<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended DECEMBER 31, 1997. Commission File No. 0-28720.
ROSE INTERNATIONAL LTD
(Exact name of small business issuer in its charter)
DELAWARE 73-1479833
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7633 EAST 63RD PLACE, SUITE 220, TULSA, OKLAHOMA 74133
(Address of principal executive office)(Zip Code)
Issuer's telephone number - (918) 461-1667
Securities registered under Section 12(b) of the Exchange Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of each class)
NONE
(Name of each exchange on which registered)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] ; No [ ].
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. None
As of February 28, 1998, the registrant had outstanding 6,525,000 shares of its
Common Stock, par value of $0.01, its only class of voting securities. The
aggregate market value of the shares of common stock of the registrant held by
non-affiliates on February 28, 1998 was approximately $478,000 based upon the
average over the counter sales price on such date (See Item 5).
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this Report except those
Exhibits so incorporated as set forth in the Exhibit Index.
Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X].
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Rose International Ltd ("Rose" or "the Company") is a Delaware
corporation organized on August 9, 1995. Rose, following its formation, merged
with Rose International Inc. a/k/a Global Ecosystems, Inc. a Utah corporation
organized on July 27, 1993 pursuant to an Agreement of Merger. Rose then
acquired 100% of the issued and outstanding shares of Rose Color, Inc. ("RCI").
Rose acts primarily as a non-operating holding company which oversees the
operations of its subsidiaries and joint ventures.
Rose has two wholly-owned subsidiaries: RCI, a New Jersey corporation,
organized on December 2, 1987, and SPS Alfachem, Inc. ("SPS"), a New Jersey
corporation, organized on May 22, 1995 and acquired May 14, 1996. Effective July
1, 1994, RCI acquired 80% of the outstanding stock of JBW International, Inc.
Effective September 30, 1997, Rose exchanged the common stock of RCI
and SPS for three million common shares of NexTech Enterprises International,
Inc. (formerly International Imaging, Inc.) ("NexTech"), which resulted in Rose
owning less than 20% of NexTech.
ACQUISITIONS AND DISPOSITIONS
ROSE COLOR, INC. - Effective August 9, 1995, the Company acquired all
of the issued and outstanding common stock of RCI, a New Jersey corporation
located in Newark, New Jersey. RCI is engaged in the manufacturing and marketing
of a wide range of specialty organic chemical dyes and certain chemical
intermediates associated with its production of dye products to the petroleum
and plastics industries.
The acquisition of RCI was accounted for by the purchase method of
accounting with the assets and liabilities acquired being recorded at their fair
value as of the effective date of the acquisition. Rose issued 4,500,000 shares
of common stock to acquire 100% of the outstanding stock of RCI.
Effective September 30, 1997, Rose entered into an Agreement and Plan
of Reorganization by and among Chiralt Corp., Rose International Ltd, Rose
Color, Inc., SPS Alfachem, Inc. and Struthers Industries which resulted in the
transfer to Chiralt Corp. of the Company's ownership of RCI and SPS in exchange
for three million (3,000,000) common shares of NexTech, a Delaware corporation
(Commission File Number 000-26182).
MARKETING AND COMPETITION
The Company, prior to the disposal of its subsidiaries, was primarily
engaged in the manufacturing and marketing of specialty organic chemical dyes
used principally in the petroleum and plastics industries, although the inks,
coatings and other industries using specialty dyes are also served. In addition,
RCI marketed certain chemical intermediates associated with its dye production
and pigments. At December 31, 1997, the Company does not have any revenue
generating operations.
RCI is affected by the actions of federal, state and local government
agencies. These agencies can directly or indirectly impact the prices at which
RCI purchases goods and services, such as tariffs on imported goods, water and
electricity. RCI cannot predict what effect new regulations or changes to
existing regulations may have on the future costs of such items. The products
produced by RCI, the raw materials used to produce these products and the
manufacturing processes employed by RCI are subject to control under various
federal health, safety and environmental laws and regulations. These laws and
regulations include, but are not limited to, the Toxic Substances Control Act,
the Clean Air Act, the Resource Conservation and Recovery Act, the Federal Water
Pollution Control Act (Clean Water Act), the Comprehensive Environmental
Response Act, the Compensation and Liability Act, the Superfund
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Amendments and Reauthorization Act and the Occupational Safety and Health Act.
In addition, RCI is regulated by the New Jersey Department of Environmental
Protection and Energy, the Passaic Valley Sewerage Commission, the Suburban
Regional Health Commission and the City of Newark. RCI holds various operating
permits required by these laws.
The Passaic Valley Sewerage Commission ("PVSC") on June 9, 1997
obtained a Temporary Restraining Order on RCI, for alleged transgressions of the
sewer permit. On December 15, 1997, RCI agreed to a consent order which provided
that RCI would pay to the PVSC a base amount of $108,000 in monthly payments of
$3,000 commencing May 1, 1998 for thirty-six months. In the event RCI does not
meet certain effluent discharge limitations, at predetermined testing times, the
assessment could increase by an additional $88,000. RCI expects to install the
necessary testing and treating equipment to allow it to comply with the
discharge standards within the time limits specified.
RCI may have to make changes to its processes or equipment to comply
with future changes in these regulations. Additionally, regulatory changes could
also impact suppliers of raw materials. RCI cannot predict how future changes
may impact its current or planned operations, or those of its suppliers, but
does expect to continue emphasizing environmental controls over manufacturing
processes.
As of December 31, 1997, Rose had no employees. Required services will
be obtained on a contract basis as needed.
ITEM 2. DESCRIPTION OF PROPERTIES
EXECUTIVE OFFICES AND OTHER PROPERTIES
The Company's corporate headquarters are presently located at 7633 East
63rd Place, Suite 220, Tulsa, Oklahoma, 74133. Commencing February 1, 1997, the
Company subleased its offices on a month to month basis at a rate of $1,350 per
month for approximately 1,100 square feet, from G. David Gordon & Associates,
P.C., the firm for which the Company's President, G. David Gordon, is the owner.
NexTech assumed the sublease when it acquired RCI and SPS effective October 1,
1997. The Company is currently utilizing space at no cost.
ITEM 3. LEGAL PROCEEDINGS
The Passaic Valley Sewerage Commission ("PVSC") on June 9, 1997
obtained a Temporary Restraining Order on RCI, for alleged transgressions of the
sewer permit. On December 15, 1997, RCI agreed to a consent order which provided
that RCI would pay to the PVSC a base amount of $108,000 in monthly payments of
$3,000 commencing May 1, 1998 for thirty-six months. In the event RCI does not
meet certain effluent discharge limitations, at predetermined testing times, the
assessment could increase by an additional $88,000. RCI expects to install the
necessary testing and treating equipment to allow it to comply with the
discharge standards within the time limits specified.
The Company is not a party to any material pending legal proceedings
other than ordinary routine litigation incidental to the business.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION - The Company's common stock began trading on August 11,
1995 and is presently traded on the NASDAQ Bulletin Board under the symbol,
"DYES". The following table sets forth the high and low bid prices for the
Company's Common Stock for the six quarters ended December 31, 1996.
<TABLE>
<CAPTION>
High Low
---- ---
1996
<S> <C> <C>
Quarter ended March 31, 1996 4 3/4 2 1/2
Quarter ended June 30, 1996 3 3/4 3/4
Quarter ended September 30, 1996 1 3/4 3/4
Quarter ended December 31, 1996 1 3/8 5/8
1997
Quarter ended March 31, 1997 1 3/8 11/16
Quarter ended June 30, 1997 1 1/4 3/8
Quarter ended September 30, 1997 7/16 3/8
Quarter ended December 31, 1997 3/8 3/8
</TABLE>
(b) HOLDERS - As of December 31, 1997, there were approximately 275 holders
of record of the Company's common stock, an undetermined number of
which represent more than one individual participant in securities
positions with the Company.
(c) DIVIDENDS - The Company has not previously paid cash dividends on its
common stock, and intends to utilize current resources to expand; thus,
it is not anticipated that cash dividends will be paid on the Company's
common stock in the foreseeable future.
ITEM 6. MANAGEMENT'S PLAN OF OPERATION
During the year ended December 31, 1996 and until September 30, 1997,
the Company's primary business was the manufacture and marketing of organic
chemical dyes. Effective September 30, 1997, Rose exchanged its ownership of RCI
and SPS for 3,000,000 shares of the common stock of NexTech, which resulted in
Rose owning less than 20% of NexTech.
The Company expects to hold its investment in NexTech for at least the
next year, at which time it may elect to sell all or part of its investment to
pursue other business opportunities. Until a future business venture is
determined, the Company has eliminated its regular payroll and will utilize
contract consultants to maintain its reporting
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requirements. Accordingly, it is anticipated that only nominal funding should be
necessary for the next several months, which amounts should be available from
debt financing.
Management has determined that the Company's new business plan is
primarily to seek one or more potential businesses which may, in the opinion of
management, warrant the Company's involvement. The Company recognizes that as a
result of its limited financial, managerial or other resources, the number of
suitable potential businesses which may be available to it will be extremely
limited. In seeking to attain its business objective, the Company will not
restrict its search to any particular industry. Rather, the Company may
investigate businesses of essentially any kind or nature, including but not
limited to, finance, high technology, manufacturing, service, sports, research
and development, communications, insurance, brokerage, transportation and
others. The Company does not intend to become an investment company or an
investment advisor. Management's discretion is otherwise unrestricted, and it
may participate in any business whatsoever which may, in the opinion of
management, meet the business objectives discussed herein. As of December 31,
1997, the Company has not chosen the particular area of business in which it
proposes to engage and has not conducted any market studies with respect to any
business or industry.
The Company will not restrict its search to any specific industry
(except as set forth above), but may acquire any entity or position in a company
which is (i) in its preliminary or development state; or (ii) is a going
concern. At this time it is impossible to determine the needs of the business in
which the company may seek to participate, and whether such business may require
additional capital, management, or may be seeking other advantages which the
Company may offer. In other instances, possible business endeavors may involve
the acquisition of or a merger with a company which does not need additional
equity, but seeks to establish a public trading market for its securities.
Businesses which seek the Company's participation in their operations
may desire to do so to avoid what such businesses deem to be adverse factors
related to undertaking a public offering. Such factors include substantial time
requirements and legal costs, along with other conditions or requirements
imposed by Federal and state securities laws.
The analysis of potential business endeavors will be undertaken by or
under the supervision of the Company's Directors. The Directors are comprised of
individuals of varying business experiences, and management will rely on their
own business judgment in formulating decisions as to the types of businesses
which the Company may acquire or in which the Company may participate. It is
quite possible that management will not have any business experience or
expertise in the type of businesses engaged in by a company which may be
investigated by the Company.
In analyzing prospective businesses, management will consider such
factors as available technical, financial and managerial resources; working
capital and other financial requirements; such businesses' history of
operations, if any, and prospects for the future; the nature of present and
expected compensation; the quality and experience of management services which
may be available and the depth of that management; the potential for further
research and development; risk factors; the potential for growth and expansion;
the potential for profit; the perceived public recognition or acceptance of such
businesses, products, services, trade or service marks; its name identification;
and other relevant factors.
While these factors will be considered, to a large extent a decision to
participate in a specific business will be difficult, if not impossible, to
analyze through the application of objective criteria. In many instances, the
achievements of a specific business to date may not necessarily be indicative of
its potential for the future because of various changing requirements in the
marketplace, such as the ability to substantially shift marketing approaches,
expand significantly or change product emphasis, change or substantially alter
management, or other factors. On the other hand, the management of such
companies may not have proven their abilities or effectiveness, or established
the viability of the market, or the products or services which they propose to
market. As such, the profitability of such a business may be unpredictable and
might, therefore, subject the Company and its assets to substantial risks.
As part of the Company's investigation of a business, management
expects that it will meet personally with the target's management and personnel,
visit and inspect the target's facilities, obtain independent analysis or
verification of certain information provided, check references of the target's
management and key personnel, and
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conduct other reasonable measures, to the extent that the Company's limited
resources and management's technical expertise, if any, permit. Generally, the
Company will analyze all available information and make a determination based
upon a composite of available facts, without reliance upon a single factor as
controlling.
It is anticipated that any number of prospective businesses will be available to
the Company from various sources, including its management, its professional
advisors, securities broker dealers, venture capitalists members of the
financial community, and others who may present unsolicited proposals. In some
instances, the Company may publish notices or advertisements in financial or
trade publications seeking potential business acquisitions. In certain
circumstances, the Company may agree, in connection with an acquisition, to pay
a finder's fee or other compensation to an investment banking firm or other
person (who may or may not be affiliated with the Company) who submits to the
Company a business in which the Company participates.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements of Rose International Ltd, together with the
report thereon of Guest & Company, P.C. dated January 16, 1998 for the years
ended December 31, 1997 and 1996 is set forth on pages F-1 through F-18 hereof.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth the names, ages and current positions with the
Company held by the Directors, Executive Officers and Significant Employees,
together with the year such positions were assumed. There is no immediate family
relationship between or among any of the Directors, Executive Officers or
Significant Employees, and the Company is not aware of any arrangement or
understanding between any Director or Executive Officer and any other person
pursuant to which he was elected to his current position.
<TABLE>
<CAPTION>
POSITION OR OFFICE DATE FIRST
NAME AGE WITH THE COMPANY ELECTED
- ---- --- ---------------- -------
<S> <C> <C> <C>
G. David Gordon 36 Director/President 1995
W. Leo Morris 76 Director/Secretary 1995
</TABLE>
Business experience for the last five years and other information relating to
each Director, Executive Officer and Significant Employee is as follows:
G. DAVID GORDON was elected a Director of the Company in 1995; has
served as general counsel to the
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Company since August 1, 1995; has been engaged in the private practice of law
since 1988 and is the owner of the law firm of G. David Gordon & Associates,
P.C., in Tulsa, Oklahoma; a member of the bar in Oklahoma and was a licensed CPA
in the state of Texas specializing in corporate acquisitions and taxation
matters; received his Bachelor of Business Administration (Accounting) from
Baylor University and his Juris Doctor Degree from the University of Tulsa;
Director of Reconversion Technologies, Inc.
W. LEO MORRIS was elected a Director of the Company in 1995; Senior
Vice President of Nations Bank (formerly Western National Bank) since July 1987;
prior to joining Western National Bank, had 30 years previous experience with
banks in Oklahoma City and Tulsa; from 1948 until 1956, a petroleum engineer and
production supervisor with Magnolia Petroleum Company.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation of the Company's
chief executive officer and each officer whose total cash compensation exceeded
$100,000, for the three fiscal years ended December 31, 1997.
The Company has no current long term compensation plans.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL POSITION YEAR SALARY BONUS OTHER
<S> <C> <C> <C> <C>
G. David Gordon 1997 - - $42,350
President & Director 1996 - - 27,286
1995 - - 7,803
</TABLE>
Other includes fees paid G. David Gordon & Associates, P.C., the firm for which
G. David Gordon is owner.
The Company makes available certain non-monetary benefits to its
executive officers with a view to acquiring and retaining qualified personnel
and facilitating job performance. The Company considers such benefits to be
ordinary and incidental business costs and expenses. The value of such benefits
did not exceed, in the case of any named individual, 10% of the cash
compensation of such individual or, in the case of the group, 10% of the cash
compensation for the group.
INCENTIVE STOCK OPTION PLAN. On August 7, 1995, the directors of the
Company adopted the Incentive Stock Option Plan (the "Plan") under which options
to purchase shares of the Company's common stock are granted to key employees by
the Compensation Committee which was established by the directors to administer
the Plan. The option prices, determined by the Compensation Committee, shall not
be less than the fair market value of the common stock at the date of grant. The
purpose of the Plan is to provide key employees of the Company with an
opportunity to acquire or increase their proprietary interest in the Company and
to encourage them to remain in the employ of the Company. The number of shares
of common stock which may be granted under the Plan shall not exceed 1,000,000,
and no option shall be granted under the Plan after August 7, 2005. During
August 1995, options to acquire 525,000 shares were granted at an exercise price
of $1.00 per share. One option to acquire 75,000 shares was cancelled during
1996. No options have been exercised under this plan as of December 31, 1997.
NONSTATUTORY STOCK OPTION PLAN. On August 10, 1995, the Company adopted
a nonstatutory stock option plan which reserved 500,000 common shares for
issuance under this Plan. During 1995, options to acquire 300,000 shares were
granted at an exercise price of $2.50 per share, and no options were exercised.
During 1996, an option to acquire 30,000 shares at an exercise price of $2.25
per share and an option to acquire 25,000 shares at $1.00 per share were
granted, and no options were exercised. After December 31, 1996, no additional
options can be granted under this plan. As of December 31, 1997 options to
acquire 355,000 Rose shares remain outstanding.
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INDIVIDUAL OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no individual option or SAR grants during 1997.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
There were no option or SAR exercises during 1997. G. David Gordon had
an option to acquire 100,000 shares of Rose common stock outstanding, the
exercise price of which exceeded the market price.
Directors are also compensated $200 for each Directors Meeting
attended.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates all persons who, as of February 28, 1998, the most
recent practicable date, are known by the Company to own beneficially more than
5% of any class of the Company's voting securities and all directors of the
Company and all officers not directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NAME & ADDRESS OF NATURE OF % OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNER CLASS
<S> <C> <C> <C>
Common Stock Richard T. Clark 3,750,000 57.5%
Par value $.01 1165 E. 24th Place
Tulsa, OK 74114
Joel C. Holt 750,000 11.5%
E 11 Woodfield Condos
Asheville, NC
G. David Gordon (1) 100,000 1.5%
7633 E. 63rd Place, #210
Tulsa, OK 74133
W. Leo Morris (1) 100,000 1.5%
5875 S. Joplin
Tulsa, OK 74119
All officers and (1) 200,000 3.0%
directors as a group
(2 persons)
</TABLE>
(1) Represents option to acquire shares.
CHANGES IN CONTROL
On August 29, 1996, M&M Group, a Nevada corporation ("M&M"), acquired
from Struthers Industries, Inc.
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("Struthers"), a total of Five Million Two Hundred Fifty Thousand (5,250,000)
shares of common stock of Rose International Ltd representing all shares of Rose
common stock owned by Struthers. M&M purchased these shares pursuant to that
certain Stock Purchase Agreement between M&M and Struthers Industries, Inc.
dated August 29, 1996. In exchange therefor, M&M delivered a promissory note to
Struthers in the amount of $4 million which is secured by the 5,250,000 shares
of Rose common stock. M&M was unable to complete the transaction and its
obligation to Struthers was assumed by EROSE Capital Corporation in exchange for
the 5,250,000 shares of common stock of Rose, which EROSE subsequently sold.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997 and 1996, G. David Gordon & Associates, P.C., for whom G.
David Gordon, President and Director, is owner, billed the Company $42,350 and
$27,286, respectively, for services rendered.
Until its sale in 1997 and during 1996, JBW International, Inc. paid
rentals to its president under a month to month rental agreement in the amount
of $750 per month ($6,750 during 1997 and $9,000 during 1996).
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS See Exhibit Index at page 13.
(b) REPORTS ON FORM 8-K The Company filed a report on Form 8-K
dated September 30, 1997 to report the sale of Rose Color,
Inc. and SPS Alfachem, Inc. for three million (3.000.000)
shares of the common stock of NexTech Enterprises
International, Inc. (formerly International Imaging, Inc.)
effective September 30, 1997. Pro forma financial schedules
were filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ROSE INTERNATIONAL LTD
Date: June 3, 1998 By: /s/ G. David Gordon
------------ --------------------
G. David Gordon,
President and Principal
Financial and Accounting Officer
Date: June 3, 1998 By: /s/ W. Leo Morris
------------ -----------------
W. Leo Morris,
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Date: June 3, 1998 By: /s/ G. David Gordon
------------ --------------------
G. David Gordon, Director
Date: June 3, 1998 By: /s/ W. Leo Morris
------------ -----------------
W. Leo Morris, Director
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EXHIBITS HAVE BEEN OMITTED FROM THIS COPY. COPIES OF EXHIBITS MAY BE OBTAINED
FROM ROSE INTERNATIONAL, LTD. ("THE COMPANY") UPON REQUEST AND PAYMENT OF THE
COMPANY'S COSTS IN FURNISHING SUCH COPIES. COPIES MAY ALSO BE OBTAINED FROM THE
SECURITIES AND EXCHANGE COMMISSION FOR A SLIGHT CHARGE.
(The foregoing is not applicable to the original(s) hereof.)
<TABLE>
<CAPTION>
EXHIBIT INDEX
SECURITIES
AND EXCHANGE
COMMISSION PAGE
EXHIBIT NO. TYPE OF EXHIBIT NUMBER
- ----------- --------------- ------
<S> <C> <C>
2 Plan of Purchase, Sale, Reorganization, Liquidation or Succession N/A
3.1 Articles of Incorporation of the Company and amendments thereto and incorporated
herein by reference thereto. N/A
3.2 By-Laws of the Company and incorporated herein by reference thereto N/A
4 Instruments defining the rights of security holders, including indentures N/A
9 Voting Trust Agreement N/A
10 Material Contracts N/A
11 Statement regarding Computation of Per Share Earnings N/A
16 Letter on Change in Certifying Accountants N/A
18 Letter regarding Change in Accounting Principles N/A
21 Subsidiaries of the Registrant-Included in Item I(a) N/A
22 Published Report Regarding Matters Submitted to Vote of Security Holders N/A
23 Consents of Experts and Counsel N/A
24 Power of Attorney N/A
27 Financial Data Schedule 12
28 Information from reports furnished to state insurance regulatory authorities N/A
99 Additional Exhibits N/A
</TABLE>
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ROSE INTERNATIONAL LTD.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1997 and 1996
(With Auditor's Report Thereon)
<PAGE> 13
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
December 31, 1997 and 1996
TABLE OF CONTENTS
PAGE
Independent Auditor's Report F-1
Consolidated Financial Statements:
Consolidated Balance Sheet F-2 to F-3
Consolidated Statements of Operations F-4 to F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7 to F-9
Notes to Consolidated Financial Statements F-10 to F-18
<PAGE> 14
[GUEST & COMPANY LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Rose International Ltd. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Rose
International Ltd. and subsidiaries as of December 31, 1997 and the consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1997 and 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Rose
International Ltd. and subsidiaries at December 31, 1997 and the consolidated
results of their operations and their cash flows for the years ended December
31, 1997 and 1996 in conformity with generally accepted accounting principles.
/s/ Guest & Company, P.C.
January 16, 1998, except for note 9, as to which the date is June 2, 1998
Tulsa, Oklahoma
F-1
<PAGE> 15
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 1,316
Marketable equity securities, less allowance for unrealized
losses of $9,750 (note 2) 4,931
Prepaid expenses 330
----------
Total current assets 6,577
----------
Office furniture and equipment 12,638
Less accumulated depreciation 2,616
----------
Net office furniture and equipment 10,022
Marketable equity securities held for investment (notes 2, 6 and 9) 3,000,000
Organization costs, net of accumulated amortization of $4,190 6,286
----------
$3,022,885
==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 16
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Balance Sheet, Continued
December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Accounts payable $ 17,428
Accrued expenses 26
------------
Total current liabilities 17,454
------------
Stockholders' equity (notes 4 and 6):
Common stock, $.01 par value. Authorized 25,000,000
shares; issued and outstanding 6,525,000 shares 65,250
Additional paid-in capital 11,005,048
Accumulated deficit (7,266,867)
------------
3,803,431
Less subscriptions receivable (798,000)
------------
Total stockholders' equity 3,005,431
------------
$ 3,022,885
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 17
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net sales $ -- --
Cost of sales -- --
----------- --------
Gross profit -- --
Selling, general and administrative expenses 102,162 118,365
----------- --------
Operating income (102,162) (118,365)
----------- --------
Other income (deductions):
Interest expense -- (6,473)
Interest income 1,236 5,852
Realized gain (loss) on sale of marketable
equity securities (15,062) 164,018
Unrealized loss on marketable equity securities
(note 2) (801) (8,949)
----------- --------
(14,627) 154,448
----------- --------
Earnings (loss) from continuing operations before
income taxes (116,789) 36,083
Income taxes (note 5) 3,000 44,000
----------- --------
Loss from continuing operations (119,789) (7,917)
Loss on disposal of discontinued segment, net of
income taxes (note 6) (6,588,031) --
Income (loss) from discontinued operations, net of
income taxes (note 6) (477,935) 136,421
----------- --------
Net income (loss) $(7,185,755) 128,504
=========== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 18
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Statements of Operations, Continued
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Weighted average common shares 6,525,000 7,411,495
============== =============
Earnings (loss) per common share:
Continuing operations $ (.018) (.001)
Discontinued operations:
Loss on disposal of discontinued segment (1.010) --
Income (loss) from discontinued operations (.073) .018
-------------- -------------
Total $ (1.101) .017
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 19
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
STOCK-
FOREIGN HOLDERS'
ADDITIONAL CURRENCY STOCK EQUITY
COMMON STOCK PAID-IN ACCUMULATED TRANSLATION SUBSCRIPTION (NOTES 4
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE AND 6)
------ ------ ------------ ----------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 5,775,000 $ 57,750 $ 10,796,548 $ (209,616) $ (39,726) $(1,000,000) $ 9,604,956
Subscriptions receivable collected - - - - - 202,000 202,000
Common stock issued on subscription 1,000,000 10,000 990,000 - - (1,000,000) -
Conversion of former parent company
debt to equity 750,000 7,500 208,500 - - - 216,000
Foreign currency translation
adjustment - - - - (6,776) - (6,776)
Net earnings for the year - - - 128,504 - - 128,504
--------- --------- ------------ ----------- ---------- ------------ -----------
Balances at December 31, 1996 7,525,000 75,250 11,995,048 (81,112) (46,502) (1,798,000) 10,144,684
Foreign currency translation
adjustment - - - - 46,502 - 46,502
Cancellation of common stock issued
on subscription (1,000,000) (10,000) (990,000) - - 1,000,000 -
Net loss for the year - - - (7,185,755) - - (7,185,755)
--------- --------- ------------ ----------- ----------- ------------ -------------
Balances at December 31, 1997 6,525,000 $ 65,250 $ 11,005,048 $(7,266,867) $ - $ (798,000) $ 3,005,431
========= ========= ============ =========== =========== ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 20
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1997 and 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(7,185,755) 128,504
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 3,712 3,056
Deferred income taxes 3,000 (3,000)
Loss on disposal of discontinued segment 6,588,031 --
Unrealized loss on marketable equity securities -- 8,949
Discontinued operations 477,935 (136,421)
Foreign operations, net -- --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 19,599 (19,599)
Decrease in marketable equity securities 9,919 198,498
(Increase) decrease in prepaids (330) --
Increase (decrease) in accounts payable and
accrued expenses (15,528) 30,023
----------- --------
Net cash provided (used) by operating activities (99,417) 210,010
----------- --------
Cash flows from investing activities:
Capital expenditures (2,258) (6,807)
Investment in subsidiary 53,114 (105,733)
----------- --------
Net cash provided (used) by investing activities 50,856 (112,540)
----------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 21
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years Ended December 31, 1997 and 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS,
CONTINUED
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Collection of stock subscriptions $ -- 202,000
Repayment of parent loan -- (268,388)
-------- --------
Net cash used by financing activities -- (66,388)
-------- --------
Net increase (decrease) in cash and cash equivalents (48,561) 31,082
Cash and cash equivalents, beginning of year
(continuing operations) 49,877 18,795
-------- --------
Cash and cash equivalents, end of year $ 1,316 49,877
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 22
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years Ended December 31, 1997 and 1996
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash paid for interest and income taxes are as follows:
Interest $ 1,236 44,814
Income taxes -- --
Noncash investing and financing activities are as follows:
Conversion of amount due parent into equity -- 216,000
Common stock issued on subscription -- 1,000,000
Cancellation of common stock subscription (1,000,000) --
Exchange of common stock of Rose Color, Inc. and
SPS Alfachem, Inc. for 3,000,000 shares of common
stock of International Imaging, Inc. 3,000,000 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 23
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Rose
International Ltd., its wholly-owned subsidiaries, Rose Color,
Inc. and SPS Alfachem, Inc. and Rose Color, Inc.'s 80% owned
subsidiary, JBW International, Inc., (collectively referred to as
the "Company"). All material intercompany accounts and
transactions have been eliminated.
(b) ORGANIZATION
On August 1, 1995, Struthers Industries, Inc. (Struthers), a
publicly-traded company, sold 100% of the issued and outstanding
shares of Rose Color, Inc. (Color) to Global Ecosystems, Inc.
(Global) in exchange for approximately 94% of the issued and
outstanding shares of Global. Global subsequently changed its name
to Rose International, Inc. and merged into and with Rose
International Ltd. (Rose), a publicly-traded company, in a
transaction accounted for as a reverse acquisition. Therefore, any
historical financial statements presented represent the operations
of Global which primarily reflect the operations of Color since
Global's primary asset was shares of Color. As a result of the
above transactions, Color was a wholly-owned subsidiary of Rose,
with Struthers being the majority owner of Rose. During August
1996, Struthers sold 100% of its interest in Rose to the M&M
Group.
Effective September 30, 1997, the Company entered into an
Agreement and Plan of Reorganization by and among Chiralt Corp.,
Rose, Color, SPS Alfachem, Inc. (SPS) and Struthers which resulted
in the transfer to Chiralt Corp. the Company's ownership of Color
and SPS in exchange for 3,000,000 shares of the common stock of
International Imaging, Inc. (Imaging), a publicly-traded Delaware
corporation (Commission File Number 000-26182). Included in the
Agreement and Plan of Reorganization is a Rescission Agreement
upon which the Company or Chiralt Corp. has the right to rescind
the entire Agreement and Plan of Reorganization in the event
certain events occur or do not occur including, but not limited
to, retention of a key employee, issuance of Imaging common shares
to certain employees and the attempted divesture of Color or SPS
by Imaging. Simultaneously with the Agreement and Plan of
Reorganization, M&M Group transferred its interest in Rose to
Erose Capital Corporation who is the beneficial owner of
approximately 70% of the outstanding common shares of Imaging. As
a result of this transaction, Color, Chiralt Corp. and SPS are
wholly-owned subsidiaries of Imaging. Subsequent to the
transaction, Imaging changed its name to NexTech Enterprises
International, Inc.
F-10
<PAGE> 24
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(c) NATURE OF BUSINESS
At December 31, 1997, the Company does not have any revenue
generating operations. The Company, prior to the disposal of its
subsidiaries, was primarily engaged in the manufacture and
marketing of speciality organic chemical dyes used principally in
the petroleum and plastics industries, although the inks, coatings
and other industries using specialty dyes are also served. In
addition, the Company marketed certain chemical intermediates
associated with its dye production and pigments.
(d) CASH EQUIVALENTS
The Company considers all liquid investments with original
maturities of three months or less to be cash equivalents. At
December 31, 1997, cash equivalents consist of money market
accounts and certificates of deposit.
(e) MARKETABLE EQUITY SECURITIES
Marketable equity securities are comprised of trading securities
held for short-term investment purposes and equity securities
available for sale. These securities are stated at fair value,
with the change in fair value during the period included in
earnings for trading securities and as a component of
stockholders' equity for equity securities available for sale.
Realized gains or losses on marketable securities are calculated
based on the first-in, first-out method of accounting.
(f) OFFICE FURNITURE AND EQUIPMENT
Owned office furniture and equipment are stated at cost and
depreciated using the straight-line method over the estimated
useful lives of the respective assets.
(g) INCOME TAXES
Deferred income taxes are recognized for income and expense items
that are reported for financial reporting purposes in different
years than for income tax purposes.
(h) REVENUE AND COST RECOGNITION
Sales revenues are recognized when the product is shipped. Cost of
sales, which is recognized simultaneously with the recognition of
sales, is comprised of the cost of raw materials and indirect
costs incurred during the manufacturing process, such as labor,
supplies, utilities, repairs and depreciation.
F-11
<PAGE> 25
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(i) USE OF ESTIMATES
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Such estimates primarily
relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual results
may differ from estimated amounts.
(j) FAIR VALUE DETERMINATION
Financial instruments other than marketable equity securities
consist of cash, accounts payable and accrued liabilities. The
carrying amount of these financial instruments approximates fair
value due to their short-term nature or the current rates which
the Company could borrow funds with similar remaining maturities.
(k) NET EARNINGS PER SHARE
Net earnings per share amounts are computed using the weighted
average number of shares outstanding during the period. Fully
diluted earnings per share is presented if the assumed conversion
of common stock equivalents results in material dilution.
(2) MARKETABLE EQUITY SECURITIES
An allowance for unrealized losses is established for the amount that
the aggregate cost of marketable equity securities exceeds their
aggregate market value. At the balance sheet date, the allowance for
unrealized losses is $9,750. Results of operations for the years ending
December 31, 1997 and 1996 include net unrealized losses of $801 and
$8,949, respectively.
Securities available for sale at December 31, 1997 consist of common
stock of International Imaging, Inc. This stock was obtained on
September 30, 1997 in exchange for the Company's wholly-owned
subsidiaries Color and SPS. The stock is restricted and may not be
traded until October 1, 1999. Fair value of the stock is estimated to be
$3,000,000 at September 30, 1997 and December 31, 1997 (see note 9).
(3) RELATED PARTY TRANSACTION
The Company incurred legal fees to a law firm owned by an
officer/director in the amount of $42,350 and $27,286 in 1997 and 1996,
respectively.
F-12
<PAGE> 26
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) CAPITAL STOCK
Stock subscriptions receivable were created through the sale of common
stock pursuant to Regulation D. The common stock was sold in two
offerings of 1,000,000 shares each at a price of $1.00 per share. The
entire 2,000,000 shares were subscribed for under the offerings. The
Form D was filed with the U.S. Securities and Exchange Commission on
August 7, 1995 and August 26, 1996. As of December 31, 1997, $202,000
was collected from the offerings and one offering for 1,000,000 shares
was cancelled.
On August 7, 1995, the directors of Rose International Ltd. adopted the
Incentive Stock Option Plan (the Plan) under which options to purchase
shares of Rose International Ltd.'s common stock are granted to key
employees by the Compensation Committee which was established by the
directors to administer the Plan. The option prices, determined by the
Compensation Committee, shall not be less than the fair market value of
the common stock at the date of grant. The purpose of the Plan is to
provide key employees of the Company with an opportunity to acquire or
increase their proprietary interest in the success of the Company and to
encourage them to remain in the employ of the Company. The number of
shares of common stock which may be granted under the Plan shall not
exceed 1,000,000 and no option shall be granted under the Plan after
August 7, 2005.
The following is a summary of transactions related to all options to
purchase common stock issued under the Plan for the two years ended
December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding at December 31, 1995 525,000 $ 1.00
Granted -
Exercised -
Cancelled 75,000
--------
</TABLE>
F-13
<PAGE> 27
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) CAPITAL STOCK, CONTINUED
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- -----
<S> <C> <C>
Outstanding at December 31, 1996 450,000 1.00
Granted -
Exercised -
Cancelled - 1.00
-------
Outstanding at December 31, 1997 450,000 1.00
=======
</TABLE>
The above options were granted with an exercise price equal to or
greater than the common stock's fair market value at the date of grant.
On August 10, 1995, the directors of Rose International Ltd. adopted the
1995 - 1996 Nonstatutory Stock Option Plan (the Nonstatutory Plan) under
which options to purchase shares of Rose International Ltd.'s common
stock are granted to key employees and consultants by the Compensation
Committee which was established by the directors to administer the
Nonstatutory Plan. The option prices, determined by the Compensation
Committee, shall require board of director approval if they are less
than 85% of the fair market value of the common stock at the date of
grant. The purpose of the Nonstatutory Plan is to encourage key
employees and consultants of the Company to promote the Company's
business. The number of shares of common stock which may be granted
under the Nonstatutory Plan shall not exceed 500,000 and no option shall
be granted under the Nonstatutory Plan after December 31, 1996.
F-14
<PAGE> 28
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) CAPITAL STOCK, CONTINUED
The following is a summary of transactions related to all options to
purchase common stock issued under the Nonstatutory Plan for the two
years ended December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- -----
<S> <C> <C>
Outstanding at December 31, 1995 300,000 $ 2.50
Granted 55,000 1.68
Exercised -
Cancelled -
--------
Outstanding at December 31, 1996 355,000 2.11
Granted -
Exercised -
Cancelled -
--------
Outstanding at December 31, 1997 355,000 2.11
========
</TABLE>
The above options were granted with an exercise price equal to or
greater than the common stock's fair market value at the date of grant.
(5) INCOME TAXES
For the year ended December 31, 1996, Rose was included in the
consolidated income tax return of Struthers through August 1996 (the
date Struthers sold Rose) and filed a consolidated short-year income tax
return with its subsidiaries for the period subsequent to the date of
sale through December 31, 1996.
F-15
<PAGE> 29
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES, CONTINUED
Income tax expense from continuing operations consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
1997:
Federal $ -- 3,000 3,000
State -- -- --
-------- ------- -------
$ -- 3,000 3,000
======== ======= =======
1996:
Federal $ 59,000 (12,400) 46,600
State -- (2,600) (2,600)
-------- ------- -------
$ 59,000 (15,000) 44,000
======== ======= =======
</TABLE>
Actual income tax expense applicable to earnings before income taxes
from continuing operations is reconciled with the "normally expected"
federal income tax from continuing operations for the years ended
December 31, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Expected tax (benefit) expense from continuing
operations $(39,708) 12,268
State income taxes, net of federal income
tax effect (4,367) 4,273
Valuation allowance adjustment 47,000 --
Difference in expected tax and intercompany
tax allocation with former parent -- 27,459
Other 75 --
-------- ------
$ 3,000 44,000
======== ======
</TABLE>
F-16
<PAGE> 30
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES, CONTINUED
There are no deferred income tax assets and liabilities at December 31,
1997.
(6) DISCONTINUED OPERATIONS
Effective September 30, 1997, the Company exchanged its wholly-owned
subsidiaries Color and SPS for 3,000,000 shares of the common stock of
Imaging which resulted in the Company owning less than 20% of Imaging.
The following summarizes the assets and liabilities of Color and SPS at
September 30, 1997:
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 141,372
Accounts receivable 684,209
Inventory 1,966,006
Other current assets 57,255
-----------
Total current assets 2,848,842
Property and equipment, net 6,162,741
Investment in foreign joint venture 283,035
Goodwill 2,086,707
Other assets 220
-----------
Total assets 11,381,545
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 1,142,692
Long-term debt 143,579
Deferred income taxes 617,000
Due Struthers Industries, Inc. 1,500,000
-----------
Total liabilities 3,403,271
-----------
Stockholders' equity 7,978,274
-----------
Total liabilities and stockholders' equity $11,381,545
===========
</TABLE>
F-17
<PAGE> 31
ROSE INTERNATIONAL LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) DISCONTINUED OPERATIONS, CONTINUED
The following summarizes the results of operations for the nine months
ended September 30, 1997 and the year ended December 31, 1996 for Rose
Color and SPS:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Sales $ 4,490,898 6,698,612
Cost of sales 3,967,438 5,284,134
----------- ---------
Gross profit 523,460 1,414,478
Costs and expenses 1,237,395 1,148,057
----------- ---------
Net income (loss) before income taxes (713,935) 266,421
Income tax expense (benefit) (236,000) 130,000
----------- ---------
Net income (loss) $ (477,935) 136,421
=========== =========
</TABLE>
The loss on the disposal of the discontinued segment of $6,588,031
represents the loss on disposal of the net assets of Color and SPS. The
disposal has no income tax effect.
The 1996 financial statements have been restated for the effect of the
discontinued operations.
(9) EVENT SUBSEQUENT TO DATE OF INDEPENDENT AUDITOR'S REPORT
As of June 2, 1998, the market value of marketable equity securities
held for investment is $690,000 based on the June 2, 1998 closing price.
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Financial Data Schedule contains summary financial information extracted
from (a) Financial Statements as of December 31, 1997 and for the year then
ended and is qualified in its entirety by reference to such (b) Form 10-KSB for
the year ended December 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,316
<SECURITIES> 4,931
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,577
<PP&E> 12,638
<DEPRECIATION> 2,616
<TOTAL-ASSETS> 3,022,885
<CURRENT-LIABILITIES> 17,454
<BONDS> 0
0
0
<COMMON> 65,250
<OTHER-SE> 2,940,181
<TOTAL-LIABILITY-AND-EQUITY> 3,022,885
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 102,162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (116,789)
<INCOME-TAX> 3,000
<INCOME-CONTINUING> (119,789)
<DISCONTINUED> (7,065,966)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,185,755)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
