OCUREST LABORATORIES INC, 424A, 1996-10-09

OCUREST LABORATORIES INC
424A, 1996-10-09
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS

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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 8, 1996
PROSPECTUS

OCUREST LABORATORIES, INC.

2,000,000 UNITS

EACH CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANT

This Prospectus relates to the offering (the "Offering") by Ocurest
Laboratories, Inc. (the "Company") of 2,000,000 Units (the "Units"). Each of the
Units consists of one share of Common Stock, $.008 par value (the "Common
Stock"), and one Class A Redeemable Common Stock Purchase Warrant (a "Warrant"
and collectively, the "Warrants"). The Common Stock and Warrants must be
purchased together as Units unless this requirement is waived by RAF Financial
Corporation (the "Representative") at the request of a person who does not
desire to purchase Warrants. In such event the Common Stock will be sold at
$4.00 per share and the Warrants will be sold at $.50 per Warrant. The Common
Stock and the Warrants comprising the Units will not be separately tradeable or
transferable for a period of six months commencing on the date of this
Prospectus or earlier at the discretion of the Representative. See "Description
of Securities--The Units."

Prior to the Offering, there has not been any public market for the
securities of the Company. The initial public offering prices of the Units, the
Common Stock and the Warrants and the initial exercise price and other terms of
the Warrants have been arbitrarily determined by negotiation between the Company
and the Representative, as representative of the underwriting group (the
"Underwriters"). Application has been made to approve the Units for quotation on
the NASDAQ Small-Cap Market ("NASDAQ") under the trading symbol OCULU. Only the
Units will be listed for quotation on NASDAQ until the Common Stock and Warrants
become separately tradeable and transferable. Thereafter, subject to the Company
then meeting the NASDAQ maintenance requirements, the Units will be delisted for
quotation on NASDAQ and only the Common Stock and Warrants will be listed for
quotation on NASDAQ.

Each Warrant entitles the registered holder thereof to purchase one share of
Common Stock at an exercise price of $4.80 per share, with a credit of $.50 per
Warrant surrendered on exercise, subject to adjustment in certain events, at any
time commencing on the date the Warrants are separately tradeable and
transferable and ending on , 1999. The Company will place in escrow $.50 per
Warrant pending the occurrence of certain events. Commencing on the date the
Warrants are separately tradeable and transferable, the Warrants are subject to
redemption by the Company at $.55 per Warrant at any time until the end of the
second year after the date of this Prospectus and thereafter at $.75 per Warrant
at any time until the end of the third year after the date of this Prospectus
and prior to their expiration, on 30 days' prior written notice to the holders
of Warrants, provided that the daily trading price per share (as defined
beginning on page 38) of Common Stock has been at least $6.72 for a period of at
least 20 consecutive trading days ending within 10 days prior to the date upon
which the notice of redemption is given. Once exercisable, the Warrants shall be
exercisable until the close of the business day preceding the date fixed for
redemption, if any. See "Description of Securities--Warrants."

THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION TO INVESTORS. POTENTIAL PURCHASERS SHOULD NOT
INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD THE RISK OF LOSING THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS AND
"DILUTION" ON PAGE 15 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)
Per Unit(3) $ 4.50 $ .405 $ 4.095
Total(4) $9,000,000 $ 810,000 $8,190,000

(FOOTNOTES ON NEXT PAGE)

It is expected that delivery of the certificates representing the Units
will be made at the offices of the Representative on or about , 1996
against payment therefor.

-------------------------
RAF Financial Corporation

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(1) The Company and certain shareholders of the Company (the "Selling
Shareholders") have also agreed to pay the Representative a non-accountable
expense allowance equal to 2.6% of the total Price to Public of the Units,
Common Stock and Warrants sold by them. The Company has also agreed to issue
to the Representative and its designees for a nominal consideration (i)
warrants to purchase 200,000 shares of Common Stock at an exercise price of
$4.80 per share and (ii) warrants to purchase 200,000 shares of Common Stock
at an exercise price of $5.76 per share. The warrants to be issued to the
Representative and the shares of Common Stock underlying such warrants have
been registered under the Securities Act of 1933, as amended (the
"Securities Act)") by means of the Registration Statement of which this
Prospectus is a part. Subject to certain limitations upon exercise of the
Warrants, the Company has also agreed to pay the Representative a
solicitation fee equal to 10% of the exercise price of the Warrants. The
Representative has a three year right of first refusal with respect to
future public or private offerings for cash by the Company or any parent or
subsidiaries of the Company. In addition, the Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act. See "Underwriting."

(2) Before deducting expenses of the Offering payable by the Company
estimated at $300,000, excluding the non-accountable expense allowance
described in Note (1) above, and assumes no exercise of the Underwriters'
over-allotment option. Includes $.50 per Warrant which will be placed in
escrow and, under certain circumstances, will not be released to the
Company. See "Use of Proceeds" and "Description of Securities--Warrants."

(3) If the Representative waives the requirement that the Common Stock and the
Warrants must be purchased together, the Price to Public, Underwriting
Discounts and proceeds to the Company per share of Common Stock will be
$4.00, $.40 and $3.60, respectively and the Price to Public, Underwriting
Discounts and proceeds to the Company per Warrant will be $.50, 0 and $.50,
respectively.

(4) The Company and the Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to 300,000 additional Units consisting of
300,000 additional shares of Common Stock (29,615 of which will be offered
by the Company and 270,385 of which will be offered by the Selling
Shareholders) and 300,000 additional Warrants offered by the Company at the
respective prices less the Underwriting Discounts solely to cover
over-allotments, if any (the "Over-Allotment Option"). The Company will not
receive any proceeds from the sale of securities by the Selling
Shareholders. If the Over-Allotment Option is exercised in full, the total
Price to Public, Underwriting Discounts, and Proceeds to Company will be
$10,350,000, $931,500 and $8,434,299, respectively. See "Security Ownership
of Certain Beneficial Owners and Management," "Selling Shareholders" and
"Underwriting."

THE SECURITIES OFFERED BY THIS PROSPECTUS ARE SUBJECT TO PRIOR SALE. THE
UNDERWRITERS RESERVE THE RIGHT TO WITHDRAW, CANCEL OR MODIFY SUCH OFFER (WHICH
MAY BE DONE ONLY BY FILING AN AMENDMENT TO THE REGISTRATION STATEMENT) AND TO
REJECT ORDERS IN WHOLE OR IN PART FOR THE PURCHASE OF ANY OF THE COMPANY'S
SECURITIES AND TO CANCEL ANY SALE EVEN AFTER THE PURCHASE PRICE HAS BEEN PAID IF
SUCH SALE, IN THE OPINION OF THE UNDERWRITERS, WOULD VIOLATE FEDERAL OR STATE
SECURITIES LAWS OR A RULE OR POLICY OF THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC. ("NASD").

IN CONNECTION WITH THE OFFERING, THE REPRESENTATIVE MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE UNITS AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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PHOTOGRAPH

Picture of the Company's products. Ocurest Redness Reliever Lubricant and
Ocurest Tears Formula Lubricant. Caption in Picture reads:

Ocurest
Eyecare Made Easy

<PAGE>

PHOTOGRAPH (Photo storyboard consisting of nine small photographs with captions)

Picture of a photo storyboard of one of the Company's 30 second television
commercials. Commercial shows woman using conventional eyedrop dispenser and
then using the Ocurest Delivery System on the bridge of her nose and explaining
how easy the Ocurest Delivery System is to use.

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. ALL INFORMATION RELATING TO SHARES OF
COMMON STOCK AND PER SHARE AMOUNTS IN THIS PROSPECTUS HAVE BEEN ADJUSTED FOR A
1-FOR-4 REVERSE STOCK SPLIT EFFECTED IN MARCH 1994 AND A 1-FOR-2 REVERSE STOCK
SPLIT EFFECTED IN JULY 1996.

THE COMPANY

Ocurest Laboratories, Inc. (the "Company") is a marketing company organized
to develop and commercialize new health and personal care products for the
consumer market. The Company's first products consist of two Ocurest/registered
trademark/ eye care products utilizing a patented delivery system for dispensing
ophthalmic drug solutions into the eye (the "Ocurest Delivery System").

The Company acquired the exclusive worldwide licensing rights to the Ocurest
Delivery System from a then affiliate of the Company in 1991. After three years
of product development, the Company began limited marketing in late 1994 of two
over-the-counter ("OTC") eye drop products packaged in the delivery system. The
products consist of Ocurest Redness Reliever Lubricant and Ocurest Tears Formula
Lubricant (collectively, "Ocurest Eye Drops"). Ocurest Eye Drops utilize
ophthalmic drug formulations owned by Bausch & Lomb Pharmaceutical, Inc.
("Bausch & Lomb") and are manufactured under a supply agreement with Bausch &
Lomb at its pharmaceutical facility in Tampa, Florida. The Company owns the
molds used to produce parts for the Ocurest Delivery System and the
manufacturing equipment which Bausch & Lomb operates to produce all Ocurest eye
care products.

The management of the Company believes that almost all of the worldwide sales
of ophthalmic drug solutions are sold in generic eyedropper dispensers which can
be difficult and messy to use. The Ocurest Delivery System was designed to rest
on the bridge of the nose, thereby stabilizing the dropper tip directly above
the eye so that drops can be applied directly into the eye, accurately and with
no spillage.

The OTC eye care products manufactured for the Company by Bausch & Lomb
contain active ingredients as to which Bausch & Lomb has advised the Company are
recognized as safe and effective by the United States Food & Drug Administration
(the "FDA"). Ocurest Redness Reliever Lubricant contains the same active
ingredients as Visine Moisturizing, a redness reliever lubricant brand, and
Ocurest Tears Formula Lubricant contains the same active ingredient as Tears
Naturale, an artificial tears brand.

Certain aspects of the Ocurest Delivery System are covered by a U.S. utility
patent issued in March 1990 and the shape of the Ocurest Delivery System is
covered by a U.S. design trademark registration issued in July 1995 and a design
patent issued in September 1991, all of which have been licensed to the Company.
The Company is also the licensee of patents issued or pending in a number of
other countries.

Ocurest Eye Drops were introduced in Florida with television and magazine
advertising starting in September 1994. In mid-1995, the marketing of Ocurest
Eye Drops was expanded to ten additional southern states with television
advertising starting in July 1995 in the Southeast and September 1995 in the
Southwest.

The Company believes the initial consumer response to Ocurest Eye Drops has
been encouraging and the Company has planned a national marketing program for
its product line with television and magazine advertising scheduled to begin in
national media during October 1996. As of the date of this Prospectus, retail
chains such as Wal-Mart, Target, Kmart, Walgreens, Revco, Rite Aid, Eckerd, CVS,

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Osco, Sav-on, Kroger, Winn-Dixie, Albertson's, A&P, Publix, Grand Union,
Pathmark, Stop & Shop, Giant Food and Fred Meyer have ordered Ocurest Eye Drops
for retail distribution. The Company intends to utilize a substantial portion of
the net proceeds of the Offering for advertising and promotion expenses in
support of the national marketing of Ocurest Eye Drops.

The Company was organized under the laws of the State of Florida on April 29,
1991. The Company's office is located at 4400 PGA Boulevard, Palm Beach Gardens,
FL 33410 and its telephone number is (561)-627-8121.

THE OFFERING

Securities offered .............. 2,000,000 Units. Each Unit consists of one
share of Common Stock and one Warrant. Each
Warrant entitles the holder thereof to
purchase one share of Common Stock. The Common
Stock and the Warrants must be purchased
together as Units unless this requirement is
waived by the Representative at the request of
a person who does not desire to purchase
Warrants. In such event the Common Stock will
be sold at $4.00 per share and the Warrants
will be sold at $.50 per Warrant. The Common
Stock and the Warrants comprising the Units
will not be separately tradeable or
transferable for a period of six months
commencing on the date of this Prospectus or
earlier at the discretion of the
Representative. See "Description of
Securities" and "Underwriting."(1)

Offering Price .................. $4.50 per Unit. If the Representative waives
the requirement that the Common Stock and the
Warrants must be purchased together, the
Common Stock will be sold at $4.00 per share
and the Warrants will be sold at $.50 per
Warrant.

Common Stock to be outstanding 3,922,674 shares (1,922,674 shares are
after the Offering ............outstanding as of the date of this Prospectus)
(2)

Warrants--Number to be outstand-
ing after the offering ....... 2,000,000 Warrants (no Warrants are
outstanding as of the date of this
Prospectus)(3)

Exercise price ................ $4.80 per share of Common Stock, with a credit
of $.50 per Warrant surrendered upon exercise,
subject to adjustment in certain
circumstances. See "Description of
Securities."

Expiration Date ............... , 1999

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<PAGE>
Redemption .................... Commencing on the date the Warrants are
separately tradeable and transferable, the
Warrants are redeemable by the Company at
$.55 per Warrant at any time until the end of
the second year after the date of this
Prospectus and thereafter at $.75 at any time
until the end of the third year after the date
of this Prospectus and prior to their
expiration, on 30 days' prior written notice
to the holders of Warrants, provided that the
daily trading price per share of Common Stock
(as defined beginning on page 38), has been
at least $6.72 for a period of at least 20
consecutive trading days ending within 10
days prior to the date of the notice of
redemption. See "Description of Securities--
Warrants."

Use of Proceeds ................. The Company intends to apply the net proceeds
of the Offering to pay for inventory
acquisition and production equipment, to pay
for expenses relating to national advertising
and promotion of the Company's products,
to repay certain indebtedness and accrued
interest and for general corporate purposes,
including working capital. See "Use of
Proceeds."

Risk Factors .................... The securities offered hereby involve a high
degree of risk and immediate substantial
dilution and should not be purchased by
investors who cannot afford the loss of their
entire investment. See "Risk Factors."

Proposed NASDAQ Small-Cap Symbol. Units: OCULU(4)(5)

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(1) Does not include up to 29,615 additional shares of Common Stock and
300,000 additional Warrants that may be sold by the Company pursuant to
the Over-Allotment option. See "Underwriting."

(2) Does not include a maximum of (a) 1,207,585 shares issuable upon exercise
of outstanding warrants and options, (b) 2,000,000 shares issuable upon
exercise of the Warrants, (c) 400,000 shares issuable upon exercise of
the warrants to be issued to the Representative, (d) 29,615 shares issuable
upon exercise of the Over-Allotment Option and (e) 300,000 shares issuable
upon exercise of the Warrants included in the Over-Allotment Option. See
"Management," "Certain Relationships and Transactions" and "Underwriting."

(3) Represents the Warrants and does not include any other options or
warrants referred to in Notes (1) and (2) above.

(4) The Common Stock and the Warrants will not be separately tradeable or
transferable for a period of six months commencing on the date of this
Prospectus or earlier at the discretion of the Representative. Until such
time, it is unlikely that any trading market will develop for such
securities. See "Risk Factors."

(5) Subject to the Company then meeting the NASDAQ maintenance requirements, the
Company intends to delist the Units from NASDAQ and to list the Common
Stock and the Warrants on NASDAQ on or about the date the Common Stock and
the Warrants are separately tradeable and transferable.

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<PAGE>

RISK FACTORS

THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO THE RISK FACTORS
DESCRIBED BELOW. PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS, AMONG OTHERS, AS WELL AS THE REMAINDER OF THIS PROSPECTUS, PRIOR
TO MAKING AN INVESTMENT IN THE COMPANY.

RISKS RELATING TO THE BUSINESS THE COMPANY

LIMITED OPERATING HISTORY; LACK OF PROFITABILITY; WORKING CAPITAL DEFICIENCY

The Company has recently commenced operations, has a limited operating
history, has never earned a profit and at June 30, 1996, its current liabilities
exceeded its current assets by approximately $2 million. During the six months
ended June 30, 1996, the Company incurred a net loss of approximately $1
million. Although the Company believes that its estimates of the capital and
resources required for its continued operations are reasonable, until the
Company has a more meaningful operating history, it will not be possible to
determine the accuracy of such estimates. In formulating its business plan, the
Company has relied on its in-market sales experience since September 1994,
results of independent market studies and the judgment of Management. There can
be no assurance that the Company's past operating history nor the results of the
market studies will accurately reflect the demand for the Company's eye care
products or that the Company will ever be profitable. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and "Management."

NEED FOR FINANCING TO CONTINUE AS A GOING CONCERN; REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS

Since the Company's inception, the Company's operations have been primarily
funded through the private placement of equity securities of the Company. The
Company's ability to continue as a going concern is dependent upon, among other
things, the Company's receipt of the net proceeds of the Offering. On June 30,
1996, the Company had an accumulated deficit and a negative net worth of
approximately $6 million and $2.3 million, respectively. In addition, as of the
date hereof the Company is in default on the repayment of approximately $650,000
of loans, including interest thereon. Although the Company's financial
statements were prepared on a going concern basis, in the Report of Independent
Certified Public Accountants dated March 29, 1996, such accountants expressed
substantial doubt about the Company's ability to continue as a going concern.
Furthermore, although the Company believes that the receipt of the net proceeds
of the Offering will satisfy its capital requirements for a period of at least
one year, there can be no assurance that the Company will not require additional
capital or be able to continue as a going concern. The Company has not obtained
any commitments with respect to any such additional capital and there can be no
assurance that any additional capital will become available to the Company on
terms not unfavorable to the Company, if at all. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Experts" and Report of Independent Certified Public Accountants.

CERTAIN RISKS RELATED TO THE OPHTHALMIC DRUG BUSINESS

In addition to being subject to all the risks associated with the creation of
a new business, the Company is subject to certain factors affecting the OTC
ophthalmic drug business generally such as intense competition, necessity to
purchase specialized equipment and varying consumer preferences. There can be no
assurance that the Company will ever be able to operate profitably. See Note L
of Notes to Financial Statements.

REVERSION OF PATENT AND TRADEMARK RIGHTS

The patent and trademark rights of the Company were granted to the Company by
Acorn Laboratories, Inc. ("Acorn"), a then affiliate of the Company. Under
certain circumstances, including a

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failure by the Company to make requisite payments to Acorn, the patent and
trademark rights will revert to Acorn. In any such event, the Company will no
longer be able to use the Ocurest Delivery System or market any products under
the name "Ocurest" and, in such event, investors can expect to lose their
entire investment in the Company. See "Business--Patents and Trademarks" and
"Certain Relationships and Transactions."

DEPENDENCE ON A LIMITED NUMBER OF SIGNIFICANT CUSTOMERS

In 1995, three customers accounted for approximately 43%, 13% and 11% of the
Company's net sales, respectively. During the six months ended June 30, 1996,
four customers accounted for approximately 13%, 11%, 10% and 9% of the Company's
net sales, respectively. The loss of any of such customers would have a material
adverse effect upon the Company. In the event that the Company is not successful
in marketing its OTC products, investors can expect to lose their entire
investment in the Company.

DEPENDENCE ON CONTRACT MANUFACTURER

Ocurest/registered trademark/ eye care products are formulated, filled and
packaged under contract by Bausch & Lomb Pharmaceutical, Inc. ("Bausch & Lomb")
pursuant to a contract in which Bausch & Lomb agreed to manufacture the
Company's OTC ophthalmic drug solutions in accordance with the Company's
manufacturing specifications. The contract runs until 1999, although it may be
terminated by either party on one year's notice. The contract provides for
minimum annual purchases by the Company. Although, as of the date of this
Prospectus, the Company is in compliance with the purchase requirements, there
can be no assurance that the Company will continue to be in compliance. If the
Company fails to so comply with such requirements and such failure is not cured
during the following six months, Bausch & Lomb may terminate the contract as of
the immediately succeeding March 31. The Company believes that if Bausch & Lomb
were to terminate or not agree to renew the contract, other contract
manufacturers are available to manufacture the Company's eye care products on
substantially similar terms, although there can be no assurance of the
foregoing. In any such event, however, the Company could incur a significant
delay in the production of its products. see "Business--Contract Manufacturer."

DEPENDENCE ON SINGLE PRODUCT CATEGORY

The Company's future profitability initially depends primarily on the
successful marketing of ophthalmic drug solutions in the Ocurest Delivery System
as an alternative to currently available OTC ophthalmic drug solutions sold in
conventional eye drop dispensers. Should the Company's future marketing of eye
care products be unsuccessful for any reason, investors can expect to lose their
entire investment in the Company. Although the Company plans to diversify its
business through the introduction of new products in selected health and
personal care markets, there can be no assurance that the Company will be able
to discover, develop or successfully commercialize any such products.

UNCERTAINTY OF CONSUMER ACCEPTANCE FOR OCUREST EYE CARE PRODUCTS

Unless Ocurest OTC eye care products marketed in the Ocurest Delivery System
gain significant consumer acceptance in the national market, the Company will
not be successful and investors can expect to lose their entire investment in
the Company. Although the Company has gained limited in-market sales experience
since September 1994, the Company has encountered and will continue to encounter
strong brand name and price competition in introducing its products. The Company
will be required to incur substantial advertising and promotion expenses to
introduce Ocurest eye care products to consumers, and there can be no assurance
that such products will gain sufficient consumer acceptance to enable the
Company to operate profitably.

DEPENDENCE UPON MANAGEMENT

The success of the Company will, to a significant extent, depend upon the
efforts and availability of its management. The loss of the services of the
Company's Chief Executive Officer may materially

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adversely affect the Company's business and prospects unless or until a
suitable successor is retained. The Company's employment agreement with its
Chief Executive Officer permits him to terminate his employment by the Company
for any reason. The Company has no key man life insurance. See "Management."

BROAD DISCRETION IN ALLOCATION OF A SUBSTANTIAL PORTION OF THE NET PROCEEDS

A significant portion of the net proceeds of the Offering will be allocated
for general corporate purposes at the discretion of the Company's management.
Investors, therefore, will be required to rely on the judgment of the Company's
management in the actual allocation of such portion. See "Use of Proceeds" and
"Management."

SUBSTANTIAL PORTION OF NET PROCEEDS TO BE UTILIZED FOR THE PAYMENT OF
EXISTING INDEBTEDNESS

The Company intends to utilize approximately $2,400,000 (approximately 36%)
of the net proceeds of the Offering for the payment of existing indebtedness.
Included in such indebtedness in an aggregate of $85,000 plus accrued interest
payable to Eric R. Schwarz, an employee and beneficial owner of approximately 6%
of the Company's outstanding Common Stock, and to the spouse of Edmund G.
Vimond, Jr., the Company's Chief Executive Officer, and $200,000 payable to
Robert M. Kassenbrock, a beneficial owner of approximately 9% of the Company's
outstanding Common Stock. See "Use of Proceeds," "Management," "Security
Ownership of Certain Beneficial Owners and Management," "Certain Relationships
and Transactions" and "Selling Shareholders."

REQUIRED ROYALTY PAYMENTS

Pursuant to an agreement with Acorn, the Company has agreed, contingent upon
the Company achieving certain net income levels, to pay royalties to Acorn until
$9,800,000 has been paid to Acorn. The royalty payments consist of (a) 4% of (i)
net sales of eye drops sold by the Company in the Ocurest Delivery System; (ii)
royalties received by the Company from sales by others of Rx products; and (iii)
the proceeds of licensing and similar arrangements received by the Company from
licensing or similar arrangements in connection with Rx products and (b) 25% of
(i) royalties received by the Company with respect to sales by others of OTC eye
drops in the Ocurest Delivery System and (ii) the proceeds of any licensing or
similar arrangements received by the Company in connection with OTC products.
Furthermore, in the event that the Company disposes of all or substantially all
of its business including the licenses granted by Acorn, other than through one
or more licenses, the Company must pay to Acorn the greater of $1,250,000 or 10%
of the gross proceeds of such disposition, in which case the Company shall have
no further obligation to Acorn. Other than as set forth in the preceding
sentence, the Company's obligation to Acorn will terminate upon the payment to
Acorn of an aggregate of $10,000,000. Payments required to be made to Acorn
could adversely affect the cash flow of the Company. See "Business--Patents and
Trademarks" and "Certain Relationships and Transactions."

CONFLICT OF INTEREST

All of the equity interest of Acorn is owned by an individual who was the
Chairman of the Company's Board of Directors at the time the original
arrangements between the Company and Acorn were made, his spouse and daughters.
One such daughter, having a 16% equity interest in Acorn, is the spouse of Larry
M. Reid, one of the Company's executive officers. Acorn has assigned 25% and 15%
of its rights to receive royalties from the Company to Edmund G. Vimond, Jr. and
Mr. Reid, two of the Company's executive officers and directors. Subject to the
Company achieving certain minimum levels of net income, any activity taken to
increase the Company's sales at the expense of profits would benefit those
persons having an interest in Acorn. See "Business--Patents and Trademarks" and
"Certain Relationships and Transactions."

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LIMITED PRODUCT LIABILITY INSURANCE

There can be no assurance that the Company will not be named as a defendant
in any litigation arising from the use of the Company's products. Although the
Company's contract supplier has agreed to include the Company as a named insured
on its product liability insurance policy and although the Company has its own
product liability insurance policy with a limit of $2 million, should such
litigation ensue and the Company is held liable for amounts in excess of such
insurance coverage, the Company could be rendered insolvent. In addition, there
can be no assurance that product liability insurance will continue to be
available to the Company or that the premiums therefor will not become
prohibitively expensive.

FORMULATIONS ARE NOT UNIQUE

The formulations utilized for the Company's eye care products are not
patented or otherwise protected from duplication by others and are substantially
identical to formulations currently being sold by certain other companies, many
of which are sold under well established brand names. Accordingly, the Company
has no competitive advantage on the basis of the quality or efficacy of its
formulations and therefore, the Company's ability to effectively compete with
such other companies will be dependent upon, among other things, whether or not
consumers accept the characteristics of the Ocurest Delivery System.

DEPENDENCE UPON TRADEMARKS AND PATENTS

The Company's success is, in part, dependent upon any protection that may be
afforded by the patents issued in connection with the Ocurest Delivery System
and the trademarks relating thereto and the name "Ocurest." There can be no
assurance that such patents or trademarks will actually provide the Company with
any protection from its competitors or that such patents or trademarks do not
infringe upon the rights of others. In the event of such infringement, the
Company would lose any protection otherwise afforded by such patents or
trademarks. In addition, in order for the Company to protect its patents and
trademarks, the Company must identify, contain and prosecute infringement by
others. Trademark and patent litigation entails substantial legal and other
costs. There can be no assurance that the Company will have the necessary
financial resources to defend or prosecute its rights in connection with any
such litigation.

NECESSITY OF COMPLIANCE WITH GOVERNMENTAL REGULATION

The manufacture, contents and labeling of the Company's products must comply
with rules, regulations and standards of the United States Food and Drug
Administration. Although the Company believes that its eye care products are in
compliance with all applicable current FDA requirements, a failure of the
Company or those that manufacture its products to comply with any of the
foregoing could have a material adverse effect on the Company.

INTENSE COMPETITION

Competition in the OTC ophthalmic drug industry is intense. The Company
competes with large, established and well financed companies, including major
corporations which are actively engaged in the manufacture and sale of products
designed to perform the same function as those of the Company. The brand names
of many of such competitors' ophthalmic drug products are well recognized and
established in the marketplace. All of such companies possess greater financial
and human resources than does the Company. Although the Company is not aware of
any technological advances or developments by others with respect to OTC eye
drops or eye drop dispensers, in the event that any such advances or
developments occur, if the Company is not then able to develop or otherwise
acquire technology to produce competitive products, the Company would be
materially adversely affected. See "Business."

9
<PAGE>

GENERAL RISK FACTORS

ABSENCE OF TRADING MARKET

There is not now nor has there ever been any public market for the Units, the
Common Stock or the Warrants. There can be no assurance that any such market
will exist in the future. Should such a market develop, there can be no
assurance that it will remain active or otherwise be sustained. The Common Stock
and the Warrants comprising the Units will not be separately tradeable or
transferable for a period of six months commencing on the date of this
Prospectus or earlier at the discretion of the Representative. In the event that
the Representative waives the requirement that the Common Stock and the Warrants
must be purchased together, it is unlikely that any trading market will develop
for the Common Stock or the Warrants prior to the end of the six month period,
if at all. Accordingly, any such purchasers of the Common Stock or the Warrants
may not be able to liquidate those securities during such six month period.

ARBITRARY DETERMINATION OF OFFERING PRICE

Because there has never been a public market for the Units, Common Stock or
Warrants, the public offering prices of the Units, Common Stock and the Warrants
and the exercise price of the Warrants have been arbitrarily determined by
negotiation between the Representative and the Company. Such prices bear no
relationship to book value, projected earnings, results of operations, net asset
value or any other objective criteria of value. Purchasers of the Units, Common
Stock and Warrants may therefore be exposed to the extraordinary risk of a
decline in the market price of the securities offered hereby subsequent to the
completion of the Offering should a market develop therefor. See "Underwriting."

NO PRESENT INTENT TO PAY DIVIDENDS

The Company has never declared or paid and does not anticipate declaring or
paying any dividends to its shareholders in the foreseeable future. Accordingly,
any investor who anticipates the need for current dividends from an investment
in the Company should not purchase any of the securities being offered hereby.
See "Description of Securities."

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price of the Common Stock included in the Units
of $4.00 per share substantially exceeds its book value. Purchasers of the
Common Stock will experience an immediate dilution in the net tangible book
value per share after the offering of $2.57 (approximately 64% of such initial
public offering price). See "Dilution."

VOTING CONTROL BY PRESENT SHAREHOLDERS BEFORE AND AFTER OFFERING AND CONTROL
BY MANAGEMENT

Following the completion of the Offering, the present shareholders of the
Company will continue to own approximately 49% of the Company's outstanding
Common Stock and, therefore, will effectively be in a position to elect all of
the Company's directors and control the policies and operation of the Company.
Accordingly, it can be anticipated that the Company's present directors will
continue to be elected and thus continue to control the Company for the
foreseeable future. Such directors who are also officers of the Company
constitute 50% of the members of the Board of Directors. See "Management" and
"Security Ownership of Certain Beneficial Owners."

ADDITIONAL SECURITIES AVAILABLE FOR ISSUANCE

The Company's Articles of Incorporation, as amended, authorize the issuance
of 25 million shares of Common Stock and five million shares of Preferred Stock
(the "Preferred Stock"). The Common Stock and the Preferred Stock can be issued
by, and the terms of the Preferred Stock, including dividend rights, voting
rights, liquidation preference and conversion rights can generally be determined
by, the Company's Board of Directors without shareholder approval. Any issuance
of the Preferred

10
<PAGE>

Stock could adversely affect the rights of the holders of Common Stock by, among
other things, establishing preferential dividends, liquidation rights or voting
powers. Accordingly, shareholders, including those purchasing the securities
offered hereby, will be dependent upon the judgment of management in connection
with the future issuance and sale of shares of the Company's Common Stock and
Preferred Stock, in the event that buyers can be found therefor. Any future
issuances of Common Stock or Preferred Stock would further dilute the percentage
ownership of the Company held by the public shareholders. Furthermore, the
issuance of Preferred Stock could be used to discourage or prevent efforts to
acquire control of the Company through acquisition of shares of Common Stock.
See "Management," "Description of Securities" and Notes to Financial Statements.

MARKET OVERHANG FROM OPTIONS AND WARRANTS

As of the date of this Prospectus, the Company had outstanding options and
warrants for the purchase of up to 1,207,585 shares of Common Stock at prices
ranging from $.01 to $5.00 per share. The options and warrants expire at various
times until June 2000. In addition, the warrants to be issued to the
Representative will permit the holders thereof to purchase a maximum of 400,000
shares of Common Stock. The holders of such warrants have certain registration
rights under the Securities Act of 1933 (the "Securities Act"). For the life of
the outstanding options and warrants and the warrants to be issued to the
Representative, the holders thereof will have the opportunity to profit from a
rise in the market price of the Common Stock. The existence of such securities
may adversely affect the terms on which the Company can obtain additional
financing, and the holders hereof can be expected to exercise the securities at
a time when the Company would, in all likelihood, be able to obtain additional
capital by an offering of its Common Stock on terms more favorable to the
Company than those provided by such warrants. See "Underwriting" and
"Description of Securities."

RESTRICTIONS ON EXERCISE OF THE WARRANTS.

During the period the Warrants are exercisable, holders of the Warrants will
not be permitted to exercise such Warrants unless at the time of the exercise
the registration statement under the Securities Act of which this Prospectus is
a part or a new registration statement is both effective and current. Although
the Company has undertaken to maintain a current and effective registration
statement during the life of the Warrants, there can be no assurance that it
either can or will do so. In addition, a holder of the Warrants residing in a
state in which the underlying Common Stock is neither registered nor exempt from
registration, will not be permitted to exercise that holder's Warrants. The
Company does not intend to advise holders of the Warrants of their inability to
exercise the Warrants other than in response to a specific written inquiry to
the Company. The value of the Warrants may be greatly reduced if a current
registration statement covering the shares of Common Stock underlying the
Warrants is not effective and current or if such Common Stock is not registered
or exempt from registration in the states in which the holders of the Warrants
reside. See "Description of Securities Warrants."

WARRANTS SUBJECT TO REDEMPTION

Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company at $.55 per
Warrant at any time until the end of the second year after the date of this
Prospectus and thereafter at $.75 per Warrant at any time until the end of the
third year after the date of this Prospectus and prior to their expiration, on
30 days' prior written notice to the holders of the Warrants, provided that the
daily trading price per share (as defined beginning on page 38) has been at
least $6.72 for a at least 20 consecutive trading days ending within 10 days
prior to the date of the notice of redemption. Redemption of the Warrants could
force the holders to exercise the Warrants and pay the exercise price at a time
when it may be disadvantageous for the holders to do so, to sell the Warrants at
the then current market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price, which is likely to be substantially
less than the market value of the Warrants at the time of redemption. See
"Description of Securities--Warrants."

11
<PAGE>

SHARES ELIGIBLE FOR PUBLIC SALE

All of the shares of Common Stock outstanding as of the date hereof are
"restricted securities," as that term is defined in Rule 144 promulgated under
the Securities Act. Without regard to the volume limitations described below,
320,666 of such shares are currently eligible for resale under Rule 144 and
577,447 of such shares will be eligible for resale under Rule 144 commencing
ninety days subsequent to the date of this Prospectus. The remaining shares will
become so eligible at various times between October 1996 and June 1998. In
general, under Rule 144 as currently in effect, subject to the satisfaction of
certain other conditions specified in such Rule, sales of "restricted
securities" may be made if a minimum of two years has elapsed between the later
of the date of the acquisition of such securities from the Company or from an
affiliate of the Company and any resale thereof in reliance on Rule 144 for the
account of either the initial acquiror or any subsequent holder. If sales can be
made under Rule 144, a seller, including persons whose securities are required
to be aggregated, is entitled to sell, within any three-month period, a number
of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or, if the shares are then quoted on
NASDAQ, the average weekly trading volume during the four calendar weeks
preceding the filing of a notice with the Securities and Exchange Commission
(the "Commission"). Where a minimum of three years has elapsed between the later
of the date of the acquisition of restricted securities from the Company or from
an affiliate of the Company and any resale thereof in reliance on Rule 144 for
the account of either the initial acquiror or any subsequent holder, a person
who has not been an affiliate of the Company for at least the three months
immediately preceding the sale is entitled to sell such securities under Rule
144 without regard to any of the limitations described above. No prediction can
be made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices, if any,
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
prevailing market prices, if any, for the Common Stock and Warrants and could
impair the Company's ability to raise capital through the sale of its equity
securities. Certain of the Company's shareholders owning an aggregate of 731,926
shares of Common Stock have agreed not to sell any of such shares without the
consent of the Representative during periods ranging from one to two years
commencing on the date of this Prospectus. In addition, the Company has granted
certain future registration rights under the Securities Act to the holders of an
aggregate of 133,920 shares of Common Stock and to the holders of warrants for
the purchase of 325,000 shares of Common Stock. See "Selling Shareholders,"
"Certain Relationships and Transactions," "Underwriting" and "Shares Eligible
for Future Sale."

NASDAQ MAINTENANCE REQUIREMENTS AND EFFECTS OF POSSIBLE DELISTING; PENNY
STOCK RULES.

Although the Company's Units have been approved for initial listing on NASDAQ
upon notice of issuance of such securities, the Company must continue to meet
certain maintenance requirements in order for such securities to continue to be
listed on NASDAQ. Further, the Company must meet such maintenance requirements
for the Company to be able to list the Company's Common Stock and Warrants on
NASDAQ at such time as they are separately tradeable and transferable. If the
Company's securities are delisted from NASDAQ, such delisting could restrict
investors' interest in the Company's securities and could materially and
adversely affect any trading market and prices for such securities. In addition,
if the Company's securities are delisted from NASDAQ, and if the Company's net
tangible assets do not exceed $2 million, and if the Company's Common Stock is
trading for less than $5.00 per share, then the Company's Common Stock and
Warrants would each be considered a "penny stock" under federal securities law.
Additional regulatory requirements apply to trading by broker-dealers of penny
stocks which could result in the loss of effective trading markets, if any, for
the Company's Common Stock and Warrants.

RESTRICTIONS ON ISSUANCE OF ADDITIONAL SECURITIES

Although the Company's Articles of Incorporation, as amended, authorize the
issuance of additional equity securities, other than with respect to securities
to be sold in connection with the Offering, substantially all of such authorized
securities may not be issued by the Company for a period

12
<PAGE>

of three years subsequent to the date of this Prospectus without the consent of
the Representative. That restriction may preclude the Company from issuing
additional shares of Common Stock or Preferred Stock or securities convertible
or exercisable into Common Stock or Preferred Stock at times when the Company
may believe that it would be advantageous to do so. See "Underwriting."

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act") and the Company
intends that such forward-looking statements be subject to the safe harbors for
such statements under such sections. The Company's forward-looking statements
include the plans and objectives of management for future operations, including
plans and objectives relating to the Company's planned national marketing
campaign and future economic performance of the Company. The forward-looking
statements and associated risks set forth in this Prospectus include or relate
to: (i) the ability of the Company to obtain a meaningful degree of consumer
acceptance for its products and proposed products, (ii) the ability of the
Company to market its products and proposed products on a national basis at
competitive prices, (iii) the ability of the Company to develop brand-name
recognition for its products and proposed products, (iv) the ability of the
Company to develop and maintain an effective sales network, (v) success of the
Company in forecasting demand for its products and proposed products, (vi) the
ability of the Company to maintain pricing and thereby maintain adequate profit
margins, (vii) the ability of the Company to achieve adequate intellectual
property protection for the Company's products and proposed products and (viii)
the ability of the Company to obtain and retain sufficient capital for its
future operations.

The forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties. Such forward-looking statements are
based on assumptions that the Company will market and provide products on a
timely basis, that there will be no material adverse competitive or
technological change in conditions in the Company's business, that demand for
the Company's products will significantly increase, that the Company's Chief
Executive Officer will remain employed as such by the Company, that the
Company's forecasts accurately anticipate market demand, and that there will be
no material adverse change in the Company's operations or business or in
governmental regulations affecting the Company or its suppliers. The foregoing
assumptions are based on judgments with respect to, among other things, future
economic, competitive and market conditions, and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the Company's control. Accordingly, although the Company believes that
the assumptions underlying the forward-looking statements are reasonable, any
such assumption could prove to be inaccurate and therefore there can be no
assurance that the results contemplated in forward-looking statements will be
realized. In addition, as disclosed elsewhere in the "Risk Factors" section of
this Prospectus, there are a number of other risks inherent in the Company's
business and operations which could cause the Company's operating results to
vary markedly and adversely from prior results or the results contemplated by
the forward-looking statements. Growth in absolute and relative amounts of cost
of goods sold and selling, general and administrative expenses or the occurrence
of extraordinary events could cause actual results to vary materially from the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause the Company to alter its marketing, capital investment and other
expenditures, which may also materially adversely affect the Company's results
of operations. In light of significant uncertainties inherent in the
forward-looking information included in this Prospectus, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the Company's objectives or plans will be achieved. See "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business."

13
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock included in
the Units offered hereby are estimated to be approximately $6,656,000
(approximately $6,743,000 if the Over-Allotment Option is exercised in full).

The Company intends to use the net proceeds as follows:

<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
USE APPROXIMATE AMOUNT OF NET PROCEEDS
--- ------------------ ----------------------
<S> <C> <C>
Purchase of inventory and production equipment; ......... $1,500,000 23%
National advertising and promotion activities ........... $2,500,000 37%
Repayment of indebtedness and accrued interest .......... $2,400,000 36%
General corporate purposes, including working capital,
payment of accounts payable and possible future acquisi-
tion or licensing of products or technologies that
complement the Company's business ...................... $ 256,000 4%
</TABLE>

The net proceeds do not include any amounts to be realized from the sale of
the Warrants included in the Units because such amounts will be held in escrow.
See "Description of Securities--Warrants."

The Company intends to utilize any amounts realized through the exercise of
the Over-Allotment Option for general corporate purposes, including working
capital, payment of accounts payable and possible future acquisition or
licensing of products or technologies that complement the Company's business.
The Company currently has no specific agreements or understandings with respect
to any acquisitions or licensing agreements.

The indebtedness which the Company intends to repay from the net proceeds was
incurred at various times between October 1994 and September 1996, bears
interest at rates ranging from approximately 10% to 15% per annum and has
maturity dates from November 30, 1995 to the time the Company receives the net
proceeds of the Offering. Included in such indebtedness is an aggregate of
$85,000 plus accrued interest payable to Eric R. Schwarz, an employee and
beneficial owner of approximately 6% of the Company's outstanding Common Stock,
and to the spouse of Edmund G. Vimond, Jr., the Company's Chief Executive
Officer and $200,000 plus accrued interest payable to Robert M. Kassenbrock, a
beneficial owner of approximately 9% of the Company's outstanding Common Stock.
The proceeds of the indebtedness were utilized by the Company for general
corporate purposes, including working capital. On the date of this Prospectus,
the Company is in default in the repayment of approximately $650,000 of loans,
including interest thereon. See "Security Ownership of Certain Beneficial Owners
and Management," "Certain Relationships and Transactions" and "Selling
Shareholders." The Company believes that the receipt of such net proceeds will
satisfy its capital requirements for a period of at least one year.

Pending utilization of the net proceeds of the Offering, the Company will
invest such net proceeds in short-term government securities in a
non-discretionary account of the Company with the Representative.

The allocation of the net proceeds of the Offering as set forth above
represents the Company's current estimates based on its proposed plan of
operations and certain assumptions with regard to the Company's proposed plan of
operations as well as certain assumptions regarding industry and general
economic conditions. In the event that the Company's plans change, its
assumptions change or prove to be inaccurate, or the proceeds of the Offering
prove to be insufficient, the Company may find it necessary or advisable to
reallocate proceeds within the above-described categories or to use proceeds for
other purposes or to seek additional financing or curtail or cease its
activities.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common Stock
nor does the Company anticipate that any such dividends will be paid in the
foreseeable future. The Company intends to apply any earnings it may realize to
the expansion of its business.

14
<PAGE>

DILUTION

The Company had a deficiency in net tangible book value of $1,139,109 or $.59
per share of the Company's Common Stock on June 30, 1996. Net tangible book
value per share is determined by dividing the tangible net worth of the Company
(tangible assets less total liabilities) by the total number of outstanding
shares of Common Stock. After giving effect to the sale of the Units offered
hereby and the receipt of the estimated net proceeds to the Company from the
sale of the Common Stock included in the Units, and assuming no exercise of the
Over-Allotment Option, the Warrants, the warrants to be issued to the
Representative or outstanding options and warrants, the pro forma net tangible
book value of the Company at June 30, 1996 would have been $1.43 per share,
representing an immediate increase in the net tangible book value of $2.02 per
share to existing shareholders and an immediate dilution to new investors of
$2.57 per share. The following table illustrates the dilution per share of
Common Stock to new investors purchasing Units in the Offering.

<S> <C> <C>
Initial public offering price per share of Common Stock ...... $4.00
Net tangible book value per share of Common Stock at June 30,
1996 ...................................................... $(.59)
Increase per share of Common Stock attributable to new
investors ................................................. $2.02
---------
Pro forma net tangible book value per share of Common Stock
after the Offering ......................................... $1.43
--------
Dilution per share to new investors .......................... $2.57
========
</TABLE>

Assuming the Over-Allotment Option is exercised in full and an additional
29,615 shares of Common Stock are sold by the Company, after deduction of the
underwriting discounts and expense allowance and the estimated expenses of the
Offering payable by the Company, the pro forma net tangible book value per share
of Common Stock at June 30, 1996 would have been $1.44, the immediate increase
in the pro forma net tangible book value per share of shares of Common Stock
owned by the existing shareholders would be $2.03 and the immediate dilution per
share to new investors would be $2.56.

The following table sets forth on a pro forma basis as of June 30, 1996 the
differences between existing stockholders and new investors with respect to the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share assuming
no exercise of the Over-Allotment Option.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ -------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ---------- ------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 1,922,674 49.0% $ 5,084,224 38.9% $2.64
New Investors ........ 2,000,000 51.0% 8,000,000 61.1% $4.00
------------ ---------- ------------- ----------
Total: ............... 3,922,674 100.0% 13,084,224 100.0%
============ ========== ============= ==========
</TABLE>

15
<PAGE>

CAPITALIZATION

The following table sets forth the Company's capitalization as of June 30,
1996 and as of June 30, 1996 as adjusted to reflect the sale by the Company of
2,000,000 Units and the application of the net proceeds from the sale of the
2,000,000 shares of Common Stock included therein. See "Use of Proceeds."

<TABLE>
<CAPTION>
AS
ACTUAL(1) ADJUSTED(2)(3)
-------------- ---------------
<S> <C> <C>
Current Liabilities .............................................. $ 3,265,616 $ 1,765,616
Stockholders' Equity
Preferred Stock, $.001 par value, 5,000,000 shares authorized,
no shares issued and outstanding (actual or adjusted) ......... -- --
Common Stock, $.008 par value, 25,000,000 shares authorized;
1,922,674 issued and outstanding (actual) and 3,922,674 shares
issued and outstanding (as adjusted) .......................... 15,381 31,381
Paid-in capital .................................................. 5,068,843 11,708,843
Accumulated deficit .............................................. (6,008,941) (6,008,941)
Total stockholders' equity (deficit) ............................. (924,717) 5,731,283
</TABLE>

- -------------------------
(1) Par value and number of shares have been adjusted for a 1 for 2 reverse
stock split that occurred in July 1996.

(2) Adjusted to include the 2,000,000 shares of Common Stock offered hereby by
the Company and application of the net proceeds therefrom. See "Use of
Proceeds."

(3) Adjusted for current liabilities to be paid from the net proceeds of the
Offering. See "Use of Proceeds."

16
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data of the Company for the periods set forth below
have been derived from the Company's financial statements included elsewhere in
this Prospectus. The selected financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Financial Statements and the related Notes thereto included
elsewhere in this Prospectus. The data for the six months ended June 30, 1995
and 1996 and as of June 30, 1996, is unaudited. In the opinion of management,
all adjustments (consisting of only normal recurring adjustments) necessary for
the fair presentation of financial position, results of operations and cash
flows for the unaudited periods have been made.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30
-------------------------------- ------------------------------
1994 1995 1995 1996
--------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales .................................. $ 96,830 $ 687,122 $ 200,384 $ 734,281
Cost of goods sold ......................... 139,733 545,175 160,206 443,579
Selling & marketing expense ................ 676,079 1,784,102 462,835 639,052
General & Administrative expense ........... 948,458 964,426 466,548 484,648
Royalty expense ............................ 3,875 27,885 8,015 29,380
Other income (expense) ..................... (18,005) (102,326) (32,552) (148,082)
--------------- --------------- ------------- ---------------
Net Loss ................................... $(1,689,320) $(2,736,792) $(929,778) $(1,010,450)
=============== =============== ============= ===============
Net loss per share ......................... $ (1.16) $ (1.55) $ (.54) $ (.50)
=============== =============== ============= ===============
Supplemental pro forma net loss(1) ........ $(2,670,192) $ (977,150)
=============== ===============
Supplemental pro forma net loss per
share(1) ................................... $ (1.40) $ (.37)
=============== ===============
</TABLE>

- -----------------------------------------
(1) The supplemental pro forma net loss and net loss per share reflect the
issuance of shares necessary to repay certain indebtedness and the
related reduction in interest expense and the net loss. See Note A of Notes
to the Financial Statements.

DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
-------------- --------------- --------------

BALANCE SHEET DATA
Total assets ................. $ 1,245,314 $ 1,562,271 $ 2,340,899
Total liabilities ............ 1,064,007 3,306,311 3,265,616
Common stock & Paid-in
Capital ...................... 2,443,006 3,254,451 5,084,224
Accumulated deficit .......... (2,261,699) (4,998,491) (6,008,941)
Stockholders' equity
(deficit) .................... $ (181,307) $(1,744,040) $ (924,717)

17
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated, all dollar amounts included in this section of
the Prospectus have been rounded to the nearest thousand.

OVERVIEW

The Company was organized in 1991 to commercialize new consumer products in
the health and personal care industry. For the period from inception though
December 31, 1993, the Company was in a development stage and accumulated a
deficit of $572,000, attributable to developing manufacturing and marketing
plans and paying the cost of professional services. The Company sells ophthalmic
drug solutions in an ophthalmic delivery system in the non-prescription eye drop
market. The Company believes that a similar delivery system has not been and is
not now being marketed by any other entity. The products sold with the delivery
system are the Company's sterile eye drops in a line of two OTC formulations.
The following table sets forth, for the periods indicated, a review of certain
items included in the Company's statement of operations. Amounts are in
thousands (000's).

TWELVE MONTHS ENDED SIX MONTHS ENDED
------------------------ ----------------------
12/31/94 12/31/95 6/30/95 6/30/96
----------- ----------- ---------- ----------

Net Sales ................ $ 97 $ 687 $ 200 $ 734
Costs & Expenses
Cost of Goods Sold ..... 140 545 160 444
Selling & Marketing .... 676 1,784 462 639
General & Administrative 948 964 467 484
Other Expenses .......... 22 130 41 177
Net Loss ................. $(1,689) $(2,736) $(930) $(1,010)

In late 1994, the Company began limited marketing of two OTC eye drop
products in the Ocurest Delivery System. In late 1995, the Company expanded its
marketing efforts to ten southern states. In early 1996, the Company began the
process of expanding its brand nationally. For the years ended December 31, 1994
and 1995, the Company had net losses of $1,689,000 and $2,737,000, respectively,
on net sales of $96,830 in 1994 and $687,122 in 1995. Net sales for the six
months ended June 30, 1996 were approximately $734,000 compared with $200,000
for the six months ended June 30, 1995 and, during such periods, the respective
net losses were approximately $1,015,000 and $930,000. While the Company
continues its national expansion of its product line, the Company anticipates
that its operations will result in continuing losses for a minimum of six months
following the completion of the Offering. There can be no assurance that the
Company will ever be profitable.

COST OF GOODS SOLD

Cost of goods sold was 144% of net sales in 1994 and 79% of net sales in
1995. The increase of $405,000 in cost of goods sold in 1995 is primarily
attributable to twelve months' of sales in 1995 as compared to six months' of
sales in 1994. For the six months ended June 30, 1996, cost of goods sold was
60% of net sales as compared with 79% of net sales for the six months ended June
30, 1995. The decrease was primarily attributable to lower per unit production
costs because of an increase in sales of $534,000 during the latter period. The
Company anticipates that product costs and expenses will continue to decline as
a percentage of net sales if the Company gains larger national distribution.

SELLING AND MARKETING EXPENSES

The Company believes that consumer demand for its products can be generated
through advertising and sales promotion. As a result, the Company intends to
expend substantial amounts of funds in advertising and sales promotion in 1996
and future years. Selling and marketing expenses in 1994 and 1995 reflect
start-up costs associated with the introduction of the Company's products in
Florida, the Company's lead market. Spot TV and magazine advertising are
primarily attributable for

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the year to year increase of $1,108,000. The Company also continued to incur
marketing and advertising research costs in 1995 as it monitored the Florida
market. Distribution costs increased in 1995 as sales expanded nationally
from Florida. For the six months ended June 30, 1996 selling and marketing
expenses of $639,000 represented 87% of net sales as compared with $462,000
and 231%, respectively, for the six months ended June 30, 1995. The
percentage decrease was primarily attributable to a substantial reduction in
advertising expenditures per sales dollar due to unavailability of funds.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses include professional services and
administrative expenses associated with legal, accounting and consulting fees
and other expenses incurred in raising capital to finance operations. Such
expenses also include support services for three full time employees and the
related compensation and benefits cost.

General and administrative expenses for 1995 were $964,000 as compared to
$948,000 in 1994 and for the six months ended June 30, 1996, general and
administrative expenses were $485,000 as compared to $467,000 for the same
period in 1995. The Company believes general and administrative expenses will be
substantially higher for the balance of 1996 and all of 1997 as the Company
hires additional personnel necessary to provide the infrastructure to support
the Company's planned continued national distribution of the Company's product
line.

DEPRECIATION

The increase in depreciation reflects the Company's increased investment in
molds, plates, dies and packaging and filling equipment.

INTEREST EXPENSE

Interest expense was nominal through December 1994 as the Company relied
heavily on equity investments to fund operations. Interest expense increased for
1995 and the first six months of 1996 because the Company increased its
indebtedness as discussed below under "Liquidity and Capital Resources."
Interest expense for the six months ended June 30, 1996 was $148,000. Management
estimates the interest expense for 1996 will be substantially higher due to
increased indebtedness and higher rates of interest.

The Company obtained various loans in 1995 and 1996 and in August 1995 the
Company entered into a factoring and financing agreement to sell its accounts
receivable and its finished goods inventory. The Company intends to terminate
the factoring arrangements shortly after its receipt of the net proceeds of the
Offering. Certain indebtedness, including accrued interest thereon, will be
repaid from the net proceeds of the Offering. See "Use of Proceeds."

RESEARCH AND PRODUCT DEVELOPMENT

At such time as the Company deems necessary, the Company intends to make
expenditures for product research and development, including testing and, if
necessary, technical modification to the Ocurest Delivery System. As new
formulas become available to the Company, the Company intends to conduct
appropriate testing.

LIQUIDITY AND CAPITAL RESOURCES

The Company's need for funds has increased from period to period as it has
incurred expenses for, among other things, test marketing, market and
advertising research, engineering and design of manufacturing systems,
applications for domestic and international patent protection and domestic
trademark protection. Since inception, the Company has funded these needs
primarily through private placements of its equity.

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On June 30, 1996, the Company was delinquent in the payment of certain of its
indebtedness including promissory notes issued by the Company in the aggregate
amount of $250,000. The Company intends to repay such promissory notes and
accrued interest thereon from the net proceeds of the Offering. See "Use of
Proceeds."

The Company's working capital and capital requirements will depend on
numerous factors, including growth, if any, of the Company's sales. The Company
currently has a factoring and financing agreement pursuant to which the Company
sells its accounts receivable and finished goods inventory, subject to the right
of the Company to repurchase such accounts receivable and inventory, and pledges
its machinery and equipment to secure a loan. In addition to interest and fees,
the financing agreement requires the Company to pay the purchaser/lender a
management fee of $5,000 per month. Such agreement may be terminated by the
Company or the purchaser/lender at any time. The Company intends to terminate
the arrangement shortly after the Company receives the net proceeds of the
Offering. The Company has recently borrowed $200,000 from Robert M. Kassenbrock.
See "Certain Relationships and Transactions."

Finished goods inventory increased by $201,000 (56%) at June 30, 1996 as
compared to finished goods inventory at December 31, 1995. The increase was a
result of the Company's planned national marketing program for its product line
with television and magazine advertising which it had scheduled to begin in
national media in June 1996. The Company now intends to commence such program in
October 1996. It is the Company's policy to maintain levels of finished goods
inventory sufficient to meet sixty days' of anticipated sales. The Company
believes that such policy is consistent with industry practice. The Company's
products bear an expiration date of two years from the date of manufacture.

The Company has invested $1,001,000 in property and equipment through June
30, 1996. The equipment is specifically suited to the manufacture and packaging
of the Company products. Ownership of the machinery and equipment allows the
Company to directly affect production costs. The Company has contractual
obligations for the acquisition of additional machinery and equipment amounting
to $500,000 to be paid from the net proceeds of the Offering. The Company
believes that the financial resources available to it, including the net
proceeds from the Offering, will be sufficient to finance its planned operations
for at least one year.

The Company believes that the level of financial resources available to it is
an important factor in its ability to achieve the marketing and distribution
objectives for its products as well as in its ability to compete effectively.
Consequently, the Company may seek to raise additional capital through public or
private equity or debt financing in the future. The Company has made no
arrangements to obtain such additional capital and there can be no assurance
that any additional capital will be available to the Company on terms not
unfavorable to the Company, if at all.

The Company's net operating losses for income tax purposes are subject to
certain restrictions on their utilization. The Company has experienced in 1994,
and will experience in 1996, changes in ownership under Internal Revenue Service
regulations that will limit the amount of net operating losses that can be
utilized in any given year. If the Company's future pre-tax profits (if any) in
any given year exceed such limitation, cash payments for such income tax
liabilities will have to be made. See Note I of Notes to Financial Statements.

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BUSINESS

GENERAL

Ocurest Laboratories, Inc. (the "Company") is a marketing company organized
to develop and commercialize new health and personal care products for the
consumer market. The Company's products consist of two Ocurest/registered
trademark/ eye care products utilizing a patented delivery system for dispensing
ophthalmic drug solutions into the eye (the "Ocurest Delivery System").

The Company acquired the exclusive worldwide licensing rights to the Ocurest
Delivery System from Acorn, a then affiliate of the Company. After three years
of product development, the Company began limited marketing in late 1994 of two
over-the-counter ("OTC") eye drop products packaged in the delivery system. See
"Business--Patents and Trademarks" and "Certain Relationships and Transactions."

The Company's initial product development related primarily to improvements
in the Ocurest Delivery System and the development of prototype models,
development of a protocol for testing the stability of product formulations, and
development of various production techniques and operating standards.

The Company's products consist of Ocurest Redness Reliever Lubricant and
Ocurest Tears Formula Lubricant (collectively, "Ocurest Eye Drops"). Ocurest Eye
Drops utilize ophthalmic drug formulations owned by Bausch & Lomb and are
manufactured under a supply agreement with Bausch & Lomb at its pharmaceutical
facility in Tampa, Florida. The Company owns the molds used to produce parts for
the Ocurest Delivery System and the manufacturing equipment which Bausch & Lomb
operates to produce all Ocurest eye care products.

The OTC eye care products manufactured for the Company by Bausch & Lomb
contain active ingredients as to which Bausch & Lomb has advised the Company are
recognized as safe and effective by the FDA. Ocurest Redness Reliever Lubricant
contains the same active ingredients as Visine Moisturizing, a redness reliever
lubricant brand, and Ocurest Tears Formula Lubricant contains the same active
ingredient as Tears Naturale, an artificial tears brand.

Certain aspects of the Ocurest Delivery System are covered by a U. S. utility
patent issued in March 1990 and the shape of the Ocurest Delivery System is
covered by a U.S. design trademark registration issued in July 1995 and a design
patent issued in September 1991, all of which have been licensed to the Company.
The Company is also the licensee of patents issued or pending in a number of
other countries.

The Company believes the initial consumer response to Ocurest Eye Drops has
been encouraging and the Company has a planned national marketing program under
way for its product line with television and magazine advertising scheduled to
begin in national media during October 1996. As of the date of this Prospectus,
retail chains such as Wal-Mart, Target, Kmart, Walgreens, Revco, Rite Aid,
Eckerd, CVS, Osco, Sav-on, Kroger, Winn-Dixie, Albertson's, A&P, Publix, Grand
Union, Pathmark,

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Stop & Shop, Giant Food and Fred Meyer have ordered Ocurest Eye Drops for
retail distribution. The Company intends to utilize a substantial portion of the
net proceeds of the Offering for advertising and promotion expenses in support
of the national marketing of Ocurest Eye Drops.

In the future, the Company plans to extend marketing of the Ocurest Delivery
System into the prescription drug market. In 1995 the Company granted Bausch &
Lomb an option for an exclusive license to market prescription ("Rx") ophthalmic
drug products in the Ocurest Delivery System. Bausch & Lomb did not exercise the
option prior to its expiration and the Company extended the option until
December 31, 1996 for no additional consideration. See "Business--Rx Marketing."

The Company has utilized a factor for the financing of its accounts
receivable and inventory. The Company intends to terminate the factoring
arrangements shortly after its receipt of the net proceeds of the Offering. See
Note G of Notes to Financial Statements.

OCUREST DELIVERY SYSTEM

The management of the Company believes that conventional eyedropper
dispensers for OTC and Rx ophthalmic drug solutions are cumbersome devices that
are not easy to use. Because it is often hard to keep an eyedropper dispenser
centered above the eye, it is often difficult to apply drops directly into the
eye and, consequently, the solution often misses the eye and runs down the cheek
of the user. In addition to being messy, drops that miss the eye in this manner
raise a potential drug compliance problem, since consumers may under-medicate
when the prescribed number of drops are not applied (or over-medicate if too
many drops are applied to compensate for those that miss the eye).

The Ocurest Delivery System was designed to attempt to solve the in-use
problems the management of the Company believes are associated with existing
eyedropper dispensers. The Company believes that the Ocurest Delivery System is
an alternative to conventional eyedropper devices. The Ocurest Delivery System
is shaped like an egg which enables the user to rest it on the bridge of the
nose and angle it 45/degree/ inward toward the eye. In this position, the
dropper tip is stabilized and centered directly above the eye and should make it
easier for the user to apply drops with no messy spillage or waste. In addition,
the Company believes that accurate drug compliance is more likely to be achieved
with the Ocurest Delivery System because it has been designed to permit metered
application of one drop at a time directly into the eye.

The Ocurest Delivery System is a molded three-piece plastic assembly which is
designed to contain and dispense a maximum of 0.5 fluid ounce of any liquid
ophthalmic drug solution. The three parts consist of a squeeze-bottom container
that holds the solution, a snap-on dropper tip shield that seals the container
to form a unitized dispenser and a single-thread screw-on cap to protect the
contents. All of the parts are made from resins that are approved by the FDA for
pharmaceutical packaging.

OCUREST OTC PRODUCTS

The Company markets two OTC formulations in the Ocurest Delivery System,
consisting of a redness reliever lubricant and an artificial tears lubricant.
The Company's current products consist of Ocurest Redness Reliever Lubricant and
Ocurest Tears Formula Lubricant, both of which use formulations that are
manufactured and owned by Bausch & Lomb. In the future, the Company intends to
expand its product line with the national introduction of two additional OTC
formulations, Ocurest Allergy Relief Formula and Ocurest Lens Rewetting Agent,
that it is planned will use formulations manufactured, but not necessarily
owned, by Bausch & Lomb. There can be no assurance that the Company will expand
its product line or that the Company's existing or proposed products can be
marketed profitably.

The Company's eye care products are packaged in tamper-resistant cartons that
prominently feature the Ocurest brand name and a picture of the product being
used on the front carton panel. The cartons also feature a riser card that
prominently displays a side-by-side comparison of a competitive dispenser next
to the Ocurest Delivery System, accompanied by the following message:

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"Nobody likes pointy things near their eyes. That's why you may find pointy
eyedroppers difficult to use. Ocurest's new egg-shaped dispenser puts an end to
hit-or-miss, pointy-tip eyedroppers. Just rest it comfortably across the bridge
of your nose. The Ocurest dispenser puts the drops where you want them. In your
eye...not down your cheek."

Each of the Company's eye care products is a sterile, buffered, isotonic
solution formulated to match the natural fluid in the eye. Each formula contains
ingredients generally recognized as safe and effective by the FDA as published
in the Final Monograph for Ophthalmic Drug Products, March 4, 1988.

Ocurest Redness Reliever Lubricant contains tetrahydrozoline Hcl, a
decongestant that relieves redness of the eye, and polyethylene glycol 400, a
demulcent that relieves and protects the eye from minor irritation. The active
ingredients in Ocurest Redness Reliever Lubricant are the same as those used in
the formulations of certain major eye drop manufacturers. Ocurest Tears Formula
Lubricant contains hydroxypropyl methylcellulose, an active ingredient that
moisturizes the eye to relieve dry-eye syndrome and relieve and protect the eye
from minor irritation. The active ingredient in Ocurest Tears Formula Lubricant
is the same as that used in the formulations of certain major eye drop
manufacturers. Although the Company believes that its products are as effective
for their intended purposes as those presently marketed by the Company's
competitors, the successful marketing of its products is dependent upon
widespread acceptance of the Ocurest Delivery System. There can be no assurance
of such acceptance or that any such potential competitor or others will not
develop products or dispensers that are superior to or are perceived to be
superior to or can be manufactured and sold a at lower cost than those of the
Company.

Ocurest Eye Drops were introduced in Florida with the start of advertising in
September 1994. This in-market test was supported by two 13-week flights of
television commercials in 10 TV markets, magazine advertisements in selected
consumer publications and distribution of coupons on three separate occasions.

Based on market research conducted by the Company, certain adjustments were
made in the Ocurest marketing program, primarily in the areas of television
commercial production, advertising media selection and pricing. These
adjustments were incorporated in the marketing program used to launch Ocurest
Eye Drops in ten additional southern states in mid-1995 and that are now
incorporated in the marketing program being used to launch Ocurest eye care
products nationally.

MANUFACTURING PLAN

OCUREST DELIVERY SYSTEM--The Company utilizes Wheaton Plastic Products, Inc.
("Wheaton"), a manufacturer of pharmaceutical packaging, to produce all parts
for the Ocurest Delivery System. The Company has agreed to purchase all of its
parts exclusively from Wheaton and Wheaton has agreed to fulfill the Company's
supply requirements at agreed upon prices for each component. Such prices will
be adjusted for price changes in raw materials and other actual cost increases.
The agreement with Wheaton terminates on December 31, 1998 and is subject to the
Company's commitment to pay for certain molds and mold upgrades. The Company
believes that if the need arises, the Company can obtain parts for the Ocurest
Delivery System in quantities necessary to satisfy the Company's needs on terms
and conditions not unfavorable to the Company from other sources.

CONTRACT MANUFACTURING--Parts for the Ocurest Delivery System are assembled
at the time Ocurest eye care products are formulated, filled and packaged under
contract by Bausch & Lomb at its pharmaceutical manufacturing facility in Tampa,
Florida. The Company has purchased, at a cost of approximately $526,000,
specially designed equipment consisting of a dispenser parts unscrambler,
80-per-minute sterile filling and capping machine and a dual-head pressure
sensitive labeler. In 1994, the equipment was installed and validated on behalf
of the Company at Bausch & Lomb's manufacturing facility in Tampa where it is
maintained and operated exclusively in the manufacture of eye care

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<PAGE>

products in the Ocurest Delivery System. The Company is identified on its
product labels as the distributor of the products. Bausch & Lomb is not
identified.

The Company plans to utilize approximately $670,000 of the net proceeds of
the Offering to install a fully-automated packaging line at the Bausch & Lomb
manufacturing facility and to make final payment on certain multi-cavity molds.
The packaging line will consist of an automatic neck bander, 100 per minute
cartoner, tamper-evident tab sealer, automatic collator and shrink wrapper and
automatic case sealer. The Company anticipates that the packaging line will be
installed, validated and operational approximately six months subsequent to its
receipt of the net proceeds of the Offering, at which time Bausch & Lomb will
have the capacity to manufacture approximately 16 million units a year of eye
care products produced in the Ocurest Delivery System. In 1994, the Company
entered into a Contract Supply Agreement with Bausch & Lomb (the "Supply
Agreement") pursuant to which Bausch & Lomb agreed to manufacture the Company's
OTC ophthalmic drug solutions in accordance with the Company's manufacturing
specifications. The Supply Agreement runs for a period of five years, although
either party may terminate the Supply Agreement on one year's notice. The
Company believes that if Bausch & Lomb were to terminate the Supply Agreement or
not agree to renew the Supply Agreement, other contract manufacturers will be
available to manufacture the Company's eye care products on substantially
similar terms, although there can be no assurance of the foregoing. In any such
event, however, the Company could incur a significant delay in the production of
its products. The Supply Agreement provides for minimum annual purchases by the
Company ranging from 500,000 to 4,000,000 units during the five year term at
designated prices which increase approximately 4% per annum in addition to any
actual cost increases incurred by Bausch & Lomb in excess of the annual
percentage increases. As of the date of this Prospectus, the Company is in
compliance with the purchase requirements. If the Company fails to so comply
with such requirements and such failure is not cured during the following six
months, Bausch & Lomb may terminate the Supply Agreement as of the immediately
succeeding March 31.

WAREHOUSING AND SHIPPING--The Company uses a bonded public warehouse in
Lakeland, Florida, to store its finished goods inventory, fill customer orders
and arrange for shipment by United Parcel Service or other carriers. The Company
believes that, should the need arise, other bonded public warehouses will be
readily available on terms not unfavorable to the Company.

NATIONAL MARKETING PLAN

OTC SELLING AND DISTRIBUTION--The Company began marketing its products to
most of its wholesalers and retailers on a national basis in early 1996 in
anticipation of the start of national advertising. The Company believes that
trade acceptance has been encouraging as indicated by the retailers who have
purchased Ocurest Eye Drops for chainwide distribution, including such chains as
Wal-Mart, Target, Kmart, Walgreens, Revco, Rite Aid, Eckerd, CVS, Osco, Sav-on,
Kroger, Winn-Dixie, Albertson's, A&P, Publix, Grand Union, Pathmark, Stop &
Shop, Giant Food, and Fred Meyer.

The Company sells its products through manufacturer representatives who call
on wholesalers and retail chain customers. These customers represent drug
stores, supermarkets and mass merchants. The balance of annual market sales are
transacted through small grocery stores, convenience stores, wholesale clubs,
military exchanges and optical centers.

The Company distributes its OTC eye care products at trade selling prices
that the Company believes are competitive with the leading brands in the redness
reliever and artificial tears segments of the OTC eye drop market. The Company
believes that its selling and distribution policies are also competitive with
those of other companies in the industry relating to credit terms, shipping
terms, returned and damaged goods and co-operative promotional programs.

OTC ADVERTISING AND PROMOTION--It is planned that the Company's national
advertising will consist primarily of TV commercials that convey the Ocurest
message in 30, 15 and 10 second lengths. The Company plans to place its TV
advertising in programs that the Company believes

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reach heavy users of OTC eye drops, skewed toward men and women 50 and under
in the case of redness reliever users and women over 50 with respect to
artificial tears. It is planned that the Company's introductory TV campaign will
be reinforced by the use of magazine advertisements in selected publications
that the Company believes will reach heavy eye drop users effectively. The
Company also plans to promote its product line periodically via the use of
coupons distributed in magazine advertisements and free-standing Sunday
newspaper inserts.

RX MARKETING--In 1995, the Company granted Bausch & Lomb an option for an
exclusive license to market Rx ophthalmic drug products in the Ocurest Delivery
System. Bausch & Lomb paid the Company $10,000 for the option which expired on
December 31, 1995. The Company subsequently extended the option until December
31, 1996 for no further consideration. Bausch & Lomb requested the extension to
allow sufficient time for Bausch & Lomb to evaluate the potential for marketing
selected ophthalmic pharmaceutical products utilizing the Ocurest Delivery
System. In the event Bausch & Lomb exercises its option to license the Ocurest
Delivery System for the domestic market, the parties have agreed in principal to
the structure of royalty payments that will be made to the Company on Rx
products marketed in the Ocurest Delivery System. There can be no assurance that
Bausch & Lomb or any other entity will seek to utilize the Ocurest Delivery
system for Rx preparations.

PRODUCT LIABILITY AND INSURANCE

Users of the Company's products could suffer, or claim to suffer, adverse
effects from the Company's products. The Company carries product liability
insurance of $2 million and, in addition, Bausch & Lomb has agreed to name the
Company as an insured on the product liability insurance policy of Bausch &
Lomb. Such insurance, however, will be subject to deductibles payable by the
Company, and it is possible that it may not apply to or be adequate to cover all
claims. There can be no assurance that any such insurance acquired directly by
the Company will not become prohibitively expensive or otherwise be unavailable
to the Company. Any recovery by a claimant in excess of the product liability
insurance limits could have a material adverse affect on the Company.

PATENTS AND TRADEMARKS

In October 1991, pursuant to an agreement between the Company and Acorn, as
subsequently amended (the "Acorn Agreement"), Acorn granted to the Company the
exclusive worldwide license to make, use and sell eye drop solutions contained
in the Ocurest Delivery System and claimed in a United States utility patent
held by Acorn (the "Acorn Patent") and certain foreign patents and patent
applications. The Acorn Patent relates to a generally egg-shaped eye drop
dispenser with a nozzle on top of a squeezable hollow body with a smooth,
generally dome-shaped top surface substantially surrounding the nozzle. The
Company is responsible for the prosecution and protection of the intellectual
property licensed to it under the Acorn Agreement, including all legal fees and
other expenses that may be incurred in connection with any litigation concerning
patent or trademark infringement.

Certain aspects of the Ocurest Delivery System are covered in the United
States by utility patent 4,909,801 issued in March 1990 and design patent
D320,083 issued in September 1991 which will remain in force until 2007 and
2005, respectively. The shape of the Ocurest Delivery System represents a trade
dress which is also covered in the United States by a trademark registration
issued in July 1995 that is effective for ten years and is renewable for
successive ten year periods for as long as the mark is in use. Patents
corresponding to the United States utility patent have either eventuated or are
pending in a number of foreign countries.

Under the Acorn Agreement, Acorn also assigned to the Company its rights in
the United States and throughout the rest of the world for the trademark and
trade name "Ocurest." The "Ocurest" trademark was registered in the United
States in June 1988. The registration is effective for ten years and is
renewable for successive ten year periods for as long as the mark is in use. The
Company has no trademark registrations in foreign countries.

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Pursuant to the Acorn Agreement, the Company has paid $200,000 to Acorn to
acquire the worldwide licensing rights to the patents and trademarks and has
agreed to pay royalties with respect to ophthalmic solutions packaged in the
Ocurest Dispenser of (a) 4% of (i) net sales of eye drops sold by the Company in
the Ocurest Delivery System; (ii) royalties received by the Company from sales
by others of Rx products; and (iii) the proceeds of licensing and similar
arrangements received by the Company from licensing or similar arrangements in
connection with Rx products and (b) 25% of (i) royalties received by the Company
with respect to sales by others of OTC eye drops in the Ocurest Delivery System
and (ii) the proceeds of any licensing or similar arrangements received by the
Company in connection with OTC products. Furthermore, in the event that the
Company disposes of all or substantially all of its business including the
licenses granted pursuant to the Acorn Agreement, other than through one or more
licenses, the Company must pay to Acorn the greater of $1,250,000 or 10% of the
gross proceeds of such disposition, in which case the Company shall have no
further obligation to Acorn. Other than as set forth in the preceding sentence,
the Company's obligation to Acorn will terminate upon the payment to Acorn of an
aggregate of $10,000,000

Acorn has agreed to permit the Company to defer accrued royalty payments
until such time, if any, as the Company realizes net income of at least
$1,000,000 during any four consecutive calendar quarters. The Company is also
permitted to defer 66.7% of accrued royalty payments and 33.3% of accrued
royalty payments until such time, if any, as the Company realizes net income of
at least $1,000,000 and less than $3,000,000 or at least $3,000,000 and less
than $5,000,000, respectively, during any four consecutive calendar quarters.
Notwithstanding the foregoing, the Company is required to pay Acorn $4,000 per
month as advances against accrued and deferred royalties (the "Acorn Advances").

The Acorn Agreement further provides that the licenses granted under the
Acorn Agreement shall terminate and the Company shall have no further interest
therein upon the (a) filing by the Company of a voluntary petition of
bankruptcy; (b) filing of an involuntary petition of bankruptcy against the
Company provided that such petition is not discharged within 45 days of the
filing thereof; (c) appointment of a receiver or a trustee for all or
substantially all of the assets of the Company; (d) general assignment by the
Company of its assets for the benefit of its creditors; (e) payments due to
Acorn under the Acorn Agreement remaining unpaid subsequent to an applicable
grace period of 45 or 120 days, as the case may be or (f) default by the Company
or its successor or licensees in the performance of any other material
obligation under the Acorn Agreement, which obligation primarily relates to the
Company's requirement to protect the patents and trademarks, including bearing
of the cost thereof, and any such default remains uncured subsequent to a grace
period of 120 days. In the event that the licenses granted by Acorn are so
terminated, investors can expect to lose their entire investment in the Company.

In order for the Company to protect any of its patents and trademarks, the
Company must identify, contain and prosecute infringement by others. Such
efforts would entail substantial legal and other costs. There can be no
assurance that under such circumstances that the Company would have the
necessary financial resources to prosecute any such infringement.

Acorn has assigned 25% and 15% of its rights to receive royalties from the
Company to the Company's President and Senior Vice President, respectively. See
"Certain Relationships and Transactions."

GOVERNMENTAL REGULATION

OTC ophthalmic drugs are generally recognized as safe and effective, and not
misbranded, if they meet certain conditions set forth by the FDA as published in
the Final Monograph for Ophthalmic Drug Products, March 4, 1988 with regard to
active and inactive ingredients, dosage, permitted combinations of ingredients
and labeling, including statement of identity, indications, warnings and
directions for use. Ophthalmic drugs must be manufactured in accordance with the
FDA's Good Manufacturing Practice ("GMP") regulations. If all of the
requirements are met, the formulation may be marketed without obtaining any
specific FDA approval. The Company believes that compliance with such
requirements will not materially adversely affect the Company's OTC ophthalmic
drug business.

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No specific FDA approval is necessary for the Ocurest Delivery System if the
dispenser and its contents meet GMP requirements. The requirements include
regulations to the effect that the Ocurest Delivery System be tested to show
that it is not reactive, additive or absorptive, that stability and sterility is
suitable for the product, that appropriate testing procedures are developed and
followed and that the manufacturing establishment and the ophthalmic drug
products being manufactured are registered with the FDA. The Company believes
that Ocurest Eye Drops packaged in the Ocurest Delivery System are in compliance
with the foregoing.

DEPENDENCY UPON SIGNIFICANT CUSTOMERS

COMPETITION

The Company competes with large and well financed manufacturers of ophthalmic
drugs, all of which have substantially greater resources than does the Company.
The Company's principal competitors are Allergan, Inc., Alcon Laboratories,
Inc., Bausch & Lomb, CibaVision, Inc., Ross Laboratories, Inc. and Pfizer, Inc.
Such companies accounted for approximately 89% of the volume of OTC eye drop
retail sales in the United States in 1995 according to Information Resources,
Inc. These competitors produce such brands as Visine, Murine Plus and Clear Eyes
in the redness reliever segment of the OTC market and Tears Naturale, Hypotears,
Refresh and Moisture Drops in the artificial tears segment. Because the
Company's eye drop formulations contain the same or similar active ingredients
as those used in certain currently available nationally distributed eye drops,
the Company expects to compete primarily on the basis of the Ocurest Delivery
System.

PROPERTY

The Company leases office space in Palm Beach Gardens, Florida. The Company
does not consider such office space material to its proposed business. The
Company believes that other suitable office space is readily available on terms
not unfavorable to the Company.

EMPLOYEES

The Company has four full-time employees, inclusive of its three executive
officers. Shortly after the receipt by the Company of the net proceeds of the
Offering, the Company plans to hire six to eight full-time accounting and
administrative employees.

27
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company. Each director holds such
position until the next annual meeting of the Company's shareholders and until
his respective successor has been elected and qualifies. Any of the Company's
directors may be removed with or without cause at any time by the vote of the
holders of not less than a majority of the Company's then outstanding Common
Stock. Other than as otherwise provided in an employment agreement, officers are
elected annually by the Board of Directors. Any of the Company's officers may be
removed with or without cause at any time by the Company's Board of Directors
although, in such event, the Company may incur certain liabilities under an
applicable employment agreement.

NAME AGE POSITION WITH THE COMPANY
- -------------------------------------------------------------------------------

Edmund G. Vimond, Jr. 61 Chairman of the Board of Directors, President,
Chief Executive Officer and Director

John F. Carlson ...... 57 Senior Vice President, Chief Financial Officer,
Treasurer and Director

Larry M. Reid ........ 51 Senior Vice President, Chief Administrative
Officer, Secretary and Director

Ralph H. Laffler .... 76 Director

Robert S. Marker .... 74 Director

Fred E. Ahlbin ....... 83 Director

EDMUND G. VIMOND, JR., a co-founder of the Company, has been the President
and Chief Executive Officer of the Company since April 1991 and Chairman of the
Board of Directors since September 1994. From 1983 until 1994, Mr. Vimond was
the principal of Edmund Vimond Associates, a business development and
acquisition consulting firm. Mr. Vimond has a marketing and general management
background in the consumer products industry, including previous positions as
President of the Consumer Products Division at Warner-Lambert Company; Group
Vice President of the Domestic Operating Company at Johnson & Johnson; Group
Vice President for Worldwide Consumer Products of American Cyanamid Company; and
President and Chief Executive Officer of R. J. Reynolds International Tobacco.

JOHN F. CARLSON has been a Senior Vice President and the Chief Financial
Officer, the Treasurer and a director of the Company since July 1, 1996. Mr.
Carlson has held management positions in the automotive accessories industries
as President and Chief Executive Officer of Allied Plastics, Inc. ("Allied")
from November 1992 to January 1995 and from June 1995 until joining the Company
as General Manager of InterScept Products Corporation. In April, 1995, Allied
filed a petition seeking protection under Chapter 11 of the Bankruptcy Act. From
1986 to March 1992, Mr. Carlson was the President and Chief Executive Officer of
JWT & Associates, a financial consultant. From 1964 through 1986, Mr. Carlson
held senior financial positions with Polygram Records, Inc., Viacom
International, Inc., Worldwide Consumer Products Group of American Cyanamid Co.
and The Mennen Company. In 1989, Mr. Carlson filed a petition for bankruptcy
under Chapter 7 of the Bankruptcy Act. Mr. Carlson is a member of the Board of
Directors of Repro-Med Systems, Inc., a medical specialties company, the
securities of which are publicly traded.

LARRY M. REID, a co-founder of the Company, has been a Senior Vice President
of the Company since July 1, 1996 and the Company's Secretary and a director of
the Company since May 1991. From May 1991 to July 1996, Mr. Reid was the
Company's Executive Vice President, Treasurer and Chief Financial Officer. Prior
thereto, Mr. Reid was a financial consultant.

28
<PAGE>

FRED E. AHLBIN has been a director of the Company since January 1996 and is
the Chairman of the Company's Compensation Committee, Mr. Ahlbin is the former
co-owner and principal of two New England manufacturing companies, John Ahlbin &
Sons and Powerwinch Corporation. Mr. Ahlbin has been retired since 1976. Mr.
Ahlbin currently is Chairman of the Board of Trustees of the Jupiter Medical
Center Foundation and a Trustee of the Jupiter Medical Center, positions he has
held since 1990.

RALPH H. LAFFLER has been a director of the Company since July 1994 and is
Chairman of the Company's Audit Committee and since April 1979 has been the
Chief Executive Officer of Graphics Illustrated, Inc., a company founded and
owned by Mr. Laffler which is engaged in printing, graphic design, marketing and
digital communications. Mr. Laffler has spent his entire career in the graphics
industry.

ROBERT S. MARKER has been a director of the Company since April 1994 and is a
member of the Company's Compensation Committee. From 1970 to 1975, Mr. Marker
was the Chairman of the Board of Directors and Chief Executive Officer of
McCann-Erickson Worldwide, Inc., an advertising agency. Since 1983, Mr. Marker
has been an advertising management consultant.

Ralph H. Laffler is a member of the Audit Committee, Fred E. Ahlbin and
Robert S. Marker are members of the Compensation Committee and Robert Marker is
a member of the Nominating Committee of the Board of Directors of the Company.
There are no family relationships among any of the officers or directors of the
Company.

EXECUTIVE COMPENSATION

The following table (the "Summary Table") sets forth certain information with
respect to all compensation paid by the Company during the years indicated to
(i) the Company's chief executive officer and (ii) the Company's four most
highly compensated executive officers other than the chief executive officer who
served as such on December 31, 1995 and whose total annual salary exceeded
$100,000 (the "Named Officers"):

SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
------------------
SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS GRANTED
- ---------------------------- ------- ----------- ------------------

Edmund G. Vimond, Jr. 1995 $150,000 31,250
Chief Executive Officer 1994 100,000 -0-
1993 -0- 12,500
Larry M. Reid, 1995 $115,000 23,438
Executive Vice President and 1994 76,800 -0-
Chief Financial Officer 1993 29,000 6,250

During 1993, 1994 and 1995, no other compensation not otherwise referred to
herein was paid or awarded by the Company to the Named Officers, the aggregate
amount of which compensation, with respect to any such person, exceeded the
lesser of $50,000 or 10% of the annual salary reported in the Summary
Compensation Table for such person.

Each of the Named Officers has accepted shares of common stock as payment for
a portion of the Company's cash indebtedness to him arising from unpaid salary.
The value of such shares has been included as salary in the Summary Compensation
table. See "Certain Relationships and Transactions." Neither of the Named
Officers received any bonus during the three years referred to in the table.

29
<PAGE>

The following table sets forth certain information with respect to
individual grants of options to each of the Named Officers during the fiscal
year ended December 31, 1995:

<TABLE>
<CAPTION>
PERCENT
OF TOTAL
NUMBER OF OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES EXPIRATION
NAME OPTIONS FISCAL YEAR EXERCISE PRICE DATE
- -------------------- ------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Edmund G.Vimond, Jr. 31,250 52% $4.80 October 5, 2005

Larry M. Reid ...... 23,438 39% $4.80 October 5, 2005

</TABLE>

The options referred to in the table will not become exercisable unless the
Company achieves net sales of not less than $20 million in any consecutive
twelve month period prior to January 1, 1999.

During the year ended December 31, 1995, none of the Named Officers exercised
any options issued by the Company. At that date, none of the options issued by
the Company to the Named Officers was in-the-money.

There are no standard or other arrangements pursuant to which any director of
the Company is or was compensated during the Company's last fiscal year for
services as a director, for committee participation or special assignments.

Other than as set forth under "Management--Employment Agreements," the
Company does not have any compensatory plan or arrangement, including payments
to be received from the Company, with respect to a Named Officer, which plan or
arrangement results or will result from the resignation, retirement or any other
termination of such person's employment with the Company or from a change in
control of the Company or a change in such person's responsibilities following a
change in control and the amount involved, including all periodic payments or
installments, exceeds $100,000.

EMPLOYMENT AGREEMENTS

Messrs. Vimond and Reid have each entered into employment agreements with the
Company for a three-year period which commenced on January 1, 1994. Mr. Carlson
has entered into an employment agreement with the Company for an eighteen-month
period which commenced July 1, 1996. Each of such employment agreements
continues thereafter for successive one year terms except upon notice to the
contrary given by the Company or the respective executive officer at least
ninety days prior to the end of the then current term. Each of Messrs. Vimond
and Reid were initially entitled to receive a base salary of $75,000 and $57,500
per annum, respectively. The foregoing salaries were increased to $150,000 and
$115,000, respectively, effective January 1, 1995. Mr. Carlson receives a salary
of $125,000 per annum.

The Company's respective employment agreements with its executive officers
permits each of them to terminate his employment by the Company for any reason
without incurring any liability to the Company. Such employment agreements may
also be terminated by the Company for any reason. If any such employment
agreement is terminated by the Company without cause, the terminated executive
officer is entitled to receive a lump sum payment equal to the greater of one
year's salary or the balance of the salary which would otherwise have been paid
to him during the remaining term of such employment agreement. In the event of
the death or permanent incapacity of an executive officer during the term of his
employment agreement, he or his estate, as the case may be, is entitled to
receive, in addition to his salary through the date of determination of
permanent incapacity or death, an additional six months' salary. For purposes of
such employment agreements, permanent incapacity is deemed to occur at the
conclusion of 90 days of continuous incapacity or 120 days of intermittent
incapacity in any twelve month period.

Each of the Company's executive officers is eligible to receive salary
increases as well as incentive compensation pursuant to the 1992 Stock Option
Plan or other incentive compensation plan which may

30
<PAGE>

be established by the Company. Any such eligibility must be determined by the
vote of Company's Board of Directors, including a majority of the directors
who are not executive officers.

1992 STOCK OPTION PLAN

In 1992, the Company adopted a Stock Option Plan (the "1992 Stock Option
Plan") in order to induce certain individuals to remain in the employ or service
of the Company; to attract new individuals to enter into such employment and
service; and to encourage such individuals to secure or increase on reasonable
terms their equity ownership in the Company. Options granted under the 1992
Stock Option Plan may be "incentive stock options," as that term is defined in
the Internal Revenue Code of 1986, as amended or "non-incentive stock options"
as described below. An aggregate of 72,000 shares of the Company's Common Stock
are available for issuance upon exercise of options that have been granted under
the 1992 Stock Option Plan. Such options have exercise prices ranging from $4.00
to $4.80 per share and expire from 2002 to 2006. To the extent that any such
options expire or terminate without having been exercised, they may be reissued
under the 1992 Stock Option Plan. The 1992 Stock Option Plan is administered by
a committee consisting of Messrs. Reid and Vimond, who are not eligible to
participate in the 1992 Stock Option Plan because of such duties. Incentive
stock options may be granted only to employees of the Company. Non-incentive
stock options may be granted only to (a) employees of the Company, (b) directors
of the Company who are not employees, certain independent contractors hired by
the Company, and (d) certain employees of a corporation which is acquired by the
Company. The exercise price of incentive stock options shall not be less than
the fair market value of a share of the Common Stock on the date of the grant.
The exercise price of non-incentive stock options shall not be less than 85% of
the fair market value of a share of the Common Stock on the date of the grant.
In the event that the fair market value of a share of the Company's Common Stock
declines below the exercise price of an option, the committee may at any time
reduce such exercise price with the prior approval of the Company's Board of
Directors.

31
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of the date hereof with
respect to any person who is known to the Company to be the beneficial owner of
more than 5% of any class of its voting securities and as to each class of the
Company's equity securities beneficially owned by its directors and executive
officers as a group:

<TABLE>
<CAPTION>
NUMBER OF SHARES APPROXIMATE
NAME OF BENEFICIAL OWNER(1)(2) BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------ ------------------ ----------------
<S> <C> <C>
Ralph H. Laffler ....................................... 450,846(3) 23%
Edmund G. Vimond, Jr. .................................. 183,271(4) 9%
Fred E. Ahlbin ......................................... 160,760(5) 8%
Larry M. Reid .......................................... 68,602(6) 4%
Robert S. Marker ....................................... 52,550(7) 3%
John F. Carlson ........................................ -0-(8) --
Executive Officers and Directors as a group (6 persons) 916,029(9) 44%
Maurice Porter ......................................... 242,398(10) 12%
Robert M. Kassenbrock .................................. 180,000(11) 9%
Eric R. Schwarz ........................................ 113,038(12) 6%
</TABLE>
- -----------------------
(1) Unless otherwise noted below, the Company believes that all persons
named in the table have sole voting and investment power with respect to
all shares of Common Stock beneficially owned by them. For purposes
hereof, a person is deemed to be the beneficial owner of securities that
can be acquired by such person within 60 days from the date hereof upon
the exercise of warrants or options or the conversion of convertible
securities. Each beneficial owner's percentage ownership is determined
by assuming that any such warrants, options or convertible securities
that are held by such person (but not those held by any other person)
and which are exercisable within 60 days from the date hereof have been
exercised.
(2) Each of the persons named in the above table may receive correspondence
addressed to him c/o Ocurest Laboratories, Inc., 4400 PGA Boulevard,
Palm Beach Gardens, FL 33410.
(3) Includes 218,173 shares held by Mr. Laffler's spouse, as to which shares
Mr. Laffler disclaims any beneficial ownership, and 4,500 shares which
may be purchased upon exercise of options.
(4) Includes 11,560 shares which may be purchased upon exercise of warrants
and 25,000 shares which may be purchased upon exercise of options and
25,000 shares which may be purchased upon exercise of warrants held by
Mr. Vimond's spouse in which shares Mr. Vimond disclaims any beneficial
ownership. Does not include 31,250 shares underlying options which may
not be exercised during the 60 day period subsequent to the date of this
Prospectus.
(5) Includes 41,528 shares which may be purchased upon exercise of warrants
and 4,500 shares which may be purchased by exercise of options.
(6) Includes 51,713 shares which are held jointly with Mr. Reid's spouse,
4,389 shares which may be purchased upon exercise of warrants and 12,500
shares which may be purchased upon exercise of options. Does not include
23,438 shares underlying options which may not be exercised during the 60
day period subsequent to the date of this Prospectus.
(7) Includes 20,625 shares which may be purchased upon exercise of warrants
and 4,500 shares which may be purchased upon exercise of options.
(8) Does not include 75,000 shares underlying an option which may not be
exercised during the 60 day period subsequent to the date of this
Prospectus.
(9) See Notes above.
(10) Includes 135,209 shares which may be purchased upon exercise of warrants
and 4,500 shares which may be purchased upon exercise of options. Includes
10,000 shares held jointly with two children.
(11) Includes 10,000 shares owned by Mr. Kassenbrock's spouse as to which
shares Mr. Kassenbrock disclaims any beneficial ownership. Does not
include 100,000 shares which may be purchased upon exercise of a warrant
which may not be exercised during the 60 day period subsequent to the
date of this Prospectus. See "Selling Shareholders" and "Certain
Relationships and Transactions."
(12) Includes 45,991 shares which may be purchased upon exercise of warrants
and 11,250 shares which may be purchased upon exercise of options. Does
not include 1,563 shares underlying options which may not be exercised
during the 60 day period subsequent to the date of this Prospectus.

32
<PAGE>

SELLING SHAREHOLDERS

If the Over-Allotment Option is exercised, the Selling Shareholders will sell
certain shares of their Common Stock in the Offering. The following table sets
forth certain information regarding the ownership of Common Stock by each of the
Selling Shareholders as of the date of this Prospectus and after giving effect
to the shares of Common Stock offered hereby, assuming that the Over-Allotment
Option is exercised in full. Substantially all offering expenses, other than the
underwriting discount and non accountable expense allowance applicable to sales
of shares of Common Stock by the Selling Shareholders, will be borne by the
Company. See "Management" and "Certain Relationships and Transactions" for a
description of certain relationships between certain of the Selling Shareholders
and the Company.

<TABLE>
<CAPTION>
SHARES TO BE OWNED
AFTER SALES IN
THE OFFERING (1)
---------------------------
NUMBER OF APPROXIMATE
SHARES OWNED PERCENTAGE OF
PRIOR TO SHARES TO BE SOLD OUTSTANDING
SELLING SHAREHOLDER OFFERING(1) IN THE OFFERING NUMBER COMMON STOCK(2)
- ----------------------------- --------------- ------------------ --------- ----------------
<S> <C> <C> <C> <C>
American Growth Fund I L.P. 50,000 30,000 20,000 *
Jose Azel ................... 10,000 7,072 2,928 *
William Boyd ................ 53,334 14,140 39,194 *
Scott Cunningham ............ 5,000 3,535 1,465 *
Robert & Nancy Cousins ...... 4,000 2,828 1,172 *
Cousins Trust ............... 4,000 2,828 1,172 *
Paul Engel .................. 2,000 1,414 586 *
William J. Hart ............. 10,000 7,070 2,930 *
Hideaway Partners ........... 40,000 28,281 11,719 *
Marcia G. Kassenbrock ....... 10,000 7,070 2,930 *
Robert M. Kassenbrock ....... 170,000 120,192 49,808 1%
Carl Teutch ................. 2,000 1,414 586 *
Thomas L. Schroeder Trust .. 3,000 2,121 879 *
William Roberts ............. 5,000 3,535 1,465 *
Ardis Schwarz ............... 98,243(3) 21,210 77,033(3) 2%(3)
Jeffrey Simon ............... 5,000 3,535 1,465 *
E.J. Sylvester Trust ........ 10,000 7,070 2,930 *
Duane Wilder ................ 10,000 7,070 2,930 *
</TABLE>
- -----------------------------------------------------------------------------
Less than 1%.

(1) For purposes hereof, a person is deemed to be the owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants or options or the conversion of convertible
securities. Each owner's percentage ownership is determined by assuming
that any such warrants, options or convertible securities that are held
by such person (but not those held by any other person) and which are
exercisable within 60 days from the date hereof, have been exercised.

(2) Computed without regard to a maximum of (a) 782,328 shares of Common
Stock issuable upon exercise of outstanding warrants and options, (b)
2,000,000 shares issuable upon exercise of the Warrants, (c) 400,000
shares issuable upon exercise of warrants to be issued to the
Representative, (d) 29,615 shares issuable upon exercise of the
Over-Allotment Option and (e) 300,000 shares issuable upon exercise of
the Warrants included in the Over-Allotment Option.

(3) Includes 5,303 shares issuable upon exercise of warrants.

On April 1, 1996 the Company borrowed $260,000 from American Growth Fund I
L.P. ("AGF"). The Company intends to repay such amount, plus accrued interest
thereon, from the net proceeds of the Offering. In connection with the
transaction with AGF, the Company issued warrants to AGF for the purchase of
25,000 shares of the Company's Common Stock at $.01 per share and warrants for
the purchase of 25,000 shares of the Company's Common Stock at $2.50 per share.
30,000 shares underlying the warrants are being offered by AGF pursuant to this
Prospectus. The exercise prices of the warrants were determined by negotiation
between the Company and AGF. Between April 1, 1996 and August 1, 1996, AGF
agreed to provide certain management consulting and investment banking services
to the

33
<PAGE>

Company. In addition, during such period, the Company had agreed to grant a
right of first refusal to AGF in connection with subsequent public offerings of
debt or equity. The offers and sales of the shares and warrants to AGF were not
registered under the Securities Act in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act for "transactions by
an issuer not involving any public offering." The principals of AGF are E.G.
Marchi and Donna Snyder. See "Use of Proceeds."

The shares being offered by the Selling Shareholders were purchased from the
Company from February to June 1996.

Other than as set forth above or, in the case of Mr. Kassenbrock under the
caption "Certain Relationships and Transactions," none of the Selling
Shareholders has had any position, office or other material relationship with
the Company during the past three years.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

Eric R. Schwarz, an employee and beneficial owner of approximately 6% of the
Company's outstanding Common Stock, has entered into an employment agreement
with the Company for a three-year period which commenced on January 1, 1994 and
continues thereafter for successive one year terms except upon notice to the
contrary given by either party. Mr. Schwarz initially received a base annual
salary of $33,000 which increased to $55,000 when the Company began shipments of
its products to Florida and to $66,000 seven months subsequent to the
commencement of shipments to a designated area of Florida. In addition, Mr.
Schwarz is eligible to receive incentive compensation pursuant to the 1992 Stock
Option Plan or other incentive compensation plan which may be established by the
Company as well as increases in salary.

In July 1994, Fred E. Ahlbin, Ralph H. Laffler, Eric R. Schwarz and Maurice
Porter, a former director of the Company and beneficial owner of approximately
12% of the Company's outstanding Common Stock, purchased 15,625 shares, 75,000
shares, 31,250 shares and 20,834 shares of Common Stock and a like number of
warrants (the "$5.00 Warrants"), respectively. The purchase price consisted of
$4.80 for a combination of one such share and one $5.00 Warrant. Each of the
$5.00 Warrants entitles its holder to purchase one share of Common Stock at
$5.00 per share on or before May 31, 1998. The original exercise price of the
$5.00 Warrants was $8.00 per share. Such exercise price was subsequently lowered
to $5.00.

In July 1994, Messrs. Laffler and Porter converted promissory notes
previously issued to them by the Company in the respective amounts of $25,000
and $150,000 into units consisting of one share of Common Stock and one $5.00
Warrant at a price of $4.80 per unit.

In November 1994, Eric R. Schwarz, Mr. Laffler, Berthold and Ardis Schwarz
and Mr. Ahlbin purchased 7,340 shares, 15,469 shares, 10,605 shares and 15,469
shares of Common Stock, respectively, upon the exercise of warrants previously
issued to them at an exercise price of $4.60 per share.

In December 1994, Robert S. Marker was issued 1,000 shares of Common Stock
for services rendered to the Company having an aggregate value of $4,500.

In January 1995, for no additional consideration, the Company issued $5.00
Warrants, to Mr. Laffler, Mr. Ahlbin, Eric R. Schwarz and Berthold and Ardis
Schwarz in the respective amounts of 22,735, 7,735, 3,421 and 5,303 $5.00
Warrants.

In January 1995, Mr. Laffler loaned $300,000 to the Company for which he
received a one year promissory note bearing interest at the rate of 12% per
annum and 15,000 $5.00 Warrants.

In April 1995, Mr. Ahlbin purchased 18,169 shares of Common Stock and a like
number of $5.00 Warrants for $73,584. During the same month, Mr. Laffler
converted a promissory note in the amount of

34
<PAGE>

$100,000 previously issued to him by the Company into 22,223 shares of Common
Stock and Mr. Marker received 4,000 shares of Common Stock for services
rendered to the Company valued at $18,000.

In May 1995, Mr. Laffler received 1,645 shares of Common Stock as payment for
interest of approximately $7,400 owed to him by the Company.

In June 1995, Mr. Laffler loaned the Company $75,000 for which he received a
one year promissory note bearing interest at the rate of 12% per annum and
warrants for the purchase of 25,000 shares of Common Stock at an exercise price
of $4.00 per share on or before June 30, 2000. During the same month Mr. Marker
received 1,800 shares of Common Stock for services rendered to the Company
valued at $9,000 and Eric R. Schwarz purchased 3,422 shares of Common Stock for
$15,741 upon the exercise of warrants previously issued to him.

In November 1995, Mr. Porter loaned the Company $50,000 for which he received
a ninety day promissory note bearing interest at the rate of 12% per annum and
warrants to purchase 25,000 shares of Common Stock on the same terms as those
issued to Mr. Laffler in June 1995.

During 1995, Edmund G. Vimond, Jr., Larry M. Reid and Eric R. Schwarz,
accepted 37,336 shares of Common Stock, 14,957 shares of Common Stock and 22,388
shares of Common Stock, respectively, at values ranging from $5.00 per share in
February 1995 to $2.32 per share in December 1995 as payment for a portion of
their respective salaries.

In January 1996, Mr. Laffler purchased 75,000 shares of Common Stock for
$130,000 upon exercise of warrants previously issued to him by the Company.
During the same month Messrs. Laffler, Porter and Eric R. Schwarz converted the
Company's indebtedness to them of approximately $525,000, $52,000 and $19,500,
respectively, into 226,334 shares, 22,480 shares and 8,417 shares of Common
Stock, respectively.

In January 1996, Mr. Ahlbin and Berthold and Ardis Schwarz purchased 40,000
and 20,000 shares of Common Stock, respectively, at $2.50 a share.

In February 1996, Robert M. Kassenbrock and his spouse purchased an aggregate
of 180,000 shares of Common Stock at $2.50 per share. 127,262 of such shares
have been registered under the Securities Act by means of the registration
statement of which this Prospectus is a part. See "Selling Shareholders."

In March 1996, the spouse of Mr. Vimond loaned $50,000 to the Company for
which she received a ninety day promissory note bearing interest at the rate of
12% per annum and 25,000 warrants. Each of the warrants entitles its holder to
purchase one share of Common Stock at an exercise price of $2.50 a share on or
before June 30, 2000 (the "$2.50 Warrants"). During the same month Mr. Laffler
and Eric R. Schwarz received 5,000 $2.50 Warrants and 22,500 $2.50 Warrants,
respectively in connection with loans made by them to the Company in the
respective amounts of $10,000 and $45,000. In connection with such loans Messrs.
Laffler and Schwarz each received ninety day promissory notes bearing interest
at the rate of 12% per annum. During the same month, Mr. Porter received 7,500
shares of Common Stock for services rendered to the Company valued at $18,750.

The exercise prices of the warrants described above were determined by the
Company.

In March 1996, Mr. Reid accepted 3,256 shares of Common Stock as payment for
$8,140 of salary owed to him by the Company.

In May 1996 Messrs. Ahlbin and Laffler each purchased 10,000 shares of Common
Stock at $2.50 per share.

In September 1996, the Company borrowed $200,000 from Mr. Kassenbrock. The
Company intends to repay such amount, plus accrued interest thereon at the
annual rate of 12%, from the net proceeds of

35
<PAGE>

the Offering. In connection with the transaction with Mr. Kassenbrock, the
Company issued a warrant to him for the purchase of 100,000 shares of the
Company's Common Stock at $2.40 per share (60% of the initial public offering
price). The Company has granted piggy back registration rights with respect to
such shares. The exercise price of the warrants was determined by negotiation
between the Company and Mr. Kassenbrock. See "Use of Proceeds," "Security
Ownership of Certain Beneficial Owners and Management" and "Selling
Shareholders."

The offers and sales of the securities referred to hereunder were not
registered under the Securities Act in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act for "transactions by
an issuer not involving any public offering."

From July 1992 until September 1996, the Company sold warrants (the "Private
Warrants") for the purchase of an aggregate of 1,098,152 shares of the Company's
Common Stock at prices ranging from $.01 to $5.00 per share (the "Warrant
Shares"). 131,068 of the Warrant Shares have been issued upon exercise of the
Private Warrants. 64,281 of such shares were issued to officers, directors and
more than 10% shareholders of the Company. The Company has suspended the
exercise of the Private Warrants until six months subsequent to the date of this
Prospectus. The offer or any subsequent sale of the Warrant Shares has not been
registered under the Securities Act in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act for "transactions by
an issuer not involving any public offering." Because the Warrant Shares were
being offered for sale to the holders of the Private Warrants shortly prior to
the time that the Registration Statement for the securities being offered hereby
was filed, an issue may arise as to whether the offer of the Warrant Shares
would be integrated with the offering of the securities being offered hereby,
and, therefore, required to be registered under the Securities Act. If it were
to be determined that the offer and sale of the Warrant Shares are to be so
integrated, the Company may incur a liability to the purchasers of the Warrant
Shares who could be given the right under the federal securities laws to rescind
their purchases. The Company believes that such purchases have been and will be
exempt from the registration provisions of the Securities Act pursuant to
Section 4(2) thereof. Accordingly, the Company does not believe that it will
incur any liability with respect to the registration provisions of the
Securities Act if any of the Warrant Sales are sold.

All of the equity interest of Acorn is owned by William J. Casey, his spouse
and daughters. Mr. Casey is a former director of the Company and beneficially
owns approximately 4% of the Company's outstanding Common Stock. One such
daughter, having a 16% equity interest in Acorn, is the spouse of Larry M. Reid.
Acorn has assigned 25% and 15% of its rights to receive payments from the
Company to Edmund G. Vimond, Jr. and Larry M. Reid, respectively.
Notwithstanding the foregoing, in the event that the Company disposes of all or
substantially all of its business including the licenses granted pursuant to the
Acorn Agreement, Messrs. Vimond and Reid will not be entitled to receive any
amounts from Acorn from the first $2,500,000 of proceeds therefrom. Should,
however, such proceeds exceed that amount, Messrs. Vimond and Reid shall be
entitled to receive from Acorn 25% and 15%, respectively, of the proceeds above
such amount and not in excess of $8,133,333 and 62.5% and 37.5%, respectively,
of such proceeds between such latter amount and $9,800,000 less any payments
made to them by Acorn from royalties paid to Acorn by the Company, respectively.
Because royalty payments to Acorn are based on the Company's sales, subject to
the Company achieving the minimum levels of net income as described earlier, any
activity taken thereafter to increase the Company's sales at the expense of
profits would benefit those persons having an interest in Acorn, including
Messrs. Vimond and Reid. Both Messrs. Vimond and Reid, as officers and directors
of the Company, owe a fiduciary duty to the Company and have advised the Company
that they will act in the best interests of the Company, irrespective of their
personal interests in Acorn. See "Business--Patents and Trademarks."

The terms of the Acorn Agreement were determined through negotiation between
Messrs. Casey and Vimond. Mr. Casey has advised the Company that Acorn's cost of
the assets which are the subject of the Acorn Agreement was in excess of
$200,000. The Company does not know whether the terms of the Acorn Agreement are
as favorable to the Company as could have been obtained from an

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<PAGE>

unaffiliated third party in a similar transaction. Under the Acorn Agreement,
the Company has made payments to Acorn and is obligated to make additional
payments thereto, including royalties. See "Business--Patents and
Trademarks."

The Board of Directors of the Company has adopted a resolution to the effect
that all future transactions between the Company and its officers, directors, or
the beneficial owners of more than 5% of any class of the Company's voting
securities, or any affiliate of any of such person, must be approved or ratified
by a majority of the disinterested directors of the Company, and the terms of
such transaction must be no less favorable to the Company than could have been
realized by the Company in an arms-length transaction with an unaffiliated
person.

The Board of Directors of the Company has also adopted a resolution that
provides that the area in which the Company shall be interested for the purpose
of the doctrine of corporate opportunities shall be the business of marketing
eye care products for the consumer market. Pursuant to the resolution, any
business opportunity which falls within such area of interest must be brought to
the attention of the Company for acceptance or rejection prior to any officer or
director of the Company taking advantage of such opportunity. Any business
opportunity outside such area of interest may be entered into by any officer of
director of the Company without the officer or director first offering the
business opportunity to the Company.

Subsequent to the receipt of the net proceeds of the Offering, the Company
does not intend to borrow any funds from or make loans to its officers and
directors.

DESCRIPTION OF SECURITIES

THE UNITS

Each Unit consists of one share of Common Stock and one Warrant. The Common
Stock and Warrants must be purchased together unless that requirement is waived
by the Representative. The Common Stock and the Warrants will not be separately
tradeable or transferable for a period of six months from the date of this
Prospectus or earlier at the discretion of the Representative.

COMMON STOCK

The holders of the Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders. Subject to preferential rights that
may be applicable to any Preferred Stock which may be issued, holders of the
Common Stock are entitled to receive dividends, if and when declared by the
Company's Board of Directors from funds legally available for that purpose. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of the Common Stock are entitled to share ratably in the
assets available of the Company, if any, remaining after the payment of all
liabilities of the Company and the liquidation preferences applicable to any
outstanding Preferred Stock. Holders of the Common Stock have no cumulative
voting rights, no preemptive rights and no conversion rights and there are no
redemption or sinking fund provisions with respect to the Common Stock. The
outstanding Common Stock is fully paid, validly issued and non-assessable.

On July 30, 1996, the Company's 1,922,674 shares of outstanding Common Stock
were held by 118 holders of record.

PREFERRED STOCK

The Company's Board of Directors has the authority to issue the authorized
shares of Preferred Stock in one or more series and to fix the designations,
relative powers, preferences, rights, qualifications, limitations and
restrictions of all shares of each such series, including without limitation

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<PAGE>

dividend rates, conversion rights, voting rights, redemption and sinking fund
provisions, liquidation preferences and the number of shares constituting
each such series, without any further vote or action by the stockholders. The
issuance of Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or adversely affect the
rights and powers, including voting rights, of the holders of Common Stock.
The issuance of Preferred Stock also could have the effect of delaying,
deterring or preventing a change in control of the Company without further
action by the shareholders.

THE WARRANTS

The Warrants will be issued in registered form under, governed by and subject
to the terms of a Warrant Agent Agreement (the "Warrant Agreement") between the
Company and the Warrant Agent. The following statements are qualified in their
entirety by reference to the Warrant Agreement and also the detailed provisions
of the form of Warrant attached to the Warrant Agreement. Copies of the Warrant
Agreement may be obtained from the Company or the Warrant Agent and have been
filed with the Securities and Exchange Commission as an exhibit to the
Registration Statement of which this Prospectus is a part. See "Additional
Information." Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants may be presented to the Warrant Agent for transfer,
exchange or exercise at any time prior to their redemption or expiration date,
at which time the Warrants become wholly void and of no value. If a market for
the Warrants develops, the holder may sell the Warrants instead of exercising
them. There can be no assurance, however, that a market for the Warrants will
develop or continue.

Each Warrant entitles its holder to purchase, at any time commencing on the
date the Warrants are separately tradeable and transferable and until the third
anniversary of the date of this Prospectus, one share of Common Stock at a price
of $4.80 per share, with a $.50 credit for each Warrant surrendered on exercise,
subject to adjustment in certain events. The right to exercise the Warrants will
terminate at the close of business on the third anniversary of the date of this
Prospectus. The Warrants contain provisions that protect the Warrantholders
against dilution by adjustment of the exercise price in certain events
including, but not limited to, stock dividends, stock splits, reclassifications
or mergers. In the event of liquidation, dissolution or winding up of the
Company, holders of the Warrants, unless exercised, will not be entitled to
participate in the assets of the Company. Holders of the Warrants will have no
voting, preemptive, liquidation or other rights of a shareholder by virtue of
holding the Warrants, and no dividends will be declared on the Warrants. The
Company has authorized and reserved for issuance a sufficient number of shares
of Common Stock to accommodate the exercise of all Warrants to be issued in the
Offering. The shares of Common Stock, when issued upon the exercise of the
Warrants in accordance with the terms thereof, will be fully paid and
non-assessable.

Commencing on the date the Warrants are separately tradeable and
transferable, the holder of any Warrant may exercise such Warrant by
surrendering the certificate representing the Warrant to the Warrant Agent, with
the subscription form on the reverse side of such certificate properly completed
and executed, together with payment of the exercise price. Unless they have been
redeemed by the Company, the Warrants may be exercised at any time in whole or
in part at the applicable exercise price commencing on the date the Warrants are
separately tradeable and transferable and until expiration of the Warrants three
years from the date of this Prospectus. In lieu of fractional shares which would
otherwise be issuable upon the exercise of the Warrants, the Company will round
up to the nearest whole share.

Commencing on the date the warrants are separately tradeable and
transferable, the Warrants may be redeemed by the Company at a redemption price
of $0.55 per Warrant until the end of the second year after the date of this
Prospectus, and at $0.75 per Warrant until the end of the third year after the
date of this Prospectus and prior to their expiration, on 30 days' prior written
given at any time that the Common Stock has traded above $6.72 per share for a
at least 20 consecutive trading days ending within 10 days prior to the date of
the notice of redemption. For purposes of determining the daily trading price of
the Common Stock, if the Common Stock is listed on a national securities
exchange, is

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<PAGE>

admitted to unlisted trading privileges on a national securities exchange, or is
listed for trading on a trading system of the NASD such as the NASDAQ Small-Cap
Market or the NASDAQ National Market System, then the last reported sale price
of the Common Stock on such exchange or system each day shall be used or if the
Common Stock is not so listed on such exchange or system or admitted to unlisted
trading privileges, then the average of the last reported high bid prices
reported by the National Quotation Bureau, Inc. each day shall be used to
determine such daily trading price. Holders of Warrants shall have exercise
rights until the close of the business day preceding the date fixed for
redemption. If any Warrant called for redemption is not exercised by such time,
it will cease to be exercisable and the holder will be entitled only to the
redemption price. Redemption of the Warrants could force Warrantholders either
to (i) exercise the Warrants and pay the exercise price thereof at a time when
it may be less advantageous economically to do so, or (ii) accept the redemption
price in consideration for cancellation of the Warrant, which could be
substantially less than the market value thereof at the time of redemption.

At any time when the Warrants are exercisable, the Company is required to
have a current registration statement on file with the Commission and to effect
appropriate qualifications under the laws and regulations of the states in which
the holders of Warrants reside in order to comply with applicable laws in
connection with the exercise of the Warrants and the resale of the Common Stock
issued upon such exercise. So long as the Warrants are outstanding, the Company
has undertaken to file all post-effective amendments to the Registration
Statement required to be filed under the Securities Act, and to take appropriate
action under federal and state securities laws to permit the issuance and resale
of Common Stock issuable upon exercise of the Warrants. There can be no
assurance, however, that the Company will be in a position to effect such action
under the federal and applicable state securities laws, and the failure of the
Company to effect such action may cause the exercise of the Warrants and the
resale or other disposition of the Common Stock issued upon such exercise to
become unlawful. The Company may amend the terms of the Warrants but only by
extending the termination date or lowering the exercise price thereof. The
Company has no present intention of amending such terms.

If the Representative, at its election, solicits the exercise of the
Warrants, the Company will be obligated, subject to certain conditions, to pay
the Representative a solicitation fee equal to 10% of the aggregate proceeds
received by the Company as a result of the solicitation. The Representative may
reallow a portion of the fee to soliciting broker-dealers. Because the
Representative is a member of the National Association of Securities Dealers,
Inc. ("NASD"), any such solicitation by the Representative must comply with the
requirements of Section 2710(c)(6)(B)(ix) of the NASD Corporate Financing Rules.

The entire proceeds from sale of the Warrants will be placed in an
interest-bearing escrow account established with Tri-State Bank, Denver,
Colorado during the three-year term of the Warrants. The escrow proceeds,
together with accrued interest, will be released to the Company or to the
Warrantholders, as follows: (i) upon exercise of each Warrant, $.50 will be
credited to the exercise price and will be released to the Company; and (ii)
upon redemption of the Warrants, the escrow proceeds relating to such redemption
will be released to the Company; and (iii) to the extent that the Warrants are
not exercised or redeemed within the three-year period, then the remaining
escrow proceeds, plus accrued interest thereon, will be returned to those
Warrantholders owning unexercised or unredeemed Warrants.

TRANSFER AGENT AND WARRANT AGENT

The transfer agent for the Common Stock and the Warrant Agent is American
Securities Transfer & Trust, Inc.

CONTROL-SHARE ACQUISITIONS

The Florida Business Corporation Act (the "FBCA") provides that "control
shares" of an "issuing public corporation" acquired in a "control-share
acquisition" have the same voting rights as accorded

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<PAGE>

the shares before the control-share acquisition only to the extent granted by
resolution approved by the shareholders. Such resolution must be approved by:
(a) a majority of the votes of the shareholders entitled to vote thereon, and if
the proposed control-share acquisition would, if fully carried out, result in
any action which would require a vote as a class or series, by a majority of the
votes of the shareholders of each such class or series entitled to vote thereon;
and (b) a majority of the votes by the shareholders of each class or series
entitled to vote as a class or series, excluding all shares owned by the
acquiror (or member of a group), officers and directors who are employees of the
corporation.

An "issuing public corporation" is a corporation that has: (a) 100 or more
shareholders; (b) its principal place of business, its principal office or
substantial assets within Florida; and (c) one or more of the following: (i)
more than 10% of its shareholders reside in Florida; (ii) more than 10% of its
shares are owned by Florida residents; (iii) 1,000 of its shareholders reside in
Florida. A "control-share acquisition" is the acquisition by any person of
ownership of, or the power to direct the exercise of voting power with respect
to, issued and outstanding control shares. "Control shares" are voting shares
which, if aggregated with all other shares owned by such person, would entitle
the acquiror, directly or indirectly, alone or as part of a group, to exercise
voting power in electing directors within one of the following ranges of voting
power: (a) one-fifth or more but less than one-third, (b) one-third or more but
less than a majority, or (c) a majority of all voting power.

A person who has made or proposes to make a control-share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the Board of Directors to call a special meeting of shareholders to
be held within 50 days of the receipt of the demand to consider the voting
rights of the shares. If the acquiring person's statement has been filed but no
request for a meeting is made, the corporation must present the question at the
next special or annual shareholders' meeting.

If authorized in an issuing public corporation's articles of incorporation or
bylaws before a control-share acquisition has occurred, control shares acquired
in a control-share acquisition where no acquiring person's statement has been
filed, may be subject to redemption by the corporation at the fair value of the
shares at any time during the period ending 60 days after the last acquisition
of control shares. Control shares acquired in a control-share acquisition are
not subject to such redemption after an acquiring person's statement has been
filed and after the meeting at which the voting rights of the control shares
acquired in a control-share acquisition are submitted to the shareholders unless
the shares are not accorded full voting rights by the shareholders.

Unless otherwise provided in an issuing public corporation's articles of
incorporation or bylaws before a control-share acquisition has occurred, if
voting rights for control shares are approved at a shareholders' meeting and the
acquiror becomes entitled to vote a majority of all of the corporation's shares
entitled to vote, all other shareholders may exercise dissenters' rights to
receive the fair value of their shares. Neither the Company's Bylaws nor its
Articles of Incorporation makes any provision with respect to control-share
acquisitions.

The control-share acquisition provisions of the FBCA could have the effect of
discouraging offers to acquire the Company and of increasing the difficulty of
consummating any such offer.

SHARES ELIGIBLE FOR FUTURE SALE

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<PAGE>

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions specified in such Rule, sales of
restricted securities may be made if a minimum of two years has elapsed between
the later of the date of the acquisition of such securities from the issuer or
from an affiliate of the issuer and any resale thereof in reliance on Rule 144
for the account of either the initial acquiror or any subsequent holder. If
sales can be made under Rule 144, a seller, including persons whose securities
are required to be aggregated, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the total
number of outstanding shares of the same class or, if the shares are quoted on
NASDAQ, the average weekly trading volume during the four calendar weeks
preceding the filing of a notice with the Securities and Exchange Commission.
Where a minimum of three years has elapsed between the later of the date of the
acquisition of restricted securities from the issuer or from an affiliate of the
issuer and any resale thereof in reliance on Rule 144 for the account of either
the initial acquiror or any subsequent holder, a person who has not been an
affiliate of the Company for at least the three months immediately preceding the
sale is entitled to sell such securities under Rule 144 without regard to any of
the limitations described above.

The Company has granted piggyback registration rights to the holders of an
aggregate of 133,920 shares of the Company's outstanding Common Stock should the
Company file a registration statement under the Securities Act which includes
shares of Common Stock of certain of the Company's officers and directors. The
Company has granted piggyback registration rights with respect to 100,000 shares
of Common Stock which may be obtained by Robert M. Kassenbrock upon exercise of
a warrant issued to him by the Company. The Company has granted similar rights
to holders of warrants for the purchase of an aggregate of 200,000 shares of
Common Stock. The Company has also granted future demand and piggyback
registration rights to AGF with respect to 25,000 shares of Common Stock
underlying a warrant held by AGF. Such registration rights terminate seven years
subsequent to the Company's receipt of the net proceeds of the Offering. See
"Security Ownership of Certain Beneficial Owners and Management," "Selling
Shareholders" and "Certain Relationships and Transactions."

No meaningful prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale will
have on the market prices, if any, of the Common Stock and Warrants prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect any
prevailing market prices for the Common Stock and Warrants and could impair the
Company's ability to raise capital through the sale of its equity securities.

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<PAGE>

UNDERWRITING

The Underwriters named below, acting through the Representative, have jointly
and severally agreed, subject to the terms and conditions of the Underwriting
Agreement, to purchase from the Company and the Company has agreed to sell to
the Underwriters, the respective number of Units set forth opposite their names
below at the initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus:

UNDERWRITER NUMBER OF UNITS
- ------------------------------ ---------------------

RAF Financial Corporation ...

---------------------
TOTAL ........................ 2,000,000
=====================

The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the Units offered hereby are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to purchase 2,000,000 Units, if any
are purchased.

The Underwriters propose to offer part of the Units offered hereby directly
to the public at the initial offering price and part of such Units to certain
dealers at a price that represents a concession within the discretion of the
Representative. The Underwriters do not intend to confirm sales to accounts over
which they exercise discretionary authority. The Underwriters may allow, and
such dealers may re-allow, a concession within the discretion of the
Representative. After the initial offering, the offering price and the selling
terms may be changed by the Underwriters.

The Units offered by the Underwriters are subject to prior sale. The
Underwriters reserve the right to withdraw, cancel or modify such offer (which
may be done only by filing an amendment to the Registration Statement) and to
reject orders in whole or in part for the purchase of any of the Units and to
cancel any sale even after the purchase price has been paid if such sale, in the
opinion of the Underwriters, would violate federal or state securities laws or a
rule or policy of the NASD.

The Company and the Underwriters have agreed to indemnity each other and
related persons against certain liabilities, including liabilities under the
Securities Act, and, if such indemnifications are unavailable or are
insufficient, the Company and the Underwriters have agreed to damage
contribution arrangements between them based upon the relative benefits received
from the Offering and the relative fault resulting in such damages. Such
relative benefits and relative fault would be determined in legal actions among
the parties. Under such contribution arrangements, the maximum amount payable by
any Underwriter would be the public offering price of the Units underwritten and
distributed by such Underwriter.

Except for the outstanding securities described herein and except upon the
exercise of the options and warrants described herein, the Company has agreed
not to sell any additional securities (other than debt securities to financial
institutions) for three years after the date of this Prospectus without the
Representative's prior written consent. Also excepted are securities issued to
officers, directors, holders of more than 5% of the Company's outstanding Common
Stock and their affiliates two years after the date of this Prospectus. The
officers and directors of the Company, holders of more than 5% of the Company's
outstanding Common Stock prior to the Offering and their affiliates have entered
into agreements which provide that such persons, who own an aggregate of 731,926
shares of Common

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<PAGE>

Stock, may not sell any of such shares without the consent of the Representative
during period ranging from one to two years commencing on the date of this
Prospectus. The agreements also provide that any sales of Common Stock by such
persons pursuant to Rule 144 will be executed through the Representative. The
provisions of this paragraph do not apply to any securities held by Maurice
Porter. See "Shares Eligible for Future Sale."

The Company and the Selling Shareholders have granted to the Underwriters an
option excersisable for 30 days from the date of this Prospectus to purchase up
to 300,000 additional Units consisting of 300,000 additional shares of Common
Stock (29,615 of which will be offered by the Company and 270,385 of which will
be offered by the Selling Shareholders) and 300,000 additional Warrants offered
by the Company at the respective prices to public less the underwriting
discounts solely to cover over-allotments, if any. In addition, the Company and
the Selling Shareholders have agreed to pay to the Representative at the closing
of the Offering, a non-accountable expense allowance equal to 2.6% of the
aggregate initial public offering prices of the Units, Common Stock and Warrants
sold by them. Such expense allowance is to cover expenses incurred by the
Representative in connection with the Offering, reduced by amounts advanced by
the Company which, as of the date of this Prospectus, are $30,000.

The Company has agreed to issue for $50.00, warrants to the Representative to
purchase 200,000 shares of Common Stock. These warrants are exercisable at any
time during the five year period after the date of this Prospectus at $4.80 per
share. These warrants are not transferable for one year from the date of this
Prospectus except (i) to an Underwriter or a partner or officer of an
Underwriter or (ii) by will or operation of law. Any profit realized on the sale
of these warrants or the underlying shares may be deemed additional underwriting
compensation. Commencing one year from the date hereof, holders of these
warrants and the shares underlying these warrants will have demand and piggyback
registration rights for periods of four years and six years, respectively, with
respect to these warrants and the underlying shares. These warrants and the
shares of Common Stock underlying these warrants have been registered under the
Securities Act by means of the Registration Statement of which this Prospectus
is a part.

In addition to the aforementioned warrants, the Company has agreed upon
completion of the Offering to issue to the Representative, for $50.00,
additional warrants to purchase 200,000 shares of Common Stock. These warrants
contain the same terms and conditions as the Warrants except that (i) the
exercise price of these warrants will be $5.76 (ii) these warrants will be
exercisable immediately but will not be transferable for a period of one year
after the date of this Prospectus except to an Underwriter or a partner or
officer of an Underwriter, or by will or operation of law and (iii) these
Warrants are not redeemable. These warrants and the shares of Common Stock
underlying these warrants have been registered under the Securities Act by means
of the Registration Statement of which this Prospectus is a part.

If any warrants issued to the Representative are exercised during the first
year after the date of this Prospectus, then any Common Stock acquired as a
result of any such exercise may not be transferred or assigned until after the
expiration of such one year period.

For a period of three years from the date hereof, the Representative has a
preferential right to purchase for its account or to sell for the account of the
Company, or any parent or subsidiaries of the Company, any securities with
respect to which any of them may seek to sell, publicly or privately, for cash.

The price to the public of the Units has been determined by negotiations
between the Company and the Representative, with consideration being given to
the current status of the Company's business, its financial condition, its
present and prospective operations, the general status of the securities market,
and the market conditions for new offerings of securities. The price bears no
relationship to the assets, net worth, book value, sales price of securities
issued to shareholders of the Company, or any other criteria of value.

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<PAGE>

The Company has agreed to give the Representative notice of meetings of its
Board of Directors and to grant access to such meetings to a representative of
the Representative. Any such representative will have no official status or
voting rights at any such meeting.

For a period of five years after the date of this Prospectus, the Company has
agreed to pay the Representative a consulting fee in connection with any merger,
consolidation, stock exchange or acquisition or sale of all or a material part
of the assets or business of any entity, if such transaction involves the
Company, its parent company, or any of its subsidiaries, if such transaction was
initiated by the Representative. The total fee will be from 1% to 5% of the
value of the transaction. In connection with any such transaction, the
Representative has agreed to provide consulting services which are customary in
the industry. If the Company, its parent company, or any of its subsidiaries,
proposes to engage in any such type of transaction which is not initiated by the
Representative, but in connection with which the Company, its parent company, or
any of its subsidiaries, proposes to obtain services from an investment banker,
the Company has agreed that the Representative will have the first opportunity
to provide consulting services which are customary in the industry in connection
therewith. In such event, the fee to be paid to the Representative will be 50%
of the total fee described above.

If the Representative, at its election, at any time one year after the date
of this Prospectus, solicits the exercise of the Warrants, the Company will be
obligated, subject to certain conditions, to pay the Representative a
solicitation fee equal to 10% of the aggregate proceeds received by the Company
as a result of the solicitation. No warrant solicitation fees will be paid
within one year after the date of this Prospectus. The Representative may
reallow a portion of the fee to soliciting broker-dealers. Because the
Representative is a member of the NASD, any such solicitation by the
Representative must comply with the requirements of Section 2710(c)(6)(B)(xi) of
the NASD Corporate Financing Rules.

LEGAL PROCEEDINGS

There are no material pending or threatened legal proceedings to which the
Company or any of its subsidiaries is a party or of which any of their property
is the subject or, to the knowledge of the Company, any proceedings contemplated
by governmental authorities.

EXPERTS

The audited financial statements included in this Prospectus have been
audited by Grant Thornton L.L.P., independent certified public accountants, to
the extent and for the periods set forth in their report thereon which contains
an explanatory paragraph expressing substantial doubt about the Company's
ability to continue as a going concern which is attributed to recurring
operating losses, working capital deficiencies and delinquencies and defaults on
its accounts payable and other matters and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

LEGAL MATTERS

The legality of the securities offered hereby has been passed upon for the
Company by Reisman & Associates, P.A., Boca Raton, Florida. An affiliate of
Reisman & Associates, P.A. is a beneficial owner of options to acquire an
aggregate of 15,000 shares of the Company's Common Stock at prices of $4.00 and
$4.50 per share. Smith, McCullough & Ferguson, P.C., Denver, Colorado, has acted
as legal counsel to the Representative in connection with certain legal matters
relating to the Offering.

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Under the Florida Business Corporation Act, the Company has the power and
authority to indemnify any person who is or was a director, officer, employee or
agent of the Company (or of the

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<PAGE>

affiliates of the Company) for liability incurred in connection with any action
brought against such person (other than an action by, or in the right of, the
Company) if such person acted in good faith and in a manner reasonably believed
to be in, or not opposed to, the best interests of the Company, and with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful. The Company's Articles of Incorporation and Bylaws
require the Company to indemnify any such person who has complied with the
foregoing standard. Under the Florida Business Corporation Act, the Company also
currently has the power and authority to indemnify any such person for liability
incurred in any action by, or in the right of, the Company against the expenses
and amounts paid in settlement not exceeding, in the judgment of the Board of
Directors, the estimated expense of litigating the proceeding described above to
its conclusion, provided such expenses and amounts are actually and reasonably
incurred in connection with the defense or settlement of such proceeding,
including any appeal thereof. The Company's Articles of Incorporation and Bylaws
require the Company to indemnify any such person against the expenses and
amounts paid in settlement as described in the foregoing sentence. The
Underwriting Agreement provides that, in certain cases, the Underwriters shall
indemnify each officer and director and controlling person of the Company
against certain costs, expenses and liabilities which he may incur in his
capacity as such. The indemnification provisions described under this caption
include indemnification for breaches of fiduciary duties. Insofar as
indemnification arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to such provisions, or
otherwise, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement under the Securities Act with
respect to the securities offered hereby with the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement,
including all exhibits and schedules thereto, which may be examined at the
Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C.
20549 without charge, or copies of which may be obtained from the Commission
upon request and payment of the prescribed fee. Statements made in this
Prospectus as to the contents of any contract, agreement or document are not
necessarily complete and in each instance reference is made to the copy of such
contract, agreement or other document filed as an exhibit to the Registration
Statement, and each such statement is qualified in its entirety by such
reference.

As of the date of this Prospectus, the Company became a reporting company
under the Exchange Act and in accordance therewith in the future will file
reports and other information with the Commission. All of such reports and other
information may be inspected and copied in Washington, D.C. and at regional
offices of the Commission located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. The Commission maintains a web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The address of such site is
http://www.sec.gov. In addition, the Company intends to provide its shareholders
with annual reports, including audited financial statements, unaudited
semi-annual reports and such other reports as the Company may determine.

45
<PAGE>

CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Certified Public Accountants ........................................... F-2
FINANCIAL STATEMENTS
Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (Unaudited) .................. F-3
Statements of Operations for the years ended December 31, 1994 and 1995 and the six months
ended June 30, 1995 and 1996 (Unaudited) ................................................... F-4
Statement of Stockholders' Equity (Deficit) for the years ended December 31, 1994 and 1995
and the six months ended June 30, 1996 (Unaudited) ......................................... F-5
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and the six months
ended June 30, 1995 and 1996 (Unaudited) ................................................... F-6
Notes to Financial Statements ................................................................ F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Ocurest Laboratories, Inc.

We have audited the accompanying balance sheets of Ocurest Laboratories, Inc.
(a Florida corporation) as of December 31, 1994 and 1995, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended. 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
managment, 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 Ocurest Laboratories, Inc. as
of December 31, 1994 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statments,
the Company incurred a net loss of $2,736,792 for the year ended December 31,
1995, and, as of that date, the Company's current liabilities exceeded its
current assets by $1,975,824. These factors, among others, as discussed in Note
B to the financial statements, raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note B. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

GRANT THORNTON LLP

Fort Lauderdale, Florida
March 29, 1996

F-2
<PAGE>
OCUREST LABORATORIES, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- --------------- --------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current Assets ........................................
Cash ................................................. $ 84,836 $ 1,607 $ 5,138
Accounts receivable-customers ........................ 22,066 65,140 240,643
Inventories .......................................... 325,854 542,071 847,183
Prepaid expenses ..................................... 21,056 64,412 133,100
------------- -------------- --------------
Total current assets ............................... 453,812 673,230 1,226,064
Property and Equipment, at cost, net .................. 618,602 543,301 888,443
Other Assets ..........................................
Patent and trademark licensing rights, net .......... 164,300 141,600 130,250
Deposits ............................................. 7,000 198,340 12,000
Deferred offering costs .............................. -- 5,000 83,742
Organizational costs, net ............................ 1,600 800 400
------------- -------------- --------------
Total Other Assets ................................. 172,900 345,740 226,392
------------- -------------- --------------
Total assets ....................................... $ 1,245,314 $ 1,562,271 $ 2,340,899
============= ============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities

Accounts payable ..................................... $ 548,854 $ 1,889,113 $ 1,626,865
Accrued advertising .................................. 114,436 155,276 --
Accrued salaries and taxes ........................... 116,649 47,362 60,202
Accrued expenses ..................................... 55,531 144,620 259,298
Accrued interest ..................................... -- 16,770 98,530
Notes payable-stockholders ........................... 198,537 238,774 295,000
Notes payable-factor ................................. -- 127,139 665,721
Notes payable-other .................................. -- -- 260,000
Patent and trademark licensing rights payable ....... 30,000 30,000 --
------------- -------------- --------------
Total current liabilities ......................... 1,064,007 2,649,054 3,265,616
Notes Payable Stockholders ............................ -- 657,257 --
Commitments ........................................... -- -- --
Stockholders' Equity (deficit) ........................
Preferred stock -$.01 par value, 5,000,000 shares
authorized -none issued ............................ -- -- --
Common stock, $.008 par value, 25,000,000 shares
authorized, 897,811, 1,123,341 and 1,922,674 shares
issued and outstanding at December 31, 1994,
December 31, 1995 and June 30, 1996, respectively .. 7,183 8,989 15,381
Paid-in capital ...................................... 2,435,823 3,245,462 5,068,843
Accumulated deficit .................................. (2,261,699) (4,998,491) (6,008,941)
------------- -------------- --------------
Total stockholders' equity (deficit) .............. 181,307 (1,744,040) (924,717)
------------- -------------- --------------
Total liabilities and stockholders' equity
(deficit) ............................................. $ 1,245,314 $ 1,562,271 $ 2,340,899
============= ============== ============
</TABLE>

The accompanying notes are an integral part of this statement.

F-3
<PAGE>
OCUREST LABORATORIES, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -----------------------------
1994 1995 1995 1996
--------------- -------------- ------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ........................... $ 96,830 $ 687,122 $ 200,384 $ 734,291
Cost of goods sold .................. 139,733 545,175 160,206 443,579
------------- -------------- ------------- --------------

Gross profit (loss) .............. (42,903) 141,947 40,178 290,712
Selling and marketing expenses ..... 676,079 1,784,102 462,835 639,052
General and administrative expenses 948,458 964,426 466,548 484,648
Royalty expense ..................... 3,875 27,885 8,015 29,380
------------- -------------- ------------- ---------------
Operating loss ................... (1,671,315) (2,634,466) (897,220) (862,368)
Other income (expense) ..............
Interest expense ................... (20,626) (112,326) (32,558) (148,082)
Interest income .................... 2,621 -- -- --
Royalty income ..................... -- 10,000 -- --
------------- -------------- ------------- ---------------
Net loss before
provision for taxes ............. (1,689,320) (2,736,792) (929,778) (1,010,450)
Provision for taxes ................. -- -- -- --
------------- -------------- ------------- ---------------
Net loss ......................... $(1,689,320) $(2,736,792) $ (929,778) $(1,010,450)
============= ============== ============= ===============
Net loss per share .................. $ (1.16) $ (1.55) $ (.54) $ (.40)
============= ============== ============= ===============
</TABLE>

The accompanying notes are an integral part of this statement.

F-4
<PAGE>
OCUREST LABORATORIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)

COMMON
COMMON STOCK ADDITIONAL STOCK
------------------------- PAID-IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
------------ ----------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 579,698 $ 4,638 $ 940,602 $ (50,000) $ (572,379) $ 322,861
Issuance of stock, net of placement
costs of $98,520 ................... 268,375 2,147 1,252,219 -- -- 1,254,366
Common stock subscription received .. -- -- -- 50,000 -- 50,000
Issuance of stock upon conversion of
notes .............................. 48,738 390 237,610 -- -- 238,000
Issuance of stock in lieu of cash to
stockholders who provide
professional services .............. 1,000 8 5,392 -- -- 5,400
Net loss for the year ................ -- -- -- -- (1,689,320) (1,689,320)
----------- ---------- ----------- ------------ ------------ ------------
Balance at December 31, 1994 ......... 897,811 7,183 2,435,823 -- (2,261,699) 181,307
Issuance of stock for cash, net of
placement costs of $6,548 .......... 57,031 457 248,452 -- -- 248,909
Issuance of stock upon conversion of
notes .............................. 23,865 191 107,204 -- -- 107,395
Issuance of stock for cash upon
exercised warrants ................. 35,730 286 124,767 -- -- 125,053
Issuance of stock in lieu of cash to
directors/stockholders who provide
professional services .............. 30,203 242 86,063 -- -- 86,305
Issuance of stock in lieu of cash to
employees for accrued salaries ..... 78,701 630 243,153 -- -- 243,783
Net loss for the year ................ -- -- -- -- (2,736,792) (2,736,792)
----------- ---------- ----------- ------------ ------------ ------------
Balance at December 31, 1995 ......... 1,123,341 8,989 3,245,462 -- (4,998,491) (1,744,040)

Balance at December 31, 1995 ......... 1,123,341 $ 8,989 $ 3,245,462 $ -- $ (4,998,491) $ (1,744,040)
Issuance of stock, net ............... 400,000 3,200 931,800 -- -- 935,000
Issuance of stock upon conversion of
notes and accrued interest ......... 300,327 2,402 693,081 -- -- 695,483
Issuance of stock for cash upon
exercised warrants ................. 88,250 705 171,695 -- -- 172,400
Issuance of stock in lieu of cash to
stockholders who provide
professional services .............. 7,500 60 18,690 -- -- 18,750
Issuance of stock in lieu of cash to
employees for accrued salaries ..... 3,256 25 8,115 -- -- 8,140
Net loss for the six months ended
June 30, 1996 ...................... -- -- -- -- (1,010,450) (1,010,450)
----------- ---------- -------------- ------------ ------------ ------------
Balance at June 30, 1996 (Unaudited) 1,922,674 $ 15,381 $ 5,068,843 $ -- $ (6,008,941) $ (924,717)
=========== ========== ============== ============ ============ ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>
OCUREST LABORATORIES, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------- ------------------------------
1994 1995 1995 1996
---------------- ---------------- ------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss ................................... $ (1,689,320) $ (2,736,792) $ (929,778) $ (1,010,450)
Adjustments to reconcile net loss to net cash
used in operating activities: ..............
Professional services paid with stock ..... 5,400 86,305 27,000 18,750

Accrued salaries paid with stock ............ -- 243,783 118,848 8,140
Interest expense paid with stock ............ -- -- 7,394 53,425
Depreciation and amortization ............... 63,128 102,986 51,264 65,098
Changes in assets and liabilities ...........
Increase in accounts receivable ............ (22,066) (43,074) (65,508) (175,503)
Increase in inventories .................... (325,854) (216,217) (24,009) (305,112)
Increase in prepaid expenses ............... (21,056) (43,356) (2,944) (65,688)
Increase (decrease) in accounts payable ... 524,646 1,340,259 (451,275) (262,248)
Increase in accrued expenses ............... 251,786 108,748 194,737 54,002
-------------- --------------- -------------- --------------
Net cash used in operating activities .... (1,213,336) (1,157,358) (1,074,271) (1,622,586)
Cash flows from investing activities ........
Purchase of property and equipment ........ (606,420) (4,185) (47,744) (398,490)
Deposits on fixed assets .................... -- (186,340) -- 186,340
Increase in deposits ........................ (6,600) (5,000) -- --
-------------- --------------- -------------- --------------
Net cash used in investing activities .... (613,020) (195,525) (47,744) (212,150)
Cash flows from financing activities ........
Proceeds from issuance of common stock, net 1,304,366 373,962 363,109 1,107,400
Proceeds from new borrowings ................ 277,498 900,692 713,439 1,079,609
Principal repayments on indebtedness ....... (5,000) -- -- (270,000)

(Increase) decrease in deferred offering
costs ..................................... 25,000 (5,000) (16,500) (78,742)
-------------- --------------- -------------- --------------
Net cash provided by financing activities 1,601,864 1,269,654 1,060,048 1,838,267
-------------- --------------- -------------- --------------
Net increase (decrease) in cash .............. (224,492) (83,229) (61,967) 3,531
Cash at beginning of period .................. 309,328 84,836 84,836 1,607
-------------- --------------- -------------- --------------
Cash at end of period ........................ $ 84,836 $ 1,607 $ 22,869 $ 5,138
============== =============== ============== ==============
Supplemental disclosure of cash flow
information: ...............................
Cash paid during the period for: ...........
Interest .................................. $ 17,767 $ 32,340 $ 8,920 $ 12,896
============== =============== ============== ==============
Noncash transactions: ........................
Conversion of notes payable to common stock $ 238,000 $ 107,395 $ 100,000 $ 642,058
============== =============== ============== ==============
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION

PRESENTATION

The interim financial statements as of June 30, 1995 and 1996 and the six
months then ended as included herein are unaudited. However, in the opinion of
management, such information reflects all adjustments, consisting only of normal
recurring accruals necessary for a fair presentation of the information shown.
The interim financial statements for the periods stated and notes presented
herein do not contain certain information included in the Company's annual
financial statements and notes as also herein presented. Results for interim
periods are not necessarily indicative of results expected for the full year.

OPERATIONS

Ocurest Laboratories, Inc. (the "Company") was incorporated in the State of
Florida on April 29, 1991. In July 1994, the Company began selling Ocurest
Sterile Eyedrops, a line of non-prescription eye medications featuring a
patented new dispenser for delivering ophthalmic drugs into the eye.

CASH

Cash and cash equivalents include cash on deposit in checking and money
market accounts with maturities of three months or less.

INVENTORIES

Inventories are principally raw materials and finished goods held for resale
and are stated at the lower of cost (first in, first out) or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the related assets which range from 5 to 10 years.

ORGANIZATIONAL COSTS

Organizational costs were capitalized and are being amortized using the
straight-line method over five years. Accumulated amortization was $2,400,
$3,200 and $3,600 at December 31, 1994, December 31, 1995 and June 30, 1996,
respectively.

PATENT AND TRADEMARK LICENSING RIGHTS

The Company has acquired the exclusive worldwide licensing rights to certain
patents and trademarks from a previously related party (see Note E) and is
capitalizing additional costs to maintain and protect these patents and
trademarks as they are incurred. These costs are being amortized over ten years,
the estimated economic life of the patent, using the straight line method.

F-7
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION--
(CONTINUED)

ADVERTISING

The Company expenses the cost of advertising, which includes production
costs, media time and space as costs are incurred. Total advertising expense for
the years ended December 31, 1994, December 31, 1995 and the six months ended
June 30, 1996, amounted to approximately $567,000, $1,528,000 and $301,000,
respectively.

INCOME TAXES

The Company accounts for income taxes under the provisions of FAS 109,
"Accounting for Income Taxes." This pronouncement requires accounting for
deferred taxes utilizing the liability method, which applies the enacted
statutory rates in effect at the balance sheet date to differences between the
book and tax basis of assets and liabilities. The resulting deferred tax
liabilities and assets are adjusted to reflect changes in tax laws.

FINANCIAL INSTRUMENTS

The carrying values of cash and cash equivalents, trade receivables, accounts
payable and notes payable approximate fair value due to the short-term
maturities of these instruments.

USE OF ESTIMATES

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amount of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

STOCK OPTIONS

Options granted under the Company's Stock Option Plans are accounted for
under APB 25, "Accounting for Stock Issued to Employees," and related
interpretations. In November 1995, the Financial Accounting Standards Board
issued Statement 123, "Accounting for Stock-Based Compensation," which will
require additional proforma disclosures for companies that will continue to
account for employee stock options under the intrinsic value method specified in
APB 25. The Company plans to continue to apply APB 25 and the only effect of
Statement 123 in 1996 is the new disclosure requirement.

NET LOSS PER SHARE

Net loss per share has been computed by dividing net loss by the weighted
average number of shares of common stock and common stock equivalents
outstanding during each period. The weighted average number of shares of common
stock and common stock equivalents used for computing net loss per share was
1,459,059 and 1,767,562 for the years ended December 31, 1994 and 1995,
respectively,

F-8
<PAGE>
OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION--
(CONTINUED)

and 1,725,825 and 2,527,613 for the six months ended June 30, 1995 and 1996,
respectively. The weighted average includes the effect of common stock,
options and warrants issued within one year of the proposed Initial Public
Offering ("IPO") at prices below the IPO price, as calculated under the
treasury stock method, and have been retroactively restated for a 1 for 2
reverse stock split that was approved on July 15, 1996 (See Note P). The
weighted average number of shares of common stock and common stock
equivalents was not computed utilizing the modified treasury stock method as
this method is antidilutive.

SUPPLEMENTAL PRO FORMA NET LOSS AND NET LOSS PER SHARE

The Company's supplemental pro forma net loss and net loss per share for the
year ended December 31, 1995 and the six months ended June 30, 1996 are
$2,670,192 and $977,150 and $1.40 and $0.37, respectively.

The supplemental pro forma net loss and net loss per share reflect the
issuance of shares necessary to retire $555,000 of notes payable and the
resulting decrease in net loss in the amount of $66,600 and $33,300 for the year
ended December 31, 1995 and the six months ended June 30, 1996, respectively, as
of the beginning of 1995. The calculation is based on the weighted average
shares outstanding used in the calculation of net loss per share, adjusted for
the estimated shares that would be issued by the Company, i.e. 138,750 shares at
$4.00 per share, to retire these obligations.

ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that long-lived assets and certain intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. This
statement had no impact on the Company's results of operations or financial
position upon adoption in 1996.

NOTE B-GOING CONCERN

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has sustained substantial
losses from operations since the date of inception, and such losses have
continued through the year ended December 31, 1995. In addition, the Company has
used more cash than capital raised and provided through its operations which
resulted in the working capital deficit of $1,975,824 as of December 31, 1995.
As of January 31, 1996, the Company also became delinquent on $250,000 of notes
payable.

In view of the matters described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to raise funds to continue to fund
its operations and planned expansion. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts or amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.

F-9
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE B-GOING CONCERN--(CONTINUED)

In addition to the debt conversion, debt issuance and the private placement
of its common stock described in Note P, the Company has entered into a Letter
of Intent (Note O) with RAF Financial Corporation relating to a proposed IPO of
its common stock and warrants. This offering is intended to generate net
proceeds to the Company of approximately $6,656,000.

NOTE C-INVENTORIES

Inventories consist of the following at:

DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- -------------- ------------
(UNAUDITED)
Raw materials $ 68,406 $ 44,646 $ 68,742
Finished goods 257,448 497,425 778,441
--------------- -------------- ------------
$325,854 $542,071 $847,183
=============== ============== ============

NOTE D-PROPERTY AND EQUIPMENT

Property and equipment consists of the following at:

DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- -------------- -------------
(UNAUDITED)
Manufacturing equipment ..... $648,565 $ 652,295 $1,050,784
Furniture and fixtures ....... 2,268 2,723 2,723
Computer equipment ........... 7,111 7,111 7,111
--------------- -------------- -------------
657,944 662,129 1,060,618
Less accumulated depreciation (39,342) (118,828) (172,175)
--------------- -------------- -------------
$ 618,602 $ 543,301 $ 888,443
=============== =============== =============

At December 31, 1995, the Company had placed a $310,000 order for certain
product specific molds to be used in its manufacturing process, of which
approximately $152,000 had been billed and is reflected in deposits and accounts
payable in the accompanying financial statements.

As of December 31, 1995, the Company has also paid a $34,000 deposit towards
the purchase of specialized machinery with an acquisition price of $370,000. The
deposit is subject to the risk of forfeiture in the event the machinery is not
purchased by October 31, 1996.

NOTE E-PATENT AND TRADEMARK LICENSING RIGHTS

The Company has acquired the exclusive worldwide licensing rights to certain
patents and trademarks for the newly developed eye drop dispenser from a related
party, Acorn Laboratories, Inc. ("Acorn"), owned by William J. Casey, past
Chairman of the Company. The Company has paid to Acorn $170,000 and accrued for
an additional $30,000 through December 31, 1995, both of which represent an
initial payment on the purchase from Acorn.

F-10
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION--
(CONTINUED)

Further, the Company has agreed to pay Acorn a royalty of 4% of future net
sales up to a maximum royalty of $9,800,000. The Company has capitalized the
initial payment and other related patent costs and is amortizing them using the
straight line method over a ten year life. Upon payment of the maximum royalty
of $9,800,000, Acorn has agreed to assign the patent and trademark to the
Company. Acorn has also agreed to allow the Company to defer payment of certain
royalties until certain earnings levels are attained. The agreement also
provides for a payment to Acorn in the event of a change in control of the
Company.

Patent and trademark licensing rights consist of the following at:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- -------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Patent and trademark licensing rights $227,000 $227,000 $227,000
Less accumulated amortization ....... (62,700) (85,400) (96,750)
--------------- -------------- ------------
$164,300 $141,600 $130,250
=============== ============== ============
</TABLE>

F-11
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE F-NOTES PAYABLE -STOCKHOLDERS

Notes payable are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1994 1995 1996
--------------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable, minority stockholders, fixed interest
at 10%, maturing June 1994 ............................ $ 5,000 $ 5,000 $ 5,000
Notes payable, minority stockholders, fixed interest
at 10%, maturing February 1995 ........................ 10,000 10,000 10,000
Notes payable, minority stockholders, fixed interest
at 12%, maturing June 1994 ............................ 50,000 -- --
Note payable, minority stockholders, fixed interest at
12%, maturing January 1995 ............................ 123,537 50,000 50,000
Note payable, minority stockholders, fixed interest at
15%, maturing June 1994 ............................... 10,000 10,000 10,000
Note payable, minority stockholders, fixed interest at
12%, maturing October 1995 ............................ -- 73,966 --
Note payable, minority stockholder, fixed interest at
12%, maturing April 1995 .............................. -- 50,000 50,000
Note payable, Director, fixed interest at 12%,
maturing November 1996 ................................ -- 200,000 --
Note payable, Director, fixed interest at 12%,
maturing January 1996 ................................. -- 91,906 --
Note payable, minority stockholders, interest at 12%,
maturing January 1996 ................................. -- 135,000 85,000
Note payable, Director, interest at prime plus 1.5%,
maturing December 31, 1995 ............................ -- 238,823 --
Note payable, individual, interest at 12%, maturing
June 1996 ............................................. -- -- 50,000
Note payable, corporation, interest at prime plus 2%,
maturing September 1996 ............................... -- -- 260,000
Note payable, minority shareholder, interest at 12%,
maturing June 1996 .................................... -- -- 35,000
------------ -------------- ------------
$198,537 $864,695 $555,000
============ ============== ============
</TABLE>
Principal and interest is due at maturity for all notes. Accrued interest due
during 1994 on these notes was paid. The accrued and unpaid interest as of
December 31, 1995 amounted to $48,106 of which $31,336 was converted into common
stock during January 1996 and is classified in the long-term portion of notes
payable stockholders in the 1995 financial statements. Interest expense was
$20,626 and $112,326 for the years ended December 31, 1994 and 1995 and $148,082
for the six months ended June 30, 1996, respectively.

Subsequent to December 31, 1995, the Company converted $625,921 of notes
payable to common stock. This portion of the notes payable has been classified
as long-term in the 1995 financial statements.

F-12
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE G-NOTES PAYABLE -FACTOR

During 1995, the Company entered into an agreement with a factor for the
financing of accounts receivable and inventory. Under the terms of the accounts
receivable agreement, the Company sells its accounts receivable to the factor
and the factor advances the Company an amount equal to 70% of the accounts
receivable sold. The factor's initial fee for this service is equal to 3% of the
amount advanced. Under certain circumstances, such fee may increase by an
additional 3%. However, the Company can avoid the additional fees by replacing
an unpaid invoice with a new invoice of equal value prior to the expiration of
the aforementioned 30 day period. Under the terms of the inventory agreement,
the factor will finance 50% of the finished goods inventory cost. Financings are
made in the form of a "sale" whereby the factor buys the inventory and then
re-sells it to the Company when the sale is made to the end customer. The factor
charges a fee ranging from 3% to 6% of the inventory amounts financed. Based
upon the escalating fee schedule and the Company's ability to substitute sales
invoices, all rights and obligations associated with a sale have not occurred
and therefore this transaction has been accounted for as a financing transaction
in the financial statements.

The total amounts financed under this agreement amounted to $127,539 and
$665,721 as of December 31, 1995 and June 30, 1996, respectively.

NOTE H-COMMITMENTS AND CONTINGENCY

LEASES

The Company is obligated under noncancelable leases which are classified as
operating leases. The Company conducts operations in a facility under a three
year lease that expires on June 30, 1997. The rent expense for real property was
$17,530, $21,530 and $6,446 for the years ended December 31, 1994 and 1995, and
for the six months ended June 30, 1996, respectively. Total rent expense for the
years ended December 31, 1994 and 1995 and for the six months ended June 30,
1996, amounted to approximately $19,200, $25,221 and $13,005, respectively.

At December 31, 1995, the following are the minimum rental payments under
such operating leases which expire at various dates through 1997:

OFFICE OFFICE
YEAR TOTAL RENTAL EQUIPMENT
- ------- -------- --------- -----------
1996 24,834 22,806 $2,028
1997 13,021 11,669 1,352
-------- --------- -----------
37,855 34,475 $3,380
======== ========= ===========

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with three key executives
which provide for base salaries ranging from $66,000 to $150,000. Total
compensation paid under these agreements amounted to approximately $221,000 and
$326,000 for the years ended December 31, 1994 and 1995, respectively. The
employment agreements expire on December 31, 1996, and are extended
automatically for successive one-year terms of employment. The Company's
remaining aggregate commitments at December 31, 1995, under such contracts,
total approximately $331,000.

F-13
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE I-INCOME TAXES

The Company has a net operating loss carryforward for tax purposes of
approximately $3,821,000, which will expire during the years 2006 through 2011.
As a result of certain cumulative changes in the Company's stock ownership over
the past three years, future use of the net operating loss carryforwards may be
substantially limited by the change in ownership rules. The Company has
deductible temporary differences which consists of the following at:

DECEMBER 31,
-----------------------
1994 1995
------------ -----------
Allowance for doubtful accounts ............. -- 5,000
Start up and organization costs ............. 741,000 577,000
Depreciation and amortization ............... 144,000 67,000
Accrued salaries ............................ 117,000 47,000
Inventory capitalization ................... 56,000 90,000
------------ ----------
1,058,000 786,000
============ ==========

The following tax benefit was recorded for the net operating loss
carryforwards and the deductible temporary differences at:

DECEMBER 31,
---------------------------
1994 1995
----------- --------------
Current assets:
Deferred tax benefit ..................... $ 127,000 $ 135,000
Less valuation allowance ................. (127,000) (135,000)
----------- --------------
Deferred tax benefit -net of allowance .. $ -- $ --
=========== ==============
Other assets:
Deferred tax benefit ..................... $ 716,000 $ 1,598,000
Less valuation allowance ................. (716,000) (1,598,000)
----------- --------------
Deferred tax benefit -net of allowance $ -- $ --
=========== ==============

NOTE J-STOCK OPTIONS

In July 1994, the Board of Directors amended the 1992 Stock Option Plan (the
"Plan") which reserves 143,750 shares of common stock for issuance under the
Plan. Options may be granted as qualified options under Section 422 of the
Internal Revenue Code, or as non-qualified options, as deemed appropriate.
Qualified options must have exercise prices equal to at least 100% of the fair
market value of the stock at the date of grant. The term of the options is
generally ten years and they are exercisable in one-third installments annually
from the date of grant.

In addition, the Company has granted other non-qualified options. The term of
these options is for a period of 10 years and they remain exercisable throughout
their term. Options granted and outstanding are as follows at:

F-14
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE J-STOCK OPTIONS--(CONTINUED)

GRANTED UNDER THE PLAN
----------------------------------------
QUALIFIED NON-QUALIFIED OTHER NON-QUALIFIED
------------------- ------------------ -------------------
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- --------- -------- --------- ---------
December 31, 1992 9,375 $4.00 18,750 $4.00 5,125 $ 4.00
December 31, 1993 3,125 $4.00 18,750 $4.50 1,875 $4.00
3,125 $4.50
December 31, 1994 3,125 $4.50 -- $ -- 18,000 $4.50
December 31, 1995 5,000 $4.50 56,250 $4.80 22,750 $4.50
-------- --------- --------
23,750 93,750 47,750
======== ========= =========

Non-qualified options are currently exercisable, and no compensation expense
has been recognized under any of these grants. As of December 31, 1995, no
options have been exercised.

NOTE K-WARRANTS

During the years ended December 31, 1994 and 1995, the Company issued
warrants to acquire common stock of the Company. Each warrant represents the
right to purchase one share of common stock for prices ranging from $4.00 to
$12.00 per warrant. Warrants unexercised as of December 31, 1995 are as follows
(exercise prices are retroactively restated to reflect 1 for 2 reverse stock
split -see Note P):

NUMBER OF WARRANTS EXERCISE PRICE EXPIRATION DATE
- ------------------- --------------- ----------------
463,545 $ 8.00 January 1997
9,750 $12.00 January 1997
43,750 $11.00 January 2000
10,784 $ 7.20 November 1997
27,000 $ 5.00 January 1996
50,000 $ 4.50 June 1997
50,000 $ 4.00 June 2000

In January 1996, the Company allowed warrant holders to exercise their
warrants at 40% of their exercise price provided that they exercised on or
before January 31, 1996. Pursuant to this agreement, 88,250 warrants were
exercised for $172,400. The incremental value of the modified warrants is not
significantly different than the value of the previous warrants.

In February 1996, the Company agreed to permanently reduce the exercise price
of all warrants with an exercise price above $5.00 per share to $5.00 share (see
Note P).

NOTE L-SIGNIFICANT CUSTOMERS

For the year ended December 31, 1994, the Company's three largest customers
accounted for 25%, 23% and 23%, respectively, of the Company's gross sales. For
the year ended December 31, 1995, the Company's three largest customers
accounted for 43%, 13% and 11%, respectively, of the Company's gross sales. For
the six months ended June 30, 1996, the Company's three largest customers
accounted for 13%, 11% and 10%, respectively, of the Company's gross sales.

F-15
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE M-SIGNIFICANT VENDORS

The Company has purchases from two vendors which represent 97% of net
purchases in 1995. The Company does not anticipate any interruption in supplies
from its vendors. In the event supplies were disrupted for any reason,
management believes alternative sources for these purchases are available.

NOTE N-AFFILIATED TRANSACTIONS

During 1994, the Company entered into consulting agreements with each of the
previous Chairman of the Board of Directors and a director to provide certain
advertising consulting activities. Total consulting expense during the years
ended December 31, 1994 and 1995 was $28,000 and $27,000, respectively, and the
amount accrued and unpaid as of December 31, 1994 and 1995 was $5,600 and $-0-,
respectively.

NOTE O-INITIAL PUBLIC OFFERING

The Board of Directors has authorized the filing of a registration statement
relating to an IPO for Units consisting of 2,000,000 shares of common stock and
2,000,000 Class A warrants. In connection with the offering, during February
1996 the Company entered into a Letter of Intent with RAF Financial Corporation
(RAF). RAF individually or as the representative of a group of underwriters
intends to underwrite the shares and the warrants being offered on a "firm
commitment basis." The underwriters will be paid 9% of the IPO proceeds and a
non-accountable expense allowance (of which $30,000 has been paid), will be
given the right to purchase warrants for 10% of the shares and will be given the
right to purchase 10% of the warrants sold exclusive of over-allotment shares.

The Letter of Intent, among other things, provides for certain anti-dilution
and registration rights to RAF in the warrant for 10% of the shares and allows
designees of RAF to observe all Board of Directors meetings for three years.

NOTE P-SUBSEQUENT EVENTS

In January 1996, the Company converted $657,257 of its debt to common stock.
This conversion reduces long-term debt to $-0- and decreases total stockholders'
deficit to $1,086,783.

In addition to the warrant exercise described in Note K, between January 1,
1996 and June 30, 1996 the Company sold and issued 400,000 shares of its common
stock for approximately $935,000.

During April 1996, the Company issued a $260,000 promissory note which is to
be repaid at the earlier of September 1996 or the closing of the IPO. In
connection with this note, the Company issued warrants to purchase 50,000 shares
of the Company's common stock.

On April 19, 1996, the Company's Board of Directors approved a 1 for 2
reverse-split of its issued and outstanding shares of common stock, warrants and
options. The Company will issue new certificates to shareholders following the
closing of the Company's forthcoming IPO. All per share and weighted average
share amounts, for all periods presented, have been restated to reflect the
effect of the 1 for 2 reverse stock split. The Company amended its Article of
Incorporation by increasing the authorized shares of common stock from 3 million
to 25 million shares and preferred stock from 1 million to 5

F-16
<PAGE>

OCUREST LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996 (UNAUDITED)

NOTE P-SUBSEQUENT EVENTS--(CONTINUED)

million shares. The Company also approved the post-split warrants with an
exercise price greater than $5.00 to be $5.00 and all warrants with expiration
dates falling in calendar year 1997 to a common expiration date of May 31, 1998.

In September 1996, the Company borrowed an additional $600,000 from certain
individuals including a shareholder, at 12% interest. The loans and accrued
interest mature upon the earlier of 10 days after the closing of the initial
public offering or 6 months from the date of the loans. In connection with the
loans, the Company issued warrants to purchase an aggregate of 300,000 shares of
its common stock at $2.40 per share. The warrant holders have certain piggyback
registration rights.

F-17
<PAGE>

PHOTOGRAPH #2 (Photo storyboard consisting of nine small photographs with
captions)

<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS .
- -----------------------------------------------------------------------------

TABLE OF CONTENTS
- -----------------------------------------------------------------------------

PAGE
---------

Prospectus Summary ................................ 3
Risk Factors ...................................... 6
Use of Proceeds ................................... 14
Dividend Policy ................................... 14
Dilution .......................................... 15
Capitalization .................................... 16
Selected Financial Data ........................... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ................................... 18
Business .......................................... 21
Management ........................................ 28
Security Ownership of Certain Beneficial Owners
and Management .................................... 32
Selling Shareholders .............................. 33
Certain Relationships and
Related Transactions .............................. 34
Description of Securities ......................... 37
Shares Eligible for Future Sale ................... 40
Underwriting ...................................... 42
Legal Proceedings ................................. 44
Experts ........................................... 44
Legal Matters ..................................... 44
Indemnification for Securities Act Liabilities ... 44
Additional Information ............................ 45
Index to Financial Statements ..................... F-1

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

UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE UNITS, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

OCUREST LABORATORIES, INC.

2,000,000 UNITS

EACH CONSISTING OF ONE SHARE OF
COMMON STOCK AND
ONE CLASS A
COMMON STOCK
PURCHASE WARRANT
- -----------------------------------------------------------------------------
PROSPECTUS
- -----------------------------------------------------------------------------

, 1996