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

                                   FORM 10-KSB
                              ---------------------

[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

[ ]      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 0-26790

                               INNOVUS CORPORATION
                               -------------------
           (Name of small business issuer as specified in its charter)

         Delaware                                      87-0461856
         --------                                      ----------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

                           392 E. 12300 South, Suite J
                                Draper, UT 84020
                    (Address of principal executive offices)
         Issuer's telephone number, including area code: (801) 576-9333



Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001
par value

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

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

         The issuer's  revenues for the fiscal year ended December 31, 1997 were
$317,653.

         As of April 13,  1998,  7,633,135 of the  issuer's  common  shares were
issued  and  outstanding,   approximately   6,668,685  of  which  were  held  by
non-affiliates.  As of April 13, 1998, the aggregate market value of shares held
by non-affiliates  was  approximately  $2,300,696 based upon the closing bid and
asked quotation on the OTC Bulletin Board.


                       DOCUMENTS INCORPORATED BY REFERENCE


                                      - 1 -
<PAGE>

         Certain  portions of the documents of the issuer listed below have been
incorporated by reference into the indicated parts of the Form 10-KSB:

         Notice  of  Annual  Meeting  of   Shareholders   and  Proxy   Statement
         anticipated   to  be  filed   within  120   days  after  December   31,
         1997 . . . . . . . Part III, Items 9-12


               Transitional Small Business Disclosure Format:  Yes_____ No  X

                                      - 2 -
<PAGE>

                                     PART I

 ITEM 1.          BUSINESS
 -------          --------

         Innovus  Corporation  (the  "Company")  has been engaged in the sale of
multimedia authoring and presentation software, INNOVUS Multimedia, with related
templates and media packages.

         Sales of Innovus  Multimedia  and  related  products  during  1997 were
minimal,  despite  the  Company's  efforts to  re-focus  the  target  market and
re-price the  software.  Due to lack of  resources,  the Company  ceased  active
marketing of the software to the retail  market  channel at the end of the third
quarter,  and ceased  substantially all other active marketing during the fourth
quarter. The Company does not currently have the financial resources to actively
market its software or to develop new software.

         Following  the end of the fiscal year,  the Company  signed a letter of
intent with Intermark Corporation ("Intermark"), a company engaged in electronic
software distribution. If the terms of a definitive agreement can be negotiated,
the letter of intent  contemplates  that the Company would acquire Intermark and
Intermark's  former  shareholders  and  management  would assume  control of the
Company.   It  is  anticipated  that  Intermark  would  distribute  the  INNOVUS
Multimedia  software  as well as  third  party  software  products.  There is no
assurance that the proposed transaction with Intermark will occur.

Company Strategy

         In the fourth quarter of 1996 Innovus management, in an effort to boost
flat sales and to reposition the Innovus  products  outside of the  professional
authoring  software niche,  dramatically  lowered the unit price of the software
and  re-targeted  the  technology  to the  business  power  user  as well as the
developer.

         New  packaging,  a new corporate  image,  and an  advertising  campaign
designed  to explain the  benefits of  multimedia  authoring  technology  to the
business  professional  began  late  in  1996.  In  addition  to the  multimedia
developer,  sales  and  marketing  professionals  with  needs  for  high-powered
presentations,  and  departmental  users with the  requirement  of an affordable
computer-based training tool were addressed.

         Initial retail  placement was obtained in the first quarter of 1997 and
sell-through was encouraging,  with restocking  orders occurring  regularly into
early second quarter.  Broader penetration of the retail channel was slower than
planned due in part to contractual disputes with a manufacturer's rep firm hired
to accomplish this task.

         Continuing  reductions  in personnel  were made  throughout  the fourth
quarter  of 1996 and the first  quarter of 1997 as all  non-essential  functions
were  outsourced.  All  production,  fulfillment,  order entry,  and call center
operations were contracted to third party firms.

         In the second quarter of 1997 Innovus' largest retail customer returned
to the  distributor  all  inventory  due to Innovus'  inability  to fund ongoing
required advertising and merchandising programs.

         Concurrently,   Innovus   management   was   attempting  to  execute  a
two-pronged  development  strategy.  It was believed  that major  changes in the
fundamental   design  of  the  Innovus  technology  were  necessary  to  achieve
significant   success  in  the  rapidly  changing   authoring   marketplace.   A
comprehensive and final version of its core product, Innovus Authoring, was

                                      - 3 -
<PAGE>

under development. This version would result in a modular technology which could
be  configured  into products in a variety of ways to suit a number of potential
target  markets.  A line of  multimedia  utility  software,  which  would  allow
customers of typical desktop business  applications to successfully augment such
applications  with very easy to use yet powerful  multimedia  capabilities,  was
envisioned and slated for initial  shipment in early fourth  quarter,  1997. The
ultimate goal was to replace the monolithic  authoring software with a series of
single purpose utility products priced in the $39 - $79 range. The second leg of
the  development  strategy was to localize the existing  authoring  products for
foreign  markets  such as Japan and  Germany.  Market  data  indicated  that the
low-end  multimedia  authoring  market  in  Europe  and  Asia was  growing  at a
significantly greater rate than that in the US.

         Localization contracts were secured, and a marketing program geared for
an early fourth quarter  re-launch of Innovus Authoring and  Presentations,  the
launch of the first of the multimedia  utility  products,  and the launch of the
Japanese and German versions of Innovus Authoring was under way.

         The low level of sales meant that this initiative could not be financed
from  operations.  Attempts to obtain the needed  financial  resources  for this
initiative were unsuccessful. In the third quarter the localization projects and
the  marketing  program were halted.  Further  cuts in personnel  and  operating
expenses were made resulting in the cessation of development activities.  All of
the key  software  engineers  had left the  Company as of the fourth  quarter of
1997. All Innovus  executives took  significant  cuts in salary at this time, or
stopped receiving any compensation.

         A potentially  significant  marketing  relationship  with IBM, based on
Innovus Authoring support of the IBM DB2 database product,  was nullified by the
inability  of Innovus to deliver  the  required  new  version 3.0 of the Innovus
Authoring product.

         Innovus management focused on the possibility of selling the technology
or  other  assets  of the  Company  to  other  software  vendors,  and had  such
discussions with several  interested  companies  without  conclusive  results in
1997.


The Innovus Product Line

         The following  software products are being offered by the Company as of
April, 1997:


                  INNOVUS  Multimedia v.2.21 Authoring 
                  INNOVUS Multimedia v.2.21 Presentations  
                  Web_Candy  Vol 1 for PC 
                  Web_Candy Vol 1 for Mac
                  Web_Candy  3D for PC  
                  Web_Candy  3D for  Mac  
                  NotesMaster  CBT
                  Company Bulletin Board Application Template 
                  Electronic Catalog Application Template  
                  Employee/Visitor Sign in/out Application Template 
                  Pay & Benefits Application Template 
                  Safety & Security Application  Template  
                  Conduct  &  Responsibility  Application Template 
                  Our Company  Application  Template  
                  Customer  Service Application Template

                                      - 4 -

<PAGE>

         Using the  Company's  products,  anyone  with basic  Microsoft  Windows
skills can:

         o         Design the flow, layout, and timing of information.
         o         Connect the project to existing  databases or create new data
                   sources,  combine video, sound,  graphics, and text, add quiz
                   and survey questions, and incorporate other applications.
         o         Deploy the  project  across  a network or  package it  for  a
                   single workstation.
         o         Measure how and by whom the applications are being used.
         o         Maintain the system and update changing information.


Marketing and Sales

         During 1997,  the Company  refocused its sales  activities to a channel
support  model.  In 1997 Innovus  sales  shifted to wholesale  distributors  and
retail   customers  who  purchased   from  those   distributors.   International
distribution  agreements  were  signed in  Korea,  Taiwan,  Australia  and Great
Britain.

         In early 1997 the  Company  utilized  magazine,  catalog  and  Internet
advertising,  as well as point of sale displays,  to market its software.  Other
than limited catalog exposure,  the Company is not currently  actively marketing
the software.


Customers and End Users

         Innovus sells primarily to wholesale distributors,  although revenue is
recognized only upon sell-through to end-user customers.  During 1997, Tech Data
was Innovus' largest customer, accounting for approximately 30% of sales, and no
other distributor accounted for more than 10% of sales.


Competition

         The markets for the Company's  products are highly  competitive and are
characterized  by  pressures  to reduce  prices,  incorporate  new  features and
accelerate the release of new product versions.  A number of companies currently
offer products that compete  directly or indirectly  with one or more aspects of
the Company's products.  Competitors could develop a product which competes with
all aspects of the Company's  products.  Most current and potential  competitors
are larger,  better  established,  and have greater financial resources than the
Company.  Such competitors may have the ability to more aggressively  market and
price  their  products  than the  Company.  The  Company  has not  been  able to
successfully compete in these markets and there is no assurance that the Company
will be able to do so in the future.

         There are currently four categories of software  products which compete
with one or more significant aspects of the Company's software:

         Web page design  tools such as Microsoft  Front Page and Netscape  Gold
         are strong media and text  document  managers and work well in extended
         network  environments.  The  increasing  power of these tools,  and the
         increasingly  widespread  acceptance of web-based  architecture,  place
         them at a competitive advantage to the Company's software.

                                      - 5 -
<PAGE>

         Visual  development  environments  such as Visual  Basic,  Delphi,  and
         PowerBuilder  are  capable  corporate  tools  which  integrate  well in
         network  solutions.   These  are  highly  technical  development  tools
         generally  requiring  skilled  programmers  and protracted  development
         schedules to create and maintain business applications.  These products
         have limited  native media support  capability,  but through the use of
         readily   available   components   offer  an   alternative  to  Innovus
         technology.

         Multimedia authoring tools such as IconAuthor, AuthorWare, and MFactory
         can create and manage  sophisticated  media  presentations  and program
         logic.  They demand a high level graphics  artist or technical user and
         have limited  business  functionality  or scalable  network  deployment
         capabilities.

         Computer based  training tools such as CBT Express,  Toolbook and Quest
         are useful  project  development  programs  for  training  and  testing
         activities   which   provide  much  of  the   presentation   logic  for
         instructional  applications.  While  some of these  tools  offer  media
         support,  they are generally lacking in scalable network  capabilities,
         database support, extensibility, and business functionality.

         Management  believes that desktop- or  network-based  software in these
categories,  such  as the  Company's  software,  are at a  distinct  competitive
disadvantage to web-based  software designed for deployment over the Internet or
an  intranet.  Converting  the  Company's  software to a  web-based  model would
require   extensive   development   beyond  the  Company's   current   financial
capabilities.


Proprietary Rights

         The Company regards certain features of its products as proprietary and
relies  on  a  combination  of  copyright,  trademark  and  trade  secret  laws,
confidentiality procedures and contractual provisions to protect its proprietary
information.  The Company holds no patents applicable to its business and has no
patent  applications  pending.  The Company  seeks to protect its  products  and
related  documentation  and other  written  materials  under  trade  secret  and
copyright laws (as described  below) which afford only limited  protection.  The
Company  seeks  to  protect  its  product  names  under   trademark  and  unfair
competition  laws.  Despite the  Company's  efforts to protect  its  proprietary
rights,  unauthorized  parties  may  attempt to copy  aspects  of the  Company's
products or obtain and use information that the Company regards as proprietary.

         The  Company's  software  is  protected  by  copyright  laws,  and each
end-user  is granted a license to use  either a single  copy or an open  network
access to the  software.  The Company has received  copyright  protection on its
various  development  tools,   application  templates  and  run  time  programs.
Copyrighted  code includes  three DOS based product  versions,  five Windows 3.x
version products, three Windows 95 version products and three Windows NT product
versions.   Copyrights   cover  authoring  and  development   products,   report
generators,  media drivers, peripheral drivers, various program executables, and
configuration  and  install  programs.  All of these  copyrights  relate  to the
Company's development programs and vertical  applications.  The Company may also
attempt  to  obtain  limited  patent  protection  for  the  architecture  of its
products,  but has not yet  determined  if its products  contain any  patentable
inventions.  Innovus  has filed for  trademark  registration  for certain of its
product and feature names.


                                      - 6 -
<PAGE>

Employees

         In addition to its Chairman  and CEO, who are  available on a part-time
basis only,  the Company had three full time  employees as of April 9, 1998.  Of
the total  employees,  2 are engaged in management and  administration  and 1 in
sales and marketing. The Company believes its relationship with its employees to
be good.

Company History

         The Company was incorporated in 1988 as a Delaware corporation. Innovus
Multimedia,  Inc., the predecessor to the Company's  operating  subsidiary,  was
founded in 1987, and acted as a value added reseller of multimedia  hardware and
software  in the  form of stand  alone  kiosks  until  1993.  Subsequently,  new
management  joined the Company,  and the Company  de-emphasized  its  multimedia
kiosk  business,   and  focussed  on  business  oriented   multimedia   software
development.  As  part  of this  transition,  the  Company  hired  new  software
developers,  marketing  personnel,  and others, and secured the equity financing
for research  and  development  necessary  to complete its first  version of its
Windows software.

         In  September  of 1994,  as part of Innovus'  transition  to a business
oriented  multimedia  software  developer,  and to enhance its  capital  raising
ability, Innovus was acquired by the Company in a reverse acquisition.

         The Company commercially released its core software product in March of
1996, and since that time has released  several  templates that  complement that
software.

ITEM 2.           DESCRIPTION OF PROPERTY

         In the fourth  quarter of 1997,  the Company sold the building in which
its  executive  offices  were  previously  located.  The sale netted the Company
enough to satisfy  the first  mortgage  on the  building  and a $150,000  second
mortgage placed on the building in 1997.

         The Company's  executive offices are currently located in approximately
1800 square feet of office  space  rented from a third party in Draper,  Utah, a
suburb of Salt Lake City, Utah. The Company's rental agreement  expires on April
30, 1998. The Company's monthly rent is $2,400. If the Intermark  transaction is
consummated,  the  Company  anticipates  relocating  its  executive  offices  to
Intermark's  facilities.  If the Intermark transaction is not consummated and if
the Company  remains in business,  the Company  anticipates  renting its current
office space or comparable  space on a month to month basis.  See  "Management's
Discussion and Analysis or Plan of Operation".

ITEM 3.           LEGAL PROCEEDINGS.

         The Company is a defendant in a number of  collection  actions filed by
its creditors.  The following litigation involves claims,  exclusive of interest
and costs, exceeding 10% of the Company's current assets at December 31, 1997:

         On September 20, 1997 Multiling  International,  Inc. filed a complaint
against the Company in the Third  Judicial  District  Court of Salt Lake County,
Utah.  The complaint  alleges that the Company owes  Multiling  $30,432.77  plus
interest  and costs  for  services  rendered.  The  company  has filed an answer
denying that amounts were owed or that services had been performed.  The Company
intends to vigorously defend this action.

                                      - 7 -
<PAGE>

         On November 26, 1997  Programmer's  Paradise filed a complaint  against
Innovus in the Third  Judicial  District  Court of Salt Lake County,  Utah.  The
complaint  alleged that  Innovus  owed  Programmer's  Paradise  $15,887.80  plus
interest and costs. On January 21, 1998, a judgement was entered against Innovus
in the amount of  $16,500.43.  The  plaintiff  has  informally  agreed to accept
product in full or partial satisfaction of the judgment, but no formal agreement
to this effect has been entered into.

         On  December  30, 1997  Tenneco  Packaging  filed a  complaint  against
Innovus in the Third  Judicial  District  Court of Salt Lake County,  Utah.  The
complaint alleges that Innovus owes Tenneco  $12,331.88 plus interest and costs.
The Company has had preliminary settlement  negotiations with the plaintiff.  If
no settlement can be reached, the Company will defend this action.

         On February 3, 1998 Blenheim Group USA, Inc. filed a Complaint  against
Innovus in the Municipal Court of the San Francisco Judicial District,  State of
California.  The  complaint  alleges that Innovus owes $19,800 for exhibit space
booked  but  not  used  in the  1997 PC Expo  exhibition.  The  Company  has had
preliminary settlement  negotiations with the plaintiff. If no settlement can be
reached, the Company will defend this action.


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of the security  holders during the
fourth quarter of the calendar year ending December 31, 1997.


                                     PART II

ITEM 5.           MARKET FOR COMMON SHARES AND RELATED SHAREHOLDER MATTERS

         From November,  1995 to November,  1997, the Company's Common Stock was
listed on the Nasdaq  SmallCap  market.  In  November,  1997,  the  Company  was
de-listed from Nasdaq.  The Common Stock is currently quoted on the OTC Bulletin
Board.

         On April 13, 1998, the closing bid and asked  quotations for the Common
Stock on the OTC Bulletin Board were $0.31 and $0.38, respectively.  As of April
13, 1998 there were 169  holders of record of the Common  Stock.  The  following
table  reflects  the high and low  closing  bid  quotations  reported by the OTC
Bulletin Board subsequent to November,  1997, as well as high and low last sales
prices reported by Nasdaq for prior periods. Such prices represent  inter-dealer
quotations,  do not  include  markups,  markdowns,  or  commissions  and may not
reflect actual transactions.


                                        High                     Low
                                        ----                     ---

Year Ending December 31, 1996
-----------------------------

January 1 to March 31, 1996             $10.75                  $7.50

April 1 to June 30, 1996                $13.75                  $9.38

July 1 to September 30, 1996            $11.50                  $5.13

October 1 to December 31, 1996           $6.25                  $3.25


                                      - 8 -
<PAGE>

Year Ending December 31, 1997
-----------------------------

January 1 to March 31, 1997              $4.50                  $2.25

April 1 to June 30, 1997                 $3.50                  $2.13

July 1 to September 30, 1997             $2.69                  $0.50

October 1 to December 31, 1997           $0.75                  $0.16


         The Company has not paid any cash dividends  since its  inception.  The
Company's  revolving loan  agreements  currently  prohibit it from declaring any
dividends  without  the  written  permission  of  the  lender.  The  Company  is
prohibited from paying dividends on its Common Stock while it has an outstanding
series of  Preferred  Stock.  The  Company  currently  intends to retain  future
earnings in the  operation  and expansion of its business and does not expect to
pay any cash dividends in the foreseeable future.

         Sale of Unregistered Shares

         During the fourth  quarter of 1997,  the Company  issued the  following
shares without registration under the Securities Act of 1933:

         During the quarter,  the Company  issued  approximately  184,100 common
shares on conversion of previously  outstanding  Series C Preferred  Stock.  The
shares were issued to a single  accredited  investor in exchange for outstanding
securities  of the  Company.  The  Company  believes  such  issuance  was exempt
pursuant to Sections 3(a)(9), 4(2) and 4(6) of the Securities Act of 1933.


                                      - 9 -
<PAGE>

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


         The following  Selected  Financial  Data should be read in  conjunction
with the financial  statements  and notes thereto bound  elsewhere  herein.  The
figures  for 1997 are  derived  from  financial  statements  which have not been
audited, and are subject to adjustment upon audit. 
<TABLE>
<CAPTION>

                                                                      Year ended December 31
                                        -----------------------------------------------------------------------------
Statement of                                  1997                   1996                 1995                1994
------------                                  ----                   ----                 ----                ----
operations data
---------------

<S>                                       <C>                    <C>                  <C>                 <C>
Revenues                                  $317,653               $597,567             $189,380            $193,848

Costs of products and
services sold                              238,810                302,571              123,701             234,234

Amortization                             1,142,838                796,673              315,464                  --

Product development                             --              1,185,525            1,340,415             444,855

Selling and marketing
expense                                  1,211,238              3,988,987            1,417,396             425,403

General and
administrative                             876,977              1,279,542              719,862             537,860

Net (loss)                             $(4,541,292)           $(7,791,146)         $(3,735,351)        $(1,554,213)

Net (loss) per share                        $(0.78)                $(1.59)              $(0.98)             $(0.60)

<CAPTION>


                                                                 At December 31
                                       -----------------------------------------------------------------------
Balance sheet data                           1997               1996               1995                1994
------------------                           ----               ----               ----                ----

<S>                                        <C>              <C>                 <C>                  <C>
Current assets                             $128,751         $1,161,735          $2,466,060           $387,370

Software development
costs                                       775,568            809,824             886,153            408,384

Current liabilities                         773,071          1,124,592             473,460          1,521,294

Long term liabilities (net)                  30,011            728,555             722,785            180,961

Stockholders' equity
(deficit)                                  $183,717         $1,490,029          $3,553,885          $(658,474)
</TABLE>


General

         As of April  15,  1998,  the  extended  filing  deadline  for this Form
10-KSB, the Company had not completed the audit of its financial  statements for
the year ended December 31, 1997. The financial  statements filed with this Form
10-KSB have not been audited and omit substantially all footnote disclosure. The
financial  statements  are subject to  adjustments  on audit  (which  management
believes will consist of normally occurring adjustments and possible adjustments
to capitalized software).

                                     - 10 -
<PAGE>

         The  following  discussion  should  be read  in  conjunction  with  the
financial  statements and notes thereto found  elsewhere  herein.  The financial
statements have been prepared on the basis of the Company being a going concern.
The  Company  has  had  continued  losses,   and  currently  has  a  substantial
accumulated  deficit and lack of financial  resources.  There may be substantial
doubt  regarding  the  Company's  ability to  continue as a going  concern.  The
financial  statements do not include any adjustments  that might result from the
outcome of such uncertainty.

Results of Operations

         Commencing  in July 1993,  Innovus  began hiring  additional  staff and
otherwise incurring additional expense to begin full scale software development.
Sales of the first commercial  version of the software through VARs began in the
fourth  quarter of 1995 and general  commercial  sales began in March,  1996. In
November,  1996,  the Company  re-positioned  its  software  towards  individual
business users, significantly lowering the price of the core software.  Although
this resulted in increased  sales in the first quarter of 1997,  sales  declined
precipitously  though the year. In 1997 the Company issued  various  application
templates and media collections.  The Company also began development of the next
planned major  revision to its core  software.  Due to lagging sales and lack of
resources, the Company ceased development and marketing activities in late 1997.
Accordingly,  results of operations  for 1997 may not be directly  comparable to
prior  periods  when the software  was being  developed,  and may not reflect be
indicative of the results of future operations.

Year ended December 31, 1997 compared to year ended December 31, 1996

         Amounts stated for 1997 are derived from unaudited financial statements
and are subject to adjustment. See the heading "General" in this Item.

         Net sales for 1997 were  $317,653,  86% of which  occurred in the first
quarter.  Net sales for 1996 were  $597,567.  1996 sales  include  approximately
$316,032 of sales from customized  programming or content  production.  In 1997,
the Company  determined not to continue  offering the customized  programming or
content  production.  Although  some sales of  INNOVUS  Multimedia  and  related
products  continue  ($24,418 in the fourth quarter of 1997) the Company does not
expect significant sales unless the Company is able to aggressively  promote the
software.  Even if the  company  were able to promote the  software,  the market
shift to web-based  software would likely  restrict sales of the software unless
large scale revisions were made. The large scale  distribution of  demonstration
versions of the software to users of IBM's DB2 database  software did not result
in  significant  sales of  software.  The Company did not have the  resources to
complete  development  of the  Version  3.0  software  which  would  more  fully
integrate with DB2. In addition, the Company's website was incorrectly listed in
the materials accompanying the demonstration software.

         As described  under  "Liquidity and Capital  Resources"  below,  if the
Company  does not  implement a new business  plan to generate  revenues or raise
additional  capital,  the Company's viability as a going concern is in question.
Other than the proposed agreement with Intermark, the Company does not currently
have any plans which it believes are likely to generate significant revenue.

         The costs of products and services sold in the year ended  December 31,
1997 was $238,810 or 75% of sales, compared to $302,571 or 51% of sales in 1996.
The gross  margins for 1997 and 1996 may not be directly  comparable  due to the
change in the nature of the revenue  stream and the build-up of staffing in 1997
in anticipation of increased sales.

                                     - 11 -
<PAGE>

         Selling and  marketing  expenses for 1997 were  $1,211,238  compared to
$3,988,987 in 1996. The decrease reflects  exhaustion of the Company's resources
available  for  marketing  and the  Company's  decision in the third  quarter to
reduce marketing in unproductive channels. The Company is currently dependent on
"word of mouth" referrals and catalog sales for its current minimal sales.

         Product  development  costs were $0 in 1997  compared to  $1,185,525 in
1996.  In the light of the low  level of  product  sales,  the  Company  stopped
development on Version 3.0 of the software. In the year ended December 31, 1997,
$1,142,838 of capitalized software development costs were amortized, compared to
$796,673 of such expenses in 1996.  The Company  increased the  amortization  to
reflect the lower expected future value of the software.

         General and  administrative  expenses  were $876,977 for the year ended
December 31, 1997 compared to $1,279,542 for 1996.

         The Company is deemed to have  incurred  $1,187,643 in 1997 in interest
expense in connection  with  warrants  issued as part of bridge  financing  from
affiliates and others an din connection  with the second  mortgage.  The Company
had incurred  $773,350 of similar expenses in 1996. The warrants are exercisable
at the fair market value of the underlying common stock at the date of issuance,
but a value was assigned to the warrants using a modified Black-Scholes method.

         The Company  sustained a net loss of $4,541,292 in 1997.  Although this
is lower than the net loss of $7,791,146 for 1996, the company does not have the
resources to sustain such a loss.  The loss per common share was $0.78 and $1.59
for  1997  and  1996,  respectively.  The  weighted  number  of  shares  used in
calculating the loss per common share does not include the potential issuance of
common shares on conversion of outstanding  preferred stock, as such conversions
are considered anti-dilutive.

         As explained in "Liquidity and Capital  Resources"  below,  the Company
does not have the  ability to sustain  additional  losses,  even at the  reduced
levels of the fourth quarter of 1997. There can be no assurance that the Company
will be able to develop  or  implement  a  business  plan which will allow it to
continue as a going concern. If the Intermark transaction is consummated,  which
is less than  certain,  there is no assurance  that the combined  entity will be
profitable or able to attract new capital.  If the Intermark  transaction is not
consummated, the Company does have any firm plans to attract additional capital.
In order to prepare this filing, in 1998 the Company privately issued debentures
secured by substantially all of the assets of the Company. Without the Intermark
transaction or an alternative business plan, the Company will not be able to pay
the debentures when they come due.


Liquidity and Capital Resources

         At  December  31,  1997  the  Company  had  $91,690  of cash  and  cash
equivalents and a deficit in working capital  (current  liabilities in excess of
current  assets) of  $673,479.  The Company  has been  relying  upon  short-term
borrowings from affiliates and others,  as well as increases in accounts payable
owed to vendors and a second mortgage on the Company's building,  to provide the
means to maintain minimal operations.  Approximately $470,000 of such short-term
debt has been  converted to equity and the second  mortgage was repaid upon sale
of the building. Management's efforts to obtain additional equity financing have
been unsuccessful. The company does not have any firm commitments for additional
equity financing. Management believes that the market overhang caused by

                                     - 12 -
<PAGE>

variable conversion features of certain series of the Company's preferred stock,
coupled with the risks inherent in restructuring  the Company's  business,  have
discouraged new investment. Management does not believe that the Company will be
able to obtain new financing unless the preferred stock structure is revised and
a new business acquired.

         The Company estimates that it is currently using approximately  $20,000
more cash  each  month  than is  generated  by  operations.  Without  additional
financing,  the Company  does not  foresee  operations  improving  significantly
enough to eliminate the negative cash flow.

         If the  Company  cannot  obtain  additional  capital,  management  will
continue to pursue other means to continue in business.  In such event, however,
it is  possible  that the Company  may have  little  alternative  but to sell or
liquidate its business operations or product line to satisfy its creditors.

         During 1997, the Company  borrowed  $405,000 from  affiliates and other
individuals pursuant to bridge financing. These amounts were secured by a second
priority interest in substantially all assets of the Company. In September, 1997
the holders of the bridge financing and the holders of an additional  $65,000 of
unsecured debt, agreed to convert the debt into common stock.

         At December 31, 1997, the Company had long term liabilities of $30,011.
This reflects the sale of the Company's building, relieving the Company from the
first and second mortgages,  as well as the sale of telephone  equipment subject
to a lease obligation.

         There is doubt  whether the Company  can  continue as a going  concern.
There can be no assurance  that  additional  financing  will be available to the
Company  or  that  operating  results  will  improve  as  management   currently
anticipates.

         The  Company's  common  stock was  de-listed  from the NASDAQ  SmallCap
Market in November,  1997. The Company  believes that its status as a non-Nasdaq
company will further hamper the Company's ability to raise capital.

         The Company  does not  anticipate  material  expenditures  to bring its
accounting and financial  systems into  compliance with the "Year 2000" problem.
The Company  bases this  assessment  on the  relative age of its systems and the
small number of transactions it conducts. The Company has not conducted a formal
study  of its  systems  or  the  systems  of its  vendors  and  distributors  to
definitively  determine  whether the systems are fully Year 2000 compliant.  The
Company  believes its software is Year 2000  compliant  (assuming that it is not
used to process  non-compliant  data),  but the Company has not had the software
certified as compliant.

         The Company is conducting due diligence into the Intermark  transaction
and is in the process of  negotiating  a definitive  agreement.  There can be no
assurance that a definitive agreement will be negotiated or consummated.

Forward Looking Statements.

         This report  contains  both  historical  statements of fact and forward
looking statements. Statements regarding the Company's expectations as to future
sales of its products,  future revenue and cash flow, future developments of the
Intermark  transaction,  plans to continue as a going  concern and certain other
information  presented  in this report  constitute  forward  looking  statements
within the meaning of the Private Securities Litigation Reform Act of 1995. When
used in this Form 10-KSB or other filings by the Company with the Securities and
Exchange  Commission,  in the  Company's  press  releases  or  other  public  or
shareholder communications, or in oral statements made with the approval of an

                                     - 13 -
<PAGE>

authorized  officer of the Company's  executive  officers,  the words or phrases
"would be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," or similar expressions
are  intended  to  identify  forward-looking  statements.  Although  the Company
believes  that its  expectations  with respect  thereto are based on  reasonable
assumptions  within the bounds of its knowledge of its business and  operations,
there can be no assurance  that actual results will not differ  materially  from
its expectations. In addition to matters affecting the economy and the Company's
industry  generally,  factors  which could cause  actual  results to differ from
expectations include the following:

         Inability  to complete the  Intermark  transaction  on favorable  terms
         Continued lack of market acceptance of other Company products Inability
         to obtain additional capital Inability to devise a viable business plan
         Product and technological obsolescence Competition

         The  Company  does  not  undertake,   and  specifically  disclaims  any
obligation,  to update any forward looking statements to reflect  occurrences or
unanticipated events or circumstances after the date of such statements.


ITEM 7.  FINANCIAL STATEMENTS

         Unaudited  financial  statements  are  filed as part of this  report on
pages F-1 through F-4.

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL STATEMENT DISCLOSURE.

         Not applicable.



                                     - 14 -
<PAGE>

                                  PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

Executive Officers and Directors

         Set forth below is information  regarding (i) the current  directors of
the Company,  who will serve until the next annual  meeting of  shareholders  or
until their  successors  are elected or appointed  and  qualified,  and (ii) the
current  executive  officers  of the  Company,  who are  elected to serve at the
discretion of the Board of Directors.

         The Company's executive officers and directors are as follows:

            Name                  Age                  Position
David M. Mock                      45      Chairman, Chief Financial Officer,
                                           Secretary, Treasurer and Director
Terry R. Haas                      48      President, Chief Executive Officer
                                           and Director
Bill Kesselring                    32      Chief Operating Officer
Michael L. Debloois                57      Director
Brenda Lowe Cornell                39      Director
Richard M. Cott                    35      Director


         Information regarding the Company's directors and executive officers in
the  Company's  Proxy  Statement to be filed within 120 days after  December 31,
1997,  with the  Securities  and Exchange  Commission  relating to the Company's
Annual Meeting of Shareholders and is incorporated herein by reference thereto.


ITEM 10.   EXECUTIVE COMPENSATION.

         Information  regarding the  compensation  of the  Company's  executives
appears  under the section  "Management  Compensation"  in the  Company's  Proxy
Statement  to be filed  within  120  days  after  December  31,  1997,  with the
Securities and Exchange  Commission  relating to the Company's Annual Meeting of
Shareholders and is incorporated herein by reference thereto.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         Information  regarding the stock  ownership of  management  and certain
beneficial  owners  appears  under the section  "Security  Ownership  of Certain
Beneficial  Owners and  Management" in the Company's Proxy Statement to be filed
within 120 days after  December  31,  1997,  with the  Securities  and  Exchange
Commission  relating to the  company's  Annual  Meeting of  Shareholders  and is
incorporated herein by reference thereto.

                                     - 15 -
<PAGE>

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Information  regarding the transactions and  relationships  between the
Company and  certain  affiliates  appears  under the  section  "Management"  and
"Certain  Transactions"  in the Company's Proxy Statement to be filed within 120
days after  December  31, 1997,  with the  Securities  and  Exchange  Commission
relating to the Company's  Annual Meeting of  Shareholders  and is  incorporated
herein by reference thereto.


                                     - 16 -
<PAGE>

                                     PART IV

ITEM 13.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

                                                                        Page No.
Title of Documents

Consolidated Unaudited Balance Sheets at December 31, 1997 and 1996....... F-1

Consolidated Unaudited Statements of Operations for the Years
   Ended December 31, 1997 and 1996 ...................................... F-2

Consolidated Unaudited Statements of Cash Flows for the Years
   Ended December 31, 1997 and 1996 ...................................... F-3

Notes to Consolidated Unaudited Financial Statements...................... F-4

Financial Statement Schedules:

All  schedules  are omitted  because  they are not  applicable  or the  required
information is shown in the financial statements or the notes thereto.

   (b)  Reports on Form 8-K

   The Company  did not file any  Current  Reports on Form 8-K during the fourth
   quarter of its fiscal year ended December 31, 1997.


   (c)  Exhibits

   The following documents are included as exhibits to this report.

 Exhibits    Exhibit Description                                Page or Location
 --------    -------------------                                ----------------
    3.1      Articles of Amendment                                        *
    3.2      By-laws                                                      **
    3.3      Certificate of Designation - Series C Preferred Stock        ***
    3.4      Certificate of Increase to the Certificate of Designation    ***
             - Series C Preferred Stock
    3.5      Certificate of Designation - Series D Preferred Stock        ***
    3.6      Certificate of Correction to Certificate of Designation -    ***
             Series D Preferred Stock
    3.7      Certificate of Designation - Series E Preferred Stock        ***
    3.8      Certificate of Designation - Series F Preferred Stock        ***
    3.9      Certificate of Designation - Series G Preferred Stock        ***
   10.3      Employment Agreement - David Mock                            *
   11.1      Computation of Earnings per Share
   21.1      Subsidiaries of the Registrant                               *
   27.1      Financial Data Schedule

                                     - 17 -
<PAGE>


       *   Incorporated by reference to  the Company's Form  10-K for  the  year
           ended December 31, 1994

       **  Incorporated by reference  to the Company's  Registration  Statement,
           File No. 33-33136-D

       *** Incorporated  by  reference to the  Company's  Form 10-K for the year
           ended December 31, 1996.

                                     - 18 -
<PAGE>
<TABLE>
<CAPTION>

                       Innovus Corporation and Subsidiary

                     CONSOLIDATED BALANCE SHEETS - UNAUDITED

                                  December 31,

                                     ASSETS

                                                                                             1997              1996
                                                                                             ----              ----
CURRENT ASSETS
<S>                                                                                    <C>               <C>       
    Cash and cash equivalents                                                          $   91,690        $  886,122
    Accounts receivable, net                                                                1,494           116,761
    Inventories                                                                             6,418            39,003
    Prepaid expenses                                                                       29,159           119,849
                                                                                       ----------        ----------

           Total current assets                                                           128,761         1,161,735

PROPERTY AND EQUIPMENT, net                                                                57,190         1,341,175

OTHER ASSETS
    Software development costs, net                                                       775,568           809,824
    Other                                                                                   7,280            30,442
                                                                                       ----------        ----------
                                                                                       $  968,799        $3,343,176
                                                                                       ==========        ==========
                                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                                                    $  748,448        $  716,068
   Accrued compensation                                                                    21,113           216,805
   Accrued liabilities                                                                      3,510           126,022
   Current maturities of long-term debt                                                    28,099            28,477
   Current maturities of capital lease obligations                                          1,912            37,220
                                                                                       ----------        ----------
           Total Current liabilities                                                      803,082         1,124,592
LONG-TERN  DEBT, less current maturities                                                        -           671,564
CAPITAL LEASE OBLIGATIONS, less current maturities                                              -            56,991
                                                                                       ----------        ----------
           Total liabilities                                                              803,082         1,853,147
                                                                                       ----------        ----------
COMMITMENTS                                                                                     -                 -

STOCKHOLDERS' EQUITY
   Preferred stock - $0.001 par value; 1,000,000 shares authorized;
      77,358 shares and 87,100 shares issued and outstanding respectively                      77                87

   Common stock - $0,001 par value; 15,000,000 shares authorized;
      7,633,135 shares and 5,052,811 shares issued and
      outstanding, respectively                                                             7,633             5,053

   Additional paid-in capital                                                          18,245,808        14,996,682

   Deferred compensation                                                                        -           (14,486)

   Accumulated deficit                                                                (18,087,801)      (13,497,307)
                                                                                       ----------        ----------
           Total stockholders' equity                                                     165,717         1,490,029
                                                                                       ----------        ----------
                                                                                       $  968,799        $3,343,176
                                                                                       ==========        ==========
</TABLE>
                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                       Innovus Corporation and Subsidiary

                CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

                             Year ended December 31,

                                                                        1997                1996
                                                                        ----                ----

<S>                                                              <C>                   <C>             
Net sales                                                            $   317,653        $  597,567       
                                                                     -----------        ----------       

Costs and operating expenses
    Costs of products and services sold                                  238,810           302,571
    Amortization of software development costs                         1,142,838           796,673
    Product development                                                        -         1,185,525
    Selling and marketing                                              1,211,238         3,988,987
    General and administrative                                           876,977         1,279,542
                                                                     -----------        ----------       
                                                                       3,469,863         7,553,298
                                                                     -----------        ----------       
           Operating loss                                             (3,152,210)       (6,955,731)
                                                                     -----------        ----------       
Other income (expense)
    Interest income                                                       15,153            35,195
    Interest expense for warrants issued with debt                    (1,187,643)         (773,350)
    Interest expense, other                                              (65,364)          (97,260)
    Loss on disposition of equipment                                    (151,228)                -
                                                                     -----------        ----------       
                                                                      (1,389,082)         (835,415)
                                                                     -----------        ----------       
           Net loss                                                  $(4,541,292)      $(7,791,146) 
                                                                     ===========       ===========       
Loss per common share                                                $     (0.72)      $     (1.59)
                                                                     ===========       ===========           
Weighted number of shares of common stock
   used in per share calculation                                       6,272,769         4,913,091
                                                                     ===========       ===========   
</TABLE>
                                      F-2

<PAGE>
<TABLE>
<CAPTION>

                       Innovus Corporation and Subsidiary

               CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

                             Year ended December 31,

                                                                          1997          1996
                                                                          ----          ----
Increase (decrease) in cash and cash equivalents                         
    Cash flows from operating activities
<S>                                                                   <C>             <C>          
       Net loss                                                       $ (4,541,292)   $ (7,791,146)

       Adjustments to reconcile net loss to net cash
         used in operating activities
           Depreciation and amortization                                 1,373,159         972,310
           Loss on disposition of assets                                   151,228               -
           Expenses for issued warrants                                  1,187,643       1,032,276
           Changes In assets and liabilities
           Accounts receivable                                             115,267         (56,995)
           Inventories                                                      32,585         (39,003)
           Accounts payable and accrued expenses                          (275,890)        652,041
           Prepaid expenses and other                                      113,852         (31,186)
                                                                      ------------    ------------ 
                 Total adjustments                                       2,697,844       2,529,443
                                                                      ------------    ------------ 
                     Net cash used in
                     operating activities                               (1,843,448)     (5,261,703)
                                                                      ------------    ------------ 
    Cash flows from investing activities
       Acquisition of property and equipment                               (13,921)        (90,725)
       Proceeds from disposition of property and
         equipment                                                         930,844               -
       Increase in software development costs                           (1,108,583)       (720,344)
                                                                      ------------    ------------ 
                    Net cash used in
                    investing activities                                  (191,660)       (811,069)
                                                                      ------------    ------------ 
    Cash flows from financing activities
       Proceeds from borrowings                                            618,000       1,470,300
       Payments to reduce long-term debt
         and capital lease obligations                                  (1,378,384)     (1,075,430)
       Net proceeds from issuance of preferred
         and common stock2,001,060                                       2,001,060       4,201,468
       Collection of receivable from stockholder                                 -               -
                                                                      ------------    ------------ 
                  Net cash provided by
                  financing activities                                   1,240,676       4,596,338
                                                                      ------------    ------------ 
Net increase (decrease) in cash and cash equivalents                      (794,432)     (1,476,434)
Cash and cash equivalents at beginning of year                             886,122       2,362,556
                                                                      ------------    ------------ 
Cash and cash equivalents at end of year                              $     91,690    $    886,122
                                                                      ============    ============
</TABLE>

                                      F-3
<PAGE>

                    Note A - Unaudited Financial Statements



The  accompanying  financial  statements  are  unaudited.   In  the  opinion  of
management,   the  accompanying   unaudited  financial  statements  contain  all
necessary  adjustments  necessary for a fair presentation of financial  position
and the  result  of  operations  except as  disclosed  herein.  

On an ongoing basis,  management  reviews the amortization and capitalization of
intangible  assets and necessary  adjustments  to carrying  values,  if any, are
recorded.  Management  is currently  evaluating  the carrying  value of software
development costs for impairment purposes. Adjustments may be necessary and such
adjustments may be material.

The Company has omitted or condensed  footnotes  and other  disclosure  normally
included in financial statements.


The financial  statements have been prepared on the basis of the Company being a
going  concern.  The Company  has had  continued  losses,  and  currently  has a
substantial  accumulated deficit and lack of financial  resources.  There may be
substantial  doubt  regarding  the  Company's  ability  to  continue  as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of such uncertainty.

   
                                   F-4

<PAGE>

                                    SIGNATURE

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


                               INNOVUS CORPORATION

Dated: April  15  , 1998                             By /s/ Terry R. Haas
                                                       -------------------------
                                                       Terry R. Haas, President

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


Signature                        Title                                Date


 /s/ Terry R. Haas               Chief Executive Officer         April 15, 1998
------------------------         President and Director   
Terry R. Haas


/s/ David Mock                   Chairman and Director           April 15, 1998
------------------------         Principal Financial Officer           
David Mock


/s/ Brenda Lowe Cornell          Director                        April 15, 1998
------------------------
Brenda Lowe Cornell



                                 Director                        April   , 1998
------------------------
Michael DeBloois



                                 Director                        April   , 1998
------------------------
Richard M. Cott