COLORSMART COM INC, SB-2/A, 1999-12-29

COLORSMART COM INC
SB-2/A, 1999-12-29
BUSINESS SERVICES, NEC

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1999

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1
TO

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

COLORSMART.COM, INC.

(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------------

<TABLE>
<S> <C> <C>
NEVADA 2750 62-17217446
(State or (Primary Standard (I.R.S. Employer
Jurisdiction of Incorporation Industrial Classification Identification
or Organization) Code Number Number)
</TABLE>

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

537 MYATT DRIVE
MADISON, TENNESSEE 37115
615-612-4002

(Address and Telephone Number of Principal Executive Offices)
------------------------------

ROGER D. FINCHUM, SR.
CHIEF EXECUTIVE OFFICER
COLORSMART.COM, INC.
537 MYATT DRIVE
MADISON, TENNESSEE 37115
615-612-4002 (TELEPHONE)
615-612-4005 (FACSIMILE)
(Name, Address, And Telephone Number Of Agent For Service)
------------------------------

COPIES TO:

<TABLE>
<S> <C> <C>
EDWARD H. BURNBAUM, ESQ. GREGORY BARTKO, ESQ. JAY M. KAPLOWITZ, ESQ.
LYNCH ROWIN NOVACK BURNBAUM & 3475 LENOX ROAD ARTHUR S. MARCUS, ESQ.
CRYSTAL, P.C. SUITE 400 GERSTEN, SAVAGE & KAPLOWITZ, LLP
300 EAST 42(ND) STREET ATLANTA, GEORGIA 30326 101 EAST 52(ND) STREET
NEW YORK, NEW YORK 10017 404-238-0550 (TELEPHONE) NEW YORK, NEW YORK 10022
(212) 682-4001 (TELEPHONE) 404-238-0551 (FACSIMILE) (212) 752-9700 (TELEPHONE)
(212) 986-2907 (FACSIMILE) (212) 980-5192 (FACSIMILE)
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: [ ]
------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE MAXIMUM
BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Shares of common stock, par value $.001 per
share (2).................................. 2,300,000 $12.00 $27,600,000 $7,673
Representative's warrants (4)................ 200,000 $ .001 $ 200 --
Common stock issuable upon exercise of the
representative's warrants (3).............. 200,000 $19.80 $ 3,960,000 $1,101
Total........................................ 2,700,000 -- 31,560,200 $8,774
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act.

(2) Includes 300,000 shares that the underwriters have the option to purchase to
cover over-allotments, if any.

(3) Pursuant to Rule 416, we are registering additional securities as may become
issuable pursuant to the anti-dilution provisions of the representative's
warrants.

(4) No registration fee is required pursuant to Rule 457 of the Securities Act.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION, DATED DECEMBER 29, 1999

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
[LOGO]

COLORSMART.COM, INC.

2,000,000 SHARES
COMMON STOCK

This is an initial public offering of 2,000,000 shares of
ColorSmart.com, Inc. Before this offering, there has been no public market for
any of our securities. We anticipate that the initial public offering price
range will be $10.00 to $12.00 per share.

These are speculative securities and investors will experience significant
dilution. Investing in the shares involves certain risks. See "Risk Factors"
beginning on page 7.

NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
- - Price to the public...................................... $12.00 $24,000,000
- - Underwriting discounts and commissions................... $ 1.08 $ 2,160,000
- - Proceeds, before expenses, to ColorSmart................. $10.92 $21,840,000
</TABLE>

The underwriters may, under certain circumstances, purchase an additional
300,000 shares from us at the initial public offering price less the
underwriting discount to cover any over-allotments.

Delivery of the securities offered hereby will be made on or about
, 2000, in New York, New York. The underwriters are offering the
shares on a firm commitment basis.

The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities, in any state where the offer and sale is not permitted.

NUTMEG SECURITIES, LTD.

Prospectus Dated January , 2000.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Prospectus Summary.......................................... 1
The Offering................................................ 4
Summary Financial Data...................................... 5
Risk Factors................................................ 7
Cautionary Note Regarding Forward-Looking Statements........ 10
Use Of Proceeds............................................. 11
Dividend Policy............................................. 12
Capitalization.............................................. 13
Dilution.................................................... 14
Selected Consolidated Financial Data........................ 15
Management's Discussion And Analysis Of Financial Condition
And Results Of
Operations................................................ 17
Business.................................................... 22
Management.................................................. 30
Certain Transactions........................................ 36
Principal Stockholders...................................... 36
Description Of Securities................................... 37
Shares Eligible For Future Sale............................. 40
Underwriting................................................ 41
Legal Matters............................................... 43
Experts..................................................... 43
ColorSmart.com, Inc. Financial Statements................... F-1
1199 MAC, Inc., d/b/a Magnum Digital Services Financial
Statements................................................ F-15
Advertising That Works, Inc. Financial Statements........... F-25
Display Arts, Inc. Financial Statements..................... F-34
Stonehouse Graphics (Pty) Limited Financial Statements...... F-46
Top Copy CC Financial Statements............................ F-61
Virtual Colour Group Financial Statements................... F-66
Virtual Colour Printing CC................................ F-66
Virtual Support CC........................................ F-73
Virtual Colour Properties CC.............................. F-79
Virtual Colour CC......................................... F-85
ColorSmart.com, Inc. Consolidated Pro Forma Financial
Statements................................................ F-92
</TABLE>

i
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THE FOLLOWING IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT
INVESTORS SHOULD CONSIDER BEFORE INVESTING IN OUR SECURITIES. INVESTORS SHOULD
READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE FINANCIAL STATEMENTS THAT
ARE A PART OF THIS PROSPECTUS.

OUR BUSINESS

We are positioning ourselves to become a leading consolidator in the digital
graphics industry and we believe we will be one of the largest digital graphics
companies in the Southeastern United States. Our comprehensive electronic
commerce applications allow businesses to privately access their own virtual
portfolio of digitally created printed graphics and multimedia applications
through our fully secure web site. These products range from full motion video
for the Internet, catalogues on CD-ROM, 100-foot printed billboards, trade show
graphics and retail displays. Each business can receive updated price quotes,
make modifications, authorize production, and generally manage their printing
and multimedia requirements, from any Windows-based, Internet-enabled computer.
Our customers generally should realize a decrease in the length of the
production cycle from price quote to the delivery of their order. We believe our
applications of leading edge Internet and digital technology enables us to be
price-competitive while providing customers with the highest level of security,
selection, speed and support.

We have entered into agreements to acquire the stock or the assets of seven
companies in the digital printing or multimedia businesses. One of these
companies specializes in the design and production of multimedia advertising,
marketing and presentation applications for delivery over the Internet and
CD-ROM. The others are commercial digital printing companies located in the
United States and the Republic of South Africa.

Commercial digital graphics involves the production of a wide range of
marketing, advertising and media imaging and digital printing using cutting-edge
software and digital printing equipment. It is the digitizing of the input that
reduces production time, costs and errors and provides the flexibility to handle
small, specialized jobs as easily as producing simple, mass-produced jobs.
Digital printing and imaging customers include companies of all sizes and in all
industries where full-color imaging and production are required. Our digital
printing technologies enable us to receive and deliver customer services most
effectively through our Internet applications.

OUR INDUSTRY

THE GROWTH OF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE

The Internet has emerged as a revolutionary force in the way businesses
operate, having evolved from a research medium to a venue for consumer-oriented
commerce. Estimates are that Internet business-to-business commerce reached a
record $43 billion in 1998. Furthermore, they predict that business-to-business
electronic commerce will grow to a staggering $1.3 trillion by 2003 and will
represent more than 90% of the total e-commerce market.

Advances in computer technology and telecommunications have enabled
businesses to link directly to their suppliers, providing shortened lead times
for purchases and better decision-making controls. The advent of the Internet
and its commercial applications has accelerated the trend of increased
efficiency related to business purchases with a number of additional benefits,
such as:

- Global reach for broader selection of products and services;

- Reduced costs and greater economies of scale;

- Ability to access suppliers from any computer with Internet access; and

- The technology to customize customer interfaces, creating greater
convenience and ease of use.

1
<PAGE>
THE PRINTING INDUSTRY

We believe digital technology in the printing and graphic design industries
is being under utilized. Most digital print operations are small and lack the
requisite capital, equipment and technical expertise to deliver the full range
of benefits offered by digital technology. It is projected that there will be
more than $18 billion in total worldwide revenue from all digital printing
services and products by 2001. We believe this growth will be demand-driven,
predicated upon continued advancements in digital technology. As a prospective
leader in the digital graphics industry, we expect to be well positioned to
satisfy this demand.

E-commerce via the Internet offers a tremendous opportunity. The Internet is
an exceptional medium for the delivery of digital graphics in a wide variety of
formats. The synergy between digital technology and the Internet should continue
to transform, and we believe, replace an ever-increasing portion of conventional
printing services and products.

OUR STRATEGY

Our objective is to be the leading Internet-based business-to-business
digital graphics and multimedia company in the world. The key elements of our
business strategy include:

- Focusing primarily on the Internet business-to-business market for digital
printing services, expected to grow to approximately $18 billion by 2001,
up from approximately $5 billion in 1998;

- Continuing to upgrade and enhance the front-end of our e-commerce
presence, while acquiring carefully targeted commercial printing companies
in this highly fragmented industry to support the back-end;

- Utilizing the most current digital graphics and multimedia technology
available to maintain a technological edge over our competition;

- Expanding beyond traditional printing products and services into
multimedia video and audio business-to-business applications primarily
tailored for the Internet and CD-ROM;

- Making the process of creating, approving, ordering and fulfilling
printing jobs more efficient by allowing customers to handle much of this
process from their desktops;

- Tailoring end-to-end business solutions to our customer's needs by
integrating design, production, and distribution services.

ACQUISITIONS

We have entered into agreements to purchase the stock or assets of companies
that have operating histories ranging from startup to 11 years with strong,
experienced management teams, solid customer bases and reputations of providing
the highest levels of quality service and products. These companies further our
goal of providing a full range of digital graphic products and services to other
geographic areas and increasing our market share in the Southeastern United
States and the Republic of South Africa. We will continue to analyze future
acquisitions in the United States, Europe and South Africa. We have entered into
agreements with the following companies:

- Magnum Digital Services specializes in a process known as dye sublimation,
in which digital images are applied to a variety of mediums ranging from
paper to stone and just about any medium in between. The delicate
sublimation process heats the ink until it becomes a gas, at which time
the image is transferred in to, rather than on to, the medium. The company
is located in Coconut Creek, Florida and has been operating for five
years.

- Advertising That Works is a wholesaler, fabricator, and finisher of
banners and screen printed posters. This company expects to be 100%
digital by the third quarter of 2000. The company is located in Atlanta,
Georgia and has been operating for 10 years.

2
<PAGE>
- Stonehouse Graphics is quickly becoming the largest billboard and backlit
fabricator in the Republic of South Africa. The company accounts for 40%
of the billboard printing done in southern Africa. The company, which is
100% digital, is located in Johannesburg, South Africa and has been
operating for 11 years.

- Display Arts specializes in trade show graphics and trade show display
booths. They are the exclusive regional distributor for Nimlock products,
a leading display manufacturing company. The company has locations in
Nashville, Memphis, and Knoxville, Tennessee and has been operating for
10 years.

- Top Copy specializes in copying services and offset print services. They
cater to small business as well as the retail trade. The company is
located in Cape Town, South Africa and has been operating for three years.
We will be acquiring the assets of Top Copy.

- Virtual Colour Group is one of the leaders in digital services technology
in South Africa. They are a fully digital shop offering both design and
print services for brochures, catalogs, and magazines on an international
basis. The company is located in Cape Town, South Africa and has been
operating for four years. The Virtual Colour Group consists of six
companies that are operated as a single entity. Throughout this
prospectus, we refer to the four companies whose assets we are acquiring
as a single group called Virtual Colour Group.

- Jamberry Lake Digital Media specializes in producing digital products and
services for use on the Internet, as well as traditional marketing and
promotional campaigns, revolving around CD- and mini CD-ROM. They achieve
this by providing full motion video products and services including real
estate tours, digital catalogues, and e-mail kiosks. The company is
located in Summit, New Jersey and has been operating since August 1999.

A partial list of the clients of the companies listed above include: ABSA
South Africa, Allstate, Autozone, Bank of America, Bell South, Carnival Cruise
Lines, Coca-Cola, Columbia Healthcare, Federal Express, First Union Bank, Fruit
of the Loom, Hewlett Packard, IBM, Ingram Book, McDonalds, MCI WorldCom,
Motorola, Nations Bank, Nissan Motor Corporation, Phillip Morris, RCA Music,
Saturn Corporation, Siemens, South African Breweries, Standard Bank, United
Parcel Service, U.S. Post Office, Visa, Wachovia, and Willis Corroon.

CORPORATE BACKGROUND

We were incorporated on July 18, 1997, as ColorSmart, Inc., in Nevada. On
December 29, 1998, we amended our certificate of incorporation to change our
name to ColorSmart.com, Inc. We have conducted our business under that name
since the amendment. Our executive office is located at 537 Myatt Drive,
Madison, Tennessee. Our telephone number is (615) 612-4002. Our facsimile number
is (615) 612-4005. Our web site address is www.colorsmart.com. In this
prospectus, "ColorSmart," "we", "us" and "our" refer to ColorSmart.com, Inc.

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Securities that we are offering.................... 2,000,000 shares of our common stock.
Common stock outstanding before this offering...... 4,005,639 shares.
Common stock to be outstanding after this
offering......................................... 6,005,639 shares.
Preferred stock outstanding before this offering... 33,610 shares.
Preferred stock outstanding after the offering..... 33,610 shares.
Use of proceeds.................................... Towards the cash portion of the purchase price
for the acquisitions described above; new
equipment purchases; implementation of a
marketing program; expansion of our business
through the hiring of additional personnel; and,
general corporate purposes.
Proposed NASDAQ National Market System symbol
Common stock..................................... "COLR"
</TABLE>

Unless stated otherwise, all information in this prospectus assumes:

- an initial public offering price of $12.00 per share; and excludes

- the exercise of the underwriter's over-allotment option to purchase
300,000 shares; and

- the exercise of the 200,000 common stock purchase warrants granted
to Nutmeg Securities, Ltd., the representative of the underwriters,
to purchase 200,000 shares of our common stock.

WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US

We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to us and the securities offered by this prospectus,
reference is made to the registration statement and the exhibits and schedules
thereto. Statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement are
not necessarily complete and are qualified in their entirety by reference to the
exhibits for a complete statement of their terms and conditions. The
registration statement, including all amendments, exhibits and schedules
thereto, may be inspected without charge at the offices of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street NW, Washington, D.C.
20549 and the Commission's regional offices located at 7 World Trade Center,
13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street
NW, Washington, DC. 20549. The Securities and Exchange Commission also maintains
a Web site (http://www.sec.gov) through which the registration statement and
other information can be retrieved.

We intend to apply for listing of our securities on the Nasdaq National
Market System, and upon listing, investors can obtain information about us on
its Web site, (http://www.Nasdaqamex.com.)

Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Securities Exchange Act of 1934 and
intend to furnish our stockholders annual reports containing financial
statements audited by our independent accountants and to make available
quarterly reports containing unaudited financial statements for each of the
first three quarters of each fiscal year.

4
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SUMMARY FINANCIAL DATA

The following table summarizes the financial data of our business for the
years ended November 30, 1997 and 1998, and for the nine months ended
August 31, 1998 and 1999. The financial data summarized below on a proforma
basis assumes the consummation of all seven of the acquisitions we have pending
at the date of this prospectus on the terms included in the acquisition
agreements. This information is qualified by reference to, and should be read
together with, the historical financial data for the years ended November 30,
1997 and 1998 and should be read in conjunction with our audited financial
statements included elsewhere in this prospectus. The historical financial data
as of August 31, 1999 and for the nine months ended August 31, 1998 and 1999 are
derived from and should be read in conjunction with our unaudited financial
statements included elsewhere in this prospectus. The data presented below
should also be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
accompanying notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------- NINE MONTHS NINE MONTHS
NOVEMBER NOVEMBER AUGUST 31, AUGUST 31,
30, 1997 30, 1998 1998 1999
---------- ---------- ------------ ------------
UNAUDITED
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................ $ 513 $ 127,191 $ 98,856 $ 57,351
Cost of revenues........................ -- 63,886 48,997 19,927
Operating costs and expenses............ 87,157 370,304 253,595 388,459
---------- ---------- ---------- ----------
(Loss) income from operations........... (86,644) (306,999) (203,736) (351,035)
Interest expense (net of interest
income)............................... -- 920 (378) 9,960
---------- ---------- ---------- ----------
Net loss................................ $ (86,644) $(307,919) $ (203,358) $ (360,995)
---------- ---------- ---------- ----------
Basic and diluted earnings (loss) per
share................................. $ (.03) $ (.10) $ (.07) $ (.10)
Shares used in computing basic and
diluted earnings per share............ 2,492,288 2,956,787 2,956,787 3,455,023
</TABLE>

The following table includes a summary of our balance sheet at August 31,
1999:

- on an actual basis;

- on a pro forma basis giving effect to the consummation of the seven
acquisitions we have pending at the date of this prospectus on the
terms included in the acquisition agreements; the issuance of 33,610
shares of our preferred stock and 33,610 common stock purchase warrants
exercisable to purchase 33,610 shares of our common stock at $5.00 per
share, which were combined and sold as units at $15.00 per unit in
connection with our private placement conducted in September and
October 1999, which resulted in our receipt of $287,075 in aggregate
offering proceeds;

- as adjusted to give affect to the issuance of 2,000,000 shares of
common stock offered by us at an offering price of $12.00 per share;
the consummation of all ten of the acquisitions we have pending at the
date of this prospectus on the terms included in the acquisition
agreements; the issuance of 33,610 shares of our preferred stock and
33,610 common stock purchase warrants exercisable to purchase 33,610
shares of our common stock at $5.00 per share, which were combined and
sold as units at $15.00 per unit in connection with our private
placement

5
<PAGE>

conducted in September and October 1999, resulting in our receipt of
$287,075 in aggregate offering proceeds.

<TABLE>
<CAPTION>
AUGUST 31, 1999 AS
ACTUAL PRO FORMA ADJUSTED
--------------- ----------- -----------
UNAUDITED
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................ $ 3,903 $ 475,728 $12,315,978
Total working capital (deficit)...................... (247,421) 780,089 12,064,654
Total assets......................................... 821,659 12,599,898 22,468,734
Short term debt, current portion of long term
liabilities and current related party
obligations........................................ 268,324 216,011 216,011
Long term debt....................................... 37,154 147,944 147,944
Total liabilities.................................... 305,478 1,262,563 1,262,563
Stockholders' (deficit) equity....................... $ 516,181 $11,337,335 $21,206,171
--------- ----------- -----------
Total liabilities and stockholders' equity..... 821,659 12,599,898 22,468,734
========= =========== ===========
</TABLE>

6
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RISK FACTORS

AN INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN ADDITION
TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE INVESTING IN OUR SECURITIES.

WE HAVE A LIMITED OPERATING HISTORY AND MAY FACE DIFFICULTIES ENCOUNTERED BY
EARLY STAGE COMPANIES IN NEW AND RAPIDLY EVOLVING MARKETS. Although some of our
targeted acquisitions have historical operating histories, we have a limited
operating history and have only been providing our services and digital graphics
products since July 1997. As a result, we have a limited basis upon which you
may evaluate our business and prospects. Our prospects must be considered in
light of the risks, expenses, delays, problems and difficulties frequently
experienced by early stage companies.

WE HAVE INCURRED NET LOSSES SINCE COMMENCING OUR BUSINESS AND EXPECT LOSSES
FROM OPERATIONS IN THE FUTURE. We have not achieved profitability and expect to
continue to incur operating losses for the foreseeable future. For our fiscal
year that ended November 30, 1997, our net loss was $(86,644) on total revenue
of $513. For our fiscal year that ended November 30, 1998, our net loss was
$(307,913) on total revenue of $127,191. Through the interim period ended
August 31, 1999, our net loss was $(360,995) on total revenue of $57,351. We
expect to continue to incur significant operating and capital expenditures and,
as a result, we expect significant net losses in the future and we will need to
generate significant revenues to achieve and maintain profitability.

WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS. Based on our
current operating plan, we anticipate that the net proceeds of this offering and
cash provided by operations will allow us to meet our cash and capital
requirements for at least 12 months following the date of this prospectus. We
may require additional funding sooner than anticipated. If we raise additional
capital through the sale of equity, including preferred stock, or convertible
debt securities, the percentage of ownership of our stockholders will be
diluted.

We currently do not have a credit facility or any commitments for additional
financing. We cannot be certain that additional financing will be available when
and to the extent required. If adequate funds are not available on acceptable
terms, we may be unable to fund our expansion, develop or enhance our services
or respond to competitive pressures.

SINCE THE E-COMMERCE DIGITAL GRAPHICS MARKET IS RELATIVELY NEW, WE DO NOT
KNOW IF OUR SERVICES WILL GENERATE MARKET ACCEPTANCE. The commercial market for
e-commerce digital graphics services and products is relatively new and we do
not know if our products and services will generate widespread market
acceptance. Several factors may contribute to our products and services not
achieving broad market acceptance, which include:

- Failure to build brand recognition of ColorSmart.com;

- Increased competition among other consolidators; and

- Failure of clientele to use our electronic commerce site.

SINCE WE UTILIZE E-COMMERCE APPLICATIONS OVER THE INTERNET, THERE ARE RISKS
TO OUR BUSINESS THAT ARE ASSOCIATED WITH ONLINE COMMERCE. A significant barrier
to online commerce is the secure transmission of confidential information over
public networks. We rely on encryption and authentication technology licensed
from third parties to effect secure transmission of confidential information.
Advances in computer capabilities, new discoveries in cryptography, or other
developments may result in a breach of the algorithms we use to protect customer
data. If any compromise of our security occurs, it would injure our reputation
and could impact the success of our business.

THE TECHNOLOGIES WE USE IN OUR DIGITAL GRAPHICS BUSINESS ARE SUBJECT TO
RAPID TECHNOLOGICAL CHANGE AND COULD CAUSE US TO MAKE SIGNIFICANT CAPITAL
INVESTMENT IN NEW EQUIPMENT. Our market is characterized by rapid technological
changes. Newer technologies, techniques or products for the delivery of digital

7
<PAGE>
graphics, and the other ancillary services we offer, could be developed with
better performance than the technologies that we use. The availability of new
and better digital graphics technologies could require us to make significant
investments in technology, render our current technology obsolete and have a
significant negative impact on our business and results of operations.

OUR BUSINESS FACES RISKS ASSOCIATED WITH UNCERTAINTIES ASSOCIATED WITH THE
INTERNET AND ELECTRONIC COMMERCE. A number of legislative and regulatory
proposals under consideration by federal, state, local and foreign governmental
organizations may lead to laws or regulations concerning various aspects of the
Internet, including:

- online content;

- user privacy;

- taxation;

- access charges;

- liability for third-party activities; and

- jurisdiction

In addition, the applicability to the Internet of existing laws is
uncertain. The adoption of new laws is uncertain. The adoption of new laws or
the application of existing laws may decrease the use of the Internet, which
would decrease the demand for our services, increase our cost of doing business
or otherwise have an adverse effect on our business.

Certain telephone carriers claim that the increasing popularity of the
Internet has burdened the existing telecommunications infrastructure and that
many areas with high Internet use are experiencing interruptions in telephone
service. These carriers have petitioned the Federal Communications Commission to
impose access fees on Internet service providers. If these access fees are
imposed, the costs of communicating on the Internet could increase, which could
decrease demand for our services and increase our cost of doing business.

THE NATURE OF OUR PRINTING AND GRAPHICS BUSINESS IS SUCH THAT OPERATING
RESULTS MAY FLUCTUATE DUE TO A NUMBER OF FACTORS, SUCH AS THE SUCCESS OF OUR
ACQUISITIONS, OUR CUSTOMER BUYING PATTERNS AND OVERALL TRENDS IN THE
ECONOMY. Our quarterly operating results have fluctuated as a result of a
number of factors, including overall trends in the economy, acquisitions of the
new businesses that we have under contract and customer buying patterns. We
compete in the commercial graphics arts and design and printing sectors, which
are characterized by individual orders from customers for specific printing
projects rather than long-term contracts, with continued engagement for
successive jobs dependent upon the customers' satisfaction with the services we
provide. As such, we are not able to predict, for more than a few months in
advance, the number, size and profitability of printing jobs in a given period.
Consequently, the timing of projects in any quarter could have a significant
impact on financial results in that quarter. Quarterly results in the future may
be influenced by these or other factors and, accordingly, there may be
significant variations in our quarterly operating results.

WE HAVE RECENTLY ENTERED INTO AGREEMENTS TO ACQUIRE THE STOCK OR ASSETS OF
SEVEN SEPARATE BUSINESSES PERFORMING DIGITAL PRINTING AND MULTIMEDIA SERVICES.
THESE ACQUISITIONS MAY HAVE ADVERSE EFFECTS ON OUR OPERATING RESULTS. A
significant element of our growth strategy is to expand by acquiring digital
printing companies. Initially, our strategy has been focused on targets located
in the Southeastern United States and in the Republic of South Africa. There can
be no assurance that we will be able to identify and acquire such companies, nor
that we will be able to finance significant acquisitions in the future. Any
acquisition may initially have an adverse effect upon our operating results
while the acquired businesses are adopting our management's practices. In
addition, there can be no assurance that we will be able to establish, maintain
or increase profitability of a business we acquire.

8
<PAGE>
IF WE ARE UNABLE TO IMPLEMENT OUR ACQUISITION STRATEGY, WE MAY NOT SUCCEED
OR MAY BE LESS SUCCESSFUL IN THE FUTURE. A key component of our growth strategy
is accomplished by acquiring digital printing companies located throughout the
United States and overseas. While there are many such companies, we may not
always be able to identify and acquire printing companies meeting our
acquisition criteria on terms acceptable to us. Additionally, some of our
competitors have developed growth strategies similar to ours and thus the
competition for acquisition candidates is constantly increasing within the
printing industry. Financing needed to complete significant acquisitions may not
always be available to us on satisfactory terms. Further, our acquisition
strategy presents a number of special risks to us that we would not otherwise
experience, including possible adverse effects on our earnings, diversion of
management's attention from our core business due to special attention to the
businesses acquired, our failure to retain key acquired personnel and risks
associated with unanticipated events or liabilities arising after our
acquisitions have been completed, some or all of which could have a material
adverse effect on our business, financial condition and results of operations.

WE MAY EXPERIENCE DIFFICULTY IN INTEGRATING THE ACQUIRED BUSINESSES AND
ASSETS INTO OUR OPERATIONS. If we are unable to manage and integrate our
pending acquisitions after we consummate the purchases, we may at some point in
the future experience difficulty in profitably managing all of the acquired
businesses or successfully integrating the acquired businesses as a whole
without substantial costs, delays or other operational or financial problems
that we had not previously experienced. Our acquisitions may also initially have
an adverse effect upon our operating results while the acquired business is
adopting our management practices. We may not in all circumstances be able to
establish, maintain or increase profitability of an acquired entity.

WE MAY NOT COMPETE EFFECTIVELY WITH OTHER DIGITAL GRAPHICS COMPANIES THAT
HAVE MORE RESOURCES AND EXPERIENCE THAN US. Many of our competitors have
substantially greater financial, technical, managerial, marketing and other
resources than we do and they may compete more effectively than we can. We
compete with MasterGraphics, Inc., Consolidated Graphics, Inc., Imagex, Inc.,
and Integrated Graphics, Inc. in offering our services and products. Since we
are a specialty printer, we also have competition from small fragmented print
shops that operate in the same geographic areas as we do. If our competitors
offer digital graphics services at lower prices than we do, we may have to lower
the prices we charge, which will adversely affect our results of operations.

SIGNIFICANT DECREASES IN DIGITAL GRAPHICS PRICES COULD HARM OUR BUSINESS BY
MAKING IT MORE ATTRACTIVE FOR SMALLER PRINT SHOPS AND DIGITAL GRAPHICS
BUSINESSES TO BUY THEIR OWN DIGITAL GRAPHICS EQUIPMENT AND TECHNOLOGIES AND
FORCE US TO LOWER PRICES. A significant reduction in the price of our digital
graphics equipment could reduce the demand for our products and services by
making it economically more attractive for other small businesses to buy their
own digital graphics equipment instead of utilizing our services. Also,
equipment price decreases could force us to reduce our fees in response to this
reduction in demand or as a means to remain competitive with digital graphics
service providers.

OUR MANAGEMENT WILL CONTROL 46.9% OF OUR COMMON STOCK AFTER THIS OFFERING
AND THEIR INTERESTS MAY BE DIFFERENT FROM AND CONFLICT WITH YOURS. Following
this offering, our executive officers and directors will beneficially own a
total of approximately 46.9% of our outstanding common stock assuming that there
is no exercise of the underwriter's over-allotment option, and approximately 50%
if the underwriter's over-allotment option is exercised in full. Accordingly, if
our management acts together, they have the power to control the election of all
of our directors and the approval of significant corporate transactions for
which the approval of our stockholders is required. If you purchase our
securities, you may have no effective voice in our management.

THE MANNER IN WHICH WE OBTAIN OUR DIGITAL GRAPHICS EQUIPMENT INCREASES OUR
LEVERAGE AND FINANCE COSTS. We may finance the purchases of our digital
graphics equipment. The use of leverage to finance our equipment increases our
risk of loss as opposed to if we borrowed a smaller portion or none of the
purchase price of this equipment. Our risk is increased because we must satisfy
these obligations on

9
<PAGE>
specific dates, regardless of our revenues. If we do not meet our debt service
payments when due, we may be forced to forfeit the equipment securing the debt.

OUR SUCCESS DEPENDS UPON THE EFFORTS OF, AND OUR ABILITY TO RETAIN, KEY
PERSONNEL, INCLUDING OUR CHIEF EXECUTIVE OFFICER. We believe that the efforts
of our senior management and key employees, particularly that of our chief
executive officer, Roger D. Finchum Sr., are essential to our operations and
growth. We have entered into a two-year employment agreement with Mr. Finchum,
and we intend to obtain key man life insurance on the life of Mr. Finchum in the
amount of $1,000,000 prior to the completion of this public offering. If we do
not succeed in retaining or motivating our current personnel or in hiring
additional qualified employees, our business will be materially adversely
affected. In addition, competition for personnel in our industry, including the
people that perform our services, is intense and there can be no assurance that
we will be able to attract and retain the necessary personnel.

THE REPRESENTATIVE OF THE UNDERWRITERS WILL CONTINUE TO HAVE INFLUENCE OVER
US FOLLOWING THE COMPLETION OF THIS PUBLIC OFFERING. We have given Nutmeg
Securities, Ltd., the representative of the underwriters, the right, for a
period of two years from the completion of this offering, to designate
Daniel F. Guifoile of Nutmeg Securities, Ltd. as an observer to our board of
directors. Although this designated observer will have no voting privileges as a
director, he will have the right to receive notices of our directors' meetings
and may have some influence over decisions made by our board of directors during
the two-year period. Upon completion of this offering, the representative will
also receive, for nominal consideration, warrants to purchase 300,000 shares of
our common stock.

FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PRODUCTS TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY IMPACT OUR BUSINESS. Many current installed computer systems
and software products only accept two digits to identify the year in any date.
Thus, the Year 2000 will appear as "00," which the system might consider to be
the Year 1900 rather than the Year 2000. This could result in system failures,
delays or miscalculations causing disruptions to our operations. The failure of
systems maintained by third parties to be Year 2000 compliant could cause us to
incur significant expense to remedy any problems, reduce our revenues from such
third parties or otherwise seriously damage our business. Our failure to correct
a material Year 2000 problem could result in an interruption in, or a failure
of, some of our normal business activities or operations.

THERE ARE INHERENT RISKS WITH REGARD TO THE COMPANIES' OPERATIONS IN SOUTH
AFRICA. After consolidation, we will be operating three businesses in South
Africa. As with any overseas operations the presiding political and economic
climate may have an impact on our overseas operating subsidiaries. Currently,
the South African economy suffers from both high unemployment and high
inflation. Should the South African economy become severely unstable, this could
have a significant negative impact on our business and results of operations.

THERE MAY BE CURRENCY AND EXCHANGE RATE RISKS WITH OPERATING OUR BUSINESS IN
THE REPUBLIC OF SOUTH AFRICA. Some of the revenues we may generate in South
Africa after we consummate the purchase agreements with our South African
acquisitions will be in South African Rands, not in U.S. dollars. The value of
the currency in South Africa fluctuates as compared to the U.S. dollar, and as a
result, revenues that may be generated from our prospective operations in South
Africa may have more or less value from time to time as compared to the U.S.
dollar. These currency and exchange rate risks associated with our pending South
African acquisitions may have a negative effect on our overall financial
condition and results of operations.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates, and projections about our industry, our beliefs and
assumptions. Words including "may," "could," "would," "will," "anticipates,"

10
<PAGE>
"expects," "intends," "plans," "projects," "beliefs," "seeks," "estimates," and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. We are not obligated to update these statements or publicly release
the result of any revisions to them to reflect events or circumstances after the
date of this prospectus or to reflect the occurrence of unanticipated events.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $21,840,000
from our sale of the 2,000,000 shares offered hereby, assuming an initial public
offering price of $12.00 per share and excluding expenses of the offering. If
the underwriters exercise their over-allotment option in full, we will receive
net proceeds of approximately $25,116,000. These amounts are after deducting
estimated underwriting discounts and commissions, and after fees and expenses of
approximately $500,000, payable by us. We intend to use the net proceeds as
follows:

<TABLE>
<CAPTION>
PERCENT
NET OF
PROCEEDS TOTAL
----------- --------
<S> <C> <C>
Acquisitions............................................ $ 8,800,000 40.3%
Equipment and Software Purchases and Upgrades........... 3,000,000 13.7%
Sales and Marketing..................................... 2,500,000 11.4%
Repayment of Debt....................................... 270,000 1.2%
Hiring executive personnel.............................. 1,000,000 4.6%
General corporate and working capital purposes.......... 6,270,000 28.8%
----------- -----
Total............................................. $21,840,000 100.0%
=========== =====
</TABLE>

We intend to use approximately 40.3% of the net proceeds of this offering as
the cash portion of the purchase prices for completion of the seven pending
acquisitions we have under agreements, all of which should be consummated
concurrently with the completion of this offering.

Of our total net proceeds, we have allocated 13.7% of the net proceeds for
the purchase or upgrading of digital printing equipment for the companies we
intend to acquire pursuant to our pending acquisition agreements, as well as for
facilities costs associated with building improvements to be made in several
locations where we will operate the newly acquired companies and their assets.

11.4% of the net proceeds of our offering are allocated to sales and
marketing expenditures that will include advertising and banner costs associated
with our advertising programs on the Internet, expansion and re-design of our
web-site to include descriptions of our newly acquired acquisitions, and a
marketing program intended to inform our prospective customer base of our
products and services.

A small portion of our net proceeds will be utilized for expansion of our
internal corporate operations, which include expanding our computer networks,
equipment for our corporate office facilities, software and new web-site
development costs. Approximately 4.6% of the net proceeds will be allocated for
costs associated with hiring additional personnel.

The proposed allocation of the net proceeds represents our best estimate of
the allocation of the net proceeds of the offering based upon the current status
of our operations, our current plans and current economic conditions. We may
reallocate the net proceeds among the categories listed above. We also may, when
the opportunity arises, acquire or invest in complementary businesses, products
or technologies. However, we have no present understandings, commitments or
agreements with respect to any acquisition

11
<PAGE>
or investment other than our seven pending acquisitions. Any net proceeds
received from the sale of the underwriter's over-allotment option will be
allocated to working capital and general corporate purposes.

We anticipate that the net proceeds of this offering along with cash
provided by operations, will be sufficient to fund our operations and capital
requirements for at least the 12 months following the date of this prospectus.
However, there can be no assurance that the net proceeds of this offering and
cash provided by operations will satisfy our requirements for any particular
period of time. To the extent capital resources are insufficient to meet future
capital requirements, we may have to raise additional funds to satisfy our
requirements. There can be no assurance that such funds will be available on
acceptable terms, if at all.

Pending application of the net proceeds in the manner described above, we
intend to invest the net proceeds in short-term, interest bearing investment
grade securities.

DIVIDEND POLICY

We have never declared or paid any cash or stock dividends on our capital
stock. We intend to reinvest earnings, if any, to fund the growth and expansion
of our business and, therefore, we do not anticipate paying cash dividends on
our common stock in the foreseeable future. The declaration of dividends will be
at the discretion of our board of directors and will depend upon our earnings,
capital requirements, financial position, general economic conditions, and other
pertinent factors.

12
<PAGE>
CAPITALIZATION

The following table sets forth our:

- actual capitalization as of August 31, 1999;

- our pro forma capitalization as of August 31, 1999 giving effect to the
issuance of 198,050 shares of our common stock between January and April
1999 where we received gross aggregate offering proceeds of $1,000,000 and
the issuance of 33,610 shares of preferred stock and 33,610 common stock
purchase warrants offered as units from July to October 1999 from which we
received gross aggregate offering proceeds of $287,075.

- pro forma as adjusted capitalization giving effect to the sale of the
2,000,000 shares offered hereby at an assumed offering price of $12.00 per
share, after deducting underwriting commissions and estimated offering
expenses, and the application of the estimated net proceeds from this
offering.

The following table should be read in conjunction with our financial
statements, related notes and other financial information included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
AUGUST 31, 1999
---------------------------------------
PROFORMA
ACTUAL PROFORMA AS ADJUSTED
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Short term debt, current portion of long term
liabilities and current related party obligations.... $ 263,995 $ 216,011 $ 216,011
========== =========== ===========
Long term debt......................................... $ 37,154 $ 147,944 $ 147,944
========== =========== ===========
Stockholders' (deficit) equity:
Common stock, $.001 par value; 24,000,000 shares
authorized; 4,005,639 issued and outstanding,
actual; 4,005,639 issued and outstanding, pro
forma: 6,005,639 issued and outstanding, as
adjusted........................................... 4,006 4,006 6,006
Preferred Stock, $.001 par value; 1,000,000 shares
authorized; 33,610 issued and outstanding, actual;
33,610 issued and outstanding, pro forma 33,610
issued and outstanding as adjusted................. 34 34
Additional paid in capital........................... 1,267,733 12,089,807 21,956,609
Accumulated deficit.................................. (755,558) (756,478) (756,478)
---------- ----------- -----------
Total stockholders' (deficit) equity............... 516,181 11,337,335 21,206,171
---------- ----------- -----------
Total capitalization............................... $ 821,659 $11,701,290 $21,570,126
========== =========== ===========
</TABLE>

The preceding table does not include the exercise of:

- the underwriter's over-allotment option to purchase 300,000 additional
shares of our common stock;

- 200,000 representative's warrants; and

- 33,610 common stock purchase warrants exercisable at $5.00 per share.

13
<PAGE>
DILUTION

As of August 31, 1999, our net tangible book value (deficit) was $(516,181),
or approximately $.13 per share of common stock. Net tangible book value
(deficit) per share represents the amount of our total tangible assets less
total liabilities divided by the number of shares of common stock.

After giving effect to the sale of the 2,000,000 shares offered hereby and
after deducting the underwriting discount and estimated offering expenses, net
tangible book value at August 31, 1999, would have been $20,584,442, or
approximately $3.53 per share of our common stock. This represents an immediate
increase in net tangible book value of $3.40 per share of common stock to our
existing stockholders and an immediate dilution in net tangible book value of
$8.47 per share of common stock, or approximately 70%, to new investors. The
following table illustrates this per share dilution:

<TABLE>
<S> <C>
Assumed initial public offering price....................... $12.00
Net tangible book value per share prior to the offering..... $ 0.13
Increase in net tangible book value per share attributable
to this offering.......................................... $ 3.40
------
Net tangible book value per share after the offering........ $ 3.53
------
Dilution of net tangible book value per share to new
investors................................................. $ 8.47
======
</TABLE>

If the over-allotment is exercised in full, our pro forma as adjusted net
tangible book value at August 31, 1999 would have been $24,064,000, or $4.28 per
share of common stock. This represents an immediate increase in net tangible
book value of $4.47 per share of common stock to existing stockholders and an
immediate dilution in net tangible book value of $7.53 per share of common
stock, or approximately 62% to new investors.

The following table summarizes, as of August 31, 1999, on a pro forma basis,
the number of shares of common stock purchased from us, the total consideration
paid and the average price per share paid by existing stockholders and investors
in this offering, and after giving effect to the sale of the 2,000,000 shares
offered by this prospectus, assuming an initial offering price of $12.00 per
share. The calculations are based upon total consideration given by new
investors and existing stockholders before any deduction of underwriting
discounts, offering expenses payable by us, and does not include the purchase of
or any exercise of the redeemable common stock purchase warrants offered hereby.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
------------------------- ------------------------- SHARE
NUMBER PERCENT AMOUNT PERCENT PER
--------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 4,005,639 67% $ 516,181 2% $ 0.13
New investors..................... 2,000,000 33% 24,000,000 98% $12.00
--------- ---------- ----------- ------ ------
Total........................... 6,005,639 100% $24,516,181 100% $ 4.08
========= ========== =========== ====== ======
</TABLE>

14
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with our
audited financial statements for the years ended November 30, 1997 and 1998
included elsewhere in the prospectus and Management's Discussion and Analysis of
Financial Condition and Results of Operations. The historical selected financial
data as of August 31, 1999 and for the nine months ended August 31, 1998 and
1999 are derived from and should be read in conjunction with our unaudited
financial statements included elsewhere in the prospectus. The unaudited
financial statements, in our opinion, include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the data for the
periods presented. The results of operations for the nine months ended
August 31, 1999 are not necessarily indicative of results to be expected for the
full year.

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30 NINE MONTHS ENDED AUGUST 31
--------------------------- -----------------------------
1997 1998 1998 1999
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................. $ 513 127,191 98,856 57,351
Cost of Revenues......................... 63,886 48,997 19,927
---------- ---------- ---------- ----------
Gross profit............................. 513 63,305 48,859 37,424
Operating costs and expenses:
Sales and marketing.................... -- 5,776 5,776 10,035
General and administrative............. 87,157 309,161 210,908 352,424
Depreciation........................... -- 55,367 36,911 26,000
---------- ---------- ---------- ----------
Total operating costs and expenses..... 87,157 370,304 253,595 388,459
---------- ---------- ---------- ----------
(Loss) income from operations............ (86,644) (306,999) (203,736) (351,035)
Interest expense......................... -- 920 (378) 9,960
Expenses relating to debt financing and
agreements to retire stock options in
preparation of proposed public
offering...............................
Minority interest in subsidiary's losses
absorbed by parent.....................
---------- ---------- ---------- ----------
Net loss................................. $ (86,644) $ (307,919) $ (203,358) $ (360,995)
========== ========== ========== ==========
Basic and diluted net loss per share..... $ (.04) $ (.10) $ (.07) $ (.10)
========== ========== ========== ==========
Shares used in computing basic and
diluted earnings per share............. 2,492,288 2,956,787 2,956,787 3,455,023
========== ========== ========== ==========
</TABLE>

The following table includes a summary of our balance sheet at August 31,
1999

- on an actual basis;

- on a pro forma basis giving effect to the consummation of all seven of
the acquisitions we have pending at the date of this prospectus on the
terms included in the acquisition agreements; the issuance of 33,610
shares of our preferred stock and 33,610 common stock purchase warrants
exercisable to purchase 33,610 shares of our common stock at $5.00 per
share, which were combined and sold as units at $15.00 per unit in
connection with our private placement conducted in September and
October 1999, which resulted in our receipt of $252,075 in aggregate
offering proceeds;

- as adjusted to give affect to the issuance of 2,000,000 shares of
common stock offered by us at an offering price of $12.00 per share;
the consummation of all seven of the acquisitions we have pending at
the date of this prospectus on the terms included in the acquisition
agreements; the

15
<PAGE>

issuance of 33,610 shares of our preferred stock and 33,610 common
stock purchase warrants exercisable to purchase 33,610 shares of our
common stock at $5.00 per share, which were combined and sold as units
at $15.00 per unit in connection with our private placement conducted
in September and October 1999, which resulted in our receipt of
$287,075 in aggregate offering proceeds.

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
AS OF AUGUST 31, 1999
------------------------------------- YEAR ENDED
AS NOVEMBER 30,
UNAUDITED PRO FORMA ADJUSTED 1998
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents................... $ 3,903 $ 475,728 $12,315,978 $ 408
Total working capital (deficit)............. (247,421) 780,089 12,064,654 (86,882)
Total assets................................ 821,659 12,599,898 22,468,734 299,422
Short term debt, current portion of long
term liabilities and current related party
obligations............................... 263,995 216,011 216,011 89,060
Long term debt.............................. 37,154 147,944 147,944 45,604
Total liabilities........................... 305,478 1,262,563 1,262,563 158,704
Total shareholders' (deficit) equity........ $ 516,181 $11,337,335 $21,206,171 140,718
--------- ----------- ----------- --------
Total liabilities and stockholders'
equity.................................. 821,659 12,599,898 22,468,734 299,422
========= =========== =========== ========
</TABLE>

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We were formed to engage in the consolidation of the digital imaging
reproduction industry, with additional emphasis on large format printing and
multimedia applications for the Internet and CD-ROM applications.

We were incorporated in Nevada on July 18, 1997 as ColorSmart, Inc. On
December 29, 1998 we changed our name to ColorSmart.com, Inc. primarily to
reflect our growing emphasis on marketing our products and services over the
Internet and the development of our fully-integrated electronic commerce
applications that allows businesses to privately access their own virtual
portfolio of digitally created printed graphics and multimedia applications
through our fully secure web site. We have entered into agreements to purchase
seven companies, four of which are located in the United States and three of
which are located in the Republic of South Africa. All seven of these potential
acquisitions significantly expand our ability to offer digital imaging and color
graphics reproduction to our customers and to increase our market share in the
digital imaging business.

Our corporate offices are currently located at 537 Myatt Drive, Madison,
Tennessee, 37115. Each of our acquisitions operates out of facilities that
contain a variety of digital imaging, color graphics equipment used in the
reproduction of artwork, transparencies and scanned images.

The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue. The results of operations data
for the nine months ended August 31, 1999 are not necessarily indicative of the
results to be expected for the full year or future periods.

<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR ENDED YEAR ENDED NINE MONTHS NINE MONTHS
NOVEMBER 30, NOVEMBER 30, ENDED AUGUST 31, ENDED AUGUST 31,
1997 1998 1998 1999
------------ ------------ ---------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues.......................... 100% 100% 100% 100%
Cost of revenues...................... -- 50% 50% 35%
Gross margin.......................... 100% 50% 50% 65%
Sales and advertising expense......... -- 4% 5% 17%
General and administrative expense.... 16,989% 243% 214% 615%
Depreciation expense.................. 0% 44% 37% 45%
Total operating expenses.............. 16,989% 291% 256% 677%
Income (loss) from operations......... (16,889)% (241)% (206)% (612)%
Interest income or expense............
-------- ----- ----- -----
Net income (loss)..................... (16,889)% (241)% (206)% (629)%
======== ===== ===== =====
</TABLE>

RESULTS OF OPERATIONS

COMPARISON OF NINE MONTHS ENDED AUGUST 31, 1999 TO THE NINE MONTHS ENDED
AUGUST 31, 1998

REVENUES

Revenues decreased to $57,351 for the nine months ended August 31, 1999 from
$98,856 for the nine months ended August 31, 1998. This decrease of $41,505, or
42% is primarily a result of our focus turned

17
<PAGE>
towards completion of our private placement offerings and development of
e-commerce activity and the relocation of production equipment to our
prospective acquisitions in order to increase capacity and profits for the
target companies, thus decreasing our revenues.

COST OF REVENUES

Costs of revenues consist primarily of material costs. Costs of revenues
decreased to $19,927 or 35% of revenues for the nine months ended August 31,
1999 from $48,997, or 50% of revenues for the nine months ended August 31, 1998.
The decrease of $29,070 or 59% was due to the reduction in revenue and the
related write down of material inventory.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist primarily of salaries, wages and
related costs for general corporate functions, including finance, accounting,
facilities and office rent, legal and other fees for professional services.
General and administrative expenses increased to $388,459 for the nine months
ended August 31, 1999 from $253,595 for the nine months ended August 31, 1998.
As a percentage of revenue, general and administrative costs increased from 219%
to 632%. The reasons for this trend were two-fold. First, with the reduction in
sales, the fixed costs increased on a relative basis to revenue. Second, we
incurred substantial start-up costs for the development of our e-commerce
business and for public offering expenses.

SALES AND MARKETING

Sales and marketing expenses increased to $10,035 for the nine months ended
August 31, 1999 from $5,776 for the nine months ended August 31, 1998. As a
percentage of revenues, sales and marketing expenses increased from 6% to 18%
for the same periods. This increase of $4,259 is a result of our efforts to
establish a business presence in the Nashville, Tennessee business community.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization decreased to $26,000 for the nine months ended
August 31, 1999 as compared to $36,911 for the nine months ended August 31,
1998. This decrease of $10,911, or 29.7% was due to a change in depreciation
methods.

INTEREST EXPENSE

Interest expense increased from $739 to $9,960 for the nine months ended
August 31, 1998 and 1999, respectively. This increase of $9,221 was a result of
short term borrowings needed to fund operations during the later period.

NET INCOME/LOSS

Our net loss for the nine months ended August 31, 1999 increased $157,637
from $(203,358) for the nine months ended August 31, 1998 to $(360,995) for the
same period in 1999. The increase in our net loss is due to higher general and
administrative expenses, an increase in our costs of revenues, increased
marketing efforts, costs associated with our seven targeted acquisitions, and
debt financing for our digital imaging equipment.

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YEAR ENDED NOVEMBER 30, 1998 COMPARED TO THE YEAR ENDED NOVEMBER 30, 1997

REVENUES

Revenues increased to $127,191 for the fiscal year ended November 30, 1998
from none for the fiscal year ended November 30, 1997. This increase in revenue
is a result of the fact that the earlier period was our start-up phase during
which we operated for only four months.

COST OF REVENUES

Cost of revenues increased to $63,886 for the fiscal year ended
November 30, 1998 from $513 for the fiscal year ended November 30, 1997. As a
percentage of revenues, cost of revenues increased from 0% to 50% for the same
periods. This increase of $63,886 is primarily due to the fact that
November 30, 1997 was our start-up year and we generated little revenue.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased to $370,304 for the fiscal
year ended November 30, 1998 from $87,157 for the fiscal year ended
November 30, 1997. As a percentage of revenue, general and administrative
expenses decreased from 16,989% to 247%. This decline, as a percentage of
revenue, is a result of the earlier year being our first full year of operations
and, therefore, we generated more revenue and the later period.

SALES AND MARKETING EXPENSES

Sales and marketing expenses increased to $5,776 for the year ended
November 30, 1998 from $0 for the fiscal year ended November 30, 1997. This
increase of $5,776, or 5,776% is due to the fact that in the prior year we had
no marketing expenses during our shortened fiscal year.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense increased to $55,367 for the fiscal
year ended November 30, 1998 from $0 for the fiscal year ended November 30,
1997. This increase of $55,367, or 55,367% is a result of our equipment not
being in service during fiscal year 1997.

INTEREST EXPENSE

Interest expense increased to $2,060 for the year ended November 30, 1998
from $0 for the fiscal year ended November 30, 1997. This increase of $2,060, or
2,060% is a result of having no borrowings during the period ended November 30,
1997.

NET INCOME/LOSS

Our net loss for the fiscal year ended November 30, 1998 increased $221,275,
or 255% from $(86,644) for the fiscal year ended November 30, 1997 to $(307,919)
for the same period in 1998. This decrease in our net loss is due to higher
operating costs in all departments, and slow revenue growth due to re-focusing
our business plan.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations through revenues and
capital raised in two private placements of our common stock and our preferred
stock with common stock purchase warrants attached. As of August 31, 1999, we
had $3,903 in cash. Cash flows used for operating activities was $392,951 for
the nine months ended August 31, 1999. Net cash used for investing activities
was $506,497

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during the same period including $204,962 used in the purchase of equipment as a
result of our expanded operations, and $301,535 used in the seven acquisitions
we now have under contract.

In April 1999, we completed a private placement whereby we sold 198,050
shares of our common stock, resulting in gross proceeds of $1,000,000 and net
proceeds of approximately $736,458, after deducting offering, legal, accounting
and finders' fee expenses. From July 1999 to October 1999, we completed another
private placement whereby we sold 33,610 shares of preferred stock and 33,610
common stock purchase warrants, which were offered and sold as units, resulting
in our receipt of $252,075 in gross offering proceeds. Net proceeds of our
private placements were used primarily for legal and accounting expenses
incurred during the process of negotiating and documenting our seven targeted
acquisitions, partial payments towards the purchase prices on some of our
acquisitions that we now have under definitive agreements, payment of the costs
and expenses associated with our initial public offering and general corporate
expenses in our Madison, Tennessee facility.

We anticipate that the net proceeds of this offering, together with the cash
flow from operations, will be sufficient to fund our anticipated working capital
and capital expenditures for the 12 months following completion of this
offering. Our capital requirements have grown since our inception and we expect
our capital requirements to continue to grow.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These systems and software
products will need to accept four digit entries to distinguish 21(st)century
dates from 20(th) century dates. As a result, computer systems and/or software
used by many companies and governmental agencies may need to be upgraded to
comply with Year 2000 requirements or risk system failure or miscalculations
causing disruptions of normal business activities. Our services, operations,
customers, suppliers and service providers all rely on information technology
systems, using hardware and software, to function properly. This includes
readily apparent systems including those controlling the digital imaging and
printing equipment that we utilize to deliver our products and services to our
customers, including systems required to provide electricity to our facilities.

SUPPLIERS: We have been surveying our suppliers about their Year 2000
compliance. Each of our suppliers has advised us verbally that they believe they
are Year 2000 compliant, but we have not received confirmation from any
suppliers. If our other suppliers do not reply to our Year 2000 inquiries or
cannot provide Year 2000 compliant products, we may need to locate alternative
sources for goods or services.

OPERATIONS: We have been gathering information from our vendors and making
an assessment of Year 2000 compliance for each of the major elements of our
internal information systems. Based upon the representations of these vendors,
we believe:

- Our operating systems, which include Microsoft Windows NT, Microsoft
Windows 98 and Microsoft Windows 95, are all Year 2000 compliant in their
latest versions, which we currently have installed.

- Our key computer applications, which include Unix, Corel, Adobe,
Macromedia, Onyx, and Microsoft Office 97, have been updated to a level of
revision that is Year 2000 compliant. Our Lucent Partner Mail phone system
is also Year 2000 compliant. Our computer hardware, which is all personal
computer based, is Year 2000 compliant. We have received representations
from the owners and managers of our Madison, Tennessee facility that such
facility is Year 2000 compliant with regard to building security, heating
and lighting controls.

COST TO ADDRESS YEAR 2000 ISSUES: We have not incurred significant costs to
date complying with Year 2000 requirements and we do not believe that we will
incur significant costs for these purposes in the foreseeable future. However,
we may spend more money than we have estimated, and this could have a material
adverse impact on our results of operations. At this stage in our assessment
process, we do not

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believe that the Year 2000 issue will materially impact our financial position,
results of operations or cash flows in future periods. However, there can be no
assurance that operating problems or expenses related to the Year 2000 issue
will not arise with our computer systems and software or that our customers or
suppliers will be able to resolve their Year 2000 issues in a timely manner.

CONTINGENCY PLANS: Our failure to identify and correct a Year 2000 problem
could result in an interruption of normal business activities and operations. A
worst case Year 2000 scenario would include a total malfunction and shutdown of
our network server and for this situation not to be resolved in a timely manner.
We are prepared to manually record information and to manually prepare any
necessary reports. If our internal review and external surveys identifies any
other problems that are reasonably likely to occur, we will develop additional
contingency plans to minimize any impact on our business. However, despite our
best efforts, we may not anticipate all problems that may ultimately arise. We
expect to be fully Year 2000 complaint by the fourth quarter of calendar year
1999.

RECENTLY ISSUED ACCOUNTING STANDARDS

We believe that recently issued financial standards will not have a
significant impact on our results of operations, financial position, or cash
flows.

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BUSINESS

OUR BUSINESS

We are positioning ourselves to become a leading consolidator in the digital
graphics industry and we believe we will be one of the largest digital graphics
companies in the Southeastern United States. Our fully integrated electronic
commerce applications allow businesses to privately access their own virtual
portfolio of digitally created printed graphics and multimedia applications
through our fully secure Web site. These products range from full motion video
for the Internet, catalogues on CD-ROM, 100-foot printed billboards, trade show
graphics and retail displays. Each business can receive updated price quotes,
make modifications, authorize production, and generally manage their printing
and multimedia requirements, from any Windows-based, Internet-enabled computer.
Our customers generally realize a decrease in the entire production cycle from
price quote to the delivery of their order. We believe our applications of
leading edge Internet and digital technology enables us to be price-competitive
while providing customers with the highest level of security, selection, speed
and support.

We have entered into agreements to acquire the stock or assets of seven
companies in the digital printing or multimedia businesses. One of these firms
specializes in the design and production of multimedia advertising, marketing
and presentation applications for delivery over the Internet and CD-ROM. The
others are digital commercial printing companies located in the United States
and the Republic of South Africa.

Commercial digital graphics involves the production of a wide range of
marketing, advertising and media imaging and digital printing produced by using
cutting-edge software and digital printing equipment. It is the digitizing of
the input that reduces production time, costs and errors and provides the
flexibility to handle small, specialized jobs as easily as producing simple,
mass-produced jobs. Digital printing and imaging customers include companies of
all sizes and in all industries where full-color imaging and production are
required. Our digital printing technologies enable us to receive and deliver
customer services most effectively through our Internet applications.

OUR INDUSTRY

THE GROWTH OF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE

- Global reach for broader selection of products and services;

- Reduced costs and greater economies of scale;

- Ability to access suppliers from any computer with Internet access; and

- The technology to customize customer interfaces, creating greater
convenience and ease of use.

To augment our business to business strategy we have implemented an online
ordering system that will consolidate all products and services produced at all
of our newly acquired locations. This is a full e-commerce site that is entirely
secure. With our online ordering system customers will be provided with a
one-stop solution. In addition to the easy on-line ordering process, ColorSmart
will provide a secure

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individual web-site for each client where they make, place, and check the
progress of their orders. The diagram that follows depicts graphically how our
on-line e-commerce applications works:

[LOGO]

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THE PRINTING INDUSTRY

According to industry statistics, United States commercial printing revenues
exceeded $55 billion in 1998. While the market is large, the industry remains
fragmented with over 40,000 local and regional printers in the United States.

Digital technology in the printing industry is being utilized in the market
place worldwide, but we believe this technology is fragmented in the digital
printing services sector. Most digital print and media operations are small and
limited to certain equipment because of the capital required and lack of
technical expertise. Most digital shops operating today are mom and pop and are
very limited. We believe a large portion of the industry has not effectively
grasped the digital opportunity. Projections are that by the year 2001, over
$18 billion in total annual revenue from all digital printing services and
products, is possible on a worldwide basis. This growth is possible because of
consolidation involving digital specialist firms such as ours, continuing
innovations in technology, along with end users' education of digital printing
technologies that provide services and products on demand.

E-commerce, also provides a tremendous opportunity for digital pringing and
multimedia companies. The Internet is uniquely suited as a medium for the
delivery of a wide variety of print, media communications, and digital graphics.
Digital printing and the Internet have synergies that will replace a large
portion of conventional marketing of digital print services and products. We
recognized the synergies between digital printing and the delivery of our
products and services on the Internet and we plan to continue to expand our
digital image library of over 10,000 images for our e-commerce customers, and
expand our technological capabilities in delivering our products and services
through the e-commerce side of our business.

DIGITAL PRINTING

We believe digital technology in the printing and graphic design industries
is being under-utilized. Most digital print and media operations are small and
lack the requisite capital, equipment, and technical expertise to deliver the
full range of benefits offered by digital technology. We believe this growth
will be demand driven, predicated upon continued advancements in digital
technology. As a leader in the digital graphics industry, ColorSmart expects to
be well positioned to satisfy this demand

E-commerce over the Internet offers us a tremendous opportunity and provides
us with a competitive advantage. The Internet is an exceptional medium for the
delivery of digital graphics in a wide variety of formats. The synergy of
digital technology and the Internet will continue to transform, and we believe,
replace, an ever-increasing portion of conventional printing services and
products.

We believe the industry suffers from the following inefficiencies:

- Excess capacity hinders profitability;

- Production inefficiencies resulting in high error rates and increased
costs;

- Despite the technological advances in the industry, there is a serious
lack of integration through all stages of production;

- Local printers typically offer a limited range of products requiring
businesses to use several different printers to satisfy their needs;

- Many printers lack the technological resources to provide customized
products in a cost-effective manner.

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OUR STRATEGY

Our objective is to be the leading Internet-based business-to-business
digital graphics and multimedia company in the world. The key elements of our
business strategy include:

- Focusing primarily on the Internet business-to-business market for digital
printing services, expected to grow to approximately $18 billion by 2001,
up from approximately $5 billion in 1998;

- Continuing to upgrade and enhance the front-end of our e-commerce
applications, while acquiring carefully targeted commercial printing
companies in this highly fragmented industry to support the back-end;

- Utilizing the most current digital graphics and multimedia technology
available to maintain a technological edge over our competition;

- Expanding beyond traditional printing products and services into
multimedia video and audio business-to-business applications primarily
tailored for the Internet and CD-ROM;

- Making the process of creating, approving, ordering and fulfilling
printing jobs more efficient by allowing customers to handle much of this
process from there desktops; and

- Tailoring end-to-end business applications to our customer's needs by
integrating creative, production, and distribution services into
customer-specific solutions.

OUR RECENT ACQUISITIONS

A key component of our growth strategy is accomplished by acquiring digital
printing companies located throughout the United States and overseas. During our
current fiscal year, we entered into agreements to acquire seven targeted
companies for acquisition. They are described as follows:

- Jamberry Lake Digital Media, Inc., of Summit, New Jersey is an early stage
company focused on producing digital multimedia products and services for
use on the Internet, as well as traditional marketing and promotional
campaigns. Utilizing streaming video and audio, Jamberry can produce high
quality multi-media presentations for Internet advertising and
instructional purposes for e-commerce companies, as well as short, high
impact advertisements, similar to television commercials. These same
technologies also have wide applications for the consumer side of
e-commerce. We plan on integrating Jamberry's services with digital print
products offered by our entire group of companies. We signed an agreement
on December 2, 1999 to purchase all of the outstanding shares of Jamberry
from Jamberry Lake, L.L.C., its sole shareholder. We agreed to pay
$1,000,000 as follows: 125,000 of our shares at the completion of this
public offering and an additional number of our shares having a value
equal to 10% of the amount by which the average equity market
capitalization exceeds $75,000,000 on each of the 30th, 60th and 90th day
after the completion of this offering. We are also required to make a
monthly capital contribution to Jamberry of $100,000 from August 15, 1999
until we close this public offering. At the date of this prospectus we
have paid $245,000 to Jamberry under this agreement. With each payment of
$100,000, 10% of Jamberry's shares are being placed in escrow for our
benefit. If we do not close this public offering, we are entitled to
receive 1% of the issued and outstanding stock of Jamberry for each
$20,000 that we have paid to Jamberry under this agreement.

- Magnum Digital Services, Inc. located in Coconut Creek, Florida. Magnum
Digital specializes in dye sublimation, which is applying digital images
in full color on fabrics, textiles and specialized substrates. This area
of digital printing is the fastest growing segment of the industry
overall. We signed an agreement on September 3, 1998 to purchase of all of
the outstanding shares of Magnum Digital with Robert McDowell, Magnum
Digital's sole shareholder and president. We agreed to pay $500,000 in
cash and deliver 63,333 shares of our stock to Mr. McDowell and to pay up
to $275,000 for balances due on Magnum Digital's equipment leases. By
letter agreement dated September 8,

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1999, the amount of our stock to be delivered to Mr. McDowell was adjusted
to 66,667 shares. By letter agreement dated September 7, 1999 the closing
of this acquisition was extended until we complete this public offering.
The cash purchase price will be paid from a portion of this public
offering.

- Advertising That Works, Inc. located in East Point, Georgia. We acquired a
wholesaler, fabricator, and finisher of banners and screen-printed
posters. This company enjoys several national accounts and a high profile
customer base. After many years as a screen printer, this company has
begun the process of changing over to a 100% digital operation. We signed
an agreement on September 23, 1998 for the purchase of all shares of
Advertising That Works with Chris England, its sole shareholder and
president. We agreed to pay $1,000,000 in cash for the stock and $500,000
for the real estate in East Point, Georgia where the company is located.
By letter agreement dated December 2, 1999, the closing of this
acquisition has been extended until January 31, 2000. The purchase price
will be paid from a portion of this public offering.

- Stonehouse Graphics, (Pty) Ltd., located in Johannesburg, South Africa, is
Africa's second largest producer of large format digital printing. With
12 years in the industry, Stonehouse has gone from a small screen printer
to a fully integrated digital fabricator. It accounts for almost 40% of
all billboard printing and backlit signage in Southern Africa. Stonehouse
Graphics has a full compliment of sales, design and production staff
utilizing only the latest in digital technology. We signed an agreement on
October 12, 1998 to purchase all of the outstanding shares of Stonehouse
from its sole shareholder, Nolan Weight. We agreed to pay 15,000,000 South
African Rands (presently convertible into approximately $2,450,980 U.S.
dollars) less all of the outstanding loans (including loans to
shareholders) and liabilities of Stonehouse (about 5,000,000 Rands or
approximately $816,992 U.S. dollars). By letter agreement dated
December 2, 1999, the consummation of this agreement has been extended
until January 31, 2000. The purchase price will be paid from a portion of
this public offering.

- Display Arts, Inc., located in Nashville, Tennessee, is a 12-year old
company specializing in trade show graphics and trade show display booths.
Display Arts is an exclusive regional distributor for Nimlok, a premier
manufacturer of these products. With locations in Nashville, Memphis, and
Knoxville, Tennessee, Display Arts brings a new dimension to the
integration of customer products and services for our entire group and our
existing customer base. We signed an agreement on June 23, 1999 to
purchase all of the outstanding shares of Display Arts, Inc. from its sole
shareholders Donovan J. McNamee, Jr., and Pamela M. McNamee. We agreed to
pay $1,300,000 at the closing that will be used first to pay off Display
Arts' debt and the balance for the stock of the selling shareholders. The
agreement called for a closing on October 1, 1999 that was extended to
December 15, 1999 in an extension agreement dated October 1, 1999, and was
further extended until January 31, 2000 in a second extension agreement
dated December 15, 1999. The closing is contingent upon the completion of
this public offering. The purchase price will be paid from a portion of
this public offering.

- Top Copy, (Pty), Ltd., located in Cape Town, South Africa, is a small but
highly efficient digital, color copy shop that offers full offset
printing. Catering to smaller businesses as well as the retail trade, Top
Copy, which is similar to Kinko's in the U.S., provides an ideal platform
to spearhead expansion in this segment of the digital copy and printing
industry in South Africa. We signed an agreement on May 20, 1999 to
purchase all of the assets of Top Copy. We agreed to pay 2,560,000 South
African Rands (presently convertible into approximately $418,300 U.S.
dollars). Under the agreement, the closing was scheduled for August 25,
1999. By letter agreement dated December 2, 1999, the date for closing of
this acquisition has been extended to January 31, 2000. At the closing, we
will also have to pay interest on the purchase price at the rate of 6.5%
per annum from August 25, 1999. The purchase price will be paid from a
portion of this public offering.

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- Virtual Colour Group, (Pty), Ltd. of Cape Town, South Africa was
originally formed in 1996 and currently consists of six companies. Virtual
Colour has become the leader in digital printing technology in South
Africa. Designers work with both PC and Mac files and produce high end,
full color brochures, catalogues, and magazines. A fully integreated, 100%
digital, full color operation, Virtual Colour's forty-plus employees rely
mainly on it's Heidelberg Digital Press. This company garners
approximately 65% of its business over the Internet and has built a strong
customer base even in Western and Central Europe, as well as Africa. We
have agreed to purchase the assets of four of the Virtual Colour Group
companies, which are operated as a single entity. For purposes of this
prospectus, the assets of the four companies we are acquiring are treated
as a single entity called Virtual Colour Group.

We signed an agreement on September 11, 1999 to purchase the assets of
Virtual Colour Property and agreed to pay 920,996 South African Rands
(presently convertible into approximately $150,489 U.S. dollars). At the
closing, certain liabilities will be paid from the closing proceeds of this
public offering. We also signed an agreement to purchase the assets of
Virtual Colour Printing cc and agreed to pay 836,178 South African Rands
(presently convertible into $136,630 U.S. dollars). At the closing, certain
liabilities will be paid from the closing proceeds of this public offering.
We also signed an agreement on September 11, 1999 to purchase the assets of
Virtual Support cc and agreed to pay 200,000 South African Rands (presently
convertible into $32,679 U.S. dollars). At the closing, certain liabilities
will be paid from the closing proceeds of this public offering. We also
signed an agreement to purchase the assets of Virtual Colour cc and agreed
to pay 473,418 South African Rands (presently convertible into $77,355 U.S.
dollars). At the closing, certain liabilities will be paid from the closing
proceeds of this public offering.

The agreements with Virtual Colour Property, Virtual Colour Printing,
Virtual Support and Virtual Colour require that we enter into management
agreements with Keith Redman, Herbert Trischler and Alois Koch prior to the
closing. The agreement with Virtual Support requires us to enter into a
management agreement with Messrs. Redman, Trischler, Koch and Aardt Davidtz
prior to the closing. It is also a condition precedent to the closing of
each agreement that we become listed on the Nasdaq National Market System.
The closing date of each agreement is January 31, 2000. The purchase prices
for all of the assets of the Virtual Color Group being purchased, as well
as the liabilities to be satisfied at the closings, will be paid from a
portion of this public offering.

We intend to pursue an acquisition strategy that seeks to consolidate the
highly fragmented digital printing industry. We believe these acquisitions will
be comprised of two types of potential target businesses: larger companies with
existing management that is well versed in the digital printing industry; and
smaller businesses that can easily be consolidated with our existing
infrastructure. Our approach in the past has been to stay in those geographical
areas that our management is familiar with, such as the Southeastern and Eastern
United States and the Republic of South Africa.

Our approach to acquiring companies in new markets will be to identify at
least one larger acquisition in that new market and then compliment it with
smaller acquisitions in areas that are in close proximity to the first
acquisition. We will be generally unwilling to enter a new market through an
acquisition unless the target company being acquired is one of the market share
leaders and provides the critical mass necessary to act as a platform for us to
build within that new market. We believe that there are attractively priced
target acquisitions in the Southeastern United States and abroad, and that for
the foreseeable future, our growth by acquisition strategy will be concentrated
within that geographic area as well as additional acquisitions in the Republic
of South Africa.

We believe that acquisitions and consolidation of other digital printing
businesses will offer the following cost savings and synergies associated with
our business:

- Decreased operating costs through elimination of duplicative
administrative costs;

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- Decreased production and distribution costs through integration with a
larger, geographically adjacent entity;

- Decreased purchasing costs through realization of economies of scale;

- Improved management control through centralized accounting and reporting
systems;

- Improved marketing and advertising efficiencies.

We are not currently negotiating any additional acquisitions, and there can
be no assurance that we can successfully negotiate any additional acquisitions
in the future.

OUR SALES AND MARKETING STRATEGY

We intend to focus our sales and marketing strategy as follows:

- We will utilize both traditional and Internet marketing approaches to
selling our digital products. Our primary means of marketing will be
focused on the Internet. We take orders on-line. While a few printers do
offer on-line ordering, they are limited to traditional business printing.
We offer a wide range of digital services not confined to printing alone.
We believe this gives us a unique marketing edge and the ability to build
a strong brand name.

- Internet and traditional marketing means will be implemented by us with an
aggressive sales staff coupled with a targeted corporate, regional, and
national marketing campaign. Our immediate focus will be primarily on
advertising agencies, large retailers, mass merchandisers, truck fleet
operators, trade show and convention organizations, municipalities,
political organizations, and large corporate customers, all of which have
many digital needs besides printing.

COMPETITION

We compete with numerous commercial digital printers, some of which are
larger, more established and have greater financial and other resources. Our
competitors include MasterGraphics, Inc., Consolidated Graphics, Inc.,
Integrated Graphics, Inc., Omni Graphics and Imagex, Inc. Our main competition
is the small to medium sized digital print shop.

We believe we can be competitive in the digital printing market by
differentiating ourselves in the areas of quality, the versatility of our
products, turnaround time, technology, full-service capability, flexibility,
service and price.

EMPLOYEES

As of December 23, 1999, we had approximately eight full-time employees, of
whom one was in sales, services and distribution, four were in our technical and
graphics design areas, and three in administration. Our employees are
non-unionized and we believe that we enjoy good relations with them. As of the
date of this prospectus, we have hired a systems administrator for our in-house
server and Internet operations. We have also hired two new designers and are
currently interviewing additional hires, including a position for a national
sales manager.

FACILITIES

Our main executive office facility is located in Madison, Tennessee, where
we lease approximately 5,500 square feet of office space for $3,500 per month
under a lease agreement entered into in March, 1997, which lease expires in
March, 2001. We have 15 months remaining on the term of our current lease with
an option to renew the lease for an additional three-year term. We believe this
facility is satisfactory for our uses for the foreseeable future.

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FACILITIES ASSOCIATED WITH OUR ACQUISITIONS

Stonehouse Graphics, one of our target acquisitions in Johannesburg, South
Africa, leases a brand new, all brick, modern business facility, which is the
subject of a lease agreement entered into by Stonehouse Graphics on October,
1999, providing for a five-year lease at R35,000 (South African Rands) per month
(US$5,800), with an option to renew the lease for an additional five-year term.
This facility consists of approximately 2,700 square feet of office space,
20,000 square feet of production area, 2,000 square feet of design area, and
5,000 square feet of covered area for vehicle and bus installations, and
billboard applications. The Stonehouse facility is adequate for current and
prospective operations.

Magnum Digital Services, Inc., located in Coconut Creek, Florida, also
leases its office and manufacturing facility under a three-year lease agreement
entered into in October 1997, which provides for a monthly rental payment of
$2,480 per month. The Magnum Digital facility is 3,000 square feet, 2,400 square
feet of which is used as a production area. The remaining 600 square feet is
used as office space. The lease agreement has two years remaining in the
original term of the lease. The facilities are adequate for current and future
operations.

Advertising That Works, Inc., located in East Point, Georgia has its
business facility located on 1.125 acres of prime commercial real estate located
near Atlanta, Georgia. The facility includes four concrete block buildings
totaling approximately 16,000 square feet of which 10,500 square feet are used
for production, with the balance used as office and design space. This entire
facility includes a one-story metal building with 6,000 square feet of space
also available. These premises are financed through a promissory note and deed
of trust with approximately 13 years remaining on the term. Monthly payments of
$2,600 per month are current.

Virtual Colour Group currently has three locations. There are two locations
in Cape Town, South Africa and one in Paarl, South Africa. The main office for
Virtual Color is owned by that company. This home office consists of
approximately 8,000 square feet of usable space. The remaining locations are
approximately 4,000 square feet each and are leased at approximately R12,000
($US 2,000) per month with approximately two years remaining on each lease. This
facility is adequate for current and prospective operations.

Top Copy is located in Cape Town, South Africa in a retail center. The lease
is for approximately 3,000 square feet with an additional 3,000 square feet
currently undergoing leasehold improvements, under a lease agreement entered
into in September 1999. There is currently three years remaining on the lease at
approximately R20,000 per month (US$3,267). This facility is adequate for
current and prospective operations.

Our Jamberry Lake Digital Media facility is located in Summit, New Jersey.
The lease is for approximately 2,500 square feet under a lease agreement entered
into in October 1999. There is currently almost 3 years left on a three year
lease at approximately $3,500 per month. This facility is adequate for current
and prospective operations.

LEGAL PROCEEDINGS

Neither we, nor the companies we intend to acquire are involved in any
material pending, or to our knowledge threatened, legal proceedings. From time
to time, we may become a party to various legal proceedings arising in the
ordinary course of business.

29
<PAGE>
MANAGEMENT

DIRECTORS AND OFFICERS

Our executive officers, directors, key employees and our nominees for
directors, and their ages as of December 23, 1999 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------------------------------------------------------
<S> <C> <C>
Roger D. Finchum, Sr. ............... 52 Chairman of the Board, Chief Executive Officer,
President and Director;

Roger D. Finchum, Jr. ............... 31 Vice-President of U.S. Operations, and Director;

Erich J. Fischer..................... 28 Vice-President of Design;

Lee Watson........................... 47 Chief Financial Officer;

Reginald W.H. Burrows................ 53 Vice-President of Foreign Operations; and Director;

Greg E. Dukoff....................... 35 Director-Nominee;

William P. Jones..................... 53 Director-Nominee;

Richard W. Weachter.................. 59 Director-Nominee.
</TABLE>

ROGER D. FINCHUM, SR., is our founder and has served as our chief executive
officer, president and chairman of our board of directors since our formation in
July 1997. From June 1996 to July 1997, Mr. Finchum was president of Express
Signs and Graphics, Inc., a small digital printing company located in Madison,
Tennessee, and also served as a director of Media Arts & Graphics Pty, Ltd., of
Cape Town, South Africa. Between September 1994 and June 1995, Mr. Finchum
served as vice president of The Poster Factory, Inc. and Digital Arts &
Graphics, Inc., both of Hendersonville, Tennessee. Mr. Finchum has served in
several corporate positions over the years in sales, marketing and advertising
for various printing and graphic arts companies. For several years prior to
that, Mr. Finchum was involved in various management capacities with Monarch
Minerals & Mining, a mineral extraction concern headquartered in the United
States and South Africa with hard rock mining extractions in South Africa and
neighboring countries.

ROGER D. FINCHUM, JR., has been our vice-president and a director since we
were formed in July 1997. Mr. Finchum has worked as a digital print specialist
for various companies in the Nashville, Tennessee area during the five years
prior to joining us. From January 1992 to June 1994, Mr. Finchum was a print
specialist with ColorQuick, Inc. From February 1994 to September 1995,
Mr. Finchum was a print specialist with Fast Signs, Inc., and from October 1995
to January 1996, Mr. Finchum was a print specialist with Signs Now, Inc.
Mr. Finchum served in the Marine Corps from 1987 to 1991. During which time he
served as a special operations team leader. He is also a Gulf War Veteran.
Mr. Finchum has been a part-time student at Belmont University in Nashville,
Tennessee and expects to graduate in December 2000 with Bachelor of Arts degrees
in both History and Philosophy.

ERICH J. FISCHER, is our vice president of design. Mr. Fischer became our
vice-president in March 1996. From 1994-1996 Mr. Fischer served as manager and
head designer for Signs Now in Nashville, Tennessee. From 1992-1994 Mr. Fischer
was the assistant supervisor of marketing for Elrick & LaVange. Mr. Fischer has
been a freelance graphic artist, writer, musician and photographer since 1990,
and a graphics designer in the sign industry since 1994 with a national
franchise company [name the company], and has done design work for such events
as the Super Bowl, the Grammy Awards, CMA Awards, Dove Awards, and Nashville's
Summer Lights Festival. Mr. Fischer received his Bachelor of Science degree in
marketing and management from McNeese State University in Lake Charles,
Louisiana in May 1992.

30
<PAGE>
LEE WATSON, is a certified public accountant and has been our chief
financial officer since joining us in January 1999. Since June 1989, Mr. Watson
has served as an independent consultant performing financial consulting services
to Tennessee-based companies with annual revenues between $5,000,000 and
$20,000,000. Prior to 1989, Mr. Watson served as the controller for Northern
Lumber, a large hardwood lumber manufacturer and exporter. From June 1973 until
September 1975, Mr. Watson was employed as an accountant with Coopers & Lybrand.
In 1973, Mr. Watson received his bachelor of science degree from Manchester
College, Detroit, Michigan, in 1973

REGINALD W. H. BORROWS, has been one of our directors since July 1999.
Mr. Burrows graduated from the South African Institute of Industrial
Engineering. After having held several positions with some of South Africa's
leading industrial companies, he founded Sigma Graphics Ltd. in 1979. After many
years of successful operations, he sold the business to the Walton Group, South
Africa's largest stationer. After selling his business Mr. Burrows was retained
as a senior manager within the group. He served on their board and held
responsibility for operating 19 locations in the Western Cape Region, including
Namibia, where he was a major part of Walton's acquisitions in that country.
From 1993-1998 Mr. Burrows served as a senior manager for Walton Group in South
Africa.

GREG DUKOFF, will become a director upon the completion of our public
offering. Mr. Dukoff has been the president and chief executive officer of
Jamberry Lake Digital Media, Inc. since its inception in August 1999. He served
as the chief financial officer and as a director of Rolling Pin Kitchen
Emporium, Inc. since July, 1998 and as its chief executive officer since
March 1999. Currently, Mr. Dukoff is the corporate secretary and the interim
chief financial officer of Rolling Pin Kitchen Emporium, Inc. and of Gaylord
Companies, Inc. During Mr. Dukoff's term as an officer and director of the
Gaylord Companies, Inc., the company filed a bankruptcy proceeding under
Chapter 11 of the Bankruptcy Code. Prior to joining Rolling Pin's predecessor
(Gaylord Companies, Inc.) to re-organize the company out of bankruptcy, he spent
the first 13 years of his career in the managed funds and hedge funds industry,
most recently as the head of ABN AMRO Chicago Corporation's Managed Funds
Department and as the director of managed futures and hedge funds at Prudential
Securities, Inc. before that. Mr. Dukoff has a Bachelor of Business
Administration with a concentration in banking, finance and investment from
Hofstra University, Hempstead, New York.

WILLIAM P. JONES, will become a director upon completion of the public
offering. Mr. Jones has been engaged in the private practice of law in
Hendersonville, Tennessee since 1974. Mr. Jones received a bachelor of arts
degree from The Citadel in Charleston, South Carolina, in 1968 and attended
Tulane University School of Law in New Orleans, Louisiana, from 1971 through
1974 and received a doctor of jurisprudence degree in 1974. Since 1983,
Mr. Jones has owned and operated several Bonanza Restaurants in the states of
Kentucky, Georgia and Tennessee and two mortgage companies dealing in commercial
and residential lending.

RICHARD W. WEACHTER, will become a director upon completion of the public
offering. From March 1997 to December 1999, Mr. Weachter served as the chief
financial officer and a director of Northstar Environmental Group, Inc. From
January 1995 to March 1997, Mr. Weachter was the president of Nationwide
Studios, Inc. Mr. Weachter received his bachelor of science in business
administration from Youngstown University in 1963 and attended graduate school
in business administration at the University of Detroit in Detroit, Michigan.

DIRECTORS' COMPENSATION

Any non-employee directors will receive $1,000 for attendance at each
meeting of the board of directors or any committee thereof and will be
reimbursed for their out-of-pocket expenses in connection with their attendance
at any such meeting. We anticipate that our board will meet at least twice each
year. No directors' fees have been paid to date.

31
<PAGE>
BOARD COMPOSITION

Our board of directors presently consists of three members who serve as
directors for one-year terms or until their successors are duly elected by our
shareholders and then qualify as directors. We anticipate expanding the board of
directors to six members at the time that we complete our initial public
offering. We have three nominees that we intend to elect as directors at the
time our public offering is completed and our pending acquisitions consummated.
Two of our board members are related as father and son. Vacancies in the office
of any director may be filled by a majority of the directors then in office.

Our board appoints our chief executive officer, and all other executive
officers, including our president, are appointed by our chief executive officer.

We have agreed that for two years from the completion of this offering, that
Nutmeg Securities, Ltd. may appoint Daniel F. Guilfoile as an observer to our
board of directors, without any voting rights or privileges that our directors
have. If the representative chooses to designate Mr. Guilfoile to attend our
directors' meetings as an observer, we have agreed to reimburse him for
out-of-pocket expenses in connection with his attendance.

COMMITTEES OF THE BOARD

Upon completion of this offering, the board of directors will establish two
standing committees; an audit committee and a compensation committee. Our audit
committee will recommend to our entire board of directors the independent public
accountants to be engaged by us, review the plan and scope of our annual audit,
review our internal controls and financial management policies with our
independent public accountants and review all related party transactions. The
compensation committee will review and recommend to our board, the compensation
and benefits to be paid to our officers and directors, administer the stock
option plan we intend to put in place, approve the grant of options under the
stock option plan and establish and review general policies relating to
compensation and benefits of our employees.

EXECUTIVE COMPENSATION

The following table sets forth the total compensation paid during our fiscal
year ended November 30, 1998 to our chief executive officer, Roger D. Finchum,
Sr. No other executive officer received a salary and bonus in excess of $100,000
in this year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------------- OTHER COMPENSATION
SALARY($) BONUS($) -----------------------------
------------------- ------------------- OTHER ANNUAL ALL OTHER
NAME AND POSITION 1998 1999 1998 1998 COMPENSATION COMPENSATION
- ----------------- ---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Finchum, Sr., chief
executive officer......... -0- -0- -0- -0- -- --
</TABLE>

The aggregate compensation paid to all persons who served in the capacity of
a director or executive officer during the fiscal years that ended November 30,
1998 and 1997, 3 persons, was $60,000 in 1998, and none in 1997.

32
<PAGE>
OPTION GRANTS DURING THE YEARS
ENDED NOVEMBER 30, 1998 AND 1997

<TABLE>
<CAPTION>
PERCENT OF TOTAL OPTIONS
-----------------------------------------------------------------------------
NUMBER OF
SECURITIES GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN
GRANTED FISCAL YEAR
----------------------- ----------------------- EXERCISE EXPIRATION
NAME 1998 1997 1998 1997 PRICE($/SH) DATE
- ---- -------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Finchum, Sr., chief
executive officer........... -0- -0- -- -0- -- --
</TABLE>

No options were granted to any person who served as an officer or director
during the fiscal year that ended November 30, 1997 or 1998.

EMPLOYMENT AGREEMENTS

On September 16, 1999, we entered into a series of employment agreements
with the following people:

Roger D. Finchum, Sr. was employed as our chief executive officer and
president for a term of two years. Mr. Finchum's employment will automatically
be extended for additional two year periods unless he is terminated according to
the terms of his employment agreement. Mr. Finchum will have a base salary in
1999 of $160,000 per year. The following year his salary shall increase by 10%.
Subsequent increases in Mr. Finchum's salary are subject to review by our
compensation committee which will be established after we receive the full
proceeds of this public offering. Mr. Finchum is eligible for both cash and
stock bonuses within the discretion of our board of directors. The agreement
also has provisions that, for a period of one year after the termination of his
employment, Mr. Finchum will not compete with us, nor solicit our employees or
customers.

Roger D. Finchum, Jr. was employed as the vice president for our U.S.
operations for a term of two years. Mr. Finchum's employment will automatically
be extended for additional two year periods unless he is terminated according to
the terms of his employment agreement. Mr. Finchum will have a base salary in
1999 of $78,000 per year. The following year his salary shall increase by 10%.
Subsequent increases in Mr. Finchum's salary are subject to review by our
compensation committee which will be established after we receive the full
proceeds of this public offering. Mr. Finchum is eligible for both cash and
stock bonuses within the discretion of our board of directors. The agreement
also has provisions that, for a period of one year after the termination of his
employment, Mr. Finchum will not compete with us, nor solicit our employees or
customers.

Erich Fischer was employed as our vice president of marketing for a term of
two years. Mr. Fischer's employment will automatically be extended for
additional two year periods unless he is terminated according to the terms of
his employment agreement. Mr. Fischer will have a base salary in 1999 of $48,000
per year. The following year his salary shall increase by 10%. Subsequent
increases in Mr. Fischer's salary are subject to review by our compensation
committee which will be established after we receive the full proceeds of this
public offering. Mr. Fischer is eligible for both cash and stock bonuses within
the discretion of our board of directors. The agreement also has provisions
that, for a period of one year after the termination of his employment,
Mr. Fischer will not compete with us, nor solicit our employees or customers.

Lee Watson was employed as our chief financial officer for a term of two
years. Mr. Watson's employment will automatically be extended for additional two
year periods unless he is terminated according to the terms of his employment
agreement. Mr. Watson will have a base salary in 1999 of $72,000 per year. The
following year his salary shall increase by 10%. Subsequent increases in
Mr. Watson's salary

33
<PAGE>
are subject to review by our compensation committee which will be established
after we receive the full proceeds of this offering. Mr. Watson is eligible for
both cash and stock bonuses within the discretion of our board of directors. The
agreement also has provisions that, for a period of one year after the
termination of his employment, Mr. Watson will not compete with us, nor solicit
our employees or customers.

The following employment agreements are to become effective on the
completion of this public offering and the closing of the stock and assets
acquisitions described in this prospectus:

Chris England is to be employed as president of Advertising That Works, Inc.
for a term of two years. Mr. England's employment will automatically be extended
for additional two year periods unless he is terminated according to the terms
of his employment agreement. Mr. England will be paid $100,000 per year
commencing from the closing of the purchase of the outstanding stock of the
company. The $100,000 is divided into $80,000 for salary and $20,000 as advance
compensation for not competing with us should Mr. England's agreement not be
renewed or extended, or should his agreement be terminated according to its
provisions. Mr. England is eligible for both cash and stock bonuses within the
discretion of our board of directors. The agreement also has provisions that,
for a period of two years after the termination of his employment, Mr. England
will not compete with us, nor solicit our employees or customers.

Stonehouse Graphics (Pty) Limited entered into an agreement to employ Nolan
Weight as its general manager for a term of two years. Mr. Weight's employment
will automatically be extended for additional two year periods unless he is
terminated according to the terms of his employment agreement. Mr. Weight will
be paid a base salary of South African Rands 200,000 per year, commencing from
the closing of the purchase of the outstanding stock of Stonehouse.
Mr. Weight's base salary will be reviewed after one year. Additionally,
Mr. Weight will be paid South African Rands 100,000 per year, for not competing
with us should Mr. Weight's agreement not be renewed or extended, or should his
agreement be terminated according to its provisions. Mr. Weight is eligible for
cash bonuses within the discretion of our board of directors. The agreement also
has provisions that, for a period of two years after the termination of his
employment, Mr. Weight will not compete with us, nor solicit our employees or
customers.

Reginald Burrows is to be employed as a the vice president for a term of two
years. Mr. Burrows's employment will automatically be extended for additional
two year periods unless he is terminated according to the terms of his
employment agreement. Mr. Burrows will have a base salary in 1999 of $96,000 per
year. The following year his salary shall increase by 10%. Subsequent increases
in Mr. Burrows's salary are subject to review by our compensation committee
which will be established after we receive the full proceeds of this offering.
Mr. Burrows is eligible for both cash and stock bonuses within the discretion of
our board of directors. The agreement also has provisions that, for a period of
one year after the termination of his employment, Mr. Burrows will not compete
with us, nor solicit our employees or customers.

Greg E. Dukoff is to be employed as president of Jamberry Lake Digital
Media, Inc. for a term of three years. Mr. Dukoff's employment will
automatically be extended for additional one year periods unless he is
terminated according to the terms of his employment agreement. Mr. Dukoff will
have a base salary in 1999 of $120,000 per year. In any renewal period, his
salary shall increase no less than 15%. Mr. Dukoff is eligible for a minimum
cash bonus of $30,000 in any fiscal year that the gross revenues of Jamberry
exceed $2.5 million. The agreement also grants Mr. Dukoff certain stock options.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our certificate of incorporation and our by-laws contain provisions that
eliminate the personal liability of our directors to us or our stockholders for
monetary damages for breach of their fiduciary duty as a director to the fullest
extent permitted by the Nevada General Statutes, except for liability for:

- any breach of their duty of loyalty to us or our stockholders;

34
<PAGE>
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

- unlawful payments of dividends or unlawful stock repurchases or
redemptions;

- any act or omission occurring prior to the date of our incorporation; and

- any transaction from which the director derived an improper personal
benefit.

Our certificate of incorporation and by-laws also contain provisions that
require us to indemnify our directors and permits us to indemnify our
incorporators, directors and officers to the fullest extent permitted by Nevada
law, including circumstances where indemnification would be discretionary.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, and persons controlling us pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act, and is therefore, unenforceable.

35
<PAGE>
CERTAIN TRANSACTIONS

Since inception, we have borrowed working capital from time to time from our
founding shareholder, Roger D. Finchum, Sr. During our fiscal year ended
November 30, 1997, Mr. Finchum advanced the sum of $7,500 for working capital.
During our fiscal year ended November 30, 1998, Mr. Finchum advanced a total of
$580,975 in working capital. During that same fiscal year, we repaid a total of
$510,470 of the advances made for that year to Mr. Finchum from the proceeds of
our private placements and from our revenues during that period.

These advances to us for working capital by Mr. Finchum were unsecured
borrowings by us. At the end of each of the fiscal years we borrowed money, we
entered into a form of promissory note in the amount of the advances outstanding
at the end of each year. We entered into a promissory note dated November 30,
1997 in the amount of the advances due to Mr. Finchum at that date. We also
entered into a promissory note dated November 30, 1998 in the amount of the
cumulative advances due to Mr. Finchum at that date. Each note accrued interest
at the rate of 7% per annum and are due on demand by the note holder.

On December 3, 1999 we entered into an agreement for our acquisition of
Jamberry Lakes Digital Media, Inc. with its sole shareholder, Jamberry Lakes,
LLC, Greg E. Dukoff, one of our director-nominees is an officer and director of
Jamberry Lakes Digital Media, Inc. and is the managing member of Jamberry Lake,
LLC, the sole shareholder of Jamberry Lakes Media, Inc. In our agreement to
acquire Jamberry Lakes Media, Inc., we agreed to pay $1,000,000 as follows:
125,000 of our shares of common stock at the completion of this public offering
and an additional number of our shares having a value equal to 10% of the amount
by which the average equity market capitalization exceeds $75,000,000 on each of
the 30th, 60th and 90th day after the completion of this public offering. We are
also required to make a monthly capital contribution to Jamberry Lakes Media,
Inc. of $100,000 from August 15, 1999 until we close this public offering. At
the date of this prospectus we have paid $245,000 to Jamberry under this
agreement. With each payment of $100,000, 10% of Jamberry's shares are being
placed in escrow for our benefit. If we do not close this public offering, we
are entitled to receive 1% of the issued and outstanding stock of Jamberry for
each $20,000 that we have paid to Jamberry under this agreement.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this prospectus. The information
in this table provides the beneficial ownership for:

- each person known by us to be the beneficial owner of more than 5% of the
outstanding shares of our common stock;

- each of our directors and director-nominees and executive officers; and

- our executive officers and directors as a group.

Unless otherwise indicated, the address of each beneficial owner is the same
as our principal office location at 537 Myatt Drive, Madison, Tennessee 37115.
Unless otherwise indicated, the individuals in this table have sole voting and
investment power with respect to all shares shown as beneficially owned by them.
Beneficial ownership is determined in accordance with the rules and regulations
of the Securities and Exchange Commission. The number of shares beneficially
owned by a person and the percentage ownership of that person includes shares of
our common stock issuable upon exercise of warrants held by

36
<PAGE>
that person, but not those held by any other person, that are currently
exercisable or exercisable within 60 days from the date of this prospectus.

<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
NAMES AND ADDRESS OF NUMBER OF SHARES ---------------------------------
BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING*
- -------------------- ------------------ --------------- ---------------
<S> <C> <C> <C>
Roger D. Finchum, Sr.............................. 2,511,668 62.9% 41.6%
Roger D. Finchum, Jr.............................. 103,334 2.6% 1.7%
Erich Fischer..................................... 15,000 .37% .25%
Lee Watson........................................ 33,333 0.8% .55%
William P. Jones.................................. 166,667 4.1% 2.8%
Richard W. Weachter............................... -0- -0- -0-
Max Herzog........................................ 408,000 10.1% 6.8%
SchlobPlatz 1
D-83684
Tegerrsee, Germany
All directors and executive officers as a group
(5) persons).................................... 2,830,002 70.6% 46.9%
</TABLE>

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

* After Offering Assumes 6,039,249 shares.

DESCRIPTION OF SECURITIES

GENERAL

Our authorized capital stock consists of 24,000,000 shares of common stock,
$.001 par value per share and 1,000,000 shares of preferred stock, $.001 par
value per share, the rights and preferences of which may be established from
time to time by our board of directors. As of December 1, 1999, there were
4,005,639 shares of our common stock issued and outstanding, and 33,610 shares
of our preferred stock outstanding.

The description of our securities are summaries and do not contain all the
information that may be important to you. For more complete information, you
should read our certificate of incorporation and all amendments, which are all
filed as exhibits to the registration statement of which this prospectus forms a
part.

COMMON STOCK

Holders of our common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders and there are no cumulative voting
rights. Accordingly, holders of a majority of the shares of our common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by our board of directors out of
funds legally available therefore, subject to any preferential dividend rights
of any outstanding shares of preferred stock. Upon the liquidation, dissolution
or winding up of us, holders of our common stock are entitled to share in our
assets remaining after the payment of all liabilities and liquidation
preferences on any outstanding shares of preferred stock. Holders of our common
stock have no preemptive, subscription, redemption or conversion rights, and
there are no redemption or sinking fund provisions applicable to our common
stock. All outstanding shares of common stock are, and the shares offered by us
in this offering will be, when issued and paid for, duly authorized, validly
issued, fully paid and non-assessable. The rights, preferences and privileges of
holders of our common stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.

37
<PAGE>
PREFERRED STOCK

We have 33,610 shares of preferred stock outstanding. Our board of directors
has the authority, without stockholder approval, to issue up to an aggregate of
1,000,000 shares of preferred stock, in one or more series. The board may fix
the rights, preferences, privileges and restrictions of the shares of each
series, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, and to fix the number of shares
constituting any series and the designations of these series. These shares may
have rights senior to our common stock. The issuance of preferred stock may have
the effect of delaying or preventing a change of control of us. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to the holders of our common stock or could adversely affect the
rights and powers, including voting rights, of the holders of our common stock.
We have no present plans to issue any shares of preferred stock.

The holders of the issued and outstanding shares of preferred stock are
entitled to receive dividends only as declared on a discretionary basis by the
board of directors. Dividends, if any, payable on the preferred stock are in
preference to dividends payable on the common stock and are non-cumulative. The
holders of the outstanding preferred stock have a liquidation preference to
holders of our common stock, which is an amount equal to $7.50 per share plus
any declared but unpaid dividends.

Two years after the date we issued our preferred stock, we may elect to
redeem the outstanding preferred stock by paying the amount of the liquidation
preference. Our outstanding preferred stock is automatically converted, on a
one-for-one basis, in the event that we conduct and underwritten public offering
of our common stock equal to or greater than $11.25 per share and the amount of
the public offering exceeds $7,500,000. Holders of our outstanding preferred
stock have voting rights in parity with our common stockholders.

The holders of our outstanding preferred stock are entitled to piggyback
registration rights on any registration statement filed by us after this public
offering, subject to the right of our underwriters, in view of market
conditions, to reduce the number of shares proposed to be registered in our
subsequent public offerings. We have agreed to pay the expenses of two piggyback
registrations, exclusive of underwriting discounts and special fees of counsel
representing the selling shareholders. Expenses associated with any other
registrations are to be borne pro rata among the selling shareholders and us, if
we participate in the offering.

COMMON STOCK PURCHASE WARRANTS

We issued 33,610 common stock purchase warrants to our private placement
investors, which are exercisable for a five-year term at a price of $5.00 per
share of common stock. None of these warrants have been exercised as of the date
of this prospectus. These warrants include provisions requiring an adjustment in
the exercise price and the number in the event that we have a stock split,
recapitalization or a similar event that alters our outstanding capitalization.

THE UNDERWRITER'S WARRANTS

In connection with the offering, we have agreed to issue and sell to the
representative and/or its designees, at the closing of this offering, for
nominal consideration, five year warrants to purchase 200,000 shares of common
stock. The representative's warrants are exercisable at any time during a period
of four years commencing at the beginning of the second year after their
issuance and they are exercisable at a price that is equal to 165% of the
initial public offering price of the common stock in this offering. The shares
of common stock issuable upon exercise of the representative's warrants are
identical to those offered to the public. The representative's warrants contain
anti-dilution provisions providing for adjustment of the number of securities
issuable upon the exercise of the warrants under certain circumstances,
including stock dividends, stock splits, mergers, acquisitions and
re-capitalization's. The holders of the

38
<PAGE>
representative's warrants will have no voting, dividend or other stockholder
rights with respect to the warrants.

We have agreed to provide the holders of the representative's warrants
certain registration privileges. During the four year period beginning one year
after the effective date of our registration statement, we have agreed to use
our best efforts to register, on one occasion, all of the representative's
warrants and all of the common stock to be issued upon exercise of the
representative's warrants, when and if requested by the representative. Our
agreement includes granting to the representative a one-time demand registration
right covering the common stock during the four year period and maintaining the
effectiveness of the registration statement for at least nine months, at our
sole expense, except for commissions and selling brokers' costs. In addition to
this one time demand registration right, we agreed to piggyback registration
rights if requested by the representative, during the term of the
representative's warrants, to include in our registration statement next filed,
the shares of common stock underlying the representative's warrants for
registration, and to maintain a current registration statement covering those
shares for a 12 month period.

TRANSFER AGENT AND REGISTRAR

We intend to make application to appoint American Stock Transfer & Trust
Company, New York, New York as our transfer agent and registrar.

39
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for any of our
securities and there can be no assurance that a significant public market for
any of our securities will be developed or sustained after this offering. Sales
of substantial amounts of our common stock in the public market after this
offering, or the possibility of those sales occurring could adversely affect the
prevailing market price for our securities and our ability to raise equity
capital in the future.

Upon completion of this offering, there will be 6,305,639 shares of our
common stock outstanding, assuming the full exercise of the underwriter's
over-allotment option. The 2,000,000 shares of common stock being offered by
this prospectus, plus the 300,000 shares of our common stock if the
overallotment option is exercised, will be freely tradable without restriction
under the Securities Act, unless purchased by an affiliate of ours, as that term
is defined under the rules and regulations of the Securities Act, which will be
subject to the resale limitations of Rule 144 under the Securities Act.

The remaining 4,005,639 shares of our common stock are considered
"restricted securities" as defined in Rule 144. These shares were issued in
private transactions and have not been registered under the Securities Act and,
therefore, may not be sold unless registered under the Securities Act or sold
pursuant to an exemption from registration, such as the exemption provided by
Rule 144.

In general, under Rule 144, beginning 90 days after the completion of this
offering, a person, or persons whose shares are aggregated, who has beneficially
owned restricted shares for at least one year, including the holding period of
any prior owner who is not an affiliate of ours, would be entitled to sell
within any three-month period, a number of shares that does not exceed the
greater of:

- one percent, or approximately 600,000 shares following this offering, of
the number of shares of our common stock then outstanding; or

- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.

Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and to the availability of current public information about us.

Under Rule 144(k), a person who is not deemed to have been an affiliate of
ours at any time during the 90 days preceding a sale, and who has beneficially
owned the shares for at least two years, including the holding period of any
prior owner who is not an affiliate of ours, would be entitled to sell those
shares under Rule 144(k) without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

Beginning 90 days after the completion of this offering, shares of common
stock issuable upon exercise of options granted by us prior to the effective
date of the registration statement will be eligible for sale in the public
market pursuant to Rule 701 under the Securities Act, subject to the lock-up
agreements described below. In general, Rule 701 permits re-sales of shares
issued under certain compensatory benefit plans commencing 90 days after the
issuer becomes subject to the reporting requirements of the Securities Exchange
Act in reliance upon Rule 144, but without compliance with restrictions,
including the holding period requirements, contained in Rule 144.

Our existing stockholders, our executive officers and directors, have agreed
that, for a period of 12 months from the completion of this offering, they will
not, without the prior written consent of Nutmeg Securities, Ltd.:

offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock.

40
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the form
of which is filed as an exhibit to the registration statement filed with the
Commission of which this prospectus is a part, the underwriters named below,
severally and not jointly, have agreed through Nutmeg Securities, Ltd. as the
representative of the underwriters, to purchase from us, and we have agreed to
sell to the underwriters, the aggregate number of shares set forth opposite
their respective names:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
Nutmeg Securities, Ltd......................................
Total:.................................................. 2,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters under that agreement are subject to certain conditions precedent,
including the absence of any material adverse change in our business and the
receipt of certain certificates, opinions and letters from our counsel and our
independent public accountants. The underwriters are committed to take and to
pay for all of the shares offered hereby, if any are purchased. In the event of
a default by any of the underwriters, the purchase commitments of the
non-defaulting underwriters may be increased or the underwriting agreement may
be terminated.

The underwriters will offer the shares to the public at the public offering
price set forth on the cover page of this prospectus. The underwriters may allow
some dealers concessions of not more than $ per share. The underwriters also
may allow, and those dealers may re-allow, a concession of not more than $ per
share to some other dealers. The public offering price, concessions, and
re-allowances may be changed after the completion of this offering.

We granted to the underwriters an option, exercisable within 45 days after
the effective date of the registration agreement, to purchase up to an
additional 300,000 shares of common stock at the initial public offering price
less the underwriting discounts and non-accountable expenses allowance. The
underwriters may exercise this option only to cover over-allotments, if any. If
any shares and/or warrants are purchased pursuant to this option, the
underwriters will severally purchase the shares and/or warrants in approximately
the same proportion as set forth above.

We agreed to indemnify the underwriters and their controlling persons
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments the underwriters and their controlling persons may be
required to make in respect thereof.

We also agreed to pay to the representative, a non-accountable expense
allowance equal to three percent of the gross proceeds of this offering, $25,000
of which has been paid to date.

We also agreed to pay all expenses in connection with qualifying the
securities under the laws of those states that the representative may designate,
including fees and expenses of counsel retained for these purposes by the
representative, and the costs and expenses in connection with qualifying the
offering with the National Association of Securities Dealers, Inc.

The representative of the underwriters has informed us that the underwriters
do not expect sales of the shares offered by this prospectus to be made to
discretionary accounts to exceed five percent of the total number of shares
offered.

41
<PAGE>
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock.

We have agreed to issue and sell to the representative of the underwriters
and/or its designees, for nominal consideration, five-year warrants to purchase
200,000 shares of our common stock. The representative's warrants are
exercisable for a period of four years commencing one-year after the date of
issuance at a price equal to 165% of the initial public offering price per share
of common stock. The representative's warrants contain anti-dilution provisions
providing for adjustments of the exercise price and the number of shares
issuable upon exercise, upon the occurrence of certain events, including stock
dividends, stock splits, and recapitalizations. The representative's warrants
contain certain demand and piggyback registration rights relating to the shares
of common stock issuable thereunder. For the life of the representative's
warrants, the representative will have the opportunity to profit from a rise in
the market price of our shares of common stock. The representative's warrants
are restricted from sale, transfer, assignment or hypothecation for the one year
period from the date of this prospectus, except to officers or partners of the
underwriters and members of the selling group and/or their officers or partners.

We agreed to grant the representative a right of first refusal to act as
underwriter, placement agent or investment banker for a period of 12 months
after the completion of this offering for any sale of securities made by us in
transactions which are valued equal to or greater than $5,000,000 in the
aggregate.

We agreed that for two years from the completion of this offering, the
representative may designate Daniel F. Guilfoile of Nutmeg Securities, Ltd. as
an observer to the board of directors. This observer will have no voting
privileges as a director but will be entitled to receive notice of our
directors' meetings and a right to receive information considered by our board.
The representative has not yet exercised this right to designate this observer.
We have agreed to reimburse the board observer for all out-of-pocket expenses
incurred in connection with the observer's attendance at meetings of our board
of directors.

Prior to this offering, there has been no public market for any of our
securities. The initial public offering price of the shares offered hereby will
be determined by negotiations between the representative and us. Among the
factors considered in determining the price, include the prevailing market
conditions, including the history of and the prospects for the industry in which
the company competes, an assessment of our management, our prospects, and our
capital structure. The offering price does not necessarily bear any relationship
to our assets, results of operations or net worth. There can be no assurance
that an active trading market will develop for any of the securities offered by
this prospectus, or that such securities will trade in the public market at or
above the initial public offering price.

The representative, on behalf of the underwriters, may engage in
over-allotments, stabilizing transactions, syndicate covering transactions and
penalty bids. An over-allotment involves syndicate sales in excess of this
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the shares of common stock and/or warrants
being offered so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the shares of common stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representative to reclaim a
selling concession from a syndicate member when the shares of common stock and
warrants originally sold by the syndicate member are purchased in a syndicate
covering transaction and penalty bids may cause the price of the shares of
common stock to be higher than it would otherwise be in the absence of such
transactions. These transactions may be effected on the Nasdaq National Market
System or otherwise, and if commenced, may be discontinued at any time. In
addition, the underwriters may engage in passive market making transactions in
our securities on the Nasdaq National Market System in accordance with Rule 103
of Regulation M. Neither the underwriters nor we make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the securities offered by this
prospectus.

Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of our securities offered
in this prospectus. These actions include purchasing the securities to cover
some or all of a short position of any of the securities maintained by the
representative and the imposition of penalty bids.

42
<PAGE>
LEGAL MATTERS

The validity of the shares of common stock being offered by this prospectus
will be passed upon for us by Gregory Bartko, Esq., of the Law Offices of
Gregory Bartko, Atlanta, Georgia, and Lynch Rowin Novack Burnbaum & Crystal,
P.C., New York, New York our legal counsel. Certain legal matters will be passed
upon for the underwriters by Gersten, Savage & Kaplowitz, LLP, New York, New
York.

EXPERTS

Our financial statements as of November 30, 1998 and for the year ended
November 30, 1998 included in this prospectus have been so included in reliance
on the report of Daszkal, Bolton & Manela, Certified Public Accountants, A
Partnership of Professional Associations, Boca Raton, Florida independent
auditors, given on the authority of such firm as experts in auditing and
accounting.

Our financial statements as of November 30, 1997 and for the year ended
November 30, 1997 included in this prospectus have been so included in reliance
on the report of Lee Watson, CPA, an independent auditor, of Nashville,
Tennessee.

The financial statements for Advertising That Works, Inc., 1199 MAC, Inc.
d/b/a Magnum Digital Services, Inc., and Display Arts, Inc. for the two year
period ended December 31, 1998 included in this prospectus have been so included
in reliance on the report of Daszkal, Bolton & Manela, Certified Public
Accountants, A Partnership of Professional Associations, Boca Raton, Florida
independent auditors, given on the authority of such firm as experts in auditing
and accounting.

The financial statements for Stonehouse Graphics (Pty), Ltd. for the
two-year period ended February 28, 1998 and 1999 included in this prospectus
have been so included in this prospectus in reliance on the report of Snyders &
Co., Chartered Accounts S.A., independent public accountants, given on the
authority of such firm as experts in auditing and accounting.

The financial statements for Top Copy CC for the one-year period ended
February 28, 1999 included in this prospectus have been so included in this
prospectus in reliance on the report by H J Hugo and Associates, Chartered
Accountants S.A., independent public accountants, given on the authority of such
firm as experts in auditing and accounting.

The financial statements for the Virtual Color Group for the one-year period
ended February 28, 1999 included in this prospectus have been so included in
this prospectus in reliance on the report by PricewaterhouseCoopers, independent
public accountants, given on the authority of such firm as experts in auditing
and accounting.

43
<PAGE>
COLORSMART.COM, INC.
F/K/A COLORSMART, INC.

FINANCIAL STATEMENTS

YEAR ENDED NOVEMBER 30, 1998

AND FROM

FEBRUARY 2, 1997 (INCEPTION) TO NOVEMBER 30, 1997

F-1
<PAGE>
TABLE OF CONTENTS

Independent Auditor's Report................................ F-3 - F-4

Financial Statements:

Balance Sheets as of November 30, 1998 and 1997, and
unaudited for the Nine Months Ended August 31, 1999 and
1998...................................................... F-5

Statements of Operations for the Year Ended November 30,
1998, the period from February 2, 1997 (inception) to
November 30, 1997, and unaudited for the Nine Months Ended
August 31, 1999 and 1998.................................. F-6

Statements of Changes in Stockholders' Equity for the Year
Ended November 30, 1998, the period from February 2, 1997
(inception) to November 30, 1997, and unaudited for the
Nine Months Ended August 31, 1999 and 1998................ F-7

Statements of Cash Flows for the Year Ended November 30,
1998, the period from February 2, 1997 (inception) to
November 30, 1997, and unaudited for the Nine Months Ended
August 31, 1999 and 1998.................................. F-8

Notes to Financial Statements............................... F-9 - F-14
</TABLE>

F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Colorsmart.com, Inc.

We have audited the accompanying balance sheet of Colorsmart.com, Inc.
(f/k/a Colorsmart, Inc.) as of November 30, 1998, and the related statement of
operations, changes in stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 Colorsmart.com, Inc., as of
November 30, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

/s/ DASZKAL BOLTON MANELA DEVLIN & CO.

Boca Raton, Florida
May 21, 1999

F-3
<PAGE>
CERTIFIED PUBLIC ACCOUNTANT
3822 WHITLAND AVENUE
NASHVILLE, TENNESSEE 37205
615-383-2650

ACCOUNTANTS' AUDIT REPORT

THE BOARD OF DIRECTORS
COLORSMART, INC.

I have audited the accompanying balance sheet of ColorSmart, Inc. as of
November 30, 1997, and the related statement of operations, changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ColorSmart, Inc. as of
November 30, 1997 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.

/s/ LEE WATSON
------------------------------------------------------------------------------
Lee Watson
Certified Public Accountant

Nashville, Tennessee
February 6, 1998

F-4
<PAGE>
COLORSMART.COM, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30, AUGUST 31,
1998 1997 1999 1998
------------ ------------ ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash........................................ $ 408 $ 33,529 $ 3,903 $ 42,708
Accounts receivable......................... 10,910 -- -- 8,000
Inventories................................. 15,500 7,765 17,000 13,000
Loans receivable -- other................... -- -- -- --
--------- -------- ---------- ---------
Total current assets...................... 26,818 41,294 20,903 63,708
--------- -------- ---------- ---------
Property and equipment, net:.................. 268,729 193,735 447,691 243,601
--------- -------- ---------- ---------
Other Assets:
Security deposits........................... 3,875 250 51,530 3,875
Acquisition Costs........................... -- -- 301,535 --
--------- -------- ---------- ---------
Total other assets........................ 3,875 250 353,065 3,875
--------- -------- ---------- ---------
Total Assets.............................. $ 299,422 $235,279 $ 821,659 $ 311,184
========= ======== ========== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................ $ 3,000 $ 65,204 $ -- $ --
Checks outstanding in excess of bank
balance................................... 8,410 -- -- --
Accrued expenses............................ 12,630 1,960 4,329 5,255
Current maturities of notes payable......... 3,489 3,000 116,690 13,119
Current maturities of capital leases........ 7,566 -- 73,757 --
Notes payable, stockholder.................. 78,005 7,500 73,548 40,261
--------- -------- ---------- ---------
Total current liabilities................. 113,100 77,664 268,324 58,635
--------- -------- ---------- ---------
Note payable, net of current portion........ 10,174 13,602 -- --
Capital lease obligations, net of current
portion................................... 35,430 -- 37,154 --
--------- -------- ---------- ---------
Total long term liabilities............... 45,604 13,602 37,154 --
--------- -------- ---------- ---------
Stockholders' equity:
Common stock, $.001 par value; authorized
24,000,000 shares; 3,326,583 and 2,452,288
shares issued and outstanding in 1998 and
1997, respectively........................ 3,329 2,492 4,006 3,329
Preferred stock, $.001 par value; authorized
1,000,000 shares, 0 shares issued and
outstanding............................... -- -- -- --
Additional paid-capital..................... 531,952 228,165 1,267,733 539,222
Accumulated deficit......................... (394,563) (86,644) (755,558) (290,002)
--------- -------- ---------- ---------
Total stockholders' equity................ 140,718 144,013 516,181 252,549
--------- -------- ---------- ---------
Total liabilities and stockholders'
equity.................................. 299,422 235,279 821,659 311,184
========= ======== ========== =========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>
COLORSMART.COM, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FEBRUARY 2, 1997 NINE MONTHS ENDED
YEAR ENDED (INCEPTION) AUGUST 31,
NOVEMBER 30, TO NOVEMBER 30, -----------------------
1998 1997 1999 1998
------------ ---------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.................................. $ 127,191 $ 513 $ 57,351 $ 98,856
Costs of goods sold........................ 63,886 -- 19,927 48,997
---------- ---------- ---------- ----------
Gross profit............................... 63,305 513 37,424 49,859
General and administrative expenses........ 370,304 87,157 388,459 253,595
---------- ---------- ---------- ----------
Loss from operations....................... (306,999) (86,644) (351,035) (203,736)
---------- ---------- ---------- ----------
Other income (expense):
Interest income.......................... 1,140 -- -- 1,117
Interest expense......................... (2,060) -- (9,960) (739)
---------- ---------- ---------- ----------
Total other income (expense)........... (920) -- (9,960) 378
---------- ---------- ---------- ----------
Net loss................................... $ (307,919) $ (86,644) $ (360,995) $ (203,358)
========== ========== ========== ==========
Net loss per share (basic and diluted)..... $ (0.10) $ (0.04) $ (0.10) $ (0.07)
---------- ---------- ---------- ----------
Weighted average common shares
outstanding.............................. 2,956,787 2,492,288 3,455,023 2,956,787
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>
COLORSMART.COM, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 1, 1996................ -- $ -- $ -- $ -- $ --
Common stock issued...................... 2,492,288 2,492 228,165 -- 230,657
Net loss - 1997.......................... -- -- -- (86,644) (86,644)
--------- ------ --------- --------- ---------
Balance, November 30, 1997............... 2,492,288 2,492 228,165 (86,644) 144,013
Issuance of common stock................. 836,295 837 357,382 -- 358,219
Stock issuance costs..................... -- -- (53,595) -- (53,595)
Net loss - 1998.......................... -- -- -- (307,919) (307,919)
--------- ------ --------- --------- ---------
Balance, November 30, 1998............... 3,328,583 $3,329 $ 531,952 $(394,563) $ 140,718

(UNAUDITED):
Issuance of common stock................. 677,056 677 850,848 -- 851,525
Stock issuance cost...................... -- -- (115,067) -- (115,067)
Net loss - August 31, 1999............... -- -- -- (360,995) (360,995)
--------- ------ --------- --------- ---------
Balance, August 31, 1999................. 4,005,639 4,006 1,267,733 (755,558) 516,181
========= ====== ========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE>
COLORSMART.COM, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FEBRUARY 2, 1997 NINE MONTHS ENDED
YEAR ENDED (INCEPTION) AUGUST 31,
NOVEMBER 30, TO NOVEMBER 30 -----------------------
1998 1997 1999 1998
------------- ----------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................. $ (307,919) $ (86,644) $ (360,995) $ (203,358)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization........ 55,367 -- 26,000 36,911
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................. (10,910) -- 10,910 (8,000)
Inventory............................ (7,735) (7,765) (1,500) (5,235)
Security deposits.................... (3,625) (250) (47,655) (3,625)

Increase (decrease) in:
Accounts payable..................... (62,204) 65,205 (3,000) (65,204)
Accrued expenses..................... 10,670 1,960 (8,301) 3,295
Checks in excess of bank balances.... 8,410 -- (8,410) --
---------- ---------- ---------- ----------
Net cash used by operating activities...... (317,946) (27,494) (392,951) (245,216)
---------- ---------- ---------- ----------

Cash flows from investing activities:
Acquisition costs.................... -- -- (301,535) --
Purchase of property and equipment... (86,778) (177,132) (204,962) (86,776)
---------- ---------- ---------- ----------
Net cash used by investing activities...... (86,778) (177,132) (506,497) (86,776)
---------- ---------- ---------- ----------

Cash flows from financing activities:
Issuance of common stock, net........ 304,625 230,655 736,458 311,894
Repayment of capital leases.......... (587) -- -- --
Proceeds from capital leases......... -- -- 67,915 --
Repayment of note payable............ (2,940) (1,397) -- (3,484)
Borrowings of notes payable.......... -- 1,397 103,027 --
Increase (decrease) in stockholder
loan............................... 70,505 7,500 (4,457) 32,761
---------- ---------- ---------- ----------
Net cash provided by financing
activities:.............................. 371,603 238,155 902,943 341,171
---------- ---------- ---------- ----------

Net increase (decrease) in cash............ (33,121) 33,529 3,495 9,179

Cash at beginning of period................ 33,529 -- 408 33,529
---------- ---------- ---------- ----------
Cash at end of period...................... $ 408 $ 33,529 $ 3,903 $ 42,708
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-8
<PAGE>
COLORSMART.COM, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS

Colorsmart.com, Inc. (the "Company") specializes in digital imaging, the
sale of stock photographic images and large format digital printing. The Company
is focusing on Internet commerce, but also provides textile-printing services.
Customers are primarily wholesale to the trade. The Company has been in this
business since 1997. Prior to its formation as a corporation, the Company
existed as a partnership that began on February 2, 1997.

On December 28, 1998, the Company changed its name from Colorsmart, Inc., to
Colorsmart.com, Inc.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are being depreciated using
the straight-line method, one half years over the estimated useful lives of
three to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful life
of the asset. Depreciation expense includes the amortization of capital lease
assets.

USE OF ESTIMATES

The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.

REVENUE RECOGNITION

Generally, revenues from sales of products are recognized when products are
shipped.

INVENTORY

Inventory consists primarily of materials used in the digital printing
process, and is stated at the lower of cost or market, with cost determined on
the first-in, first-out (FIFO) method.

ADVERTISING COSTS

Advertising costs are expensed as incurred. The Company incurred
approximately $5,700 in advertising costs during the year ended November 30,
1998.

UNAUDITED INTERIM INFORMATION

The information presented as of August 31, 1999 and 1998, and for the
nine-month periods ended August 31, 1999 and 1998, has not been audited. In the
opinion of management, the unaudited interim financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of August 31, 1999 and 1998,
and the results of its operations and its cash flows for the nine months ended
August 31, 1999 and 1998, and the stockholder's equity for the nine months ended
August 31, 1999.

F-9
<PAGE>
COLORSMART.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Software............................................... $ 9,139 $ 9,139
Leasehold improvements................................. 5,100 --
Equipment.............................................. 285,847 160,586
Automobile............................................. 24,010 24,010
--------- --------
Total property and equipment....................... $ 324,096 $193,735
Less: accumulated depreciation......................... 55,367 --
--------- --------
Property and equipment, net........................ $ 268,729 $193,735
========= ========
</TABLE>

Depreciation expense for the year ended November 30, 1998 was $55,367.

NOTE 4--RELATED PARTY TRANSACTIONS

At November 30, 1998, the Company had an outstanding payable to a
stockholder in the amount of $78,005, payable on demand.

The transactions involving the stockholder/officer are summarized below:

<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Balance at December 1, 1997............................ $ 7,500 $ --
Advances to company.................................... 580,975 7,500
Repayment to stockholder/officer....................... (510,470) --
--------- --------
Balance at November 30, 1998........................... $ 78,005 $ 7,500
========= ========
</TABLE>

NOTE 5--NOTE PAYABLE

The Company has an automobile note payable with a bank requiring monthly
payments of $379 through May 2002. The loan accrues interest at 8.75% and is
collateralized by the automobile.

<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Note payable........................................... $ 13,663 $ 16,602
Less: current portion.................................. (3,489) (3,000)
--------- --------
Total.............................................. $ 10,174 $ 13,602
========= ========
</TABLE>

F-10
<PAGE>
COLORSMART.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--NOTE PAYABLE (CONTINUED)

Maturities of notes payable are as follows:

<TABLE>
<CAPTION>
YEARS ENDED
NOVEMBER 30,
- ------------
<S> <C>
1999........................................................ $ 3,489
2000........................................................ 3,807
2001........................................................ 4,154
2002........................................................ 2,213
--------
Total................................................... $ 13,683
========
</TABLE>

NOTE 6--LEASE COMMITMENTS

Certain non-cancelable leases are classified as capital leases, and the
leased assets are included as part of "Property and equipment." Other leases are
classified as operating leases and are not capitalized. Details of the
capitalized leased assets are as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Equipment................................................ $ 43,584 $ --
Less: accumulated amortization........................... (4,358)
-------- -------
Total................................................ $ 39,226 $ --
======== =======
</TABLE>

The Company leases it's facility under an operating lease with a term of
three years, payable in monthly installments. Total lease expense for the year
ended November 30, 1998 was $38,454.

At November 30, 1998, the future minimum lease payments under operating and
capital leases are as follows:

<TABLE>
<CAPTION>
YEARS ENDED CAPITAL OPERATING
NOVEMBER 30, LEASES LEASES
- ------------ -------- ---------
<S> <C> <C>
1999..................................................... $ 14,331 $42,000
2000..................................................... 13,724 42,000
2001..................................................... 11,904 14,000
2002..................................................... 11,904 --
2003..................................................... 11,904 --
-------- -------
Total minimum lease payments............................. $ 63,767 $98,000
=======
Less: amount representing interest....................... (20,771)
--------
Present value of net minimum lease payments.............. 42,996
Less: current maturities................................. (7,566)
--------
Long-term obligation................................... $ 35,430
========
</TABLE>

F-11
<PAGE>
COLORSMART.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--STOCKHOLDERS EQUITY

COMMON STOCK ISSUED FOR CASH

During the year ended November 30, 1998, the Company issued 836,295 shares
(after reverse split) of common stock. The price of the stock ranged from $0.10
per share to $1.00 per share. The total amount obtained from the issuance of
these common shares was $304,624, net of $53,595 cost of issuance.

Subsequent to November 30, 1998, the company issued 173,950 shares of common
stock through a Regulation D offering, and issued an additional 503,106 shares
of common stock to date. The total amount obtained from the issuance of these
shares was $964,664 net of $113,817 cost of issuance.

REVERSE STOCK SPLIT

On December 28, 1998, the Company's Board of Directors authorized a 1-for-3
reverse stock split effective December 28, 1998, for stockholders on record on
December 28, 1998. This resulted in a reduction in the number of shares of
common stock.

NOTE 8--CONCENTRATION OF CREDIT RISK

The Company maintains its cash in what it believes to be credit worthy
financial institutions. The balances, at times, may exceed federally insured
limits. At November 30, 1998, the Company was within the insured limit. The
Company routinely assesses the financial strength of its customers and, as a
consequence, believes its trade accounts receivable exposure is limited.

NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company's financial instruments approximates the
fair market value, due to their short-term maturities and interest rates.

NOTE 10--INCOME TAXES

Deferred income taxes (benefits) are provided for certain income and
expenses, which are recognized in different periods for tax and financial
reporting purposes. There are no significant temporary or permanent differences
between the financial statement income and taxable income. Sources of temporary
differences and the resulting tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DEFERRED TAX
ASSETS
------------
<S> <C>
Net operating loss carryforwards............................
Federal and State......................................... $ 307,919
Applicable tax rate (34% Federal, 6% State)................. 40%
123,167
Valuation allowance......................................... $(123,167)
---------
Amount per balance sheet.................................... $ --
=========
</TABLE>

F-12
<PAGE>
COLORSMART.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--INCOME TAXES (CONTINUED)

The provision (benefit) for income taxes consist of the following:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current................................................. $ -- $ --
Deferred................................................ $ -- $ --
</TABLE>

The Company has a net operating loss carryover of $307,919, which expires in
2013. The Company existed as a partnership prior to its reorganization as a
corporation on November 30, 1997. Therefore, no provision for income taxes has
been made for the period ended November 30, 1997.

NOTE 11--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The following is supplemental information of cash flow information for the
periods ended November 30, 1998 and the period February 2, 1997 (inception)
through November 30, 1997.

<TABLE>
<CAPTION>
NINE MONTHS
FEBRUARY 2, ENDED
1997 AUGUST 31,
YEAR ENDED (INCEPTION) (UNAUDITED)
NOVEMBER 30, TO NOVEMBER 30, -------------------
1998 1997 1999 1998
------------ --------------- -------- --------
<S> <C> <C> <C> <C>
Cash paid during the year for:
Interest.......................................... $ 2,060 $ -- $9,960 $739
------- ------- ------ ----
Non cash transactions affecting investing and
financing activities:
Equipment acquired under capital lease............ $43,584 $ -- $ -- $ --
------- ------- ------ ----
Equipment acquired under note payable............. $ -- $16,603 $ -- $ --
------- ------- ------ ----
</TABLE>

NOTE 12--MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS

As shown in the accompanying financial statements, the Company incurred a
net loss of $307,919 during the year ended November 30, 1998. The ability of the
Corporation to continue as a going concern is dependent on the successful
completion of the Company's initial public offering or raising additional
capital. The financial statements do not include any adjustments that might be
necessary if the Corporation is unable to continue as a going concern. The
Company has completed a private placement and raised $964,664 as of May 31,
1999.

NOTE 13--ACQUISITIONS

The Company has entered into ten (10) separate agreements to acquire
unrelated corporations within the printing industry. These acquisitions are
contingent upon the successful completion of the Company's initial public
offering, which is planned for fiscal year ending 1999. There can be no
assurance that the initial public offering will be successful, which would
materially adversely affect the Company's ability to close these acquisitions.

In September 1998, the Company executed a definitive agreement to purchase
all of the outstanding common shares of Advertising That Works, Inc. As
consideration, the Company will pay $1,500,000 in cash to the shareholder of
Advertising That Works, Inc. The acquisition will be accounted for as a purchase
and

F-13
<PAGE>
COLORSMART.COM, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 13--ACQUISITIONS (CONTINUED)

the results of operations will be included in the consolidated financial
statements beginning with the date of closing.

Additionally in September 1998, the Company executed an agreement to
purchase all of the common stock of Magnum Digital Services Corporation. As
consideration, the Company will pay $775,000 in cash and issue 66,667 shares of
Colorsmart.com, Inc., common stock. The value of the stock will be determined
when the transaction is closed and is contingent on the Company successfully
completing the initial public offering. In addition, approximately $275,000 of
the cash will be used to reduce the outstanding liabilities of Magnum Digital
Services. The acquisition will be accounted for as a purchase and the results of
operations and goodwill will be included in the consolidated financial
statements beginning with the date of closing.

In October 1998, the Company entered into an agreement to purchase all of
the common stock of Stonehouse Graphics (Pty), Ltd., a South African graphics
printing company. In consideration, the Company will pay approximately
$2,500,000 and is contingent upon the successful completion of the initial
public offering. Approximately $816,992 of the cash paid to acquire Stonehouse
Graphics will be used to retire certain liabilities of Stonehouse Graphics. The
acquisition will be accounted for as a purchase and the results of operations
and goodwill will be included in the consolidated financial statements beginning
with the date of closing.

In May 1999, the Company agreed to purchase Top Copy CC, a South African
printing company for approximately $430,000 in cash of which approximately
$30,000 will be used to pay off Top Copy CC's outstanding liabilities and is
contingent upon the initial public offering. The acquisition will be accounted
for as a purchase and the results of operations and goodwill will be included in
the consolidated financial statements at the date of closing.

In June 1999, the Company agreed to acquire Display Arts, Inc., for
approximately $1,300,000 of which approximately $300,000 will be used to retire
the outstanding liabilities of Display Arts, Inc., the purchase will be
contingent upon the successful initial public offering. The acquisition will be
accounted for as a purchase and the results of operations and goodwill will be
included in the consolidated financial statements at the date of closing.

In 1999 the Company agreed to purchase Jamberry Lake Digital Media, Inc.,
for approximately $1,000,000 and is contingent upon the successful completion of
the initial public offering. The acquisition will be accounted for as a purchase
and the results of operations and goodwill will be included in the consolidated
financial statements at the date of closing.

In 1999 the Company agreed to purchase Virtual Colour Group, Pty (Limited)
for approximately $1,800,000 and is contingent upon the successful completion of
the initial public offering. The acquisition will be accounted for as a purchase
and the results of operations and goodwill will be included in the Consolidated
Financial Statements at the date of closing.

F-14
<PAGE>
1199 MAC, INC.

D/B/A MAGNUM DIGITAL SERVICES

FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997

F-15
<PAGE>
TABLE OF CONTENTS

Independent Auditor's Report................................ F-17

Financial Statements:

Balance Sheets as of December 31, 1998 and 1997 and
unaudited at August 31, 1999 and 1998................... F-18

Statements of Operations for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-19

Statements of Changes in Stockholder's Equity (Deficit)
for the Years Ended December 31, 1998 and 1997 and
unaudited for the eight months ended August 31, 1999 and
1998.................................................... F-20

Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-21

Notes to Financial Statements............................... F-22 - F-24
</TABLE>

F-16
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
1199 MAC, Inc.
d/b/a Magnum Digital Services
Coconut Creek, Florida

We have audited the accompanying balance sheets of 1199 MAC, Inc. d/b/a
Magnum Digital Services as of December 31, 1998 and 1997, and the related
statements of operations, changes in stockholder's equity (deficit) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of 1199 MAC, Inc. d/b/a Magnum
Digital Services, as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ DASZKAL BOLTON MANELA DEVLIN & CO.

Boca Raton, Florida
April 2, 1999

F-17
<PAGE>
1199 MAC, INC.

D/B/A MAGNUM DIGITAL SERVICES

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
------------------------- -------------------------
1998 1997 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash..................................... $ 3,942 $ 7,132 $ 2,919 $ 12,786
Accounts receivable...................... 71,614 138,021 53,348 74,457
Inventories.............................. 8,000 8,000 -- 8,000
----------- ----------- ----------- -----------
Total curent assets.................... 83,556 153,153 56,267 95,243
----------- ----------- ----------- -----------
Property and equipment, net: .............. 287,258 422,819 221,971 337,957
----------- ----------- ----------- -----------
Other Assets:
Note receivable.......................... 12,538 3,558 12,538 11,429
Security deposits........................ 3,977 3,053 3,977 3,977
----------- ----------- ----------- -----------
Total other assets................... 16,515 6,611 16,515 15,406
----------- ----------- ----------- -----------
Total Assets........................... $ 387,329 $ 582,583 $ 294,753 $ 448,606
=========== =========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Obligations under capital leases......... $ 107,548 $ 101,863 $ 106,735 $ 116,607
Current maturities of long-term debt..... 4,538 1,217 32,330 13,543
Accounts payable......................... 138,200 36,505 174,462 111,544
----------- ----------- ----------- -----------
Total current liabilities.............. 250,286 139,585 313,527 241,694
----------- ----------- ----------- -----------
Obligations under capital leases........... 278,618 388,112 227,078 349,749
Long term debt............................. 5,247 -- 3,672 --
----------- ----------- ----------- -----------
Total long term debt................... 283,865 388,112 230,750 349,749
----------- ----------- ----------- -----------
Stockholders' equity (deficit):
Common stock, $1.00 par value; 7,000
shares authorized; 1,000 shares issued
and outstanding........................ 1,000 1,000 1,000 1,000
Additioal paid-in capital................ 1,854,050 1,701,178 1,952,341 1,739,768
Accumulated deficit...................... (2,001,872) (1,647,292) (2,202,865) (1,883,605)
----------- ----------- ----------- -----------
Total stockholders' equity (deficit)... (146,822) 54,886 (249,524) (142,837)
----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity............................... $ 387,329 $ 582,583 $ 294,753 $ 448,606
=========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-18
<PAGE>
1199 MAC, INC.

D/B/A MAGNUM DIGITAL SERVICES

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
------------------------- -------------------------
1998 1997 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.................................. $ 608,891 $ 459,947 $ 349,904 $ 431,618
Costs of goods sold........................ 454,976 331,884 273,483 302,476
----------- ----------- ----------- -----------
Gross profit............................... 153,915 128,063 76,421 129,142
----------- ----------- ----------- -----------
General and administrative expenses........ 484,325 468,181 258,126 349,157
Loss from operations....................... (330,410) (340,118) (181,705) (220,015)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 351 1,663 790 --
Interest expense (24,521) (40,476) (20,078) (16,298)
Loss on disposal of equipment............ -- (28,199) -- --
----------- ----------- ----------- -----------
Total other expense.................... (24,170) (67,012) (19,288) (16,298)
Loss before income taxes................... (354,580) (407,130) (200,993) (236,313)
Provision for income taxes................. -- -- -- --
----------- ----------- ----------- -----------
Net loss................................... $ (354,580) $ (407,130) $ (200,993) $ (236,313)
=========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-19
<PAGE>
1199 MAC, INC.

D/B/A/ MAGNUM DIGITAL SERVICES

STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
-------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997.................. 1,000 $1,000 $1,402,244 $(1,240,162) $ 163,082
Capital contribution...................... -- -- 298,934 -- 298,934
Net loss--1997............................ -- -- -- (407,130) (407,130)
----- ------ ---------- ----------- ---------
Balance, December 31, 1997................ 1,000 1,000 1,701,178 (1,647,292) 54,886
Capital contribution...................... -- -- 152,872 -- 152,872
Net loss--1998............................ -- -- -- (354,580) (354,580)
Balance, December 31, 1998................ 1,000 $1,000 $1,854,050 $(2,001,872) $(146,822)
UNAUDITED
Net loss--August 31, 1999................. -- -- -- (200,993) (200,993)
Capital contribution...................... -- -- 98,291 -- 98,291
----- ------ ---------- ----------- ---------
Balance--August 31, 1999.................. 1,000 $1,000 $1,952,341 $(2,202,865) $(249,524)
===== ====== ========== =========== =========
</TABLE>

See accompanying notes to financial statements.

F-20
<PAGE>
1199 MAC, INC.
D/B/A MAGNUM DIGITAL SERVICES

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
--------------------- ---------------------
1998 1997 1999 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss)..................................... $(354,580) $(470,130) $(200,993) $(236,313)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Depreciation and amortization.............. 152,097 147,399 68,288 101,398
Net loss on disposal of fixed assets....... -- 28,199 -- --
Changes in assets and liabilities:
(Increase) decrease in:
Inventory.................................. -- -- 8,000 --
Accounts receivable........................ 66,407 (138,021) 18,266 63,564
Notes receivable........................... (8,980) 57,906 -- (7,871)
Security deposits.......................... (924) -- -- (924)
Increase (decrease) in:
Accounts payable........................... 101,695 33,020 36,262 75,039
--------- --------- --------- ---------
Net cash (used) by operating activities.......... (44,285) (278,627) (70,177) (5,107)
--------- --------- --------- ---------

Cash flows from investing activities:
Purchase of property and equipment............. (2,961) (43,285) (3,000) (4,210)
--------- --------- --------- ---------

Cash flows from financing activities:
Capital contribution........................... 152,872 298,934 98,291 38,590
Repayment of capital leases.................... (103,809) -- (52,353) (23,619)
Proceeds from capital leases................... -- 32,152 -- --
Repayment of long-term debt.................... (5,007) (4,290) -- (1,199)
Proceeds from long-term debt................... -- -- 26,216 1,199
--------- --------- --------- ---------
Net cash provided by financing activities:....... 44,056 326,796 72,154 14,971
--------- --------- --------- ---------

Net increase (decrease) in cash.................. (3,190) 4,884 (1,023) 5,654

Cash at beginning of year........................ 7,132 2,248 3,942 7,132
--------- --------- --------- ---------

Cash at end of year.............................. $ 3,942 7,132 2,919 12,786
========= ========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-21
<PAGE>
MAGNUM DIGITAL SERVICES

NOTES TO FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS

1199 MAC, Inc. d/b/a Magnum Digital Services (the "Company") specializes in
large format digital printing worldwide. The Company also provides
textile-printing services. Customers are primarily wholesale to the trade. The
Company has been in this business since 1996.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are being depreciated using
the straight-line and accelerated methods over the estimated useful lives of two
to seven years. Leasehold improvements are stated at cost and are being
amortized over the lesser of the term of the lease or the estimated useful life
of the asset. Depreciation expense includes the amortization of capital lease
assets.

USE OF ESTIMATES

REVENUE RECOGNITION

Generally, revenues from sales of products are recognized when products are
shipped.

INVENTORY

Inventory consists primarily of materials used in the digital printing
process, and is stated at the lower of cost or market, with cost determined on
the first-in, first-out (FIFO) method.

NOTE 3--PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Equipment............................................. $ 27,517 $ 27,009
Equipment under capital lease......................... 137,987 619,560
Automobile............................................ 483,388 --
Total property and equipment........................ 16,190 13,321
--------- ---------
665,082 659,890
Less: accumlated depreciation......................... (377,824) (237,071)
--------- ---------
Property and equipment, net......................... $ 287,258 $ 422,819
========= =========
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1998
and 1997, was $152,097 and $147,399, respectively.

F-22
<PAGE>
MAGNUM DIGITAL SERVICES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--LEASE COMMITMENTS

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Equipment............................................... $483,388 $483,388
Less: accumulated amortization.......................... 260,154 130,022
-------- --------
Total................................................. $223,234 $353,366
======== ========
</TABLE>

The Company leases it's facility under an operating lease with a term of
three years, payable in monthly installments. Total lease expense for the years
ended December 31, 1998 and 1997, was $27,104 and $26,275, respectively.

At December 31, 1998, the future minimum lease payments under operating and
capital leases are as follows:

<TABLE>
<CAPTION>
YEARS ENDED CAPITAL OPERATING
DECEMBER 31, LEASESE LEASES
- ------------ -------- ---------
<S> <C> <C>
1999.................................................... $129,124 $28,188
2000.................................................... 113,099 29,316
2001.................................................... 112,379 --
2002.................................................... 77,342 --
-------- -------
$431,944 $57,504
======== =======
Total minimum lease payments
Less: amount reprsenting interest....................... 45,778
--------
Present value of net minimum lease payments............. 386,166
Less: current maturities................................ 107,548
--------
Long-term obligation.................................. $278,618
========
</TABLE>

NOTE 5--INCOME TAXES

The Company has an unused net operating loss carryforward of $1,910,044
available for use on its future corporate federal and state income tax returns.
The net operating loss carryforward originated from December 31, 1987 to
December 31, 1998. Expiration occurs from 2002 through 2013. The Company's
evaluation of the tax benefit of its net operating loss carryforward is
presented in the following table. The tax amounts have been calculated using the
34% federal and 5.5% state income tax rates.

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
DEFERRED TAX ASSET:
Tax benefit of net operating loss................... $ 754,467 $ 614,408
Less: valuation allowance........................... (745,467) (614,408)
--------- ---------
Deferred tax asset.................................... $ -- $ --
========= =========
</TABLE>

F-23
<PAGE>
MAGNUM DIGITAL SERVICES

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--LONG-TERM DEBT

Note payable of $9,785 consists of a note payable to Navy Federal Credit
Union with monthly payments of $420 including interest at 6.9% until
December 2000. An automobile secures this note.

Maturities of long-term debt are as follows:

NOTE 7--MANAGEMENT'S PLAN AND ACQUISITION

As shown in the accompanying financial statements, the Corporation incurred
a net loss of $354,580 during the year ended December 31, 1998, and $407,130 for
the year ended December 31, 1997. The ability of the corporation to continue as
a going concern is dependent on the Company being successfully acquired by
Colorsmart, Inc. The Company has entered into a stock and asset purchase
agreement with Colorsmart, Inc. Colorsmart shall deliver at closing the sum of
$500,000 to the sole shareholder, and Colorsmart will pay the balances due on
all outside equipment leases, not to exceed $275,000. Further, Colorsmart shall
also deliver 200,000 of Colorsmart ordinary shares to the sole shareholder of
1199 MAC, Inc. d/b/a Magnum Digital Services, Inc.

NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the year ended December 31, 1998 and
1997 is as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash payment for interest................................ $24,571 $ 40,476
------- --------
</TABLE>

Non-cash transactions affecting investing and financing activities:

<TABLE>
<S> <C> <C>
Equipment acquired under capital lease................... $ -- $205,561
======= ========
Refinancing of note payable.............................. $13,525 $ --
======= ========
</TABLE>

NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company's financial instruments approximates the
fair market value, due to their short-term maturities and interest rates.

F-24
<PAGE>
ADVERTISING THAT WORKS, INC.

FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997

F-25
<PAGE>
TABLE OF CONTENTS

Independent Auditor's Report................................ F-27

Financial Statements:

Balance Sheets as of December 31, 1998 and 1997 and
unaudited at
August 31, 1999 and 1998................................ F-28

Statements of Operations for the Years Ended December 31,
1998 and 1997 and
unaudited for the eight months ended August 31, 1999 and
1998.................................................... F-29

Statements of Changes in Stockholder's Equity for the
Years Ended December 31, 1998 and 1997 and unaudited
for the eight months ended August 31, 1999 and 1998..... F-30

Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-31

Notes to Financial Statements............................... F-32--F-33
</TABLE>

F-26
<PAGE>
[LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Advertising That Works, Inc.
East Point, Georgia

We have audited the accompanying balance sheets of Advertising That
Works, Inc. as of December 31, 1998 and 1997, and the related statements of
operations, changes in stockholder's equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Advertising That
Works, Inc. as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ DASZKAL BOLTON MANELA DEVLIN & CO.

Boca Raton, Florida
April 16, 1999

F-27
<PAGE>
ADVERTISING THAT WORKS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
DECEMBER 31, (UNAUDITED)
------------------- -------------------
1998 1997 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS

Current Assets:
Cash.............................................. $ 8,384 $ 9,231 $ 12,387 $ 16,438
Accounts receivable............................... 65,270 145,047 81,087 104,195
Inventories....................................... 47,085 -- 73,287 87,414
-------- -------- -------- --------

Total current assets............................ 120,739 154,276 166,761 208,047
-------- -------- -------- --------

Property and equipment, net......................... 25,357 6,522 27,800 4,523
-------- -------- -------- --------

Total Assets.................................... $146,096 $160,800 $194,561 $212,570
======== ======== ======== ========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current Liabilities:
Accounts payable.................................. $ 61,138 $ 49,270 $ 90,303 $102,174
Due to stockholder................................ 44,962 59,407 16,692 82,406
-------- -------- -------- --------

Total current liabilities....................... 106,100 108,677 106,995 184,580
-------- -------- -------- --------

Stockholder's equity:
Common stock, no par value; 100,000 shares
authorized; 500 shares issued and outstanding... 15,574 15,574 15,574 15,574
Retained earnings................................. 24,422 36,549 71,992 12,416
-------- -------- -------- --------

Total stockholder's equity.................... 39,996 52,123 87,566 27,990
-------- -------- -------- --------

Total liabilities and stockholder's equity.... $146,096 $160,800 $194,561 $212,570
======== ======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-28
<PAGE>
ADVERTISING THAT WORKS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEARS ENDED AUGUST 31,
DECEMBER 31, (UNAUDITED)
--------------------- -------------------
1998 1997 1999 1998
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net Sales.......................................... $967,275 $1,137,760 $535,082 $653,337
Costs of goods sold................................ 594,211 740,571 265,281 414,417
-------- ---------- -------- --------
Gross profit....................................... 373,064 397,189 269,801 238,920
-------- ---------- -------- --------
General and administrative expenses................ 390,438 292,118 223,609 259,274
Income (loss) from operations...................... (17,374) 105,071 46,192 (20,354)
-------- ---------- -------- --------
Other income (expense):
Interest Income.................................. 111 144 1,746 5,666
Miscellaneous income............................. 5,547 -- -- --
Interest expense................................. (411) (4,990) (368) (9,445)
-------- ---------- -------- --------
Total other income (expense)................... 5,247 (4,846) 1,378 (3,779)
-------- ---------- -------- --------
Net income (loss).................................. $(12,127) $ 100,225 $ 47,570 $(24,133)
======== ========== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-29
<PAGE>
ADVERTISING THAT WORKS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK RETAINED
------------------- -------------------
SHARES AMOUNT EARNINGS TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, January 1, 1997................................ 500 $15,574 $ -- $ 15,574
Shareholder distributions............................... 0 0 (63,676) (63,676)
Net income--1997........................................ -- -- 100,225 100,225
--- ------- -------- --------
Balance, December 31, 1997.............................. 500 15,574 36,549 52,123
Net loss--1998.......................................... -- -- (12,127) (12,127)
--- ------- -------- --------
Balance, December 31, 1998.............................. 500 15,574 24,422 39,996
UNAUDITED:
Net income, August 31, 1999............................. -- -- 47,570 47,570
--- ------- -------- --------
Balance, August 31, 1999................................ 500 $15,574 $ 71,992 $ 87,566
=== ======= ======== ========
</TABLE>

See accompanying notes to financial statements.

F-30
<PAGE>
ADVERTISING THAT WORKS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
-------------------- -------------------
1998 1997 1999 1998
-------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................. (12,127) 100,225 47,570 (24,133)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation.................................... 17,513 16,443 4,543 2,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable............................. 79,777 (145,047) (15,817) 40,852
Inventory....................................... (47,085) -- (26,202) (87,414)
Increase (decrease) in:
Accounts payable................................ 11,868 49,270 29,163 52,903
-------- --------- -------- --------
Net cash provided (used) by operating activities: 49,946 20,891 39,257 (15,792)
-------- --------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment................ (36,348) (22,965) (6,984) --
-------- --------- -------- --------
Cash flows from financing activities:
Shareholder advances.............................. -- 59,407 -- 22,999
Shareholder distributions......................... (14,445) (63,676) (28,270) --
Issuance of common stock.......................... -- 15,574 -- --
-------- --------- -------- --------
Net cash provided (used) by financing activities.... (14,445) 11,305 (28,270) 22,999
Net cash increase (decrease)........................ (847) 9,231 4,003 7,207
-------- --------- -------- --------
Cash, beginning of period........................... 9,231 -- 8,384 9,231
-------- --------- -------- --------
Cash, end of period................................. $ 8,384 $ 9,231 $ 12,387 $ 16,438
======== ========= ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest........................................ $ 411 $ 4,990 $ 368 $ 9,445
======== ========= ======== ========
</TABLE>

See accompanying notes to financial statements

F-31
<PAGE>
ADVERTISING THAT WORKS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS

Advertising That Works, Inc. (the "Company") specializes in finishing custom
and blank banners, screen and digital printing, worldwide. The Company derives a
majority of its revenue through the sale of materials and blank banners to
retail sign stores. Their customers are primarily wholesale to the trade.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

USE OF ESTIMATES

REVENUE RECOGNITION

Generally, revenues from sales of products are recognized when products are
shipped.

INVENTORY

Inventory consists primarily of materials used in the production of banners,
and is stated at the lower of cost or market, with cost determined on the
first-in, first-out (FIFO) method.

INCOME TAXES

Advertising That Works, Inc., with the consent of its' stockholder, has
elected to be taxed under S corporation provisions of the Internal Revenue Code.
Under these provisions, the taxable income of this entity is reflected by the
stockholder on his personal income tax return.

F-32
<PAGE>
ADVERTISING THAT WORKS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Leasehold improvements.................................. $ 595 $ --
Equipment............................................... 53,219 17,463
Automobile.............................................. 5,500 5,500
-------- --------
Total property and equipment.......................... 59,314 22,963
Less: accumulated depreciation.......................... (33,957) (16,441)
-------- --------
Property and equipment, net........................... $ 25,357 $ 6,522
======== ========
</TABLE>

Depreciation expense for the years ended December 31, 1998 and 1997 was
$17,513 and $16,443, respectively.

NOTE 4--ACQUISITION

The Company has entered in to a stock and asset purchase agreement with
Colorsmart, Inc. Colorsmart shall deliver at closing the sum of $1,500,000 to
the sole shareholder.

NOTE 5--DUE TO STOCKHOLDER AND RELATED PARTY

The stockholder has lent money to the Company as required. At December 31,
1998 and 1997, the Company owes the stockholder $44,962 and $59,407,
respectively. The note is due on demand and currently non-interest bearing.

The Company leases its operating facility from the stockholder; the term of
the lease is one year, payable in monthly installments of $2,700. At
December 31, 1998 and 1997, rent expense was $33,402 and $27,800, respectively.

F-33
<PAGE>
DISPLAY ARTS, INC.

FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997

F-34
<PAGE>
TABLE OF CONTENTS

Independent Auditor's Report................................ F-36

Financial Statements:

Balance Sheets as of December 31, 1998 and 1997 and
unaudited at August 31, 1999 and 1998................... F-37

Statements of Operations for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-38

Statements of Changes in Stockholder's Equity (Deficit)
for the Years Ended December 31, 1998 and 1997 and
unaudited for the eight months ended August 31, 1999
and 1998................................................ F-39

Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and unaudited for the eight months ended
August 31, 1999 and 1998................................ F-40

Notes to Financial Statements............................... F-41--F-45
</TABLE>

F-35
<PAGE>
[LETTERHEAD]

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Display Arts, Inc.
Nashville, Tennessee

We have audited the accompanying balance sheets of Display Arts, Inc., as of
December 31, 1998 and 1997, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Display Arts, Inc., as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

/s/ DASZKAL BOLTON MANELA DEVLIN & CO.

Boca Raton, Florida
May 26. 1999

F-36
<PAGE>
DISPLAY ARTS, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
------------------- -------------------
1998 1997 1999 1998
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current Assets:
Cash.............................................. $ 25,139 $ 422 $ 45,385 $ 24,918
Accounts receivable, less allowance of $31,900 in
1998 and $23,128 in 1997........................ 249,728 245,075 146,005 208,241
Inventories....................................... 19,385 18,475 29,385 28,475
-------- -------- -------- --------
Total current assets............................ 294,252 263,972 220,775 261,634
-------- -------- -------- --------
Property and equipment, net......................... 243,276 296,592 197,544 308,247
-------- -------- -------- --------

Other Assets:
Security deposits................................. 15,414 6,075 16,977 6,179
Deferred income taxes............................. 20,031 46,439 51,441 21,509
-------- -------- -------- --------
Total other assets.............................. 35,445 52,514 68,418 27,688
-------- -------- -------- --------
Total Assets.................................... $572,973 $613,078 $486,737 $597,569
======== ======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
Due to shareholder................................ $187,542 $178,535 $187,542 $178,259
Obligations under capital leases.................. 55,495 56,767 32,737 56,232
Current maturities of long-term debt.............. 27,621 25,003 31,846 28,828
Line of credit.................................... 31,774 48,338 -- 55,037
Accounts payable.................................. 82,738 47,435 73,916 29,026
Accrued expenses.................................. 3,237 16,382 68,028 40,014
-------- -------- -------- --------
Total current liabilities....................... 388,407 372,460 394,069 387,396
-------- -------- -------- --------

Obligations under capital leases.................. 813 56,345 -- 19,150
Long term debt.................................... 128,334 155,915 106,029 124,530
Deferred rent..................................... 7,397 10,261 -- --
-------- -------- -------- --------
Total long term debt............................ 136,544 222,521 106,029 143,680
-------- -------- -------- --------

Stockholders' equity (deficit):
Common stock, $.10 par value; 100 shares
authorized, issued and outstanding.............. 10 10 10 10
Additional paid-in capital........................ 990 990 990 990
Retained earnings (deficit)....................... 47,022 17,097 (14,361) 65,493
-------- -------- -------- --------
Total stockholders' equity (deficit)............ 48,022 18,097 (13,361) 66,493
-------- -------- -------- --------
Total liabilities and stockholders equity
(deficit)..................................... $572,973 $613,078 $486,737 $597,569
======== ======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-37
<PAGE>
DISPLAY ARTS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
----------------------- -----------------------
1998 1997 1999 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales..................................... $1,660,753 $1,306,718 $ 969,316 $1,053,234
Costs of goods sold........................... 812,563 695,954 506,610 470,439
---------- ---------- ---------- ----------
Gross profit.................................. 848,190 610,764 462,706 582,795
General and administrative expenses........... 770,986 693,228 544,873 491,530
---------- ---------- ---------- ----------
Income (Loss) from operations................. 77,204 (82,464) (82,167) 91,265
---------- ---------- ---------- ----------
Other income (expense):
Miscellaneous income........................ 4,764 1,353 655 570
Interest expense............................ (25,635) (55,012) (10,871) (18,509)
Loss on disposal of equipment............... -- (1,360) -- --
---------- ---------- ---------- ----------
Total other expense....................... (20,871) (55,019) (10,216) (17,939)
Income (loss) before income taxes............. 56,333 (137,483) (92,383) 73,326
Provision (benefit) for income taxes.......... 26,408 (46,439) (31,000) 24,930
---------- ---------- ---------- ----------
Net income (loss)............................. $ 29,925 $ (91,044) $ (61,383) $ 48,396
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-38
<PAGE>
DISPLAY ARTS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
-------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997....................... 100 $10 $990 $108,141 $109,141

Net loss - 1997................................ -- -- -- (91,044) (91,044)
--- --- ---- -------- --------

Balance, December 31, 1997..................... 100 10 990 17,097 18,097

Net income - 1998.............................. -- -- -- 29,925 29,925
--- --- ---- -------- --------

Balance, December 31, 1998..................... 100 10 990 47,022 48,022

(UNAUDITED):

Net loss - August 31, 1999..................... -- -- -- (61,383) (61,383)
--- --- ---- -------- --------

Balance, August 31, 1999....................... 100 $10 $990 $(14,361) $(13,361)
=== === ==== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-39
<PAGE>
DISPLAY ARTS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS ENDED
DECEMBER 31, AUGUST 31,
-------------------- -------------------
1998 1997 1999 1998
-------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ 29,925 $ (91,044) $(61,383) $ 48,396
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization.................... 79,303 96,027 45,732 21,602
Deferred income taxes............................ 26,408 (46,439) (31,410) 24,930
Net loss on disposal of fixed assets............. -- 1,360 -- --
Changes in assets and liabilities:
(Increase) decrease in:
Inventory.................................... (910) 7,719 (10,000) (10,000)
Accounts receivable.......................... (4,657) (111,573) 103,723 36,834
Security deposits............................ (9,339) 18,660 (1,563) (104)
Increase (decrease) in:
Accounts payable............................. 35,303 19,883 (8,822) (18,409)
Accrued expenses............................. (13,145) (25,095) 64,791 23,632
Deferred rent................................ (2,864) 10,261 (7,397) (10,261)
-------- --------- -------- --------
Net cash provided (used) by operating activities... 140,024 (120,241) 93,671 116,620
-------- --------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (25,983) (74,924) -- (33,257)
-------- --------- -------- --------
Cash flows from financing activities:
Shareholder advances (distributions)............. 9,007 30,662 -- (276)
Repayment of line of credit...................... (16,564) (3,610) (31,774) --
Proceeds from line of credit..................... -- 51,948 -- 6,699
Repayment of capital leases...................... (56,804) (50,327) (23,571) (37,730)
Proceeds from capital leases..................... -- 33,603 -- --
Repayment of long-term debt...................... (24,963) (19,082) (18,080) (27,560)
Proceeds from long-term debt..................... -- 115,000 -- --
-------- --------- -------- --------
Net cash provided (used) by financing
activities:...................................... (89,324) 158,194 (73,425) (58,867)
-------- --------- -------- --------
Net increase (decrease) in cash.................... 24,717 (36,971) 20,246 24,496
-------- --------- -------- --------
Cash, beginning of period.......................... 422 37,393 25,139 422
-------- --------- -------- --------
Cash, end of period................................ $ 25,139 $ 422 $ 45,385 $ 24,918
======== ========= ======== ========
</TABLE>

See accompanying notes to financial statements.

F-40
<PAGE>
DISPLAY ARTS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--ORGANIZATION AND DESCRIPTION OF BUSINESS

Display Arts, Inc., is a Nashville, Tennessee based design firm and digital
service bureau that serves clients with a balance of management, creative and
technical skills. The Company specializes in the creation of high impact,
affordable graphics and displays utilizing state-of-the-art methods and
equipment. All work is handled in-house to provide the highest quality and quick
turnaround.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

USE OF ESTIMATES

REVENUE RECOGNITION

Generally, revenues from sales of products are recognized when products are
shipped.

INVENTORY

Inventory consists primarily of materials used in the digital printing
process, and is stated at the lower of cost or market, with cost determined on
the first-in, first-out (FIFO) method.

INCOME TAXES

The Company accounts for income taxes under SFAS 109, ACCOUNTING FOR INCOME
TAXES, which requires that deferred income taxes be recognized for the tax
consequences in future years of differences between the tax basis of assets and
liabilities and their financial reporting basis at rates based on enacted tax
laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Current income tax expense
represents the tax payable for the period. The deferred income tax expense
(benefit) represents the change during the period in the balance of deferred
taxes.

F-41
<PAGE>
DISPLAY ARTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Equipment............................................. $ 19,145 $ 16,521
Equipment under capital lease......................... 350,601 327,629
Automobile............................................ 188,027 188,027
Total property and equipment...................... 13,990 13,990
--------- ---------
571,763 546,167
Less: accumulated depreciation and amortization....... (328,487) (249,575)
--------- ---------
Property and equipment, net....................... $ 243,276 $ 296,592
========= =========
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1998
and 1997, was $79,303 and $96,027, respectively.

NOTE 4--LEASE COMMITMENTS

Details of the capitalized leased assets are as follows:

<TABLE>
<S> <C> <C>
Equipment............................................. $ 188,027 $ 188,027
Less: accumulated amortization........................ (79,024) (50,461)
--------- ---------
Total............................................. $ 109,003 $ 137,566
========= =========
</TABLE>

The Company has four facilities located throughout Tennessee. The Company
leases it's facilities under operating leases with terms of three to five years,
payable in monthly installments. Total lease expense for the years ended
December 31, 1998 and 1997, was $80,674 and $72,640, respectively.

At December 31, 1998, the future minimum lease payments under operating and
capital leases are as follows:

<TABLE>
<CAPTION>
YEARS ENDED CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
- ------------ --------- ---------
<S> <C> <C>
1999.................................................. $ 59,798 $ 117,751
2000.................................................. 823 117,751
2001.................................................. -- 117,751
2002.................................................. -- 103,433
2003.................................................. -- 57,607
--------- ---------
$ 60,621 $ 514,293
=========
Total minimum lease payments
Less: amount representing interest.................... 4,313
---------
Present value of net minimum lease payments........... 56,308
Less: current maturities.............................. (55,495)
---------
Long-term obligation.............................. $ 813
=========
</TABLE>

F-42
<PAGE>
DISPLAY ARTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--INCOME TAXES

The provision (benefit) for income taxes is as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Taxes currently payable.................................. $ -- $ --
Deferred income benefit taxes............................ 26,408 (46,439)
Change in beginning valuation allowance.................. -- --
------- --------
Provision (benefit) for income taxes..................... $26,408 $(46,439)
======= ========
</TABLE>

Reconciliation of the Federal statutory income tax rate to the Company's
effective income tax rate is as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Computed at the Statutory rates.......................... $19,153 $(46,475)
Increase (decrease) resulting from:
Non-deductible expenses................................ 5,723 1,102
State income taxes, net of federal income tax benefit.... 1,532 (1,066)
------- --------
Net operating loss carryforward.......................... $26,408 $(46,439)
======= ========
</TABLE>

The components of the deferred tax asset were as follows at December 31,:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net operating loss carryforward......................... $ 18,137 $ 48,392
Allowance for bad debts................................. 13,398 9,714
-------- --------
Total deferred tax asset............................ 31,535 58,106

Deferred tax liabilities:
Depreciation expense.................................. (11,504) (11,667)
-------- --------
Net deferred tax asset.................................. 20,031 46,439
-------- --------
Valuation allowance:
Beginning of year..................................... -- --
Decrease (increase) during year....................... -- --
Ending balance........................................ -- --
-------- --------
Net deferred taxes...................................... $ 20,031 $ 46,439
======== ========
</TABLE>

At December 31, 1998 and 1997, the Company has unused net operating loss
carryforwards of approximately $51,918 and $120,808, respectively, expiring
primarily in 2013 and 2012, which is available for use on its future corporate
Federal and State tax returns.

NOTE 6--BORROWINGS

The note payable of $155,955 and $180,918 at December 31, 1998 and 1997,
respectively, consists of a note payable to a financial institution with monthly
payments of $3,498 including interest at 10% until August 2003. This note is
personally guaranteed by the shareholder of the corporation.

F-43
<PAGE>
DISPLAY ARTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--BORROWINGS (CONTINUED)

Maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
1998
--------
<S> <C>
1999........................................................ $ 27,621
2000........................................................ 30,523
2001........................................................ 33,708
2002........................................................ 37,328
2003........................................................ 26,735
--------
Total................................................... $155,915
========
</TABLE>

Revolving line-of-credit:

In August of 1996, the Company secured a revolving line-of-credit allowing
for maximum borrowing of $50,000. The loan bears interest at prime rate plus
three percent (10.75% at December 31, 1998 and 11.50% at December 31, 1997) and
is due on demand. The line-of-credit is collateralized by the Company's accounts
receivables, inventory and equipment. Approximately $18,000 is available under
this line-of-credit at December 31, 1998.

NOTE 7--ACQUISITION

The Company has entered in to a stock and asset purchase agreement with
Colorsmart.com, Inc., whereas Colorsmart.com, Inc. shall acquire 100% of the
Company's stock. Colorsmart.com, Inc. shall deliver at closing approximately
$1,300,000. The closing of the deal is contingent upon the successful initial
public offering by Colorsmart.com, Inc.

NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for the years ended December 31, 1998 and
1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash payment for interest................................ $25,635 $ 43,348
======= ========
</TABLE>

Non-cash transactions affecting investing and financing activities:

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Equipment acquired under capital lease................... $ -- $121,028
======= ========
</TABLE>

NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS

THE CARRYING VALUE OF THE COMPANY'S FINANCIAL INSTRUMENTS APPROXIMATES THE
FAIR MARKET VALUE, DUE TO THEIR SHORT-TERM MATURITIES AND INTEREST RATES.

F-44
<PAGE>
DISPLAY ARTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--DUE TO SHAREHOLDER

The majority shareholder has lent money to the Company as needed. At
December 31, 1998 and 1997, the Company owes the shareholder $187,542 and
$178,535, respectively. The note is due on demand and bears interest at 10%. In
1998, interest on this note was deferred.

NOTE 11--LITIGATION

The Company is party from time-to-time to various legal proceedings. None of
these proceedings are expected to have a material impact on its financial
position or results of operations.

NOTE 12--SUBSEQUENT EVENT

In January 1999, the Company entered into a five year operating lease, with
options to renew for three consecutive five year terms. The lease is for 3,700
square feet of office space, calling for $22,200 of annual rent.

F-45
<PAGE>
STONEHOUSE GRAPHICS (PTY) LIMITED

REGISTRATION NUMBER 97/19446/07

ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

F-46
<PAGE>
STONEHOUSE GRAPHICS (PTY) LIMITED

REGISTRATION NUMBER 97/19446/07

ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- -----------------
<S> <C>

Report of the independent auditors.......................... F-48

Director's report........................................... F-49

Income statement............................................ F-51

Balance sheet............................................... F-52

Cash flow statement......................................... F-53

Notes to the annual financial statements.................... F-55--F-59

Detailed income statement................................... F-60
</TABLE>

APPROVAL OF ANNUAL FINANCIAL STATEMENTS

The annual financial statements which appear on pages 3 to 10 have been
approved by the board of directors and are signed on its behalf by:

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

DIRECTOR

Germiston
30 March 1999

F-47
<PAGE>
REPORT OF THE INDEPENDENT AUDITORS

To the members of Stonehouse Graphics (Proprietary) Limited

We have audited the annual financial statements set out on pages 3 to 9.
These financial statements are the responsibility of the company's directors
while our responsibility is to report thereon.

We conducted our audit in accordance with generally accepted auditing
standards which require that we plan and carry out the audit to obtain
reasonable assurance that fair presentation is achieved in the financial
statements in all material respects. 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 policies used and
significant estimates made by the management, as well as evaluating the overall
financial statement presentation. We consider that our audit procedures were
appropriate in the circumstances to express our opinion presented below.

In our opinion these financial statements fairly present the financial
position of the company at 28 February 1999, and the results of its operations
and cash flow information for the year then ended in conformity with generally
accepted accounting practice and in the manner required by the Companies Act.

The supporting schedule set out on page 10 does not form part of the
financial statements and is presented solely for the information of the
shareholders. We have not audited this schedule and accordingly we do not
express an opinion on it.

<TABLE>
<S> <C>
/s/ SNYDERS & CO.
Snyders & Company
Chartered Accountants (SA)
Boksburg
30 March 1999.
</TABLE>

F-48
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

DIRECTORS' REPORT
FOR THE YEAR ENDED 28 FEBRUARY 1999

The directors present their annual report which forms part of the audited annual
financial statements of the company for the year ended 28 February 1999.

1. DIRECTOR AND SECRETARY

N P Weight
No secretary has been appointed
The company's business and postal addresses are as follows:
150 Fleming Road
Meadowdale Extension
Germiston
PO Box 75539
Gardenview
2047.

2. PRINCIPAL ACTIVITIES OF THE COMPANY

The principal activities of the company during the year were digital
printing, screenprinting and sign making.

3. OPERATING RESULTS

The company incurred a loss of R3 892 for the year (1998: loss of R600 658
after taxation).

4. REVIEW OF OPERATIONS

REVENUE:

The company has achieved a record turnover of R10.9 million for the year,
which is more that double the R4.6 million recorded in 1998. The rapid growth is
partly due to the improved trading conditions, but significant growth was
obtained through the installation of two new NUR printing machines. These came
on line in March and November respectively, and the full benefit will therefore
only accrue in the next financial year. The company has also achieved growth in
its export markets, and further improvements are forecast.

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

The company recorded a loss of R3 892, compared to a loss of R599 727 in
1998. This remarkable improvement was achieved after writing off depreciation of
R1 058 403 (1998: R257 900) and finance charges of R903 210 (1998: R298 541).
The increase in finance charges arose from the finance leases raised to fund
capital expenditure. The director has deemed it prudent to write off the
goodwill of R50 000 since no value can be placed on this asset.

TAXATION

No provision has been made for taxation since the company did not earn
taxable income.

F-49
<PAGE>
5. SHARE CAPITAL

There were no changes to the authorised and issued share capital of the
company during the financial year.

6. EVENTS SUBSEQUENT TO BALANCE SHEET DATE

The director is not aware of any matter or circumstance arising since the
end of the financial year, not otherwise dealt with in the annual financial
statements, which significantly affect the financial position of the company or
the results of its operations.

F-50
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

INCOME STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998R
-------- ---------- ---------
R R
<S> <C> <C> <C>
Revenue..................................................... 1.2 10 978 829 4 563 261

Cost of sales............................................... 4 133 527 1 982 586
---------- ---------

Gross profit................................................ 6 845 302 2 580 675

Other income................................................ 111 964 81 725
---------- ---------

6 957 266 2 642 400

Operating costs............................................. 6 057 948 2 943 586
---------- ---------

Profit/(loss) on ordinary activities before interest........ 899 318 (301 186)

Financing costs............................................. 3 903 210 298 541
---------- ---------

Net loss before taxation.................................... (3 892) (599 727)

Taxation.................................................... 4 0 931
---------- ---------

Net loss for the year....................................... (3 892) (600 658)

Retained earnings at beginning of the year.................. (576 306) 24 352
---------- ---------

Accumulated loss at end of the year......................... (580 198) (576 306)
---------- ---------
</TABLE>

F-51
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

BALANCE SHEET

AT 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- ---------- ---------
R R
<S> <C> <C> <C>
CAPITAL EMPLOYED

Share capital............................................... 5 100 100

Accumulated loss............................................ (580 198) (576 308)
---------- ---------
Shareholder's interest...................................... (580 098) (576 208)

Shareholder's loan.......................................... 6 306 125 372 747

Long-term liabilities....................................... 7 4 398 683 564 761
---------- ---------
4 124 710 361 302
---------- ---------

EMPLOYMENT OF CAPITAL

Property, plant and equipment............................... 9 5 131 426 753 887
Investment.................................................. 10 125 000
Goodwill.................................................... 50 000

Current assets.............................................. -- 457 515 135 800
Inventories............................................... -- 1 413 125 520 804
Debtors................................................... 11 788 980
Cash on hand.............................................. 1 871 428 657 584

Current liabilities......................................... 3 003 144 1 100 169
Creditors................................................. 12 1 921 824 686 132
Taxation.................................................. 20 272 20 272
Bank overdraft............................................ 8 1 061 048 413 785

Net current liabilities..................................... (1 131 716) (442 585)
---------- ---------
4 124 710 361 302
---------- ---------
</TABLE>

F-52
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

CASH FLOW STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTE 1999 1998
-------- ---------- --------
R R
<S> <C> <C> <C>
CASH UTILISED IN OPERATING ACTIVITIES
Cash generated by operations................................ 1 1 982 015 104 180
Cash generated by decrease/(increase) in working capital.... 2 (629 033) 295 526
---------- --------
Cash generated from operating activities.................... 1 352 982 399 706
Interest paid............................................... (903 210) (298 541)
Taxation paid............................................... 0 (875)
---------- --------
Net cash inflow from operating activities................... 449 772 100 290

CASH UTILISED IN INVESTING ACTIVITIES
Investment to maintain operations:
Purchase of fixed assets.................................... (5 505 910) (203 463)
Proceeds on disposal of fixed assets........................ 95 874 51 300
Investment in timeshare..................................... (125 000)
---------- --------
Net cash outflow from investing activities.................. (5 535 236) (152 163)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in long term liabilities................ 4 504 611 (66 884)
Increase in shareholder's loan.............................. (66 622) (76 159)
---------- --------
Net cash inflow from financing activities................... 4 437 969 (143 043)
---------- --------
Net decrease in cash and cash equivalents................... (647 475) (194 916)
Cash and cash equivalents at beginning of year.............. (412 785) (217 869)
---------- --------
Cash and cash equivalents at end of year.................... (1 060 280) (412 785)
---------- --------
</TABLE>

F-53
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

CASH FLOW STATEMENT (CONTINUED)

FOR THE YEAR ENDED 28 FEBRUARY 1999

NOTES TO THE CASH FLOW STATEMENT

<S> <C> <C> <C>
1. Cash generated by operations
Operating profit before interest............................ 899 318 (301 186)
Adjustment for: Depreciation................................ 1 058 403 257 900
Goodwill written off........................................ 50 000
(Profit)/Loss on sale and scrapping of assets............... (25 706) 147 466
--------- --------
1 982 015 104 180
--------- --------
2. Cash utilised to increase working capital...................
(Increase)/decrease in inventories.......................... (321 715) 3 583
(Increase)/decrease in debtors.............................. (892 321) 109 884
Increase in creditors....................................... 585 003 181 949
--------- --------
(629 033) 295 526
--------- --------
3. Taxation paid
Outstanding at beginning of the year........................ (20 272) (20 216)
Amount charged to the income statement...................... 0 (931)
Outstanding at end of the year.............................. 20 272 20 272
--------- --------
Taxation paid............................................... 0 (875)
--------- --------
</TABLE>

F-54
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

NOTES TO THE ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

1. ACCOUNTING POLICIES

The Financial statements are prepared on the historical cost basis and
incorporate the following principal accounting policies which are consistent
with the previous year.

1.1 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost less depreciation.
Depreciation has been calculated on the straight line method at rates
appropriate to reduce assets to net realisable value over their expected useful
lives, as follows:

<TABLE>
<S> <C>
Computer equipment.......................................... 3 years
Plant and machinery......................................... 4 years
Furniture and fittings...................................... 6 years
Motor vehicles.............................................. 4 years
</TABLE>

1.2 TURNOVER

Turnover comprises the invoiced value of sales in respect of trading
operations and excludes value added tax.

1.3 INVENTORIES

Inventories are valued at the lower of cost and net realisable value.

1.4 LEASED ASSETS

Assets leased in terms of finance lease agreements are capitalised.
Capitalised leased assets are depreciated on the straight line method at rates
considered appropriate to reduce book values to estimated residual values over
their useful lives. Lease finance charges are amortised over the duration of the
lease by the effective interest method. All costs relating to operating leases
are charged to income as incurred.

1.5 DEFERRED TAXATION

Deferred taxation is calculated on the comprehensive liability method. It
arises due to timing differences of taxation allowances on fixed assets in the
calculation of taxable income.

2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

Profit on ordinary activities before taxation is arrived at after taking
into account the following items:

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
Auditors' remuneration
- Audit fees................................................ 15 000 10 500
- Other services............................................ 1 500 2 000
- Expenses.................................................. 1 500
- Underprovision in prior year.............................. 1 400
--------- ---------
17 900 12 500
--------- ---------
</TABLE>

F-55
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 28 FEBRUARY 1999

2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (CONTINUED)

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
Depreciation
- Computer equipment........................................ 63 244 17 248
- Plant and equipment....................................... 868 633 157 651
- Furniture and fittings.................................... 12 951 5 083
- Motor vehicles............................................ 113 575 77 918
--------- ---------
1 058 403 257 900
--------- ---------
Directors' emoluments
- For managerial services................................... 464 296 188 670
--------- ---------
Rentals in respect of operating leases
- Land and buildings........................................ 351 708 205 915
- Plant and equipment....................................... 32 704 16 212
--------- ---------
384 412 222 127
--------- ---------
</TABLE>

3. FINANCING COSTS

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
- Interest paid............................................. 147 343 63 826
- Finance lease cost........................................ 755 867 234 715
--------- ---------
903 210 298 541
--------- ---------
</TABLE>

4. TAXATION

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
Under-provision in prior years.............................. 931

No provision has been made for current taxation as the
company did not earn any taxable income. The estimated
assessable loss available for set off against future taxable
income is................................................... 355 563 379 653
No provision has been made for deferred taxation as any
possible liability will be offset by the taxation loss.
</TABLE>

F-56
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 28 FEBRUARY 1999

5. SHARE CAPITAL

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
Authorised:
1000 Ordinary shares of R1 each............................. 1 000 1 000
--------- ---------
Issued:
100 Ordinary shares of R1 each.............................. 100 100
--------- ---------
</TABLE>

6. SHAREHOLDER'S LOAN

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
Balance at beginning of the year............................ 372 747 448 906
Advances.................................................... 560 142 291 619
Repayments.................................................. (626 764) (367 778)
--------- ---------
Balance at the end of the year.............................. 306 125 372 747
--------- ---------
The loan is unsecured, interest free and has no fixed date
for repayment.
</TABLE>

7. LONG-TERM LIABILITIES

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
Liabilities under capitalised finance lease agreements
Total liabilities........................................... 8 056 235 1 034 478
Less: Deferred interest..................................... 2 829 357 312 211
--------- ---------
5 228 878 722 267
Less: Current portion repayable by 28 February 2000 828 195 157 506
transferred to current liabilities..........................
--------- ---------
4 398 683 564 761
--------- ---------
The loans bear interest at a rate linked to the prime rate,
currently about 23%, and are repayable in monthly
installments of R 171 747 (1998: R27 003) including
interest, continuing until 2003.
</TABLE>

8. BANK OVERDRAFT

The bank overdraft facility has been secured by a cession of the trade
debtors and personal guarantees by the shareholder.

F-57
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

NOTES TO THE ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

9. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
COMPUTER PLANT AND FURNITURE MOTOR
EQUIPMENT EQUIPMENT & FITTINGS VEHICLES TOTAL
--------- ---------- ---------- -------- ----------
R R R R R
<S> <C> <C> <C> <C> <C>
1999
Carrying value at 28 February 1998...... 51 745 405 451 52 940 243 751 753 887
At cost............................... 102 520 825 356 86 197 418 290 1 212 372
Accumulated depreciation.............. (50 784) (219 905) (13 267) (174 539) (458 485)

Additions............................... 208 067 5 182 724 48 635 68 484 5 505 910
Disposals............................... (187 990) (187 990)
Depreciation for the year............... (63 244) (866 833) (12 951) (113 575) (1 058 403)
Depreciation reversed on disposals...... 118 022 118 022

Carrying value at 28 February 1999...... 196 588 4 719 542 88 624 128 682 5 131 426
At cost............................... 310 596 5 808 080 114 832 296 784 6 530 292
Accumulated depreciation.............. (114 028) (1 088 538) (26 208) (170 092) (1 396 866)

1998
Carrying value at 28 February 1997...... 51 346 615 482 18 593 321 689 1 007 090
At cost............................... 84 682 700 236 26 787 418 290 1 230 175
Accumulated depreciation.............. (33 538) (84 754) (8 174) (96 621) (223 085)

Additions............................... 17 647 146 386 39 430 203 463
Disposals............................... (221 266) (221 266)
Depreciation for the year............... (17 248) (157 651) (5 063) (77 918) (257 900)
Depreciation reversed on disposals...... 22 500 22 500

Carrying value at 28 February 1998...... 51 745 406 461 52 940 243 751 753 887
At cost............................... 102 529 625 358 68 197 418 290 1 212 372
Accumulated depreciation.............. (50 784) (219 905) (13 257) (174 539) (458 485)
</TABLE>

Certain assets with a book value of R4 914 919 (1998: R825 861) are encumbered
as security for the finance leases (refer note 7).

F-58
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

NOTES TO THE ANNUAL FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
10. INVESTMENT
Investment in timeshare, at cost......................... 125 000

The investment is encumbered as security for a finance
lease (refer note 7).

11. DEBTORS
Trade debtors............................................ 1 377 652 503 231
Sundry debtors........................................... 20 200 2 300
Deposits................................................. 15 273 15 273
--------- ---------
1 413 125 520 804
--------- ---------

12. CREDITORS
Trade creditors.......................................... 803 495 429 025
Sundry creditors......................................... 290 134 79 601
Current portion of capitalised finance leases............ 828 195 157 506
--------- ---------
1 921 824 666 132
--------- ---------

13. COMMITMENTS
Contracted for:
Equipment rental......................................... 111 419
Capital equipment........................................ 8 231 734
--------- ---------
111 419 8 231 734
--------- ---------
</TABLE>

F-59
<PAGE>
STONEHOUSE GRAPHICS (PROPRIETARY) LIMITED

INCOME STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- ---------- ---------
R R
<S> <C> <C> <C>
Turnover.................................................... 1,2 10 978 829 4 563 261
Less: Cost of sales......................................... 4 133 527 1 962 588
Opening stock............................................. 135 800 139 383
Add: Purchases............................................ 4 455 242 1 976 993
---------- ---------
4 591 042 2 118 395
Less: Closing stock....................................... 457 515 135 800
---------- ---------
Gross profit................................................ 6 845 302 2 580 675
Discount received........................................... 86 258 81 725
Profit on sale of fixed assets.............................. 25 706
---------- ---------
6 957 286 2 642 400
Less: Operating expenses.................................... 6 067 948 2 943 586
Audit fees.................................................. 19 400 12 500
Administration and accounting fees.......................... 32 842 8 698
Advertising costs........................................... 215 659 99 811
Bad debts written off....................................... 353 732 54 331
Bank charges................................................ 29 459 31 953
Cleaning.................................................... 8 265 3 211
Commission.................................................. 25 922 8 535
Computer processing costs................................... 21 656 22 764
Consulting fees............................................. 40 550
Depreciation................................................ 1 058 403 257 900
Director's remuneration..................................... 447 216 188 870
Discount allowed............................................ 92 884 50 359
Donations and fines......................................... 43 586 9 710
Equipment hire.............................................. 7 190
Insurance................................................... 173 629 142 345
Goodwill written off........................................ 50 000
Legal expenses.............................................. 2 061 9 185
Travel and entertainment.................................... 231 502 78 461
Loss on sale of assets...................................... 147 466
Medical aid................................................. 116 944 82 717
Motor vehicle hire.......................................... 11 033 28 168
Motor vehicle running costs - fuel.......................... 78 604 64 178
Motor vehicle running costs - repairs and maintenance....... 79 156 40 100
Motor vehicle running costs - insurance..................... 55 292 33 220
Moving expenses............................................. 31 441
Overseas travel............................................. 55 409 24 069
Packaging materials......................................... 26 489 15 688
Postage and telephone....................................... 124 755 76 764
Printing and stationery..................................... 22 284 8 019
Provident fund contributions................................ 27 054
Regional services levy...................................... 20 738 10 634
Rental of premises.......................................... 351 708 205 915
Rental of office equipment.................................. 32 704 16 212
Repairs and maintenance - office equipment.................. 40 581 15 241
Repairs and maintenance - building.......................... 82 473 42 037
Salaries and wages.......................................... 1 913 301 1 011 579
Security.................................................... 20 636 11 378
Staff training and recruitment.............................. 72 084 34 346
Staff refreshments.......................................... 15 383 9 914
Subscriptions............................................... 8 157 6 178
Water and electricity....................................... 57 753 25 427
Workman's compensation...................................... 7 979 7 165
---------- ---------
Net profit/(loss) before interest paid...................... 899 318 (301 186)
Financing costs............................................. 3 903 210 296 541
---------- ---------
Net loss before tax......................................... (3 892) (599 727)
Taxation.................................................... 4 931
---------- ---------
Net loss after tax for the year............................. (3 892) (600 658)
Retained earnings/(loss) at beginning of the year........... (576 306) 24 362
---------- ---------
Accumulated loss at end of the year......................... (580 198) (576 306)
---------- ---------
</TABLE>

F-60
<PAGE>

TOPCOPY CC

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

F-61
<PAGE>

TOPCOPY CC

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
Consent of independent auditors............................. F-63
Balance sheet............................................... F-64
Income statement............................................ F-65
</TABLE>

F-62
<PAGE>
RANSOME HOUSE, 5 CONSTRUCTION STREET, CAPE TOWN 8001
P.O. Box 10116, CALEDON SQUARE, 7905
Tel: (021) 465 7701 FAX: (021) 461 2287
Cell: 002 458 6434
E-Mail: [email protected]

H J HUGO AND ASSOCIATES
- --------------------------------------------------------------------------------

CHARTERED ACCOUNTANTS (SOUTH AFRICA)
H J Hugo, B. COM. CA. (S.A.)

26th November 1999

COLORSMART.COM INC. USA
Jumbo Graphics & Digital Printing
537 Myatt Drive, Madison,
TENNESSEE 37115 USA

Dear Sir

TOP COPY FINANCIAL STATEMENTS 1998/1999
MANAGEMENT ACCOUNTS FROM MARCH TO AUGUST 1999

We hereby give our consent for the use of these accounts for your listing
process.

Yours sincerely

/s/ H J Hugo

H J Hugo

F-63
<PAGE>
TOPCOPY CC

BALANCE SHEET FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTE 1999
-------- --------
R
<S> <C> <C>
CAPITAL EMPLOYED
Member's Contribution....................................... 1,000

Retained Loss for year...................................... -66,018
Retained Loss brought....................................... -85,070
--------
Retained income............................................. -151,088
--------
Member's Interest........................................... -150,088

Loan Account................................................ 676,319
Stanoic..................................................... 124,027
--------
650,258
========
EMPLOYMENT OF CAPITAL
Equipment................................................... 284,241
Motor Vehicles.............................................. 157,145
--------
Fixed Assets................................................ 441,386

CURRENT ASSETS
Debtors Account............................................. 139,570
Bank Account................................................ 36,666
Nedbank--1046 406663........................................ 9,824
Nedbank Credit Card......................................... 59,796
Boland Bank--25698206....................................... 103,261
Unit Trust.................................................. 11,202
Stamford Bank Call Account.................................. 1,420
Loans....................................................... 10,645
Stock....................................................... 21,565
--------
393,949

CURRENT LIABILITIES
Other Creditors............................................. 4,500
Creditors Account........................................... 170,677
VAT......................................................... 9,900
--------
185,077
--------
NET CURRENT ASSETS.......................................... 208,872
--------
650,258
========
</TABLE>

F-64
<PAGE>
TOPCOPY CC

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTE 1999
-------- ---------
R
<S> <C> <C>
INCOME
Sales....................................................... 2,506,408
Interest Received........................................... 18,571
---------
2,524,979

EXPENDITURE:
Accountants fees............................................ 5,377
Bank charges................................................ 6,134
Cleaning.................................................... 251
Couriers.................................................... 10,451
Commissions paid............................................ 8,491
Stock purchases............................................. 1,321,797
Electricity................................................. 16,154
Entertainment............................................... 3,349
F&T......................................................... 146
Insurance................................................... 21,821
Interest on overdraft....................................... 572
Lease expenses.............................................. 103,003
Legal expenses.............................................. 872
Licences and annual duty.................................... 216
Medical contributions....................................... 15,542
MCS bureau.................................................. 4,203
Motor vehicle repairs....................................... 9,196
Motor vehicle petrol........................................ 4,357
PAYE........................................................ 19,901
Paging service.............................................. 910
Printing and stationary..................................... 316
Rental-shop................................................. 90,180
Rental-machinery............................................ 289,269
Repairs and maintenance..................................... 4,476
Salaries and wages.......................................... 400,818
Members salary.............................................. 159,434
Staff [unreadable copy] and training........................ 6,633
Subscriptions............................................... 567
Security.................................................... 1,524
Taxation.................................................... 7,482
Traffic fines............................................... 825
Telephone................................................... 49,867
Travelling expenses......................................... 18,017
UIF......................................................... 313
Regional council fees....................................... 4,682
Workmen's compensation...................................... 3,852
---------
2,590,998

Net Loss.................................................... -66,019
</TABLE>

F-65
<PAGE>

VIRTUAL COLOUR PRINTING CC
(REG NO 97/43010/23)
FINANCIAL STATEMENTS - 28 FEBRUARY 1999

F-66
<PAGE>

VIRTUAL COLOUR PRINTING CC

(REG NO 97/43010/23)

FINANCIAL STATEMENTS - 28 FEBRUARY 1999

<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- ------------------
<S> <C>
Report of independent auditors.............................. F-68
Balance sheet............................................... F-69
Income statement............................................ F-70
Notes to financial statements............................... F-71-F-72
</TABLE>

F-67
<PAGE>

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
VIRTUAL COLOUR PRINTING CC

We have audited the financial statements set out on pages 2 to 5 for the
year ended 28 February 1999 as requested. These financial statements are the
responsibility of the members of the close corporation. Our responsibility is to
express an opinion on these financial statements based on our audit.

SCOPE

We conducted our audit in accordance with statements of South African
Auditing Standards. Those standards require that we plan and perform the audit
to obtain misstatement.

An audit includes:

- examining, on a test basis, evidence supporting the amounts and
disclosures included in the financial statements,

- assessing the accounting principles used and significant estimates made
by management and

- evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

AUDIT OPINION

In our opinion, the financial statements fairly present, in all material
respects, the financial position of the close corporation at 28 February 1999
and the results of its operations for the year then ended in accordance with
generally accepted accounting practice.

COMPARATIVE FIGURES

We have reviewed the comparative figures for the year ended 28 February 1998
to the extent that we considered necessary to express our opinion. We have not
audited the comparative figures and express no opinion thereon.

Pricewaterhouse Coopers Inc.

- ----------------------------
Registered Accountants and Auditors
Chartered Accountants (SA)
Cape Town

27-10-99
- ----------------------------
Date

F-68
<PAGE>

VIRTUAL COLOUR PRINTING CC

BALANCE SHEET

AT 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- -------- --------
R R
<S> <C> <C> <C>
CAPITAL EMPLOYED
MEMBERS' CONTRIBUTIONS...................................... 2 400 400
RETAINED INCOME............................................. 73,361 216,935
-------- -------
MEMBERS' INTEREST........................................... 73,761 217,335
LONG TERM LIABILITIES....................................... 3 188,188 --
-------- -------
261,949 217,335
======== =======

EMPLOYMENT OF CAPITAL
FIXED ASSETS................................................ 4 376,538 16,700
NET CURRENT (LIABILITIES)/ASSETS............................ (114,589) 200,635
CURRENT ASSETS.............................................. 760,382 473,187
Stock....................................................... 80,000 27,500
Accounts receivable......................................... 5 680,382 445,387
Bank and cash on hand....................................... -- 300
CURRENT LIABILITIES......................................... 874,971 272,552
Accounts payable............................................ 287,190 87,654
Bank overdraft.............................................. 5 139,844 105,742
Receiver of Revenue--Income tax............................. 646 646
Short term portion of long term loan........................ 3 28,041 --
Short term loan............................................. 6 419,250 78,510
-------- -------
261,949 217,335
======== =======
</TABLE>

F-69
<PAGE>
VIRTUAL COLOUR PRINTING CC

INCOME STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- --------- ---------
R R
<S> <C> <C> <C>
SALES....................................................... 3,026,049 1,118,125
COST OF SALES............................................... 1,558,593 458,771
Opening stock............................................... 27,500 --
Purchases................................................... 1,611,093 486,271
--------- ---------
1,638,593 486,271
Closing stock............................................... 80,000 27,500
--------- ---------
GROSS PROFIT................................................ 1,467,456 659,354
OTHER INCOME
Insurance claims............................................ 23,122 --
Interest received........................................... 449 241
--------- ---------
1,491,027 659,595
EXPENDITURE................................................. 1,634,601 442,014
Accounting fees............................................. 4,400 1,467
Administration fees......................................... 36,000 --
Bad debts................................................... 50,827 --
Bank charges................................................ 2,950 1,638
Cleaning.................................................... 3,736 1,105
Commission paid............................................. 23,873 3,947
Computer expenses........................................... 1,050 --
Depreciation of fixed assets................................ 18,939 879
Discount allowed............................................ 4,322 --
Electricity and water....................................... 4,508 6,402
Entertainment............................................... 2,181 594
Insurance................................................... -- 797
Interest paid............................................... 13,791 799
Hiring charges--Plant and equipment......................... 801,343 181,784
Leasing charges--Motor Vehicle.............................. 14,867 14,962
Legal expenses.............................................. 684 --
Maintenance contract........................................ 12,800 --
Members' salaries........................................... 128,320 --
Motor and travelling expenses............................... 8,834 1,200
Overseas travelling......................................... 6,309 --
Printing and stationery..................................... 755 899
Rent........................................................ 34,700 15,600
Regional service council levies............................. 1,690 1,182
Repairs and maintenance (less recoveries)................... (2,703) 9,781
Salaries and wages.......................................... 440,996 188,228
Telephone, telefax and postage.............................. 19,429 10,750
--------- ---------
NET (LOSS)/INCOME for the year.............................. (143,574) 217,581
TAXATION.................................................... 7 -- 646
--------- ---------
NET (LOSS)/INCOME for the year after taxation............... (143,574) 216,935
RETAINED INCOME at beginning of the year.................... 216,935 --
--------- ---------
RETAINED INCOME at end of the year.......................... 73,361 216,935
========= =========
</TABLE>

F-70
<PAGE>

VIRTUAL COLOUR PRINTING CC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

1. ACCOUNTING POLICIES

The financial statements have been drawn up on the historical cost basis and
incorporate the following principal accounting policies which are consistent
with those of the previous year.

<TABLE>
<S> <C> <C> <C>
1.1 Fixed assets

Fixed assets are depreciated on the reducing balance basis at rates which are
considered appropriate to reduce book values to estimated residual values over
the useful lives of the assets.

Furniture, fixtures and fittings............................ 10%
Machinery................................................... 20%
Motor vehicle............................................... 20%

1.2 Stock

Materials and work in progress are valued at the lower of cost, determined on a
first-in-first-out basis, and net realisable value.

The value of work in progress includes direct costs and a proportion of
manufacturing overheads.
</TABLE>

<TABLE>
<CAPTION>
1999 1998
-------- --------
R R
<S> <C> <C> <C>
2. MEMBERS' CONTRIBUTIONS

P Pedersen.................................................. 100 100
H Trischler................................................. 100 100
K Redman.................................................... 100 100
A Koch...................................................... 100 100
------- -------
400 400
======= =======

3. LONG TERM LIABILITIES

Secured..................................................... 188,188 --
Secured by suspensive sale agreements over vehicles with
a book value of R222 278.................................... 216,229 --
Repayable in monthly instalments of R4 663 which include
interest and capital........................................
Less: Instalments payable within 12 months transferred to
current liabilities......................................... (28,041) --
</TABLE>

F-71
<PAGE>

VIRTUAL COLOUR PRINTING CC

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
1999 1998
-------- --------
R R
<S> <C> <C> <C>
4. FIXED ASSETS

Furniture, fixtures and fittings............................ 15,030 16,700

Cost price.................................................. 17,579 17,579
Accumulated depreciation.................................... 2,549 879
Machinery................................................... 150,345
Cost price.................................................. 156,500 --
Accumulated depreciation.................................... 6,155 --
Motor vehicle............................................... 211,163 --
Cost price.................................................. 222,277 --
Accumulated depreciation.................................... 11,114 --
------- -------
376,538 16,700
======= =======

5. DEBTORS

The debtors are ceded to the bank as security for bank overdraft purposes.

6. SHORT TERM LOAN

Loan: Virtual Colour CC..................................... 419,250 78,510
======= =======
Interest free loan for which no repayment terms have been
determined.

7. TAXATION

SA Normal Close Corporation tax............................. -- 646
======= =======
No provision has been made for taxation as the Close
Corporation had no taxable income.
</TABLE>

F-72
<PAGE>

VIRTUAL SUPPORT CC
(REG NO 96/38134/23)
FINANCIAL STATEMENTS - 28 FEBRUARY 1999

F-73
<PAGE>

VIRTUAL SUPPORT CC

(REG NO 96/38134/23)

FINANCIAL STATEMENTS - 28 FEBRUARY 1999

<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
Report of independent auditors.............................. F-75
Balance sheet............................................... F-76
Income statement............................................ F-77
Notes to financial statements............................... F-78
</TABLE>

F-74
<PAGE>

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
VIRTUAL SUPPORT CC

We have audited the financial statements set out on pages 2 to 4 for the
year ended 28 February 1999 as requested. These financial statements are the
responsibility of the members of the close corporation. Our responsibility is to
express an opinion on these financial statements based on our audit.

SCOPE

We conducted our audit in accordance with statements of South African
Auditing Standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance that the financial statements are free of
material misstatement. An audit includes:

- examining, on a test basis, evidence supporting the amounts and
disclosures included in the financial statements,

- assessing the accounting principles used and significant estimates made
by management and

- evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

AUDIT OPINION

COMPARATIVE FIGURES

PricewaterhouseCoopers Inc.
- ----------------------------
Registered Accountants and Auditors
Chartered Accountants (SA)
Cape Town

27-10-99
- ----------------------------
Date

F-75
<PAGE>

VIRTUAL SUPPORT CC

BALANCE SHEET

AT 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- -------- --------
R R
<S> <C> <C> <C>
CAPITAL EMPLOYED
MEMBERS' CONTRIBUTIONS...................................... 2 100 100
RETAINED INCOME............................................. 16,865 9,946
------- ------
MEMBERS' INTEREST........................................... 16,965 10,046
LONG TERM LIABILITY......................................... 3 -- 20,017
------- ------
16,965 30,063
======= ======

EMPLOYMENT OF CAPITAL

FIXED ASSETS................................................ 4 1,605 5,667
LOAN TO MEMBER.............................................. 3 47,523 --
NET CURRENT (LIABILITIES)/ASSETS............................ (32,163) 24,396
CURRENT ASSETS.............................................. 280,649 70,021
Stock....................................................... 454 19,298
Accounts receivable......................................... 5 279,996 50,451
Cash on hand................................................ 199 272
CURRENT LIABILITIES......................................... 312,812 45,625
Accounts payable............................................ 298,483 44,743
Bank overdraft.............................................. 5 9,721
Receiver of Revenue--Income tax............................. 4,608 882
------- ------
16,965 30,063
======= ======
</TABLE>

F-76
<PAGE>

VIRTUAL SUPPORT CC

INCOME STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- --------- ---------
R R
<S> <C> <C> <C>
SALES....................................................... 1,890,027 1,049,858
COST OF SALES............................................... 1,684,071 889,052
Opening stock............................................... 19,298 21,063
Purchases................................................... 1,665,227 887,287
--------- ---------
1,684,525 908,350
Closing stock............................................... 454 19,298
--------- ---------
GROSS PROFIT................................................ 205,956 160,806
OTHER INCOME
Interest received........................................... 489 198
--------- ---------
206,445 161,004
EXPENDITURE................................................. 195,800 150,133
Accounting fees............................................. 2,804 2,545
Administration fees......................................... 13,500 --
Advertising................................................. 17,296 6,043
Bank charges................................................ 4,589 4,128
Commission paid............................................. 4,600 14,143
Computer expenses........................................... 799 --
Depreciation of fixed assets................................ 4,000 4,000
Discount allowed............................................ 49 --
Entertainment............................................... 765 5,097
General expenses............................................ 210 --
Interest paid............................................... 390 --
Leasing charges............................................. 8,320 --
Member's salary............................................. 75,396 60,000
Motor and travelling expenses............................... 19,445 12,854
Overseas travelling......................................... 2,991 --
Printing, stationery and courier services................... 834 905
Rent........................................................ 2,193 26,176
Repairs and maintenance..................................... 279 --
Salaries and wages.......................................... 23,553 --
Security.................................................... 1,096 --
Staff welfare............................................... 2,017 --
Subscriptions............................................... 620 --
Telephone, telefax and postage.............................. 10,054 14,242
--------- ---------
NET INCOME for the year..................................... 10,645 10,871
TAXATION.................................................... 6 3,726 882
--------- ---------
NET INCOME for the year after taxation...................... 6,919 9,989
RETAINED INCOME at beginning of the year.................... 9,946 (43)
--------- ---------
RETAINED INCOME at end of the year.......................... 16,865 9,946
========= =========
</TABLE>

F-77
<PAGE>

VIRTUAL SUPPORT CC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

1. ACCOUNTING POLICIES

The financial statements have been drawn up on the historical cost basis and
incorporate the following principal accounting policies which are consistent
with those of the previous year:

<TABLE>
<S> <C> <C> <C>
1.1 Fixed assets

Fixed assets are depreciated on the reducing balance basis at rates which are
considered appropriate to reduce book values to estimated residual values over
the useful lives of the assets.
Computer equipment.......................................... 33.3%

1.2 Stock

Stock is valued at the lower of cost, determined on a first-in-first-out basis,
and net realisable value.

1.3 Turnover

Turnover comprises sales to customers and excludes value added tax.
</TABLE>

<TABLE>
<CAPTION>
1999 1998
-------- --------
R R
<S> <C> <C> <C>
2. MEMBERS' CONTRIBUTION

A Davidtz................................................... 50.0 50.0
P Pedersen.................................................. 12.5 12.5
H Trischler................................................. 12.5 12.5
K Redman.................................................... 12.5 12.5
A Koch...................................................... 12.5 12.5
------- -------
100 100
======= =======

3. LONG TERM LIABILITY

Loan (to)/from member--A Davidtz............................ (47,523) 20,017
======= =======
Interest free loan, to be repaid during the next financial
year.

4. FIXED ASSETS

Computer equipment.......................................... 1,605 5,667
Cost price.................................................. 11,938 12,000
Accumulated depreciation.................................... 10,333 6,333
------- -------
1,605 5,667
======= =======

5. DEBTORS

The debtors are ceded to the bank as security for bank overdraft purposes.

6. TAXATION

S A normal close corporation income tax..................... 3,726 882
======= =======
</TABLE>

F-78
<PAGE>

VIRTUAL COLOUR PROPERTIES CC
(REGISTRATION NUMBER: CK97/18915/23)
FINANCIAL STATEMENTS - 28 FEBRUARY 1999

F-79
<PAGE>

VIRTUAL COLOUR PROPERTIES CC

(REG NO CK97/18915/23)

FINANCIAL STATEMENTS - 28 FEBRUARY 1999

<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- -----------------------------
<S> <C>
Report of independent auditors.............................. F-81
Balance sheet............................................... F-82
Income statement............................................ F-83
Notes to financial statements............................... F-84
</TABLE>

F-80
<PAGE>

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
VIRTUAL COLOUR PROPERTIES CC

SCOPE

- examining, on a test basis, evidence supporting the amounts and
disclosures included in the financial statements,

- assessing the accounting principles used and significant estimates made
by management and

- evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

AUDIT OPINION

COMPARATIVE FIGURES

PricewaterhouseCoopers Inc.

- ----------------------------
Registered Accountants and Auditors
Chartered Accountants (SA)
Cape Town

26-10-99
- ----------------------------
Date

F-81
<PAGE>

VIRTUAL COLOUR PROPERTIES CC

BALANCE SHEET

AT 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- -------- --------
R R
<S> <C> <C> <C>
CAPITAL EMPLOYED

MEMBERS' CONTRIBUTIONS...................................... 400 400

ACCUMULATED LOSS............................................ (28,534) (14,626)
-------- --------

MEMBERS' DEFICIT............................................ (28,134) (14,226)

LONG TERM LIABILITY......................................... 2 472,415 478,100
-------- --------

444,281 463,874
======== ========

EMPLOYMENT OF CAPITAL

FIXED ASSETS................................................ 4 706,643 706,643

NET CURRENT LIABILITIES..................................... (262,362) (242,769)

CURRENT ASSETS

Accounts receivable......................................... 21,649 5,778

CURRENT LIABILITIES......................................... 284,011 248,547

Accounts payable............................................ 16,849 13,184

Short term loan............................................. 3 267,016 228,440

Bank........................................................ 146 6,923
-------- --------

444,281 463,874
======== ========
</TABLE>

F-82
<PAGE>

VIRTUAL COLOUR PROPERTIES CC

INCOME STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- -------- --------
R R
<S> <C> <C> <C>
INCOME...................................................... 136,442 86,744

Rent received............................................... 136,441 86,561
Interest received........................................... 1 183
------- -------

EXPENSES.................................................... 150,350 101,370
------- -------

Accounting fees............................................. 250 700
Bank charges................................................ 1,492 549
Electricity and water....................................... 336 --
Insurance................................................... -- 5,472
Interest paid............................................... 106,155 63,198
Legal expenses.............................................. -- 5,415
Levies...................................................... 42,117 23,436
Repairs and maintenance..................................... -- 1,200
Valuation fee............................................... -- 1,400
------- -------
NET LOSS for the year before taxation....................... (13,908) (14,626)

S A NORMAL TAXATION......................................... 6 -- --
------- -------

NET LOSS for the year after taxation........................ (13,908) (14,626)
ACCUMULATED LOSS at beginning of year....................... (14,626) --
------- -------
ACCUMULATED LOSS at end of year............................. (28,534) (14,626)
======= =======
</TABLE>

F-83
<PAGE>

VIRTUAL COLOUR PROPERTIES CC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

1. ACCOUNTING POLICIES

The financial statements have been drawn up on the historical cost basis and
incorporate the following principle accounting policy:

Land and buildings are not depreciated.

2. LONG TERM LIABILITY

<TABLE>
<S> <C> <C>
Loan from FNB payable in monthly instalments of R8 177 at
an interest rate of 22%...................................
Secured by a first mortgage bond over the immovable
property (Note 4)......................................... 472,415 478,100
======= =======
</TABLE>

3. SHORT TERM LOAN

<TABLE>
<S> <C> <C>
Loan: Virtual Colour CC................................... 267,016 228,440
======= =======
Interest free loan for which no repayment terms have been
determined.
</TABLE>

4. FIXED ASSETS

<TABLE>
<S> <C> <C>
Immovable property........................................

Comprising Section 19 and Section 20 under Sectional Plan
No. SS101/96 in the scheme known as Castle Mews, situate
at 16A Newmarket Street, Cape Town (Mortgaged as per note
2)........................................................

Cost...................................................... 706,643 706,643
======= =======
</TABLE>

5. TAXATION

<TABLE>
<S> <C> <C>
No provision has been made for taxation as the Close
Corporation had no taxable income.
</TABLE>

F-84
<PAGE>
VIRTUAL COLOUR CC

(REG NO 95/49496/23)

FINANCIAL STATEMENTS - 28 FEBRUARY 1999

F-85
<PAGE>

VIRTUAL COLOUR CC

(REG NO 95/49496/23)

FINANCIAL STATEMENTS - 28 FEBRUARY 1999

<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- -----------
<S> <C>
Report of independent auditors.............................. F-87
Balance sheet............................................... F-88
Income statement............................................ F-89
Notes to financial statements............................... F-90-F-91
</TABLE>

F-86
<PAGE>

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
VIRTUAL COLOUR CC

SCOPE

We conducted our audit in accordance with statements of South African
Auditing Standards. Those standards require that we plan and perform the audit
to obtain misstatement.

An audit includes:

- examining, on a test basis, evidence supporting the amounts and
disclosures included in the financial statements,

- assessing and accounting principles used and significant estimates made
by management and

- evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

AUDIT OPINION

In our opinion, the financial statements fairly present, in all material
respects, the financial position of the close corporation at 28 February 1999
and the results of its accounting practice.

COMPARATIVE FIGURES

PricewaterhouseCoopers Inc.

- ----------------------------
Registered Accountants and Auditors
Chartered Accountants (SA)
Cape Town

27-10-99
- ----------------------------
Date

F-87
<PAGE>

VIRTUAL COLOUR CC

BALANCE SHEET

AT 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- --------- ---------
<S> <C> <C> <C>
R R
CAPITAL EMPLOYED
MEMBERS' CONTRIBUTIONS...................................... 2 100 100
RETAINED INCOME............................................. 1,952,317 1,263,462
--------- ---------
MEMBERS' INTEREST........................................... 1,952,417 1,263,562
LONG TERM LIABILITIES....................................... 3 775,746 460,020
--------- ---------
2,728,163 1,723,582
========= =========

EMPLOYMENT OF CAPITAL

FIXED ASSETS................................................ 4 1,275,499 807,881
LOANS TO ASSOCIATED CORPORATIONS............................ 5 686,266 306,950
LOANS TO MEMBERS............................................ 6 508,958 37,921
NET CURRENT ASSETS.......................................... 257,440 570,830
CURRENT ASSETS.............................................. 1,714,566 1,065,241
Stock....................................................... 7 55,000 51,724
Accounts receivable......................................... 8 1,339,225 828,122
Bank and cash on hand....................................... 320,341 185,395

CURRENT LIABILITIES......................................... 1,457,126 494,411
Accounts payable............................................ 432,622 100,431
Receiver of Revenue--Income tax............................. 421,488 42,138
Bank overdraft.............................................. 8 72,592 --
Current portion of long term liabilities.................... 530,424 351,842
--------- ---------
2,728,163 1,723,582
========= =========
</TABLE>

F-88
<PAGE>
VIRTUAL COLOUR CC

INCOME STATEMENT

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
NOTES 1999 1998
-------- --------- ---------
R R
<S> <C> <C> <C>
SALES....................................................... 6,404,826 4,591,278
COST OF SALES............................................... 2,040,237 812,716
Opening stock............................................... 51,725 37,244
Purchases................................................... 2,043,512 827,197
--------- ---------
2,095,237 864,441
Closing stock............................................... 55,000 51,725
--------- ---------
GROSS PROFIT................................................ 4,364,589 3,778,562
OTHER INCOME
Administration fees received................................ 109,500 --
Interest received........................................... 1,393 6,251
Insurance claims............................................ 32,230 --
Bad debts recovered......................................... 2,560 --
Export incentive............................................ 19,340 --
Rent recovered.............................................. -- 1,400
--------- ---------
4,529,612 3,786,213
EXPENDITURE................................................. 3,466,463 2,850,277
Accounting fees............................................. 12,450 13,620
Advertising................................................. 20,431 2,469
Bad debts................................................... 21,389 40,021
Bank charges................................................ 12,473 11,617
Cleaning.................................................... -- 326
Commission paid............................................. 4,312 40,609
Computer expenses........................................... 66,982 31,119
Depreciation of fixed assets................................ 326,652 366,360
Discount allowed............................................ 35,557 --
Electricity and water....................................... 25,133 22,187
Entertainment............................................... 4,020 5,460
Finance charges............................................. 101,961 169,070
Fines....................................................... 1,207 --
Hire of equipment........................................... 8,179 --
Insurance................................................... 120,615 47,243
Interest paid...............................................
- --bank...................................................... 2,361 433
- --Receiver of Revenue....................................... 5,056 --
Leasing charges............................................. 147,319 150,236
Legal expenses.............................................. 6,908 --
Members' salaries........................................... 674,200 786,000
Motor and travelling expenses............................... 63,451 64,579
Overseas travelling......................................... 15,033 --
Printing and stationery..................................... 8,295 12,825
Rent........................................................ 69,491 76,055
Regional service council levies............................. 11,762 5,595
Repairs and maintenance..................................... 39,611 33,600
Salaries and wages.......................................... 1,486,981 902,846
Security.................................................... 1,365 --
Staff welfare............................................... 11,406 --
Subscriptions............................................... 4,438 3,694
Teas and refreshments....................................... 10,502 9,940
Telephone, telefax and postage.............................. 146,943 54,374
--------- ---------
NET INCOME for the year..................................... 1,063,149 935,936
TAXATION.................................................... 9 374,294 42,138
--------- ---------
NET INCOME for the year after taxation...................... 688,855 893,798
RETAINED INCOME at beginning of the year.................... 1,263,462 369,664
--------- ---------
RETAINED INCOME at end of the year.......................... 1,952,317 1,263,462
========= =========
</TABLE>

F-89
<PAGE>

VIRTUAL COLOUR CC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 1999

1. ACCOUNTING POLICIES

The financial statements have been drawn up on the historical cost basis and
incorporate the following principal accounting policies which are consistent
with those of the previous year.

<TABLE>
<S> <C> <C> <C>
1.1 Fixed assets

Fixed assets are depreciated on the reducing balance and straight line base at rates
which are considered appropriate to reduce book values to estimated residual values
over the useful lives of the assets.

Motor Vehicle............................................... 20% RB
Furniture, fixtures and fittings............................ 10% RB
Computer hardware........................................... 33% SL

1.2 Stock

Materials and work in progress are valued at the lower of cost, determined on a
first-in-first-out basis, and net realisable value.

The value of work in progress includes direct costs and a proportion of
manufacturing overheads.

1.3 Turnover

Turnover comprises sales to customers and exludes value added tax.
</TABLE>

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
2. MEMBERS' CONTRIBUTIONS

P Pedersen............................................ (25%) 25 25
H Trischler........................................... (25%) 25 25
K Redman.............................................. (25%) 25 25
A Koch................................................ (25%) 25 25
--------- ---------
100 100
========= =========

3. LONG TERM LIABILITIES

Secured..................................................... 1,306,170 811,862

Secured in terms of instalment sale agreements over motor
vehicles and computer equipment. The rate of interest is
linked to the prime bank
overdraft rate. Repayable in monthly instalments of R44 202,
inclusive of
interest.

Less: Amounts payable within one year reflected under
current liabilities......................................... 530,424 351,824
--------- ---------
775,746 460,020
========= =========
</TABLE>

F-90
<PAGE>

VIRTUAL COLOUR CC

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 28 FEBRUARY 1999

<TABLE>
<CAPTION>
1999 1998
--------- ---------
R R
<S> <C> <C> <C>
4. FIXED ASSETS

Furniture, fixtures and fittings............................ 105,912 87,499
Cost price.................................................. 121,209 94,047
Accumulated depreciation.................................... 15,297 6,548
Motor vehicles.............................................. 470,772 19,294
Cost price.................................................. 482,783 27,447
Accumulated depreciation.................................... 12,011 8,153
Computer hardware........................................... 698,815 701,088
Cost price.................................................. 1,685,052 1,373,280
Accumulated depreciation.................................... 986,237 672,192
--------- ---------

1,275,499 807,881
========= =========

5. LOANS TO ASSOCIATED CORPORATIONS

Virtual Colour Properties CC................................ 267,016 228,440
Virtual Colour Printing CC.................................. 419,250 78,510
--------- ---------
686,266 306,950
========= =========

6. LOANS TO MEMBERS

Interest free loans, to be repaid during the next financial
year........................................................ 508,958 37,921
========= =========

7. STOCK

Materials................................................... 20,000 26,884
Work in progress............................................ 35,000 24,840
--------- ---------
55,000 51,724
========= =========

8. DEBTORS

The debtors are ceded to the bank as security for bank overdraft purposes.

9. TAXATION

S A normal close corporation income tax..................... 374,294 42,138
========= =========
</TABLE>

F-91
<PAGE>

COLORSMART.COM, INC.
PRO FORMA FINANCIAL STATEMENTS

The following Pro Forma Combined Balance Sheet of the Registrant has been
prepared by management of the Registrant based upon the balance sheets of the
Registrant as of November 30, 1998 and August 31, 1999. The Pro Forma Combined
Statement of Operations was prepared based upon the statement of operations for
the Registrant for the twelve months ended November 30, 1998, and the nine
months ended August 31, 1999. The pro forma statement of operations also
includes the proposed acquisition's statements of operations for the twelve
months ended December 31, 1998, and the eight months ended August 31, 1999. The
pro forma statements give effect to the transactions under the purchase method
of accounting and the assumptions and adjustments in the accompanying notes to
the pro forma combined financial statements. The pro forma combined balance
sheets give effect to the acquisition as if they had occurred as of
November 30, 1998 and August 31, 1999. The pro forma combined statement of
operations for the year ended November 30, 1998, gives effect to the
acquisitions as if they had occurred as of December 1, 1997. The pro forma
combined statement of operations for the nine months ended August 31, 1999,
gives effect to the acquisitions as if they had occurred December 1, 1998.

The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma combined
financial statements do not purport to represent what the combined companies'
financial position or results of operations would actually have been had the
acquisition occurred on such date or as of the beginning of the period
indicated, or to project the combined companies' financial position or results
of operations for any future period.

F-92
<PAGE>

<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
Pro forma balance sheet, November 30, 1999.................. F-94
Pro forma statement of operations, November 30, 1999........ F-95
Notes to unaudited pro forma financial statements, November F-96
30, 1999..................................................
Pro forma balance sheet, August 31, 1999.................... F-97
Pro forma statement of operations, August 31, 1999.......... F-98
Notes to unaudited pro forma financial statements, August F-99
31, 1999..................................................
</TABLE>

F-93
<PAGE>

COLORSMART.COM, INC.
PRO FORMA BALANCE SHEET
NOVEMBER 30, 1998

MAGNUM ADV. THAT DISPLAY
COLORSMART.COM DIGITAL WORKS, INC. STONEHOUSE ARTS
-------------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash........................................................ 408 3,942 8,384 131 25,139
Accounts receivable......................................... 10,910 71,614 65,270 235,521 249,728
Investment.................................................. 20,833
Inventory................................................... 15,500 8,000 47,085 76,253 19,385
Prepaid expenses
--------- ---------- ------- --------- -------
Total current assets........................................ 26,818 83,556 120,739 332,738 294,252
Property and equipment...................................... 268,729 287,258 25,357 855,238 243,276
Other assets:
Goodwill....................................................
Accumulated Amortization....................................
Note receivable............................................. 12,538
Deferred taxes.............................................. 20,031
Deposits.................................................... 3,875 3,977 15,414
--------- ---------- ------- --------- -------
Total other assets.......................................... 3,875 16,515 35,445
========= ========== ======= ========= =======
Total assets................................................ 299,422 387,329 146,096 1,187,976 572,973
========= ========== ======= ========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Obilgations under capital leases............................ 7,566 107,548 55,495
Current maturities of long-term debt........................ 3,489 4,538 27,621
Due to shareholder.......................................... 44,962 51,021 187,542
Line of credit.............................................. 31,774
Accrued expenses............................................ 21,040 180,220 3,237
Accounts payable............................................ 3,000 138,200 61,138 320,304 82,738
--------- ---------- ------- --------- -------
Total current liabilities................................... 35,095 250,286 106,100 551,545 388,407
Long-term debt:
Obligations under capital leases............................ 10,174 278,618 813
Deferred rent............................................... 7,397
Deferred revenue............................................
Note payable--stockholder................................... 78,005
Notes payable............................................... 35,430 5,247 733,114 128,334
--------- ---------- ------- --------- -------
Total long-term debt........................................ 123,609 283,865 733,114 136,544
Stockholders' equity (deficit)
Common stock................................................ 3,329 1,000 15,574 17 10
Additional paid-in capital.................................. 531,952 1,854,050 990
Retained earnings (deficit)................................. (394,563) (2,001,872) 24,422 (96,700) 47,022
--------- ---------- ------- --------- -------
Total stockholders' equity (deficit)........................ 140,718 (146,822) 39,996 (96,683) 48,022
--------- ---------- ------- --------- -------
Total liabilities and stockholder's Equity (deficit)........ 299,422 387,329 146,096 1,187,976 572,973

TOP VIRTUAL JAMBERRY
COPY COLOUR LAKE COMBINED
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash........................................................ 42,397 53,071 133,471
Accounts receivable......................................... 23,262 478,935 1,135,240
Investment.................................................. 20,833
Inventory................................................... 22,255 188,477
Prepaid expenses
------- --------- ---- ----------
Total current assets........................................ 65,658 554,260 1,478,022
Property and equipment...................................... 73,564 355,068 2,108,490
Other assets:
Goodwill....................................................
Accumulated Amortization....................................
Note receivable............................................. 121,871 134,409
Deferred taxes.............................................. 20,031
Deposits.................................................... 23,266
------- --------- ---- ----------
Total other assets.......................................... 121,871 177,706
======= ========= ==== ==========
Total assets................................................ 139,223 1,031,199 3,764,218
======= ========= ==== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Obilgations under capital leases............................ 170,609
Current maturities of long-term debt........................ 87,148(10) 122,796
Due to shareholder.......................................... 283,525
Line of credit.............................................. 31,774
Accrued expenses............................................ 36,552 241,049
Accounts payable............................................ 30,846 101,064 737,290
------- --------- ---- ----------
Total current liabilities................................... 30,846 224,764 1,587,043
Long-term debt:
Obligations under capital leases............................ 289,605
Deferred rent............................................... 7,397
Deferred revenue............................................ 0
Note payable--stockholder................................... 78,005
Notes payable............................................... 319,592(10) 1,221,717
------- --------- ---- ----------
Total long-term debt........................................ 319,592 1,596,724
Stockholders' equity (deficit)
Common stock................................................ 167 164 20,261
Additional paid-in capital.................................. 133,391 2,520,383
Retained earnings (deficit)................................. (25,181) 486,680 (1,960,192)
------- --------- ---- ----------
Total stockholders' equity (deficit)........................ 108,377 486,844 580,452
------- --------- ---- ----------
Total liabilities and stockholder's Equity (deficit)........ 139,223 1,031,200 3,764,218

<CAPTION>
PRO FORMA
ADJUSTMENTS NOVMBER 30,
----------------------- 1998
DR CR PRO FORMA
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash........................................................ 133,471
Accounts receivable......................................... 1,135,240
Investment.................................................. 20,833
Inventory................................................... 188,477
Prepaid expenses
---------- ---------- ----------
Total current assets........................................ 1,478,022
Property and equipment...................................... 500,000(2) 2,608,490
Other assets:
Goodwill.................................................... 7,648,282(10) 7,648,282
Accumulated Amortization.................................... 0
Note receivable............................................. 134,409
Deferred taxes.............................................. 20,031
Deposits.................................................... 23,266
---------- ---------- ----------
Total other assets.......................................... 7,648,282 7,825,988
========== ========== ==========
Total assets................................................ 8,148,282 11,912,500
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Obilgations under capital leases............................ 170,609
Current maturities of long-term debt........................ 87,148(11) 35,648
Due to shareholder.......................................... 283,525
Line of credit.............................................. 31,774
Accrued expenses............................................ 241,049
Accounts payable............................................ 676,064(11) 61,226
---------- ---------- ----------
Total current liabilities................................... 763,212 823,831
Long-term debt:
Obligations under capital leases............................ 289,605
Deferred rent............................................... 7,397
Deferred revenue............................................
Note payable--stockholder................................... 30,845(11) 47,160
Notes payable............................................... 1,152,925(11) 68,792
---------- ---------- ----------
Total long-term debt........................................ 1,183,770 412,954
Stockholders' equity (deficit)
Common stock................................................ 8,580,271(12) 8,564,544 4,534
Additional paid-in capital.................................. 2,520,383(12) 11,065,386 11,065,386
Retained earnings (deficit)................................. 394,204(12) 1,960,192 (394,204)
---------- ---------- ----------
Total stockholders' equity (deficit)........................ 11,494,858 21,590,122 10,675,716
---------- ---------- ----------
Total liabilities and stockholder's Equity (deficit)........ 13,441,840 21,590,122 11,912,500
</TABLE>

See Notes to Unaudited Pro Forma Financial Statements.

F-94
<PAGE>

COLORSMART.COM, INC.
PRO FORMA STATEMENT OF OPERATIONS
NOVEMBER 30, 1998

MAGNUM ADV. THAT DISPLAY
COLORSMART.COM DIGITAL WORKS, INC. STONEHOUSE ARTS
-------------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................................... 127,191 608,891 967,275 1,829,805 1,660,753
Cost of sales............................................... 1,149 454,976 594,211 688,921 812,563
--------- ---------- ------- --------- ---------
Gross profit................................................ 126,042 153,915 373,064 1,140,884 848,190
General and administrative expenses......................... 433,041 484,325 390,438 1,009,658 770,986
--------- ---------- ------- --------- ---------
Income (loss) from operations............................... (306,999) (330,410) (17,374) 131,226 77,204
Other income (expense):
Interest income............................................. 1,140 351 111
Misc. income................................................ 5,547 18,661 4,764
Interest expense............................................ (2,060) (24,521) (411) (150,535) (25,635)
Gain (loss) on disposal of equipment
--------- ---------- ------- --------- ---------
Total other income (expense)................................ (920) (24,170) 5,247 (131,874) (20,871)
Income (loss) before income taxes........................... (307,919) (354,580) (12,127) (649) 56,333
Provision for income taxes.................................. 26,408
--------- ---------- ------- --------- ---------
Net income (loss)........................................... (307,919) (354,580) (12,127) (649) 29,925
========= ========== ======= ========= =========
Net loss per share (basic and diluted)...................... (0.10)
=========
Weighted average shares outstanding......................... 2,956,787
=========

TOP VIRTUAL
COPY COLOUR COMBINED
-------- --------- ----------
<S> <C> <C> <C> <C>
Net sales................................................... 420,830 1,804,168 7,418,913
Cost of sales............................................... 746,126 3,297,946
------- --------- --------- ----------
Gross profit................................................ 420,830 1,058,043 4,120,967
General and administrative expenses......................... 431,833 856,138 4,376,419
------- --------- --------- ----------
Income (loss) from operations............................... (11,003) 201,905 (255,452)
Other income (expense):
Interest income............................................. 383 1,985
Misc. income................................................ 30,951 59,923
Interest expense............................................ (18,608) (221,770)
Gain (loss) on disposal of equipment
------- --------- --------- ----------
Total other income (expense)................................ 12,726 (159,862)
Income (loss) before income taxes........................... (11,003) 214,631 (415,314)
Provision for income taxes.................................. 26,408
------- --------- --------- ----------
Net income (loss)........................................... (11,003) 214,631 (441,722)
======= ========= ========= ==========
Net loss per share (basic and diluted)......................

Weighted average shares outstanding.........................

<CAPTION>
PRO FORMA
ADJUSTMENTS
----------------------- NOVMBER 30,
1998
DR CR PRO FORMA
---------- ---------- ------------
<S> <C> <C> <C>
Net sales................................................... 7,418,913
Cost of sales............................................... 3,297,946
---------- ---------- ----------
Gross profit................................................ 4,120,967
General and administrative expenses......................... 509,885(8) 4,886,312
---------- ---------- ----------
Income (loss) from operations............................... (509,885) (765,345)
Other income (expense):
Interest income............................................. 1,985
Misc. income................................................ 59,923
Interest expense............................................ (221,770)
Gain (loss) on disposal of equipment
---------- ---------- ----------
Total other income (expense)................................ (159,862)
Income (loss) before income taxes........................... (509,885)(8) (925,207)
Provision for income taxes.................................. 26,408
---------- ---------- ----------
Net income (loss)........................................... (509,885) (951,615)
========== ========== ==========
Net loss per share (basic and diluted)...................... (0.21)
==========
Weighted average shares outstanding......................... 4,534,000
==========
</TABLE>

See Notes to Unaudited Pro Forma Financial Statements.

F-95
<PAGE>

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

NOVEMBER 30, 1998

The Pro Forma financial statements have been prepared assuming the
acquisition had occurred at November 30,1998. The acquisitions are contingent
upon the successful initial public offering to be completed in fiscal year 2000.
The statement of operations is prepared assuming the acquisition occurred
December 1, 1997.

The following assumptions have been made:

(1) Magnum Digital Services, Inc. will be acquired for $500,000 in cash and
200,000 shares of Colorsmart.com, Inc. stock. This will result in the
recordation of approximately $847,000 of goodwill, which will be amortized
over 15 years. The purchase agreement states that $275,000 of the purchase
price will be used to pay off debt of Magnum Digital Services, Inc. that
existed at the date of purchase.

(2) Advertising That Works, Inc. will be acquired for $1,500,000 in cash. This
will result in the recordation of approximately $960,000 of goodwill, which
will be amortized over 15 years. The purchase agreement states that $500,000
of the purchase price will be used to purchase the facility currently
occupied by Advertising That Works, Inc.

(3) Stonehouse Graphics (Pty) Limited will be acquired for approximately
$2,500,000 in cash. This will result in the recordation of approximately
$1,760,000 of goodwill, which will be amortized over 15 years.
Colorsmart.com, Inc. will not be assuming any liabilities that existed as of
the acquisition date.

(4) Display Arts, Inc. will be acquired for approximately $1,300,000 in cash.
This will result in the recordation of approximately $952,000 of goodwill,
which will be amortized over 15 years. The purchase agreement states that
$300,000 of the purchase price will be used to pay off debt of Display
Arts, Inc. that existed at the date of purchase.

(5) Top Copy CC will be acquired for approximately $426,000 in cash. This will
result in the recordation of approximately $287,000 of goodwill, which will
be amortized over 15 years. Colorsmart, Inc. will not be assuming any
liabilities that existed as of the acquisition date.

(6) Jamberry Lake, LLC will be acquired for $1,000,000 and 125,000 shares of
Colorsmart.com, Inc. common stock

(7) The Company expects to pay approximately $9,300,000 at the closings, the
cash will be paid from the initial public offering, and it is assumed common
stock will be issued and this amount is included in additional paid-in
capital.

(8) Amortization of goodwill is included in general and administrative expenses
and totals $509,885.

(9) Virtual Color Group will be acquired for approximately $426,000 in cash.
This will result in the recordation of approximately $420,000 of goodwill,
which will be amortized over 15 years. Colorsmart.com, inc. will not be
assuming any liabilities that existed as of the acquisition date.

(10) Total goodwill recorded is as follows; $846,822 for Magnum Digital
Services, $960,004 for Advertising That Works, $1,763,350 for Stonehouse
Graphics, $951,978 for Display Arts, $287,443 for Top Copy, $2,000,000 for
Jamberry Lake, and $838,685 for Virtual Colour for a total of $7,648,282.

(11) As agreed upon certain liabilities of the acquirees will be paid off from
the purchase price received from Colorsmart.com, Inc. These liabilities
total $1,946,982.

(12) At November 30, 1998 Colorsmart.com had total common stock of 3,329 as a
result of the Magnum Digital Services acquisition another 200,000 shares of
.001 par value common stock will be issued and as a result of the Jamberry
Lake acquisition another 125,000 shares of .001 par value common stock will
be issued, and another 880,000 shares .001 par value common stock will be
issued to fund the acquisitions which will increase common stock to 4,534.

F-96
<PAGE>

COLORSMART.COM, INC.
PRO FORMA BALANCE SHEET
AUGUST 31, 1999

MAGNUM ADV. THAT DISPLAY TOP VIRTUAL JAMBERRY
COLORSMART DIGITAL WORKS, INC. STONEHOUSE ARTS COPY COLOUR LAKE
---------- ---------- ----------- ---------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash.......................... 3,903 2,919 12,387 129 45,385 41,794 82,136
Investments................... 20,537
Accounts receivable........... 53,348 81,087 344,389 146,005 34,381 518,930
Inventory..................... 17,000 73,287 75,169 29,385 25,462
Loan Receivable...............
--------- ---------- ------- --------- ------- ------- --------- ---
Total current assets.......... 20,903 56,267 166,761 440,224 220,775 76,175 626,528 0
Property and equipment........ 447,691 221,971 27,800 843,083 197,544 72,519 787,29 2
Other assets:
Goodwill......................
Accumulated Amortization......
Note receivable............... 12,538
Acquisition costs............. 301,535
Deferred taxes................ 31,000
Deposits...................... 51,530 3,977 16,977
--------- ---------- ------- --------- ------- ------- --------- ---
Total other assets............ 353,065 16,515 0 0 47,977 0 0 0
========= ========== ======= ========= ======= ======= ========= ===
Total assets.................. 821,659 294,753 194,561 1,283,307 466,296 148,694 1,413,820 0
========= ========== ======= ========= ======= ======= ========= ===
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Obilgations under capital
leases...................... 73,757 106,735 32,737
Due to Shareholder............ 73,548 16,692 187,542
Line of credit................
Current maturities of notes
payable..................... 116,690 32,330 31,846
Accrued expenses.............. 4,329 177,734 47,587
Accounts payable.............. 174,462 90,303 315,752 73,916 30,408 63,920
--------- ---------- ------- --------- ------- ------- --------- ---
Total current liabilities..... 268,324 313,527 106,995 493,486 373,628 30,408 63,920 0
Long-term debt:
Obligations under capital
leases...................... 37,154 227,078
Note payable--S/H............. 17,055
Notes payable................. 3,672 722,695 106,029 131,493 729,056
--------- ---------- ------- --------- ------- ------- --------- ---
Total long-term debt.......... 37,154 230,750 739,750 106,029 131,493 729,056 0
Stockholders' equity
(deficit):
Common stock.................. 4,006 1,000 15,574 17 10 167 131
Additional paid-in capital.... 1,267,733 1,952,341 71,992 990
Retained earnings (deficit)... (755,558) (2,202,865) 50,054 (14,361) (13,374) 620,713
--------- ---------- ------- --------- ------- ------- --------- ---
Total stockholders' equity
(deficit)................... 516,181 (249,524) 87,566 50,071 (13,361) (13,207) 620,844 0
========= ========== ======= ========= ======= ======= ========= ===
Total liabilities and
stockholder's Equity
(deficit)................... 821,659 294,753 194,561 1,283,307 466,296 148,694 1,413,820 0
========= ========== ======= ========= ======= ======= ========= ===

<CAPTION>
PRO FORMA
ADJUSTMENTS
-------------------------- 1999
COMBINED DR CR PRO FORMA
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash.......................... 188,653 188,653
Investments................... 20,537 20,537
Accounts receivable........... 1,178,140 1,178,140
Inventory..................... 220,303 220,303
Loan Receivable............... 0 0
---------- --------- ---------- ----------
Total current assets.......... 1,607,633 1,607,633
Property and equipment........ 2,597,900 500,000 (2) 3,097,900
Other assets:
Goodwill...................... 0 7,189,733 (10) 7,189,733
Accumulated Amortization...... 0 0
Note receivable............... 12,538 12,538
Acquisition costs............. 301,535 301,535
Deferred taxes................ 31,000 31,000
Deposits...................... 72,484 72,484
---------- --------- ---------- ----------
Total other assets............ 417,557 7,189,733 7,607,290
========== ========= ========== ==========
Total assets.................. 4,623,090 7,689,733 12,312,823
========== ========= ========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Obilgations under capital
leases...................... 213,229 213,229
Due to Shareholder............ 277,782 275,000 (11) 2,782
Line of credit................ 0 0
Current maturities of notes
payable..................... 180,866 180,866 (11) 0
Accrued expenses.............. 229,650 3,108 (11) 226,542
Accounts payable.............. 748,761 76,695 (11) 672,066
---------- --------- ---------- ----------
Total current liabilities..... 1,650,288 535,669 1,114,619
Long-term debt:
Obligations under capital
leases...................... 264,232 264,232 (11) 0
Note payable--S/H............. 17,055 17,055
Notes payable................. 1,692,945 1,562,056 (11) 130,889
---------- --------- ---------- ----------
Total long-term debt.......... 1,974,232 1,826,288 147,944
Stockholders' equity
(deficit):
Common stock.................. 20,905 15,694 (12) 5,211
Additional paid-in capital.... 3,293,056 (12) 8,508,471 11,801,527
Retained earnings (deficit)... (2,315,391) (12) 1,558,913 (756,478)
---------- --------- ---------- ----------
Total stockholders' equity
(deficit)................... 998,570 15,694 10,067,384 11,050,260
========== ========= ========== ==========
Total liabilities and
stockholder's Equity
(deficit)................... 4,623,090 2,377,651 10,067,384 12,312,823
========== ========= ========== ==========
</TABLE>

See Notes to Unaudited Pro Forma Financial Statements

F-97
<PAGE>

COLORSMART.COM, INC.
PRO FORMA STATEMENT OF OPERATIONS
AUGUST 31, 1999

<CAPTION>
PRO FORMA
ADJUSTMENTS
-------------------------- 1999
COMBINED DR CR PRO FORMA
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales..................... 2,868,477 2,868,477
Cost of sales................. 1,388,438 1,388,438
--------- --------- ---------- ----------
Gross profit.................. 1,480,039 1,480,039
General and administrative
expenses.................... 1,875,944 359,487(9) 2,235,431
--------- --------- ---------- ----------
Income (loss) from
operations.................. (395,905) (359,487) (755,392)
Other income (expense):
Interest income............... 2,536 2,536
Misc.......................... 655 655
Interest expense.............. (41,277) (41,277)
Gain (loss) on disposal of
equipment
--------- --------- ---------- ----------
Total other income
(expense)................... (38,086) (38,086)
Income (loss) before income
taxes....................... (433,991) (359,487)(9) (793,478)
Provision for income taxes.... 3,799 3,799
--------- --------- ---------- ----------
Net income (loss)............. (437,790) (359,487) (797,277)
========= ========= ========== ==========
Net loss per share (basic and
diluted).................... (0.15)
==========
Weighted average shares
outstanding................. 5,211,000
==========
</TABLE>

See Notes to Unaudited Pro Forma Financial Statements

F-98
<PAGE>

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

AUGUST 31, 1999

The Pro Forma financial statements have been prepared assuming the acquisition
had occurred at August 31, 1999. The acquisitions are contingent upon the
successful initial public offering to be completed in fiscal year 2000. The
statement of operations is prepared assuming the acquisition occurred
November 31, 1998.

The following assumptions have been made:

(1) Magnum Digital Services, Inc. will be acquired for $500,000 in cash and
200,000 shares of Colorsmart.com, Inc. stock. This will result in the
recordation of approximately $950,000 of goodwill, which will be amortized
over 15 years. The purchase agreement states that $275,000 of the purchase
price will be used to pay off debt of Magnum Digital Services, Inc that
existed at the date of purchase.

(2) Advertising That Works, Inc. will be acquired for $1,500,000 in cash. This
will result in the recordation of approximately $910,000 of goodwill, which
will be amortized over 15 years. The purchase agreement states that $500,000
of the purchase price will be used to purchase the facility currently
occupied by Advertising That Works, Inc.

(3) Stonehouse Graphics (Pty) Limited will be acquired for approximately
$2,500,000 in cash. This will result in the recordation of approximately
$1,620,000 of goodwill, which will be amortized over 15 years.
Colorsmart.com, Inc. will not be assuming any liabilities that existed as of
the acquisition date.

(4) Display Arts, Inc. will be acquired for approximately $1,300,000 in cash.
This will result in the recordation of approximately $1,010,000 of goodwill,
which will be amortized over 15 years. The purchase agreement states that
$300,000 of the purchase price will be used to pay off debt of Display
Arts, Inc. that existed at the date of purchase.

(5) Top Copy CC will be acquired for approximately $426,000 in cash. This will
result in the recordation of approximately $280,000 of goodwill, which will
be amortized over 15 years. Colorsmart, Inc. will not be assuming any
liabilities that existed as of the acquisition date.

(6) Virtual Colour Group will be acquired for approximately $1,800,000 in cash.
This will result in the recordation of approximately $280,000 of goodwill,
which will be amortized over 15 years. Colorsmart, Inc. will not be assuming
any liabilities that existed as of the acquisition date.

(7) Jamberry Lake, LLC will be acquired for $1,000,000 and 125,000 shares of
Colorsmart.com common stock.

(8) The Company expects to pay approximately $9,300,000 at the closings. The
cash will be paid from the initial public offering, and it is assumed common
stock will be issued and this amount is included in additional paid-in
capital.

(9) Amortization of goodwill is included in general and administrative expenses
and totals approximately $359,000.

(10) Total goodwill recorded is as follows; $1,013,361 for Display Arts,
$1,616,929 for Stonehouse Graphics, $912,434 for Advertising That Works,
$949,524 for Magnum Digital Services, $277,972 for Top Copy, $419,513 for
Virtual Colour and $2,000,000 for Jamberry Lake for a total of $7,189,733.

(11) As agreed upon certain liabilities of the acquirees will be paid off from
the purchase price received from Colorsmart.com, Inc. These liabilities
total $2,361,957.

(12) At August 31, 1999 Colorsmart.com, Inc. had total common stock of 4,006 as
a result of the Magnum Digital Services Acquisition another 200,000 shares
of .001 par value common stock will be issued and as a result of the
Jamberry Lake acquisition another 125,000 shares of .001 par value common
stock will be issued, and another 880,000 shares of .001 par value common
stock will be issued to fund the acquisitions which will increase common
stock to 5,211.

F-99
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON, OR ANY OTHER PERSON TO PROVIDE YOU
WITH DIFFERENT INFORMATION OR REPRESENT ANYTHING THAT IS NOT CONTAINED IN THIS
PROSPECTUS. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE ACCURATE AS OF THE
DATE ON THE FRONT COVER OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION,
RESULTS OF OPERATIONS, AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE. THIS
PROSPECTUS IS AN OFFER TO SELL ONLY THE SHARES, AND COMPONENTS THEREOF, OFFERED
HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO
DO SO.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary........................
The Offering..............................
Summary Consolidated Financial Data.......
Risk Factors..............................
Cautionary Note Regarding Forward-Looking
Statements..............................
Use Of Proceeds...........................
Dividend Policy...........................
Capitalization............................
Dilution..................................
Selected Consolidated Financial Data......
Management's Discussion And Analysis Of
Financial Condition And Results Of
Operations..............................
Business..................................
Management................................
Certain Transactions......................
Principal Stockholders....................
Description Of Securities.................
Shares Eligible For Future Sale...........
Underwriting..............................
Legal Matters.............................
Experts...................................
ColorSmart.com, Inc. Index To Consolidated
Financial Statements....................
Information Not Required In Prospectus....
</TABLE>

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

UNTIL , 2000, 25 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS THAT
BUY, SELL OR TRADE THE SHARES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

2,000,000

SHARES OF COMMON STOCK.

[LOGO]

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

PROSPECTUS

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

NUTMEG SECURITIES, LTD.

JANUARY , 2000

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As permitted by Section 78.037 of the Nevada General Corporation Law, the
Company has included in its Restated Articles of Incorporation a provision which
states that a director or officer of the Company shall not be liable to the
Company or its shareholders for monetary damages for breach of fiduciary duty as
a director or officer, except to the extent such limitation of liability is
prohibited by Nevada General Corporation Law as the same exists or may hereafter
be amended. Section 78.037 currently provides that any such provision may not
eliminate or limit the liability of a director or officer for (a) acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law; or (b) the payment of dividends in violation of the Nevada General
Corporation Law.

As permitted by Section 78.751 of the Nevada General Corporation Law,
Article VIII of the Company's Bylaws provides for the indemnification by the
Company, including suits brought by or on behalf of the Company, of each
director, officer, employee or agent thereof to the fullest extent permitted by
Nevada law.

As permitted by the Nevada General Corporation Law and Article VIII of the
Company's Bylaws, the Company has entered into indemnity agreements with its
directors and officers that provide for indemnification of such individuals to
the fullest extent permitted by Nevada law, and the Company maintains director's
and officer's liability for its directors and officers against certain
liabilities.

The Registrant intends to obtain directors' and officers' insurance
providing indemnification for certain of the Registrant's directors, officers
and employees against certain liabilities, prior to the completion of this
offering.

Reference is also made to the underwriting agreement filed as Exhibit 1.1 to
the Registration Statement for information concerning the Underwriters'
obligation to indemnify the Registrant and its officers and directors in certain
circumstances, and our obligation to indemnify the underwriters. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses to be incurred in connection with this offering are
as follows:

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 8,774
Nasdaq National Market System Listing Fee................... $ 6,000
NASD Filing Fee............................................. $ 61,875
Accounting Fees and Expenses*............................... $ 75,000
Printing and Engraving*..................................... $100,000
Legal Fees and Expenses*.................................... $150,000
Blue Sky Fees and Expenses*................................. $ 30,000
Transfer Agent and Registrar Fees*.......................... $ 10,000
Miscellaneous Expenses*..................................... $ 58,351
--------
Total*...................................................... $500,000
========
</TABLE>

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

* Estimated.

II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

During the last three years, the Registrant has sold and issued the
following unregistered securities in transactions which were exempt from
registration under the Securities Act of 1933, pursuant to Section 4(2) of the
Securities Act, as they were transactions not involving a public offering:

In February 1998, we offered and sold 719,490 shares of our common stock in
a private placement transaction exempt from registration under Rule 504 of
Regulation D promulgated under the Securities Act of 1933, as amended. We raised
a total of $320,000 in the aggregate in this offering. From March 1999 through
April 1999, we also offered and sold an additional 198,050 shares of our common
stock in a private placement transaction exempt from registration under
Rule 504 of Regulation D promulgated under the Securities Act of 1933, as
amended. We raised a total of $1,000,000 in the aggregate in this offering.

From July 10, 1999 through November 15, 1999, we offered and sold to
accredited investors 16,805 units, with each unit offered and sold consisting of
two shares of our preferred stock and two common stock purchase warrants
entitling the holders to purchase one additional share of our common stock for
each common stock purchase warrant, at an exercise price of $5.00 per warrant.
Accordingly, we offered and sold a total of 33,610 shares of our preferred stock
and 33,610 common stock purchase warrants entitling the holders to purchase
33,610 shares of our common stock at the time the warrants are exercised. All of
these warrants are now outstanding. This offering was made as a private
placement transaction exempt from registration under Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended, and we raised a total
of $287,075 in the aggregate.

ITEM 27. EXHIBITS.

a. The following Exhibits are filed as a part of this registration statement
pursuant to Item 601 of Regulation S-B:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
1.01* Underwriting Agreement between ColorSmart and Nutmeg
Securities, Ltd. dated

2.01** Stock and Asset Purchase Agreement between ColorSmart and
Magnum Digital Services Corp. dated September 3, 1998

2.02** Extension Agreement between ColorSmart.com, Inc. and Magnum
Digital, Inc. dated December 2, 1999

2.03** Stock and Asset Purchase Agreement between ColorSmart and
Advertising That Works dated September 3, 1998

2.04** Extension Agreement between ColorSmart.com, Inc. and
Advertising That Works, Inc. dated December 2, 1999

2.05** Sales of Shares Agreement between ColorSmart and Stonehouse
Graphics (Pty) Limited dated October 12, 1998

2.06** Stock Purchase Agreement between ColorSmart.com, Inc. and
Donovan J. McNamee Jr. and Pamela M. McNamee dated June 23,
1999

2.07** Extension Agreement between ColorSmart.com, Inc. and
Donovan J. McNamee, Jr. and Pamela M. McNamee dated
October 1, 1999

2.08** Second Extension Agreement between ColorSmart.com, Inc. and
Donovan J. McNamee, Jr. and Pamela M. McNamee dated
December 15, 1999

2.09** Agreement between Top Copy CC and ColorSmart.com Inc, dated
October 14, 1999

2.10** Agreement between Top Copy CC and ColorSmart.com, Inc. to
Reinstate Sale of Business Agreement dated October 8, 1999
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
2.11** Agreement between ColorSmart.com, Inc. and Alois Koch dated
November 19, 1999

2.12** Agreement between Virtual Support CC and ColorSmart.com,
Inc. and Keith Howard Redman and Herbert Maria Trischler and
Alois Koch and Aardt Davidtz dated September 11, 1999

2.13** Agreement between Virtual Colour Printing CC and
ColorSmart.com, Inc. and K. Redman and K. Trischler and
A. Koch dated September 11, 1999

2.14** Agreement between Virtual Colour Property CC and
ColorSmart.com, Inc. and Keith Howard Redman and Herbert
Maria Trischler and Alois Koch dated September 11, 1999

2.15** Agreement between Jamberry Lake, LLC, Jamberry Lake Digital
Media, Inc. and ColorSmart.Com, Inc. dated December 3, 1999,
Nunc Pro Tunc to August , 1999

3.01** Articles of Incorporation of ColorSmart, Inc. dated
July 17, 1997

3.02** Certificate of Amendment to Articles of Incorporation dated
December 29, 1998

3.03** By-laws

5.0* Opinion of Gregory Bartko, Esq.

5.1* Opinion of Lynch, Rowin, Novack, Burnbaum & Crystal, P.C.

10.01** Commercial Rental Agreement between Chris England and
Advertising That Works, Inc. dated January 1, 1998

10.02** Commercial Rental Agreement between Chris England and
Advertising That Works, Inc. dated March 1, 1999

10.03** Contract for Sale of Realty dated August 16, 1995

10.04** Lease Agreement between The Hertz Group and Display Arts,
Inc. dated August 13, 1996

10.05** Lease Agreement between Michael N. Ryan and Lynda K. Ryan
and ColorSmart Inc. dated March 6, 1998

10.06** Memorandum of Agreement of Lease between Constantia Court
Yard and Colour Smart.Com.SA dated on October 1, 1999

10.07** Lease Agreement between Rollins Associates and Professional
Displays, Inc. dated February 25, 1993

10.08** Agreement for Assumption of Obligations Under Lease between
Display Arts, Inc. and Donovan J. McNamee, Jr. dated
October 23, 1998

10.09** Lease Agreement between Raymond G. Guay Revocable Trust and
Display Arts dated January 1, 1999

10.10** Lease Agreement between Steve Kress and Don McNamee Jr.,
d/b/a Graphic Transfer/Display Arts and Enos Reed dated
October 23, 1998

10.11** Agreement between ColorSmart.com and Dimitri Haralambous
dated August 7, 1999

10.12** Memorandum of Agreement of Lease between Norwich Life South
Africa Limited and Colour Smart.Com South Africa dated
June 25, 1999

10.13** Employment Agreement between ColorSmart.com Inc. and Greg
Stooksberry dated October 15, 1999

10.14** Employment Agreement between ColorSmart.com Inc. and Robert
McDowell dated September 16, 1999
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
10.15** Employment Agreement between ColorSmart.com Inc. and
Roger D. Finchum, Sr. dated September 16, 1999

10.16** Employment Agreement between ColorSmart.com Inc. and Lee
Watson dated September 16, 1999

10.17** Employment Agreement between ColorSmart.com Inc. and
Roger D. Finchum Jr. dated September 16, 1999

10.18** Employment Agreement between ColorSmart.com Inc. and Erich
Fischer dated September 16, 1999

10.19** Employment Agreement between ColorSmart.com Inc. and
Reginald Burrows dated September 16, 1999

10.20** Employment Agreement between ColorSmart and England dated
September 23, 1998

10.21** Employment Agreement between Stonehouse Graphics (Pty), Ltd.
and Nolan Weight dated October 12, 1998

10.22** Agreement between ColorSmart.com Inc. and Aardt Davidtz
dated November 18, 1999

10.23** Agreement between ColorSmart.com Inc. and Keith Redman dated
November 18, 1999

10.24** Agreement between ColorSmart.com Inc. and Herbert Trischler
dated November 18, 1999

10.25** Employment Agreement between ColorSmart.Com, Inc. and
Greg E. Dukoff dated December 3, 1999

10.26** Closed End Vehicle Lease Agreement between Bank One and
Display Arts, Inc. dated August 30, 1997

10.27** Plain Language Equipment Lease between Dolphin Capital
Corporation and Display Arts Inc. dated January 15, 1999

10.28** Promissory Note between Display Arts, Inc. and First
American National Bank dated May 20, 1999

10.29** Promissory Note executed by ColorSmart, Inc. dated
November 30, 1997

10.30** Promissory Note executed by ColorSmart, Inc. dated
November 30, 1998

10.31** Commercial Guaranty between Donovan McNamee and First
American National Bank dated May 20, 1999

10.32** Commercial Guaranty between Pamela McNamee and First
American National Bank dated May 20, 1999

10.33** Commercial Security Agreement between Display Arts Inc. and
First American National Bank dated May 20, 1999

10.34** Agreement to Provide Insurance between Display Arts Inc. and
First American National Bank dated May 20, 1999

10.35** Business Line Plus Agreement between Display Arts and First
American National Bank dated August 15, 1996

10.36** U.S. Small Business Administration Note between First
American National Bank and Display Arts Inc. dated
August 15, 1996

10.37** Security Agreement between Display Arts Inc. and First
American National Bank dated August 15, 1996
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------------------- ------------------------------------------------------------
<C> <S>
10.38** Security Agreement between Display Arts Inc. and First
American National Bank dated August 15, 1996

10.39** Employment Agreement between ColorSmart.com Inc. and
Donovan J. McNamee Jr. dated June 23, 1999

10.40** Lease Agreement between Michele Ferrera, Trustee of the
Michele Ferrera Trust Dated April 4, 1972 as amended et al
and Robert L. McDowell dated November 18, 1994

10.41** Catalog Business Lease Agreement between Apple Commercial
Credit and Robert McDowell

10.42** Lease Agreement between Ikon Capital and Magnum Digital
Services dated November 12, 1997

10.43** Lease Agreement between Ikon Capital and Magnum Digital
Services dated August 27, 1997

10.44** Equipment Lease Agreement between 1199 Mac, Inc. d/b/a
Magnum Digital Services and GBC/Protech for a GBC/Protech
dated November 19, 1997

10.45** Master Lease Agreement between 3M Financing Services and
1199 Mac, Inc. d/b/a Electronic Computer Imaging dated
October 10, 1996

10.46** Exclusive Distributor Agreement between Display Arts, Inc.
and Nimlok Company dated July 8, 1998

10.47** Letter Agreement between Display Arts, Inc. and Xerox
Colorgrafx Systems dated July 31, 1998

23.1 Consent of Daszkal, Bolton & Manela dated December 23, 1999

23.2** Consent of Lee R. Watson dated December 3, 1999

23.3 Consent of PricewaterhouseCoopers dated December 21, 1999

23.4* Consent of Gregory Bartko, Esq. (included in opinion filed
as Exhibit 5.0)

23.5* Consent of Lynch, Rowin, Novack, Burnbaum & Crystal, P.C.
(included in opinion filed as Exhibit 5.1)

24.0** Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures")

27.0** Financial Data Schedule
</TABLE>

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

* To be filed by amendment

** Previously filed

ITEM 28. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the undersigned Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the undersigned Registrant of expenses incurred or
paid by a director, officer or controlling person of the undersigned Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the undersigned Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,

II-5
<PAGE>
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(b) The undersigned Registrant in all instances will provide to the
Underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the undersigned Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of the registration statement as of the time it was
declared effective; and

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(d) The undersigned Registrant hereby undertakes that it will:

(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which
wasregistered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and

(iii) Include any additional or changed material information on the
plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.

(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

II-6
<PAGE>
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Madison, Tennessee, on the 29th day of December,
1999.

<TABLE>
<S> <C> <C>
COLORSMART.COM,INC.

BY:
-----------------------------------------
Roger D. Finchum, Sr.
CHIEF EXECUTIVE OFFICER
</TABLE>

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
Chief Executive Officer,
President and Director
------------------------------------------- (Principal Executive December 29, 1999
Roger D. Finchum, Sr. Officer)

* Vice-President and Director
------------------------------------------- December 29, 1999
Roger D. Finchum, Jr.

* Director
------------------------------------------- December 29, 1999
Reginald W.H. Burrows

* Chief Financial Officer
------------------------------------------- (Principal Financial and December 29, 1999
Lee Watson Accounting Officer)

* Vice-President
------------------------------------------- December 29, 1999
Erich J. Fischer

-------------------------------------------
*Roger D. Finchum, Sr. December 29, 1999
As Power of Attorney
</TABLE>

II-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------------------- ----------- -------------
<C> <S> <C>
1.01* Underwriting Agreement between ColorSmart and Nutmeg
Securities, Ltd. dated ..................

2.01** Stock and Asset Purchase Agreement between ColorSmart and
Magnum Digital Services Corp. dated September 3, 1998.....

2.02** Extension Agreement between ColorSmart.com, Inc. and Magnum
Digital, Inc. dated December 2, 1999......................

2.03** Stock and Asset Purchase Agreement between ColorSmart and
Advertising That Works dated September 3, 1998............

2.04** Extension Agreement between ColorSmart.com, Inc. and
Advertising That Works, Inc. dated December 2, 1999.......

2.05** Sales of Shares Agreement between ColorSmart and Stonehouse
Graphics (Pty) Limited dated October 12, 1998.............

2.06** Stock Purchase Agreement between ColorSmart.com, Inc. and
Donovan J. McNamee Jr. and Pamela M. McNamee dated
June 23, 1999.............................................

2.07** Extension Agreement between ColorSmart.com, Inc. and
Donovan J. McNamee, Jr. and Pamela M. McNamee dated
October 1, 1999...........................................

2.08** Second Extension Agreement between ColorSmart.com, Inc. and
Donovan J. McNamee, Jr. and Pamela M. McNamee dated
December 15, 1999.........................................

2.09** Agreement between Top Copy CC and ColorSmart.com Inc, dated
October 14, 1999..........................................

2.10** Agreement between Top Copy CC and ColorSmart.com, Inc. to
Reinstate Sale of Business Agreement dated October 8,
1999......................................................

2.11** Agreement between ColorSmart.com, Inc. and Alois Koch dated
November 19, 1999.........................................

2.12** Agreement between Virtual Support CC and ColorSmart.com,
Inc. and Keith Howard Redman and Herbert Maria Trischler
and Alois Koch and Aardt Davidtz dated September 11,
1999......................................................

2.13** Agreement between Virtual Colour Printing CC and
ColorSmart.com, Inc. and K. Redman and K. Trischler and
A. Koch dated September 11, 1999..........................

2.14** Agreement between Virtual Colour Property CC and
ColorSmart.com, Inc. and Keith Howard Redman and Herbert
Maria Trischler and Alois Koch dated September 11, 1999...

2.15** Agreement between Jamberry Lake, LLC, Jamberry Lake Digital
Media, Inc. and ColorSmart.Com, Inc. dated December 3,
1999, Nunc Pro Tunc to August , 1999....................

3.01** Articles of Incorporation of ColorSmart, Inc. dated July 17,
1997......................................................

3.02** Certificate of Amendment to Articles of Incorporation dated
December 29, 1998.........................................

3.03** By-laws.....................................................

5.0* Opinion of Gregory Bartko, Esq..............................

5.1* Opinion of Lynch, Rowin, Novack, Burnbaum & Crystal, P.C....
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------------------- ----------- -------------
<C> <S> <C>
10.01** Commercial Rental Agreement between Chris England and
Advertising That Works, Inc. dated January 1, 1998........

10.02** Commercial Rental Agreement between Chris England and
Advertising That Works, Inc. dated March 1, 1999..........

10.03** Contract for Sale of Realty dated August 16, 1995...........

10.04** Lease Agreement between The Hertz Group and Display Arts,
Inc. dated August 13, 1996................................

10.05** Lease Agreement between Michael N. Ryan and Lynda K. Ryan
and ColorSmart Inc. dated March 6, 1998...................

10.06** Memorandum of Agreement of Lease between Constantia Court
Yard and Colour Smart.Com.SA dated on October 1, 1999.....

10.07** Lease Agreement between Rollins Associates and Professional
Displays, Inc. dated February 25, 1993....................

10.08** Agreement for Assumption of Obligations Under Lease between
Display Arts, Inc. and Donovan J. McNamee, Jr. dated
October 23, 1998..........................................

10.09** Lease Agreement between Raymond G. Guay Revocable Trust and
Display Arts dated January 1, 1999........................

10.10** Lease Agreement between Steve Kress and Don McNamee Jr.,
d/b/a Graphic Transfer/Display Arts and Enos Reed dated
October 23, 1998..........................................

10.11** Agreement between ColorSmart.com and Dimitri Haralambous
dated August 7, 1999......................................

10.12** Memorandum of Agreement of Lease between Norwich Life South
Africa Limited and Colour Smart.Com South Africa dated
June 25, 1999.............................................

10.13** Employment Agreement between ColorSmart.com Inc. and Greg
Stooksberry dated October 15, 1999........................

10.14** Employment Agreement between ColorSmart.com Inc. and Robert
McDowell dated September 16, 1999.........................

10.15** Employment Agreement between ColorSmart.com Inc. and
Roger D. Finchum, Sr. dated September 16, 1999............

10.16** Employment Agreement between ColorSmart.com Inc. and Lee
Watson dated September 16, 1999...........................

10.17** Employment Agreement between ColorSmart.com Inc. and
Roger D. Finchum Jr. dated September 16, 1999.............

10.18** Employment Agreement between ColorSmart.com Inc. and Erich
Fischer dated September 16, 1999..........................

10.19** Employment Agreement between ColorSmart.com Inc. and
Reginald Burrows dated September 16, 1999.................

10.20** Employment Agreement between ColorSmart and England dated
September 23, 1998........................................

10.21** Employment Agreement between Stonehouse Graphics (Pty), Ltd.
and Nolan Weight dated October 12, 1998...................

10.22** Agreement between ColorSmart.com Inc. and Aardt Davidtz
dated November 18, 1999...................................
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------------------- ----------- -------------
<C> <S> <C>
10.23** Agreement between ColorSmart.com Inc. and Keith Redman dated
November 18, 1999.........................................

10.24** Agreement between ColorSmart.com Inc. and Herbert Trischler
dated November 18, 1999...................................

10.25** Employment Agreement between ColorSmart.Com, Inc. and
Greg E. Dukoff dated December 3, 1999.....................

10.26** Closed End Vehicle Lease Agreement between Bank One and
Display Arts, Inc. dated August 30, 1997..................

10.27** Plain Language Equipment Lease between Dolphin Capital
Corporation and Display Arts Inc. dated January 15,
1999......................................................

10.28** Promissory Note between Display Arts, Inc. and First
American National Bank dated May 20, 1999.................

10.29** Promissory Note executed by ColorSmart, Inc. dated
November 30, 1997.........................................

10.30** Promissory Note executed by ColorSmart, Inc. dated
November 30, 1998.........................................

10.31** Commercial Guaranty between Donovan McNamee and First
American National Bank dated May 20, 1999.................

10.32** Commercial Guaranty between Pamela McNamee and First
American National Bank dated May 20, 1999.................

10.33** Commercial Security Agreement between Display Arts Inc. and
First American National Bank dated May 20, 1999...........

10.34** Agreement to Provide Insurance between Display Arts Inc. and
First American National Bank dated May 20, 1999...........

10.35** Business Line Plus Agreement between Display Arts and First
American National Bank dated August 15, 1996..............

10.36** U.S. Small Business Administration Note between First
American National Bank and Display Arts Inc. dated
August 15, 1996...........................................

10.37** Security Agreement between Display Arts Inc. and First
American National Bank dated August 15, 1996..............

10.38** Security Agreement between Display Arts Inc. and First
American National Bank dated August 15, 1996..............

10.39** Employment Agreement between ColorSmart.com Inc. and
Donovan J. McNamee Jr. dated June 23, 1999................

10.40** Lease Agreement between Michele Ferrera, Trustee of the
Michele Ferrera Trust Dated April 4, 1972 as amended et al
and Robert L. McDowell dated November 18, 1994............

10.41** Catalog Business Lease Agreement between Apple Commercial
Credit and Robert McDowell................................

10.42** Lease Agreement between Ikon Capital and Magnum Digital
Services dated November 12, 1997..........................

10.43** Lease Agreement between Ikon Capital and Magnum Digital
Services dated August 27, 1997............................

10.44** Equipment Lease Agreement between 1199 Mac, Inc. d/b/a
Magnum Digital Services and GBC/Protech for a GBC/Protech
dated November 19, 1997...................................
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------------------- ----------- -------------
<C> <S> <C>
10.45** Master Lease Agreement between 3M Financing Services and
1199 Mac, Inc. d/b/a Electronic Computer Imaging dated
October 10, 1996..........................................

10.46** Exclusive Distributor Agreement between Display Arts, Inc.
and Nimlok Company dated July 8, 1998.....................

10.47** Letter Agreement between Display Arts, Inc. and Xerox
Colorgrafx Systems dated July 31, 1998....................

23.1 Consent of Daszkal, Bolton & Manela dated December 23,
1999......................................................

23.2** Consent of Lee R. Watson dated December 3, 1999.............

23.3 Consent of PricewaterhouseCoopers dated December 21, 1999

23.4* Consent of Gregory Bartko, Esq. (included in opinion filed
as Exhibit 5.0)...........................................

23.5* Consent of Lynch, Rowin, Novack, Burnbaum & Crystal, P.C.
(included in opinion filed as Exhibit 5.1)................

24.0** Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures").................

27.0** Financial Data Schedule.....................................
</TABLE>

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

* To be filed by amendment.

** Previously File

<PAGE>
EXHIBIT 23.1

[DASZKAL BOLTON MANELA DEVLIN & CO. LETTERHEAD]

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

We hereby consent to the use in Registration Statement on Form SB-2 of our
reports dated for the following companies as follows:

<TABLE>
<S> <C> <C>
COMPANY YEAR ENDED DATE OF REPORT
- ---------------------------- ------------------ -----------------

Colorsmart.com, Inc. November 30, 1998 May 21, 1999
Advertising That Works, Inc. December 31, 1999 April 16, 1999
Magnum Digital Services December 31, 1998 April 2, 1999
Display Arts, Inc. December 31, 1998 May 26, 1999
</TABLE>

/s/ DASZKAL BOLTON MANELA DEVLIN &
CO.

Boca Raton, Florida
December 23, 1999

<PAGE>
EXHIBIT 23.3

[LOGO]

[LETTERHEAD]

21 December 1999

The Directors
Colorsmart.com Inc.
Nashville
Tennessee
USA

C/o Mr. R. Burrows

Fax number: 461 2287

Sirs

VIRTUAL COLOUR CC
VIRTUAL COLOUR PROPERTIES CC
VIRTUAL SUPPORT CC
VIRTUAL COLOUR PRINTING CC
FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 1999

We have audited the annual financial statements of the above mentioned close
corporations for the year ended 28 February 1999.

We consent to the use of the financial statements of the close corporations
for listing purposes.

Yours faithfully

/s/ Eldie Brink
- --------------------------
Eldie Brink
Director