COMPARE GENERIKS INC, 10KSB40, 1997-06-30

COMPARE GENERIKS INC
10KSB40, 1997-06-30
PHARMACEUTICAL PREPARATIONS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

REPORT ON 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 March 31, 1997

Commission File No. 33-80659

COMPARE GENERIKS, INC.
----------------------
(Exact name of registrant as specified in its charter)

Delaware 11-3289396
- ------------------------------- ---------------------------------
(State of or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

300 Oser Avenue
Hauppauge, New York 11788
- --------------------- ----------
(Address of Principal (Zip Code)
Executive Officers)

Registrant's telephone number, including area code: (800) 342-6555

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 $.0001 per share
----------------------------------------
(Title of Class)

Units consisting of two (2) shares of common stock, par value $.0001 per share
and one (1) Class A Redeemable Common Stock Purchase Warrant
------------------------------------------------------------
(Title of Class)

Class A Redeemable Common Stock Purchase Warrant
------------------------------------------------
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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 the Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year were $2,289,629.

The aggregate market value of the voting stock held by non-affiliates
of the Registrant, computed by reference to the closing price of such stock as
of June 20, 1997, was approximately $17,505,000.

Number of shares outstanding of the issuer's common stock, as of June
20, 1997 was 3,890,000.

See Page 26 for Exhibits

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PART 1

Item 1. BUSINESS

General

Compare Generiks, Inc., a Delaware corporation (the "Company" or
"CGI"), was formed on April 25, 1995 with the name Lesser Paul, Inc. ("LPI").
LPI changed its name to CGI on November 13, 1995. The Company is engaged in the
distribution, marketing and sale of dietary supplements and over-the-counter
nonprescription pharmaceuticals ("OTCs"). The Company distributes its products
under Company owned trademarks through direct sales to major wholesalers,
particularly those that service convenience stores, drug stores, discount
department stores, wholesale clubs, petroleum marketers, hospital gift shops and
airport gift shops supported by a sophisticated broker network.

Acquisitions/Disposals

On October 31, 1995, the Company acquired from PDK Labs Inc., a New
York corporation ("PDK"), certain assets and rights relating to the "Energex
Plus" product line ("Energex Plus") including all interest in the Energex Plus
market, customer list, trade secrets, trademarks and trade names, including the
use of the trade name "Energex Plus" (the "Energex Assets"). In addition, on
October 31, 1995, the Company also acquired from PDK all of the assets and
rights relating to the "Compare Generiks" product line ("Compare Generiks")
which was developed by PDK, except for such rights relating to sales by direct
mail (the "Compare Generiks Assets"). The Compare Generiks Assets include
customer lists, trade secrets, trademarks and trade names, including the use of
the trade name "Compare Generiks" and a mechanical counter display for which
there is a patent application pending for a display unit. The Energex Assets and
the Compare Generiks Assets and all of PDK's rights relating thereto, except in
relation to sales by direct mail of the Compare Generiks product line, form the
core of the Company's business.

On May 31, 1996, the Company acquired 500,000 shares of common stock,
par value $.0001 per share, of Superior Supplements, Inc., a Delaware
corporation ("SSI"), (i) for a cash consideration of $100,000, and (ii) in
consideration of the issuance of 200,000 shares of common stock of the Company.

Supply and Licensing Agreements

On October 31, 1995, the Company entered into a supply agreement with
PDK. The agreement was amended in December 1996 and provides for PDK to supply
the Company certain products at prices based on PDK's material cost plus a
specified mark-up.

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On May 31, 1996, the Company entered into an exclusive supply agreement
with SSI, pursuant to which SSI agreed to supply the Company with all of the

Company's requirements for vitamins on an exclusive basis (other than any
vitamins sold under the "Energex" trade mark or as part of the "Energex" product
line) for a three (3) year period, renewable for successive one (1) year periods
thereafter.

On March 24, 1997, the Company entered into an exclusive supply and
licensing agreement (the "Agreement")with PDK, pursuant to which PDK granted the
Company an exclusive license to use the trade marks "Max Brand" and "HeadsUp"
brands of OTCs and the exclusive right to distribute products bearing such
names. The Agreement has a five year term which automatically renews for
successive periods of one year and provides for PDK to supply the Company with
"Max Brand" and "Heads Up" products at prices based on PDK's material cost plus
50%.

On May 5, 1997, the Company entered into a marketing agreement with a
pharmaceutical distributor (the "Distributor"), pursuant to which the
Distributor will market the Company's "Max Brand" and "Heads Up" products for a
period of two years, renewable for successive periods of one year. The
Distributor will earn a marketing fee equal to the difference between (i) the
price of the products sold and (ii) an amount equal to 200% of the material cost
of the products, as defined.

Products and Development

The Company develops and sells products for its own Energex Plus and
Compare Generiks lines and distributes products in the Max Brand and HeadsUp
lines. Its products include dietary supplements and OTCs. Each product category
contains numerous different dosage sizes and various and unique combinations of
ingredients. These product groups include Acti-Tab, Non-Aspirin Extra Strength,
Ibuprofen, Non-Aspirin (325 mg), Micro Coated Aspirin (325 mg), Adult Strength
Pain Reliever, Non-Aspirin Sinus Relief, Nasal Decongestant, Night Cough Relief,
Day Cough Relief, Complete Allergy Relief, Ex-Pain and Multi-Symptom Cold
Formula.

The Company markets its nonprescription products under its Compare
Generiks, Max Brand and Heads Up brand names. These products contain active
ingredients which are identical to those contained in nonprescription products
sold under national and regional brand names, private label brands, local and
regional products sold by other national and regional direct mail markets. For
instance, the Company's tablets and capsules are similar to Actifed(R), Tylenol
Extra Strength(R), Advil(R), Tylenol Regular Strength(R), Bayer (325 mg)(R),
Anacin(R), Tylenol Sinus Formula(R), Sudafed (30 mg)(R), Nyquil(R), Dayquil(R),
Comtrex(R), Excedrin(R) and Benadryl(R).

The Company only sells over-the-counter products which have been proven
to be generally recognized to be safe and effective for the intended uses.
Proposed rules issued by

<PAGE>

the Food and Drug Administration have established, after an expanded review of
all over-the-counter products, those over-the-counter drugs that will be

generally recognized as safe and effective and not misbranded.

For its sales of vitamins and nutritional supplements to retailers, the
Company employs a multi-brand strategy and associated marketing efforts designed
to access several different classes of trade. The Company's marketing strategy
with respect to each of its brands is directed at the ultimate retail consumer,
with an emphasis on the educated consumer. The Company provides a wide product
selection for the consumer, attractive price points, clear and informative
labeling, safety-conscious packaging and thoughtful shelf organization for
easier product selection. The Company works closely with retailers to help them
optimize the performance of their dietary supplement products and
over-the-counter pharmaceutical departments, including providing retailers with
various types of merchandising assistance to maintain the inventory and
appearance of the dietary supplement products and over-the-counter
pharmaceutical sections of their stores, sophisticated plan-o-grams which map
out the shelf displays and shelf marketing strategies, point-of-sale displays
and topical informational materials.

The Company is expanding its vitamin and nutritional supplement line of
products. The products to be introduced include Joint Support, Pressur-Lo and
Bright Eyes. The Company anticipates introduction of these products to occur in
the second quarter of fiscal year end March 31, 1998.

The Company introduces new products in response to anticipated consumer
trends. Product concepts are generally developed by the Company's management,
key employees and consultants. Since the Company acquired the Energex Assets and
the Compare Generiks Assets, the Company has not incurred any expenses which
have been allocated to such research and development.

Marketing and Advertising

The Company markets its products to retail and wholesale customers
through in-store demonstrations, point of purchase displays, promotional
literature, direct salespersons, sales agents and manufacturer's
representatives. Advertising is through trade magazines, newspapers, in-store
flyers, radio and distributors catalogs. The Company offers placement allowances
and quarterly rebates which insure continued placement and reorders.

Manufacturing and Suppliers

The Company has purchased essentially all of its products from PDK
pursuant to a Supply Agreement dated October 31, 1995, as amended, pursuant to
an amendment dated as of December 13, 1996, and an Exclusive Supply and
Licensing Agreement dated March 24, 1997. In addition, in May 1996 the Company
entered into an Exclusive Supply Agreement

<PAGE>

with SSI for certain vitamin and nutritional supplements. Although the Company
believes that other sources are available for such products, there can be no
assurance that the Company would be able to replace these products, or obtain
new suppliers, in the event the Company was no longer able to obtain products

from PDK or SSI. Even if the Company is able to develop alternative product
sources, there can be no assurance that it can do so without material delay or
on a cost effective basis at prices similar to those paid to PDK or SSI. As a
result, any interruption or discontinuance of supplies from PDK or SSI could
result in considerable expense, delay the Company's operations and ability to
deliver products, and have a material adverse effect on the Company.

Competition

The market for dietary supplements and over-the-counter pharmaceutical
products is highly competitive in each of the Company's existing and anticipated
product lines and methods of distribution. Numerous manufacturers and
distributors compete with the Company for customers throughout the United States
and internationally in the packaged dietary supplement and over-the-counter
pharmaceutical industry selling products to retailers, such as mass
merchandisers, drug store chains, independent drug stores and health food
stores. Many of the Company's competitors are substantially larger and more
experienced than the Company, have longer operating histories and have
materially greater financial and other resources than the Company (although no
implication is intended hereby regarding the Company's industry ranking in
comparison to such competitors). Many of these competitors are private
companies, and therefore, the Company cannot compare its revenues with respect
to the sales volume of each competitor. The Company's significant competitors
include Perrigo Company and Rexall Sundown, Inc. both of whom have longer
operating histories and materially greater financial and other resources than
the Company.

Although certain of the Company's competitors are substantially larger
than the Company and have greater financial resources, the Company believes that
it competes favorably with other vitamin and nutritional supplement companies
because of its access to products, competitive pricing, quality of products,
sales support and diverse product line.

Trademarks and Service Marks

The trademarks Energex Plus and Compare Generiks and an application for
a mechanical patent for the Compare Generiks tablet display and dispenser are
the property of the Company and have been assigned to the Company by PDK. The
trademarks have been registered and a patent application filed with the United
States Patent and Trademark Office ("PTO"). The trademarks Max Brand and HeadsUp
have been exclusively licensed to the Company by PDK. To the Company's
knowledge, the Company has the common law right to use such trademarks on, and
the mechanical patent with, its products and in the marketing of its services.
The Company has retained trademark counsel and a patent agent and presently

<PAGE>

intends to make all appropriate filings and registrations and take all other
actions necessary, to protect all of its intellectual property rights.

Management and Employees

As of June 20, 1997, the Company employed a total of six (6) employees
on a full time basis (three (3) employees in sales and marketing and three (3)
people in administration and finances).

The Company has experienced no work stoppages and considers its
employee relations to be satisfactory. The Company's employees are not
represented by a labor union.

Government Regulation

The Company's products and/or its business operations are subject to
regulation by one or more federal agencies, including The United States Postal
Service, the Federal Trade Commission ("FTC"), the Food and Drug Administration
("FDA"), the Consumer Product Safety Commission and the United States Department
of Agriculture. The FDA in particular, is primarily responsible for regulation
of the labeling, manufacture and sale of vitamins and mineral supplements which
the FDA believes to be unapproved drugs or food additives rather than food
supplements. The Company's activities are also regulated by various agencies of
the states and localities in which the Company's products are sold.

The Company markets vitamins, minerals, herbs, amino acids and other
similar nutritional substances ("dietary supplements"), and over-the-counter
("OTC") drug products. These products are primarily regulated by the FDA under
the auspices of the Federal Food, Drug and Cosmetic Act (the "FFDCA"). Under the
FFDCA, most dietary supplements are currently regulated as foods, which require
no approval from the FDA prior to marketing. Therefore, the regulation of
dietary supplements is far less restrictive than that imposed upon manufacturers
and distributors of prescription drugs. Dietary supplements, however, must be
labeled correctly to avoid being misbranded under the FFDCA. Health claims made
by vitamin and dietary supplement companies with respect to their products are
specifically regulated by the FDA. If such products make unapproved health
claims, the FDA may consider them to be unapproved drugs, which require approval
by the FDA prior to marketing.

Some of the products marketed by the Company are classified as OTC
drugs. Under the FFDCA, drugs are deemed by the FDA either to be drugs which
require approval by the FDA prior to marketing ("new drugs"), or drugs which do
not require approval by the FDA prior to marketing because they are generally
recognized as safe and effective ("old drugs"). Old drugs must conform to
monographs developed by the FDA to be lawfully marketed. Most

<PAGE>

OTC drugs are old drugs. Therefore, the regulation of OTC drugs is less
restrictive than that imposed upon manufacturers and distributors of new drugs.

To the extent the Company establishes its own manufacturing facilities
in the future and produces products deemed by the FDA now or in the future to be
a drug, the operation of the Company's manufacturing facilities will be subject
to regulation by the FDA as a drug manufacturing facility and to compliance with
good drug manufacturing practices. Although the Company does not anticipate any
difficulties in complying with the necessary good drug manufacturing practices,

any such difficulties that are encountered could have a material adverse effect
on the Company.

Marketing misbranded or adulterated food or drugs, or unapproved new
drugs or food additives, can result in civil or criminal penalties, including,
but not limited to, product seizure, injunction and fines.

On January 4, 1994, the FDA issued final regulations concerning dietary
supplements. It did so partially in response to the Nutritional Labeling and
Education Act of 1990 ("NLEA") and the Dietary Supplement Act of 1992 in order
to amend its food labeling regulations, setting forth specific regulations for
the nutrition labeling of vitamins and mineral supplements, establish up to date
reference standards for nutrients and food components and establish procedures
for FDA approval of health claim messages. The regulations subject dietary
supplement labels to the same standards as food labels under the Nutrition
Labeling and Education Act with regard to health claim messages and nutrition
labeling information. The regulations concerning health claim messages went into
effect on July 1, 1994 and the regulations concerning nutrition labeling went
into effect on July 5, 1995.

The regulations prohibit the use of any health claim on a dietary
supplement unless the health claim is supported by significant scientific
agreement and is pre-approved by the FDA. To date, the FDA has approved the use
of health claims only in connection with calcium products and osteoporosis, and
folic acid and neural tube defects. Accordingly, most dietary supplements will
be precluded from bearing most health claims. The Company's products include
multivitamins and minerals and specialty formulas. The Company cannot determine
at this time whether the new regulations will have any adverse effect on its
operations, although it believes that they will not have a material adverse
effect.

In addition, the FDA issued an Advanced Notice of Proposed Rulemaking
on June 18, 1993 ("ANPR") requesting comments on the general regulation of
certain dietary supplements, such as herbs, fish and plant oils, fatty acids,
fibers and vegetable gums, carnitine and amino acids. Some of these substances
are sold by the Company. In connection therewith, the FDA commissioned the
Federation of American Societies for Experimental Biology ("FASEB") to conduct a
study of the safety of amino acids. The FASEB report published in September 1992
concluded that there was insufficient research and information on amino acids to
conclude that added, manufactured, or incomplete mixtures of amino acids are
safe and, therefore,

<PAGE>

recommended that further research be conducted. The internal FASEB report issued
in connection with the ANPR contains recommendations concerning the possible
regulation of dietary supplements by category.

The Company cannot determine whether separate regulations will be
issued for these substances, or what effect any new regulations for such
governmental regulations or administrative orders concerning such substances,
when and if promulgated, could require the reformulation of certain products to

meet new standards or require the recall or discontinuance of certain products
not capable of reformulation.

The Dietary Supplement Act of 1992 requires that the Comptroller
General of the United States and the Director of the Office of Technology
Assessment undertake separate studies of FDA regulation of dietary supplements
and make recommendations in Congress which would reduce or modify the FDA's
authority to regulate dietary supplements. While these bills have not been
enacted as law, there is a strong likelihood that Congress will again consider
such legislation. There is no assurance, however, that these bills will
ultimately be passed and signed into law.

Any such legislation reducing the FDA's authority to modify dietary
supplements could result in the Company being subject to fewer regulatory
requirements and would, therefore, have no adverse impact on the Company. Any
modification which increases the FDA's regulatory authority could subject the
Company to additional expenses in order to comply with more stringent
requirements and could have a material adverse impact on the Company by limiting
products or causing the Company to incur additional expenses in order to comply
with these regulations.

Conflict of Interests

At present, PDK supplies essentially all of the Company's products as
well as certain management and administrative facilities and personnel. It is
anticipated that PDK will continue to supply a significant percentage of the
Company's products, at or near present levels. The Company will continue to
operate its executive offices, distribution and packaging at facilities leased
and managed by PDK. In addition, a member of SSI's Board of Directors, Daniel
Durchslag and a member of PDK's Board of Directors, Hartley T. Bernstein, are
also members of the Company's Board of Directors. Because of PDK's role and
SSI's role as significant suppliers to the Company, certain conflicts of
interest may occur between the Company and SSI or PDK. In such instances,
members of the Board of Directors who are also members of the SSI Board of
Directors or the PDK Board of Directors may be precluded from participating in
corporate decisions. Although the Board of Directors of the Company has not
adopted any written policy on this matter, the Delaware Corporation Law contains
specific provisions governing such conflicts.

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Liability Insurance

The Company, like other manufacturers of products that are ingested,
faces inherent risk of exposure to product liability claims if, among other
things, the use of its products results in an injury. With respect to product
liability coverage, the Company through its main supplier, currently has
coverage under a product liability insurance policy. There is no assurance that
any judgment against the Company will not exceed liability coverage. A judgment
significantly in excess of the amount of insurance coverage would have a
material adverse effect on the Company.

Item 2. PROPERTIES.

On October 31, 1995, the Company entered into a one (1) year lease with
PDK for its 10,000 square foot executive offices, distribution center and
warehouse space at 300 Oser Avenue, Hauppauge, NY 11788 at a monthly rent of
$5,000. The lease has been extended on a month-to-month basis since October
1996. In the judgment of management, the lease with PDK reflects a rent at
current fair market value.

Item 3. LEGAL PROCEEDINGS

There is no material litigation pending or threatened against the
Company nor are there any such proceedings to which the Company is a party.

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

There have been no matters which have been submitted to a vote of the
Company's security holders.

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PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

The Company's securities commenced trading in the over-the-counter
market on the effectiveness of the Company's Initial Public Offering on March 6,
1996 in the form of Units each consisting of two (2) shares of Common Stock and
one (1) Class A Warrant. The Units, Common Stock and Class A Warrants are
regularly quoted and traded on the NASDAQ system under the symbols COGEU, COGE
and COGEW.

The following table indicates the high and low bid prices for the
Company's Common Stock and Class A Warrants for the period up to March 31, 1997
based upon information supplied by the NASDAQ system. Prices represent
quotations between dealers without adjustments for retail markups, markdowns or
commissions, and may not represent actual transactions.

Units
- -----

1997 Fiscal Year Quoted Bid Price
---------------- ----------------
High Low
---- ---
First Quarter 23 18
Second Quarter 12 12
Third Quarter DID NOT TRADE
Fourth Quarter DID NOT TRADE

Common
Stock
- -----

1997 Fiscal Year Quoted Bid Price
---------------- ----------------
High Low
---- ---
First Quarter 10 6
Second Quarter 8 1/8 4
Third Quarter 7 3/4 5
Fourth Quarter 6 3/8 4 1/8

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Class A
Warrants

1997 Fiscal Year Quoted Bid Price

---------------- ----------------
High Low
---- ---
First Quarter 6 1/4 3 1/2
Second Quarter 4 3/4 1 15/16
Third Quarter 3 11/16 1 3/4
Fourth Quarter 2 13/16 1 1/2

On June 20, 1997 the closing price of the Common Stock as reported on
NASDAQ SmallCap Market was $4.50. On June 20, 1997 the closing price for the
Class A Warrant reported on NASDAQ SmallCap was $1.56. The Units did not trade.
On June 20, 1997 there were 63 holders of record of Common Stock.

<PAGE>

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

Fiscal Year 1997

Nets sales for the fiscal year ended 1997, derived primarily from
convenience stores and drug store chains, were approximately $2,290,000. Net
sales for the period April 25, 1995 (inception) to March 31, 1996 (the
"Development Stage") approximated $546,000. The gross profit on these sales was
approximately $815,000 (36% of sales) and $291,000 (53% of sales), respectively.
The change in gross profit is primarily attributable to the mix of sales. Sales
for the Energex product line approximated 42% of total sales during the
Development Stage as compared to 19% of total sales for the year ended March 31,
1997.

Selling, general and administrative expenses approximated $2,077,000
(91% of sales) for fiscal year 1997. For the period April 25, 1995 (inception)
to March 31, 1996, selling, general and administrative expenses were
approximately $491,000 (90% of sales). The Company has increased attendance at
trade shows, placed radio advertisements and trade publications throughout the
nation, and has implemented marketing campaigns targeting convenience store
chains for the placement of product displays.

The Company realized losses of approximately ($1,165,000) and
($214,000) for the fiscal year end 1997 and 1996, respectively. The losses are
principally attributable to the amortization of intangible assets on a straight
line basis, the implementation of marketing campaigns geared toward product
placement and advertising costs.

On May 31, 1996, the Company entered into a three-year supply agreement
with Superior Supplements, Inc. ("SSI"), which provides for SSI to supply the
Company with vitamins in bulk tablet form (other than any vitamins sold under
the "Energex" trademark or as part of the "Energex" product line) at a price
equal to SSI's cost plus 15 percent.

In December 1996, the Company amended its Supply Agreement ("Amended
Agreement") with PDK Labs Inc. ("PDK"). The Amended Agreement provides for PDK
to supply the Company with certain products at prices based on PDK's material
cost, plus a specified mark-up.

In March 1997, the Company entered into an exclusive supply and
licensing agreement (the "Agreement") with PDK, pursuant to which PDK granted
the Company an exclusive license to use the trademarks "Max Brand" and "Heads
Up" of OTCs and the exclusive right to distribute products bearing such names.
The Agreement has a five year term which automatically renews for successive
periods of one year and provides for PDK to supply the

<PAGE>

Company with "Max Brand" and "Heads Up" products at prices based on PDK's
material cost plus 50%.

Management believes that inflation did not have a material effect on
operations or financial conditions in 1997 and 1996. Management also believes
that its business is not seasonal; however, significant promotional activities
have a direct impact on sales volume in any given quarter.

Liquidity and Capital Resources

As of March 31, 1997, the Company had working capital of approximately
$1,069,000.

The Company's statement of cash flows reflects cash used in operating
activities of approximately ($967,000) primarily due to a net loss of
approximately $1,165,000 and increases in operating assets such as accounts
receivable ($372,000), inventories ($480,000) and other assets ($145,000) offset
by an increase in due to affiliate ($847,000) and an adjustment for amortization
and depreciation expense of ($388,000).

The statement also reflects net cash used in investing activities of
approximately ($190,000) which is principally attributable to the purchase of
property and equipment ($53,000), intangible assets ($37,000), as well as a cash
investment in Superior Supplements, Inc. common stock ($100,000).

The Company expects to meet its cash requirements from operations,
current cash reserves, and existing financial arrangements.

Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See financial statements following Item 13 of this Annual Report on
Form 10-KSB.

Item 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

<PAGE>

PART III

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

Name Age Position(s) with the Company
- ---- --- ----------------------------

Dr. Daniel Durchslag 53 Director

Hartley T. Bernstein 44 Director

Thomas A. Keith 37 President, Chief Executive Officer,
Chief Financial Officer and Director

Raymond A. Aiken 43 Vice President-Sales and Secretary

Background of Executive Officers and Directors

Dr. Daniel Durchslag, DDS. has been a Director of the Company since October 2,
1995 and has practiced General Cosmetic and Sports Dentistry in Beverly Hills,
California since 1980. From 1973 until 1979, he was an Associate Professor and
Director of Clinics at the University of Southern California School of
Dentistry. He is a graduate of the University of Wisconsin and Loyola
University/Chicago College of Dental Surgery. He is presently team dentist for
the Oakland Raiders. Dr. Durchslag also serves as a director of SSI.

Hartley T. Bernstein has been a Director of the Company since October 31, 1995
and is a member of the law firm of Bernstein & Wasserman, LLP specializing in
corporate and securities law. He was associated with the firm of Parker Chapin
Flattau & Klimpl from 1976-1977, served as an Assistant District Attorney for
New York County from 1977-1979 and was associated with the law firm of
Guggenheimer & Untermyer from 1979-1982. In 1982, Mr. Bernstein formed his own
law practice which subsequently merged with his present firm. Mr. Bernstein also
serves as a director of PDK, Futurebiotics, Inc., and Bev-Tyme, Inc. (formerly
New Day Beverage, Inc.). Mr. Bernstein is a member of the adjunct faculty of
Yale Law School where he teaches a course in corporate negotiations and has
served previously on the adjunct faculties of New York Law School and Mercy
College. He is also an instructor at the National Institute of Trial Advocacy
and a member of the Boards of Arbitration of the National Association of
Securities Dealers and the New York Stock Exchange. Mr. Bernstein serves as a
commentator on securities law matters on the nationally syndicated Business
Radio Network and Money Radio. Mr. Bernstein graduated from Columbia University
with a B.A. and received his J.D. from New York University School of Law.

<PAGE>

Thomas A. Keith has been a Director of the Company since May 21, 1997 and the
President of the Company since October 31, 1995. Prior to joining the Company,

from December 1990 to October 1995, Mr. Keith was
Vice President of Sales & Marketing of PDK Labs Inc., a company which is engaged
in the manufacture and distribution of nutritional supplements, vitamins and
OTCs. From 1983 to 1990, Mr. Keith was President and Chief Financial Officer of
Executive Adjustment Bureau, Inc., a company which was engaged in the sales of
various insurance services. Mr. Keith will continue to devote substantially all
of his business time to the Company.

Raymond A. Aiken was the Vice President of Sales of the Company from October 31,
1995 until his resignation effective May 16, 1997. Prior to joining the Company,
from November 1992 to October 1995, Mr. Aiken served as National Sales Manager
for PDK Labs Inc., a company which is engaged in the manufacture and
distribution of nutritional supplements, vitamins and OTCs. From September 1986
to November 1992, Mr. Aiken was Director of Purchasing for Rack Service Co.,
Inc., a company whose primary business was the distribution and marketing of
OTCs. A replacement for Mr. Aiken's position has not been hired.

There are no family relationships between the officers and directors of
the Company.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

To the Company's knowledge, based solely upon its review of the copies
of such reports furnished to the Company during the year ended March 31, 1997,
all Section 16(a) filing requirements applicable to its officers and directors
and greater than ten percent beneficial owners were satisfied.

<PAGE>

Executive Compensation
- ----------------------

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
--------------------------------------- ------------- ------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)

Restricted All
Other Stock LTIP Other
Annual Awards Options/ Payouts Compensation
Name and Principal Position Year Salary($) Bonus($) Compensation($) ($) SARs(#) ($) ($)
- ---------------------------- ---- --------- ------- ---------------- ------------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas A. Keith, CEO 1997 $135,000 $75,000 $-0- $-0- --- $-0- $-0-
1996 $ 57,000 $-0- $-0- $-0- 100,000 $-0- $-0-
Raymond A. Aiken(1) 1997 $ 70,000 $14,000 $-0- $-0- --- $-0- $-0-
1996 $ 25,000 $-0- $-0- $-0- 100,000 $-0- $-0-
</TABLE>

(1) Mr. Aiken resigned effective May 16, 1997, at which time his options
expired.

Aggregated Option/SAR Exercises -
and FY-End Option/SAR Values
<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------------------------------

(a) (b) (c) (d) (e)

Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End (#)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized($) Unexercisable Unexercisable
- ---- --------------- ----------------- ------------- -------------

<S> <C> <C> <C> <C>
Thomas A. Keith -0- -0- 100,000 /-- $-0-
Raymond A. Aiken (1) -0- -0- 100,000 /-- $-0-
</TABLE>

(1) Mr. Aiken resigned effective May 16, 1997, at which time his options
expired.

<PAGE>

Employment Agreements

In October, 1995, the Company entered into a one (1) year employment
agreement with Thomas A. Keith, pursuant to which Mr. Keith serves as the
Company's President. The agreement provides for Mr. Keith to receive a salary of
$135,000 per annum. In addition, Mr. Keith has been granted an option to
purchase 100,000 shares of the outstanding Common Stock of the Company
exercisable (i) at an exercise price equal to the public offering price of the
shares of Common Stock of the Company , and (ii) only at a time when Mr. Keith
is employed by the Company. The agreement can be terminated by the Company, with
or without cause, upon ninety (90) days' notice and contains prohibitions on the
disclosure of confidential information and covenants not to compete with the
Company which survive any such termination. In October, 1996, the Company
entered into an amended agreement to Mr. Keith's employment agreement, pursuant
to which Mr. Keith's term of employment was extended for a further year.

In October, 1995, the Company entered into a one (1) year employment
agreement with Raymond Aiken, pursuant to which Mr. Aiken serves as the
Company's Vice President of Sales. The agreement provides for Mr. Aiken to
receive a salary of $70,000 per annum. In addition, Mr. Aiken has been granted
an option to purchase 100,000 shares of the outstanding Common Stock of the
Company exercisable (i) at an exercise price equal to the public offering price
of the shares of Common Stock of the Company, and (ii) only at a time when Mr.
Aiken is employed by the Company. The agreement can be terminated by the
Company, with or without cause, upon ninety (90) days' notice and contains
prohibitions on the disclosure of confidential information and covenants not to
compete with the Company which survive any such termination. Mr. Aiken resigned
effective May 16, 1997, at which time his options expired.

Stock Option Plans

1995 Stock Plan

In December 1995, the Board of Directors of the Company adopted the
1995 Stock Plan (hereinafter called the "1995 Plan"). The 1995 Plan was approved
by the Stockholders of the Company in December 1995. The purpose of the 1995
Plan is to provide an incentive and reward for those executive officers and
other key employees in a position to contribute substantially to the progress
and success of the Company, to closely align the interests of such employees
with the interests of stockholders of the Company by linking benefits to stock
performance and to retain the services of such employees, as well as to attract
new key employees. In furtherance of that purpose, the 1995 Plan authorizes the
grant to executives and other key employees of the Company and its subsidiaries
of stock options, restricted stock, deferred stock, bonus shares, performance
awards, dividend equivalent rights, limited stock appreciation rights and other
stock-based awards, or any combination thereof. The 1995 Plan is expected to
provide flexibility to the Company's compensation methods, after giving due
consideration to competitive conditions and the impact of federal tax laws. The
Company anticipates that the stockholders will be requested to approve the
adoption of the 1995 Plan in the near future.

<PAGE>

The maximum number of shares of Common Stock with respect to which
awards may be granted pursuant to the 1995 Plan is initially 2,000,000 shares.
Shares issuable under the 1995 Plan may be either treasury shares or authorized
but unissued shares. The number of shares available for issuance will be subject
to adjustment to prevent dilution in the event of stock splits, stock dividends
or other changes in the capitalization of the Company.

The 1995 Plan will be administered by a committee consisting of not
less than two (2) members of the Board of Directors who are "disinterested"
within the meaning of Rule 16b-3 promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code (including persons
who may be deemed outside directors by virtue of any transitional rule which may
be adopted by the Internal Revenue Service implementing such Section). The Board
will determine the persons to whom awards will be granted, the type of award
and, if applicable, the number of shares to be covered by the award. During any
calendar year, no person may be granted under the 1995 Plan awards aggregating
more than 100,000 shares (which number shall be subject to adjustment to prevent
dilution in the event of stock splits, stock dividends or other changes in
capitalization of the Company).

Types of Awards

Stock Options. Options granted under the 1995 Plan may be "incentive
stock options" ("Incentive Options") within the meaning of Section 422 of the
Code or stock options which are not incentive stock options ("Non-Incentive
Options" and, collectively with Incentive Options, hereinafter referred to as
"Options"). The persons to whom Options will be granted, the number of shares
subject to each Option granted, the prices at which Options may be exercised
(which shall not be less than the fair market value of shares of Common Stock on
the date of grant), whether an Option will be an Incentive Option or a
Non-Incentive Option, the time or times and the extent to which Options may be
exercised and all other terms and conditions of Options will be determined by
the Committee.

Each Incentive Option shall terminate no later than ten (10) years from
the date of grant, except as provided below with respect to Incentive Options
granted to 10% Stockholders (as hereinafter defined). No Incentive Option may be
granted at any time after October 2005. Each Non-Incentive Option shall
terminate not later than fifteen (15) years from the date of grant. The exercise
price at which the shares may be purchased may not be less than the Fair Market
Value of shares of Common Stock at the time the Option is granted, except as
provided below with respect to Incentive Options granted to 10% Stockholders.
Options granted to executive officers may not be exercised at any time prior to
six (6) months after the date of grant.

The exercise price of an Incentive Option granted to a person
possessing more than 10% of the total combined voting power of all shares of
stock of the Company or a parent or subsidiary of the Company ("10%
Stockholder") shall in no event be less than 110% of the Fair Market Value of

<PAGE>

the shares of the Common Stock at the time the Incentive Option is granted. The
term of an Incentive Option granted to a 10% Stockholder shall not exceed five
(5) years from the date of grant.

The exercise price of the shares to be purchased pursuant to each
Option shall be paid (i) in full in cash, (ii) by delivery (i.e., surrender) of
shares of the Company's Common Stock owned by the optionee at the time of the
exercise of the Option, (iii) in installments, payable in cash, if permitted by
the Committee or (iv) any combination of the foregoing. The stock-for-stock
payment method permits an optionee to deliver one (1) or more shares of
previously owned Common Stock of the Company in satisfaction of the exercise
price of subsequent Options. The optionee may use the shares obtained on each
exercise to purchase a larger number of shares on the next exercise. (The
foregoing assumes an appreciation in value of previously acquired shares). The
result of the stock-for-stock payment method is that the optionee can generally
avoid immediate tax liability with respect to any appreciation in the value of
the stock utilized to exercise the Option.

Shares received by an optionee upon exercise of a Non-Incentive Option
may not be sold or otherwise disposed of for a period determined by the Board
upon grant of the Option, which period shall be not less than six (6) months nor
more than three (3) years from the date of acquisition of the shares (the
"Restricted Period"), except that, during the Restricted Period (i) the optionee
may offer the shares to the Company and the Company may, in its discretion,
purchase up to all the shares offered at the exercise price and (ii) if the
optionee's employment terminates during the Restricted Period (except in limited
instances), the optionee, upon written request of the Company, must offer to
sell the shares to the Company at the exercise price within seven (7) business
days. The Restricted Period shall terminate in the event of a Change in Control
of the Company (as defined), or at the discretion of the Board. After the
Restricted Period, an optionee wishing to sell must first offer such shares to
the Company at the Fair Market Value.

Limited Stock Appreciation Rights. The Committee is authorized, in
connection with any Option granted under the 1995 Plan, to grant the holder of
such Option a limited stock appreciation right ("LSAR"), entitling the holder to
receive, within sixty (60) days following a Change in Control, an amount in cash
equal to the difference between the exercise price of the Option and the market
value of the Common Stock on the effective date of the Change in Control. The
LSAR may be granted in tandem with an Option or subsequent to grant of the
Option. The LSAR will only be exercisable to the extent the related Option is
exercisable and will terminate if and when the Option is exercised.

Restricted and Deferred Stock. An award of restricted stock or deferred
stock may be granted under the 1995 Plan. Restricted stock is subject to
restrictions on transferability and other restrictions as may be imposed by the
Committee at the time of grant. In the event that the holder of restricted stock
ceases to be employed by the Company during the applicable restrictive period,
restricted stock that is at the time subject to restrictions shall be forfeited
and reacquired by the Company. Except as otherwise provided by the Committee at
the time of grant, a holder of restricted stock shall have all the rights of a
stockholder including, without limitation, the right to vote restricted stock

and the right to recover dividends thereon. An award of deferred stock is an
award

<PAGE>

that provides for the issuance of stock upon expiration of a deferral period
established by the Committee. Except as otherwise determined by the Committee,
upon termination of employment of the recipient of the award during the
applicable deferral period, all stock that is at the time subject to deferral
shall be forfeited. Until such time as the stock which is the subject of the
award is issued, the recipient of the award has no rights as a stockholder.

Dividend Equivalent Awards. A dividend equivalent gives the recipient
the right to receive cash or other property equal in value to the dividends that
would be paid if the recipient held a specified number of shares of Common
Stock. A dividend equivalent right may be granted as a component of another
award or as a free standing award.

Bonus Shares and other Share Based Awards. The 1995 Plan authorizes the
Committee to grant shares as a bonus, or to grant shares or other awards in lieu
of obligations of the Company to pay cash under other plans or compensatory
arrangements, upon such terms as shall be determined by the Committee. The 1995
Plan also authorizes the Committee to grant other forms of awards based upon,
payable in, or otherwise related in whole or in part to, Common Stock,
including, without limitation, convertible or exchangeable debentures or other
debt securities, other rights convertible or exchangeable into shares, purchase
rights for shares, awards contingent upon performance of the Company, and awards
valued by reference to the book value of shares of Common Stock or awards
determined by reference to the value of securities of, or the performance of,
specified subsidiaries.

<PAGE>

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth information, as of June 20, 1997 with
respect to the beneficial ownership of the outstanding shares of the Company's
Common Stock and Preferred stock by (i) any holder of more than five percent
(5%) of the outstanding shares; (ii) the Company's officers and directors; and
(iii) the directors and officers of the Company as a group:

<TABLE>
<CAPTION>
Shares of Percentage Percentage
Name and Address of Common (%) of Shares of (%) of Total
Beneficial Owner (1) Stock Common Preferred Combined
- ------------------- Owned Stock Stock Vote
----- ----- ----- ----

<S> <C> <C> <C> <C>
Walpac, Inc.(2) 0.0 0.0 5,000,000 53.25

Delsin Investments, 0.0 0.0 5,000,000 53.25
Ltd.(3)

PDK Labs Inc.(4) 0.0 0.0 500,000 5.32

Daniel Durchslag(5) 0.0 0.0 0.0 0.0

Hartley T. Bernstein(5) 0.0 0.0 0.0 0.0

Thomas A. Keith(5) 100,000(6) 2.51 0.0 1.05

All officers and directors
as a group (three (3)
persons) 100,000 2.51 0.0 1.05

</TABLE>
- -----------------
(1) Beneficial ownership as reported in the table above has been determined
in accordance with Instruction (b1) to Item 403 of Regulation S-B of
The Securities Exchange Act.

(2) The address of Walpac, Inc. is P.O. Box 743, Suites 41/42, Victoria
House, 26 Main Street, Gibraltar.

(3) The address of Delsin Investments, Ltd. is P.O. Box 743, Suites 41/42,
Victoria House, 26 Main Street, Gibraltar.

(4) The address of PDK Labs Inc., is 145 Ricefield Lane, Hauppauge, NY
11788.

(5) The address of each stockholder shown above is c/o Compare Generiks,
Inc., 300 Oser Avenue, Hauppauge, NY 11788.

(6) Includes 100,000 shares of Common Stock underlying an option to
purchase 100,000 shares of Common Stock of the Company issued pursuant
to Mr. Keith's employment agreement.

<PAGE>

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On April 3, 1995, PDK entered into a binding agreement with
International Sales Association, Inc. ("ISA") appointing ISA as the exclusive
sales agent for sales of Energex Plus to grocery, drug, discount department
stores, department stores, variety stores, and U.S. government/military sales
(the "ISA Agreement"). PDK agreed to pay ISA (i) a commission of ten percent
(10%) of the net amount of goods shipped pursuant to the ISA Agreement, and (ii)
an additional two percent (2%) for marketing services through February 28, 1997.
PDK agreed not to hire any of ISA's employees or sales associates for the term
of the ISA Agreement and for a further two (2) year period thereafter. ISA and
ISA's founder and controlling shareholder, Patrick Higgins, agreed not to
represent any competing product for the term of the ISA Agreement and for a
further one (1) year period thereafter.

On April 25, 1995, the Company was formed in the State of Delaware
under the name Lesser Paul, Inc.

On April 28, 1995, Walpac, Inc. acquired 2,500,000 shares of Common
Stock of the Company, par value $.0001 per share, for a cash consideration of
$50,000.

On October 31, 1995, all of the Energex Assets and the Compare Generiks
Assets were transferred from PDK to the Company for a purchase price of
approximately $1,700,000. In exchange (i) PDK was issued 500,000 shares of
Common Stock of the Company representing $1,200,000 of the purchase price ($2.40
per share), (ii) the Company delivered to PDK a promissory note in the aggregate
principal amount of $500,000 together with interest at the rate of eight percent
(8%) per annum, payable to PDK on October 31, 1996, and (iii) the Company agreed
to purchase PDK's Energex Plus inventory at the cost specified in the Supply
Agreement (defined and referred to below). The Company agreed to assume certain
liabilities associated with the Energex Assets, including PDK's obligations to
(a) Nu-Tek Laboratories, Inc. ("Nu-Tek") pursuant to a promissory note in the
aggregate principal amount of $100,000, of which $50,000 remained outstanding,
delivered by PDK to Nu-Tek as part consideration for PDK's acquisition of the
Energex Assets and (b) ISA, pursuant to the ISA Agreement. In addition, the
Company agreed to pay to Nu-Tek a thirteen percent (13%) royalty on all "net
sales" (as defined in the agreement between Nu-Tek and PDK) for the period from
March 1, 1995 through February 28, 1997.

On October 31, 1995, the Company leased 10,000 square feet of executive
offices, a distribution center and warehouse space at 300 Oser Avenue,
Hauppauge, NY 11788 from PDK for a period of one (1) year at a monthly rent of
$5,000. The lease has been extended on a month-to-month basis since October
1996.

Since October 31, 1995, the Company has purchased essentially all of
its products and materials from PDK, pursuant to a supply agreement between PDK
and the Company (the "Supply Agreement"). On December 13, 1996, the Company
amended its Supply Agreement with PDK, which amendment provided for PDK to
supply the Company with certain products at prices based

<PAGE>

on PDK's material cost plus a specified mark-up. In addition, the Company has
paid the royalty described above to Nu-Tek. The term of the Supply Agreement is
for a period of five (5) years, automatically renewable for successive one (1)
year terms.

In December, 1995, the Company borrowed an aggregate of $300,000 from
four (4) unaffiliated lenders (the "Bridge Lenders"). In exchange for making
loans to the Company, each Bridge Lender received two promissory notes (the
"Bridge Notes"). In February, 1996, one of the Bridge Lenders assigned all of
his right, title and interest in the aggregate principal amount of $20,000 of
Bridge Notes held by him to one of the other Bridge Lenders in consideration for
the payment of $20,000. Certain of the Bridge Notes are in the aggregate
principal amount of $270,000 (the "Principal Bridge Notes") and the other Bridge
Notes are in the aggregate principal amount equal to $30,000 (the "Convertible
Bridge Notes"). Each of the Bridge Notes bears interest at the rate of eight
percent (8%) per annum. The Bridge Notes were due and payable upon the earlier
of (i) October 31, 1996 or (ii) the closing of an initial underwritten public
offering of the Company's securities. In addition, each Bridge Lender has the
right to convert a Convertible Bridge Note into a number of Class A Warrants
equal to one hundred (100) times the principal amount of such Convertible Bridge
Note. The Company entered into the bridge financing transactions because it
required additional financing and no other sources of financing were available
to the Company at that time. Further, the Company agreed to register the Class A
Warrants issuable upon conversion of the Convertible Bridge Notes, as well as
the shares of Common Stock issuable upon exercise of the Class A Warrants in the
first registration statement filed by the Company following the date of the
loan.

On December 14, 1995, Walpac, Inc. acquired 5,000,000 shares of Series
A Preferred Stock of the Company, for a cash consideration of $5,000. The Series
A Preferred Stock has no dividend rights and has a liquidation right of $.02 per
share. Each share of Series A Preferred Stock shall be entitled to one (1) vote
per share on all matters presented to stockholders of the Company.

On January 30, 1996, the $500,000 promissory note payable to PDK in
connection with the business acquisition was converted into 500,000 shares of
Series B Preferred Stock. The Series B Preferred Stock earns cumulative annual
dividends of 12% or $.12 per share and is redeemable by the Company after one
year from the date of issuance. The Series B Preferred Stock has a liquidation
right of $1 per share. Each of the Series B Preferred Stock shall be entitled to
one (1) vote per share on all matters presented to the stockholders of the
Company.

On March 6, 1996, the Company completed its initial public offering of
securities. During the offering all 345,000 units, each comprised of two (2)
shares of the Company's Common Stock and one (1) Class A Redeemable Purchase
Warrant, were sold, which raised gross proceeds of $3,450,000 for the Company.

On March 12, 1996, the Company repaid the principal plus all accrued
interest on the Principal Bridge Notes issued in exchange for loans made to the
Company. An aggregate of $275,385 was paid to the Bridge Lenders. The Principal
Bridge Notes were paid off by utilizing a

<PAGE>

portion of the proceeds from the Company's initial public offering. In addition,
the Company issued 3,000,000 Class A Warrants in connection with the conversion
of the Convertible Bridge Notes.

On May 31, 1996, the Company entered into an exclusive supply agreement
with SSI, pursuant to which SSI agreed to supply the Company with all of the
Company's requirements for vitamins on an exclusive basis (other than any
vitamins sold under the "Energex" trade mark or as part of the "Energex" product
line) for a three (3) year period, renewable for successive one (1) year periods
thereafter.

On March 24, 1997, the Company entered into an exclusive supply and
licensing agreement with PDK, pursuant to which PDK granted the Company an
exclusive license to use the trade marks "Max Brand" and "HeadsUp" brands of
OTCs and the exclusive right to distribute products bearing such names.

On May 5, 1997, the Company entered into a marketing agreement with a
pharmaceutical distributor (the "distributor"), pursuant to which the
distributor will market the Company's "Max Brand" and "Heads Up" products for a
period of two years, renewable for successive periods of one year. The
distributor will earn a marketing fee equal to the difference between (i) the
price of the products sold and (ii) an amount equal to 200% of the material cost
of the products, as defined.

Miscellaneous

For the year ended March 31, 1997, legal fees of approximately $80,000
were incurred for services from the law firm of Bernstein & Wasserman, LLP.
Hartley T. Bernstein, a partner in the firm, is a Director of the Company
hereunder.

<PAGE>

PART IV

Item 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)(1) Financial Statements.

The following financial statements are included in Part II, Item 7:

Report of Independent Certified Public Accountants F-1

Balance sheet as of March 31, 1997 F-2

Statements of operations for the year ended March 31, 1997
and period April 25, 1995 (inception) to March 31, 1996 F-3

Statement of stockholders' equity for the year ended March 31, 1997
and period April 25, 1995 (inception)
to March 31, 1996 F-4

Statements of cash flows for the year ended March 31, 1997
and period April 25, 1996 (inception)
to March 31, 1996 F-5

Notes to financial statements F-6 - F-12

<PAGE>

(a) (2) Exhibits

1.01* _ Form of Underwriting Agreement.
3.01* _ Certificate of Incorporation of the Company dated April 25, 1995
3.02* _ Certificate of Amendment of Certificate of Incorporation of the
Company dated November 13, 1995.
3.03* _ Certificate of Amendment of Certificate of Incorporation of the
Company dated December 13, 1995.
3.04* _ Certificate of Amendment of Certificate of Incorporation of the
Company dated January 30, 1996.
3.05* _ By-Laws of the Company.
3.06* _ Form of Certificate of Designation of Series A Preferred Stock.
3.07* _ Form of Certificate of Designation of Series B Preferred Stock.
4.01* _ Specimen Certificate for shares of Common Stock.
4.02* _ Specimen Certificate for shares of Series A Preferred Stock.
4.03* _ Specimen Certificate for shares of Series B Preferred Stock.
4.04* _ Specimen Certificate for Class A Redeemable Common Stock Purchase
Warrant.
4.05* _ Form of Warrant Agreement by and among the Company and American Stock
Transfer & Trust Company.
4.06* _ Form of Underwriters' Unit Purchase Option.
10.01* _ Asset Purchase Agreement between the Company and PDK dated as of
October 31, 1995

10.02* _ Supply Agreement between the Company and PDK dated as of October 31,
1995.
10.03* _ Lease between the Company and PDK dated as of October 31, 1995.
10.04* _ Promissory Note of the Company, issued to PDK, dated as of October
31, 1995.
10.05* _ Employment Agreement between the Company and Thomas A. Keith dated as
of October 31, 1995, as amended.
10.06* _ Employment Agreement between the Company and Raymond A. Aiken dated
as of October 31, 1995, as amended.
10.07* _ Form of December, 1995 Bridge Loan Agreements.
10.08* _ Form of Selected Dealers' Agreement.
10.09* _ 1995 Stock Plan.
10.10* _ Sales Agency Agreement between PDK and International Sales
Association, Inc. dated as of April 3, 1995, as amended.
10.11 _ Exclusive Supply Agreement between the Company and Superior
Supplements, Inc. dated as of May 31, 1996.
10.12 _ Amendment to Supply Agreement the Company and PDK dated as of
December 13, 1996.
10.13 _ Exclusive Supply and Licensing Agreement between the Company and PDK
dated March 24, 1997.
10.14 _ Marketing Agreement between the Company and Body Dynamics, Inc. dated
May 5, 1997.

* Incorporated by Reference to the Company's Registration Statement on
Form SB-2, No. 33- 80659.

(b) Reports on Form 8-K.

None.

<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: New York, New York
June 26, 1997

COMPARE GENERIKS, INC.

By: /s/ Thomas A. Keith
--------------------------------------
Thomas A. Keith
President, Chief Executive Officer,
Chief Financial Officer and Director

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
in the capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----

/s/ Thomas A. Keith Director June 26, 1997
- ------------------------
Thomas A. Keith

/s/ Hartley T. Bernstein Director June 26, 1997
- ------------------------
Hartley T. Bernstein

/s/ Daniel Durchslag Director June 26, 1997
- ------------------------
Daniel Durchslag

<PAGE>

INDEX TO FINANCIAL STATEMENTS

Page
----

Compare Generiks, Inc.

Report of independent certified public accountants F-1

Balance sheet as of March 31, 1997 F-2

Statements of operations for the year ended March 31, 1997
and period April 25, 1995 (inception) to March 31, 1996 F-3

Statement of stockholders' equity for the year ended March 31,
1997 and period April 25, 1995 (inception) to March 31, 1996 F-4

Statements of cash flows for the year ended March 31, 1997
and period April 25, 1995 (inception) to March 31, 1996 F-5

Notes to financial statements F-6 - F-12

<PAGE>

Independent Auditors' Report

Board of Directors and Stockholders
Compare Generiks, Inc.
Hauppauge, New York

We have audited the balance sheet of Compare Generiks, Inc. as of March 31,
1997, and the related statements of operations, stockholders' equity and cash
flows for the year ended March 31, 1997 and period April 25, 1995 (inception) to
March 31, 1996. 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 Compare Generiks, Inc. as of
March 31, 1997 and the results of its operations and its cash flows for the year
ended March 31, 1997 and period April 25, 1995 (inception) to March 31, 1996, in
conformity with generally accepted accounting principles.

HOLTZ RUBENSTEIN & CO., LLP

Melville, New York
May 2, 1997 (except for Note 13, as
to which the date is May 5, 1997)

F-1

<PAGE>

COMPARE GENERIKS, INC.

BALANCE SHEET

MARCH 31, 1997

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 890,485
Accounts receivable, net of $10,000 allowance for doubtful accounts 606,949
Inventories 642,422
Prepaid expenses and other current assets 165,640
-----------
Total current assets 2,305,496

INVESTMENT IN AVAILABLE-FOR-SALE SECURITIES (Note 4) 1,256,000

PROPERTY AND EQUIPMENT (Note 5) 52,153

INTANGIBLE ASSETS, net (Note 6) 1,297,932

OTHER ASSETS 218,500

$ 5,130,081
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 96,166
Due to affiliates 1,080,419
Dividends payable (Note 8) 60,000
-----------
Total current liabilities 1,236,585

COMMITMENTS (Note 12)

STOCKHOLDERS' EQUITY: (Notes 4 and 8)
Common stock, $.0001 par value; authorized 25,000,000
shares; 3,890,000 issued and outstanding 389
Preferred stock - Class A - $.0001 par value; liquidation
preference of $100,000; authorized 10,000,000 shares;
5,000,000 issued and outstanding 500
Preferred stock - Class B - $.0001 par value; liquidation
preference of $500,000; authorized 10,000,000 shares;
500,000 issued and outstanding 50
Additional paid-in capital 5,273,344
Deficit (1,438,787)

Unrealized holding gain on available-for-sale securities 63,000
-----------
3,898,496

Less stock subscription receivable (5,000)

3,893,496

$ 5,130,081
===========
</TABLE>

See notes to financial statements

F-2

<PAGE>

COMPARE GENERIKS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Period
Year Ended April 25, 1995
March 31, (inception) to
1997 March 31, 1996
----------- -----------
<S> <C> <C>

REVENUE $ 2,289,629 $ 545,670
----------- -----------

COSTS AND EXPENSES: (Notes 6, 10 and 12)
Cost of sales 1,474,609 254,676
Selling, general and administrative 2,077,219 490,601
----------- -----------

3,551,828 745,277
----------- -----------

OPERATING LOSS (1,262,199) (199,607)

INTEREST INCOME (EXPENSE), net 54,589 (14,570)
----------- -----------

LOSS BEFORE INCOME TAX BENEFIT (1,207,610) (214,177)

INCOME TAX BENEFIT (Note 4) 43,000 --
----------- -----------

NET LOSS $(1,164,610) $ (214,177)
=========== ===========

NET LOSS PER SHARE (Note 8) $ (.32) $ (.07)
=========== ===========

WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING (Note 8) 3,856,667 3,036,529
=========== ===========
</TABLE>

See notes to financial statements

F-3

<PAGE>

COMPARE GENERIKS, INC.

STATEMENT OF STOCKHOLDERS' EQUITY

YEAR ENDED MARCH 31, 1997 AND
PERIOD APRIL 25, 1995 (INCEPTION) TO MARCH 31, 1996
(Notes 4 and 8)

<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Common Stock Class A Class B
25,000,000 Shares 10,000,000 Shares 10,000,000 Shares
$.0001 Par Value $.0001 Par Value $.0001 Par Value
-------------------- ----------------- -----------------
Par Par Par
Shares Value Shares Value Shares Value
--------- ---- --------- ---- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock for cash
at inception 2,500,000 $250 -- $-- -- $--
Issuance of founder stock -- -- 5,000,000 500 -- --
Issuance of stock in connection
with purchase of Energex/
Compare Division 500,000 50 -- -- -- --
Conversion of note payable to stock -- -- -- -- 500,000 50
Public issuance of securities for
cash, net 690,000 69 -- -- -- --
Conversion of bridge note
to warrants -- -- -- -- -- --
Net loss -- -- -- -- -- --
--------- ---- --------- ---- ------- ---

Balance, March 31, 1996 3,690,000 369 5,000,000 500 500,000 50

Issuance of stock in connection
with Subscription Agreement 200,000 20 -- -- -- --
Dividends -- -- -- -- -- --
Unrealized gain on investment
available-for-sale -- -- -- -- -- --
Net loss -- -- -- -- -- --
--------- ---- --------- ---- ------- ---

Balance, March 31, 1997 3,890,000 $389 5,000,000 $500 500,000 $50
========= ==== ========= ==== ======= ===
</TABLE>

Unrealized
Holding
Gain on
Additional Available-
Paid-in for-Sale Subscription
Capital Deficit Securities Receivable Total
---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of stock for cash
at inception $ 49,750 $ -- $ -- $ -- $ 50,000
Issuance of founder stock 4,500 -- -- (5,000) --
Issuance of stock in connection
with purchase of Energex/
Compare Division 1,199,950 -- -- -- 1,200,000
Conversion of note payable to stock 499,950 -- -- -- 500,000
Public issuance of securities for
cash, net 2,439,214 -- -- -- 2,439,283
Conversion of bridge note
to warrants 30,000 -- -- -- 30,000
Net loss -- (214,177) -- -- (214,177)
---------- ----------- ------- ------- -----------

Balance, March 31, 1996 4,223,364 (214,177) -- (5,000) 4,005,106

Issuance of stock in connection
with Subscription Agreement 1,049,980 -- -- -- 1,050,000
Dividends -- (60,000) -- -- (60,000)
Unrealized gain on investment
available-for-sale -- -- 63,000 -- 63,000
Net loss -- (1,164,610) -- -- (1,164,610)
---------- ----------- ------- ------- -----------

Balance, March 31, 1997 $5,273,344 $(1,438,787) $63,000 $(5,000) $ 3,893,496
========== =========== ======= ======= ===========
</TABLE>

See notes to financial statements

F-4

<PAGE>

COMPARE GENERIKS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Period
Year Ended April 25, 1995
March 31, (inception) to
1997 March 31, 1996
----------- --------------
<S> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,164,610) $ (214,177)
----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 388,085 131,137
Allowance for doubtful accounts -- 10,000
Deferred tax benefit (43,000) --
Changes in operating assets and liabilities:
Increase in assets:
Accounts receivable (371,653) (245,296)
Inventories (480,019) (162,403)
Prepaid expenses and other current assets (7,685) (45,864)
Other assets (144,500) (74,000)
Increase in liabilities:
Accounts payable and accrued expenses 8,972 87,194
Due to affiliate 847,244 233,175
----------- -----------
Total adjustments 197,444 (66,057)
----------- -----------
Net cash used in operating activities (967,166) (280,234)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investment in available-for-sale securities (100,000) --
Acquisition of property and equipment (52,769) (4,023)
Acquisition of intangible assets (37,053) (137,553)
----------- -----------
Net cash used in investing activities (189,822) (141,576)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock and securities -- 2,489,283
Repayment of note payable -- (50,000)
Proceeds of bridge loan -- 300,000
Repayment of bridge loan -- (270,000)
----------- -----------
Net cash provided by financing activities -- 2,469,283
----------- -----------

Net (decrease) increase in cash and cash equivalents (1,156,988) 2,047,473

CASH AND CASH EQUIVALENTS, beginning of period 2,047,473 --
----------- -----------

CASH AND CASH EQUIVALENTS, end of period $ 890,485 $ 2,047,473
=========== ===========
</TABLE>

See notes to financial statements

F-5

<PAGE>

COMPARE GENERIKS, INC.

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED MARCH 31, 1997 AND
PERIOD APRIL 25, 1995 (INCEPTION) TO MARCH 31, 1996

1. Organization and Nature of Operations:

Compare Generiks, Inc., a Delaware Corporation (the "Company"), was
formed on April 25, 1995 and is engaged in the distribution, marketing and sale
of dietary supplements and over-the-counter nonprescription pharmaceuticals.

The Company was in the development stage through March 31, 1996. The
year ended March 31, 1997 is the first year during which it is considered an
operating company.

On October 31, 1995, the Company acquired certain assets and
liabilities and the ongoing business of Energex/Compare Division of PDK Labs
Inc. ("PDK") (Note 3).

On March 12, 1996, the Company completed an initial public offering of
its securities (Note 8c).

2. Summary of Significant Accounting Policies:

a. Inventories

Inventories, consisting of finished goods, are valued at lower of cost
(first-in, first-out method) or market.

b. Depreciation and amortization

Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Maintenance and repairs of
property and equipment are charged to operations and major improvements are
capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts and gain or loss is included in operations.

Intangible assets arising from the acquisition discussed in Note 3 are
amortized using the straight-line method over the following periods:

Customer list 5 years
Covenant not to compete 4 years
Patents and trademarks 7 years
Goodwill 10 years
Other 3-5 years
Distribution rights 1-5 years

c. Income taxes

Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax basis of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.

F-6

<PAGE>

2. Summary of Significant Accounting Policies: (Cont'd)

d. Statement of cash flows

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

e. Marketable securities

Available-for-sale securities are carried at fair value with the
unrealized holding gain (loss), net of deferred income taxes, included in
stockholders' equity.

f. Estimates

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.

g. Concentration of credit risk

Financial instruments which potentially expose the Company to credit
risk, as defined by Statement of Financial Accounting Standard No. 105 ("FAS
105"), consists primarily of temporary cash investments and trade accounts
receivable. Wholesale distributors of dietary supplements and over-the-counter
pharmaceuticals account for a substantial portion of trade receivables. The risk
associated with this concentration is limited due to the large number of
distributors and their geographic dispersion. The Company places its temporary
cash investments with high credit quality financial institutions.

h. Advertising

The Company charges to expense, advertising costs as incurred.
Advertising costs approximated $202,000 and $41,000 for the years ended March
31, 1997 and 1996, respectively.

i. Stock-based compensation

The Company applies APB Opinion No. 25 and related interpretations in
accounting for stock-based compensation to employees. Stock compensation to
non-employees is accounted for at fair value in accordance with FASB Statement

No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").

j. New standards

In February 1997, the FASB issued Statement 128, "Earnings Per Share"
("Statement 128"), which simplifies the standards for computing earnings per
share previously used and makes them comparable to international standards. The
Statement is effective for financial statements issued for periods ending after
December 15, 1997, and earlier application is not permitted. The Company does
not believe that the adoption of this Statement will have a material effect to
its financial statements.

F-7

<PAGE>

3. Business Combination:

On October 31, 1995, the Company acquired certain assets, liabilities
and the on-going business of the Energex/Compare Division ("Division") of PDK
Labs Inc. ("PDK") for approximately $1,700,000. The Division was engaged in the
business of distributing health supplement products. The acquisition consisted
of certain assets and rights relating to the "Energex Plus" and "Compare
Generiks" product lines, including customer lists, trade secrets, trademarks and
tradenames and the assumption of a $50,000 obligation under a promissory note.
The purchase price of $1,700,000 was based upon the appraised value of the
"Energex Plus" and "Compare Generiks" product lines. Consideration paid by the
Company consisted of (i) 500,000 shares of the Company's Common Stock and (ii) a
promissory note of $500,000. In January 1996, the note was converted into
500,000 shares of the Company's Series B preferred stock. In addition, the
Company purchased PDK's inventory attributable to these product lines.

The above acquisition has been accounted for utilizing purchase
accounting principles, and as a result, the following was recorded:

Customer lists $1,350,000
Covenant not to compete 41,667
Patents and trademarks 70,000
Goodwill 176,242
Other assets 112,091
----------

$1,750,000
==========

Notes payable $ 550,000
Common stock 50
Additional paid-in capital 1,199,950
----------

$1,750,000
==========

4. Investment in Available-For-Sale Securities:

In May 1996, the Company acquired 500,000 shares of common stock of
Superior Supplements, Inc. ("Superior") for $100,000 cash and the issuance of
200,000 shares of common stock (valued at $1,050,000).

At March 31, 1997, available-for-sale securities consisted of the
following:

Unrealized
Investment Gain
---------- ---------

Cost $1,150,000 $ --
Unrealized gain 106,000 106,000
Deferred tax liability -- (43,000)
---------- ---------

$1,256,000 $ 63,000
========== =========
5. Property and Equipment:

Property and equipment, at cost, consist of the following at March 31,
1997:

Machinery and equipment $31,967
Furniture and fixtures 7,369
Leasehold improvements 17,456
------
56,792

Less accumulated depreciation and amortization 4,639

$52,153
=======

F-8

<PAGE>

6. Intangible Assets:

Intangible assets consist of the following at March 31, 1997:

Customer lists $1,350,000
Covenant not to compete 41,667
Patents and trademarks 74,320
Goodwill 176,242
Distribution rights 71,206
Other 30,000
----------
1,743,435

Less accumulated amortization 445,503

$1,297,932
==========

Amortization expense for the year ended March 31, 1997 and period ended
March 31, 1996 approximated $383,700 and $130,900.

The Company has implemented a marketing program with select retail
stores and distributors in order to obtain premium shelf space. Contracts with
retailers are for a fixed period of not less than one year. Costs associated
with these distribution rights are being charged to operations ratably over the
lives of the agreements.

7. Income Taxes:

At March 31, 1997, the Company had net operating loss carryforwards
("NOLs") of approximately $1,184,000 available to offset against future Federal
income tax liabilities.

Net deferred income tax asset (liability) is composed of the following
at March 31, 1997:

Net operating loss carryforward $ 474,000
Unrealized holding gain on available-for-sale securities (43,000)
Intangible assets 114,000
Other 29,000
Valuation allowance (574,000)
--------
$ --
========

8. Stockholders' Equity:

a. Capitalization

Pursuant to an amendment of the Company's certificate of incorporation,
the Company has changed the number of authorized shares of common stock to
25,000,000, Series A Preferred Shares to 10,000,000 and authorized 10,000,000
shares of Series B Preferred Shares. All stock has a $.0001 par value. Each
share of common and preferred has one vote in all matters.

The Series A Preferred Shares rank senior to all common stock, do not
have any right to the payment of any dividend, and in the event of any voluntary
or involuntary liquidation of the Company each share shall have a liquidation
preference of $.02.

The Series B Preferred Stock earns cumulative annual dividends of 12%
or $.12 per share and is callable by the Company after one year from the date of
issuance. The Series B Preferred Stock ranks senior to all series of preferred
and common stock. In the event of any voluntary or involuntary liquidation of
the Company each share shall have a liquidation preference of $1.00.

F-9

<PAGE>

8. Stockholders' Equity: (Cont'd)

b. Initial capitalization

In April 1995, the Company issued 2,500,000 shares of common stock for
$50,000 and 5,000,000 shares of Series A Preferred Stock for $5,000 ("Founders'
Stock").

c. Public offering

In March 1996, the Company completed a public offering of 345,000 units
at $10.00 per unit for an aggregate of $3,450,000. Each unit consists of two
shares of common stock and one Class A Warrant. Each Class A Warrant entitles
the holder to purchase one share of common stock at $4.00 per share. The
warrants are exercisable at any time during the four year period commencing one
year from the date of offering. The Class A Warrants are redeemable by the
Company, for $.05 per warrant, if the average price of the common stock equal or
exceeds $10.00 per share for any twenty trading days within a period of thirty
consecutive trading days ending five days prior to the date of the notice of
redemption.

Effective with the closing of the offering, the Company entered into a
two year consulting agreement with the underwriter. The consulting fee of
$72,000 is being charged to operations ratably over the term of the agreement.

d. Stock option plan

The Company has adopted, subject to shareholder approval, a Stock
Option Plan (the "Plan") covering 2,000,000 shares of common stock of the
Company. Options under the Plan are granted at terms set by the Board of
Directors at the time of issuance. To date, no options have been granted under
the Plan.

e. Warrants

(i) Underwriter's warrants

Pursuant to the Company's public offering, the Company issued to the
underwriter warrants to purchase an additional 30,000 Units at an exercise price
of $12.00 per unit. These warrants are exercisable for a period of four years,
commencing one year from the date of the public offering.

(ii) Bridge lender warrants

In March 1996, the Company issued 3,000,000 Class A Warrants in
connection with the conversion of $30,000 of convertible bridge notes. The value
of these notes has been recorded as additional-paid-in capital.

f. Conversion of note payable

On January 30, 1996, the $500,000 promissory note payable to PDK in
connection with the business acquisition described in Note 3 was converted to
500,000 shares of Series B Preferred Stock.

F-10

<PAGE>

8. Stockholders' Equity: (Cont'd)

g. Net loss per share

Net loss per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period. Pursuant to a
Securities and Exchange Commission Staff Accounting Bulletin, all common stock
issued by the Company during the twelve months preceding the offering date at
prices below the offering price have been included in the calculation of
weighted average shares outstanding as if they were outstanding for the entire
period.

Net loss per share attributable to common shareholders was computed as
follows:

<TABLE>
<CAPTION>
Period
Year Ended April 25, 1995
March 31, (inception) to
1997 March 31, 1996
---- --------------

<S> <C> <C>
Net loss $1,164,610 $214,177
Dividends on preferred shares 60,000 10,000
---------- --------

Net loss attributable to common shareholders $1,224,610 $224,177
========== ========
</TABLE>

h. Reserved shares

At March 31, 1997, the Company has 5,635,000 shares of common stock
reserved for future issuances.

9. Fair Value of Financial Instruments:

The methods and assumptions used to estimate the fair value of the
following classes of financial instruments were:

Current Assets and Current Liabilities: The carrying amount of cash,
current receivables and payables and certain other short-term financial
instruments approximate their fair value.

10. Retirement Plans:

Qualified employees are eligible to participate in a salary reduction

plan under Section 401(k) of the Internal Revenue Code. Participation in the
Plan is voluntary, and any participant may elect to contribute up to 17% of
earnings. The Company may, at its discretion, contribute up to 3% of any
employee's earnings. The Company contributed approximately $5,700 and $-0- to
the Plan for the periods ended March 31, 1997 and 1996, respectively.

11. Supplementary Information - Statement of Cash Flows:

Cash paid was as follows:

Period
Year Ended April 25, 1995
March 31, (inception) to
1997 March 31, 1996
---- --------------

Interest $1,628 $15,385
====== =======

Income taxes $3,891 $ --
====== =======

F-11

<PAGE>

12. Commitments:

a. Lease

The Company leases office and warehouse space from PDK on a
month-to-month basis. Rent expense approximated $64,000 and $25,000 for the year
ended March 31, 1997 and the period April 25, 1995 to March 31, 1996,
respectively.

b. Supply agreements

In December 1996, the Company amended its "Supply Agreement" (the
"Amended Agreement") with PDK. Under the Amended Agreement, which expires in
2001, PDK will provide the Company certain products at prices based upon PDK's
material cost plus a specified mark-up. Essentially all purchases during the
periods ended March 31, 1997 and 1996 were from PDK.

In March 1997, the Company entered into a second five year Supply
Agreement with PDK covering the purchase of products in the "Max Brand" and
"Heads Up" product ranges under terms similar to the December 1996 Amended
Agreement.

In May 1996, the Company entered into a three year Supply Agreement
with Superior Supplements, Inc. which provides for Superior to supply the
Company with certain products at specified prices. As of March 31, 1997, the
Company had made no purchases under this agreement.

c. Royalty agreement

In connection with the acquisition of the Division, the Company agreed
to pay the obligation under a distribution royalty agreement which required the
Company to pay a royalty fee of 13% of all "net sales" during the period March
1, 1995 through February 28, 1997. Royalties earned by the distributor for the
periods ended March 31, 1997 and 1996 approximated $52,000 and $78,000,
respectively.

d. Employment agreement

The Company has an employment agreement with its President which
provides for annual compensation of $135,000. The agreement, as amended, expires
in October 1997.

Additionally, in November 1995, the Company granted employees options
to purchase 200,000 shares of common stock at an exercise price equal to the
price of the common shares in the initial public offering ($5.00 per share). The
options are exercisable during the term of employment.

13. Subsequent Event:

On May 5, 1997, the Company entered into a two-year Marketing Agreement
with a pharmaceutical distributor (the "distributor"), under which the
distributor will market the Company's "Max Brand" and "Heads Up" products. As
consideration for their services, the distributor will earn a marketing fee
equal to the difference between (i) the sales price of the products sold and
(ii) an amount equal to 200% of the material cost of the products, as defined.
The marketing fee is payable monthly.

F-12

<PAGE>

Exhibit 10.11

EXCLUSIVE SUPPLY AGREEMENT

This Exclusive Supply Agreement (the "Agreement") is made and entered
into as of the 31st day of May, 1996 by and between Superior Supplements, Inc.,
a Delaware corporation ("SSI"), and Compare Generiks, Inc., a Delaware
corporation ("CGI").

W I T N E S S E T H:

WHEREAS, SSI is engaged in the business of manufacturing and
distributing certain vitamins in bulk tablet form; and

WHEREAS, SSI owns and operates a factory for the manufacture of
vitamins in bulk tablet form; and

WHEREAS, CGI is engaged in the business of marketing and distributing
vitamin products.

NOW, THEREFORE, the parties for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, agree as follows:

1. Exclusive Purchase and Sale of Products.

(a) During the term hereof (the "Term"), as defined at
paragraph 3 hereof, CGI, its successors, assigns, subsidiaries and affiliates
(collectively, "CGI") shall purchase from SSI, exclusively, all "Pills" (the
"Pills") which CGI distributes, markets or otherwise sells within the United
States ("US"). For purposes of this Agreement, the term "Pills" shall include
all vitamins manufactured in bulk tablet form, other than any vitamins now or
hereafter sold under the "Energex" trade mark or as part of the "Energex"
product line, as set forth on Schedule 1(a) attached hereto and as notified in
writing by CGI to SSI from time to time.

(b) SSI shall use its best efforts to fulfill all of CGI's
orders on a timely basis. SSI shall comply with applicable laws and regulations
regarding the manufacture and delivery of Pills for and on behalf of CGI.

<PAGE>

(c) SSI will supply all materials used in connection with the
manufacture of the Pills. All Pills shall meet CGI's specifications.

(d) All sales by SSI to CGI will be FOB, SSI's manufacturing
facility in Hauppauge, New York or such other manufacturing facility of SSI of
SSI's choice. Title to and risk of loss of the products shall pass from SSI to
CGI upon acceptance by the carrier of CGI's choice.

(e) Nothing herein shall restrict or limit in any manner the
right of SSI to sell Pills, or any other products, to any party other than CGI.

2. Purchase Price and Payment. CGI will pay for the Pills as follows:

(a) CGI will pay to SSI, SSI's material cost ("Material Cost")
plus fifteen percent (15%). For purposes of this agreement "Material Cost" shall
mean SSI's actual material expenses incurred in the manufacture of the Pills.

(b) SSI shall invoice CGI upon delivery of each order and all
invoices shall be paid by CGI within thirty (30) days of the date of shipment.
CGI shall pay all costs and expenses, including reasonable attorney's fees,
reasonably incurred by SSI in the collection of any sum payable hereunder by CGI
to SSI. In addition to paying the price in effect under this Agreement, CGI
shall pay all sales or use taxes applicable to the sale or delivery by SSI or
the subsequent use by CGI of any items delivered hereunder.

3. Term of Agreement.

(a) The term of this Agreement (the "Term") shall commence on
the date hereof (the "Effective Date") and shall continue for a period of three
(3) years, and thereafter will be automatically renewed for successive one (1)
year terms unless either party provides written notice of intent to terminate
the Agreement at least ninety (90) days prior to the end of any Agreement Year,
as defined below.

(b) For purposes of this Agreement, an "Agreement Year" shall
commence on the Effective Date and on each anniversary thereof and shall end on
the day before the first anniversary of each such Agreement Year.

<PAGE>

4. Placement and Acceptance of Orders; Delivery Schedule.

(a) Written Orders. CGI will place all orders for the purchase
of Pills from SSI, by written purchase order executed by an authorized agent of
CGI, no less than forty-five (45) days in advance. Such orders shall be filled
by SSI, within such forty-five (45) day period, unless an order is significantly
in excess of previous orders, in which case SSI will use its best efforts to
process the order, or a substantial portion thereof, within a forty-five (45)
day period or a reasonable time period (subject to raw material availability).

(b) Rejection of Orders. SSI shall not be obligated to
manufacture or distribute to CGI any item, and shall have the right to reject
any order, in whole or in part, based upon SSI's determination that such
manufacture or distribution might violate existing regulatory standards,
requirements, regulations, or concerns. In the event, SSI declines to
manufacture any item requested by CGI, or rejects any order placed by CGI, CGI
shall have the right to purchase such item or items, or fill such requested
order or such portion of an order, through another manufacturer or distributor.

(c) Resale of Products. CGI will not sell or distribute any
product purchased from SSI hereunder to any party or entity that CGI knows, or
has reason to know, will utilize such product in any manner that is inconsistent
with or contrary to prevailing federal and state regulations or laws, including

the rules and regulations of any state or federal regulatory organization.

(d) Obligation for Cost of Raw Materials. Upon placement of
any order, CGI shall become liable for all costs incurred by SSI in connection
with the purchase of raw materials to be used in fulfilling such order.

5. Force Majeure. SSI shall not be liable for any delay or failure to
perform in accordance with this Agreement if such delay or failure to perform is
a result of a strike, lock-out or other labor dispute; riot, insurrection, civil
disturbance or other hostility; embargo; inability or delay in obtaining fuel,
energy, equipment or power; inability or delay in obtaining labor or materials;
inability or delay in obtaining government approvals, permits or licenses;
inability or delay in obtaining transportation or other services; fire, flood,
lightning, storm, earthquake, or other Act of God; or is a result of causes
beyond SSI's reasonable control (each of the foregoing being hereinafter
referred to as an "Event of Force Majeure"). In

<PAGE>

such event, SSI's obligation to perform hereunder shall be suspended for the
duration of such Event of Force Majeure. SSI will use reasonable efforts to
promptly notify CGI, either orally or in writing, upon learning of the
occurrence or potential occurrence of such Event of Force Majeure. If any Event
of Force Majeure is not remedied by SSI within five (5) days of its occurrence,
CGI shall have the right to purchase Pills from another manufacturer or
distributor until such time as SSI can again fully meet CGI's needs and has
given CGI at least thirty (30) days written notice of such fact.

6. Exclusivity Provisions.

6.1 Exclusivity. This Agreement shall automatically terminate in the
event during any year of the Term CGI purchases Pills from any other parties in
violation of this Agreement.

6.2 Indemnification. CGI hereby agrees to indemnify and hold SSI, its
officers, directors, agents, servants, employees, subsidiaries and affiliates,
harmless from and against any and all claims, suits, demands, losses,
liabilities, damages, court costs, (including reasonable attorneys' fees),
whether based in contract or in tort, arising out of or related to, or as a
consequence of any act or omission of CGI relating to the Pills.

6.3 Termination of this Agreement.

(a) SSI shall have the right to terminate this Agreement at
its sole discretion, at any time, upon being advised that any regulatory
authority objects to the sale of the Pills by SSI to CGI.

(b) Upon the termination of this Agreement any then unpaid
accounts receivable fees shall accrue and become immediately due and payable.

7. Termination of Agreement.

<PAGE>

of a receiver for all or a substantial portion of CGI's property; (iv) the
assumption of custody, attachment or sequestration by a court of competent
jurisdiction of all or a significant portion of a party's property; (v) a party
hereto or any principal thereof is charged with a felony or crime of moral
turpitude; (vi) notification to a party hereto from the United States Drug
Enforcement Administration, or any other federal or state regulatory agency,
that such party should discontinue business relations with the other party; or
(vii) fraudulent conduct by a party hereto in any of its dealings with the other
party, the non-defaulting party shall have the right to terminate this
Agreement, by written notice to the other party. No assignee for the benefit of
creditors, receiver, liquidator, trustee in bankruptcy, sheriff or any other
officer of the court or official charged with taking over custody of the assets
or business or a party shall have any right to continue performance of this
Agreement, and this Agreement may not be assigned by CGI by operation of law.

(b) Any failure by either party to terminate this Agreement by
reason of one or more of the foregoing acts or events shall not constitute a
waiver of the right to terminate this Agreement upon reoccurrence or continuance
of such acts or events.

8. Representations and Warranties of CGI. CGI (including all of its
subsidiaries and affiliates) represents and warrants to SSI as follows:

8.1 Organization and Qualification. CGI is a corporation validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted. CGI is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to do so would not have a
material adverse effect on the business of CGI.

8.2 Subsidiaries and Affiliates. Except as set forth on Schedule 9.2
hereof, CGI has no subsidiaries or affiliates.

8.3 Validity and Execution of Agreement. CGI has the full legal right,
capacity and power and all requisite corporate authority and approval required
to enter into, execute and deliver this Agreement and any other agreement or
instrument contemplated hereby, and to perform fully its obligations hereunder
and

<PAGE>

thereunder. The stockholders and the board of directors of CGI has approved the
transactions contemplated pursuant to this Agreement. This Agreement has been
duly executed and delivered by CGI and constitutes the valid and binding
obligation of CGI enforceable against it in accordance with its terms.

8.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by CGI of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Certificate of Incorporation
or Bylaws or other organizational documents of CGI; (b) result in the
acceleration of, or entitle any party to accelerate the maturity or the
cancellation of the performance of any obligation under, or result in the
creation or imposition of any lien in or upon their respective assets or
constitute a default (or an event which might, with the passage of time or the
giving of notice, or both, constitute a default) under any contract, (c) any
order, judgment, regulation or ruling of any governmental or regulatory body to
which CGI are a party or by which any of its property or assets may be bound or
affected or with any provision of any law, rule, regulation, order, judgment, or
ruling of any governmental or regulatory body applicable to CGI.

8.5 Licenses and Permits. CGI maintains all governmental permits,
licenses, registrations and other governmental consents (federal, state and
local) which are necessary in connection with its operations and properties, and
no others are required. All such permits, licenses, registrations and consents
are in full force and effect and in good standing and shall continue to be in
full force and effect and in good standing following the consummation of the
transactions contemplated by this Agreement.

8.6 Compliance with Laws. CGI has complied in all respects with all
applicable federal, state and local laws, regulations and ordinances or any
requirement of any governmental or regulatory body, court or arbitrator
affecting the business or the assets the failure to comply with which could have
a material adverse effect on the business of CGI.

8.7 Products. There are no statements, citations or decisions by any
governmental or regulatory body that any product marketed or distributed at any
time by CGI is defective or fails to meet in any material respect any standards
promulgated by any such governmental or regulatory body. There have been no
recalls ordered by any such governmental or regulatory body with respect to any
product. To the best knowledge of CGI, there is no (a) fact relating to any
product that may impose upon the Companies a duty to recall any product or a
duty to warn customers of a defect in any product, other than defects about
which CGI has

<PAGE>

issued appropriate and adequate warnings or (b) latent or overt design,
manufacturing or other defect in any product.

8.8 Survival. All of the representations and warranties of CGI
contained herein shall survive the date hereof until the date upon which the

liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.

9. Representations and Warranties of SSI.

9.1 Organization and Qualification. SSI is a corporation validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted. SSI is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to do so would not have a
material adverse effect on the business of SSI.

9.2 Subsidiaries and Affiliates. Except as set forth on Schedule 10.2
hereof, SSI has no subsidiaries or affiliates.

9.3 Validity and Execution of Agreement. SSI has the full legal right,
capacity and power and all requisite corporate authority and approval required
to enter into, execute and deliver this Agreement and any other agreement or
instrument contemplated hereby, and to perform fully its obligations hereunder
and thereunder. The stockholders and the board of directors of SSI has approved
the transactions contemplated pursuant to this Agreement. This Agreement has
been duly executed and delivered by SSI and constitutes the valid and binding
obligation of SSI enforceable against it in accordance with its terms.

9.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by SSI of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Certificate of Incorporation
or Bylaws or other organizational documents of SSI; (b) result in the
acceleration of, or entitle any party to accelerate the maturity or the
cancellation of the performance of any obligation under, or result in the
creation or imposition of any lien in or upon their respective assets or
constitute a default (or an event which might, with

<PAGE>

the passage of time or the giving of notice, or both, constitute a default)
under any contract, (c) any order, judgment, regulation or ruling of any
governmental or regulatory body to which SSI are a party or by which any of its
property or assets may be bound or affected or with any provision of any law,
rule, regulation, order, judgment, or ruling of any governmental or regulatory
body applicable to SSI.

9.5 Licenses and Permits. SSI maintains all governmental permits,
licenses, registrations and other governmental consents (federal, state and
local) which are necessary in connection with its operations and properties, and
no others are required. All such permits, licenses, registrations and consents
are in full force and effect and in good standing and shall continue to be in
full force and effect and in good standing following the consummation of the
transactions contemplated by this Agreement.

9.6 Compliance with Laws. SSI has complied in all respects with all
applicable federal, state and local laws, regulations and ordinances or any
requirement of any governmental or regulatory body, court or arbitrator
affecting the business or the assets the failure to comply with which could have
a material adverse effect on the business of SSI.

9.7 Products. To SSI's knowledge, there are no statements, citations or
decisions by any governmental or regulatory body that any product marketed or
distributed at any time by SSI is defective or fails to meet in any material
respect any standards promulgated by an governmental or regulatory body. There
have been no recalls ordered by any such governmental or regulatory body with
respect to any product. To the knowledge of SSI, there is no (a) fact relating
to any product that may impose upon SSI a duty to recall any product or a duty
to warn customers or a defect in any product, other than defects about which SSI
has issued appropriate and adequate warning, or (b) latent or overt design,
manufacturing or other defect in any product.

9.8 Survival. All of the representations and warranties of SSI
contained herein shall survive the date hereof until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.

10. Nondisclosure. Neither party, nor any person controlled by it,
shall for any reason other than fulfilling its obligations hereunder, directly
or indirectly,

<PAGE>

for itself or any other person, use or disclose any trade secrets or
confidential information, know-how or proprietary information relating to the
other party, except to the extent (i) within the public domain; or (ii) pursuant
to a subpoena, court order or applicable law.

11. Relationship of the Parties. The relationship of the parties
created hereby is that of independent contractors, and neither party shall have
any right or authority to create or assume any obligation of any kind on behalf
of the other.

12. Disclaimer of Warranties. SSI makes no other representations or
warranties except as set forth in this Agreement, and SSI expressly disclaims
any implied warranties of merchantability, fitness for use or fitness for a
particular purpose.

13. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, telegraphed, telefaxed, sent by facsimile transmission or sent
by prepaid air courier, same day or overnight messenger or certified, registered
or express mail, postage prepaid. Any such notice shall be deemed to have been
given (a) when received, if delivered in person, telegraphed, telexed, sent by
facsimile transmission and confirmed in writing within three (3) Business Days
thereafter or sent by prepaid air courier, same day or overnight messenger or
(b) three (3) Business Days following the mailing thereof, if mailed by

certified first class mail, postage prepaid, return receipt requested, in any
such case as follows (or to such other address or addresses as a party may have
advised the other in the manner provided in this Section 13):

If to SSI, to:

Superior Supplements, Inc.
270 Oser Avenue
Hauppauge, NY 11788
Attn: Larry Simon

with copy to:

Bernstein & Wasserman, LLP
950 Third Avenue, 10th Floor

<PAGE>

New York, NY 10022
Attn: Hartley T. Bernstein

If to CGI, to:

Compare Generiks, Inc.
300 Oser Avenue
Hauppauge, NY 11788
Attn: Thomas A. Keith

14. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Neither party shall assign any of its rights or delegate any of its
duties or obligations hereunder without the prior written consent of the other
party. Notwithstanding the foregoing, the parties hereto do not intend to create
hereby, and this Agreement shall not be read or construed to create or grant,
any rights or benefits in or for any person or entity other than the parties
hereto and any and all such third party rights or benefits are hereby expressly
disclaimed and denied.

15. Governing Laws. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to
principles of conflicts of law, and the parties irrevocably agree to submit any
controversy or claim arising out of or relating to this Agreement to a court of
competent jurisdiction located in the State of New York. The parties agree that
any proceedings arising out of, relating to, or brought for the purpose of
enforcing this Agreement, or remedying any breach thereof shall be instituted in
the courts of the State of New York, and in no other jurisdiction.

16. Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.

17. Severability. The invalidity or unenforceability of any provision

of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

18. Amendment. This Agreement may be amended only by a writing signed
by all parties hereto.

<PAGE>

19. Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to its subject matter and supersedes any
prior arrangements or understandings (written or otherwise) between them.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date written above.

SUPERIOR SUPPLEMENTS, INC.

By: /s/ Lawrence D. Simon
------------------------
Lawrence D. Simon

COMPARE GENERIKS, INC.

By: /s/ Thomas A. Keith
------------------------
Thomas A. Keith

<PAGE>

Exhibit 10.12

AMENDMENT AGREEMENT

AMENDMENT AGREEMENT, dated as of December 13, 1996 by and between PDK
Labs Inc., a New York corporation, with offices at 145 Ricefield Lane,
Hauppauge, NY 11788 ("PDK") and, Compare Generiks, Inc., (formerly Lesser Paul,
Inc.) a Delaware corporation, with offices at 300 Oser Avenue, Hauppauge, NY
11788 ("CGI").

WHEREAS, PDK and CGI have heretofore entered into an Agreement (the
"Agreement"), dated as of October 31, 1995.

WHEREAS, the Agreement contains a provision providing for the payment
by CGI to PDK of an amount equal to PDK's Material Cost (as defined in the
Agreement) plus one hundred percent (100%) for the Pills (as defined in the
Agreement) supplied pursuant thereto, which provision the parties hereto desire
to amend to provide for the payment by CGI to PDK of an amount equal to PDK's
Material Cost plus $.05 per bottle of Pills of the Compare Generiks brand
products packaged in 25cc. bottles or as otherwise agreed in the related written
purchase order.

The terms which are not defined herein shall have the respective
meanings ascribed to them in the Agreement.

NOW, THEREFORE, for valid and good consideration, the parties hereto
agree as follows:

1. Section 2(a) of the Agreement shall be deleted in its entirety and
shall be replaced with the following language:

"(a) Except as otherwise provided herein at paragraph 2, LPI
will pay to PDK, PDK's material cost ("Material Cost") plus
$.05 per vial or bottle of Pills of Compare Generiks brand
products packaged in 25cc. bottles or for all

<PAGE>

other Pills and, for Compare Generiks brand products upon the
mutual consent of the parties hereto, such other amount as
shall be agreed by PDK and LPI as set forth in the related
written purchase order. For purposes of this Agreement
"Material Cost" shall mean PDK's actual material expenses
incurred in the manufacture and packaging of the Pills."

2. Except as hereinabove amended, all of the terms and provisions of
the Agreement shall remain in full force and effect.

3. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of
law.

IN WITNESS WHEREOF, the parties have executed this Amendment Agreement
as of the day and year first above written.

PDK LABS INC.

By: /s/ Michael Krasnoff
---------------------------
Michael Krasnoff, President

COMPARE GENERIKS, INC.

By: /s/ Thomas A. Keith
---------------------------
Thomas A. Keith, President

<PAGE>

EXCLUSIVE SUPPLY AND LICENSING AGREEMENT

This Supply and Licensing Agreement (the "Agreement") is made and
entered into as of the 24th day of March, 1997 by and between PDK Labs Inc., a
New York corporation ("PDK"), and Compare Generiks, Inc., a Delaware corporation
("CGI").

W I T N E S S E T H:

WHEREAS, PDK is engaged in the business of manufacturing, marketing and
distributing vitamins, herbs and non-prescription pharmaceutical products; and

WHEREAS, PDK owns and operates a factory for the manufacture of
vitamins and non-prescription pharmaceutical products; and

WHEREAS, CGI is engaged in the business of marketing and distributing
dietary supplements and over-the-counter non-prescription pharmaceutical
products; and

WHEREAS, PDK and CGI desire that PDK sell to CGI and CGI wishes to
purchase from PDK, certain products manufactured by PDK in its "Max Brand" and
"HeadsUp" product ranges (the "Products"); and

WHEREAS, PDK and CGI also wish to enter into an agreement whereby PDK
licenses to CGI certain trademarks, tradenames and rights of distribution
relating to the Products; and

WHEREAS, CGI acknowledges that PDK will incur substantial expenses and
will expend significant resources in order to acquire additional equipment,
incur obligations and employ additional personnel in order to fulfill its
obligations to CGI under this Agreement.

NOW, THEREFORE, the parties for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, agree as follows:

<PAGE>

1. Exclusive Purchase and Sale of Products.

(a) Commencing from the date of this Agreement, and during the
term hereof (the "Term"), as defined at paragraph 3 hereof, CGI, its successors,
assigns, subsidiaries and affiliates (collectively, "CGI") shall purchase from
PDK, exclusively, all "Pills" (the "Pills") relating to the Products which CGI
distributes, markets or otherwise sells within the United States ("US"). For
purposes of this Agreement, the term "Pills" shall include all vitamins,
non-prescription pharmaceutical products and health and fitness products
manufactured in tablet, capsule, caplet, liquid or equivalent form as part of
the "Max Brand" and "HeadsUp" product ranges.

(b) PDK shall use its best efforts to fulfill all of CGI's
orders on a timely basis. PDK shall comply with applicable laws and regulations
regarding the manufacture, packaging and delivery of Pills for and on behalf of

CGI.

(c) PDK will supply all materials used in connection with the
manufacture and packaging of the Pills. All Pills shall meet CGI's
specifications and be in "finished good format" as defined by accepted industry
standards.

(d) All sales by PDK to CGI will be FOB, PDK's manufacturing
facility in Hauppauge, New York or such other manufacturing facility of PDK of
PDK's choice. Title to and risk of loss of the products shall pass from PDK to
CGI upon acceptance by the carrier of CGI's choice. PDK will ship directly to
customers of CGI, at CGI's written direction and expense, in case lots of no
less than fifty (50) cases.

(e) Nothing herein shall restrict or limit in any manner the
right of PDK to sell any other products in any other product range to any party
other than CGI.

2. Purchase Price and Payment. CGI will pay for the Pills as follows:

(a) Except as otherwise provided herein at paragraphs 2 and 6,
CGI will pay to PDK, PDK's material cost ("Material Costs") plus fifty percent
(50%). For purposes of this agreement "Material Cost" shall mean PDK's actual
material expenses incurred in the manufacture and packaging of the Pills.

<PAGE>

(b) PDK shall receive a premium of (i) five cents (5(cent))
per vial on any product packaged in a vial containing a 100 count or less and
(ii) eight cents (8(cent)) per vial on any product packaged in a vial containing
greater than 100 count.

(c) The Material Costs for each item ordered by CGI will be
determined, in advance, each forty five (45) days during the term of this
Agreement. Upon written request from CGI, PDK will provide to CGI an MRP
schedule reflecting PDK's Material Cost per item.

(d) PDK shall invoice CGI upon delivery of each order and all
invoices shall be paid by CGI within sixty (60) days of the date of shipment.
CGI shall pay all costs and expenses, including reasonable attorney's fees,
reasonably incurred by PDK in the collection of any sum payable hereunder by CGI
to PDK. In addition to paying the price in effect under this Agreement, CGI
shall pay all sales or use taxes applicable to the sale or delivery by PDK or
the subsequent use by CGI of any items delivered hereunder.

(e) CGI shall have the right to audit the MRP, and to review
invoices reflecting MRP costs, on a quarterly basis. In the event such audit
reveals any discrepancies in the costs charged to CGI, such charges will be
adjusted within 90 days of the conclusion of the audit. If CGI fails to review
and audit the MRP within one hundred twenty (120) days of the end of each year,
the year shall close and CGI shall lose the ability to review such year, unless
a subsequent audit reveals a "Material Discrepancy" which occurred in the closed

year. In the event of any Material Discrepancy in such charges, PDK shall be
responsible for payment of all reasonable expenses of the audit. A Material
Discrepancy shall mean any Material Costs charged to CGI which is greater than
two percent (2%) above the actual Material Cost incurred by PDK.

(f) PDK hereby agrees to keep complete and accurate books of
accounts, records, data and memoranda respecting the acquisition of raw material
and freight charges and the manufacture, packaging and delivery of Pills to or
for the benefit of CGI as provided herein and to retain such records for a
period of not less than five (5) years, or such longer period as may be required
by any regulatory agency.

<PAGE>

3. Term of Agreement.

(a) The term of this Agreement (the "Term") shall commence on
the date hereof (the "Effective Date") and shall continue for a period of five
(5) years, and thereafter will be automatically renewed for successive one (1)
year terms unless either party provides written notice of intent to terminate
the Agreement at least ninety (90) days prior to the end of any Agreement Year,
as defined below.

4. Placement and Acceptance of Orders; Delivery Schedule.

(a) CGI will place all orders for the purchase of Pills from
PDK, by written purchase order executed by an authorized agent of CGI, no less
than forty-five (45) days in advance. Such orders shall be filled by PDK, within
such forty-five (45) day period, unless an order is significantly in excess of
previous orders, in which case PDK will use its best efforts to process the
order, or a substantial portion thereof, within a forty-five (45) day period or
a reasonable time period (subject to raw material availability).

(b) PDK shall not be obligated to manufacture or distribute to
CGI any item, and shall have the right to reject any order, in whole or in part,
based upon PDK's determination that such manufacture or distribution might
violate existing regulatory standards, requirements, regulations, or concerns.
In the event, PDK declines to manufacture any item requested by CGI, or rejects
any order placed by CGI, CGI shall have the right to purchase such item or
items, or fill such requested order or such portion of an order, through another
manufacturer or distributor.

(c) Resale of Products. CGI will not sell or distribute any
product purchased from PDK hereunder to any party or entity that CGI knows, or
has reason to know, will utilize such product in any manner that is inconsistent
with or contrary to prevailing federal and state regulations or laws, including
the rules and regulations of any state or federal regulatory organization.

<PAGE>

(d) Obligation for Cost of Raw Materials. Upon placement of
any order, CGI shall become liable for all costs incurred by PDK in connection
with the purchase of raw materials to be used in fulfilling such order.

5. Force Majeure. PDK shall not be liable for any delay or failure to
perform in accordance with this Agreement if such delay or failure to perform is
a result of a strike, lock-out or other labor dispute; riot, insurrection, civil
disturbance or other hostility; embargo; inability or delay in obtaining fuel,
energy, equipment or power; inability or delay in obtaining labor or materials;
inability or delay in obtaining government approvals, permits or licenses;
inability or delay in obtaining transportation or other services; fire, flood,
lightning, storm, earthquake, or other Act of God; or is a result of causes
beyond PDK's reasonable control (each of the foregoing being hereinafter
referred to as an "Event of Force Majeure"). In such event, PDK's obligation to
perform hereunder shall be suspended for the duration of such Event of Force
Majeure. PDK will use reasonable efforts to promptly notify CGI, either orally
or in writing, upon learning of the occurrence or potential occurrence of such
Event of Force Majeure. If any Event of Force Majeure is not remedied by PDK
within five (5) days of its occurrence, CGI shall have the right to purchase
Pills from another manufacturer or distributor until such time as PDK can again
fully meet CGI's needs and has given CGI at least thirty (30) days written
notice of such fact.

6. License.

6.1 Rights Granted.

(a) PDK hereby grants to CGI an exclusive license (the
"License") to use the trademarks Max Brand(R) and Heads Up(R), and its
trademarks for its ginseng herbal products (the "Licensed Trade Names") and the
exclusive right to distribute products bearing such names and consisting of the
components set forth in Schedule 6.1 hereto (the "Licensed Products"). During
the Term, PDK will not grant any license for the Licensed Products to any other
person, without the express written consent of CGI.

(b) PDK agrees to disclose to CGI all information,
documentation and related materials within its possession or knowledge in
connection with the Licensed Trade Name and the Licensed Products, including but
not limited to distributor and customer lists, sales contracts, customer credit
history, price, sale

<PAGE>

terms, any rebates or other negotiated contracts, either oral or written, verbal
promises or other deals relating to the Licensed Trade Names and/or the sale of
distribution of the Licensed Products, any existing pending or potential
litigation claims relating or involving the Licensed Trade Names and/or the
Licensed Products, any existing or pending rulings or regulations relating to or

involving the use of the Licensed Trade Names or Licensed Products, and any
other information that CGI may request in connection with carrying out the terms
of this Agreement. CGI agrees to receive such information subject to the
restrictions imposed by all regulatory laws and shall exercise the standards of
care utilized by CGI treating its own information which it does not wish
disclosed outside CGI; provided, however, that this restriction shall not be
construed to limit the rights granted by the PDK to CGI under the terms of this
Agreement.

(c) In consideration for the License, CGI agrees to pay to PDK
a license fee ("License Fee") for each Agreement Year, in the amount of
$500,000, payable in arrears on each anniversary of the date of this Agreement.
Such License Fee shall be payable, at the sole option of CGI, either in cash or
satisfied by the issuance of such aggregate number of shares of common stock,
par value $.0001 of CGI as shall be equal to the License Fee calculated by
assuming a per share value of fifty percent (50%) of the "Market Price" of CGI's
common stock. Market Price for the purpose of this Section 6.1 shall mean (i)
the average closing bid price for any twenty (20) consecutive trading days
within a period of thirty (30) consecutive trading days ending within five (5)
days prior to the date payment is due of the common stock of CGI as reported by
the National Association of Securities Dealers, Inc. Automatic Quotation System
or (ii) the last reported sale price, for twenty (20) consecutive trading days
within a period of thirty (30) consecutive trading days ending within five (5)
days of the date payment is due, on the primary exchange on which the common
stock is traded, if the common stock is traded on a national securities
exchange.

6.2 Exclusivity.

(a) The License granted to CGI pursuant to this Section shall
automatically terminate in the event during any year of the Term, (i) CGI
utilizes the Licensed Names in connection with any product other than those
comprised of the components as set forth on Schedule 6.1 hereto without the
express written consent of PDK; or (ii) CGI purchases Pills from any other
parties in violation of this Agreement.

<PAGE>

6.3 Trademarks, Records, Research

(a) CGI shall have the right to sell the Licensed Products
only under the Licensed Trade Names.

(b) CGI hereby agrees to keep complete and accurate books of
accounts, records, data and memoranda respecting the purchase, marketing and
sale of the Licensed Products and to retain such records for a period of not
less than seven years. Such books and records shall also be in sufficient detail
to enable the payments hereunder to PDK to be determined. CGI further gives PDK
the right, at this own expense, to have said books and records and supporting
documents examined by an accountant, insofar as they concern the sales of any
Licensed Product, annually during CGI's business hours for the purpose of
verifying the reports provided for in this Agreement, such examination to be

conducted in such manner as not unduly to interfere with the business of CGI.
PDK and its representatives shall not use for its own competitive purposes or
disclose to any other person or entity any information acquired as a result of
such examination, except as may be required by law, government regulation or
pursuant to governmental process; provided that, prior to any such disclosure,
PDK shall provide CGI with reasonable notice thereof, as well as reasonable
opportunity to take appropriate steps to preserve the confidentiality of such
information.

6.4 Indemnification. CGI hereby agrees to indemnify and hold PDK, its
officers, directors, agents, servants, employees, subsidiaries and affiliates,
harmless from and against any and all claims, suits, demands, losses,
liabilities, damages, court costs, (including reasonable attorneys' fees),
whether based in contract or in tort, arising out of or related to, or as a
consequence of any act or omission of CGI relating to the Licensed Products.

6.5 Termination of License.

(a) PDK shall have the right to terminate the License at its
sole discretion, at any time, upon being advised that any regulatory authority
objects to the sale of the Licensed Products by PDK to CGI. In the event any
regulatory agency restricts or denies further use of the Licensed Names in
connection with the Licensed Products, all rights and obligations of the parties
under the License shall remain in effect, except that the Licensed Products will
be marketed under a name

<PAGE>

or names mutually acceptable to PDK and CGI and consistent with the
determination of such regulatory authorities.

(b) Upon the termination of the License any then unpaid
licensing and/or accounts receivable fees shall accrue and become immediately
due and payable.

(c) CGI hereby agrees that if this License is terminated under
any of its provisions CGI will not itself, or through others, thereafter
manufacture and sell any Licensed Product and all rights to the Licensed Names
and the Licensed Products shall revert to PDK.

6.6 Sell-Off Period.

(a) Upon the expiration or earlier termination of the License
for any reason whatsoever, CGI shall immediately discontinue any and all use of
the Licensed Names. If the termination of the License Agreement occurs for any
reason other than a default of CGI, CGI shall have the reasonable time, not to
exceed ninety (90) days, during which it shall have the right on a non-exclusive
basis to dispose of its inventory of Licensed Products. Within ten (10) business
days of the expiration or termination of the License, CGI shall deliver to PDK a
statement of its then existing inventory of Licensed Products specifying the
quantity and kind of Licensed Products on hand. CGI's sales of Licensed Products
during this sell-off period shall not exceed the amount of inventory disclosed

on such statement plus any returns received by CGI subsequent to the effective
date of the inventory statement. If CGI fails to timely provide PDK with the
required statement of inventory, CGI shall forfeit this sell-off period
privilege.

(b) During the sell-off period, CGI shall not sell the
Licensed Products at a price below its usual price for such products without
obtaining the prior written consent of PDK.

(c) Except as necessary to sell-off the inventory during the
sell-off period, CGI shall cease to use all items which display the Licensed
Trade Names.

(d) Within ten (10) business days of the end of the sell-off
period, CGI shall furnish to PDK a statement of its then existing inventory of
Licensed Products specifying the quantity and kind of Licensed Products on hand.
Within

<PAGE>

ten (10) business days of its receipt of the inventory statement, PDK shall have
the right to purchase the inventory set forth on the statement at a price equal
to CGI's cost plus labeling expenses, but otherwise, excluding labor and
overhead. If PDK fails to purchase the inventory, CGI shall have the right to
sell such inventory at whatever price it desires.

6.7 Infringement and Litigation.

(a) CGI shall have the option to defend the Licensed Names
against infringement or interference by other parties, including bringing any
action of infringement or defending any counterclaim of invalidity or action of
a third party for declaratory judgment of non-infringement or interference, and
may settle any such actions solely at its own expense and through counsel of its
selection. PDK must approve any settlement that adversely affects the validity
of any of the Licensed Trade Names. Approval shall not be unreasonably withheld.

(b) PDK shall provide reasonable assistance to CGI as
requested, and shall be reimbursed for its out-of-pocket expenses in connection
with any such requested assistance. CGI shall bear the expenses of such actions.
In the event CGI fails to initiate and pursue or participate in such legal
action, PDK shall have the right to initiate legal action to uphold the Licensed
Name against third parties. CGI shall have no legal or contractual obligation to
PDK for its failure to initiate or participate in any such legal action, except
that PDK may terminate the License granted to CGI hereunder.

(c) In the event CGI is permanently enjoined from exercising
its License rights granted hereunder pursuant to an infringement action brought
by a third party, or if both CGI and PDK elect not to undertake the defense or
settlement of such a claim of alleged infringement for a period of six months
from notice of such claim or suit, PDK shall have the right to terminate this
agreement with respect to the infringing trademark claims following thirty (30)
days' written notice.

6.8. Breach of License. No violation of the provisions of this
Agreement concerning the License shall operate to modify, cancel or otherwise
affect the other rights and obligations of the parties under this Agreement,
including, without limitation, those rights and obligations relating to the
purchase of products from PDK by CGI.

<PAGE>

7. Security Interest and Guarantees.

(a) As security for the performance by CGI of its obligations
under this Agreement, PDK shall file all appropriate financing statements (on
Form UCC-1) with the necessary governmental authorities in the State of Indiana
and all other states where CGI maintains assets, equipment, inventory or
receivables, granting PDK a collateral interest in all of CGI's assets,
equipment, trade names, accounts receivables and inventory, such interest to be
subordinate to all encumbrances thereon prior to the date hereof.

8. Termination of Agreement.

(a) In the event of the occurrence of any of the following
events: (i) insolvency or the making by a party hereto of an assignment for the
benefit of creditors; (ii) the filing by or against a party hereto of, or the
entry of an order for relief against a party hereto in, a voluntary or
involuntary proceeding under any bankruptcy, insolvency, reorganization or
receivership law; (iii) the appointment of a receiver for all or a substantial
portion of CGI's property; (iv) the assumption of custody, attachment or
sequestration by a court of competent jurisdiction of all or a significant
portion of a party's property; (v) a party hereto or any principal thereof is
charged with a felony or crime of moral turpitude; (vi) notification to a party
hereto from the United States Drug Enforcement Administration, or any other
federal or state regulatory agency, that such party should discontinue business
relations with the other party; or (vii) fraudulent conduct by a party hereto in
any of its dealings with the other party, the non-defaulting party shall have
the right to terminate this Agreement, by written notice to the other party. No
assignee for the benefit of creditors, receiver, liquidator, trustee in
bankruptcy, sheriff or any other officer of the court or official charged with
taking over custody of the assets or business or a party shall have any right to
continue performance of this Agreement, and this Agreement may not be assigned
by CGI by operation of law.

(b) Any failure by either party to terminate this Agreement
and the License hereunder by reason of one or more of the foregoing acts or
events shall not constitute a waiver of the right to terminate this Agreement
and the License hereunder upon reoccurrence or continuance of such acts or
events.

<PAGE>

(c) CGI acknowledges that it shall have earned income from its
performance under this Agreement, and that in the event of termination of this
Agreement for any reason, the income earned thereby shall constitute its sole
earnings, and it shall not be entitled to reimbursement, lost profits or
indemnity payments of any kind.

9. Representations and Warranties of CGI. CGI (including all of its
subsidiaries and affiliates) represents and warrants to PDK as follows:

9.1 Organization and Qualification. CGI is a corporation validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted. CGI is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to do so would not have a
material adverse effect on the business of CGI.

9.2 Subsidiaries and Affiliates. Except as set forth on Schedule 9.2
hereof, CGI has no subsidiaries or affiliates.

9.3 Validity and Execution of Agreement. CGI has the full legal right,
capacity and power and all requisite corporate authority and approval required
to enter into, execute and deliver this Agreement and any other agreement or
instrument contemplated hereby, and to perform fully its obligations hereunder
and thereunder. The stockholders and the board of directors of CGI has approved
the transactions contemplated pursuant to this Agreement. This Agreement has
been duly executed and delivered by CGI and constitutes the valid and binding
obligation of CGI enforceable against it in accordance with its terms.

9.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by CGI of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Articles of Incorporation or
Bylaws or other organizational documents of CGI; (b) result in the acceleration
of, or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or imposition of
any lien in or upon their respective assets or constitute a default (or an event
which might, with the passage of time or the giving of notice, or both,
constitute a default) under any

<PAGE>

contract, (c) any order, judgment, regulation or ruling of any governmental or
regulatory body to which CGI are a party or by which any of its property or
assets may be bound or affected or with any provision of any law, rule,
regulation, order, judgment, or ruling of any governmental or regulatory body
applicable to CGI.

9.5 Licenses and Permits. CGI maintains all governmental permits,
licenses, registrations and other governmental consents (federal, state and
local) which are necessary in connection with its operations and properties, and
no others are required. All such permits, licenses, registrations and consents

are in full force and effect and in good standing and shall continue to be in
full force and effect and in good standing following the consummation of the
transactions contemplated by this Agreement.

9.6 Compliance with Laws. CGI has complied in all respects with all
applicable federal, state and local laws, regulations and ordinances or any
requirement of any governmental or regulatory body, court or arbitrator
affecting the business or the assets the failure to comply with which could have
a material adverse effect on the business of CGI.

9.7 Products. There are no statements, citations or decisions by any
governmental or regulatory body that any product marketed or distributed at any
time by CGI is defective or fails to meet in any material respect any standards
promulgated by any such governmental or regulatory body. There have been no
recalls ordered by any such governmental or regulatory body with respect to any
product. To the best knowledge of CGI, there is no (a) fact relating to any
product that may impose upon the Companies a duty to recall any product or a
duty to warn customers of a defect in any product, other than defects about
which CGI has issued appropriate and adequate warnings or (b) latent or overt
design, manufacturing or other defect in any product.

9.8 Survival. All of the representations and warranties of CGI
contained herein shall survive the date hereof until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.

<PAGE>

10. Representations and Warranties of PDK.

10.1 Organization and Qualification. PDK is a corporation validly
existing and in good standing under the laws of the State of New York, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted. PDK is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to do so would not have a
material adverse effect on the business of PDK.

10.2 Subsidiaries and Affiliates. Except as set forth on Schedule 10.2
hereof, PDK has no subsidiaries or affiliates.

10.3 Validity and Execution of Agreement. PDK has the full legal right,
capacity and power and all requisite corporate authority and approval required
to enter into, execute and deliver this Agreement and any other agreement or
instrument contemplated hereby, and to perform fully its obligations hereunder
and thereunder. The stockholders and the board of directors of PDK has approved
the transactions contemplated pursuant to this Agreement. This Agreement has
been duly executed and delivered by PDK and constitutes the valid and binding
obligation of PDK enforceable against it in accordance with its terms.

10.4 No Conflict. Neither the execution and delivery of this Agreement

nor the performance by PDK of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Articles of Incorporation or
Bylaws or other organizational documents of PDK; (b) result in the acceleration
of, or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or imposition of
any lien in or upon their respective assets or constitute a default (or an event
which might, with the passage of time or the giving of notice, or both,
constitute a default) under any contract, (c) any order, judgment, regulation or
ruling of any governmental or regulatory body to which PDK are a party or by
which any of its property or assets may be bound or affected or with any
provision of any law, rule, regulation, order, judgment, or ruling of any
governmental or regulatory body applicable to PDK.

10.5 Licenses and Permits. PDK maintains all governmental permits,
licenses, registrations and other governmental consents (federal, state and
local)

<PAGE>

which are necessary in connection with its operations and properties, and no
others are required. All such permits, licenses, registrations and consents are
in full force and effect and in good standing and shall continue to be in full
force and effect and in good standing following the consummation of the
transactions contemplated by this Agreement.

10.6 Compliance with Laws. PDK has complied in all respects with all
applicable federal, state and local laws, regulations and ordinances or any
requirement of any governmental or regulatory body, court or arbitrator
affecting the business or the assets the failure to comply with which could have
a material adverse effect on the business of PDK.

10.7 Products. To PDK's knowledge, there are no statements, citations
or decisions by any governmental or regulatory body that any product marketed or
distributed at any time by PDK is defective or fails to meet in any material
respect any standards promulgated by an governmental or regulatory body. There
have been no recalls ordered by any such governmental or regulatory body with
respect to any product. To the knowledge of PDK, there is no (a) fact relating
to any product that may impose upon PDK a duty to recall any product or a duty
to warn customers or a defect in any product, other than defects about which PDK
has issued appropriate and adequate warning, or (b) latent or overt design,
manufacturing or other defect in any product.

10.8 Trademarks. PDK warrants and represents that the Licensed Trade
Names are the property of PDK, there is no litigation pending or existing
regarding the use of such trademarks, there are no ongoing investigations
regarding the use of such trademarks and that the use of such trademarks does
not violate any existing federal or state regulations.

10.9 Insurance and Indemnification. At all times during the Term and
for five (5) years thereafter, PDK agrees to be responsible for maintaining
products liability coverage on all products sold to CGI hereunder. Such coverage
shall be in an amount not less than $3 million and shall include the

distribution and sale of such products by CGI and its distributors and
customers. CGI shall be named as an additional insured on any and all products
liability policies maintained by PDK. Each such policy shall require the
insurance carrier to give at least thirty (30) days but not more than ninety
(90) days written notice to CGI of cancellation. PDK shall provide proof of
adequate insurance coverage to CGI at least annually.

<PAGE>

10.10 Survival. All of the representations and warranties of PDK
contained herein shall survive the date hereof until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.

11. Injunctive Relief. CGI acknowledges that PDK will incur
considerable expenses in connection with the purchase of equipment and materials
and the employment of personnel in order to fulfill its obligations under this
Agreement. CGI further acknowledges that its obligations to PDK hereunder are of
a special, unique and extraordinary character, and would be difficult or
impossible to replace and that any breach of this Agreement by CGI would result
in irreparable and continuing damages to PDK for which there would be no
adequate remedy at law. Accordingly, CGI agrees that any breach or threatened
breach by it of this Agreement shall entitle PDK, its successors and assigns, to
injunctive relief, and to such further relief as may be proper, including
damages at law and equitable relief, and further agrees to hold PDK harmless
from, and indemnify PDK from any losses or damages sustained, including lost
profits, and any expenses incurred, including attorneys fees, arising out of any
breach by CGI of this Agreement. The parties understand and intend that each
restriction agreed to by CGI hereinabove shall be construed as separable and
divisible from every other restriction, that the unenforceability of any
restriction shall not limit the enforceability, in whole or in part, of any
other restriction, and that one or more or all of such restrictions may be
enforced in whole or in part as the circumstances warrant. In the event that any
restriction in this Agreement is more restrictive than permitted by law in the
jurisdiction in which PDK seeks enforcement thereof, such restriction shall be
limited to the extent permitted by law. Nothing contained herein shall waive or
limit any right or remedy which PDK may have, either in law or equity, to
enforce this Agreement and its rights hereunder.

12. Nondisclosure. Neither party, nor any person controlled by it,
shall for any reason other than fulfilling it obligations hereunder, directly or
indirectly, for itself or any other person, use or disclose any trade secrets or
confidential information, know-how or proprietary information relating to the
other party, except to the extent (i) within the public domain; or (ii) pursuant
to a subpoena, court order or applicable law.

<PAGE>

13. Relationship of the Parties. The relationship of the parties
created hereby is that of independent contractors, and neither party shall have

any right or authority to create or assume any obligation of any kind on behalf
of the other.

14. Disclaimer of Warranties. PDK makes no other representations or
warranties except as set forth in this agreement, and PDK expressly disclaims
any implied warranties of merchantability, fitness for use or fitness for a
particular purpose.

15. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, telegraphed, telefaxed, sent by facsimile transmission or sent
by prepaid air courier or certified, registered or express mail, postage
prepaid. Any such notice shall be deemed to have been given (a) when received,
if delivered in person, telegraphed, telexed, sent by facsimile transmission and
confirmed in writing within three (3) Business Days thereafter or sent by
prepaid air courier or (b) three (3) Business Days following the mailing
thereof, if mailed by certified first class mail, postage prepaid, return
receipt requested, in any such case as follows (or to such other address or
addresses as a party may have advised the other in the manner provided in this
Section 15):

If to PDK, to:

PDK Labs Inc.
145 Ricefield Lane
Hauppauge, NY 11788
Attn: Michael Krasnoff

If to CGI, to:

Compare Generiks
300 Oser Avenue
Hauppauge, New York 11788
Attn: Thomas A. Keith

16. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors

<PAGE>

and assigns. Neither party shall assign any of its rights or delegate any of its
duties or obligations hereunder without the prior written consent of the other
party. Notwithstanding the foregoing, the parties hereto do not intend to create
hereby, and this Agreement shall not be read or construed to create or grant,
any rights or benefits in or for any person or entity other than the parties
hereto and any and all such third party rights or benefits are hereby expressly
disclaimed and denied.

17. Governing Laws. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to
principles of conflicts of law, and the parties irrevocably agree to submit any
controversy or claim arising out of or relating to this Agreement to a court of

competent jurisdiction located in the State of New York. The parties agree that
any proceedings arising out of, relating to, or brought for the purpose of
enforcing this Agreement, or remedying any breach thereof shall be instituted in
the courts of the State of New York, and in no other jurisdiction.

18. Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.

19. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

20. Amendment. This Agreement may be amended only by a writing signed
by all parties hereto.

21. Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to its subject matter and supersedes any
prior arrangements or understandings (written or otherwise) between them.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date written above.

PDK LABS INC.

By: /s/ Michael Krasnoff
---------------------------
Michael Krasnoff, President

COMPARE GENERIKS, INC.

By: /s/ Thomas A. Keith
---------------------------
Thomas A. Keith, President

<PAGE>

MARKETING AGREEMENT

This Marketing Agreement (the "Agreement") is made and entered into as
of the 5th day of May, 1997 by and between Compare Generiks, Inc., a Delaware
corporation ("CGI") and Body Dynamics, Inc., an Indiana corporation ("BDI").

W I T N E S S E T H:

WHEREAS, CGI is engaged in the business of marketing and distributing
dietary supplements and over-the-counter non-prescription pharmaceutical
products; and

WHEREAS, BDI is engaged in the business of marketing vitamin, herbs and
non-prescription pharmaceutical products; and

WHEREAS, CGI and BDI wish to enter into an agreement whereby BDI
markets certain products distributed by CGI in the "Max Brand" and "HeadsUp"
product ranges; and

WHEREAS, BDI acknowledges that CGI may incur substantial expenses and
may expend significant resources in order to acquire additional equipment, incur
obligations and employ additional personnel in order to fulfill its obligations
to BDI under this Agreement.

NOW, THEREFORE, the parties for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, agree as follows:

1. Marketing of Products.

(a) Commencing from the date of this Agreement, and during the
term hereof (the "Term"), as defined at paragraph 3 hereof, BDI and its
successors, assigns, subsidiaries and affiliates (collectively, "BDI") shall
market upon the terms of this Agreement the distribution and sale by CGI of all
products in the "Max Brand" and "HeadsUp" product ranges as set forth on
Schedule 1(a) hereof (the "Products") for sale to customers solicited by BDI
(the "Customers").

(b) Nothing herein shall restrict or limit in any manner the
right of CGI to sell any other products, to any party, including the Customers,
except as expressly set forth herein.

(c) BDI shall be responsible for all marketing and sales
efforts and all costs relating thereto, including, without limitation, trade
shows, brokers' commissions and advertising expenses.

<PAGE>

(d) BDI shall ensure that all terms of this Agreement relating
to the sale and delivery of Products to the Customers are included in any
contract or agreement between the Customers and/or BDI and CGI.

2. Term of Agreement.

(a) The term of this Agreement (the "Term") shall commence on
the date hereof (the "Effective Date") and shall continue for a period of two
(2) years, and thereafter will be automatically renewed for successive one (1)
year terms unless either party provides written notice of intent to terminate
the Agreement as set forth in paragraph 2(b) below and Clause 6 hereof.

(b) CGI may, at its sole option and in its sole discretion,
for any reason whatsoever, give BDI thirty days' written notice to terminate
this Agreement at any time.

3. Placement and Acceptance of Orders.

(a) CGI shall not be obligated to sell to any Customer any
item, and shall have the right to reject any order, in whole or in part, whether
based upon geographic location, Customer identity, regulatory standards,
requirements or concerns or otherwise. In such event, all provisions of this
agreement will continue to remain in full force and effect. BDI is prohibited
from assisting any Customers from obtaining the Products from any other source
during the term of this Agreement.

(b) BDI will not market any Product sold by CGI hereunder to
any party or entity that BDI knows, or has reason to know or reason to be
suspicious, will utilize such product in any manner that is inconsistent with or
contrary to prevailing federal and state regulations or laws, including the
rules and regulations of any state or federal regulatory organization.

4. Obligations of BDI; Payment of Marketing Fee.

(a) BDI agrees to disclose to CGI all information,
documentation and related materials within its possession or knowledge in
connection with the Products, including but not limited to distributor and
customer lists, sales contracts, customer credit history, price, sale terms, any
rebates or other negotiated contracts, either oral or written, verbal promises
or other deals relating to the sale or distribution of the Products, any
existing pending or potential litigation claims relating or involving the
Products, any existing or pending rulings or regulations relating to or
involving the use of the Products, and any other information that CGI may
request in connection with carrying out the terms of this Agreement (the
"Proprietary Information"). CGI agrees to receive such information subject to
the restrictions imposed by all regulatory laws and shall exercise the standards
of care utilized by CGI treating its own information which it does not wish
disclosed outside CGI; provided, however, that this restriction shall not be

<PAGE>

construed to grant any rights to BDI in, to or under the Proprietary Information
under the terms of this Agreement.

(b) BDI hereby agrees and acknowledges that it has, and shall
have, no right, title or interest in the Products, or the Proprietary

Information, including without limitation, any Customer lists or names.

(c) CGI agrees to pay to BDI a marketing fee ("Marketing Fee")
as follows: CGI shall pay BDI the difference between (i) the purchase price for
the Products as billed to the Customer, and (ii) an amount equal to two hundred
percent (200%) of the Material Cost of the Products. "Material Cost" shall mean
the actual material expenses of PDK Labs Inc. ("PDK") incurred in the
manufacture and packaging of the Products. The Material Costs for each item
ordered will be determined, in advance, each forty-five (45) days during the
term of this Agreement. Upon written request from BDI, CGI will provide to BDI
an MRP Schedule reflecting PDK's Material Cost per item. The Marketing Fee is
payable monthly, in arrears, within fifteen (15) days of the end of the month in
which CGI received payment for the related Products and is only payable upon
receipt of the purchase price from the related Customer.

(d) CGI has the absolute right in its sole and absolute
discretion, if an invoice remains unpaid for a period in excess of 150 days to
offset 100% of the Material Cost of the Products delivered pursuant to the
delinquent invoice, against the next installment of the Marketing Fee.

(e) CGI agrees to be responsible for all returns of Products
sold from and after the date of this contract.

(f) If CGI terminates this Agreement pursuant to any of the
provisions hereof, Marketing Fees shall be paid only in relation to any order
placed by a Customer prior to the date of termination of this Agreement. No
Marketing Fees shall be paid from and after such date, including, without
limitation, in relation to any re-orders of Product by any Customer.

5. Indemnification. The parties hereby agree to indemnify and hold one
another, their officers, directors, agents, servants, employees, subsidiaries
and affiliates, harmless from and against any and all claims, suits, demands,
losses, liabilities, damages, court costs, (including reasonable attorneys'
fees), whether based in contract or in tort, arising out of or related to, or as
a consequence of any act or omission of the indemnifying party relating to the
Products.

6. Termination of Agreement.

(a) CGI shall have the right to terminate this Agreement at
its sole discretion, at any time, upon being advised that any regulatory
authority objects to the sale of the Products by CGI to the Customers.

<PAGE>

(b) In addition, in the event any regulatory agency restricts
or denies further use of any trademarks used by CGI in connection with the
Products, all rights and obligations of the parties under this Agreement shall
remain in effect, except that the Products will be marketed under a name or
names mutually acceptable to CGI and BDI, subject to receipt of the prior
written consent of PDK, and consistent with the determination of such regulatory
authorities.

(c) BDI acknowledges that it shall have earned income from its
performance under this Agreement, and that in the event of termination of this
Agreement for any reason, the income earned thereby shall constitute its sole
earnings, and it shall not be entitled to reimbursement, lost profits or
indemnity payments of any kind.

(d) Any failure by either party to terminate this Agreement
pursuant to Clause 2(b) or this Clause 6 by reason of one or more of the
foregoing acts or events shall not constitute a waiver of the right to terminate
this Agreement upon reoccurrence or continuance of such acts or events.

7. Representations and Warranties of BDI. BDI (including all of its
subsidiaries and affiliates) represents and warrants to CGI as follows:

7.1 Organization and Qualification. BDI is a corporation validly
existing and in good standing under the laws of the State of Indiana, and has
all requisite corporate power and authority to (a) own, lease and operate its
properties and assets as they are now owned, leased and operated and (b) carry
on its business as now presently conducted. BDI is duly qualified to do business
in each jurisdiction in which the nature of its business or properties makes
such qualification necessary, except where the failure to do so would not have a
material adverse effect on the business of BDI.

7.2 Subsidiaries and Affiliates. Except as set forth on Schedule 7.2
hereof, BDI has no subsidiaries or affiliates.

7.3 Validity and Execution of Agreement. BDI has the full legal right,
capacity and power and all requisite corporate authority and approval required
to enter into, execute and deliver this Agreement and any other agreement or
instrument contemplated hereby, and to perform fully its obligations hereunder
and thereunder. The stockholders and the board of directors of BDI has approved
the transactions contemplated pursuant to this Agreement. This Agreement has
been duly executed and delivered by BDI and constitutes the valid and binding
obligation of BDI enforceable against it in accordance with its terms.

7.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by BDI of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Articles of Incorporation or
By-laws or other organizational documents of BDI; (b) result in the acceleration
of, or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or

<PAGE>

imposition of any lien in or upon their respective assets or constitute a
default (or an event which might, with the passage of time or the giving of
notice, or both, constitute a default) under any contract, (c) any order,
judgment, regulation or ruling of any governmental or regulatory body to which
BDI are a party or by which any of its property or assets may be bound or
affected or with any provision of any law, rule, regulation, order, judgment, or
ruling of any governmental or regulatory body applicable to BDI.

7.5 Licenses and Permits. BDI maintains all governmental permits,
licenses, registrations and other governmental consents (federal, state and
local) which are necessary in connection with its operations and properties, and
no others are required. All such permits, licenses, registrations and consents
are in full force and effect and in good standing and shall continue to be in
full force and effect and in good standing following the consummation of the
transactions contemplated by this Agreement.

7.6 Compliance with Laws. BDI has complied in all respects with all
applicable federal, state and local laws, regulations and ordinances or any
requirement of any governmental or regulatory body, court or arbitrator
affecting the business or the assets the failure to comply with which could have
a material adverse effect on the business of BDI.

7.7 Products. There are no statements, citations or decisions by any
governmental or regulatory body that any product marketed or distributed at any
time by BDI is defective or fails to meet in any material respect any standards
promulgated by any such governmental or regulatory body. There have been no
recalls ordered by any such governmental or regulatory body with respect to any
product. To the best knowledge of BDI, there is no (a) fact relating to any
product that may impose upon the Companies a duty to recall any product or a
duty to warn customers of a defect in any product, other than defects about
which BDI has issued appropriate and adequate warnings or (b) latent or overt
design, manufacturing or other defect in any product.

7.8 Survival. All of the representations and warranties of BDI
contained herein shall survive the date hereof until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.

8. Representations and Warranties of CGI.

<PAGE>

8.2 Subsidiaries and Affiliates. Except as set forth on Schedule 8.2
hereof, CGI has no subsidiaries or affiliates.

contemplated pursuant to this Agreement. This Agreement has been duly executed
and delivered by CGI and constitutes the valid and binding obligation of CGI
enforceable against it in accordance with its terms.

8.4 No Conflict. Neither the execution and delivery of this Agreement
nor the performance by CGI of the transactions contemplated hereby will: violate
or conflict with (a) any of the provisions of the Articles of Incorporation or
By-laws or other organizational documents of CGI; (b) result in the acceleration
of, or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or imposition of
any lien in or upon their respective assets or constitute a default (or an event
which might, with the passage of time or the giving of notice, or both,
constitute a default) under any contract, (c) any order, judgment, regulation or
ruling of any governmental or regulatory body to which CGI are a party or by
which any of its property or assets may be bound or affected or with any
provision of any law, rule, regulation, order, judgment, or ruling of any
governmental or regulatory body applicable to CGI.

8.5 Survival. All of the representations and warranties of CGI
contained herein shall survive the date hereof until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.

9. Force Majeure. CGI shall not be liable for any delay or failure to
perform in accordance with this Agreement if such delay or failure to perform is
a result of a strike, lock-out or other labor dispute; riot, insurrection, civil
disturbance or other hostility; embargo; inability or delay in obtaining fuel,
energy, equipment or power; inability or delay in obtaining labor or materials;
inability or delay in obtaining government approvals, permits or licenses;
inability or delay in obtaining transportation or other services; fire, flood,
lightning, storm, earthquake, or other Act of God; or is a result of causes
beyond CGI's reasonable control including but not limited to governmental
actions or inactions.

10. Injunctive Relief. The parties acknowledge that each party will
incur considerable expenses in connection with the purchase of Equipment and
materials and the employment of personnel in order to fulfill their respective
obligations under this Agreement. The parties further acknowledge that the
obligations of each party hereunder are of a special, unique and extraordinary
character, and would be difficult or impossible to replace and that any breach
of this Agreement by either party would result in irreparable and continuing
damages to the non-breaching party for which there would be no adequate remedy
at law. Accordingly, BDI

<PAGE>

and CGI agree that any breach or threatened breach of this Agreement by either
party shall entitle the non-breaching party, its successors and assigns, to
injunctive relief, and to such further relief as may be proper, including
damages at law and equitable relief, and further agree to hold the non-breaching
party harmless from, and indemnify the non-breaching party from any losses or
damages sustained, including lost profits, and any expenses incurred, including

attorneys fees, arising out of any breach of this Agreement by the breaching
party. The parties understand and intend that each restriction agreed to
hereinabove shall be construed as separable and divisible from every other
restriction, that the unenforceability of any restriction shall not limit the
enforceability, in whole or in part, of any other restriction, and that one or
more or all of such restrictions may be enforced in whole or in part as the
circumstances warrant. In the event that any restriction in this Agreement is
more restrictive than permitted by law in the jurisdiction in which the
non-breaching party seeks enforcement thereof, such restriction shall be limited
to the extent permitted by law. Nothing contained herein shall waive or limit
any right or remedy which the non-breaching party may have, either in law or
equity, to enforce this Agreement and its rights hereunder.

11. Nondisclosure. Neither party, nor any person controlled by it,
shall for any reason other than fulfilling it obligations hereunder, directly or
indirectly, for itself or any other person, use or disclose any trade secrets or
confidential information, know-how or proprietary information relating to the
other party, except to the extent (i) within the public domain; or (ii) pursuant
to a subpoena, court order or applicable law.

12. Relationship of the Parties. The relationship of the parties
created hereby is that of independent contractors, and neither party shall have
any right or authority to create or assume any obligation of any kind on behalf
of the other.

13. Disclaimer of Warranties. CGI makes no other representations or
warranties except as set forth in this agreement, and CGI expressly disclaims
any implied warranties of merchantability, fitness for use or fitness for a
particular purpose.

14. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, telegraphed, telefaxed, sent by facsimile transmission or sent
by prepaid air courier or certified, registered or express mail, postage
prepaid. Any such notice shall be deemed to have been given (a) when received,
if delivered in person, telegraphed, telexed, sent by facsimile transmission and
confirmed in writing within three (3) Business Days thereafter or sent by
prepaid air courier or (b) three (3) Business Days following the mailing
thereof, if mailed by certified first class mail, postage prepaid, return
receipt requested, in any such case as follows (or to such other address or
addresses as a party may have advised the other in the manner provided in this
Section 14):

<PAGE>

If to CGI, to:

Compare Generiks, Inc.
300 Oser Avenue
Hauppauge, NY 11788
Attn: Thomas A. Keith
If to BDI, to:

Body Dynamics, Inc.
9700 North Michigan Road
Carmel, IN 46032
Attn: Karen Windle-Burcham

15. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Neither party shall assign any of its rights or delegate any of its
duties or obligations hereunder without the prior written consent of the other
party. Notwithstanding the foregoing, the parties hereto do not intend to create
hereby, and this Agreement shall not be read or construed to create or grant,
any rights or benefits in or for any person or entity other than the parties
hereto and any and all such third party rights or benefits are hereby expressly
disclaimed and denied.

16. Governing Laws. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to
principles of conflicts of law, and the parties irrevocably agree to submit any
controversy or claim arising out of or relating to this Agreement to a court of
competent jurisdiction located in the State of New York. The parties agree that
any proceedings arising out of, relating to, or brought for the purpose of
enforcing this Agreement, or remedying any breach thereof shall be instituted in
the courts of the State of New York, and in no other jurisdiction.

17. Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.

18. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

19. Amendment. This Agreement may be amended only by a writing signed
by all parties hereto.

20. Entire Agreement. This Agreement contains the entire understanding
of the parties hereto with respect to its subject matter and supersedes any
prior arrangements or understandings (written or otherwise) between them.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date written above.

COMPARE GENERIKS, INC.

By: /s/ Thomas A. Keith
-------------------------------
Thomas A. Keith, President

BODY DYNAMICS, INC.

By: /s/ Karen Windle-Burcham
-------------------------------
Karen Windle-Burcham, President

<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements and is qualified in its entirety by reference to such financial
statements.
</LEGEND>

<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 890,485
<SECURITIES> 0
<RECEIVABLES> 616,949
<ALLOWANCES> 10,000
<INVENTORY> 642,422
<CURRENT-ASSETS> 2,305,496
<PP&E> 56,792
<DEPRECIATION> 4,639
<TOTAL-ASSETS> 5,130,081
<CURRENT-LIABILITIES> 1,236,585
<BONDS> 0
0
550
<COMMON> 389
<OTHER-SE> 3,892,557
<TOTAL-LIABILITY-AND-EQUITY> 5,130,081
<SALES> 2,289,629
<TOTAL-REVENUES> 2,289,629
<CGS> 1,474,609
<TOTAL-COSTS> 1,474,609
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,589
<INCOME-PRETAX> (1,207,610)
<INCOME-TAX> (43,000)
<INCOME-CONTINUING> (1,164,610)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,164,610)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)

</TABLE>