 from 39.4% in 
1994.  The Company incurred $1.4 million in advertising expenditures in 1995 
compared to $.15 million in 1994 and increased the staffing and
   
                                       14
    
<PAGE>

infrastructure of the sales and marketing departments by increasing the outside
sales force and adding other supporting activities.  4Health's research and
development spending increased $.1 million.  Only one new product was launched
in 1995.

     Interest expense results from the $1.3 million loan on 4Health's building
which was outstanding for twelve months in 1995 at 7.5% interest compared to 
only seven months in 1994 at an interest rate of 3.5%.

LIQUIDITY AND CAPITAL RESOURCES

     Since the Company's inception on February 17, 1993, it has financed its
business growth primarily through operations, common stock sales and short-term
borrowings from stockholders.
   
     In 1995, the Company raised $1.5 million in cash from the net proceeds 
of the sale of preferred stock.  In 1994, 4Health raised $1.0 million of cash 
from the net proceeds of the sale of Common Stock.  The Company used the 
proceeds raised in 1995 and 1994 to finance its growth and expansion in those 
years.
    
   
     During 1996, the Company used cash of $3.3 million for operations.  As a 
result of the merger with Surgical, the Company received cash and cash 
equivalents of $3.6 million.  The bulk of these proceeds were used to fund 
marketing projects and increased marketing personnel costs.  Sales and 
marketing expenses increased $5.7 million in 1996 over 1995.  The majority of 
these expenditures were discretionary in nature and the Company plans to 
curtail these activities unless they can be supported by ongoing operations.  
An additional $1.2 million was used to increase inventory during 1996.  The 
Company intends to substantially reduce inventory amounts during 1997 to 
reduce cash requirements.
    
     The Company's cash and cash equivalents position at December 31, 1997, was
$.11 million compared to $1.1 million on December 31, 1996.  The $1 million
decrease in cash was due primarily to the cost of national magazine advertising
and the development of an infomercial for the mass market distribution channel
in the first half of 1997.  The magazine advertising was not targeted to health
food store shoppers and proved to be ineffective in producing increased revenue
and the infomercial was discontinued after an unsuccessful test.  The Company
ended the latest year with working capital of $1.6 million and a 1.8 to 1
working capital ratio.

     Accounts receivable totaled $1.6 million at December 31, 1997 as compared
to $1.1 million on December 31, 1996.  Management attributes the increase to
the longer collection cycle for mass market related sales, as well as an
increase of $.3 million in fourth quarter sales in 1997 when compared to the
same period in 1996.

     Inventories were valued at $1.3 million at December 31, 1997 as compared
to $2.5 million at December 31, 1996, which represents a 48% decrease or $1.2
million.  The decline in inventories was due primarily to a write-down which
reduced inventories $.76 million.  Management attributes the rest of the
inventory reduction to better inventory and vendor management.

     Notes receivable decreased $.27 million to $.11 million on December 31,
1997 from $.38 million on December 31, 1996 as the result of the payments on
notes receivable acquired by 4Health in the merger with Surgical Technologies,
Inc.

     Capital expenditures for the year ended December 31, 1997 were $.08
million compared to $.53 million for the same period in 1996.  Management
attributes the decline in capital expenditures to its efforts to conserve cash
and a policy to aggressively use the existing capital assets acquired in 1995
and 1996.
   
    
   
                                       15
    
<PAGE>

   
     Other assets as of December 31, 1996 consisted primarily of intangible 
assets related to the merger with Surgical Technologies, Inc., including ID 
Technology and goodwill, with the remainder made up of prepaid expenses and 
deposits.  The ID Technology is primarily the capitalized cost of patents and 
trademarks of a medical device used in angioplasty procedures.
    
The intangible assets decreased $3 million in 1997 due primarily to the write-
off of the goodwill in accordance with Statement of Financial Accounting
Standards No. 121 which deals with the accounting for impairment of long-lived
assets.  The goodwill was recorded in the merger with Surgical Technologies,
Inc. in 1996 and was determined to have no value at December 31, 1997.  The
balance of other assets at December 31, 1997 consisted of ID Technology,
prepaid expenses and deposits.  The Company believes the ID Technology to be a
viable asset at its current recorded value of approximately $480,000 at
December 31, 1997.  In December 1997, the Company entered into an agreement
with InterVentional Technologies, Inc. ("IVT") to mutually explore the
viability of entering into a joint venture agreement in order to further
develop the technology, increase revenues and earnings, and transfer the
ownership of the device to IVT.  The Company believes the new design of the
device will be less expensive to produce, thus allowing the device to compete
for U.S. market share, while maintaining international sales volumes.  The
Company is currently amortizing this asset over an eight year useful life.

     Accounts payable and accrued liabilities decreased $.3 million due
primarily to borrowing on the Company's line of credit with Norwest Business
Credit, Inc., which line had a balance of $.7 million at December 31, 1997.
Borrowings have been used primarily to pay vendors and suppliers for inventory
needed for the normal seasonal first quarter increase in sales activity
anticipated in 1998 and to finance additional accounts receivable generated in
the fourth quarter of 1997.  Available borrowing capacity in addition to the
amount outstanding on the revolving line of credit at December 31, 1997 was
$.25 million, and at March 27, 1998 was $.93 million.

     The Company used cash for operating activities of $3.3 million in 1996 and
$2.1 million in 1997.  $3.9 million in cash was generated in 1996 from
investing activities, the majority of which came from the Surgical acquisition.
This cash, together with the cash on hand at the beginning of 1996 of $.9
million and the additional borrowings from financing activities in 1997 of $.9
million has allowed the Company to fund these operating losses and some capital
expenditures.

     The Company reduced its operating costs over $.95 million in the last six
months of 1997 as compared to the first half of 1997.  Although cash used in
operations in the second half of 1997 increased slightly over the first half of
1997, the increase was due to a large reduction of accounts payable using the
Company's line of credit.  Cash flows from operations in the first quarter of
1998 continues to improve.

     The Company is not anticipating significant future capital requirements.
Such investment will depend on many factors, including, but not limited to,
the nature and timing of orders from customers, the expansion of sales and
marketing efforts, costs associated with entering into new channels of
distribution, the ability of the Company to increase sales beyond the break
even point and the status of competitive products.  The Company believes,
however, that the timing of any required expenditures will be somewhat
discretionary.
   
                                       16
    
<PAGE>

     In January 1998, the Company entered into a merger agreement with Irwin
Naturals, a company also engaged in the nutritional supplement business.  The
Company expects the anticipated merger to substantially increase its revenue
stream and its cash flow generated from operations with minimal additional
cost.
   
     Management believes that its working capital and borrowing capacity will
be sufficient to satisfy anticipated sales growth and operating requirements 
over the next 12 months. Nevertheless, because of its anticipated sales 
growth, the Company continues to explore sources of additional capital for 
future needs.  There can be no assurance, however, that the Company will not 
require additional financing earlier than anticipated.  Further, there can be 
no assurance that additional financing will be available at acceptable terms 
to the Company or at all.  The inability to obtain such financing could have 
a material adverse effect on the Company's business, financial condition, and 
results of operations.
    
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The following Financial Statements are filed with this report as pages F-1
through F-22.  The Index to Financial Statements appears on page 13.

     Report of Independent Public Accountants
     Balance Sheet
     Statements of Operations
     Statements of Shareholders' Equity
     Statements of Cash Flows
     Notes to Financial Statements
   
    

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

     The Company has not made any changes in accountants.  The Company does not
have any disagreement with accountants regarding accounting or financial
disclosure.
    
   
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table lists the names, ages, and positions of the Company's
directors, executive officers and other significant employees.
    
   
<TABLE>
----------------------------------------------------------------------------------------
                             Officer      Director
      Name            Age     Since         Since                  Position
----------------------------------------------------------------------------------------
<S>                   <C>    <C>          <C>          <C>
R. Lindsey Duncan      35     1993          1993       Chairman of the Board, Chief
                                                        Executive Officer, President
Cheryl M. Wheeler      37     1993          1993       Secretary, Director, Marketing
                                                        Manager
Scott W. Lusk          40     1997             -       Director of Finance
Rockwell D. Schutjer   51     1996          1996       Director, Manager of the Surgical
                                                        Technologies Division
Steven B. Beckman      30        -          1997       Director
</TABLE>
    

   
     R. LINDSEY DUNCAN, the founder of 4Health, is a nutritionist certified by
the National Institute of Nutritional Education, an industry accrediting body. 
Since 1993, Mr. Duncan has been the President, Chief Executive Officer, and
Chairman of the Board of 4Health, Inc.  Since the mid-1980s, he has owned,
operated, and been the principal nutritionist of Home Nutrition Clinic, Santa
Monica, California.  In January 1988, Mr. Duncan began formulating his own
nutritional supplements and in 1993, he organized 4health, Inc. (a California
corporation and a predecessor to the Company.) Mr. Duncan is a member of the
National Nutritional Foods Association, the American Herbal Products
Association, and the Herb Research Foundation.
    
                                      18
<PAGE>
   
     CHERYL M. WHEELER, a marketing manager at the Company since 1993, assists
Mr. Duncan with industry seminars, speeches, and other public appearance and
related marketing activities.  Ms. Wheeler is a nutritionist certified by the
National Institute of Nutritional Education.  For in excess of five years prior
to her joining the Company, Ms. Wheeler was a professional stuntwoman and
martial arts expert.
    
   
     SCOTT W. LUSK, has been with the finance department of 4Health since
September of 1995.  Prior to joining 4Health, Mr. Lusk held the position of
Controller at Greenbar Corporation from 1991 until 1995.  He has fifteen years
of experience in wholesale, distribution, retail sales, and computer networking.
Mr. Lusk received a bachelor of science degree in accounting from the University
of Northern Colorado and is a certified public accountant.
    
   
     ROCKWELL D. SCHUTJER, a co-founder of Surgical Technologies, Inc., served
as Vice President of Operations and as a director of Surgical Technologies, Inc.
from its inception in 1991 through 1996.  Upon the merger of Surgical
Technologies, Inc. and 4Health, Mr. Schutjer became the Manager of Surgical
Technologies, a division of 4Health, Inc. and was elected to 4Health's board of
directors.  Mr. Schutjer received his bachelor of science degree in business
finance from the University of Utah.
    
   
     STEVEN B. BECKMAN, has been a director of the Company since 1997. From 1993
through 1996, Mr. Beckman served as Vice President Sales and Marketing at
4health, Inc. as well as being responsible for accounting and operations
functions from 1993 to 1995.  Upon leaving 4Health, Inc. in 1996, Mr. Beckman
founded Achieve Communications, Inc. in Boulder, Colorado.  He currently serves
as the President of Achieve Communications, Inc.  He received a bachelor of arts
degree from the University of California at Santa Barbara.
    
   
     The Board of Directors of 4Health during 1997 was comprised of R. Lindsey
Duncan, Cheryl Wheeler, Todd B. Crosland (resigned effective June 12, 1997),
Rockwell D. Schutjer and Steven B. Beckman.  The Board of Directors met 2 times
during 1997 for regular Board of Directors meetings.  All directors attended
100% of the aggregate of (i) the total number of meetings of the Board of
Directors held while they were members and (ii) the total number of meetings
held by all Committees of the Board of Directors on which they served as members
except Mr. Crosland, who missed one Board meeting.  In addition, on several
occasions, the Board of Directors gave their unanimous written consent on issues
involving normal corporate business.  The Board of Directors has three standing
committees, the Audit Committee, the Compensation Committee, and the Long-Term
Stock Incentive Plan Administration Committee ("LTSIP Administration
Committee").  During 1997, the Audit Committee and the LTSIP Administration
Committee were composed of Messrs. Crosland and Beckman.  The Audit Committee
did not meet during 1997, the functions of such committee being performed by the
Board of Directors as a whole.  The LTSIP Administration Committee met
throughout 1997 as needed to grant stock options.  The LTSIP Administration
Committee is responsible for overseeing 4Health's Long-Term Stock Incentive Plan
(the "LTSIP") including, subject to the express terms of the LTSIP, making
awards, interpreting the LTSIP, amending and rescinding rules and other duties
related to the proper implementation of the LTSIP.  During 1997, the 


                                      19

<PAGE>

Compensation Committee was composed of Messrs. Duncan, Crosland, and Beckman. 
The Compensation Committee met once in 1997.  The primary responsibility of the
Compensation Committee is to establish and review the compensation policies of
4Health, including those for executives.  During 1997, 4Health did not have a
nominating committee, the functions of such a committee being performed by the
Board of Directors as a whole.
    
   
     The LTSIP provides that upon assuming office, each non-employee director
shall be granted a non-qualified option to acquire 5,000 shares of Common Stock
at an exercise price equal to 100% of the fair market value on the date of
grant.  One-half of the grant shall become exercisable upon completion of one
year of service as a director and the remaining balance upon completion of two
years of service as a director.  All options have a five year expiration term. 
On April 1, 1997, Mr. Beckman received 5,000 options under this policy
exercisable at a price of $5.00 per share.
    
   
     Directors do not receive compensation for attending meetings of the Board
of Directors.  Directors are reimbursed for their reasonable travel and lodging
expenses incurred attending meetings.
    
   
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Pursuant to Section 16(a) of the Securities Exchange Act of 1934, executive
officers, directors and 10% shareholders of 4Health are required to file reports
on Form 3, 4 and 5 of their beneficial holdings and transactions in the 4Health
Common Stock.  During 1997, all such reports were filed in a timely manner.
    
   
ITEM 11. EXECUTIVE COMPENSATION

     The following table shows, for the year ending December 31, 1997, the cash
compensation paid by the Company, as well as certain other compensation paid or
accrued for the year, to R. Lindsey Duncan, 4Health's President and Chief
Executive Officer.  No other executive received total cash compensation
exceeding $100,000 during 1997.
    
   
<TABLE>
                                       Summary Compensation
                                       -------------------- 
                                                              Long-Term Compensation
                                                         --------------------------------  
                                Annual Compensation             Awards            Payouts  
                                ---------------------------------------------------------  
                                                                                             All    
                                                         Restricted  Securities             Other   
                                                            Stock    Underlying    LTIP    Compen-  
Name and Position        Year    Salary    Bonus   Other    Award     Options     Payouts   sation  
--------------------------------------------------------------------------------------------------  
<S>                      <C>    <C>         <C>     <C>    <C>       <C>          <C>      <C>
R. Lindsey Duncan,       1997   $150,000    $ 0     $ 0      $ 0       401,252      $ 0       $ 0   
  President and Chief    1996    150,000      0       0        0       331,034        0         0   
  Executive Officer      1995    150,000      0       0        0       105,329        0         0   
</TABLE>
    

                                      20

<PAGE>
   
OPTION EXERCISES AND HOLDINGS

     The following table presents information with respect to the Chief
Executive Officer concerning the exercise of options during 1997 and unexercised
options held as of December 31, 1997.  No options were granted to the Chief
Executive Officer during 1997.
    
   
               Aggregated Option Exercises and Year end Option Values
               ------------------------------------------------------ 
<TABLE>
                                                    Number of Unexercised        Value of Unexercised In-
                                                          Options at               the-Money Options at
                                                       December 31, 1997            December 31, 1997
                                                 --------------------------------------------------------- 
                       Shares        Value
Name                Exercised(#)   Realized($)   Exercisable   Unexercisable   Exercisable   Unexercisable  
----------------------------------------------------------------------------------------------------------  
<S>                 <C>            <C>           <C>           <C>             <C>           <C>
R. Lindsey Duncan        0            $0           401,252         35,111       $444,723(1)     $0.00(1)    
</TABLE>

(1)  Based on the closing market price of $5.125 per share for 4Health's Common
     Stock as of December 31, 1997.
    
   
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     R. Lindsey Duncan, the President and Chief Executive Officer of 4Health,
served on the Compensation Committee of the Board of Directors during 1997.
    
   
REPORT ON EXECUTIVE COMPENSATION

     The Compensation Committee of the Board of Directors has responsibility for
making recommendations regarding compensation policy for 4Health, including
executives.  The Compensation Committee's overall goal is to provide a strong
link among shareholder value, company performance, and executive compensation. 
An additional goal is to promote long-term growth and development for 4Health by
attracting and retaining qualified and talented executives.  The following
report shall not be deemed incorporated by reference into any filing under the
Securities Exchange Act of 1933 or the Securities Exchange Act of 1934.
    
   
     4Health uses various compensation surveys, including industry and regional
specific surveys, to develop its compensation strategy and plans.  The
Compensation Committee also refers to such surveys for executive compensation,
including that of the Chief Executive Officer.  
    
   
     There is no set policy for adjusting base salary or bonuses subsequent to
initial employment.  Such adjustments in the past have occurred due to changes
in job skills, performance, and competitive salary information.
    
   
     4Health's current stock option plan includes executives, managers and key
employees.  Stock options are granted periodically by the LTSIP Administration
Committee of the Board of Directors.  The Long-Term Stock Incentive Plan allows
the grant of options, both incentive and non-qualified.  Historically, the LTSIP
Administration Committee has granted non-qualified options.  For executives, the
options are usually granted with one third vesting after each year of service
with 4Health.  Pricing of the options generally begins at the fair market price
on the date of grant for the options vested after one year and increases $1.00
per share for each additional year of service.
    

                                      21

<PAGE>
   
     The compensation of Mr. Duncan, Chief Executive Officer of 4Health, for
1997 is shown in the Summary Compensation table.  The Compensation Committee
believes that his comp-ensation adequately reflects his performance as 4Health's
President and Chief Executive Officer.
    
   
     The Compensation Committee has reviewed 4Health's compensation plans with
regard to the deduction limitations under the Omnibus Budget Reconciliation Act
of 1993 (the "Act") and the final regulations interpreting the Act which have
recently been adopted by the Internal Revenue Service and the Department of the
Treasury.  Based on this review, the Committee has determined that 4Health's
LTSIP, as previously approved by shareholders, meets the requirements for
deductibility under the Act.  The Committee believes that no tax deduction will
be lost as a result of Section 162(m) on compensation paid to Company executives
in 1997.
                         R. Lindsey Duncan, Todd B. Crosland, Steven B. Beckman
    
   
STOCK PERFORMANCE

     The graph below presents a comparison of the cumulative shareholder return
of the Company's Common Stock over the period July 17, 1996 to December 31, 1997
with the cumulative total return over the same period for The Nasdaq Stock
Market - U.S. Companies Total Return Index and a peer group represented by the
Nasdaq Pharmaceutical Stocks Total return Index (SIC code 283).  Both indexes
were prepared for Nasdaq by the Center for Research in Security Prices.  The
graph below compares the cumulative total return of 4Health's Common Stock over
the July 17, 1996 to December 31, 1997 period assuming a $100 investment on July
17, 1996 and assuming reinvestment of all dividends.  (4Health's Common stock
commenced trading on the Nasdaq National Market tier of The Nasdaq Stock Market
under the stock symbol HHHH on July 17, 1996.  Prior to that date, 4Health was
known as Surgical Technologies, Inc. with stock trading under the symbol SGTI. 
The prior market performance history of Surgical has not been included herein
because it does not reflect the results of the merger or the changed nature of
4Health's business since the merger.  The graph is based on daily total return
figures from July 17, 1996 and month-end figures from July 30, 1996 through
December 31, 1997.)
    



                                    [GRAPH]



   
<TABLE>
                               ------------------------------------------------------------------------- 
                                                      Quarter End Values
-------------------------------------------------------------------------------------------------------- 
                               7/17/96    9/30/96   12/31/96    3/31/97    6/30/97    9/30/97   12/31/97
-------------------------------------------------------------------------------------------------------- 
<S>                            <C>       <C>        <C>        <C>        <C>        <C>        <C>
4Health                        $100.00   $  78.95   $  57.90   $  58.55   $  61.84   $  50.66   $  53.95
-------------------------------------------------------------------------------------------------------- 
Nasdaq US Index                 100.00     113.16     118.73     112.29     132.88     155.35     145.69
-------------------------------------------------------------------------------------------------------- 
Nasdaq Pharmaceutical Index     100.00     113.64     110.25     104.70     113.03     126.80     113.92
-------------------------------------------------------------------------------------------------------- 
</TABLE>
    

                                      22

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

     The following table includes information as of December 31, 1997 concerning
the beneficial ownership of the holdings of the Company's Common Stock by (i)
all persons who are known by the Company to hold five percent or more of the
outstanding shares of 4Health Common Stock, (ii) each of the directors of the
Company, (iii) each executive officer of the Company, and (iv) all directors and
executive officers of the Company as a group.  Except as otherwise indicated,
all shares are owned directly, and the persons named in the table have sole
voting and investing power with respect to shares shown as beneficially owned by
them.
    
   
<TABLE>
                                                     SHARES
                                                  BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER                  OWNED           PERCENT
------------------------------------              ------------        -------
<S>                                               <C>                 <C>
Principal Shareholders
---------------------- 
R. Lindsey Duncan                                  5,899,153 (4)      49.25 %
  5485 Conestoga Court
  Boulder, CO  80301

Directors and Executive Officers
--------------------------------
R. Lindsey Duncan (1)(2)                       -------- See Above  --------

Cheryl Wheeler (1)(3)                                332,353 (4)      2.77 %

Rockwell D. Schutjer (1)                              75,250 (4)         *

Steven B. Beckman (1)                                  7,523 (4)         *

Scott W. Lusk (3)                                      5,864 (4)         *

All Officers and directors as a group (5 People)   6,320,143 (4)     52.76 %
</TABLE>

------------------------
*    Less than 1%
(1)  Serves as a director of 4Health.
(2)  Serves as an executive officer of 4Health and appears in the Summary
       Compensation table.
(3)  Serves as an executive officer of 4Health, but does not appear in the
       Summary Compensation table.
(4)  Includes the following number of shares which could be purchased under
       stock options exercisable within 60 days from the date hereof; 
       Mr. Duncan, 401,252 shares; Ms. Wheeler, 51,914 shares; Mr. Schutjer,
       9,000 shares; Mr. Beckman, 7,523 shares; Mr. Lusk, 4,512 shares; and 
       all officers and directors as a group, 474,201 shares.
    
   
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As a director and in accordance with the LTSIP, on April 1, 1997, Mr.
Beckman received 5,000 options under the LTSIP exercisable at a price of $5.00
per share (the fair market value.) One-half of these options becomes exercisable
upon completion of one year of service as a director and the remaining balance
upon completion of two years of service as a director.
    

                                      23

<PAGE>
   
PART IV

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

(a)  (1)  Financial Statements.  See Index to Financial Statements (and
          Financial Statement Schedules) at page 28 of this Form 10-K.

     (2)  Financial Data Schedule.  All other schedules required by Form 10-K
          Annual Report have been omitted because they were not applicable, were
          included in the notes to the financial statements, or were not
          required under the instructions contained in Regulation S-X.

     (3)  Exhibits.  See Exhibit Index at page 25 of this Form 10-K.

(b)  Form 8-K dated October 14, 1997 consisting of the Registrant's press
release regarding its signing of a letter of intent to merge.
    



                                      24

<PAGE>

                                 EXHIBIT INDEX

<TABLE>
             SEC
Exhibit   Reference
Number     Number                               Title of Document                                    Location        
-----------------------------------------------------------------------------------------------------------------  
<S>       <C>          <C>                                                                        <C>
Item 2.                Plan of Acquisition, Reorganization, Liquidation, or Succession   
-----------------------------------------------------------------------------------------------------------------  
 2.01         2        Agreement and Plan of Merger dated April 10, 1996, by and between          Incorporated by  
                       4health, Inc., and Surgical Technologies, Inc. as amended June 4, 1996      Reference (6)   

 2.02         2        Asset Purchase Agreement dated November 30, 1995, by and between           Incorporated by  
                       Microtek Medical, Inc., and Surgical Technologies, Inc.                     Reference (5)   

 2.03         2        Acquisition Agreement dated effective January 1, 1996, by and between      Incorporated by  
                       Rex Industries Acquisition Corporation and Rex Industries, Inc.             Reference (5)   

 2.04         2        Amended and Restated Agreement and Plan of Merger dated December 24,       Incorporated by  
                       1997, signed January 7, 1998, by and between 4Health, Inc. and Irwin        Reference (1)   
                       Naturals as amended April 2, 1998.

 2.05         2        Amended and Restated Agreement and Plan of Merger dated December 24,            This
                       1997, signed January 7, 1998, amended April 2, 1998, by and between            Filing
                       4Health, Inc. and Irwin Naturals as amended May 22, 1998.

Item 3.                Articles of Incorporation and Bylaws
-----------------------------------------------------------------------------------------------------------------  
 3.01         3        Articles of Incorporation of Surgical Subsidiary, Inc., a                  Incorporated by   
                       Utah Corporation now known as Surgical Technologies, Inc.                   Reference (8)    

 3.02         3         Articles of Merger and related Plan of Merger                             Incorporated by   
                                                                                                   Reference (8)    

 3.03         3        Bylaws                                                                     Incorporated by   
                                                                                                   Reference (8)    

 3.04         3        Articles of Merger and related Plan of Merger                              Incorporated by   
                                                                                                   Reference (6)    

 3.05         3        Form of Articles of Merger and related Plan of Merger                      Incorporated by   
                                                                                                   Reference (1)    
Item 4.                Instruments Defining the Rights of Security Holders
-----------------------------------------------------------------------------------------------------------------  
 4.01         4        Form of Warrant Agreement between 4Health, Inc. and Zions                  Incorporated by   
                       First National Bank with related form of Warrant                            Reference (6)    

 4.02         4        Form of Sale Restriction Agreement respecting shareholders of              Incorporated by   
                       both Surgical Technologies, Inc., and 4Health, Inc.                         Reference (6)    

 4.03         4        Form of Consent, Approval, and Irrevocable Proxy respecting                Incorporated by   
                       certain Surgical stockholders with related schedule                         Reference (6)    

 4.04         4        Form of Consent, Approval, and Irrevocable Proxy respecting                Incorporated by   
                       certain 4Health stockholders with related schedule                          Reference (6)    

 4.05         4        Specimen Common Stock Certificate                                          Incorporated by   
                                                                                                   Reference (6)    


                                      25

<PAGE>

             SEC
Exhibit   Reference
Number     Number                               Title of Document                                    Location        
-----------------------------------------------------------------------------------------------------------------  
<S>       <C>          <C>                                                                        <C>
 4.06         4        Specimen Warrant Certificate                                               Incorporated by  
                                                                                                   Reference (6)   

 4.07         4        Warrant certificates between 4Health and Allen & Company Incorporated      Incorporated by  
                       dated April 15, 1997                                                        Reference (10)  

Item 5.                Other Items
-----------------------------------------------------------------------------------------------------------------  
 5.01         5        Summary of Revolving Line of Credit Agreement between 4Health and          Incorporated by  
                       Norwest Business Credit, Inc.                                               Reference (2)   

Item 10.               Material Contracts
-----------------------------------------------------------------------------------------------------------------  
10.01         10       Form of Directors' Options                                                 Incorporated by  
                                                                                                   Reference (5)*  

10.02         10       Stock Option and Stock Award Plan                                          Incorporated by  
                                                                                                   Reference (5)*  

10.03         10       1991 Directors' Stock Option Plan                                          Incorporated by  
                                                                                                   Reference (5)*  

10.04         10       Directors' Stock Option Plan                                               Incorporated by  
                                                                                                   Reference (7)*  

10.05         10       Technology Purchase Agreement between Ellis E. Williams, Professional      Incorporated by  
                       Medical, Inc., and Surgical Technologies, Inc., dated February 4, 1993      Reference (8)   

10.06         10       Patent Cross-License Agreement between Utah Medical Products, Inc.,        Incorporated by  
                       and Professional Medical, Inc., dated February 9, 1993                      Reference (9)   

10.07         10       Form of Promissory Note in the amount of $1,000,000 payable to             Incorporated by  
                       First Interstate Bank, dated August 16, 1994                                Reference (9)   

10.08         10       Deed of Trust Note and related Deed of Trust, Assignment of Rents,         Incorporated by  
                       Security Agreement, and Fixture Filing, dated April 8, 1994, in the         Reference (8)   
                       principal amount of $1,000,000 due Standard Insurance Company

10.09         10       Stock Purchase Agreement dated May 6, 1994, between Surgical               Incorporated by  
                       Technologies, Inc., and Benitex, A.G.                                       Reference (8)   

10.10         10       Real Estate Contract dated February 2, 1994, between Surgical              Incorporated by  
                       Technologies, Inc. and Rex Crosland related to the facilities at            Reference (8)   
                       2801 South Decker Lake Lane, Salt Lake City, Utah

10.11         10       Asset Purchase Agreement between Milwaukee Acquisition Company,            Incorporated by  
                       Insulation Distributors, Inc., and Surgical Technologies, Inc.,             Reference (8)   
                       effective September 30, 1993

10.12         10       All-Inclusive Promissory Note and related All-Inclusive Trust              Incorporated by  
                       Deed, relating to sale of building and property, dated March 31,            Reference (9)   
                       1995, in the principal amount of $981,375.32


                                      26

<PAGE>

             SEC
Exhibit   Reference
Number     Number                               Title of Document                                    Location        
-----------------------------------------------------------------------------------------------------------------  
<S>       <C>          <C>                                                                        <C>
10.13         10       1996 Long-Term Stock Incentive Plan                                        Incorporated by   
                                                                                                   Reference (6)    

10.14         10       Form of $2.00 option granted to Surgical directors, officers,              Incorporated by  
                       and employees with related schedule                                         Reference (6)*  

10.15         10       Form of Option granted to Todd B. Crosland                                 Incorporated by  
                                                                                                   Reference (6)*  

10.16         10       Form of Option granted to Rockwell D. Schutjer                             Incorporated by  
                                                                                                   Reference (6)*  

10.17         10       Form of Proprietary Information, Inventions, and Non-                      Incorporated by  
                       Competition Agreement between 4Health and R. Lindsey Duncan                 Reference (6)   

10.18         10       Form of Employment Agreement between the Surviving Corporation             Incorporated by  
                       and Rockwell D. Schutjer                                                    Reference (6)*  

10.19         10       Deed of Trust Note and related Deed of Trust, Assignment of Rents,         Incorporated by  
                       Security Agreement, and Fixture Filing, dated February 20, 1997, in         Reference (4)   
                       the principal amount of $1,350,000 due Standard Insurance Company

10.20         10       Form of Non-Negotiable Promissory Note                                     Incorporated by  
                                                                                                   Reference (1)   

Item 20.               Other Documents or Statements to Security Holders
-----------------------------------------------------------------------------------------------------------------  
20.01         20       Notice of change of transfer and warrant agent.                            Incorporated by  
                                                                                                   Reference (3)   

Item 27.               Financial Data Schedule
-----------------------------------------------------------------------------------------------------------------  
27.01         27       Financial Data Schedule                                                      This Filing
</TABLE>

---------------- 
(1)  Incorporated by reference from 4Health's report on Form 10-K for the year
     ended December 31, 1997.
(2)  Incorporated by reference from 4Health's report on Form 10-Q for the
     quarter ended September 30, 1997.
(3)  Incorporated by reference from 4Health's report on Form 10-Q for the
     quarter ended March 31, 1997.
(4)  Incorporated by reference from 4Health's report on Form 10-K for the year
     ended December 31, 1996.
(5)  Incorporated by reference from Surgical's registration statement on Form 
     S-1 filed with the Commission, SEC file number 33-31863.
(6)  Incorporated by reference from Surgical's registration statement on Form 
     S-4 filed with the Commission, SEC file number 33-03243.
(7)  Incorporated by reference from Surgical's report on Form 10-K for the year
     ended March 31, 1992.
(8)  Incorporated by reference from Surgical's report on Form 10-K for the year
     ended March 31, 1994.
(9)  Incorporated by reference from Surgical's report on Form 10-Q for the
     quarter ended December 31, 1995.
(10) Incorporated by reference from Schedule 13D filed with the Commission by
     Allen & Company Incorporated on April 18, 1997.

*    Represents a management contract, compensatory plan, or arrangement
     required to be filed as an exhibit.


                                      27
<PAGE>
                                       
                         INDEX TO FINANCIAL STATEMENTS

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

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . F-3

Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . F-4

Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Notes to Financial Statements  . . . . . . . . . . . . . . . . . . . . . . F-8
</TABLE>







   
                                      28
    
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To 4Health, Inc.:

     We have audited the accompanying balance sheets of 4Health, Inc. (a Utah 
corporation) as of December 31, 1997 and 1996, and the related statements of 
operations, stockholders' equity and cash flows for each of the three years 
in the period ended December 31, 1997 (as restated - see Note 2).  These 
financial statements are the responsibility of the Company's management.  Our 
responsibility is to express an opinion on these financial statements based 
on our audits.

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

     In our opinion, the financial statements referred to above present 
fairly, in all material respects, the financial position of 4Health, Inc. as 
of December 31, 1997 and 1996, and the results of its operations and its cash 
flows for each of the three years in the period ended December 31, 1997 in 
conformity with generally accepted accounting principles.



                                        Arthur Andersen LLP



Denver, Colorado,
  February 20, 1998.

                                      F-1
<PAGE>

                                 4Health, Inc.
                                Balance Sheets
                       As of December 31, 1997 and 1996

   
<TABLE>
                                                                         1997           1996
                                                                     -----------    -----------
<S>                                                                  <C>            <C>
CURRENT ASSETS
  Cash and cash equivalents                                          $   109,787    $ 1,086,168
  Accounts receivable, net of allowance for doubtful
     accounts of $13,998 and $23,296, respectively                     1,609,692      1,105,207
  Inventories                                                          1,329,223      2,534,881
  Deferred tax asset                                                     225,506        313,872
  Other assets                                                           109,893        171,138
  Notes receivable, net of allowance of $300,000                          34,817        265,819
                                                                     -----------    -----------
    Total Current Assets                                               3,418,918      5,477,085

PROPERTY AND EQUIPMENT, NET                                            2,295,707      2,559,629
OTHER ASSETS, NET                                                        570,152      4,071,435
NOTES RECEIVABLE                                                          78,063        116,308
                                                                     -----------    -----------
    Total Assets                                                     $ 6,362,840    $12,224,457
                                                                     -----------    -----------
                                                                     -----------    -----------

CURRENT LIABILITIES
  Accounts payable                                                   $   698,310    $   484,079
  Accrued liabilities                                                    360,454        878,025
  Taxes payable                                                           60,587        113,833
  Notes Payable, current portion                                          29,454         20,555
  Line of credit                                                         740,797              -
  Capital leases                                                               -          3,733
                                                                     -----------    -----------
    Total Current Liabilities                                          1,889,602      1,500,225

DEFERRED TAX LIABILITY                                                    42,376        113,072
NOTES PAYABLE                                                          1,297,629      1,275,716
                                                                     -----------    -----------
    Total Liabilities                                                  3,229,607      2,889,013

COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)

STOCKHOLDERS' EQUITY
  Common stock, $0.01 par value, 30,000,000
    authorized, 12,068,798 and 11,460,374
    issued, respectively, 90,890 shares held in treasury                 120,687        114,603
  Additional paid-in capital - common stock                           11,407,668     11,261,852
  Additional paid-in capital - common stock warrants                     275,000              -
  Treasury stock, 90,890 shares                                         (50,000)       (50,000)
  Retained deficit                                                   (8,620,122)    (1,991,011)
                                                                     -----------    -----------
    Total Stockholders' Equity                                         3,133,233      9,335,444
                                                                     -----------    -----------

    Total Liabilities and Stockholders' Equity                       $ 6,362,840    $12,224,457
                                                                     -----------    -----------
                                                                     -----------    -----------
</TABLE>
    
     The accompanying notes are an integral part of these balance sheets.

                                      F-2
<PAGE>

                                 4Health, Inc.
                           Statements of Operations
             For the years ended December 31, 1997, 1996 and 1995

<TABLE>
                                                         1997            1996           1995
                                                      -----------    -----------    -----------
                                                      <S>            <C>            <C>
Net sales                                             $12,431,670    $17,351,829    $10,434,022

Cost of goods sold                                      6,122,315      6,924,473      3,802,877
                                                      -----------    -----------    -----------

Gross profit                                            6,309,355     10,427,356      6,631,145

Operating expenses:
Sales and marketing                                     6,197,524      9,585,232      3,873,466
Research and development                                  418,190        414,998        149,366
General and administrative                              3,031,447      3,080,588      1,476,986
Loss on write-off of intangible
  assets                                                3,202,431              -              -
                                                      -----------    -----------    -----------

                                                       12,849,592     13,080,818      5,499,818
                                                      -----------    -----------    -----------

(Loss) income from operations                          (6,540,237)    (2,653,462)     1,131,327
                                                      -----------    -----------    -----------

Other income (expense):
Interest income                                            51,727        146,592         27,542
Interest expense                                         (140,601)      (108,486)       (90,467)
                                                      -----------    -----------    -----------

                                                          (88,874)        38,106        (62,925)
                                                      -----------    -----------    -----------

Net (loss) income before
 income tax (provision) benefit                        (6,629,111)    (2,615,356)     1,068,402

Income tax (provision) benefit                                  -         65,215       (359,723)
                                                      -----------    -----------    -----------

NET (LOSS) INCOME                                     $(6,629,111)   $(2,550,141)   $   708,679
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------

Net (loss) income per
  common share - basic and diluted                    $      (.57)   $      (.26)   $       .08
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------

Weighted average common
  shares outstanding - basic                           11,615,004      9,896,822      8,707,214
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------

Weighted average common
  shares outstanding - diluted                         11,615,004      9,896,822      8,833,047
                                                      -----------    -----------    -----------
                                                      -----------    -----------    -----------
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-3

<PAGE>
                                       
                                 4Health, Inc.
                      Statements of Stockholders' Equity
             For the years ended December 31, 1997, 1996 and 1995

   
<TABLE>
                                                                                                                   Additional
                                                                                                                    Paid-In
                                                           Preferred Stock                Common Stock               Capital 
                                                       ----------------------------------------------------------------------
                                                       Common Stock                                                          
                                                        Equivalent                                                           
                                                          Shares         Amount        Shares          Amount        Amount  
                                                       ----------------------------------------------------------------------
<S>                                                    <C>              <C>           <C>             <C>          <C>       
BALANCES, December 31, 1994                                     -       $      -      8,703,442       $ 87,034     $  954,271

Issuance of Series A Convertible Preferred
  Stock for cash, net of offering costs of
  $87,229 consisting of cash and common
  stock                                                   376,167         15,000         11,285            113      1,427,658

Net income                                                      -              -              -              -              -
                                                       ----------------------------------------------------------------------

BALANCES, December 31, 1995                               376,167       $ 15,000      8,714,727       $ 87,147     $2,381,929

Conversion of a $50,000 shareholder note
  receivable for Treasury Stock                                 -              -              -              -              -
Conversion of Series A Convertible
  Preferred Stock                                        (376,167)       (15,000)       376,167          3,762         11,238
Common stock issued in merger with
  Surgical Technologies Inc.                                    -              -      2,271,108         22,711      8,773,955
Issuance of common stock to employees,
  directors and officers for options exercised                  -              -         98,372            983         94,730

Net loss                                                        -              -              -              -              -
                                                       ----------------------------------------------------------------------

BALANCES, December 31, 1996                                     -       $      -     11,460,374       $114,603    $11,261,852
                                                       ----------------------------------------------------------------------
                                                       ----------------------------------------------------------------------
<CAPTION>
                                                                                                                    
                                                                                                                    
                                                                   Treasury Stock                                   
                                                       ------------------------------                      Total    
                                                                                          Retained         Stock-   
                                                                                          Earnings        holders'  
                                                                Shares        Amount      (Deficit)        Equity   
                                                       ------------------------------------------------------------ 
<S>                                                    <C>                    <C>        <C>            <C>
BALANCES, December 31, 1994                                          -              -    $  (149,549)   $   891,756 
                                                                                                                    
Issuance of Series A Convertible Preferred                                                                          
  Stock for cash, net of offering costs of                                                                          
  $87,229 consisting of cash and common                                                                             
  stock                                                              -              -              -      1,442,771 
                                                                                                                    
Net income                                                           -              -        708,679        708,679 
                                                       ------------------------------------------------------------ 
                                                                                                                    
BALANCES, December 31, 1995                                          -              -     $  559,130   $  3,043,206 
                                                                                                                    
Conversion of a $50,000 shareholder note                                                                            
  receivable for Treasury Stock                                 90,890        (50,000)             -        (50,000)
Conversion of Series A Convertible                                                                                  
  Preferred Stock                                                    -              -              -              -
Common stock issued in merger with                                                                                  
  Surgical Technologies Inc.                                         -              -              -      8,796,666 
Issuance of common stock to employees,                                                                              
  directors and officers for options exercised                       -              -              -         95,713 
                                                                                                                    
Net loss                                                             -              -     (2,550,141)    (2,550,141)
                                                       ------------------------------------------------------------ 
                                                                                                                    
BALANCES, December 31, 1996                                     90,890       $(50,000)   $(1,991,011)   $ 9,335,444 
                                                       ------------------------------------------------------------ 
                                                       ------------------------------------------------------------ 
</TABLE>
    
                                      
       The accompanying notes are an integral part of these statements.


                                     F-4



<PAGE>

                                 4Health, Inc.
                      Statements of Stockholders' Equity
             For the years ended December 31, 1997, 1996 and 1995
                                  (Continued)

<TABLE>
                                                                                                               Additional 
                                                                                                                 Paid-In  
                                                         Preferred Stock                Common Stock             Capital  
                                                    ----------------------------------------------------------------------
                                                    Common Stock                                                          
                                                     Equivalent                                                           
                                                       Shares         Amount         Shares        Amount        Amount   
                                                    ----------------------------------------------------------------------
<S>                                                 <C>               <C>          <C>            <C>         <C>         
BALANCES, December 31, 1996                                 -         $    -       11,460,374     $114,603    $11,261,852 

Issuance of common stock to
  employees (current and former) for
  options exercised                                         -              -          108,424        1,084        150,816 
Issuance of warrants as compensation
  for investment banking services                           -              -                -            -              - 
Issuance of common stock to Old
  4Health shareholders pursuant to a
  realignment of equity interests
  (Note 1)                                                  -              -          500,000        5,000         (5,000)

Net loss                                                    -              -                -            -              - 
                                                    ----------------------------------------------------------------------

BALANCES, December 31, 1997                                 -         $    -       12,068,798     $120,687    $11,407,668 
                                                    ----------------------------------------------------------------------
                                                    ----------------------------------------------------------------------

<CAPTION>
                                                                                                                           
                                                                                  Additional                               
                                                              Treasury Stock        Paid-In                                
                                                    ----------------------------    Capital                       Total    
                                                                                     Common       Retained        Stock-   
                                                                                     Stock        Earnings       holders'  
                                                            Shares      Amount      Warrants      (Deficit)       Equity   
                                                    ---------------------------------------------------------------------- 
<S>                                                 <C>                <C>        <C>           <C>            <C>         
BALANCES, December 31, 1996                                 90,890     $(50,000)    $      -    $(1,991,011)   $ 9,335,444 
                                                                                                                           
Issuance of common stock to                                                                                                
  employees (current and former) for                                                                                       
  options exercised                                              -            -            -              -        151,900 
Issuance of warrants as compensation                                                                                       
  for investment banking services                                -            -      275,000              -        275,000 
Issuance of common stock to Old                                                                                            
  4Health shareholders pursuant to a                                                                                       
  realignment of equity interests                                                                                          
  (Note 1)                                                       -            -            -              -              - 
                                                                                                                           
Net loss                                                         -            -            -     (6,629,111)    (6,629,111)
                                                    ---------------------------------------------------------------------- 
                                                                                                                           
BALANCES, December 31, 1997                                 90,890    $(50,000)     $275,000    $(8,620,122)   $ 3,133,233 
                                                    ---------------------------------------------------------------------- 
                                                    ---------------------------------------------------------------------- 
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-5

<PAGE>

                                 4Health, Inc.
                           Statements of Cash Flows
             For the years ended December 31, 1997, 1996 and 1995

<TABLE>
                                                         1997           1996           1995
                                                     -----------    -----------     ---------
<S>                                                  <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                                    $(6,629,111)   $(2,550,141)   $  708,679
Adjustments to reconcile net (loss) income to
 net cash used in operating activities:
  Depreciation and amortization                          523,055        334,971       122,401
  Bad debt expense                                        15,788              -             -
  Loss on disposal of assets                              99,148          7,444        33,927
  Issuance of warrants for compensation expense          275,000              -             -
  Loss on write-off of intangible assets               3,202,431              -             -
(Increase) decrease in:
  Accounts receivable                                   (520,274)       (54,168)     (723,462)
  Inventory                                            1,205,658     (1,166,483)     (584,420)
  Other assets                                            84,132       (147,580)      (52,118)
  Deferred tax assets                                     88,366       (231,862)      (31,005)
Increase (decrease) in:
  Accounts payable                                       214,231       (125,252)      311,852
  Accrued interest payable                                     -              -         4,984
  Accrued liabilities                                   (517,571)       558,913        84,920
  Taxes payable                                          (53,246)        63,868       (24,495)
  Deferred tax liability                                 (70,696)        22,507        32,458
                                                     -----------    -----------    ----------
Net cash used in operating activities                 (2,083,089)    (3,287,783)     (116,279)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities                    -        524,002             -
Acquisition of Surgical Technologies, Inc.                     -      3,639,257             -
Purchase of fixed assets                                 (84,111)      (532,754)     (689,030)
Proceeds from asset dispositions                             600              -        11,205
Proceeds from note receivable                            269,247        262,062             -
                                                     -----------    -----------    ----------
Net cash provided by (used in) investing activities      185,736      3,892,567      (677,825)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Preferred Stock                                  -              -     1,500,000
Preferred Stock issuance costs                                 -              -       (57,229)
Proceeds from common stock                               151,900         95,713             -
Surgical Technologies, Inc. acquisition costs                  -       (457,551)            -
Borrowings on short-term debt                          2,577,490              -             -
Borrowings on long-term debt                           1,350,000              -             -
Repayments on short-term borrowings                   (1,836,693)             -             -
Repayments on long-term borrowings                    (1,319,188)       (71,198)            -
Repayments on capital leases                              (2,537)        (5,515)       (3,413)
                                                     -----------    -----------    ----------
Net cash provided by (used in) financing activities      920,972       (438,551)    1,439,358
                                                     -----------    -----------    ----------

NET (DECREASE) INCREASE IN CASH                         (976,381)       166,233       645,254

CASH AND CASH EQUIVALENTS, at beginning of period      1,086,168        919,935       274,681
                                                     -----------    -----------    ----------

CASH AND CASH EQUIVALENTS, at end of period         $    109,787    $ 1,086,168    $  919,935
                                                     -----------    -----------    ----------
                                                     -----------    -----------    ----------
</TABLE>

       The accompanying notes are an integral part of these statements.

                                      F-6
<PAGE>

                                 4Health, Inc.
                           Statements of Cash Flows
             For the years ended December 31, 1997, 1996 and 1995
                                  (Continued)

<TABLE>
                                                           1997         1996         1995
                                                        ---------    ----------    ---------
<S>                                                     <C>          <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION:
  Cash paid during the year for income taxes            $  40,871    $      800    $ 443,769
  Cash paid during the year for interest                  128,190        98,527       83,735

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
 FINANCING ACTIVITIES:

   
    

During 1996, assets and liabilities acquired in
 connection with the reverse purchase of
 Surgical Technologies, Inc. (See Note 1):
    Cash and cash equivalents                                        $3,639,257
    Marketable securities                                               524,002
    Accounts receivable                                                  76,419
    Inventories                                                         390,508
    Deferred tax asset                                                   51,005
    Property and equipment                                              117,842
    Other assets                                                      1,037,257
    Notes receivable                                                    644,189
    Accounts payable                                                   (193,765)
    Taxes payable                                                        (9,398)
    Deferred tax liability                                              (58,107)
                                                                     ----------
Net assets acquired                                                   6,219,209
    Less acquisition costs                                             (457,551)
                                                                     ----------
Net equity issued                                                    $5,761,658
                                                                     ----------
                                                                     ----------
</TABLE>

During 1996, a $50,000 note receivable from a shareholder was canceled in
 exchange for 90,890 shares of common stock received from the shareholder.

During 1995, for services relating to the sale of preferred stock, the Company
 issued 11,285 shares of common stock to a director.  The fair value was
 estimated to be approximately $30,000.

       The accompanying notes are an integral part of these statements.

                                      F-7
<PAGE>

                                 4Health, Inc.
                         Notes to Financial Statements
                          December 31, 1997 and 1996

(1)  ORGANIZATION AND BUSINESS ACTIVITY

     ORGANIZATION

4health, Inc. was incorporated in California and commenced operations on
February 17, 1993.  4health, Inc. acquired Nature's Secret, a vitamin and
health food supplement company, on February 17, 1993, by issuing 4,000,000
shares of common stock to R. Lindsey Duncan, 4health's president, founder and
majority stockholder.

On July 15, 1996, 4health, Inc. ("Old 4Health"), a California corporation,
merged with Surgical Technologies, Inc., ("Surgical") a Utah corporation. The
merger was recorded as a reverse purchase.  The merger included a two for four
reverse split of Surgical's common stock.  Pursuant to the Merger Agreement,
Surgical continues as the surviving corporate entity, with its name changed to
"4Health, Inc." (the "Company" or "4Health").

The Merger Agreement between Surgical and Old 4Health provided for the merger
of Old 4Health with and into Surgical, pursuant to which: (a) the shares of Old
4Health common stock and the shares of Old 4Health Series A preferred stock
were exchanged for approximately 9,000,000 shares of Surgical common stock, (b)
each four shares of Surgical common stock issued and outstanding were converted
into two shares of Surgical common stock (or 2,271,108 shares) and one warrant
to purchase a share of the Company's common stock  at $11.00 per share (or
1,135,554 total shares), (c) the board of directors of the Company was
reconstituted to include five designees of Old 4Health and two designees of
Surgical, and (d) the articles of incorporation of Surgical were amended to (i)
change its name to 4Health, Inc., (ii) increase the authorization of common
stock to 30,000,000 shares, (iii) add a "fair price" provision in the event of
certain corporate transactions, and (iv) restrict the use of written consents
of stockholders in lieu of meetings.  The warrants may be redeemed by the
Company at $0.01 per warrant, provided that the trading price of the underlying
common stock exceeds $13.75 per share for 30 consecutive days.

As part of the merger, all outstanding options to purchase shares of Old
4Health common stock were converted, pursuant to the Old 4Health conversion
ratio (1.50467:1), into options to purchase shares of the Company at such
converted exercise prices, such that the cash received by the Company upon
exercise will be unchanged.

Outstanding options to purchase an aggregate of 651,000 shares of Surgical
common stock at a weighted average exercise price of $2.23 per share were
converted into options to purchase an aggregate of 325,000 shares of the
Company's common stock, at a weighted average exercise price of $4.45 per
share.  In addition, outstanding options to purchase an aggregate of 599,999

                                      F-8
<PAGE>

shares of Old 4Health common stock at a weighted average exercise price of
$6.70 per share were converted into options to purchase an aggregate 902,800
shares of the Company's common stock at a weighted average exercise price of
$4.45 per share.

The number of shares of the Company's common stock issuable to the holders of
Old 4Health common stock and Old 4Health Series A preferred stock was subject
to adjustment in the event that the Company did not realize at least $2,000,000
in earnings, before interest and income taxes, from the ID Technology acquired
from Surgical during the twelve month period following the merger.  On
September 26, 1997, pursuant to this adjustment clause, 500,000 additional
shares of common stock were issued to the Old 4Health shareholders to realign
the equity interests because of the failure of the acquired assets to produce
the required level of earnings.

     PRO FORMA CONDENSED COMBINED OPERATIONS

As a result of the sale of Surgical's specialty metals fabrication business
segment and its disposable surgical pack and drape manufacturing product lines,
both of which occurred prior to the merger, the continuing operations of
Surgical subsequent to the merger were not material compared to the continuing
operations of 4Health.  Accordingly, the unaudited pro forma condensed
statements of operations would reflect only the historical operations of
4Health.

     BUSINESS ACTIVITY

The Company wholesales vitamins and health food supplements developed by 
Lindsey Duncan under the brand names of Nature's Secret-Registered 
Trademark-, Harmony Formulas-Registered Trademark-, and 4Health-TM-.  
Nature's Secret products are marketed through retail outlets for the health 
food industry, Harmony Formulas products are marketed to health care 
practitioners throughout the United States, and 4Health products are marketed 
through the mass market.  The products are formulated to appeal to the 
general public and address overall health considerations.

(2)  RESTATEMENT
   
The Company's balance sheets as of December 31, 1997 and 1996 and the related 
statements of operations, stockholders' equity and cash flows for each of the 
two years in the period ended December 31, 1997 have been restated.  The 
restatement is a result of the Securities and Exchange Commission's review of 
the Company's proxy materials related to the prospective merger with Irwin 
Naturals (See Note 10).  The restatement affects the accounting treatment of 
the purchase price recorded for the Surgical acquisition effective July 15, 
1996.  In connection therewith, the Company increased the intangible asset 
values recorded for the Surgical acquisition based on the average stock price 
of Surgical for the two days before and after the announcement of the 
Surgical acquisition by $3,042,000.  The remaining intangible assets of 
$3,202,000 were subsequently written off in 1997 because the continuing 
Surgical operations did not generate sufficient revenue to justify continuing 
such valuation.  The restatement also included an adjustment to write-down 
inventory by $758,000 in connection with an exchange for barter credits in 
February 1997. These write downs were considered corrections of errors under 
APB No. 20 and the affected financial reporting periods were restated.
    

                                      F-9
<PAGE>

   
The restatement was a non-cash charge against earnings and does not reflect 
an adverse change in the Company's cash flow previously reported. The 
accounts affected by the restatement are as follows:
    
<TABLE>
                                                      --------------------------------------------------------
                                                                           As of December 31,
                                                      --------------------------------------------------------
                                                      Previously         As         Previously          As
                                                       Reported       Restated       Reported        Restated
                                                         1997           1997           1996            1996
                                                      -----------    -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>            <C>
Other assets, net                                     $ 1,317,350    $   680,045    $ 1,307,669    $ 4,242,573
Deferred tax liability                                      5,638         42,376        152,112        113,072
Additional paid-in capital -
  common stock                                          7,904,884     11,407,668      8,226,844     11,261,852
Retained deficit                                       (4,442,387)    (8,620,122)    (1,929,947)    (1,991,011)

                                                      --------------------------------------------------------
                                                                           As of December 31,
                                                      --------------------------------------------------------
                                                      Previously         As         Previously          As
                                                       Reported       Restated       Reported        Restated
                                                         1997           1997           1996            1996
                                                      -----------    -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>            <C>
Net sales                                             $13,189,979    $12,431,670            N/A            N/A
General and administrative
  expenses                                              2,951,294      3,031,447     $2,980,484   $  3,080,588
Loss on write-off of intangible
  assets                                                        -      3,202,431            N/A            N/A
Income tax benefit                                         75,778              -         26,175         65,215
</TABLE>
   
The restatement did not affect the beginning balance in retained earnings for 
the year ended December 31, 1996 and decreased beginning of the year retained 
earnings by $61,000 for the year ended December 31, 1997.  The effect on net 
income and related per share amounts for each of the years is as follows:
    
<TABLE>
                                                      --------------------------------------------------------
                                                                           As of December 31,
                                                      --------------------------------------------------------
                                                      Previously         As         Previously          As
                                                       Reported       Restated       Reported        Restated
                                                         1997           1997           1996            1996
                                                      -----------    -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>            <C>
Net loss before income tax benefit                    $(2,588,218)   $(6,629,111)   $(2,515,252)   $(2,615,356)
Net loss                                               (2,512,440)    (6,629,111)    (2,489,077)    (2,550,141)
Net loss per common share
  - basic and diluted                                 $      (.22)   $      (.57)   $      (.25)   $      (.26)
</TABLE>

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    CASH AND CASH EQUIVALENTS

The Company considers all highly liquid cash investments with original 
maturity dates of three months or less to be cash equivalents.

    CONCENTRATION OF CREDIT RISK

The Company has no significant off-balance sheet concentrations of credit 
risk such as foreign exchange contracts, options contracts or other foreign 
hedging arrangements.  The Company 

                                      F-10
<PAGE>

maintains the majority of its cash balance with two financial institutions, 
in the form of demand deposits and money market accounts.

The Company performs ongoing credit evaluations of its customers' financial 
condition and generally does not require collateral.  The Company maintains 
reserves for estimated credit losses.  Its accounts receivable balances are 
primarily domestic.  The Company has one principal customer which accounted 
for approximately 6% of its total revenue for the year ended December 31, 
1997, 30% of its total revenue for the year ended December 31, 1996 and 13% 
of its total revenue for the year ended December 31, 1995.

     OTHER ASSETS
   
Included in other assets at December 31, 1996 was unamortized goodwill 
resulting from the merger (See Note 1) of approximately $3,227,000 and the ID 
Technology acquired from Surgical of approximately $727,000.  The unamortized 
ID Technology is used in angioplasty procedures.  These intangible assets are 
being amortized using the straight-line method over a period of eight years.
    
In 1997, the purchase price for Surgical was adjusted downward because of the 
failure of the former Surgical assets to produce a specific level of earnings 
in the first year (See Note 1).  The goodwill arising from the merger was 
reduced to $0 and the value of the ID Technology was reduced to $480,000 at 
December 31, 1997.  The Company believes the carrying value of the asset is 
fully recoverable.

On February 25, 1997, 4Health entered into a barter credit agreement with 
Active Media Services, Inc.  Under the terms of the agreement, the Company 
exchanged with Active Media Services, Inc. certain inventory with a cost of 
$758,308 for which the Company received $2,300,000 in barter credits.  These 
barter credits can be used in lieu of cash to purchase goods and services 
available through Active Media Services, Inc.  4Health intends to use these 
barter credits to reduce future advertising, printing, travel and other 
normal operating expenditures.  This transaction was recorded as a reduction 
of inventory.

     INVENTORIES

Inventories consist primarily of vitamins and health food supplements and are 
valued at the lower of first-in, first-out cost or net realizable value.  As 
of December 31, 1997 and 1996, all of the Company's inventory consisted of 
purchased finished goods.

     PROPERTY AND EQUIPMENT

Property and equipment additions, as well as major renewals and improvements to
property and equipment, are capitalized at cost while repairs and maintenance
costs which do not improve or extend the life of the respective assets are
expensed when incurred.  Depreciation and

                                      F-11
<PAGE>

amortization is provided using the straight-line method at rates based on 
estimated useful lives which range from 3.5 to 39 years.  Property and 
equipment consisted of the following at December 31:

<TABLE>
                                               1997           1996
                                            ----------     ----------
<S>                                         <C>            <C>
Land                                        $  270,000     $  270,000
Buildings and improvements                   1,606,527      1,567,444
Machinery and equipment                        174,779        201,036
Furniture, fixtures and equipment              760,364        868,757
                                            ----------     ----------
                                             2,811,670      2,907,237
Less-accumulated depreciation                 (515,963)      (347,608)
                                            ----------     ----------
                                            $2,295,707     $2,559,629
                                            ----------     ----------
                                            ----------     ----------
</TABLE>

Upon sale or other disposition of property and equipment, the cost and 
related accumulated depreciation or amortization are removed from the 
accounts and any gain or loss is included in the determination of income or 
loss.

     IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets for impairment whenever events or 
changes in circumstances indicate that the carrying amount of an asset may 
not be recoverable from future undiscounted cash flows.  Impairment losses 
are recorded for the difference between the carrying value and fair value of 
the long-lived asset.

     STOCK BASED COMPENSATION PLANS
   
In October of 1995, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for 
Stock-Based Compensation."  SFAS No. 123 establishes financial accounting and 
reporting standards for stock-based compensation. The Statement defines a 
fair value-based method of accounting for an employee stock option or similar 
equity instrument.  However, it also allows an entity to continue to measure 
compensation costs for those plans using the intrinsic value-based method of 
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to 
Employees."  Entities electing to remain with the accounting in Opinion No. 
25 must make pro forma disclosures of net income and earnings per share, as 
if the fair value-based method of accounting defined in the Statement had 
been applied.  Additionally, certain other disclosures are required with 
respect to stock compensation and the assumptions used to determine the pro 
forma effects of SFAS No. 123.  The Company adopted SFAS No. 123 during 1996. 
The Company has elected to make pro forma disclosures as allowed by SFAS No. 
123  (See Note 7).
    
     REVENUE RECOGNITION

The Company recognizes revenue from product sales at the time of shipment.
Sales returns and allowances are estimated at each reporting date and a reserve
is established.

                                      F-12
<PAGE>

     FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, short-term trade 
receivables and payables and short-term and long-term debt.  The carrying 
values of cash and short-term trade receivables, payables and short-term debt 
approximate fair value.  The fair value of long-term notes payable is 
estimated based on current rates available for debt with similar credit risk, 
yield and maturity and at December 31, 1997 and 1996, approximates the 
carrying value.

     EARNINGS PER SHARE

Effective December 15, 1997, the Company has adopted the provisions of 
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings 
Per Share."  SFAS No. 128 requires entities to present both Basic Earnings 
Per Share ("EPS") and Diluted EPS.  Basic EPS excludes dilution and is 
computed by dividing income available to common stockholders by the 
weighted-average number of common stock outstanding for the period. Diluted 
EPS reflects the potential dilution that could occur if securities or other 
contracts to issue common stock were exercised or converted into common stock 
or resulted in the issuance of common stock that then shared in the earnings 
of the entity.  All earnings per share amounts for 1996 and 1995 have been 
restated to reflect the adoption of SFAS No. 128.

<TABLE>
                                                                        Years ended December 31,
                                                               (in thousands, except per share amounts)
                                      ---------------------------------------------------------------------------------------
                                                    1997                            1996                       1995
                                      ---------------------------------------------------------------------------------------
                                                                Per                           Per                        Per
                                        Loss       Shares      Share      Loss     Shares    Share    Income    Shares  Share
                                        ----       ------      -----      ----     ------    -----    ------    ------  -----
<S>                                   <C>          <C>         <C>      <C>        <C>       <C>      <C>       <C>     <C>
Net (loss) income                     $(6,629)     11,615               $(2,550)    9,897              $709     8,707
Basic EPS                                                      $(.57)                        $(.26)                      $.08
                                                               -----                         -----                       ----
                                                               -----                         -----                       ----
Effect of diluted securities:                                                                        
  Convertible preferred                                                                              
     stock                                                                                                        119
  Stock options                                                                                      
     outstanding                                                                                                    7
                                      ---------------------------------------------------------------------------------------
Net (loss) income                     $(6,629)      11,615              $(2,550)    9,897              $709     8,833
                                      -------       ------              -------     -----              ----     -----     
                                      -------       ------              -------     -----              ----     -----     
Diluted EPS                                                    $(.57)                        $(.26)                      $.08
                                                               -----                         -----                       ----
                                                               -----                         -----                       ----
</TABLE>

  Assumed conversions were not included in the calculation for diluted EPS in
  1997 and 1996 as they would have been anti-dilutive.

     Recently Issued Accounting Standards

In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income."  
SFAS No. 130 establishes standards for reporting and display of comprehensive 
income and its components (revenue, gains and losses) in a full set of 
general-purpose financial statements.  SFAS No. 130 requires that all items 
that are required to be recognized under accounting standards as components 
of comprehensive income be reported in a financial statement that is 
displayed with

                                      F-13
<PAGE>

the same prominence as other financial statements.  This statement is 
effective for fiscal years beginning after December 15, 1997.  
Reclassification of financial statements for earlier periods provided for 
comparative purposes is required.  The impact of the adoption of SFAS No. 130 
on the Company's financial position and results of operations is not expected 
to be material.
   
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an 
Enterprise and Related Information," which supersedes SFAS No. 14, "Financial 
Reporting for Segments of a Business Enterprise."  SFAS No. 131 establishes 
standards for the way that public business enterprises report information 
about operating segments in annual financial statements and requires that 
those enterprises report selected information about operating segments in 
interim financial reports issued to shareholders.  It also establishes 
standards for related disclosures about products and service, geographic 
areas and major customers.  This statement is effective for financial 
statements for periods beginning after December 15, 1997.  In the initial 
year of application comparative information for earlier years is to be 
restated.  SFAS No. 131 may require certain disclosures to be made by the 
Company, if applicable.
    
     INCOME TAXES

The Company accounts for income taxes under the provisions of SFAS No. 109, 
"Accounting for Income Taxes."  SFAS No. 109 requires recognition of deferred 
income tax assets and liabilities for the expected future income tax 
consequences, based on enacted tax laws, of temporary differences between the 
financial reporting and tax bases of assets and liabilities.

     ESTIMATES MADE BY MANAGEMENT

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

     RECLASSIFICATIONS

Certain reclassifications have been made to prior year balances to conform 
with the current year  presentation.

(4)  NOTES PAYABLE
   
During 1997, the Company refinanced the corporate headquarters building loan 
for $1,350,000 for a five-year term. Payments of principal and interest of 
$11,503 are due monthly with the remaining balance due at the end of year 
five. Interest is calculated at the rate of 8.25% per year. Also during 
September 1997, the Company entered into a $1,500,000 three year revolving 
credit agreement with Norwest Business Credit, Inc. used for financing growth 
in inventory and receivables and other working capital needs.  The agreement 
allows the Company to borrow up to $1,500,000 if
    
                                      F-14
<PAGE>

eligible accounts receivable and inventory are sufficient to warrant such 
borrowings and contains certain covenants customary for this type of 
agreement. Borrowing on the line is subject to certain limitations and is 
secured by accounts receivable, inventory and various other assets.  All of 
the Company's receipts are applied to the credit facility on a daily basis.  
The loan bears interest at Minnesota's Base Rate plus 2.75% and is subject to 
a minimum interest charge which is calculated on a quarterly basis.  At year 
end, the maximum amount available to borrow was $.93 million, of which, $.19 
million was still available.

The maturities of the note payable and the revolving credit agreement are as 
follows:

<TABLE>
<S>                                       <C>
          1998                            $  770,251
          1999                                31,978
          2000                                34,718
          2001                                37,694
          2002                             1,193,239
                                          ----------
                     Total                $2,067,880
                                          ----------
                                          ----------
</TABLE>

(5) NOTES RECEIVABLE

As of December 31, 1997 and 1996 notes receivable consisted of the following:

<TABLE>
                                                               1997           1996
                                                             --------      ---------
<S>                                                          <C>           <C>
Note receivable from a third party for certain assets,
  bearing interest 8%, with interest and principal due on
  January 31, 1997.  Subsequent to the year ended
  December 31, 1996, the note receivable was extended
  to September 1, 1997 and has been paid.                    $      -      $ 250,000

Note receivable from a third party for the purchase of
  certain assets, bearing interest 10% through February
  16, 1999, secured by purchased assets                       112,880        132,127

Less current portion                                          (34,817)      (265,819)
                                                             --------      ---------
Long-term notes receivable                                   $ 78,063        116,308
                                                             --------      ---------
                                                             --------      ---------
</TABLE>


(6)  RELATED-PARTY TRANSACTIONS

     LOAN PAYABLE

The majority shareholder loaned the Company $200,000 during 1994 for the down 
payment required on the purchase of the corporate headquarters building.  The 
loan was unsecured and bore interest at 7.0% and was due by March 31, 1997. 
This loan was paid off in 1996.  Interest expense for fiscal 1996 totaled 
$2,492.

                                      F-15
<PAGE>

     NOTE RECEIVABLE

In 1996, the Company received treasury stock as payment for a $50,000 
shareholder note receivable  (See Note 7).

(7)  STOCKHOLDERS' EQUITY

     TREASURY STOCK

In 1996, the note receivable previously outstanding from a shareholder was 
exchanged for 60,405 shares of common stock received from the shareholder 
(See Note 6).

     ISSUANCE OF STOCK

During 1995, Old 4Health sold 15,000 shares of Series A Convertible Preferred 
Stock ("Preferred Stock"), $1.00 par value, at $100.00 per share for gross 
proceeds of $1,500,000.  The Company used the funds for working capital and 
investment purposes.  The Company also issued 7,500 shares of common stock 
valued at $30,000 to a director of the Board in exchange for services related 
to consummating the Preferred Stock offering effected in 1995.
   
In 1996, in conjunction with the merger transaction (See Note 1), all 
5,731,381 shares of Old 4Health common stock and all 15,000 shares of Old 
4Health Preferred Stock outstanding were converted into an aggregate of 
approximately 9,000,000 shares of common stock, split at a rate of 1.50467 to 
1 for common stock and at 25.07782 to 1 for the Preferred Stock.  Further, 
2,271,108 shares of common stock were issued to holders of Surgical common 
stock.  Shares of 4Health common stock, Preferred Stock and treasury stock 
have been retroactively restated to reflect the equivalent number of shares 
received in the merger, as presented in the Statements of Stockholders' 
Equity.
    
In 1996 and 1997, common stock was issued as a result of options exercised by 
employees, an officer and a director of the Company as well as prior Surgical 
employees.  The exercise prices ranged from $3.99 to $4.15 per share in 1997 
and from $3.32 to $4.15 per share in 1996.  Also during 1997, 500,000 shares 
of common stock were issued to Old 4Health shareholders pursuant to a clause 
in the merger agreement related to ID Technology post-merger earnings (See 
Note 1).

     WARRANTS
   
In 1997, the Company entered into a three-year contract with Allen & Company 
to provide investment banking services.  In consideration for these services 
the Company issued to Allen & Company warrants to purchase 1,000,000 shares 
of the Company's common stock at an exercise price of $6.00 per share and 
additional warrants to purchase 250,000 shares of the Company's common stock, 
at an exercise price of $4.00 per share, both exercisable up to the fifth 
anniversary of the date of issuance.  The Company recorded professional 
service expense of $275,000 in connection with the issuance of these warrants.
    

                                      F-16
<PAGE>

In 1996, as part of the merger transaction, warrants were issued to holders 
of Surgical common stock at the rate of one warrant per four shares of 
Surgical common stock held.  Each warrant entitles the holder to acquire one 
share of the Company's common stock at an exercise price of $11.00 per share, 
for a period of 18 months.  Compensation expense of $223,243, as calculated 
for SFAS No. 123, related to the warrants, is included in the pro forma 
information presented below.

     STOCK OPTION PLAN

In 1996, upon consummation of the merger, the 1995 Stock Option Plan was 
terminated.  The Long-Term Stock Incentive Plan ("LTSIP") as previously 
sponsored by Surgical was adopted.  The LTSIP allows issuance of incentive 
stock options and non-qualified stock options and is administered by the 
Long-Term Stock Incentive Plan Administration Committee of the Board of 
Directors. The LTSIP can authorize an aggregate of 3,250,000 options 
exercisable into shares of new common stock.  The option price of incentive 
stock options shall not be less than the fair market value of the Company's 
common stock on the date of the grant.

All outstanding Old 4Health options were canceled/reissued pursuant to the 
merger.  Options reissued under the LTSIP were issued giving effect to the 
rate at which common stock was split, as noted above, times the number of 
options previously held.

A summary of stock option activity for the years ended December 31, 1995, 
1996 and 1997 is as follows, including retroactive treatment of the stock 
split:

<TABLE>
                                                        Number of      Weighted Average
                                                         Shares         Exercise Price
                                                        ---------      ----------------
<S>                                                     <C>            <C>
Balance, December 31, 1994                                      -                -
   Granted                                                279,869            $4.57
   Exercised                                                    -                -
   Canceled                                                (4,514)           $4.15
                                                        ---------            -----
Balance, December 31, 1995                                275,355            $4.57
   Granted                                              1,211,814            $4.37
   Exercised                                             (172,622)           $3.91
   Canceled                                              (448,444)           $4.93
                                                        ---------            -----
Balance, December 31, 1996                                866,103            $4.35
   Granted                                                192,500            $5.92
   Exercised                                             (186,396)           $4.01
   Canceled                                              (129,564)           $6.00
                                                        ---------            -----
Balance, December 31, 1997                                742,643            $4.57
                                                        ---------            -----
                                                        ---------            -----

Options exercisable at
   December 31, 1995                                            -                -
   December 31, 1996                                      498,478            $4.01
   December 31, 1997                                      585,516            $4.24

Weighted average fair value of options granted during
   1995                                                         -            $2.29
   1996                                                         -            $0.56
   1997                                                         -            $1.62
</TABLE>

                                      F-17
<PAGE>

The following table summarizes information about the options outstanding at 
December 31, 1997:

<TABLE>
                                      Options Outstanding                       Options Exercisable
                     -------------------------------------------------      -------------------------
                                          Weighted 
                        Number             Average            Weighted        Number         Weighted
                     Outstanding          Remaining           Average       Exercisable      Average 
Range of Exercise    at December         Contractual          Exercise      at December      Exercise
      Prices           31, 1997              Life              Price          31, 1997        Price
-----------------    -----------         -----------          --------      -----------      --------
<S>                  <C>                 <C>                  <C>           <C>              <C>
$3.32 - $4.98           543,516           2.94 years           $  4.07         543,516        $  4.07
$5.50 - $7.69           186,127           3.80 years              5.74          32,000           5.79
$8.44 - $8.75            13,000           1.76 years              8.58          10,000           8.63
                        -------                                                ------- 
   Total                742,643           3.14 years           $  4.57         585,516        $  4.24
                        -------                                                ------- 
                        -------                                                ------- 
</TABLE>

As noted in Note 3, the Company has elected to account for its stock-based 
compensation plans for employees and directors under APB 25. The Company 
recorded no compensation expense during 1997, 1996 or 1995 related to APB 25. 
Accordingly, for purposes of the pro forma disclosures presented below, the 
Company has computed the fair values of all options granted during 1997, 1996 
and 1995 using the Black-Scholes pricing model and the following weighted 
average assumptions:

<TABLE>
                                       1997           1996           1995
                                     ---------      ---------      ---------
<S>                                  <C>            <C>            <C>
Risk-free interest rate                 5.97%          5.60%          6.27%
Expected dividend yield                  0.0%           0.0%           0.0%
Expected lives outstanding           2.2 years      1.5 years      2.7 years
Expected volatility                    60.68%         58.44%         58.44%
</TABLE>

To estimate lives of options for this valuation, it was assumed options will 
be exercised one year after becoming fully vested.  Cumulative compensation 
costs recognized in pro forma net income or loss with respect to options that 
are forfeited prior to vesting is adjusted as a reduction of pro forma 
compensation expense in the period of forfeiture.  The expected volatility 
was based on an approximation of similar companies' volatility.  Actual 
volatility of the Company's common stock varies.  Fair value computations are 
highly sensitive to the volatility factor assumed; the greater the 
volatility, the higher the computed fair value of options granted.

The total fair value of options granted was computed to be approximately 
$311,857, $1,164,173 and $427,837 for the years ended December 31, 1997, 1996 
and 1995, respectively.  These amounts are amortized ratably over the vesting 
periods of the options or recognized at the date of grant if no vesting 
period is required.  Pro forma stock-based compensation, net of the effect of 
forfeitures, was $281,178, $1,037,949 and $265,069 for 1997, 1996 and 1995, 
respectively.

                                      F-18
<PAGE>

If the Company had accounted for its stock-based compensation plans in 
accordance with SFAS No. 123, the Company's net (loss) income and pro forma 
net (loss) income per common share would have been reported as follows:

<TABLE>
                                                  1997          1996          1995
                                              -----------    -----------    --------
<S>                                           <C>            <C>            <C>
Net (loss) income:
     As reported                              $(6,629,111)   $(2,550,141)   $708,679
                                              -----------    -----------    -------- 
                                              -----------    -----------    -------- 
     Pro forma                                $(6,910,289)   $(3,588,090)   $443,610
                                              -----------    -----------    -------- 
                                              -----------    -----------    -------- 
EPS:
     Basic and diluted as reported (Note 3)   $      (.57)   $      (.26)   $    .08
                                              -----------    -----------    -------- 
                                              -----------    -----------    -------- 
     Basic and diluted pro forma              $      (.59)   $      (.36)   $    .05
                                              -----------    -----------    -------- 
                                              -----------    -----------    -------- 
</TABLE>

Weighted average shares used to calculate pro forma net income (loss) per 
share were determined as described in Note 3, except in applying the treasury 
stock method to outstanding options, net proceeds assumed received upon 
exercise were increased by the amount of compensation cost attributable to 
future service periods and not yet recognized as pro forma expense.  Because 
the SFAS No. 123 method of accounting has not been applied to options granted 
prior to January 1, 1995, the resulting pro forma compensation costs may not 
be representative of that to be expected in future years.

(8)  INCOME TAXES

The Company is subject to corporate and state income taxes.  Deferred taxes 
are determined based on the estimated future tax effects of differences 
between the financial reporting and tax bases of assets and liabilities given 
the provisions of the enacted tax laws.  The net deferred tax asset 
(liability) is comprised of the following:

<TABLE>
                                                         1997           1996
                                                      -----------    -----------
<S>                                                   <C>            <C>
DEFERRED TAX ASSETS:
  Allowance for bad debt                              $     5,459    $     9,085
  Sales reserve                                            19,708        156,000
  Inventory tax adjustment                                 26,274              -
  Inventory reserve                                        71,444         50,505
  Warrants                                                107,250              -
  Accrued liabilities                                     164,139         36,733
  Net operating loss carryforward                       5,642,125      2,433,050
                                                      -----------    -----------
     Total deferred tax assets                          6,036,399      2,685,373
DEFERRED TAX LIABILITIES:
  Inventory tax adjustment                                (49,986)             -
  Tax over book depreciation/amortization                (161,158)      (113,072)
                                                      -----------    -----------
     Net deferred tax asset (liability),
       before valuation reserve                         5,825,255      2,572,301
  Valuation reserve                                    (5,642,125)    (2,371,501)
                                                      -----------    -----------
     Net deferred tax asset                           $   183,130    $   200,800
                                                      -----------    -----------
                                                      -----------    -----------
        Current portion                                   225,506        313,872
        Long-term portion                                 (42,376)      (113,072)
                                                      -----------    -----------
                                                      $   183,130    $   200,800
                                                      -----------    -----------
                                                      -----------    -----------
</TABLE>

                                      F-19

<PAGE>

The Company provided a valuation allowance to offset the majority of its 1996
and all of its 1997 net operating loss carryforwards primarily due to its
history of operating losses.

The components of the income tax (benefit) provision are as follows:

<TABLE>
                                               Years Ended December 31,
                                         ------------------------------------
                                           1997           1996         1995
                                         --------      ---------     --------
<S>                                      <C>           <C>           <C>
Current:
  Federal                                $(16,970)     $ 143,340     $319,568
  State                                      (700)           800       38,702
Deferred:
  Federal                                  17,670       (209,355)       1,453
                                         --------      ---------     --------
     Total                               $    -        $ (65,215)    $359,723
                                         --------      ---------     --------
                                         --------      ---------     --------
</TABLE>

A reconciliation between the Company's effective tax rate and the statutory
federal income tax rate on the income (loss) from continuing operations is as
follows:

<TABLE>
                                                  1997        1996       1995
                                                 -----       -----       ----
<S>                                              <C>         <C>         <C>
Statutory federal income tax rate                (34.0%)     (34.0%)     34.0%
State income taxes                                (5.0)       (5.0)       3.6
Utilization of net operating loss                  -           -         (5.5)
Establishment of valuation allowances             40.0        32.9        -
Short-year tax provision                           -           5.7        -
Other                                             (1.0)       (2.1)       1.6
                                                 -----       -----       ----
Effective income tax rate                          (.0%)      (2.5%)     33.7%
                                                 -----       -----       ----
                                                 -----       -----       ----
</TABLE>

(9)  COMMITMENTS AND CONTINGENCIES

The Company entered into certain leases which have various expiration dates.
Rental expense was $134,763, $132,980 and $13,612 for the years ended December
31, 1997, 1996 and 1995, respectively.  Future minimum rental payments
applicable to these noncancelable operating leases are as follows for the years
ending December 31,:

<TABLE>
<S>                                       <C>
      1998                                $126,826
      1999                                 133,560
      2000                                 126,592
      2001                                  96,440
                                          --------
                                          $483,418
                                          --------
                                          --------
</TABLE>

The Company is involved in various legal matters that arise out of the normal
course of business.  The Company's management believes it has meritorious
defenses to all lawsuits and that such matters will not have a material adverse
affect on the Company's financial position or results of its operations.

                                     F-20
<PAGE>

(10) SUBSEQUENT EVENT

On January 7, 1998 4Health, Inc. entered into a merger agreement with Irwin
Naturals, a privately held California corporation also engaged in the
nutritional supplement business.  The merger transaction is conditioned upon
both companies satisfying certain conditions as specified in the agreement
including the approval of the method of accounting for the transaction, the
receipt of shareholder approval of the merger, and the satisfaction of other
customary conditions.

(11) SELECTED FINANCIAL DATA (UNAUDITED)

The following tables set forth certain unaudited quarterly financial
information:

<TABLE>
                                                          Quarters Ended
                                     -------------------------------------------------------
                                                              1997
                                     -------------------------------------------------------
                                     December 31   September 30     June 30       March 31
                                     -----------   ------------   -----------    -----------
<S>                                  <C>           <C>            <C>            <C>
Income statement data:
  Net sales                          $ 2,893,448    $3,076,185    $ 3,090,234    $ 3,371,803
  Gross profit                         1,620,188     1,774,857      1,591,994      1,322,317
  (Loss) from operations              (3,796,684)     (392,584)    (1,011,090)    (1,407,801)
  Other (expense) income                 (36,685)       11,459        (18,042)        22,317
                                     -----------    ----------    -----------    -----------
    (Loss)income before tax           (3,833,369)     (381,125)    (1,029,132)    (1,385,484)

Income tax (provision) benefit           (88,408)      (52,970)           -  (b)     141,378(a)
                                     -----------    ----------    -----------    -----------
     Net (loss) income               $(3,921,777)   $ (434,095)   $(1,029,132)   $(1,244,106)
                                     -----------    ----------    -----------    -----------
                                     -----------    ----------    -----------    -----------
Net (loss) income per common
  share - basic and diluted          $      (.33)   $     (.04)   $      (.09)   $      (.11)
                                     -----------    ----------    -----------    -----------
                                     -----------    ----------    -----------    -----------
</TABLE>

<TABLE>
                                                          Quarters Ended
                                     -------------------------------------------------------
                                                              1996
                                     -------------------------------------------------------
                                     December 31   September 30     June 30       March 31
                                     -----------   ------------   -----------    -----------
<S>                                  <C>           <C>            <C>            <C>
Income statement data:
  Net sales                          $ 2,559,896    $3,311,507    $ 8,007,026    $ 3,473,400
  Gross profit                         1,415,521     2,027,067      4,768,824      2,215,944
  (Loss) income from
    operations                        (1,863,097)     (852,847)        26,671         34,253
  Other income (expense)                  11,437        52,480        (13,823)       (10,429)
                                     -----------    ----------    -----------    -----------
    (Loss)income before tax           (1,851,660)     (800,367)        12,848         23,824

Income tax (provision) benefit           (26,561)       17,137         86,801(c)     (12,162)
                                     -----------    ----------    -----------    -----------
     Net (loss) income               $(1,878,221)   $ (783,230)   $    99,649    $    11,662
                                     -----------    ----------    -----------    -----------
                                     -----------    ----------    -----------    -----------
Net (loss) income per common
  share - basic and diluted          $      (.16)   $     (.07)   $       .01    $       .00
                                     -----------    ----------    -----------    -----------
                                     -----------    ----------    -----------    -----------
</TABLE>

(a)  The tax benefit in the first quarter of 1997 was recorded in anticipation
     of the Company having net income for the year.  The Company recorded a
     benefit in the first quarter which the Company believed would be offset by
     a provision booked in subsequent profitable quarters.

                                     F-21
<PAGE>

(b)  There is neither a tax provision or benefit in the second quarter of 1997
     as the Company anticipated having net income for the year.  Based on the
     tax benefit recorded in the first quarter of 1997 and anticipated
     subsequent profitable quarters, the Company believed no tax benefit or
     provision was necessary in order to effectively adjust the year-end income
     tax provision.

(c)  The tax benefit recorded in the quarter ended June 30, 1996 reflects a tax
     refund from 1995.  This refund was the result of additional book/tax
     timing differences filed on the Company's tax returns but not taken into
     account when the 1995 income tax provision was recorded.

                                     F-22
<PAGE>

                                  SIGNATURES

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

   
Dated: June 17, 1998                     4HEALTH, INC.
    

                                        By: /s/ R. Lindsey Duncan
                                           ------------------------------
                                        R. Lindsey Duncan
                                        President and Chief Executive Officer

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

         Signature                     Title                          Date
         ---------                     -----                          ----
   
/s/ R. Lindsey Duncan
---------------------------
R. Lindsey Duncan             Director and Chairman of the         June 17, 1998
                              Board, President and Chief
                              Executive Officer (Principal
                              Executive Officer)

/s/ Scott W. Lusk
---------------------------
Scott W. Lusk                 Director of Finance                  June 17, 1998

/s/ Cheryl M. Wheeler
---------------------------
Cheryl M. Wheeler             Director and Secretary               June 17, 1998

/s/ Steven B. Beckman
---------------------------
Steven B. Beckman             Director                             June 17, 1998

/s/ Rockwell D. Schutjer
---------------------------
Rockwell D. Schutjer          Director                             June 17, 1998