USA DETERGENTS INC, 424B4, 1996-06-05

USA DETERGENTS INC
424B4, 1996-06-05
SOAP, DETERGENTS, CLEANG PREPARATIONS, PERFUMES, COSMETICS

Previous: BAB HOLDINGS INC, 8-K, 1996-06-05

Next: DEVCAP TRUST, 497, 1996-06-05

<PAGE>
Filed Pursuant to Rule 424(b)(4)
Registration File No.: 333-04327

<PAGE>

300,000 SHARES
COMMON STOCK

#############################################################################
GRAPHIC OMITTED
#############################################################################

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

All the shares of Common Stock of USA Detergents, Inc. (the "Company" or
"USA Detergents") offered hereby are being sold by the Company.

The Company expects to offer the shares of Common Stock offered hereby to
one or more institutional or other investors in transactions on The Nasdaq
National Market, in private transactions or otherwise, at negotiated prices
and terms. Pursuant to the terms of a Placement Agent Agreement between the
Company and PaineWebber Incorporated (the "Placement Agent"), the Placement
Agent has agreed to act as the placement agent for the Company in connection
with the sale of the Common Stock offered hereby. See "Plan of Distribution."

The Common Stock is quoted on The Nasdaq National Market under the symbol
"USAD." As of June 3, 1996, the last reported sale price of the Common Stock
as reported by The Nasdaq National Market was $41.75 per share. See "Price
Range of Common Stock."

SEE "RISK FACTORS" ON PAGES 5 TO 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.

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

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.

- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO PLACEMENT PROCEEDS TO
PURCHASERS AGENT FEE (1) COMPANY (2)
- ------------ ------------- ------------- -------------
<S> <C> <C> <C>
Per Share .. $ 39.375 $ .05 $ 39.325
- ------------ ------------- ------------- -------------
Total ....... $11,812,500 $15,000 $11,797,500
- ------------ ------------- ------------- -------------
</TABLE>
- -----------------------------------------------------------------------------

(1) See "Plan of Distribution."

(2) Before deducting expenses estimated at $75,000, which are payable by
the Company.

--------------
THE DATE OF THIS PROSPECTUS IS JUNE 5, 1996.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary ................................................ 3
Risk Factors ...................................................... 5
The Company ....................................................... 9
Use of Proceeds ................................................... 10
Prior S Corporation Status ........................................ 10
Dividend Policy ................................................... 10
Price Range of Common Stock ....................................... 11
Capitalization .................................................... 12
Selected Financial Data ........................................... 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations .................... 14
Business .......................................................... 20
Management ........................................................ 28
Certain Transactions .............................................. 33
Security Ownership of Certain Beneficial Owners and Management ... 34
Description of Capital Stock ...................................... 35
Shares Eligible for Future Sale ................................... 36
Plan of Distribution .............................................. 37
Legal Matters ..................................................... 37
Experts ........................................................... 37
Change of Accountants ............................................. 38
Available Information ............................................. 38
Index to Consolidated Financial Statements ........................ F-1
</TABLE>

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus (a) assumes no exercise of outstanding stock options for
368,145 shares of Common Stock as of March 31, 1996, and (b) has been adjusted
to reflect (i) a reorganization of the Company into a Delaware corporation
effected in August 1995, (ii) the issuance of approximately 88,167 shares of
Common Stock for each share of common stock of the Company's predecessor in
connection with the reorganization and (iii) a 3-for-2 stock split effected in
the form of a 50% stock dividend paid on February 9, 1996 (the "Stock Split").
Unless the context otherwise requires, the "Company" or "USA Detergents" shall
mean USA Detergents, Inc., its wholly-owned subsidiary and its predecessor
prior to the reorganization. See "The Company."

THE COMPANY

USA Detergents is a leading manufacturer and marketer of quality
nationally distributed value brand laundry and household cleaning products.
The Company currently markets its products in eight laundry and household
product categories and features eleven distinct value brands. Three of the
Company's brands, XTRA(Registered Trademark), Nice'N FLUFFY(Registered
Trademark) and Touch of Glass(Registered Trademark), currently rank among the
ten largest brands in their respective product categories in terms of total
retail sales in the United States. XTRA(Registered Trademark), Nice'N
FLUFFY(Registered Trademark) and Touch of Glass(Registered Trademark)
represented 60.6%, 20.1% and 3.2%, respectively, of the Company's net sales in
1995. The Company sells its products to approximately 1,000 retailers with
approximately 30,000 retail outlets throughout the United States including
mass merchandisers, supermarkets, variety and dollar stores, drug stores and
small grocery stores, such as Wal-Mart, Hannaford Bros., Dollar General and
Rite Aid.

USA Detergents' business strategy is to provide value to retailers by
enabling retailers to increase sales and realize attractive profit margins on
the Company's value brand products while providing value to consumers and to
promote brand and corporate identification of its products. The Company's
strategy for continued growth includes further penetration of existing
distribution channels and expansion of its product offerings, including
expansion into new product categories, in an effort to capture a greater share
of the estimated $15 billion annual market for laundry and household cleaning
products in the United States. Although prior financial results are not
necessarily indicative of future results, the success of the Company's
strategy has resulted in the Company's net sales increasing from $5.0 million
in 1990 to $104.9 million in 1995, a compound annual growth rate of 83.9%. Net
sales in 1995 increased by 52.7% over 1994 net sales of $68.7 million. From
1990 to 1995, income from operations increased from $196,000 to $9.7 million,
a compound annual growth rate of 118.3%. Income from operations in 1995
increased by 98.8% over 1994 income from operations of $4.9 million.

The Company believes that consumer purchases of laundry and household
cleaning products are determined, in large part, by price, with certain
consumers willing to pay a premium for leading national brand names and the
latest packaging and technology, while other consumers demand value-priced
brands incorporating certain features found in premium-priced brands. The
Company believes that consumers are increasingly purchasing products at either
the premium-priced or value-priced ends of the laundry and household cleaning
products market and that the Company will continue to benefit from the
consumer trend away from purchasing mid-priced brands due to value brands'
better price-value relationship.

The Company provides value to retailers by assisting them in profitably
optimizing their retail space in traditionally low margin product categories.
The Company provides value to consumers by offering attractively-packaged,
high quality, brand name laundry and household cleaning products at prices
significantly below the leading national brands. The Company believes that it
is able to maintain attractive profit margins for retailers while offering
consumers a better price-value relationship compared to other leading national
brands as a result of the Company's continuing emphasis on (i) significantly
lower advertising and promotion expenses, (ii) significantly lower research
and development expenditures, (iii) a lower overhead cost structure and (iv)
manufacturing high quality products at substantially the same costs as leading
national brand manufacturers.

<PAGE>

THE OFFERING

Common Stock Offered by
the Company ........... 300,000 shares

Common Stock to be
Outstanding after
the Offering(1) ....... 13,692,372 shares

Use of Proceeds ........ To pay down borrowings under the Company's
Line of Credit. Remaining net proceeds, if
any, will be used to finance capital
expenditures, for working capital needs and
for general corporate purposes.

Nasdaq National Market
Symbol ................ "USAD"
- ------------

(1) Does not include, as of March 31, 1996, (i) an aggregate of 463,935 shares
of Common Stock reserved for issuance under the Company's stock option
plans, including outstanding options to purchase 249,000 shares of Common
Stock, and (ii) an aggregate of 119,145 shares of Common Stock issuable
upon exercise of an outstanding stock option at an exercise price of $2.00
per share. See "Management--Executive and Directors' Compensation" and
"--Stock Option Plans."

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ --------------------
1991(1) 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales .......................... $5,790 $21,860 $46,939 $68,663 $104,878 $23,255 $34,067
Gross profit ....................... 882 4,919 10,043 17,075 31,957 6,426 11,542
Income (loss) from operations (2) . (69) 628 705 4,893 9,725 1,791 3,590
Earnings (loss) before income taxes (191) 436 322 4,350 9,181 1,603 3,423
Net income (loss) .................. (191) 436 300 4,267 7,025 1,572 2,088
Net income per share ............... $ 0.16
=========
Weighted average number of shares
outstanding ....................... 13,392
=========
PRO FORMA INCOME STATEMENT DATA:(3)
Pro forma net income ............... $ 5,425 $ 969
Pro forma net income per share .... 0.43 0.08
Weighted average number of
shares outstanding ................ 12,494 11,915
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED(4)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital ...... $11,508 $23,231
Total assets ......... 52,600 54,322
Short-term debt ...... 10,334 333
Long-term debt ....... 1,739 1,739
Stockholders' equity 22,380 34,103
<FN>
- ------------

(1) The selected financial data for the year ended December 31, 1991, was
derived from financial statements audited by Goldstein Golub Kessler &
Company, P.C., whose report for that year does not appear in this
Prospectus and includes a disclaimer as to the income statement since
Goldstein Golub Kessler & Company, P.C. was not present for the taking
of physical inventory at the beginning of the year.

(2) Includes non-recurring expenses consisting of loss on theft of
inventory of $398,000 in 1992, and plant relocation expense of $474,000
and loss on theft of inventory of $419,000 in 1993.

(3) Pro forma net income represents net income less a provision for income
taxes that would have been required had the Company been taxed as a C
corporation during the entire period presented. The Company elected to
be treated as a Subchapter S corporation until August 9, 1995, and, as
a result, was not subject to federal and certain state income taxes
prior to that time. No pro forma adjustments have been made for
additional compensation expense paid to the existing stockholders of
the Company who are officers of the Company associated with the
termination of the Company's S corporation status in connection with
its initial public offering or for a reduction in interest expense

relating to the pay down of borrowings under the Company's line of
credit with the net proceeds of the initial public offering because the
net effect of such adjustments is not material. See Note 1 of "Notes to
Consolidated Financial Statements" for the years ended December 31,
1993, 1994 and 1995 and "Prior S Corporation Status."

(4) Adjusted to reflect the sale of 300,000 shares of Common Stock offered
by the Company hereby at an offering price of $39.375 per share and the
anticipated application of the estimated net proceeds therefrom. See
"Use of Proceeds," and "Capitalization."

<PAGE>

RISK FACTORS

In addition to all other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Common Stock offered hereby.

COMPETITION

The Company experiences substantial competition from a number of
suppliers of laundry and household cleaning products, including larger
premium-priced, mid-priced and private label suppliers. Many of these
suppliers offer broader product lines and have substantially greater
financial, technical, marketing, distribution and other resources than the
Company. In addition, there are several value brand suppliers which compete
directly with the Company. The Company believes its products compete primarily
on the basis of price and it does not intend to compete on the basis of
premium-priced brand product features. See "Business--Household Products
Market Overview" and "--Competition."

The Company's competitors vary by product category, with one competitor
ranking as the market leader in retail sales in 1995 in five of the eight
laundry and household cleaning product categories in which the Company
currently competes. The Company estimates, based on published industry data
for the year ended December 31, 1995, that the two largest suppliers in the
laundry and household cleaning products industry held approximately 49%, in
the aggregate, of the domestic market for such products. These two suppliers,
Procter & Gamble Co. and Unilever N.V., accounted for an aggregate of
approximately 75% and 83% of 1995 domestic retail sales of liquid laundry
detergents and liquid fabric softeners, respectively. These two product
categories accounted for 52% and 20%, respectively, of the Company's net sales
in 1995. There can be no assurance that suppliers of premium-priced or
mid-priced brand laundry and household cleaning products will not enter the
value brand market for these products and compete directly with the Company.

The laundry and household cleaning products industry is characterized by
substantial price competition which is effected through changes in price,
product size and promotions. As a value brand supplier, the Company believes
it typically is not affected by price changes initiated by larger
premium-priced or mid-priced suppliers whose pricing is substantially higher
than the Company's pricing. Some suppliers of value brands or store brands
compete directly with the Company as low-price suppliers. Competitors may
attempt to gain market share by offering products at prices at or below those
typically offered by the Company. Competitive pricing has in certain cases
necessitated and may continue to necessitate price reductions by the Company
and has and may continue to result in lost orders. Although the Company has
not suffered significantly as a result of competitive pricing, there can be no
assurance that future price or product changes by the Company's competitors
will not have a material adverse effect on the Company or that the Company
will be able to react with price or product changes of its own to maintain its
current market position.

RAPID EXPANSION; LIMITED EXPERIENCE OF MANAGEMENT

Since its organization in 1988, the Company has experienced rapid growth
both in sales and product offerings. The growth of the Company has been, and
will continue to be, dependent upon a number of factors, including the ability
of the Company to successfully introduce new products, to increase sales to
existing retail customers and to sell its products to new retail customers. If
products introduced by the Company are discontinued or encounter production or
formulation problems, the Company's results of operations could be materially
adversely affected. There can be no assurance that the Company will be able to
maintain its present rate of growth.

In addition, the Company's growth has resulted in increased
responsibility for both existing and new management personnel. Certain of the
Company's management have limited or no experience in managing companies as
large as the Company. In addition, certain of the Company's key employees and
management personnel have recently joined the Company. The Company's ability
to manage growth effectively will depend upon the Company's ability to
integrate new personnel, to improve its operational, management and financial
systems and controls and to train, motivate and manage its employees. If the
Company's management is unable to manage growth effectively, the Company's
business, results of operations and financial condition would be materially
and adversely affected.

<PAGE>

DEPENDENCE ON MAJOR CUSTOMERS

The Company's five largest customers in the aggregate accounted for 28%
and 29% of net sales during 1994 and 1995, respectively, including Wal-Mart
which accounted for 10% of net sales in 1994 and 17% of net sales in 1995. One
other customer of the Company accounted for more than 5% of the Company's net
sales during 1994 and no other customer of the Company accounted for more than
5% of the Company's net sales in 1995. As is customary in the industry, the
Company does not have long-term contracts with its customers. A significant
reduction of purchases by any of the Company's largest customers could have a
material adverse effect on the Company's business and results of operations.
See "Business--Marketing and Distribution."

DEPENDENCE ON KEY PRODUCTS

Liquid XTRA(Registered Trademark) laundry detergent, the Company's
primary liquid laundry detergent brand, accounted for 50% and 52% of the
Company's net sales, respectively, for 1994 and 1995, and Nice'N
FLUFFY(Registered Trademark) liquid fabric softener, the Company's primary
liquid fabric softener brand, accounted for 18% and 20% of the Company's net
sales, respectively, for such years. In addition, the Company has made
substantial investments in manufacturing equipment and processes for these
products. The Company's financial results and condition are substantially
dependent on the continued success and growth of sales of these products. A
number of factors could limit sales by the Company of these products, or the
profitability of such sales, including competitive efforts by other
manufacturers of similar products, shifts in consumer preferences or
introduction and acceptance of alternative product offerings. See
"Business--Products."

DEPENDENCE ON SOLE OR LIMITED SOURCES OF SUPPLY

Certain chemicals, plastic bottles, packaging materials and manufacturing
equipment used in connection with the manufacture of the Company's products as
well as certain finished products sold by the Company are obtained from a sole
or a limited group of suppliers and subcontractors. The Company's reliance on
a sole supplier or limited groups of suppliers and subcontractors involves
several risks, including increased risk of inability to obtain adequate
supplies, and reduced control over pricing and timely delivery. Although the
timeliness, quality and pricing of deliveries from the Company's suppliers
have been acceptable to date and the Company believes that additional sources
of supply are generally available, there can be no assurance that supplies
will be available on an acceptable basis or that delays in obtaining new
suppliers, particularly of plastic bottles, will not have an adverse effect on
the Company. In 1995, the Company purchased approximately 45% of its liquid
chemicals from two suppliers, Stepan Company and Henkel Corporation, and all
of its powder detergent from one supplier, Cap City Products Company, Inc.
Additionally, substantially all of the bottles used by the Company at its
manufacturing facility are purchased from Owens-Illinois Plastic Products Inc.
and Owens-Illinois Closure Inc. (together, "Owens-Illinois"). The Company's
inability to obtain adequate supplies of chemicals, packaging materials,
manufacturing equipment or finished products could have a material adverse
effect on the Company's business. The Company has recently added a second
supplier of powder laundry detergent and has engaged a contract manufacturer
and distributor to supply liquid products. See "Business-- Manufacturing and
Supply."

RELIANCE ON MANUFACTURING FACILITIES

The Company manufactures substantially all of its liquid products at its
facility in North Brunswick, New Jersey. In January 1996, the Company added
significant new manufacturing capacity to its existing facility. The Company
expects to continue to expand its manufacturing capabilities by adding
production lines and increasing automation, either of which could result in
disruptions of the Company's manufacturing operations. The Company's
manufacturing operations use certain custom designed equipment which, if
damaged or otherwise rendered inoperable or unavailable, could result in the
disruption of the Company's manufacturing operations. Any extended
interruption of operations at the Company's manufacturing facility or at any
facility at which the Company outsources production could have a material
adverse effect on the business of the Company. The Company also continues to
selectively outsource production. The Company has recently engaged a
California-based contract manufacturer and

<PAGE>

distributor to supply liquid products and has recently added a second
supplier of powder laundry detergent. The Company spent approximately $3.9
million in 1995 and $2 million during the first quarter of 1996 to increase
manufacturing capacity and anticipates that it will expend approximately $4
million during the remainder of 1996 to fulfill its current expansion plans.
Funds for such expansion are expected to come from operations and the
Company's working capital line of credit (the "Line of Credit"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business--Manufacturing and
Supply."

DEPENDENCE ON KEY PERSONNEL

The Company believes that its Chairman and Chief Executive Officer, Uri
Evan, plays a significant role in the Company's success and that the loss of
the services of Mr. Evan could have an adverse effect on the Company. There
can be no assurance that the Company would be able to find a suitable
replacement for Mr. Evan. The Company has an employment agreement with Mr.
Evan which expires in June 1999. The Company does not maintain key man life
insurance on Mr. Evan. See "Management."

CONTROL BY EXISTING STOCKHOLDERS

Assuming the completion of this offering, eight stockholders, some of
whom are directors of the Company, will beneficially own approximately 52% of
the Company's outstanding Common Stock. As a result, these stockholders acting
in concert will continue to have the ability to elect or remove any or all of
the Company's directors and to control substantially all corporate activities
involving the Company, including tender offers, mergers, proxy contests or
other purchases of Common Stock that could give stockholders of the Company
the opportunity to realize a premium over the then prevailing market price for
their shares of Common Stock. See "Security Ownership of Certain Beneficial
Owners and Management."

INTELLECTUAL PROPERTY RISKS

Although the Company considers certain of its packaging, labels,
trademarks and designs to be proprietary, certain of these items may not be
protected by trademark or copyright registration. In addition, the Company
from time to time has received, and may receive in the future, communications
from third parties asserting that the Company's products, trademarks, designs,
labels or packaging infringe upon such third parties' intellectual property
rights. There can be no assurance that third parties will not successfully
assert claims against the Company with respect to existing or future products
or packaging. Should the Company be found to infringe upon the intellectual
property rights of others, the Company could be required to cease use of
certain products, trademarks, designs, labels or packaging or pay damages to
the affected parties, any of which could have a material adverse effect on the
business and operations of the Company. Substantial costs also may be incurred
by the Company in redesigning its labels or packaging, in selecting and
clearing new trademarks or in defending any legal action. See
"Business--Intellectual Property."

VARIABILITY OF QUARTERLY OPERATING RESULTS

The Company has experienced, and may experience in the future,
quarter-to-quarter fluctuations in its operating results. The Company's growth
has historically been somewhat slower in the fourth quarter than in other
fiscal quarters, primarily as a result of promotion-oriented retailers
providing reduced or less desirable display space for laundry and household
cleaning products during the holiday shopping season. The timing and
introduction of new products and other factors may also cause quarterly
fluctuations in the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results of Operations."

<PAGE>

ENVIRONMENTAL REGULATION

The Company is subject to various federal, state and local environmental
laws and regulations, including those relating to wastewater discharge, air
quality and the storage, handling and disposal of a variety of substances.
Some of the chemicals used by the Company and stored at its manufacturing
facility are materials regulated by federal or state environmental protection
agencies. While the Company has not had to make significant capital
expenditures for environmental compliance, the Company cannot predict with any
certainty its future capital expenditure requirements for environmental
compliance because of continually changing compliance standards and
technology. Consequently, unforeseen expenditures required to comply with such
laws and regulations, including unforeseen environmental liabilities, could
have a material adverse effect on the Company's business. The Company
maintains $6.0 million of insurance coverage for environmental liabilities.

PROVISIONS WITH POTENTIAL ANTI-TAKEOVER EFFECT

The Company's Certificate of Incorporation provides that up to 1,000,000
shares of Preferred Stock may be issued by the Company from time to time in
one or more series. The Board of Directors is authorized to determine the
rights, preferences, privileges and restrictions granted to and imposed upon
any wholly unissued series of Preferred Stock and to fix the number of shares
of any series of Preferred Stock and the designation of any such series,
without any vote or action by the Company's stockholders. The Board of
Directors may authorize and issue Preferred Stock with voting or conversion
rights that could adversely affect the voting power or other rights of the
holders of Common Stock. In addition, the potential issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company, may discourage bids for the Common Stock at a premium
over the market price of the Common Stock and may adversely affect the market
price of the Common Stock. See "--Control by Existing Stockholders" and
"Description of Capital Stock--Preferred Stock."

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common
Stock, other than S corporation distributions. The Company currently intends
to retain all of its earnings to finance the expansion and development of its
business and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. The Line of Credit and the Company's loan from the New
Jersey Economic Development Authority (the "EDA Loan") both restrict the
Company from paying dividends without first obtaining the consent of the
respective lender. See "Prior S Corporation Status," "Dividend Policy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources."

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of Common Stock in the public market following this offering
by the current stockholders of the Company could adversely affect the market
price for the Common Stock. Upon completion of this offering, 6,452,500 shares
will be freely tradeable without restriction (except shares held by affiliates
of the Company) or further registration under the Securities Act of 1933, as
amended (the "Securities Act") and an additional 7,239,872 shares of Common
Stock may be sold in the public market, subject to the limitations contained
in Rule 144 under the Securities Act. Following this offering, sales of
substantial amounts of the shares of Common Stock in the public market, or
even the potential for such sales, could adversely affect the prevailing
market price of the Common Stock and impair the Company's ability to raise
capital through the sale of equity securities. See "Security Ownership of
Certain Beneficial Owners and Management" and "Shares Eligible for Future
Sale."

<PAGE>

THE COMPANY

USA Detergents, Inc. is located at 1735 Jersey Avenue, North Brunswick,
New Jersey 08902. The Company's telephone number is (908) 828-1800. The
Company was originally incorporated in 1988 under the laws of the state of New
Jersey. The Company was reorganized as a Delaware corporation in August 1995.

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common
Stock to be sold in this offering are estimated to be $11.7 million, after
deducting estimated placement fees and commissions and estimated offering
expenses payable by the Company, based on an offering price of $39.375.

The Company intends to use the net proceeds of this offering to pay down
borrowings under the Line of Credit. Borrowings under the Line of Credit bear
interest at LIBOR plus 1.75% (7.06% as of June 3, 1996) on the first $5
million outstanding and the prime rate of the lender bank (8.25% as of June 3,
1996) on the balance. As of June 3, 1996, the Company had approximately $14.5
million outstanding under the Line of Credit. Remaining net proceeds, if any,
will be used to finance capital expenditures, for working capital needs and
for general corporate purposes. Pending such uses, the net proceeds will be
invested in short-term, investment rate, interest-bearing securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

PRIOR S CORPORATION STATUS

From its inception through August 9, 1995, two days prior to the closing
of its initial public offering (the "1995 IPO"), the Company was treated for
federal income tax purposes as an S corporation under Subchapter S of the
Internal Revenue Code of 1986, as amended, and was treated as an S corporation
for certain state corporate income tax purposes under certain comparable state
tax laws (an "S corporation"). As a result, the Company's historical earnings
have been taxed directly to the Company's stockholders, at their individual
federal and state income tax rates, rather than to the Company. Prior to the
closing of the 1995 IPO, the Company ceased to be treated as an S corporation
and, accordingly, has been subject to federal and state corporate income taxes
on its earnings.

From inception through August 9, 1995, the Company paid or accrued 75.8%
($6.9 million) of its earnings before income taxes for distribution to
stockholders in the form of S corporation distributions. To the extent there
was insufficient cash from operations available to fund such historical
distributions, funds were borrowed under the Line of Credit. Amounts
outstanding under the Line of Credit were fully paid down with the proceeds of
the 1995 IPO.

DIVIDEND POLICY

Except for S corporation distributions, the Company has never declared or
paid any cash dividends on its Common Stock. The Company anticipates that all
future earnings will be retained by the Company for the development and
expansion of its business. Accordingly, the Company does not anticipate paying
cash dividends on the Common Stock in the foreseeable future. The payment of
any future dividends will be at the discretion of the Company's Board of
Directors, subject to applicable law, and will depend upon, among other
things, future earnings, operations, capital requirements, the general
financial condition of the Company and general business conditions. The Line
of Credit and the EDA Loan both restrict the Company from paying dividends
without first obtaining the consent of the respective lender. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

<PAGE>

PRICE RANGE OF COMMON STOCK

The Common Stock is quoted on The Nasdaq National Market under the symbol
"USAD." The Common Stock was initially offered to the public on August 7, 1995
at $9.67 per share. The following table sets forth for the periods indicated
the high and low reported last sale prices per share for the Common Stock as
reported by The Nasdaq National Market. All last sale prices prior to February
9, 1996, the effective date of the Stock Split, have been divided by 1.50, the
assumed effect of the Stock Split.

</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL 1995
Third Quarter (commencing August 7) .. $14.75 $11.50
Fourth Quarter ....................... 18.17 13.67

FISCAL 1996
First Quarter ........................ $25.25 $15.75
Second Quarter (through June 3, 1996) $46.50 $30.375
</TABLE>

The number of shareholders of record of Common Stock on June 3, 1996 was
70. On June 3, 1996, the last reported sale price of the Common Stock as
reported by The Nasdaq National Market was $41.75 per share.

<PAGE>

CAPITALIZATION

The following table sets forth certain short-term obligations and the
capitalization of the Company (i) as of March 31, 1996, and (ii) as adjusted
on a pro forma basis to give effect to the sale by the Company of the 300,000
shares of Common Stock offered hereby at an offering price of $39.375 per
share and the anticipated application of the estimated net proceeds therefrom.
See "Use of Proceeds." The table set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements and notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Short-term debt:
Current portion of revolving line of credit ..................... $10,001 $ --
Current portion of long-term debt ............................... 305 305
Current portion of capitalized lease obligations ................ 28 28
--------- -------------
Total short-term debt .......................................... $10,334 $ 333
========= =============
Long-term debt:
Long-term debt .................................................. $ 1,729 $ 1,729
Capitalized lease obligations ................................... 10 10
--------- -------------
Total long-term debt ........................................... 1,739 1,739
--------- -------------
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized;
no shares issued and outstanding ............................... --
Common stock, $.01 par value, 30,000,000 shares authorized;
13,392,372 shares issued and outstanding; 13,692,372 shares
issued and outstanding as adjusted ............................. 134 137
Additional paid-in capital ....................................... 15,499 27,219
Retained earnings ................................................ 6,747 6,747
--------- -------------
Total stockholders' equity ..................................... 22,380 34,103
--------- -------------
Total capitalization ......................................... $24,119 $35,842
========= =============
</TABLE>

<PAGE>

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Certain of the following selected financial data are derived from the
audited consolidated financial statements of the Company. The consolidated
financial statements for the years ended December 31, 1994 and 1995 have been
audited by Deloitte & Touche LLP, and their report dated February 9, 1996
appears elsewhere herein. Goldstein Golub Kessler & Company, P.C.'s report
dated February 21, 1994 for the year ended December 31, 1993 appears elsewhere
herein. The selected financial data for the years ended December 31, 1991 and
1992 was derived from financial statements audited by Goldstein Golub Kessler
& Company, P.C. The report of Goldstein Golub Kessler & Company for 1991 and
1992 does not appear in this Prospectus and the report for 1991 includes a
disclaimer as to the income statement since Goldstein Golub Kessler & Company,
P.C. was not present for the taking of physical inventory at the beginning of
the year. The selected financial data presented below for the three months
ended March 31, 1995 and 1996, and as of March 31, 1996, was derived from the
unaudited financial statements (and notes thereto) which appear elsewhere
herein. In the opinion of management, all unaudited financial statements
include adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of such information for the periods presented. Results
of operations for the three months ended March 31, 1996 are not necessarily
indicative of results to be expected for the year ending December 31, 1996. No
cash dividends, other than S corporation distributions, were paid for any
years presented.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------ -------------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ................................... $5,790 $21,860 $46,939 $68,663 $104,878 $23,255 $34,067
Cost of goods sold .......................... 4,908 16,941 36,896 51,588 72,921 16,829 22,525
--------- --------- --------- --------- ---------- --------- --------------
Gross profit ................................ 882 4,919 10,043 17,075 31,957 6,426 11,542
Selling, general and administrative expenses 951 3,893 8,445 12,182 22,232 4,635 7,952
Non-recurring expenses(1) ................... -- 398 893 -- -- -- --
--------- --------- --------- --------- ---------- --------- --------------
Income (loss) from operations ............... (69) 628 705 4,893 9,725 1,791 3,590
Interest expense -- net ..................... 122 192 383 543 544 188 167
--------- --------- --------- --------- ---------- --------- --------------
Earnings (loss) before income tax ........... (191) 436 322 4,350 9,181 1,603 3,423
Income tax provision ........................ -- -- 22 83 2,156 31 1,335
--------- --------- --------- --------- ---------- --------- --------------
Net income (loss) ........................... $(191) $ 436 $ 300 $ 4,267 $ 7,025 $ 1,572 $ 2,088
========= ========= ========= ========= ========== ========= ==============
Net income per share ........................ $ 0.16
==============
Weighted average number of shares
outstanding ................................ 13,392
==============
PRO FORMA INCOME STATEMENT DATA(2):
Earnings before income tax as reported ..... $ 9,181 $ 1,603
Pro forma income tax provision .............. 3,756 634
---------- ---------
Pro forma net income ........................ $ 5,425 969
========== =========
Pro forma net income per share .............. $ 0.43 $ 0.08
========== =========
Weighted average number of shares
outstanding ................................ 12,494 11,915
========== =========
DECEMBER 31, MARCH 31, 1996
------------------------------------------------------ -------------------------
1991 1992 1993 1994 1995(3) ACTUAL AS ADJUSTED(4)
--------- --------- --------- --------- ---------- --------- --------------
BALANCE SHEET DATA:
Working capital (deficit) ................... $(265) $ 1,192 $ (30) $ 5,154 $ 11,132 $11,508 $23,231
Total assets ................................ 3,427 9,308 19,718 24,449 40,590 52,600 54,322
Short-term debt ............................. 1,097 1,893 4,425 3,860 7,320 10,334 333
Long-term debt .............................. 147 2,142 4,563 6,180 1,830 1,739 1,739
Stockholders' equity ........................ 615 1,050 1,850 5,880 20,292 22,380 34,103
</TABLE>

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

(1) Consists of loss on theft of inventory of $398,000 in 1992, and plant
relocation expense of $474,000 and loss on theft of inventory of
$419,000 in 1993.

(2) Pro forma net income represents net income less a provision for income
taxes that would have been required had the Company been taxed as a C
corporation during the entire period presented. The Company elected to
be treated as a Subchapter S corporation until August 9, 1995, and, as
a result, was not subject to federal and certain state income taxes
prior to that time. No pro forma adjustments have been made for
additional compensation expense paid to the existing stockholders of
the Company who are officers of the Company associated with the
termination of the Company's S corporation status in connection with
the 1995 IPO or for a reduction in interest expense relating to the

assumed pay down of borrowings under the Line of Credit with the net
proceeds of the 1995 IPO because the net effect of such adjustments is
not material. See Note 1 of "Notes to Consolidated Financial
Statements" for the years ended December 31, 1993, 1994 and 1995 and
"Prior S Corporation Status."

(3) On August 11, 1995, the Company completed the 1995 IPO pursuant to
which the Company received net proceeds of approximately $12.7 million.

(4) Adjusted to reflect the sale by the Company of the 300,000 shares of
Common Stock offered hereby at an offering price of $39.375 per share
and the anticipated application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

<PAGE>

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

GENERAL

The Company has grown to annual net sales of $104.9 million in the year
ended December 31, 1995 from annual net sales of $5.0 million in the year
ended December 31, 1990, representing a compound annual growth rate of 83.9%.
Net sales in the three months ended March 31, 1996 increased 46.5% to $34.1
million from $23.3 million for the three months ended March 31, 1995 and net
sales in the year ended December 31, 1995 increased by 52.7% over net sales of
$68.7 million in the year ended December 31, 1994. The Company's growth has
been achieved primarily through increases in market penetration of the
Company's products, particularly liquid laundry detergents and liquid fabric
softeners, and the introduction of new products. Net sales of the Company's
liquid laundry detergent and liquid fabric softeners totaled $46.2 million or
67.3% of net sales in the year ended December 31, 1994, and $75.6 million or
72.1% of net sales in the year ended December 31, 1995. Net sales of products
introduced in 1995 were $13.4 million or 12.8% of net sales for the year ended
December 31, 1995. Since 1993, gross margins have improved due to (i) sales
increases of laundry products which generally have higher gross margins than
the Company's other products, (ii) the relocation by the Company of its
manufacturing operations to its current, more efficient North Brunswick, New
Jersey facility in 1993 and (iii) efficiencies in purchasing packaging
supplies and raw materials. As the Company has increased sales through
supermarkets, it has increased payments of "slotting fees" (fees which are
generally required to be paid in advance to supermarkets in order to obtain
shelf space and are accounted for by the Company as selling, general and
administrative expenses). The Company intends to continue increasing sales to
supermarkets.

From its organization through August 9, 1995, the Company operated as an
S corporation and, as a result, liability for the Company's net income for
federal and certain state income tax purposes was borne directly by the
Company's stockholders. The Company paid or accrued 75.8% ($6.9 million) of
its earnings before income taxes from inception through August 9, 1995 in the
form of S corporation distributions to stockholders. Two days prior to the
closing of the 1995 IPO, the Company became a taxable C corporation for income
tax reporting purposes. The Company has incurred increased salary expenses for
certain members of senior management in connection with the termination of its
S corporation status. See "Prior S Corporation Status" and
"Management--Employment Agreements."

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain income
statement data expressed as a percentage of net sales. Certain column totals
set forth may not add due to rounding.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
---------------------------- --------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales ................................... 100.0% 100.0% 100.0% 100% 100%
Cost of goods sold .......................... 78.6 75.1 69.5 72.4 66.1
-------- -------- -------- ------ ------
Gross profit ................................ 21.4 24.9 30.5 27.6 33.9
Selling, general and administrative expenses 18.0 17.7 21.2 19.9 23.3
Non-recurring expenses ...................... 1.9 -- -- -- --
-------- -------- -------- ------ ------
Income from operations ...................... 1.5 7.1 9.3 7.7 10.5
Interest expense -- net ..................... 0.8 0.8 0.5 0.8 0.8
-------- -------- -------- ------ ------
Earnings before income taxes ................ 0.7 6.3 8.8 6.9 10.1
Income tax provision ........................ -- 0.1 2.1 0.1 3.9
-------- -------- -------- ------ ------
Net income .................................. 0.6% 6.2% 6.7% 6.8% 6.1%
======== ======== ======== ====== ======
</TABLE>

<PAGE>

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995

Net sales for the three months ended March 31, 1996 increased 46.5% to
$34.1 million from $23.3 million for the three months ended March 31, 1995.
The increase was primarily the result of an increase in unit sales of laundry
products, reflecting the addition of new customers and sales of additional
products to existing customers. The increase in net sales was facilitated by
an increase in the number of salespersons who joined the Company in the third
and fourth quarter of 1995.

Gross profit increased 79.6% to $11.5 million in the three months ended
March 31, 1996 from $6.4 million for the comparable period in 1995. Gross
profit increased as a percentage of net sales to 33.9% in the three months
ended March 31, 1996 from 27.6% for the comparable period in 1995. The
increase as a percentage of net sales was primarily attributable to the
installation, in January 1995 and January 1996, of improved manufacturing
equipment, which had a positive impact on labor efficiency and reduced product
over-fills, and an increase as a percentage of net sales in unit sales of
higher margin laundry products.

Selling, general and administrative expenses increased 71.6% to $8.0
million in the three months ended March 31, 1996 from $4.6 million for the
comparable period in 1995. As a percentage of net sales, these expenses
increased to 23.3% in the three months ended March 31, 1996 from 19.9% for the
comparable period in 1995. The increase as a percentage of net sales was
primarily due to increases as a percentage of net sales of 1.0% in salaries
and 0.7% in slotting fees resulting from increased penetration into
supermarkets.

Income from operations increased 100.4% to $3.6 million in the three
months ended March 31, 1996 from $1.8 million for the comparable period in
1995. As a percentage of net sales, income from operations increased to 10.5%
in the three months ended March 31, 1996 from 7.7% for the comparable period
in 1995.

Interest expense-net decreased to $167,000 in the three months ended
March 31, 1996 from $188,000 for the comparable period in 1995, primarily as a
result of lower average outstanding balances.

Earnings before income taxes increased 113.5% to $3.4 million in the
three months ended March 31, 1996 from $1.6 million for the comparable period
in 1995. As a percentage of net sales, earnings before income taxes increased
to 10.1% in the three months ended March 31, 1996 from 6.9% for the comparable
period in 1995.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net sales in the year ended December 31, 1995 increased 52.7% to $104.9
million from $68.7 million in the year ended December 31, 1994. The increase
was primarily the result of an increase in unit sales of laundry products,
reflecting the addition of new customers and sales of additional products to
existing customers. The increase in net sales was facilitated by an increase
in the number of salespersons who joined the Company in the fourth quarter of
1994.

Gross profit increased 87.2% to $32.0 million in the year ended December
31, 1995 from $17.1 million in the prior year. Gross profit increased as a
percentage of net sales to 30.5% in the year ended December 31, 1995 from
24.9% in the prior year. The increase as a percentage of net sales was
primarily attributable to the installation, in January 1995, of improved
manufacturing equipment, which had a positive impact on labor efficiency and
reduced product over-fills, and an increase as a percentage of net sales in
unit sales of higher margin laundry products.

Selling, general and administrative expenses increased 82.5% to $22.2
million in the year ended December 31, 1995 from $12.2 million in the prior
year. As a percentage of net sales, these expenses increased to 21.2% in the
year ended December 31, 1995 from 17.7% in the prior year. The increase as a
percentage of net sales was primarily due to increases as a percentage of net
sales of 2.2% in merchandising allowances and co-op advertising, 0.4% in
selling commissions, 0.2% in slotting fees resulting from increased
penetration into supermarkets and 0.2% in bad debt expenses.

<PAGE>

Income from operations increased 98.8% to $9.7 million in the year ended
December 31, 1995 from $4.9 million in the prior year. As a percentage of net
sales, income from operations increased to 9.3% in the year ended December 31,
1995 from 7.1% in the prior year.

Interest expense-net increased to $544,000 in the year ended December 31,
1995 from $543,000 in the prior year.

Earnings before income taxes increased 111.1% to $9.2 million in the year
ended December 31, 1995 from $4.4 million in the prior year. As a percentage
of net sales, earnings before income taxes increased to 8.8% in the year ended
December 31, 1995 from 6.3% in the prior year.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

Net sales in the year ended December 31, 1994 increased 46.3% to $68.7
million from $46.9 million in the year ended December 31, 1993. The increase
was primarily the result of an increase in unit sales of laundry products and,
to a lesser extent, the introduction of new products and additional product
sizes.

Gross profit increased 70.0% to $17.1 million in the year ended December
31, 1994 from $10.0 million in the prior year. Gross profit increased as a
percentage of net sales to 24.9% in 1994 from 21.4% in the prior year. The
Company conducted all of its operations out of its North Brunswick, New Jersey
facility in 1994 compared to operating out of one manufacturing facility and
two warehouse facilities in 1993. The improved configuration of the North
Brunswick, New Jersey facility was the primary reason for improved
manufacturing efficiency which increased gross profit margin. Additional
reasons for the increase include purchasing efficiencies, improvements in
product formulations which reduced raw material costs and increased sales of
higher margin laundry products. The increase was partially offset by increases
in the cost of certain materials used in the Company's packaging.

Selling, general and administrative expenses increased 44.3% to $12.2
million in the year ended December 31, 1994 from $8.4 million in the prior
year. As a percentage of net sales, selling, general and administrative
expenses decreased to 17.7% in 1994 from 18.0% in the prior year. The decrease
as a percentage of net sales was due in part to a decrease as a percentage of
net sales of 1.1% in bad debt expense due to the implementation of tighter
credit controls. The decrease as a percentage of net sales was partially
offset by an increase of 0.4% in slotting fees resulting from increased
penetration into supermarkets and, to a lesser extent, an increase of 0.3% in
selling commissions.

Income from operations increased 594.0% to $4.9 million in the year ended
December 31, 1994 from $705,000 in the prior year. As a percentage of net
sales, income from operations increased to 7.1% in 1994 from 1.5% in the prior
year. The increase in income from operations was partially attributable to the
elimination of non-recurring expenses which totaled $893,000 in the prior
year.

Interest expense - net increased to $543,000 in the year ended December
31, 1994 from $383,000 in the prior year. The increase resulted primarily from
an increase in the Company's outstanding debt principally incurred to pay S
corporation distributions and to finance fixed asset acquisitions, and from
increased interest rates on the Company's borrowings.

Earnings before income taxes increased to $4.4 million in the year ended
December 31, 1994 from $322,000 in the prior year. As a percentage of net
sales, earnings before income taxes increased to 6.3% in 1994 from 0.7% in the
prior year.

Quarterly Results of Operations

The following table presents selected unaudited quarterly results of
operations for the first quarter of 1996 and for each of the four quarters of
1995 and 1994. This quarterly information is unaudited, has been prepared on
the same basis as the annual financial information and, in the opinion of
management, reflects all adjustments necessary for a fair presentation of the
information for the periods presented. The results of operations for any
quarter are not necessarily indicative of results for any future period.
Growth in net sales and income from operations during the fourth quarter of
the year historically has been somewhat slower than in other fiscal quarters,
primarily as a result of promotion-oriented retailers

<PAGE>

providing reduced or less desirable display space for the Company's products
during the holiday shopping season. The Company expects that this trend will
be somewhat mitigated as anticipated sales from supermarkets, which are less
promotion-oriented during the holiday shopping season, increase as a
percentage of total net sales. The timing and introduction of new products
and other factors may also cause quarterly fluctuations in the Company's
results of operations.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31,
FISCAL 1996 1996
- ----------- -----------
<S> <C>
Net sales .............. $34,067
Gross profit ........... 11,542
Income from operations 3,590
Net income ............. 2,088
Net income per share .. 0.16
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
FISCAL 1995 1995 1995 1995 1995
- ----------- ----------- ---------- --------------- --------------
<S> <C> <C> <C> <C>
Net sales ..................... $23,255 $25,652 $27,120 $28,851
Gross profit .................. 6,426 7,277 8,770 9,484
Income from operations ........ 1,791 2,207 2,785 2,942
Pro forma net income .......... 969 1,192 1,616 1,649
Pro forma net income per share 0.08 0.10 0.13 0.12
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
FISCAL 1994 1994 1994 1994 1994
- ----------- ----------- ---------- --------------- --------------
<S> <C> <C> <C> <C>
Net sales ..................... $17,469 $17,190 $18,521 $15,483
Gross profit .................. 4,267 4,324 4,653 3,831
Income from operations ........ 1,327 1,451 1,402 713
Pro forma net income .......... 731 805 765 360
Pro forma net income per share 0.06 0.07 0.06 0.03
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company's working capital was $11.5 million
compared to $11.1 million at December 31, 1995. The increase in working
capital is primarily attributable to the increase in accounts receivable,
inventory and prepaid expenses offset by increases in accounts payable,
accrued expenses and the current portion of indebtedness under the Company's
revolving credit line. At March 31, 1996, accounts receivable was $18.2
million, an increase of $2.9 million from December 31, 1995 and at March 31,
1996, inventory was $13.9 million, an increase of $5.4 million from December
31, 1995. Both increases were primarily attributable to increased sales volume
in the first quarter of 1996. At March 31, 1996, prepaid expenses and other
current assets were $4.6 million, an increase of $1.6 million, primarily
attributable to increased slotting costs, which are amortized over a twelve
month period. These changes were partially offset by an increase in accounts
payable and accrued expenses from $8.8 million at December 31, 1995, to $14.5
million at March 31, 1996. There was also an increase in the current portion
of indebtedness under the Company's revolving credit line from $7.0 million at
December 31, 1995 to $10.0 million at March 31, 1996, primarily attributable
to the purchase of machinery and equipment.

At December 31, 1995, the Company's working capital was $11.1 million
compared to $5.2 million at December 31, 1994. The increase in working capital
as of December 31, 1995 was principally attributable to the Company's
receiving net proceeds of approximately $12.7 million from the 1995 IPO. At
December 31, 1995 accounts receivable was $15.3 million, an increase of $8.6
million from December 31, 1994 primarily attributable to increased sales
volume in 1995. At December 31, 1995 inventory was $8.4 million,

<PAGE>

an increase of $549,000 from December 31, 1994 primarily attributable to
increased sales volume. These changes were partially offset by an increase in
accounts payable and accrued expenses from $7.3 million at December 31, 1994
to $8.8 million at December 31, 1995. Net cash provided by (used in)
operating activities in 1994 and 1995 was $1.0 million and $(412,000),
respectively. Decreases in cash provided by operating activities in 1995
relate primarily to the increase in accounts receivable. The increase in cash
provided by operating activities in 1994 was primarily due to an increase in
net income.

The Company's 1995 IPO provided net proceeds to the Company of
approximately $12.7 million. Approximately $8.3 million was used by the
Company to repay amounts outstanding under the Line of Credit. Historically,
the Company has financed its operations from capital provided by existing
stockholders, funds generated by operations, the Line of Credit from Chemical
Bank, the proceeds of the EDA Loan and capitalized lease obligations. The
Company has used cash provided by operating activities to fund capital
expenditures, operations and S corporation distributions. See "Prior S
Corporation Status." On January 18, 1996, the Company declared a three-for-two
stock split effected in the form of a 50% stock dividend that was paid on
February 9, 1996.

Net cash (used in) provided by operating activities for the first three
months of 1996 was ($0.7 million) compared to $0.7 million for the comparable
period of 1995. The increase in cash used in operating activities relates
primarily to the increase in accounts receivable and the increase in inventory
offset by cash provided from an increase in net income. The Company has used
cash provided by operating activities to fund capital expenditures, operations
and S corporation stockholder distributions. The Company made S corporation
stockholder distributions to its then existing stockholders equal to
approximately 80% of 1995 earnings before income taxes through August 9, 1995,
which is the date the Company terminated its S corporation election.

Net cash used in investing activities for the three months ended March
31, 1996 was $2.0 million. Cash used in investing activities relates primarily
to the purchase of production equipment.

Net cash used in investing activities in 1994 and 1995 was $1.7 million
and $6.1 million, respectively. Cash used in investing activities relates
primarily to purchases of production equipment and a loan of approximately
$2.3 million to an unaffiliated third party supplier of powder laundry
detergent in 1995. The Company has an option to purchase the supplier's
facility for the outstanding principal amount of the loan. See "Manufacturing
and Supply" and Note 7 of "Notes to Consolidated Financial Statements."

Net cash provided by financing activities in 1994 and 1995 was $719,000
and $6.5 million, respectively. Cash provided by financing activities is
primarily proceeds from sales of Common Stock, the Line of Credit and the EDA
Loan, offset primarily by S corporation distributions to stockholders. At
December 31, 1995, the Company had short-term debt of $7.3 million and
long-term debt of $1.8 million. Short-term debt consisted of borrowings under
the Line of Credit, current portions of long-term debt and current portions of
capitalized lease obligations. Long-term debt consisted of the long-term
portion of the Line of Credit, borrowings under the EDA Loan and capitalized
lease obligations.

The Line of Credit

The following is a description of the material terms of the Line of
Credit. The maximum permitted borrowings under the Line of Credit, are for the
lesser of $15.0 million or a defined borrowing base. Borrowings under the Line
of Credit bear interest at LIBOR plus 1.75% on the first $5.0 million (7.0625%
as of March 31, 1996) and the prime rate of the lender bank on the balance
(8.25% as of March 31, 1996). Unused portions of the Line of Credit are
subject to a commitment fee of 0.25% on such unused amounts. The Line of
Credit is secured by accounts receivable, inventory and substantially all of
the Company's assets. The Line of Credit contains various restrictions on the
Company which preclude the Company, without first obtaining Chemical Bank's
consent, from taking certain actions, including engaging in any business other
than manufacturing and marketing household detergents, cleaners and businesses
related thereto, incurring additional indebtedness, purchasing the assets of
any entity other than in the ordinary course of business, merging or
consolidating with any other entity, altering its existing capital structure,
paying dividends, making capital expenditures in excess of $3.0 million
annually, or changing the present management of the Company. As of March 31,
1996, the Company had an outstanding balance of approximately $10.0 million
under the Line of Credit.

<PAGE>

The EDA Loan

The following is a description of the material terms of the EDA Loan of
$2.75 million received by the Company in 1993 from the New Jersey Economic
Development Authority. As of March 31, 1996, the Company had used
approximately $2.5 million of the EDA Loan for purchases of machinery and
equipment and improvements to the Company's manufacturing facility. The
remainder is restricted for the duration of the EDA Loan. The EDA Loan is
payable in monthly installments of approximately $26,000 through November 1,
2002. Interest on the EDA Loan is payable at a variable rate (3.3% as of March
31, 1996). The EDA Loan is collateralized by all assets purchased with the
proceeds of the EDA Loan. The EDA Loan contains various restrictions on the
Company which preclude the Company, without first obtaining consent, from
taking certain actions including making capital expenditures in excess of
$7.25 million, transferring or making other dispositions of any material
property of the Company, engaging in any business not incidental to the
Company's present business, incurring additional indebtedness, paying
dividends, making changes in the management of the Company or merging or
consolidating with another entity. In connection with the EDA Loan, the
Company also executed a Reimbursement Agreement with Banque Nationale de
Paris, Houston Agency ("Banque Nationale"), pursuant to which Banque Nationale
agreed to issue a letter of credit to ensure payment when due of the bonds
issued in connection with the EDA Loan. The Company also entered into a
Security Agreement with Banque Nationale pursuant to which Banque Nationale
and the New Jersey Economic Development Authority were granted a security
interest in all assets of the Company subject to Chemical Bank's prior lien
under the Line of Credit.

Capital Expenditures

Capital expenditures for the three months ended March 31, 1996 and 1995
were $2.0 million and $0.3 million, respectively. The Company anticipates that
capital expenditures during the remainder of 1996 will be approximately $4
million, which includes installation of new manufacturing equipment and costs
allocated to open a new manufacturing facility and a distribution facility.

Capital expenditures were $1.7 million in 1994 and $3.9 million in 1995.
Historically, capital expenditures have related principally to increasing
manufacturing capacity. The Company anticipates that capital expenditures in
1996 will be between $4 million and $6 million, which includes installation of
new manufacturing equipment at the Company's North Brunswick, New Jersey
facility and expenditures associated with expanding the Company's
manufacturing and distribution capabilities.

The Company believes its existing sources of liquidity, cash provided by
operations, development authority loans, the Line of Credit and the net
proceeds from the offering will satisfy the Company's anticipated working
capital and capital expenditure requirements for the foreseeable future.

EFFECTS OF INFLATION

The Company believes that the relatively moderate rate of inflation over
the past few years has not had a significant impact on the Company's results
of operations.

<PAGE>

BUSINESS

GENERAL

HOUSEHOLD PRODUCTS MARKET OVERVIEW

The Company believes the market for laundry and household cleaning
products ("Household Products") in which it competes or intends to compete
consists of the following eleven product categories: household cleaners,
powder laundry detergent, personal soap products, liquid laundry detergent,
dish detergent, liquid fabric softeners, bleach, air fresheners, fabric
softener sheets, rug and upholstery cleaners and floor cleaners. The Company
estimates that the Household Products market, measured by retail sales, was
approximately $15 billion during 1995, with estimated total Household Products
market sales of each product category as set forth in the following table:

<TABLE>
<CAPTION>
TOTAL HOUSEHOLD
PRODUCTS MARKET
----------------------
PRODUCT CATEGORY (IN BILLIONS)
- --------------------------- -------------
<S> <C> <C>
Household Cleaners ......... $ 2.7 18.2%
Powder Laundry Detergent .. 2.7 18.2
Personal Soap Products .... 2.3 15.5
Liquid Laundry Detergent .. 2.1 14.2
Dish Detergent ............. 1.5 10.2
Liquid Fabric Softeners ... 0.8 5.4
Bleach ..................... 0.8 5.4
Air Fresheners ............. 0.8 5.4
Fabric Softener Sheets .... 0.5 3.4
Rug and Upholstery Cleaners 0.5 3.4
Floor Cleaners ............. 0.1 0.7
------------- -------
Total .................... $14.9 100.0%
============= =======
</TABLE>

While the leading supplier varies among different Household Products
categories, the overall market for Household Products is dominated by two
principal suppliers: Procter & Gamble Co. and Unilever N.V. The Company
believes these two premium-priced brand suppliers accounted for approximately
49%, in the aggregate, of retail sales of Household Products in 1995.

<PAGE>

Household Products are distributed primarily through supermarkets, mass
merchandisers, small grocery, variety and dollar stores and drug stores with
the Company's estimate of total Household Products market sales through each
distribution channel in 1995 as follows:

<TABLE>
<CAPTION>
TOTAL HOUSEHOLD
PRODUCTS MARKET
----------------------
DISTRIBUTION CHANNEL (IN BILLIONS)
- ----------------------------------------- -------------
<S> <C> <C>
Supermarkets ............................. $ 8.2 55.3%
Mass Merchandisers ....................... 3.4 22.8
Small Grocery, Variety and Dollar Stores 2.5 16.6
Drug Stores .............................. 0.8 5.3
------------- -------
Total ................................... $14.9 100.0%
============= =======
</TABLE>

The Company views the market for Household Products as being segmented
into four types of brands: value brands, store brands, mid-priced brands and
premium-priced brands. The Company believes that consumer purchases of laundry
and household cleaning products are determined, in large part, by price, with
certain consumers willing to pay a premium for leading national brand names
and the latest packaging and technology and other consumers demanding
value-priced brands incorporating certain features found in premium-priced
products. Based on its experience and the overall growth of mass
merchandisers, the Company believes that consumers are increasingly purchasing
products at either the premium-priced or value-priced ends of the Household
Products market and that the Company will continue to benefit from the
consumer trend away from purchasing mid-priced brands due to the value brands'
better price-value relationship. The Company believes the primary
characteristics of each of these types of brands are as follows:

Value Brands. Value brands are sold to retailers and consumers at prices
significantly below most other brands of Household Products. Value brands
generally incorporate packaging features and product quality comparable to
premium-priced and mid-priced brands and typically are offered with only the
most popular product features and in only the most popular sizes. Value brands
are not advertised or promoted directly to the consumer by the value brand
supplier.

Store Brands. Store brands are marketed through various retail outlets
under retailer-affiliated (private) labels and are typically manufactured to
the specifications of individual retailers. Store brands typically are
supported by limited retailer advertising, do not incorporate state-of-the-art
packaging and are priced below mid-priced brands.

Mid-Priced Brands. Mid-priced brands generally attempt to capitalize on
their existing or historical brand equity, are supported by limited consumer
advertising and are positioned as comparable but less expensive alternatives
to premium-priced brands.

Premium-Priced Brands. Premium-priced brands focus on promoting brand
loyalty and consumer awareness of product features through significant
national advertising. Premium-priced brands are supported by extensive
research and development to design state-of-the-art packaging and product
features and to develop new products.

BUSINESS STRATEGY

The Company's objective is to be the leading supplier of value brand
Household Products. The Company's business strategy is to enable retailers to
increase sales and realize attractive profit margins on its products while
providing value to consumers. The key elements of the Company's business
strategy are described below:

Value to Retailers

The Company focuses on assisting the retailer to profitably optimize its
retail space in traditionally low margin Household Products categories. The
Company provides retailers with merchandising support relating to product mix,
shelf display and pricing strategies, and promotional programs which are
designed to increase sales of the Company's products. The Company's emphasis
on being a low-cost supplier allows

<PAGE>

it to sell its Household Products to retailers at prices which enable these
retailers to offer a lower price to consumers while realizing relatively
attractive margins. The Company also seeks to build strong relationships with
retailers by providing them with a high level of customized service including
direct shipments, electronic data interchange, mixed product pallets and
flexible, prompt delivery.

Value to Consumers

The Company offers consumers attractively packaged, quality brand name
products at prices significantly below most other brands. The Company
estimates that the average retail selling price for substantially all of its
products was approximately 30% to 40% lower than the industry average retail
selling price in their respective Household Products category in 1995. This
combination of high product quality and low prices offers consumers an
attractive alternative to other brands. The Company emphasizes cost reduction
and has historically passed substantially all of its savings on to retailers
and consumers. The Company maintains a low-cost structure by eliminating
consumer advertising and coupon programs, employing efficient manufacturing
and packaging techniques and limiting corporate overhead.

Brand and Corporate Identification

The Company seeks to develop strong brand and corporate name recognition
among retailers and strong brand recognition and brand loyalty among
consumers. The Company believes that colorful and graphic packaging combined
with recognizable product names and the Company's commitment to quality and
low price, contribute to strong brand awareness and purchaser confidence at
the consumer level, and generate increased product sales. The Company further
believes that development of corporate and brand name recognition of the
Company and its products among retailers enables the Company to introduce new
products more effectively.

Further Market Penetration

The Company focuses its sales efforts on supermarkets, mass
merchandisers, variety and dollar stores, drug stores and small grocery
stores, particularly those whose retailing philosophy closely corresponds to
the Company's high value, low cost marketing philosophy. The Company intends
to continue increasing its market penetration by distributing its products
through additional supermarkets, as well as other retail outlets. The Company
sells its products to approximately 1,000 retailers with approximately 30,000
retail outlets throughout the United States. For 1995, published industry data
indicate that the Company's XTRA(Registered Trademark) liquid laundry
detergent and Nice'N FLUFFY(Registered Trademark) liquid fabric softener were
sold to retailers representing 34% and 27%, respectively, of all commodity
volume ("ACV") distribution within the food, drug and mass merchants sector,
up from 3% and 2%, respectively, in 1992. ACV distribution for a product
represents the percentage of food, drug and mass merchant retail outlets (as
measured by aggregate retail sales) which sold that product during a specified
time period in the United States. The Company believes its expanding
distribution network increases consumer recognition of its brands. The Company
intends to use the access to retailers it has gained through the success of
its XTRA(Registered Trademark) and Nice'N FLUFFY(Registered Trademark) brands
to increase the penetration of its other products through these existing
retail outlets.

Expand Product Line

To capitalize on the market opportunity for value brand products, the
Company has continually expanded its line of products and currently sells 42
products, representing approximately 250 stock keeping units ("SKUs"), in
eight Household Product categories under eleven distinct brand names. The
Company introduced four new products in 1994 and 15 new products in 1995. The
Company intends to continue to broaden its product line through extensions of
existing product lines (including introduction of new sizes, packaging and
product formulations) and by introducing products, primarily in new product
categories. The Company also expects to introduce several automobile cleaning
products beginning in the second quarter of 1996. The Company believes that
expansion of its product line will also enable it to continue building
corporate and brand name recognition among retailers and should enable the
Company

<PAGE>

to capitalize on the desire of retailers to reduce the number of suppliers
from which they obtain products and to increase the portion of a store's
retail space allocated to the Company's products. Net sales of products
introduced in 1995 were $0.8 million or 2.2% of net sales for the three
months ended March 31, 1996.

PRODUCTS

In selecting the product categories in which it will compete, the Company
attempts to identify products with large existing markets which the Company
can source efficiently and distribute profitably. The Company currently sells
42 products, representing approximately 250 SKUs, in eight Household Product
categories under eleven distinct brand names, including the following:

<TABLE>
<CAPTION>
PRODUCT CATEGORY PRIMARY COMPANY BRANDS
--------------------------- -----------------------------------------------
<S> <C>
Liquid Laundry Detergent XTRA(Registered Trademark)
Powder Laundry Detergent XTRA(Registered Trademark)
Liquid Fabric Softener Nice'N FLUFFY(Registered Trademark)
Fabric Softener Sheets Nice'N FLUFFY(Registered Trademark)
Household Cleaners Captain Shine(Registered Trademark), Touch of
Glass(Registered Trademark), Swiss Pine(Registered
Trademark), Tile Action(Trademark),
Fabulous(Trademark), Plumber's Aid(Trademark)
Dish Detergent XTRA(Registered Trademark), Crystal
Shine(Registered Trademark)
Personal Soap Products Fine Care(Registered Trademark)
</TABLE>

The Company's laundry detergents and fabric softeners accounted for an
aggregate of approximately 81% and 82% of the Company's net sales in 1995 and
the first quarter of 1996, respectively, with XTRA(Registered Trademark)
liquid laundry detergent accounting for 52% and 50% of net sales in such
periods, respectively. The Company introduced 15 new products in 1995 and has
introduced ten new products in 1996.

PRODUCT DESIGN AND DEVELOPMENT

The Company consistently seeks to enhance the value of its products by
either improving their performance and packaging or lowering their cost and
has historically passed substantially all cost savings on to the retailer. The
Company places considerable emphasis on package quality and uses premium
quality materials and appealing, colorful graphic designs with the objective
of providing its products with the same or better shelf appeal than premium
and mid-priced brands.

Most of the important product enhancements in the Household Products
industry during the past several years have been developed by the research and
development departments of the premium-priced brand companies and the chemical
companies that supply the Household Products industry. Rather than maintain a
large research and development department, the Company works closely with its
suppliers, distributors and other industry participants to identify, and in
some cases anticipate, technological and design innovations which may be
incorporated into the Company's products. Generally, the Company adopts
product and packaging features after they have gained general market
acceptance and believes that it has typically been one of the first value
brand suppliers to incorporate features comparable to the successful
innovations of these larger competitors. The Company only incorporates
features which it believes are valued by its consumer base. The Company
believes that its approach to product design and development minimizes costs
associated with significant research and development, limits the introduction
of unproven innovations and features, and reduces the need to spend heavily to
advertise new product developments or to educate consumers.

MARKETING AND DISTRIBUTION

The Company sells its products to approximately 1,000 retailers with
approximately 30,000 retail outlets throughout the United States. The
Company's various branded products have historically been sold primarily to
supermarkets, mass merchandisers, variety and dollar stores, drug stores and
small

<PAGE>

grocery stores. Significant customers of the Company include Wal-Mart,
Hannaford Bros., Dollar General and Rite Aid. The following table sets forth
the Company's net sales for fiscal 1993, 1994 and 1995 by retail distribution
channel:

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------
DISTRIBUTION CHANNEL 1993 1994 1995
- ------------------------- -------- -------- -------
<S> <C> <C> <C>
Supermarkets ............. 20.6% 25.4% 32.1%
Mass Merchandisers ....... 12.4 20.8 29.0
Variety and Dollar Stores 40.5 34.2 24.5
Drug Stores .............. 11.6 10.5 8.8
Small Grocery and Other . 14.9 9.1 5.6
-------- -------- -------
Total .................. 100.0% 100.0% 100.0%
======== ======== =======
</TABLE>

The five largest customers of the Company in the aggregate accounted for
29% and 29% of net sales during 1995 and the first quarter of 1996,
respectively, with Wal-Mart accounting for 17% of net sales in 1995 and 15% of
net sales in the first quarter of 1996. One other customer of the Company
accounted for more than 5% of the Company's net sales during 1994 and no other
customer of the Company accounted for more than 5% of the Company's net sales
in 1995. As is customary in the Household Products industry, the Company does
not have long-term contracts with its customers.

The Company seeks to provide retailers with high levels of sales and
merchandising support and delivery services. The Company's sales and
merchandising support and delivery services are designed to assist retailers
in increasing sales of the Company's products through development of improved
packaging, product mix, shelving and pricing strategies and effective
promotional programs. To provide better delivery service to its customers, the
Company is flexible as to the amounts and combinations of products it will
deliver and is generally able to deliver products within one to seven business
days of receiving an order. With certain retailers, the Company uses
electronic data interchange ("EDI") systems that interface directly with the
customer's product ordering process. EDI, combined with the Company's internal
computerized management information and control system, improves inventory and
cost management and facilitates rapid delivery to retailers.

As of March 31, 1996, the Company sold its products through its own 42
person national sales department, which included seven regional offices,
supported by a network of 98 independent brokers and sales representatives. In
fiscal 1995, approximately 46.6% of the Company's net sales were generated by
its internal sales force with independent broker assistance, with the
remaining 53.4% of net sales generated without broker assistance. Each
salesperson is compensated by salary and commissions. The Company intends to
increase the size of its national sales force in order to facilitate its
continued growth.

MANUFACTURING AND SUPPLY

The Company manufactures substantially all of its liquid products at its
facility in North Brunswick, New Jersey. The manufacturing process at the
Company's facility consists of blending liquid chemicals and fragrance, which
the Company purchases from independent suppliers, and packaging such blends to
create finished products. Blending is done according to or by modifying
formulas provided by the Company's chemical suppliers. The Company conducts
quality control tests on raw materials on a regular basis and also conducts
stringent quality control tests on its products during and after the
manufacturing process. The Company believes that as it generally manufactures
one primary brand in each of its product categories, it is able to lengthen
manufacturing runs, reduce manufacturing costs and sell products to retailers
at prices which enable retailers to sell products to consumers at lower prices
and/or achieve higher profit margins.

For the year ended December 31, 1995, the Company purchased approximately
45% of its liquid chemicals from two suppliers, Stepan Company and Henkel
Corporation, and purchased all of its powder detergent from one supplier, Cap
City Products Company, Inc. The Company believes alternative sources of supply
and chemical formulations for its liquid products exist. The Company has
recently added a second supplier of powder laundry detergent with the aim of
diversifying and increasing the supply and

<PAGE>

reducing the cost of its powder detergent. The Company has entered into a
management agreement whereby the Company maintains manufacturing control, and
a supply agreement whereby the Company has the right to purchase all of the
supplier's output. Under the Company's supply and management agreements, the
Company, by its purchases of products, funds operations of the supplier's
facility. See Note 7 to "Notes to Consolidated Financial Statements." The
Company also has engaged a California- based contract manufacturer and
distributor to supply liquid products.

Substantially all of the bottles used by the Company at its manufacturing
facility are purchased from Owens-Illinois. The Owens-Illinois plant is
located near the Company's manufacturing facility and the majority of the
Owens-Illinois plant's production is dedicated to the Company. The Company has
entered into a supply agreement expiring January 31, 2001 with Owens-Illinois
pursuant to which the Company has agreed to purchase substantially all of its
plastic bottle packaging requirements from Owens-Illinois in return for
Owens-Illinois' agreement to dedicate certain of its machinery to meet the
Company's packaging requirements and provide additional machinery if
necessary. Owens-Illinois has also agreed to use its best efforts to expand
its capacity to meet the Company's continued growth in exchange for the
Company's continuing commitment to purchase bottles from Owens-Illinois.
Certain molds used to manufacture the Company's packaging are not owned by the
Company. In addition, in January 1996 the Company entered into a lease for a
facility located contiguous to Owens-Illinois' facility in Edison, New Jersey.
The Company uses such facility for additional warehouse and distribution
capacity. See "--Properties."

The Company also has certain products manufactured to the Company's
specifications by independent contractors and intends to expand its capacity
to produce non-liquid products by continuing to outsource manufacturing. The
Company subcontracts the manufacture of products based on cost- effectiveness,
manufacturing capacity and a desire to avoid large capital commitments
associated with manufacturing before the Company can determine the long-term
success of such products. The Company remains actively involved with each of
its principal subcontractors and seeks to promote efficiencies and
cost-savings at the subcontractor level by offering continuing technical,
manufacturing and managerial advice. Many of the Company's subcontractors rely
on the Company for a majority of their sales. The Company's purchases from
subcontractors are generally made pursuant to purchase orders.

To support anticipated demand for its products, the Company expects to
expand its manufacturing capacity by continuing to improve manufacturing
efficiency, installing new manufacturing equipment during 1996, and
selectively outsourcing production. The Company spent approximately $2 million
during the first quarter of 1996 and anticipates that it will expend
approximately, $4 million during the remainder of 1996 to fulfill its current
expansion plans.

Substantially all product distribution is centralized at the Company's
facilities in New Jersey, although subcontracted products are usually
distributed directly to retailers from the subcontractors by freight companies
selected by the Company. Products are generally delivered to a retailer's
distribution center, although the Company distributes products representing a
limited amount of net sales directly to retail outlets. Substantially all of
the Company's products are delivered by independent trucking companies, with
the remainder delivered by seven trucks and 14 trailers leased by the Company.

INVENTORY PRACTICE AND ORDER BACKLOG

The Household Products industry is generally characterized by prompt
delivery of products by suppliers. The time between the Company's receipt of a
customer's order and shipment to the customer is generally between one and
seven business days. The Company generally maintains between two and ten days
of finished product inventory. As a result of the short lead time between the
order and delivery of its products, the Company does not maintain a
significant backlog.

INTELLECTUAL PROPERTY

Brand identification is an important element in marketing the Company's
products and the Company recognizes the importance of its trademarks to the
success of its business. Therefore, the Company obtains trademarks for certain
of its brands and has registered or has applications pending to register
certain

<PAGE>

trademarks with the United States Patent and Trademark Office. The Company has
registered or applied for registration of certain of its trademarks in a
number of foreign countries. Packaging, labels, trademarks and designs are
generally reviewed by the Company's intellectual property counsel prior to
general adoption and usage. The Company is not aware of any challenge to the
validity of any trademark or copyright material to its business, except for a
challenge filed by The Clorox Company with respect to the name Super Scrub.
There can be no assurance that additional challenges will not arise. Due to
the importance of package design, labels, trademarks and trade dress to its
business, the Company has taken, and intends to take, vigorous action to
protect against infringement of its trademarks and copyrights.

Although the Company considers certain of its packaging, labels,
trademarks and designs to be proprietary, certain of such packaging, labels,
trademarks and designs are not protected by copyright or trademark
registration. In addition, the Company from time to time has received, and may
receive in the future, communications from third parties asserting
intellectual property rights relating to the Company's products, labels,
trademarks and packaging. There can be no assurance that third parties will
not successfully assert claims against the Company with respect to existing or
future products or packaging. Should the Company be found to infringe upon the
intellectual property rights of others, the Company could be required to cease
use of certain products, trademarks, labels or packaging or pay damages to the
affected parties, either of which could have a material adverse effect on the
business and operations of the Company. Substantial costs also may be incurred
by the Company in redesigning its labels or packaging, in selecting and
clearing a new trademark or in defending any legal action taken against it.

Manufacturers normally seek United States and foreign patent protection
for the chemical formulations that they develop and numerous third party
patents that relate to laundry and household cleaning products are on file
with the United States Patent and Trademark Office. Formulations of the
products produced by the Company are generally provided by the Company's third
party chemical suppliers who are responsible for the intellectual property, if
any, in such formulations. The Company believes it has been able to introduce
products comparable to those introduced by most of its competitors by using
manufacturing methods or materials that are not protected by patents or by
acquiring patented formulations.

COMPETITION

The Company experiences substantial competition from a number of
suppliers of laundry and household cleaning products, including larger
premium-priced, mid-priced and private label suppliers. Many of these
suppliers have substantially greater financial, technical, marketing,
distribution and other resources than the Company. In addition, there are
several value brand suppliers which compete directly with the Company. The
Company believes its products compete primarily on the basis of price and the
Company does not intend to compete on the basis of premium-priced brand
product features.

The Company's competitors vary by product category, with one competitor
ranking as the market leader in retail sales in 1995 in five of the eight
Household Product categories in which the Company currently competes. The
Company estimates, based on published industry data for the year ended
December 31, 1995, that the two largest suppliers in the laundry and household
cleaning products industry held approximately 49%, in the aggregate, of the
domestic market for such products. These two suppliers, Procter & Gamble Co.
and Unilever N.V., accounted for an aggregate of approximately 75% and 83% of
1995 domestic retail sales of liquid laundry detergents and liquid fabric
softeners, respectively. These two product categories accounted for 52% and
20%, respectively, of the Company's net sales in 1995.

The laundry and household cleaning products industry is characterized by
substantial price competition which is effected through changes in price,
product size and promotions. The Company believes it typically is not affected
by price changes initiated by larger premium-priced or mid-priced suppliers
whose pricing is substantially higher than the Company's pricing. Some
suppliers of value brands or store brands compete directly with the Company as
low price suppliers. Competitors may attempt to gain market share by offering
products at prices at or below those typically offered by the Company. Such
competitive pricing has in certain cases necessitated and may continue to
necessitate price reductions by the Company and has and may continue to result
in lost orders. Although the Company has not suffered

<PAGE>

significantly as a result of competitive pricing, there can be no assurance
that future price or product changes by the Company's competitors will not
have a material adverse effect on the Company or that the Company will be
able to react with price or product changes of its own to maintain its
current market position.

EMPLOYEES

As of March 31, 1996, the Company had 340 full-time employees, of whom 34
worked in executive, administrative or clerical capacities, 232 worked in
design and manufacturing, 32 worked in warehouse facilities and 42 worked in
sales. The Company intends to increase the size of its sales force. The
Company believes that its relations with its employees are good. The Company
has never experienced any interruption of any of its operations due to a labor
disagreement with its employees.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceeding other than such
proceedings which it believes will not have a material adverse effect on the
Company.

ENVIRONMENTAL REGULATION

PROPERTIES

The Company currently conducts its operations from a 360,000 square foot
facility located in North Brunswick, New Jersey. The Company's executive
offices and its manufacturing, office support, and receiving and shipping
departments are all located in that facility. The lease relating to such
facility expires in 2004, subject to two five-year extensions. For the fiscal
year ended December 31, 1995, the Company recorded rent expense of
approximately $1.0 million. In January 1996, the Company entered into a lease
for a 175,000 square foot facility located in Edison, New Jersey. The Company
uses this facility for additional warehouse and distribution capacity. The
lease relating to such facility expires in 2001, subject to one five-year
extension, and provides for an annual rental of $568,750. The Company also
leases seven additional sales offices throughout the United States.

The Company believes that its facilities are adequate to meet current
requirements.

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The name, age and position of each person who is an executive officer or
director of the Company is as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Uri Evan 60 Chairman of the Board; Chief Executive Officer
Joseph S. Cohen 45 Vice Chairman of the Board
Frank Valdez 45 President; Chief Operating Officer
Frederick J. Horowitz 31 Executive Vice President; Chief Administrative Officer; Director
Frank Corella 52 Vice President of Sales and Marketing
Harold J. Macsata 52 Vice President of Finance; Chief Financial Officer; Treasurer
Daniel Bergman 38 Vice President; Director of New York Metro Sales; Director; Secretary
Mark Antebi 43 Vice President; Director of International Sales; Director
Frederick R. Adler 70 Director
Dr. Shlomo Kalish 44 Director
Richard A. Mandell 53 Director
</TABLE>

URI EVAN has been Chairman of the Board of the Company since 1989 and
Chief Executive Officer since 1993. Since 1993, Mr. Evan has been Vice
Chairman and Chief Executive Officer of American Value Brands Inc., a food
marketing company of which he was a co-founder. From 1991 to 1992, he served
as Chairman and Chief Executive Officer of I. Rokeach & Sons Inc., a kosher
food manufacturing and marketing company. From 1988 to 1990, Mr. Evan was
Chairman and Chief Executive Officer of Newrock Development Inc., a real
estate development company. From 1969 to 1986, Mr. Evan was President and
Chief Executive Officer of Engineering Services Group, a Tel Aviv-based
international engineering, printing and publishing conglomerate of which he
was a co-founder. From 1970 to 1982, he served as Chairman of Organization and
Management Sciences Consultants Ltd., an Israeli management and computer
sciences firm of which he was a co-founder.

JOSEPH S. COHEN was a founder of the Company and has been Vice Chairman
of the Board of the Company since 1988. From 1981 to 1988, Mr. Cohen was
President of Michael Brooke Accessory, a jewelry accessory company, of which
he was the founder. From 1976 to 1981, Mr. Cohen was President and Chief
Executive Officer of Pam Lauren, a jewelry retailer, of which he was the
founder.

FRANK VALDEZ has been President of the Company and Chief Operating
Officer since April 1995. From 1990 to 1995, Mr. Valdez held various
management positions at Reckitt & Colman Inc. in purchasing, manufacturing and
project management, including Director of Manufacturing between January 1994
and April 1995. From 1976 to 1990, he held various positions at Johnson &
Johnson in manufacturing, distribution, purchasing and project management.

FREDERICK J. HOROWITZ has been Executive Vice President and Chief
Administrative Officer of the Company since June 1995, having served as
Managing Director of the Company since January 1995 and a director of the
Company since 1989. From 1991 through 1994, Mr. Horowitz was President and
Chief Operating Officer of the Company. From 1990 to 1991, he served as Vice
President of Operations. From 1988 to 1991, Mr. Horowitz was a Senior Vice
President of Newrock Development Inc., a real estate development company. Mr.
Horowitz is the son of Dinah Evan, who is married to Uri Evan.

FRANK CORELLA has been Vice President of Sales and Marketing of the
Company since 1991. From 1990 to 1991, he was President and Principal of
Paperoni, Inc., a party supply company. From 1988 to 1990, he served as
President of US1 Auto Parts. From 1984 to 1988, Mr. Corella served as
President of American Discount Auto Parts, a division of Rite Aid. From 1962
to 1984, he held various positions at SupeRx Drugs, a division of Kroger
Foods, including Vice President of Marketing.

<PAGE>

HAROLD J. MACSATA has been Vice President of Finance and Chief Financial
Officer of the Company since January 1994 and Treasurer since June 1995. From
1987 to 1993, he served as Vice President of Finance and Chief Financial
Officer for Roller Bearing Company of America, a roller bearing company. From
1966 to 1987, he served in various management positions at Torrington Company,
a roller bearing company.

DANIEL BERGMAN was a founder of the Company, has been a Vice President of
the Company since June 1995 and has been Director of New York Metro Sales,
Secretary and a director of the Company since 1988. Between 1987 and 1991, Mr.
Bergman was President of Carnegie International Inc., a retail and export
electronics company, and between 1984 and 1987, Mr. Bergman was a Vice
President of Nikora International Inc., a retail and export electronics
company.

MARK ANTEBI was a founder of the Company, has been a Vice President of
the Company since June 1995 and has been Director of International Sales of
the Company and a director of the Company since 1988. Between 1987 and 1991,
Mr. Antebi was Vice President of Carnegie International Inc., a retail and
export electronics company, and between 1985 and 1988, Mr. Antebi was
President of Nikora International Inc., a retail and export electronics
company.

FREDERICK R. ADLER has been a director of the Company since 1993. Mr.
Adler is Managing Director of Adler & Company, a venture capital management
firm he organized in 1968, and a general partner of its related investment
funds. Since January 1, 1996, Mr. Adler has been of counsel to the law firm of
Fulbright & Jaworski L.L.P. and prior thereto was a senior partner in the
firm. Mr. Adler is also Chairman of the Executive Committee and a director of
Data General Corporation, a computer company, Chairman of the board of
directors of Shells Seafood Restaurants, Inc., a restaurant chain, a director
of Global Pharmaceutical Corp., a manufacturer of generic pharmaceuticals, a
director of Prime Cellular, Inc., a wireless communications company, and a
director of Micro Linear Corporation, an integrated circuit manufacturer, and
of various private companies.

DR. SHLOMO KALISH has been a director of the Company since August 1995.
Dr. Kalish has served since September 1990 as the director of the Recanati
Wharton Insead York International Marketing Program at the Leon Recanati
Graduate School of Management Administration, Tel Aviv University. Dr. Kalish
has also served since June 1994 as the managing director of Jerusalem Global
Consultants, an Israeli investment banking boutique and strategic consulting
firm. Between September 1981 and August 1987 Dr. Kalish was a professor at the
Simon School of Business, University of Rochester.

RICHARD A. MANDELL has been a director of the Company since August 1995.
Mr. Mandell has served since January 1996 as Vice President--Private
Investments at Clariden Asset Management (New York) Inc., a subsidiary of
Clariden Bank, a private Swiss bank. From 1982 to June 1995, he was Managing
Director of Investment Banking for Prudential Securities Incorporated. Mr.
Mandell is also a director of Sbarro, Inc., a food service company, and
Trend-Lines, Inc., a specialty retailer of woodworking tools and accessories
and golf equipment and supplies.

The Board of Directors met four times in 1995 with each director
attending each meeting.

BOARD COMMITTEES

The Board of Directors has an Audit Committee, a Compensation Committee,
a Stock Option Committee and a Nominating Committee. The Audit Committee is
currently composed of Messrs. Mandell, Kalish and Horowitz. The functions
performed by this Committee include recommending to the Board of Directors the
engagement of the independent auditors, reviewing the scope of internal
controls and reviewing the implementation by management of recommendations
made by the independent auditors.

The Compensation Committee is currently composed of Messrs. Adler,
Mandell and Cohen. The functions of this Committee include the review of
existing and proposed employment arrangements and making recommendations to
the Board of Directors with respect to all forms of remuneration to any
officer or director of the Company.

<PAGE>

The Stock Option Committee is currently composed of Messrs. Kalish, Adler
and Mandell. The Stock Option Committee is responsible for recommending grants
of stock options under the Company's 1995 Stock Option Plan.

The Nominating Committee is currently composed of Messrs. Evan, Antebi
and Adler. The Nominating Committee is responsible for recommending director
nominees and Board of Director committee members.

EXECUTIVE AND DIRECTORS' COMPENSATION

The following table sets forth information concerning all cash and
non-cash compensation awarded to, earned by or paid to the Company's Chief
Executive Officer and the four most highly compensated executive officers of
the Company during the fiscal years ended December 31, 1993, 1994 and 1995:

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- ------------------------------ ------ ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Uri Evan(1) ................... 1995 $118,308 $-- $21,491 --
Chairman of the Board and 1994 70,000 -- -- --
Chief Executive Officer 1993 53,000 -- -- --

Frank Valdez .................. 1995 123,904 43,506 30,000 30,000
President and Chief 1994 -- -- -- --
Operating Officer 1993 -- -- -- --

Frank Corella ................. 1995 150,000 273,750(2) 20,000 --
Vice President of Sales and 1994 150,000 190,388(2) 20,000 --
Marketing 1993 150,000 130,957(2) 20,000 119,145(3)

Harold J. Macsata ............. 1995 121,961 30,144 -- 22,500
Vice President of Finance; 1994 118,000
Chief Financial Officer 1993 -- -- -- --

Daniel Bergman(1) ............. 1995 88,538 30,144 7,877 --
Vice President 1994 65,000 -- -- --
1993 70,463 -- -- --
</TABLE>
- ------------

(1) Does not include S corporation distributions. See "Prior S Corporation
Status."
(2) Represents sales commissions.
(3) At an exercise price of $2.00 per share.

The following two tables set forth certain information with respect to
(i) the number of options granted to named executive officers in fiscal 1995
and (ii) the aggregate number and value of options exercisable by the named
executive officers at December 31, 1995. No named executive officer exercised
any options in fiscal 1995. All share and per share amounts have been adjusted
to reflect the three-for-two split of the Company's Common Stock.

OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE DATE 5% 10%
- ---- ------------- ---------------- ------------ ------------ ---- -----

<S> <C> <C> <C> <C> <C> <C>
Uri Evan ......... -- -- -- -- -- --
Frank Valdez ..... 30,000 21.3% $9.67 8/7/05 $159,891 $393,818
Frank Corella ... -- -- -- -- -- --
Harold J. Macsata 22,500 15.9% 9.67 8/7/05 119,918 295,362
Daniel Bergman .. -- -- -- -- -- --
</TABLE>
- ------------

(1) Options vest over three years in installments of 25%, 25% and 50%.

(2) Amounts reported in these columns represent hypothetical values that
may be realized upon exercise of the options immediately prior to the
expiration of their term, assuming the specified annually compounded
rates of appreciation of the Company's Common Stock over the term of
the options. These numbers are calculated based on rules promulgated by
the Securities and Exchange Commission. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the time of
such exercise and the future performance of the Company's Common Stock.

<PAGE>

AGGREGATED FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Uri Evan ......... -- -- -- --
Frank Valdez ..... -- 30,000 -- $ 180,000
Frank Corella ... 29,786 89,359 $407,175 1,221,538
Harold J. Macsata -- 22,500 -- 135,000
Daniel Bergman .. -- -- -- --
</TABLE>
- ------------

(1) The value for an "in-the-money" option represents the difference
between the exercise price of the option and the closing price of the
Common Stock on The Nasdaq National Market on December 31, 1995 of
$15.67.

EMPLOYMENT AGREEMENTS

In January 1996, the Company entered into an amended employment agreement
with Mr. Evan which, as amended, provides for an annual base salary of
$200,000, as well as such bonuses as may be authorized from time to time by
the Board of Directors. The agreement expires in June 1999, with automatic
extensions of one year unless terminated, and a covenant not to compete for a
period of up to twenty-four months following the termination of employment.
Mr. Evan has agreed to devote approximately 80% of his working time to the
business and affairs of the Company. If the Company terminates the agreement
other than for cause, Mr. Evan will be entitled to continue to receive his
base salary through the end of the term. The agreement also provides that in
the event of a Change of Control (as defined in the agreement) during the term
of the agreement or during the 24 months thereafter, Mr. Evan shall receive a
payment equal to 2.5% of the increase in the Market Capitalization of the
Company (as defined in the agreement) between the 1995 IPO and such Change of
Control.

Messrs. Cohen, Horowitz, Bergman and Antebi have each entered into an
employment agreement with the Company that provides for an annual base salary
of $125,000, the right to receive 8% of a bonus pool maintained by the Company
for its employees based on the Company's operating gross margin (the "OGM
Plan") and such other bonuses as may be authorized from time to time by the
Board of Directors. See "--Profit Sharing Plan." Each agreement has a term of
three years expiring in 1998, with automatic extensions of one year unless
terminated, and a covenant not to compete for a period of up to twenty-four
months following the termination of employment. Each agreement requires the
executive to devote his full time, attention and efforts to the business and
affairs of the Company. If the Company terminates the agreement other than for
cause, the executive will be entitled to continue to receive his base salary
through the end of the term.

Messrs. Valdez, Corella and Macsata have each entered into an employment
agreement with the Company that provides for an annual base salary of $175,000
in the case of Messrs. Valdez and Corella and $125,000 in the case of Mr.
Macsata. The agreements with Messrs. Valdez and Macsata are also expected to
provide for the payment of such bonuses as may be authorized from time to time
by the Board of Directors, as well as the right to receive 12% of the OGM Plan
in the case of Mr. Valdez and 8% of the OGM Plan in the case of Mr. Macsata.
Under his employment agreement, Mr. Corella is also expected to be able to
earn up to $125,000 in bonuses based on the Company's net sales.

PROFIT SHARING PLAN

The Company has a profit sharing plan based on the amount by which the
Company's operating gross margin (the "OGM") exceeds 10% in a given year. OGM
is equal to the percentage of gross sales represented by the Company's income
from operations plus general and administrative expenses. If the Company's OGM
exceeds 10%, a percentage of that excess is placed in a bonus pool. The
percentage added to the bonus pool varies between 5% and 22% of OGM in excess
of 10%, provided that the total amount available for distribution shall not be
calculated based on annual net sales in excess of $200 million. Of the bonus
pool, 52% is allocated for distribution to senior executives with Mr. Valdez
to receive 12% and Messrs. Macsata, Antebi, Bergman, Cohen and Horowitz each
to receive 8%. Of the remainder of the bonus pool, no participant currently
can receive a distribution greater than 50% of his or her base salary. Amounts
not allocated for distribution under the bonus pool will not be distributed.
For 1995, the Company made payments aggregating $231,000 under the plan. No
distributions were made under the plan for periods prior to 1995.

<PAGE>

STOCK OPTION PLANS

1995 Stock Option Plan. Effective in August 1995, the Company adopted the
USA Detergents, Inc. 1995 Stock Option Plan (the "Plan"), pursuant to which
options to acquire an aggregate of 388,935 shares of Common Stock may be
granted to key employees and consultants of the Company or any of its
subsidiaries. The Plan authorizes the Board to issue incentive stock options
("ISO's"), as defined in Section 422A(b) of the Internal Revenue Code (the
"Code"), and stock options that do not conform to the requirements of that
Code section ("Non-ISO's"). The exercise price of each ISO may not be less
than 100% of the fair market value of the Common Stock at the time of grant,
except that in the case of a grant to an employee who owns (within the meaning
of Code Section 422A(b)(6)) 10% or more of the outstanding stock of the
Company or any subsidiary ("10% Shareholder"), the exercise price shall not be
less than 110% of such fair market value. The exercise price of each Non-ISO
may not be less than the par value of the Common Stock. Generally, options
will vest over a three to five year period and may not be exercised after the
tenth anniversary (fifth anniversary in the case of an ISO granted to a 10%
Shareholder) of their grant. Options may not be transferred during the
lifetime of an optionholder. No stock options may be granted under the Plan
after 2005.

The Plan is administered by the Stock Option Committee. Subject to the
provisions of the Plan, such Committee has the authority to determine the
individuals to whom the stock options are to be granted, the number of shares
to be covered by each option, the option price, the type of option, the option
period, the restrictions, if any, on the exercise of the option, the terms for
the payment of the option price and other terms and conditions. Payment by
optionholders upon exercise of an option may be made (as determined by the
Committee) in cash, by promissory note or by shares of Common Stock. It is
contemplated that an optionholder will be personally liable on a promissory
note used as payment for the exercise of an option.

Non-Employee Directors' Plan. Effective in August 1995, the Company
adopted a Stock Option Plan for Non-Employee Directors (the "Directors'
Plan"), pursuant to which options to acquire an aggregate of 75,000 shares of
Common Stock may be granted to non-employee directors. The Directors' Plan
provides for the automatic grant to each of the Company's non-employee
directors of (1) an option to purchase 4,500 shares of Common Stock on the
later of the date of such director's initial election or appointment to the
Board of Directors or the date of adoption of the Directors' Plan, and (2) an
option to purchase 4,500 shares of Common Stock on each annual anniversary of
such election or appointment, provided that such individual is on that
anniversary date a non-employee director. The options will have an exercise
price of 100% of the fair market value of the Common Stock on the date of
grant, have a ten-year term and become exercisable in four equal quarterly
installments commencing on the date which is three months after the date of
the grant thereof, subject to acceleration in the event of a change of control
(as defined in the Directors' Plan). The options may be exercised by payment
in cash, check or shares of Common Stock.

COMPENSATION OF DIRECTORS

Each non-employee director of the Company receives (i) an annual fee of
$15,000 and (ii) $1,500 per day for each Board of Directors or committee
meeting attended, but shall not receive additional pay for attending more than
one meeting of the Board of Directors or any committee in one day. In
addition, directors who are not employees of the Company are compensated
through stock options. See "--Stock Option Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors did not maintain a compensation committee prior to
the 1995 IPO. Compensation was determined in accordance with a stockholders'
agreement which terminated upon the closing of the 1995 IPO. Compensation
prescribed by the stockholders' agreement was adopted by the Board of
Directors from time to time. Uri Evan, Chief Executive Officer, Chairman of
the Board and a principal stockholder of the Company, is also a director,
officer and stockholder of American Value Brands, Inc. and Frederick R. Adler,
a director and principal stockholder of the Company, is also a director and
principal stockholder of American Value Brands, Inc.

<PAGE>

CERTAIN TRANSACTIONS

Prior to the 1995 IPO, the Company and all its stockholders were parties
to a stockholders' agreement providing for, among other things, the election
of directors and officers and a right of first refusal to purchase shares sold
by other stockholders. The stockholders' agreement terminated upon the closing
of the 1995 IPO.

Prior to the 1995 IPO, Mr. Adler, Mr. Rachamim Anatian, Mr. Evan, Mrs.
Dinah Evan, Mr. Horowitz and Mr. Blair Effron were also parties to a
stockholders' agreement with respect to, among other things, voting of their
shares for the election of certain directors and prohibiting the Company from
issuing additional equity except under certain circumstances. This
stockholders' agreement terminated upon the closing of the 1995 IPO.

Prior to the 1995 IPO, Messrs. Cohen, Antebi, Bergman, Horowitz and
Anatian each personally guaranteed the full repayment of the EDA Loan. In
August 1995 the Company paid $25,000 to each of the EDA and Banque Nationale
de Paris to release these individuals from their personal guarantees. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

In December 1992, Messrs. Cohen, Antebi and Bergman loaned an aggregate
of $73,500 to the Company for working capital and general corporate purposes.
The loan was repaid in full in March 1993.

In December 1992, the Company borrowed an additional $111,538, in the
aggregate, from Messrs. Cohen, Antebi, Bergman, Horowitz and Anatian for
working capital and general corporate purposes. A portion of the loan was
repaid in April 1993, with the remainder paid in April 1994.

In June 1994, as security for a loan extended by a bank to Mr. Horowitz,
Mr. Horowitz and Mr. and Mrs. Evan pledged all of their shares of Common Stock
in the Company to such bank and agreed not to consent to the issuance of
additional shares by the Company other than pursuant to a public offering so
long as the loan remained outstanding. This loan was repaid with the proceeds
of the sale of Common Stock by Mr. Horowitz and Mrs. Evan in the 1995 IPO and,
therefore, the pledge was extinguished.

In June 1994, U.S.A. Products, Inc., a New Jersey corporation, agreed to
act as guarantor under the Line of Credit. U.S.A. Products, Inc. is owned by
Mr. Horowitz and the wives of Messrs. Antebi, Bergman, Cohen and Anatian.

In December 1993, the Company granted options to purchase 446,788 shares
of Common Stock to each of Mr. Adler and Mr. Evan. The options were exercised
in December 1993 by Mr. Adler and Mr. Evan, with the exercise price being paid
by Mr. Adler partially in cash and partially in the form of a short-term
promissory note, and by Mr. Evan in the form of a short-term promissory note.
At the time of his exercise of the option, Mr. Evan transferred to Mr.
Horowitz 111,697 shares acquired by Mr. Evan pursuant to the option. The
promissory notes were paid in full by June 1994.

In 1995, Mr. Adler and Mr. Effron were granted rights to "piggyback" on
any registration statement filed by the Company, subject to certain
restrictions. The registration rights agreement relating to such "piggyback"
rights covers all Common Stock held by Messrs. Adler and Effron. Messrs. Adler
and Effron have waived such registration rights with respect to this offering.

In August 1995, the Company loaned Frank Valdez, its President, $130,500
at an interest rate of 3.54%. Such loan was repaid in full by October 1995.

<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of May 16, 1996 (except
as otherwise noted) by (i) each person known to the Company to be the
beneficial owner of more than five percent of the outstanding Common Stock,
(ii) each of the Company's directors, (iii) each of the persons named in the
Summary Compensation Table, and (iv) all directors and executive officers of
the Company as a group. Unless otherwise indicated below, the persons named
below have sole voting and investment power with respect to the number of
shares set forth opposite their names, subject to community property laws
where applicable.

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME AND ADDRESS(1) BENEFICIALLY OWNED (2)
------------------- ----------------------
NUMBER PERCENT
------ -------
<S> <C> <C>
Uri Evan (3) ............................... 984,505 7.19%
Dinah Evan (3) ............................. 984,505 7.19
Frederick J. Horowitz (4) .................. 1,181,746 8.63
Joseph S. Cohen (5) ........................ 900,003 6.57
Daniel Bergman (6) ......................... 900,003 6.57
Mark Antebi (7) ............................ 900,003 6.57
Frederick R. Adler
1520 South Ocean Boulevard
Palm Beach, Florida 33480 ................. 1,750,683 12.79
Dr. Shlomo Kalish (8) ...................... 3,375 *
Richard A. Mandell (9) ..................... 7,875 *
Rachamim Anatian ........................... 863,802 6.3
Frank Valdez ............................... 18,500 *
Harold J. Macsata .......................... 16,450 *
Frank Corella (10) ......................... 32,286 *
All directors and executive officers
as a group (11 persons)(3)(4)(5)(6)(7)(11). 6,335,429 46.15%
</TABLE>
- ------------
* Indicates less than one percent.

(1) Except as otherwise noted, the address of the named stockholder is c/o
USA Detergents, Inc., 1735 Jersey Avenue, North Brunswick, New Jersey
08902.

(2) Percentages of outstanding Common Stock are based upon 13,692,372
shares of Common Stock outstanding after the offering. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission (the "Commission") which generally attribute
beneficial ownership of securities to persons who possess sole or
shared voting power and/or investment power with respect to those
securities.

(3) Amounts reflected for Uri Evan and Dinah Evan, who are married to one
another, include (i) 536,430 shares held by Dinah Evan and a grantor
retained annuity trust of which Mrs. Evan is the grantor, (ii) 369,630
shares held by Uri Evan and (iii) 285,945 shares of Common Stock held
by a trust for the benefit of a child of Mr. Evan. Mr. and Mrs. Evan
may each be deemed to beneficially own the shares of Common Stock held
by the other and the shares of Common Stock held by each trust. Each
of Mr. and Mrs. Evan disclaims beneficial ownership of all shares
other than those held in his or her name.

(4) Includes 360,000 shares of Common Stock held by the grantor retained
annuity trust of which Dinah Evan is the grantor and Mr. Horowitz is
the remainderman and a trustee. See footnote (3) above.

(5) Amounts reflected include 238,290 shares of Common Stock held by the
children of Mr. Cohen. Mr. Cohen disclaims beneficial ownership of all
shares other than those held in his name.

(6) Amount reflects 661,713 shares of Common Stock held by the Bergman
Family Limited Partnership, a Nevada limited partnership of which Mr.
Bergman is the general partner, and 238,290 shares of Common Stock
held by the children of Mr. Bergman. Mr. Bergman disclaims beneficial
ownership of all shares other than those held in his name.

(7) Amounts reflected include 211,813 shares of Common Stock held by the
children of Mr. Antebi. Mr. Antebi disclaims beneficial ownership of
all shares other than those held in his name.

(8) Represents shares of Common Stock subject to options.

(9) Amounts reflected include 3,375 shares of Common Stock subject to
options.

(10) Amounts reflected include 29,786 shares of Common Stock subject to
options.

(11) Amounts reflected include 36,536 shares of Common Stock subject to
options.
34

<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 31,000,000 shares,
consisting of 30,000,000 shares of Common Stock, $.01 par value, and 1,000,000
shares of Preferred Stock, no par value.

On May 16, 1996, there were 13,392,372 shares of Common Stock and no
shares of Preferred Stock issued and outstanding.

In August 1995, the Company was reincorporated under the laws of the
State of Delaware. In addition, in connection with such reincorporation, each
outstanding share of common stock of the predecessor corporation was converted
into approximately 88,167 shares of Common Stock of the Company. On January
18, 1996, the Company declared a three-for-two stock split effected in the
form of a 50% stock dividend to holders of record of the Company's Common
Stock at the close of business on January 30, 1996 and paid on February 9,
1996.

The following descriptions of the share capital of the Company and the
material provisions of the Company's Certificate of Incorporation and By-Laws
are summaries and are qualified in their entirety by reference to the
Certificate of Incorporation and By-Laws, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders. The Common Stock does not
have cumulative voting rights and, as a result, the holders of a majority of
the shares of Common Stock entitled to vote in any election of directors may
elect all of the directors standing for election. In that event, the holders
of the remaining shares will not be able to elect any directors. Subject to
the rights and preferences of any Preferred Stock which may be issued, the
holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors out of funds legally
available therefor and, upon the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are,
and the shares offered by the Company in the offering will be, when issued and
paid for, fully paid and nonassessable.

PREFERRED STOCK

Pursuant to the Certificate of Incorporation, the Company is authorized
to issue "blank check" Preferred Stock, which may be issued from time to time
in one or more series upon authorization by the Company's Board of Directors.
The Board of Directors, without further approval of the stockholders, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each series of
the Preferred Stock. The issuance of Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, among other things, could adversely affect the voting power of the
holders of Common Stock and, under certain circumstances, make it more
difficult for a third party to gain control of the Company, discourage bids
for the Company's Common Stock at a premium to the prevailing market price or
otherwise adversely affect the market price of the Common Stock.

DELAWARE ANTI-TAKEOVER LAW

Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by
more than 2,000 stockholders, and an "interested stockholder" are prohibited
for a three-year period following the date that such stockholder became an
interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation or bylaws not to be governed by the Delaware
anti-takeover law (the Company has not made such an election), (ii) the
business combination

<PAGE>

was approved by the board of directors of the corporation before the other
party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the commencement of the transaction (excluding
voting stock owned by directors who are also officers or held in employee
stock plans in which the employees do not have a right to determine
confidentially whether to tender or vote stock held by the plan), or (iv) the
business combination was approved by the board of directors of the
corporation and ratified by 66 2/3 % of the voting stock which the interested
stockholder did not own. The three year prohibition does not apply to certain
business combinations proposed by an interested stockholder following the
announcement or notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested stockholder
during the previous three years or who became an interested stockholder with
the approval of a majority of the corporation's directors. The term "business
combination" is defined generally to include mergers or consolidations
between a Delaware corporation and an interested stockholder, transactions
with an interested stockholder involving the assets or stock of the
corporation or its majority owned subsidiaries and transactions which
increase an interested stockholder's percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who becomes
the beneficial owner of 15% or more of a Delaware corporation's voting stock.
The Delaware anti-takeover law could have the effect of delaying, deferring
or preventing a change in control of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, relating to prohibited
dividends or distributions or the repurchase or redemption of stock, or (iv)
for any transaction from which the director derives an improper personal
benefit. The provision does not apply to claims against a director for
violations of certain laws, including federal securities laws. If the Delaware
General Corporation Law is amended to authorize the further elimination or
limitation of directors' liability, then the liability of directors of the
Company shall automatically be limited to the fullest extent provided by law.
The Company's Certificate of Incorporation and By-laws also contain provisions
to indemnify the directors, officers, employees or other agents to the fullest
extent permitted by the Delaware General Corporation Law. In addition, the
Company has entered into indemnification agreements with its current directors
and executive officers. These provisions and agreements may have the practical
effect in certain cases of eliminating the ability of stockholders to collect
monetary damages from directors. The Company believes that these contractual
agreements and the provisions in its Certificate of Incorporation and By-laws
are necessary to attract and retain qualified persons as directors and
officers.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Continental
Stock Transfer & Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 13,692,372 shares
of Common Stock outstanding. Of those shares, 6,452,500 shares will be freely
tradeable without restriction (except as to affiliates of the Company) or
further registration under the Securities Act, and an additional 7,239,872
shares of Common Stock may be sold in the public market, subject to the
limitations contained in Rule 144 under the Securities Act. Shares of Common
Stock held by certain stockholders of the Company are subject to registration
rights. See "Certain Transactions."

In general, under Rule 144 under the Securities Act as currently in
effect, a person (or persons whose shares are aggregated) who has beneficially
owned restricted securities within the meaning of Rule 144 for

<PAGE>

at least two years, including the holding period of any prior owner except an
affiliate, would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of one percent of the then
outstanding shares of Common Stock or the average weekly trading volume of
the Common Stock on The Nasdaq National Market during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain manner
of sale provisions, notice requirements and the availability of current
public information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the three months preceding a sale, and who has beneficially owned
shares for at least three years, would be entitled to sell such shares under
Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements. An
"affiliate" is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or under common control with,
such issuer.

PLAN OF DISTRIBUTION

The Company expects to offer the shares of Common Stock offered hereby to
one or more institutional or other investors in transactions on The Nasdaq
National Market, in private transactions or otherwise, at negotiated prices
and terms. Under the terms and subject to the conditions set forth in a
Placement Agent Agreement between PaineWebber Incorporated (the "Placement
Agent") and the Company (the "Placement Agent Agreement"), the Placement Agent
has agreed to act as the placement agent for the Company in connection with
the investment or investments in the shares of the Common Stock being offered
hereby by one or more investors.

The Placement Agent Agreement provides that the Company shall pay the
Placement Agent a fee of $.05 per share of Common Stock sold to an investor or
investors introduced to, or referred to, the Company by the Placement Agent
($15,000 in total, in the event all 300,000 shares registered hereby are sold
to such investors). The Placement Agent Agreement will terminate on June 1,
1997, unless extended in writing by both the Company and the Placement Agent.
In addition, either the Company or the Placement Agent may terminate the
Placement Agent Agreement upon 10 days' written notice from one party to the
other. The Company has agreed to indemnify the Placement Agent against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Placement Agent may be required to make in respect
thereof.

LEGAL MATTERS

Certain legal matters with respect to the legality of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company by
Fulbright & Jaworski L.L.P., New York, New York. Frederick R. Adler, who is of
counsel to the firm, is a director of the Company and owns 1,750,683 shares of
its Common Stock and other attorneys in the firm own 6,382 shares of its
Common Stock.

EXPERTS

The financial statements of the Company, as of December 31, 1994 and 1995
and for each of the years then ended, appearing in this Prospectus and
Registration Statement have been audited by Deloitte & Touche LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

The financial statements of the Company for the year ended December 31,
1993, appearing in this Prospectus and Registration Statement have been
audited by Goldstein Golub Kessler & Company, P.C., independent auditors, as
set forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

<PAGE>

CHANGE OF ACCOUNTANTS

The Company engaged Deloitte & Touche LLP as the Company's independent
auditors to report on the Company's financial statements commencing with the
year ended December 31, 1994. Goldstein Golub Kessler & Company, P.C. acted as
the Company's independent auditors with regard to the fiscal year ended
December 31, 1993. The report on the financial statements for such year did
not contain an adverse opinion or disclaimer of opinion, or a modification as
to uncertainty, audit scope, or accounting principles. The decision to change
accountants was approved by the Company's Board of Directors. There were no
disagreements with Goldstein Golub Kessler & Company, P.C., resolved or
unresolved, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved
to Goldstein Golub Kessler & Company, P.C.'s satisfaction, would have caused
it to make reference to the subject matter of the disagreement(s) in
connection with its report.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, NW, Washington, D.C. 20549, and at the Commission's Regional
Offices at Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed
rates. The Company's Common Stock is listed on the Nasdaq Stock Market, and
such reports, proxy statements and certain other information can also be
inspected at the office of Nasdaq Operations, 1735 K Street, NW, Washington,
D.C. 20006.

The Company has filed with the Commission a Registration Statement on
Form S-1 relating to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or any other document referred to are not
necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement. For further information with respect to the Company and the Common
Stock offered hereby, reference is hereby made to the Registration Statement
and to the exhibits and schedules thereto. A copy of the Registration
Statement may be inspected by anyone without charge and may be obtained at
prescribed rates at the Commission at the Public Reference Section of the
Commission, maintained by the Commission at its principal office located at
450 Fifth Street, N.W., Washington, D.C. 20549, the New York Regional Office
located at 7 World Trade Center, New York, New York 10048, and the Chicago
Regional Office located at 500 West Madison, Suite 1400, Chicago, Illinois
60661.

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports ......................................... F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 ............ F-4
Consolidated Statements of Income for the years ended
December 31, 1993, 1994 and 1995 ..................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995 ..................................... F-6
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 ..................................... F-7
Notes to Consolidated Financial Statements for the years ended
December 31, 1993, 1994 and 1995 ..................................... F-8
Balance Sheets at March 31, 1995 and 1996 (unaudited) ................. F-16
Statements of Income for the three months ended
March 31, 1995 and 1996 (unaudited) .................................. F-17
Statements of Cash Flows for the three months ended
March 31, 1995 and 1996 (unaudited) .................................. F-18
Notes to Financial Statements for the three months ended
March 31, 1995 and 1996 (unaudited) .................................. F-19

</TABLE>

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
USA Detergents, Inc.:

We have audited the accompanying consolidated balance sheets of USA
Detergents, Inc. and subsidiary as of December 31, 1994 and 1995, and the
related consolidated statements of operations, retained earnings and cash
flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of USA Detergents, Inc. and
subsidiary at 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.

Deloitte & Touche LLP

New York, New York
February 9, 1996

F-2

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
USA Detergents, Inc.

We have audited the accompanying balance sheet of USA Detergents, Inc. as
of December 31, 1993 and the related statements of income, stockholders'
equity, and cash flows for the year ended December 31, 1993. (The balance
sheet is not presented herein). 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 audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 USA Detergents,
Inc. as of December 31, 1993 and the results of its operations and its cash
flows for the year ended December 31, 1993 in conformity with generally
accepted accounting principles.

GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.

New York, New York
February 21, 1994

F-3

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash ................................................................... $ 77 $ 61
Accounts receivable, net of allowance for doubtful accounts of
$84 and $276 respectively ............................................. 6,664 15,278
Inventories ............................................................ 7,899 8,448
Prepaid expenses and other current assets .............................. 1,696 2,989
Deferred income taxes receivable ....................................... -- 630
--------- ---------
Total current assets ................................................. 16,336 27,406
Property and equipment -- net ........................................... 7,561 10,404
Restricted funds ........................................................ 275 275
Other assets ............................................................ 277 255
Note receivable ......................................................... -- 2,250
--------- ---------
Total assets ............................................................ $24,449 $40,590
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 3,866 $ 4,830
Accrued expenses ....................................................... 3,399 3,942
Current portion of revolving credit line ............................... 3,500 6,983
Current portion of long-term debt ...................................... 305 305
Current portion of capitalized lease obligations ....................... 55 32
Income taxes payable ................................................... 57 182
--------- ---------
Total current liabilities ............................................ 11,182 16,274
Long-term portion of revolving credit line .............................. 4,000 --
Long-term debt -- net of current portion ................................ 2,111 1,806
Capital lease obligations -- net of current portion ..................... 69 24
Deferred rent payable ................................................... 1,207 1,204
Deferred income taxes payable ........................................... -- 990
--------- ---------
Total liabilities .................................................... 18,569 20,298
Commitments and Contingencies
Stockholders' equity:
Preferred Stock -- no par value; authorized 1,000,000 shares, none
issued ................................................................. -- --
Common stock -- $.01 par value; authorized 30,000,000 shares, issued
and outstanding 7,943,000 and 13,392,390 shares, respectively ........ 79 134
Additional paid-in capital ............................................. 2,836 15,499
Retained earnings ...................................................... 2,965 4,659
--------- ---------
Total stockholders' equity ........................................... 5,880 20,292
--------- ---------
Total liabilities and stockholders' equity .............................. $24,449 $40,590
========= =========

</TABLE>

See Notes to Consolidated Financial Statements.

F-4

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ----------
<S> <C> <C> <C>
Net sales .................................... $46,939 $68,663 $104,878
Cost of goods sold ........................... 36,896 51,588 72,921
--------- --------- ----------
Gross profit ................................. 10,043 17,075 31,957
--------- --------- ----------
Selling, general and administrative ......... 8,445 12,182 22,232
Non-recurring expenses ....................... 893 -- --
--------- --------- ----------
9,338 12,182 22,232
--------- --------- ----------
Income from operations ....................... 705 4,893 9,725
Other (income) expense
Interest expense ............................ 395 546 616
Interest income ............................. (12) (3) (72)
--------- --------- ----------
383 543 544
--------- --------- ----------
Earnings before income taxes ................. 322 4,350 9,181
Income tax provision ......................... 22 83 2,156
--------- --------- ----------
Net income ................................... $ 300 $ 4,267 $ 7,025
========= ========= ==========
Pro Forma Income Statement Data:
Earnings before income tax, as reported .... $ 322 $ 4,350 $ 9,181
Pro forma income tax provision .............. 149 1,689 3,756
--------- --------- ----------
Pro forma net income ........................ $ 173 $ 2,661 $ 5,425
========= ========= ==========
Pro forma net income per share .............. $ .02 $ .22 $ .43
========= ========= ==========
Weighted average number of shares
outstanding used in the pro forma per share
calculation ................................ 11,915 11,915 12,494
========= ========= ==========
</TABLE>

See Notes to Consolidated Financial Statements.

F-5

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 300 $ 4,267 $ 7,025
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization ....................... 398 762 1,006
Loss on disposal of equipment ....................... 59 -- --
Change in the provision for bad debts and sales
allowances ......................................... (6) 157 192
Increase/(decrease) in deferred rent ................ (398) 416 (3)
Changes in operating assets and liabilities:
Increase in accounts receivable ..................... (1,963) (384) (8,806)
Increase in inventories ............................. (3,333) (2,346) (549)
(Increase)/decrease in prepaid expenses and other
current assets ..................................... 81 (1,250) (1,293)
Increase in security deposits ....................... (11) -- (1)
Increase in other assets ............................ (172) (34) 23
Increase/(decrease) in accounts payable ............. 2,795 (2,962) 966
Increase/(decrease) in accrued expenses ............. 1,087 2,158 543
Decrease in restricted funds ........................ -- 141 --
Increase in deferred income taxes receivable ....... -- -- (630)
Increase in deferred income taxes payable .......... -- -- 990
Increase in income taxes payable .................... 20 38 125
--------- --------- ---------
Net cash provided by (used in) operating activities: (1,143) 963 (412)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment ....... 21 -- --
Purchase of property and equipment .................. (4,627) (1,651) (3,851)
Increase in note receivable ......................... -- -- (2,250)
--------- --------- ---------
Net cash used in investing activities: .............. (4,606) (1,651) (6,101)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholder distributions ........................... -- (1,612) (5,331)
Repayment of stockholders loans ..................... (104) (82) --
Proceeds from common stock subscription ............. 500 1,375 --
Proceeds from long-term debt ........................ 3,062 -- --
Repayment of long-term debt ......................... -- (334) (305)
Proceeds from initial public offering ............... -- -- 12,718
Increase (decrease) in revolving credit line, net .. 2,299 1,394 (517)
Capitalized lease repayments ........................ (17) (22) (68)
--------- --------- ---------
Net cash provided by financing activities .......... 5,740 719 6,497
--------- --------- ---------
Net increase (decrease) in cash ...................... (9) 31 (16)
Cash, January 1, ..................................... 55 46 77
--------- --------- ---------
Cash, December 31, ................................... $ 46 $ 77 $ 61
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest .......................................... $ 363 $ 520 $ 539
Income taxes ...................................... $ 3 $ 45 $ 1,671

</TABLE>

See Notes to Consolidated Financial Statements.

F-6

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- ------------ --------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1993 ... $ 7,347,282 $ 73
Net income .................
Common stock subscriptions -- -- 595,718 6
-------- -------- ------------ --------
BALANCE, December 31, 1993 . 7,943,000 79
Net income .................
Stockholder distributions .
Collection of common stock
subscription receivable ..
-------- -------- ------------ --------
BALANCE, December 31, 1994 . -- -- 7,943,000 79
Net income .................
Stockholder distributions .
Proceeds from initial
public offering ........... 985,260 10
Three-for-two stock split .. -- -- 4,464,130 45
-------- -------- ------------ --------
BALANCE, December 31, 1995 . -- $-- 13,392,390 $134
======== ======== ============ ========

</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>

ADDITIONAL STOCK TOTAL
PAID-IN RETAINED SUBSCRIPTIONS STOCKHOLDERS'
CAPITAL EARNINGS TOTAL RECEIVABLE EQUITY
------------ ---------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993 ... $ 967 $ 10 $ 1,050 $ $ 1,050
Net income ................. 300 300 300
Common stock subscriptions 1,869 1,875 (1,375) 500
------------ ---------- --------- --------------- ---------------
BALANCE, December 31, 1993 . 2,836 310 3,225 (1,375) 1,850
Net income ................. 4,267 4,267 4,267
Stockholder distributions . (1,612) (1,612) (1,612)
Collection of common stock
subscription receivable .. 1,375 1,375
------------ ---------- --------- --------------- ---------------
BALANCE, December 31, 1994 . 2,836 2,965 5,880 -- 5,880
Net income ................. 7,025 7,025 7,025
Stockholder distributions . (5,331) (5,331) (5,331)
Proceeds from initial
public offering ........... 12,708 12,718 12,718
Three-for-two stock split .. (45) -- -- -- --
------------ ---------- --------- --------------- ---------------
BALANCE, December 31, 1995 . $15,499 $ 4,659 $20,292 $ -- $20,292
============ ========== ========= =============== ===============

</TABLE>
See Notes to Consolidated Financial Statements.

F-7

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USA Detergents, Inc. (the "Company") manufactures and markets nationally
distributed value brand laundry and household cleaning products.

Basis of Presentation--The accompanying Financial Statements include the
accounts of the Company and its wholly-owned subsidiary. All intercompany
accounts and transactions have been eliminated in consolidation.

Organization, Recapitalization and Initial Public Offering -- The Company
was organized in New Jersey and commenced operations effective October 25,
1988. On August 2, 1995, the Company was reincorporated in Delaware. In
connection with the reincorporation, the Company became authorized to issue up
to 30,000,000 shares of Common Stock, $.01 par value per share, and up to
1,000,000 shares of Preferred Stock, no par value. As part of the
reincorporation each share of the predecessor corporation's common stock was
converted into 88,167 shares of Common Stock of the Company. All applicable
share data have been retroactively adjusted to reflect the reincorporation and
share conversion.

On January 18, 1996, the Company declared a three-for-two stock split
effected in the form of a 50% stock dividend to holders of record of the
Company's Common Stock at the close of business on January 30, 1996 and paid
February 9, 1996. Shares outstanding and per share amounts have been
retroactively adjusted to reflect the three-for-two stock split.

In August 1995, the Company completed an initial public offering of
3,622,500 shares of Common Stock, including 1,477,890 shares of Common Stock
sold by it which provided net proceeds of approximately $12,718,000.

Inventories -- Inventories are stated at the lower of cost, determined by
using the first-in, first-out and average methods, or market. The Company
periodically reviews inventory for slow moving or obsolete items. Such items
are written down to net realizable value and have not been material for any
period presented.

Slotting fees -- The Company incurs certain costs in connection with
placing its products. These costs are known in the trade as "slotting fees."
The Company is amortizing these fees over a one year period from the date
incurred. Deferred slotting fees are included in prepaid expenses and other
current assets.

Long-Lived Assets -- In March 1995, the Financial Accounting Standards
Board issued Statement Number 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
is effective for fiscal years beginning after December 15, 1995. The Company
does not expect the effect on its consolidated financial condition from the
adoption of this statement to be material.

Depreciation and Amortization -- Depreciation of property and equipment
is provided for by using the straight-line method over the estimated useful
lives of the respective assets. Amortization of leasehold improvements is
provided for by the straight-line method over the lease term.

Trademark and Deferred Loan Costs -- Other assets include trademark
costs, which are being amortized using the straight-line method over a period
of 10 years, and loan closing costs, which are being amortized over the life
of the loan.

Income Taxes -- Prior to August 9, 1995 (two days prior to the completion
of the Company's initial public offering), the Company elected to be treated
as an S corporation ("S corporation") under the applicable sections of the
Internal Revenue Code. Accordingly, during the "S Corporation Period" there
was no provision for federal income taxes as such earnings of the Company
flowed through directly to the stockholders. The Company is subject to state
and local taxes in certain states.

F-8

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (CONTINUED)

1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Deferred taxes on income are provided to reflect the tax effect of
temporary differences between financial statement income and taxable income.
The principal items giving rise to deferred taxes are the use of accelerated
depreciation methods for tax purposes, straight-lining of step rental
increases and differences in the timing of the deductibility of certain
expenses between income tax and financial reporting.

As of January 1, 1993, the Company has adopted Statement of Financial
Accounting Standards, No. 109, "Accounting for Income Taxes" ("SFAS 109").

Fair Value of Financial Instruments -- For financial instruments
including cash, accounts receivable and payable and accruals, it was assumed
that the carrying amount approximated fair value because of their short
maturity. The carrying amount of long-term debt, which bears interest at
floating rates, also approximates fair value. Credit risk on trade receivables
is minimized as a result of the large and diverse nature of the Company's
customer base.

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

Revenue Recognition -- Revenue is recognized at the time the merchandise
is shipped.

Stock Options and Warrants -- In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Standards No. 123, "Accounting
for Stock-Based Compensation," which requires adoption of its disclosure
provisions for fiscal years beginning after December 15, 1995 and adoption of
the measurement and recognition provisions for non-employee transactions for
fiscal years beginning after December 15, 1995. The new standard defines a
fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period.

Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee
stock-based transactions. Companies are also permitted to continue to account
for such transactions under Accounting Principles Board Option No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose
in a note to the financial statements pro forma net income and pro forma
earnings per share as if the Company had applied the new method of accounting.
The new standard also requires increased disclosure for stock-based
compensation arrangements regardless of the method chosen to measure and
recognize compensation for employee stock-based arrangements.

The accounting requirements of the new method are effective for all
transactions entered into during the fiscal year of adoption. The Company has
not yet determined if it will elect to change to the fair value method, nor
has it determined the effect the new standard will have on net income and
earnings per share should it elect to make such a change.

Pro forma Earnings Per Share and Pro forma Information -- Pro forma
earnings per share are computed by dividing pro forma net income by the
weighted average number of shares outstanding. The dilutive effect of stock
options have not been included as the impact is not material. Shares
outstanding have been retroactively adjusted for the recapitalization.

Pro forma net income has been adjusted to reflect a tax provision which
reflects the actual taxes that would have been paid had the Company been a C
corporation for all of 1995.

F-9

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (CONTINUED)

2. INVENTORIES

Inventories consist of the following:

DECEMBER 31,
------------------
1994 1995
-------- --------
(IN THOUSANDS)
Raw material . $5,200 $3,816
Finished goods 2,699 4,632
-------- --------
$7,899 $8,448
======== ========

3. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists of the following:

DECEMBER 31, ESTIMATED
------------------ USEFUL LIFE/
1994 1995 RECOVERY PERIOD
-------- -------- ---------------

(IN THOUSANDS)

Machinery and equipment .......... $5,682 $ 7,672 6 to 20 years
Furniture and fixtures ........... 950 1,382 5 to 7 years
Leasehold improvements ........... 2,310 2,563 Term of lease
Construction in progress ......... 247 1,423
-------- --------
9,189 13,040
Less accumulated depreciation and
amortization .................... 1,628 2,636
-------- --------
$7,561 $10,404
======== ========

4. REVOLVING CREDIT LINE

The Company has amended its credit facility with a bank, effective August
15, 1995 (the date of the last amendment). The agreement, which expires
November 1, 1996 provides for a revolving credit line not to exceed the lesser
of $15,000,000 or the borrowing base, as defined. Interest on the outstanding
balance is payable at LIBOR plus 1.75% per annum (7.375% at December 31, 1995)
on the first $5,000,000 of borrowings (at the option of the borrower) and at
the prime rate of the lender on the balance (8.5% at December 31, 1995).

The agreement contains, among other items, restrictions relating to
incurrence of additional indebtedness and the payment of dividends.
Additionally, the Company is required to maintain certain minimum financial
ratios.

Borrowings under this agreement are collateralized by substantially all
of the assets of the Company.

5. LONG-TERM DEBT

During 1993, the Company received a loan of $2,750,000 from the New
Jersey Economic Development Authority. Proceeds from this loan are to be used
solely for machinery and equipment and improvements to the Company's
manufacturing facility in North Brunswick, New Jersey. As of December 31,
1995, the Company had used $2,474,775 for machinery and equipment and
improvements. From the remaining $275,225, classified as restricted funds,
$275,000 must remain restricted through the duration of the loan. The loan is
payable in monthly installments of $25,416 from January 1, 1995 through
November 1, 2001 and $25,833 from December 1, 2001 through November 1, 2002.
Interest on the loan is payable at a variable rate (5.15% at December 31,
1995).

F-10

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (CONTINUED)

5. LONG-TERM DEBT (Continued)

The agreement contains, among other items, restrictions relating to the
payment of dividends.

The loan is collateralized by all assets purchased with the proceeds of
the loan.

6. CAPITALIZED LEASE OBLIGATIONS

The Company has acquired equipment under leases that have been accounted
for as capital leases.

Aggregate future minimum lease payments are as follows:

YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
- ------------
1996 ................................... $49
1997 ................................... 25
1998 ................................... 6
--------------
80
Less amount representing interest ..... 24
--------------
Present value of minimum lease payments 56
Current portion ........................ 32
--------------
Long-term portion ...................... $24
==============

During the years ended December 31, 1993, 1994 and 1995, the Company
acquired equipment under capital leases amounting to $24,323, $95,613 and $0,
respectively.

7. COMMITMENTS AND CONTINGENCIES

Note Receivable

In December 1995, the Company loaned approximately $2.3 million to an
unaffiliated third party in connection with such third party's acquisition of
a powder detergent manufacturing facility. Amounts outstanding under such loan
bear interest at 10.0% per annum and are payable on demand. The loan is
secured exclusively by the stock and assets of the borrower. The Company has
an option to purchase the manufacturing facility for the amount of the loan.
Pursuant to certain related agreements, the Company maintains manufacturing
control of the facility and has the right to purchase all of the facility's
output. Under the Company's supply and management agreements, the Company, by
its purchases of products, funds operations of the supplier's facility.

F-11

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES (Continued)

Leases

The Company is committed under various operating leases which expire at
varying dates through the year 2004. Aggregate minimum future lease payments,
exclusive of payments for real estate taxes and operating costs, are as
follows:

YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
- --------------
1996 .......... $ 4,485
1997 .......... 2,122
1998 .......... 2,094
1999 .......... 1,690
2000 .......... 1,649
Thereafter .... 3,519
--------------
$15,559
==============

Rent expense charged to operations amounted to $678,442, $1,099,177 and
$1,043,418 for the years ended December 31, 1993, 1994 and 1995, respectively,
including real estate taxes and operating escalations.

Rent expense recognized annually differs from actual rent paid as a
result of free rent periods and escalations in base rent provided in the
leases. Accordingly, the Company has recorded deferred rent of $1,204,240 at
December 31, 1995. This amount is being amortized by the straight-line method
over the life of the lease.

Servicing Agreement

The Company entered into an exclusive use agreement with a vendor whereby
the vendor has committed the use of certain machines for the production of
packaging materials for the Company. The monthly payment is $738,000, subject
to maximum annual increases of 2%, through January 31, 2001, which will be
applied against the purchase price of the packaging materials.

Profit Sharing Plan

The Company has a profit sharing plan based on the amount by which the
Company's operating gross margin (the "OGM"), as defined, exceeds ten percent.
If the Company's OGM exceeds ten percent, a percentage of that excess is
placed in a bonus pool based on a predetermined formula provided that the
total amount available for distribution shall not be based on annual gross
sales in excess of $200 million. Fifty-two percent of the bonus pool is
allocated for distribution to senior executives. Of the remainder of the bonus
pool, no participant can currently receive a distribution greater than 50% of
his or her base salary. Amounts not allocated for distribution under the bonus
pool will not be distributed. The Company did not make payments through
December 31, 1994, under the plan as amounts have been immaterial and waived.
For the year ended December 31, 1995, approximately $231,000 will be
distributed under the plan.

Officer Loan

In August, 1995, the Company made a short-term advance to its President
in the amount of $130,500. Such amount was fully repaid by October 1995.

F-12

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES (Continued)

Employment Agreements

The Company is obligated under various employment agreements expiring in
1999. The minimum future annual amounts payable under these agreements are as
follows:

(IN THOUSANDS)
1996 ... $1,175
1997 ... 1,175
1998 ... 1,175
1999 ... 200
--------------
$3,725
==============

Environmental Regulation

8. INCOME TAXES

Components of income taxes are as follows:

YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
------ -------------- --------
(IN THOUSANDS)
Current:
Federal ......... $-- $-- $1,403
State and local 22 83 393
Deferred ......... -- -- 360
------ -------------- --------
$22 $83 $2,156
====== ============== ========

Temporary differences which give rise to net deferred tax liabilities are
as follows:

DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
Deferred tax liabilities
Depreciation ............................. $990
-----------------
Deferred tax assets
Straight-lining of step rental increases 466
Allowance for bad debts .................. 107
Inventory capitalization ................. 37
Miscellaneous ............................ 20
-----------------
630
-----------------
Net deferred tax liabilities .............. $360
=================

F-13

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (CONTINUED)

8. INCOME TAXES (Continued)

A reconciliation of income taxes at the Federal statutory rate to amounts
provided is as follows:

YEAR ENDED
DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
Tax provision computed at statutory rate ......... $ 3,122
State and local income taxes ...................... 264
Non taxable earnings during period prior to
conversion to C corporation status ............... (1,522)
Recognition of deferred taxes upon conversion to C
corporation status ............................... 227
Other--net ........................................ 65
-----------------
$ 2,156
=================

Prior to August 10, 1995, the Company was taxed as an S corporation.
Accordingly, no reconciliation for 1994 and 1993 has been provided as taxes on
earnings of the Company were the responsibility of the stockholders.

9. SIGNIFICANT CUSTOMERS AND SUPPLIERS

The Company's five largest customers in the aggregate accounted for
32.7%, 27.9% and 29.2%, including Wal-Mart which accounted for 1.2%, 10.0% and
17.2% of sales, respectively, in 1993, 1994 and 1995. No other customer of the
Company accounted for more than 10.0% of the Company's net sales. As is
customary in the industry, the Company does not have long-term contracts with
its customers.

Certain chemical plastic bottles, packaging materials and manufacturing
equipment used in connection with the manufacture of the Company's products as
well as certain finished products sold by the Company are obtained from a sole
or a limited group of suppliers and subcontractors. The Company's reliance on
a sole supplier or limited groups of suppliers and subcontractors involves
several risks, including increased risk of inability to obtain adequate
supplies, and reduced control over pricing and timely delivery. Although the
timeliness, quality and pricing of deliveries from the Company's suppliers
have been acceptable to date and the Company believes that additional sources
of supply are generally available, there can be no assurance that supplies
will be available on an acceptable basis or that delays in obtaining new
suppliers, particularly of plastic bottles, will not have an adverse effect on
the Company.

10. NON-RECURRING EXPENSES

Relocation Expenses

During the year ended December 31, 1993, the Company relocated its
operations to a new facility. The Company continued to incur expenses on its
old plant, including rent and real estate taxes, from the date of relocation
through the expiration date of the lease on that facility. These expenses
amounted to approximately $474,000.

Theft Loss

During the year ended December 31, 1993, the Company suffered a loss of
$419,000, due to a systematic theft of inventory involving several outside
shippers. The Company is in the process of attempting to recover a portion of
this amount from its insurance company. No estimated recovery has been
recorded in the financial statements.

F-14

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (CONTINUED)

11. STOCK OPTIONS

1995 Stock Option Plan. Effective in August 1995, the Company adopted the
USA Detergents, Inc. 1995 Stock Option Plan (the "Plan"), pursuant to which
options to acquire an aggregate of 388,935 shares of Common Stock may be
granted to key employees and consultants of the Company or any of its
subsidiaries. The Plan authorizes the Board to issue incentive stock options
("ISO's"), as defined in Section 422A(b) of the Internal Revenue Code (the
"Code"), and stock options that do not conform to the requirements of that
Code section ("Non-ISO's"). The exercise price of each ISO may not be less
than 100% of the fair market value of the Common Stock at the time of grant,
except that in the case of a grant to an employee who owns 10% or more of the
outstanding stock of the Company or any subsidiary ("10% Shareholder"), the
exercise price shall not be less than 110% of such fair market value. The
exercise price of each Non-ISO may not be less than the par value of the
Common Stock. Generally, options will vest over a three to five year period
and may not be exercised after the tenth anniversary (fifth anniversary in the
case of an ISO granted to a 10% Shareholder) of their grant. Options may not
be transferred during the lifetime of an optionholder. No stock options may be
granted under the Plan after 2005.

Activity in these Plans since inception is as follows:

NUMBER OF EXERCISE PRICE
OPTIONS RANGE
------------ ----------------------
Granted in 1995 ....................... 141,150 $9.67 - $12.67
Canceled .............................. (7,500) $9.67 - $12.67
------------
Options outstanding, December 31, 1995 133,650 $9.67 - $12.67
============ ======= ========

As of December 31, 1995 there were 330,285 options available for future
grant under the Plans and none of the options granted were exercisable.

In December 1993, the Company granted an option to an executive covering
119,145 shares of common stock exercisable in four annual installments
beginning December 31, 1995. Such option is exercisable at $2.00 per share.

F-15

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
BALANCE SHEETS
MARCH 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................ $ 78 $ 313
Accounts receivable, net of allowance for doubtful accounts of
$80 and $386, respectively ..................................... 9,611 18,174
Inventories ..................................................... 7,334 13,850
Prepaid expenses and other current assets ....................... 1,939 4,612
Deferred taxes .................................................. -- 709
--------- ---------
Total current assets .......................................... 18,962 37,658
Property and equipment -- net .................................... 7,618 12,097
Restricted funds ................................................. 275 275
Other assets ..................................................... 270 320
Note receivable .................................................. -- 2,250
--------- ---------
Total assets ..................................................... $27,125 $52,600
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilties:
Accounts payable ................................................ $ 5,897 $ 8,729
Accrued expenses ................................................ 2,845 5,736
Revolving credit line ........................................... 3,778 10,001
Current portion of long-term debt ............................... 305 305
Current portion of capitalized lease obligations ................ 51 28
Income tax payable .............................................. 85 1,351
--------- ---------
Total current liabilities ..................................... 12,961 26,150
Long-term debt -- net of current portion ......................... 2,021 1,729
Capital lease obligations -- net of current portion ............. 63 10
Deferred rent payable ............................................ 1,232 1,285
Deferred taxes ................................................... -- 1,046
--------- ---------
Total liabilities ............................................. 20,277 30,220
--------- ---------
Stockholders' equity:
Preferred stock -- no par value; authorized 1,000,000 shares,
none issued .................................................... -- --
Common stock -- $.01 par value; authorized 30,000,000 shares,
issued and outstanding 11,914,500 shares and 13,392,372 shares,
respectively ................................................... 119 134
Additional paid-in capital ...................................... 2,796 15,499
Retained earnings ............................................... 3,933 6,747
--------- ---------
Total stockholders' equity .................................... 6,848 22,380
--------- ---------
Total liabilities and stockholders' equity ....................... $27,125 $52,600
========= =========
</TABLE>

See Notes to Financial Statements.

F-16

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

1995 1996
--------- ---------

Net sales ..................................... $23,255 $34,067
Cost of goods sold ............................ 16,829 22,525
--------- ---------
Gross profit .................................. 6,426 11,542
Selling, general and administrative ........... 4,635 7,952
--------- ---------
Income from operations ........................ 1,791 3,590
Interest expense -- net ....................... 188 167
--------- ---------
Earnings before income taxes .................. 1,603 3,423
Income tax provision .......................... 31 1,335
--------- ---------
Net income .................................... $ 1,572 $ 2,088
========= =========
Net income per share .......................... $ 0.16
=========
Weighted average shares outstanding ........... 13,392
=========
Pro forma Income Statement Data:
Earnings before income taxes, as reported ... $ 1,603
Pro forma income tax provision ............... 634
---------
Pro forma net income ......................... $ 969
=========
Pro forma net income per share ............... $ 0.08
=========
Weighted average shares used in the
calculation
of pro forma net income per share ........... 11,915
=========

See Notes to Financial Statements.

F-17

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(IN THOUSANDS)
(UNAUDITED)

1995 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................................... $ 1,572 $ 2,088
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization .................................. 223 294
Change in the provision for bad debts and sales allowances .... 65 110
Increase in deferred rent ...................................... 25 81
Changes in operating assets and liabilities:
(Increase) in accounts receivable .............................. (3,012) (3,006)
(Increase)/decrease in inventories ............................. 565 (5,402)
(Increase) in prepaid expenses and other current assets ....... (243) (1,623)
(Increase)/decrease in other assets ............................ 7 (65)
Increase in accounts payable and accrued expenses .............. 1,477 5,693
Increase in taxes payable ...................................... 28 1,169
Increase in deferred tax asset ................................. -- (79)
Increase in deferred tax liability ............................. -- 56
--------- ---------
Net cash provided by (used in) operating activities .......... 707 (684)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............................. (281) (1,987)
--------- ---------
Net cash used in investing activities ......................... (281) (1,987)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
S corporation distributions .................................... (604) --
Repayments of long-term debt ................................... (90) (77)
Net proceeds on revolving credit line .......................... 278 3,018
Capitalized lease repayments ................................... (9) (18)
--------- ---------
Net cash provided by/(used in) financing activities .......... (425) 2,923
--------- ---------
Net increase in cash ............................................ 1 252
Cash, January 1 ................................................. 77 61
--------- ---------
Cash, March 31, ................................................. $ 78 $ 313
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ...................................................... 191 158
Income taxes .................................................. 3 166

</TABLE>

See Notes to Financial Statements.

F-18

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)

1. BASIS OF PRESENTATION

The financial statements included herein should be read in conjunction
with the financial statements and notes thereto contained in the USA
Detergents, Inc. (the Company) Form 10-K filed with the Securities and
Exchange Commission on March 29, 1996. In the opinion of the management of the
Company, the accompanying unaudited financial statements contain all
adjustments necessary, consisting of only normal recurring accruals, to
present fairly the Company's financial position as of March 31, 1996, the
statements of operations for the three month periods ended March 31, 1996 and
1995, and the statements of cash flows for the three month periods ended March
31, 1996 and 1995. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted from the
accompanying financial statements. The results of operations for the three
months ended March 31, 1996, are not necessarily indicative of the results of
operations expected for the year ending December 31, 1996.

2. ORGANIZATION, RECAPITALIZATION AND INITIAL PUBLIC OFFERING

The Company was organized in New Jersey and commenced operations
effective October 25, 1988. On August 2, 1995, the Company was reincorporated
in Delaware. In connection with the reincorporation, the Company became
authorized to issue up to 30,000,000 shares of Common Stock, $.01 par value
per share, and up to 1,000,000 shares of Preferred Stock, no par value. As
part of the reincorporation, each share of the predecessor corporation's
common stock was converted into approximately 88,167 shares of Common Stock of
the Company. All applicable share data have been retroactively adjusted to
reflect the reincorporation and share conversion.

On March 6, 1996, certain selling shareholders completed a secondary
public offering of 2,530,000 shares.

3. INCOME TAXES

During the period prior to the initial public offering (Note 2), the
Company elected to be treated as an S corporation under the applicable
sections of the Internal Revenue Code. Accordingly, there is no provision for
federal income taxes as such earnings and losses of the Company flow through
directly to the stockholders. In connection with the offering, the Company
terminated its S corporation election. The income tax provision consists of
state and local taxes in certain states for all periods presented, and federal
income taxes on earnings subsequent to the public offering.

4. PRO FORMA INFORMATION

Pro forma net income per share is computed by dividing pro forma net
income by the average weighted number of shares outstanding. In connection
with the initial public offering of the Company's common stock, the Company
changed its tax status to a C corporation (Note 3) and is subject to federal
and all applicable state and local income taxes. Pro-forma information in the
statements of income assumes the Company's change in tax status for the period
presented.

F-19

<PAGE>

USA DETERGENTS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 (CONTINUED)
(UNAUDITED)
5. REVOLVING CREDIT LINE

The Company has a credit facility with a bank which was last amended
August 10, 1995. The agreement, which expires November 1, 1996, provides for a
revolving credit line not to exceed the lesser of $15,000,000 or a borrowing
base, as defined. Interest on outstanding balances are computed at LIBOR plus
1.75% per annum (7.0625% at March 31, 1996) on the first $5,000,000 of
borrowings (at the option of the borrower) and at the prime rate of the lender
on the balance (8.25% at March 31, 1996). At March 31, 1996, outstanding
borrowings against the revolving credit line were approximately $10,000,000.

The Company is required to maintain certain minimum financial ratios.

Borrowings under this agreement are collateralized by substantially all
of the assets of the Company.

F-20