FLORAFAX INTERNATIONAL INC, 10KSB40, 1995-12-12

FLORAFAX INTERNATIONAL INC
10KSB40, 1995-12-12
BUSINESS SERVICES, NEC

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United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-KSB

(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [Fee Required]
For the fiscal year ended August 31, 1995
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or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period from to
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Commission File Number 0-5531
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Florafax International, Inc.
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(Name of small business issuer in its charter)

Delaware 41-0719035
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

8075 20th Street, Vero Beach, Florida 32966
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(Address of principal executive offices) (Zip Code)

Issuer's telephone number (407) 563-0263
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Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock par value of $.01
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(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[ ]
State issuers' revenues for its most recent fiscal year $7,046,000.

On November 17, 1995, the aggregate market value of the Common Stock based upon
the average bid and asked prices as reported by the NASD held by nonaffiliates
was approximately $6,144,000.

As of November 17, 1995, 5,795,874 common shares were outstanding.

Documents Incorporated by Reference

None

Transitional Small Business Disclosure Format (Check One): Yes ; No X
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Florafax International, Inc.

Index

<TABLE>
<CAPTION>
Reference Page
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PART I

Item 1 Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 2 Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 8

PART II

Item 5 Market for Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Item 7 Management's Discussion and Analysis or Plan of
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Item 8 Financial Statements:

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Statements of Changes in
Stockholders' Equity (Net Capital Deficiency) . . . . . . . . . . . . . . . . . . 21
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . 22
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 24

Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 34

PART III
Items 10, 11, 12 and 13 are incorporated by reference to the Company's
definitive proxy statement, pursuant to Regulation 14A, which will involve
the election of directors. However, if such definitive proxy statement is
not filed with the Securities and Exchange Commission within 120 days following
August 31, 1995, such items will be filed as an amendment to this Form 10-K
under a cover of a Form 8 not later than the end of the 12-day period. . . . . . . . 35

PART IV

Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

</TABLE>
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PART I

Item 1. DESCRIPTION OF BUSINESS

Florafax International, Inc. is principally engaged in the business of
generating floral orders and providing floral order placement services to
retail florists. The Company is also a third-party processor of credit cards.

As used herein, the terms "Florafax" and "Company" mean Florafax International,
Inc. (the Registrant), its divisions and subsidiaries, unless the context
requires otherwise.

Flowers-By-Wire

The Company operates a flowers-by-wire business which enables Florafax member
florists (independent owners) to send and deliver floral orders throughout the
United States. Floral orders between florists are transacted primarily by
telephone or by the Company's communication network, FloraNet. FloraNet is a
floral order communication system which electronically links member florists
throughout the United States for the transmission of floral orders and receipt
of business information. FloraNet is designed to make the transmission of
floral orders less expensive and less time consuming than telephone orders.
FloraNet revenue is comprised of monthly membership dues and transaction fees.

The FloraNet system has the ability to distribute orders ratably to Florafax
member florists. Once an order enters the system FloraNet analyzes the area to
ascertain which member florists will deliver to that location. The system then
determines which florist should receive that order based on certain criteria.
The most important of the distribution criteria is that all florists are to
receive an equitable number of orders. Once FloraNet determines which florist
is to receive the order it is sent via FloraNet, facsimile, or telephone.
Management believes that the FloraNet system is presently the only system in
the industry that is capable of distributing orders equitably to member
florists.

Historically, floral orders have usually originated with one florist and were
then filled by another florist. However, during the current year the Company
began generating a significant portion of floral orders through its wholly
owned subsidiary, The Flower Club. The Flower Club has arrangements with
numerous nationally recognized companies which allows The Flower Club to
generate orders by marketing directly to the customers of these companies.
These orders do not require individuals to initiate the floral order at a
flower shop. Instead, the consumer dials a toll free number and places the
order at the Company's order entry department. These orders are then
transmitted to member florists via the FloraNet system.

Flowers-by-wire is the Company's primary business, accounting for 82% of net
revenues in 1995, 83% in 1994 and 88% in 1993.

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Florists, and their advertisements, are listed in the "Florafax Directory,"
which is published and distributed several times a year. The Company produces
the "Florafax Directory," brochures, and sales and promotional materials for
use by the Company and its member florists.

When a member florist sends a floral order they select from the Florafax
Directory a florist near the desired point of delivery and contact the selected
florist by use of the telephone or FloraNet and place the order. In the event a
florist cannot find a fulfilling florist in the area they wish to send an
order, they can call the Company's order entry department and the Company will
place the order. The sending florist is paid by the customer for the purchase
and the receiving (or fulfilling) florist is responsible for designing and
delivering the flowers to the recipient, and will be paid by Florafax. The
Company is capable of placing floral orders virtually anywhere in the world.

Member florists are on a "reporting plan" under which the sending florist, who
collects the price of the flowers from the customer, normally pays the Company
80% of the sales price and the Company generally pays the receiving florist 71%
of the sales price, retaining 9% for its processing services. Under this
"reporting plan" the Company is normally not aware of the transaction until the
receiving florist reports the order. Accordingly, accounting recognition of the
transaction does not normally occur until the order is reported to the Company.
Included in floral order processing are revenues generated by The Flower Club.
As more fully discussed in management's Discussion and Analysis or Plan of
Operation, some of these campaigns have a different revenue structure than the
revenue structure for traditional processing services. Consequently, net
revenues from floral order processing can range from 9% to 11% of gross floral
orders processed by the Company. Revenues and associated costs related to
floral orders generated by The Flower Club are recorded in the month that the
order was filled, as the Company is aware of the order at the time it is
placed.

A florist applying to become a Florafax member is evaluated to determine their
ability to operate in accordance with the Company's rules and regulations, to
provide a quality service and to comply with the credit policies established by
the Company. Member florists are eligible to receive orders from, and send
orders to, any other member.

The Company's flowers-by-wire operation is seasonal in that its member florists
send a much higher volume of orders during Thanksgiving, Christmas, Valentine's
Day, Easter and Mother's Day. During 1994 the Company purchased certain assets,
primarily trademarks and rights to telephone numbers, from Savannah Floral
Services, Inc. Subsequent to their purchase, these assets were transferred to
The Flower Club, Inc. The Flower Club, Inc. was formed to generate additional
orders by pursuing relationships with nationally recognized corporations. The
Company engages in joint marketing campaigns with these corporations not only
during holidays, but also during nonseasonal periods in an effort to provide
member florists with orders during slow periods of the year. Management expects
the upward trend in orders from nontraditional campaigns to continue. No one
Florafax member florist accounts for as much as 5% of the Company's annual
flowers-by-wire revenue.

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Credit and Charge Card Processing

Through its wholly owned subsidiary, Credit Card Management System, Inc.
(CCMS), the Company makes available to its members an electronic credit card
and charge card processing system, FloraCash. FloraCash essentially eliminates
paper from the processing of credit cards and travel and entertainment cards.
FloraCash automatically provides authorization codes for each transaction and
captures all the transaction data electronically, which can allow florists to
receive frequent, automatic deposits directly to their bank account. FloraCash
terminals and optional printers are sold or leased by the Company at
competitive rates.

As of August 31, 1995, CCMS processed credit and charge card transactions for
approximately 2,000 businesses and professional organizations in the United
States which are outside the floral industry. These businesses are primarily
funeral homes, cemeteries and dentists.

CCMS intends to continue to seek credit card processing opportunities outside
the floral industry.

History

Florafax was incorporated under the laws of Delaware in 1970 as the successor
to Spotts International, Inc., a company engaged in the premium promotion
business. In 1970, Florafax acquired a flowers-by-wire service, Florafax
Delivery, Inc., which had been incorporated in Arkansas since 1961. In 1974,
Florafax sold Spotts International, Inc. which represented its premium
promotion business.

In June 1991, the Company purchased for $19,000 the stock of U.S. Credit
Services, Inc., a credit services and collection business based in Orlando,
Florida. During 1993 the Company disposed of its investment in U.S. Credit by
transferring all of the stock of U.S. Credit to Floyd Cox, former Chairman of
the Board of Directors.

In April 1992, the Company incorporated Credit Card Management System, Inc., an
Oklahoma corporation formed to provide credit card processing services to both
floral and nonfloral businesses.

In March 1994 the Company incorporated The Flower Club, Inc. to generate
additional orders for its member florists.

Employees

As of August 31, 1995, the Company had approximately 124 full-time and
part-time employees.

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Competition

The flowers-by-wire industry is principally comprised of six companies. A major
portion of all flowers-by-wire transactions are processed by Florists'
Transworld Delivery Association (FTD), a cooperative organization of retail
florists. Because many florists subscribe to more than one flowers-by-wire
service, competition is intense. Usage can be affected by the quality and cost
of services offered by each company, promotional programs, industry reputation
and traditional patterns of usage employed by the sending florist. The Company
believes that its flowers-by-wire service is competitive in the industry.

In the credit card industry there are many banks and other companies which
process credit and charge card transactions on behalf of their business
clients. Most of these companies have greater revenues and process more
transactions than the Company. In addition, some of the Company's
flowers-by-wire industry competitors provide credit card processing services to
their members. The selection of one credit card processor over another can be
affected by a variety of factors including price, services offered and the
capability of providing specialized functions to accommodate the particular
credit card processing requirements of certain businesses. The Company believes
that its credit card processing services are competitive in the retail and
wholesale floral industry in particular and in the general credit card
processing industry as a whole.

Working Capital

During the current year the Company generated nearly $1,014,000 in working
capital from operations. The Company's working capital deficit was $1,398,000
at August 31, 1995 compared to $2,412,000 at August 31, 1994.

At August 31, 1994 the Company had borrowed $1,065,000 under the terms of the
overdraft facility with PNC Bank. During 1995 the Company retired the entire
$1,065,000 from cash flow generated from operations. In addition at August 31,
1995, PNC Bank held securities and cash belonging to the Company in the amount
of $535,000 as collateral for any future borrowings against the overdraft
facility.

Management is currently considering various options to retire the outstanding
balance of $2,921,000 on the Company's 9-1/2% convertible subordinated notes
due September 15, 1996.

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Item 2. DESCRIPTION OF PROPERTY

The Company's corporate headquarters were moved from Tulsa, Oklahoma to Vero
Beach, Florida in the last quarter of 1994. The Company's primary computer
operations and order entry system remain in Tulsa, Oklahoma. The Vero Beach
facilities are leased under an operating lease agreement expiring March 1,
2000. The lease agreement requires monthly payments of $2,750, plus utilities
and property taxes. The Tulsa facilities are leased under a three-year
operating lease agreement expiring August 31, 1997. The lease agreement
requires monthly payments of $5,650, which includes utilities.

The physical facilities occupied by the Company are anticipated to be adequate
for future requirements.

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Item 3. LEGAL PROCEEDINGS

The Company is involved in the following proceedings and litigation:

In October 1989, Bellerose Floral, Inc. (Bellerose) of Bayside, N.Y., an
affiliate of 800-FLOWERS, Inc. became a Florafax member florist, and Florafax
agreed to provide certain telecommunication services to Bellerose for a fee.
GTE Market Resources, Inc. (GTE/MR) was engaged by Florafax to provide
order-entry services for Florafax and to customers of Florafax, including
Bellerose.

In 1990 certain disputes arose among Florafax, Bellerose and GTE/MR regarding
the services to be performed by GTE/MR. As a result, in 1990, Florafax filed an
action in Tulsa County (Oklahoma) District Court against GTE/MR and Bellerose.
Bellerose then filed an action in New York Federal Court against Florafax.
Subsequently, Florafax and Bellerose settled their claims against each other.
Florafax pursued its claim against GTE/MR for damages suffered as a result of
GTE/MR's breach of the telecommunications service agreement. On November 23,
1993 a jury awarded Florafax $1,481,000 in net damages against GTE/MR.

GTE/MR appealed this case and posted bond with the Court in order to do so. On
December 22, 1994 this case was assigned to the Oklahoma Court of Appeals by
the Oklahoma Supreme Court. On April 4, 1995 the Court of Appeals of the State
of Oklahoma released for publication its decision on the appeal filed by
GTE/MR. The award to the Company of $743,117 for consequential damages was
affirmed. To the extent that the Company was awarded lost profits for two years
in the amount of $750,000, the judgment was reversed and remanded for a
determination of lost profits as limited by Oklahoma law. The award to GTE/MR
of a set-off amount of $88,750 for unpaid invoices was affirmed, a contractual
rate of 18% per annum applied for pre-judgment interest was applied and the
case remanded for a determination of an award of GTE's reasonable attorney's
fees, expenses and other collection costs incurred in recovering the unpaid
invoice amounts, but not their fees or expenses in defending against the claims
of the Company or in pursuing other unsuccessful aspects of GTE/MR's
counterclaim. The denial of the Company's request for attorney's fees was
affirmed. The Company and GTE/MR have each petitioned the Oklahoma Supreme
Court for writ of certiorari to review the portions of the Oklahoma Court of
Appeals decision adverse to their respective interests, and both of the parties
appeals have been granted. There are no assurances that the Company will obtain
a favorable ruling from the Oklahoma Supreme Court.

The Company's legal counsel has tried this case on a contingency fee basis and,
accordingly, the Company has incurred minimal expenses related to this
litigation. However, the agreement between the Company and its legal counsel
stipulates that the Company's attorneys are to receive 40% of the net proceeds
now that the case has reached the appellate court. Consequently, the Company is
to receive 60% of the ultimate proceeds. Recognition of any of these amounts
will not be reflected in the financial statements until ultimate resolution.

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Other

The Company is involved in various disputes involving routine business matters,
the resolution of all of which in management's opinion will not have a material
adverse effect upon the Company.

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

No matters were submitted to a vote of stockholders of the Company in the
fourth quarter of fiscal 1995.

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PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Florafax Common Stock is traded on the over-the-counter market, on a secondary
listing service, referred to as the "bulletin board" by the National
Association of Securities Dealers, Inc. (NASD), with a symbol of FIIF. The
number of record holders of Common Stock at November 17, 1995 was based on the
listing of record holders furnished by the Company's transfer agent. The
Company believes that, at November 17, 1995, there were approximately 2,200
holders of Common Stock, including persons who held in "street" or "nominee"
name, based on the number of record holders listed above and information
furnished by those brokers, dealers, banks and voting trustees of which the
Company is aware.

The table below sets forth by quarter for its fiscal years ended August 31,
1995 and 1994, the high and low bid prices for the Florafax Common Stock as
reported by the NASD. The quotations represent prices in the over-the-counter
market between dealers in securities, which prices are not necessarily
representative of actual transactions, and do not include retail markups,
markdowns or commissions.

<TABLE>
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Bid Prices
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High Low
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1995
First quarter 5/16 5/32
Second quarter 7/16 5/32
Third quarter 5/16 7/32
Fourth quarter 3/4 1/4

1994
First quarter 7/16 1/8
Second quarter 1/2 1/8
Third quarter 3/8 1/8
Fourth quarter 1/4 1/8
</TABLE>

On November 17, 1995, the closing bid quotation of Florafax Common Stock as
reported by published financial sources was $.875.

Florafax has never paid dividends on its Common Stock. Payment of dividends on
its Common Stock in the future will be at the discretion of the Company's Board
of Directors and will be dependent upon the Company's earnings, financial
condition, capital requirements and other factors deemed relevant by the Board
of Directors. Currently, the Company has no plans to pay any dividends.

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Item 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
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(In Thousands Except Per Share Amounts)
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Selected income statement data
(years ended August 31):
Net revenues $ 7,046 $ 7,093 $ 7,164 $ 7,041 $ 7,980
===========================================================

Net income (loss) $ 707 $ (311) $ (401) $(2,317) $ 5
===========================================================

Primary and fully diluted
earnings per share (years
ended August 31) $ .12 $ (0.06) $ (0.08) $ (0.45) $ 0.00
===========================================================

Selected balance sheet data
(at year-end):
Current assets $ 4,117 $ 2,847 $ 2,610 $ 3,128 $ 4,435
Current liabilities 5,515 5,259 4,270 4,982 4,291
Working capital
(deficiency) (1,398) (2,412) (1,660) (1,854) 144
Total assets 6,852 5,946 5,257 6,253 7,913
Long-term debt 3,034 3,142 3,007 3,026 3,044
Stockholders' investment
(net capital deficiency) (1,756) (2,515) (2,209) (1,843) 474
</TABLE>

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Liquidity and Capital Resources

Late in fiscal 1992, the Company began to experience a significant shortfall in
cash provided by operations. Consequently, during fiscal 1993, 1994 and 1995
the Company suspended all but necessary capital expenditures and reduced
expenses.

Late in fiscal 1992 arrangements were made with PNC Bank, which holds the
Company's operating funds and credit card accounts, for an interim secured
overdraft facility limited to $1,300,000. This agreement was extended several
times and matured on September 15, 1995. At August 31, 1994 the Company had
borrowed $1,065,000 under the terms of the overdraft facility with PNC Bank.
During 1995 the Company retired the entire $1,065,000 from cash flow generated
from operations. In addition at August 31, 1995, PNC Bank held securities and
cash belonging to the Company in the amount of $535,000 as collateral for the
overdraft facility.

For fiscal 1995, operating activities provided cash of $2,406,000, investing
activities used cash of $172,000 and financing activities used cash of
$820,000, resulting in a net increase in cash of $1,414,000.

Operating cash flow historically has been generated primarily from processing
floral orders and charge card transactions for the Company's member florists,
as well as collecting dues, fees and directory advertising from the members.
Floral order processing may require settlement with the fulfilling florist
before collection of funds from the sending florist. The terms of the
Company's receivables are 30 days, which management believes are consistent
within the industry. Charge card processing, however, generally allows the
Company to collect funds from the charge card issuer prior to settlement with
the member florist. Since in both types of transactions the Company is both
collecting and settling funds, the timing of these cash flows has a significant
impact on the Company's liquidity.

During 1995 and 1994 cash flows benefited from orders generated by The Flower
Club. All Flower Club orders are paid for by credit cards, which allows the
Company to receive its money within days after processing the transaction.
Gross floral orders and related handling fees in 1995 were in excess of
$10,100,000 (approximately 210,000 orders) which generated net revenues of
$1,363,000. Gross floral orders and related handling fees in 1994 were in
excess of $4,300,000 (approximately 92,000 orders) which generated net revenues
of $613,000.

During fiscal 1993 the Company began developing and marketing FloraNet 5000.
FloraNet 5000 is a point-of-sale credit card terminal that allows for florists
to send and receive orders on the same terminal. The cost of developing
FloraNet 5000 was approximately $73,000 in fiscal 1993.

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During 1994, the Company completed the development of the FloraNet 5000
terminal. Expenditures related to development of the terminal amounted to
approximately $41,000 in 1994. In addition, during 1994 the Company spent
$312,000 purchasing and deploying the FloraNet 5000 terminals. The Company used
$112,000 from operations and borrowed $200,000 to fund the purchase and
deployment of the FloraNet 5000 terminals. This loan is secured by certain
assets of the Company and is guaranteed by the Chairman of the Board.

During 1995 management analyzed the marketing program for the FloraNet 5000
terminals. The analysis indicated that the FloraNet 5000 terminals were not
achieving the results that the Company had expected when the program was
implemented. Consequently, after careful consideration the Company decided to
discontinue further funding of the FloraNet 5000 program. The Company will
continue to maintain the terminals that have been deployed in order to service
the florists who currently use the terminals.

During 1995 the Company kept capital expenditures to a minimum in order to
continue to maximize cash flow. Capital expenditures for 1995 were only
$136,000, compared to $394,000 in 1994 and $218,000 in 1993. Of the $136,000
expended during 1995, approximately $30,000 was spent on furniture for the new
corporate office, $25,000 was spent on credit card equipment, and approximately
$60,000 was spent on computer and communications equipment. At the present time
the Company's equipment and facilities are adequate to handle operations.
However, with an expected increase in business during the holiday season, the
Company may purchase additional equipment to handle the increased volume.

On November 30, 1995, the Company restructured the outstanding $2,921,000
balance of its 9-1/2% convertible subordinated notes such that the notes would
mature on September 15, 1996 and beyond, except for $354,000 which is due
December 31, 1995. Prior to the restructuring, the notes were to mature on June
30, 1996.

Results of Operations

General Comments

The Company completed its most profitable fiscal year since 1983. The Company
had operating income of $952,000 for 1995 compared to operating income of
$20,000 in 1994 and an operating loss of ($248,000) in 1993. The primary reason
for the improvement in operations has been the Company's ability to reduce
operating expenses from $7,412,000 in 1993 to $6,094,000 in 1995, a decrease of
18%, without experiencing a significant decline in revenues (less than a 2%
decline from 1993 to 1995). Management attributes the sustenance in revenues to
the Company's ability to generate orders through The Flower Club and the fact
that the Company's membership dues are the lowest in the industry.

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Net Revenues

Net revenues from member dues and fees during 1995 declined by 10% from 1994
compared to a 24% decline from 1993 to 1994. Management is hopeful that the
increased number of orders the Company is providing to its member florists has
slowed the member florist attrition rate. Recent information tends to indicate
that the attrition rate has subsided, as the dues for monthly subscriptions
were fairly constant during fiscal 1995.

Floral order processing revenue has experienced significant growth over the
past three years, increasing by 30% from 1993 to 1994 and by 33% from 1994 to
1995. The increase is due to orders generated by The Flower Club. The Flower
Club has established joint marketing campaigns with several nationally
recognized companies which allows The Flower Club to market directly to the
customers of these companies. Since its formation in 1994 the Flower Club has
experienced considerable growth, generating floral orders and handling fees in
excess of $10,100,000 during 1995 compared to $4,300,000 in 1994. The gross
amount of floral orders recorded by the Company totaled $21,978,000 in 1995,
$18,731,000 in 1994 and $18,800,000 in 1993. The average amount of each order
reported to the Company by its members in 1995 increased to $39.83 (3.3%
increase) compared to $38.54 (7.7% increase) in 1994 and $35.77 in 1993.

Directory and advertising fees were $1,273,000, $1,470,000 and $1,586,000 for
1995, 1994 and 1993, respectively. The current year decrease of $197,000 (13%)
is primarily a result of a decline in the number of members that advertise in
the Florafax directory.

Net revenues from charge card processing decreased by 9% from 1994 to 1995
compared to a 21% increase from 1993 to 1994. The decline from 1994 to 1995 is
a combination of several factors. Gross charge cards processed increased from
$161,000,000 during 1994 to $210,000,000 in 1995. However, there were three
primary factors that more than offset the increase in volume, as follows:
First, the Company lowered its discount rate to be more competitive in certain
markets. Second, the Company experienced an increase in the cost to clear
credit card transactions as well as an increase in data capture and
authorization fees. Third, certain credit card companies began settling credit
card transactions directly with a segment of the Company's merchants, which
eliminated the Company's ability to charge a discount rate on these
transactions. The increase in revenue from 1993 to 1994 was primarily a result
of processing a greater dollar volume. The number of transactions processed in
the respective years were 1,319,000 in 1995, 1,210,000 in 1994 and 1,134,000 in
1993.

The Company also earns revenue from the sale and lease of credit card terminals
and printers. Sale and lease revenue amounted to $349,000 in 1995, $389,000 in
1994 and $376,000 in 1993.

The credit card processing industry is becoming extremely competitive.
Management is committed to taking the necessary steps to remain competitive in
the industry.

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Expenses

Member support, general and administrative expenses were $4,553,000 in 1995,
$4,726,000 in 1994 and $4,252,000 in 1993. General and administrative expense
decreased by 4% in 1995 when compared to 1994. The Company managed to decrease
1995 salaries and contract labor costs by $236,000 when compared to 1994. This
is attributable to two primary factors. First, the Company restructured its
management and consolidated certain departments thereby eliminating a number of
personnel. Second, the Company hired more employees to place orders generated
by The Flower Club, which eliminated a significant portion of its high cost
contract labor that was incurred during 1994. In addition to lower salaries and
contract labor the Company also experienced a decrease in equipment lease and
maintenance cost. This was primarily attributable to the conversion of the
Company's outdated Sperry mainframe computer to an up-to-date, more efficient
main frame. The Company also reduced its 1995 legal expense by $95,000 when
compared to 1994. Even though the Company managed to reduce the aforementioned
expenses it did experience a significant increase in telephone expense during
1995. Telephone expense for 1995 increased by $308,000 over 1994 telephone
expense, primarily as a result of the orders generated by The Flower Club. Each
one of these orders originates via an 800 number and is then transmitted to the
florist through a phone line which results in two phone calls per order.
Management is currently attempting to reduce the Company's telephone expense.
However, as Flower Club volume increases the Company will experience an
associated increase in telephone expense. The $474,000 (11%) increase in 1994
expenses over 1993 were primarily contract labor (an increase of $265,000) and
telephone expense (an increase of $238,000).

1995 selling, advertising and promotion expenses declined by 54% when compared
to 1994, and 1994 selling expenses declined by 34% when compared to 1993
expenses. The 1995 decrease was a result of a significant reduction in the
sales staff. All but the most productive sales staff were terminated which
caused an associated reduction in salaries, commissions, benefits, travel and
auto expense. In an effort to increase membership management is in the process
of commencing a sales campaign, which could lead to an increase in sales
expense in the coming year. The decrease from 1993 to 1994 was a result of
payroll related costs (a decrease of $367,000), advertising (a decrease of
$112,000) and trade shows (a decrease of $67,000).

The provision for doubtful accounts was $173,000, $413,000 and $400,000 for
fiscal years 1995, 1994 and 1993, respectively. The primary reason for the
decrease in 1995 bad debt expense when compared to 1994 is the orders generated
by The Flower Club. These orders are paid for with credit cards which
eliminates any potential collection problems associated with shop-to-shop
orders. In addition, when the Company sends these orders to the fulfilling
florist it reduces amounts due to the Company from the florist.

During the current year directory publishing cost declined by 7%. This is
attributable to printing fewer directories due to a lower membership.

- 14 -
<PAGE> 17

Depreciation, amortization and retirements were $490,000, $427,000 and $586,000
for 1995, 1994 and 1993, respectively. Depreciation and amortization expense
for 1995 and 1994 is lower than 1993 due to the fact that many of the Company's
assets are becoming fully depreciated. 1995 depreciation and amortization is
greater than 1994 depreciation and amortization as a result of a full year's
amortization of intangible assets related to The Flower Club.

Other Income (Expense)

During 1993 the Company reversed accrued expenses of $97,000 related to the GTE
Market Resources lawsuit and forfeited an $89,000 cash bond related to the
Equidyne Industries lawsuit, which are included in litigation settlements and
expense. Included in other income for 1993 is $100,000 of insurance proceeds
from an employee bonding policy for a misappropriation of funds. Litigation
related expense of $52,000 for 1994 is primarily comprised of the following.
Late in the first quarter of 1994 the Company incurred $22,000 of unanticipated
expenses related to the GTE-MR trial. In addition, in January 1994 the Company
satisfied a $24,000 judgment resulting from additional legal fees from
litigation settled several years ago, and in February 1994 the Company settled
a dispute with a disgruntled former employee for $5,000.

Inflation

Over the past three years, inflation has not had a material effect on the
Company's operations and is not anticipated to have an effect in the near
future. A portion of the increase in the average dollar value of wire orders
reported to the Company represents a response by florists to general price
level increases.

- 15 -
<PAGE> 18

Item 8. FINANCIAL STATEMENTS

- 16 -
<PAGE> 19

Report of Independent Auditors

The Board of Directors and Stockholders
Florafax International, Inc.

We have audited the accompanying consolidated balance sheets of Florafax
International, Inc. as of August 31, 1995 and 1994, and the related
consolidated statements of operations, changes in stockholders' equity (net
capital deficiency), and cash flows for each of the three years in the period
ended August 31, 1995. Our audits also included the financial statement
schedule listed in the index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Florafax International, Inc. at August 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended August 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information set
forth therein.

ERNST & YOUNG LLP

Tulsa, Oklahoma
November 2, 1995, except for Note 10 as to
which the date is December 5, 1995

- 17 -
<PAGE> 20

Florafax International, Inc.

Consolidated Balance Sheets

<TABLE>
<CAPTION>
August 31
1995 1994
------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,972 $ 558
Restricted cash (Note 1c) 66 530
Restricted investment (Note 1c) 500 -
Accounts receivable:
Members, less allowances of $706,000 at
August 31, 1995 and $819,000 at August 31,
1994 1,289 1,303
Charge card issuers 225 274
Other 34 152
------------------------
1,548 1,729

Prepaid and other assets 31 3 0
------------------------
Total current assets 4,117 2,847

Property and equipment, at cost:
Fixtures and equipment 1,347 1,331
Computer systems 1,114 1,049
Communication systems 1,516 1,491
Leasehold improvements 311 303
------------------------
4,288 4,174
Accumulated depreciation and amortization 3,919 3,548
------------------------
369 626

Other assets:
Excess of cost over net assets of acquired
business (Note 1i) 1,995 1,995
Other 371 478
------------------------
2,366 2,473
------------------------
Total assets $6,852 $5,946
========================
</TABLE>

See accompanying notes.

- 18 -
<PAGE> 21

Florafax International, Inc.

Consolidated Balance Sheets

<TABLE>
<CAPTION>
August 31
1995 1994
------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' NET CAPITAL DEFICIENCY
Current liabilities:
Bank overdraft (Note 2) $ - $ 1,065
Current maturities of long-term debt 466 113
Accounts payable 3,919 3,098
Accrued liabilities:
Consulting fee payable - 100
Member benefits 150 81
Other 980 802
------------------------
Total current liabilities 5,515 5,259

Long-term debt, less current maturities (Note 2):
9-1/2% convertible subordinated notes 2,567 2,920
Other 467 222
------------------------
3,034 3,142

Membership security deposits 59 60
------------------------
Total liabilities 8,608 8,461

Stockholders' net capital deficiency:
Preferred stock ($10 par value, 600,000 shares
authorized at August 31, 1995 and 1994,
respectively, none issued)
Common stock ($.01 par value, 18,000,000
shares authorized, 5,793,874 and 5,548,874
issued at August 31, 1995 and 1994, respectively,
5,770,874 and 5,525,874 outstanding at August 31,
1995 and 1994, respectively) 58 56
Additional paid-in capital 7,381 7,331
Accumulated deficit (9,195) (9,902)
------------------------
Total stockholders' net capital deficiency (1,756) (2,515)
------------------------
Total liabilities and stockholders' net capital
deficiency $ 6,852 $ 5,946
========================
</TABLE>

See accompanying notes.

- 19 -
<PAGE> 22

Florafax International, Inc.

Consolidated Statements of Operations

<TABLE>
<CAPTION>
Year ended August 31
1995 1994 1993
----------------------------------------
(In Thousands Except Per Share Data)
<S> <C> <C> <C>
Net revenues:
Member dues and fees $1,953 $2,172 $2,862
Floral order processing 2,267 1,705 1,313
Directory and advertising fees 1,273 1,470 1,586
Charge card processing 1,519 1,670 1,378
Other revenue 34 76 25
----------------------------------------
7,046 7,093 7,164

Expenses:
Member support, general and
administrative 4,553 4,726 4,252
Selling, advertising and promotion 509 1,111 1,680
Provision for doubtful accounts 173 413 400
Directory publishing 369 396 494
Depreciation, amortization and
retirements 490 427 586
----------------------------------------
6,094 7,073 7,412
----------------------------------------
Operating profit (loss) 952 20 (248)

Other income (expense):
Interest expense (309) (315) (291)
Interest income 60 - -
Other 4 36 130
Litigation costs and settlements - (52) 8
----------------------------------------
(245) (331) (153)
----------------------------------------
Net income (loss) $ 707 $ (311) $ (401)
========================================

Weighted average common and common
equivalent shares outstanding:
Primary 5,777 5,532 5,215
Fully diluted 5,872 5,532 5,215
========================================

Primary and fully diluted
income (loss) per share $ .12 $(0.06) $(0.08)
========================================
</TABLE>

See accompanying notes.

- 20 -
<PAGE> 23

Florafax International, Inc.

Consolidated Statements of Changes in
Stockholders' Equity (Net Capital Deficiency)

<TABLE>
<CAPTION>
Common Stock
------------------------
Number of Additional
Shares Par Paid-In Accumulate
Outstanding Value Capital Deficit
--------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Balance at August 31, 1992 5,149 $51 $7,296 $(9,190)
Issuance of common
stock 350 4 31 -
Net loss - - - (401)
----------------------------------------------------------
Balance at August 31, 1993 5,499 55 7,327 (9,591)
Issuance of common
stock 50 1 4 -
Relinquishment of
common stock by
a shareholder (23) - - -
Net loss - - - (311)
----------------------------------------------------------
Balance at August 31, 1994 5,526 56 7,331 (9,902)
Issuance of common
stock 245 2 50 -
Net income - - - 707
----------------------------------------------------------
Balance at August 31, 1995 5,771 $58 $7,381 $(9,195)
==========================================================
</TABLE>

See accompanying notes.

- 21 -
<PAGE> 24

Florafax International, Inc.

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
Year ended August 31
1995 1994 1993
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 707 $ (311) $ (401)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 490 423 496
Equipment retirements - 4 90
Provision for doubtful accounts 173 413 400
Noncash compensation expense 62 - -
Increase (decrease) in cash flows
due to changes in:
Accounts receivable 8 (79) (72)
Inventories - 65 16
Prepaid and other assets (1) 73 17
Other assets - (87) 103
Accounts payable 821 (4) 504
Accrued liabilities 147 227 (405)
Unearned directory income - (125) 125
Membership security deposits (1) (4) (24)
-----------------------------------------
Net cash provided by operating
activities 2,406 595 849

INVESTING ACTIVITIES
Capital expenditures (136) (394) (218)
Acquisition of certain assets - (100) -
Receipt (deposit) of restricted cash 464 (451) (51)
Purchase of restricted investment (500) - -
-----------------------------------------
Net cash used in investing activities (172) (945) (269)
</TABLE>

- 22 -
<PAGE> 25

Florafax International, Inc.

Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
Year ended August 31
1995 1994 1993
---------------------------------------
(In Thousands)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt $ 356 $200 $ -
Proceeds from issuing stock - 5 35
Increase (reduction) in bank overdraft (1,065) 671 (400)
Payments of long-term debt (111) (75) (423)
---------------------------------------
Net cash provided by (used in)
financing activities (820) 801 (788)
---------------------------------------
Net increase (decrease) in cash and
cash equivalents 1,414 451 (208)

Cash and cash equivalents at beginning
of year 558 107 315
---------------------------------------
Cash and cash equivalents at end of year $ 1,972 $558 $ 107
=======================================

Supplemental disclosures of cash
flow information:
Cash paid during the year
for interest $ 310 $309 $ 292
=======================================
</TABLE>

See accompanying notes.

- 23 -
<PAGE> 26

Florafax International, Inc.

Notes to Consolidated Financial Statements

August 31, 1995, 1994 and 1993

1. Summary of Significant Accounting Policies

(a) Principles of Consolidation

The consolidated financial statements include the accounts of Florafax
International, Inc. and its wholly owned subsidiaries (the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

(b) Cash and Cash Equivalents

The Company considers as cash equivalents all highly liquid overnight investing
accounts at banking institutions plus other interest bearing deposits having
original maturities of less than three months.

In conjunction with a credit card authorized processor agreement, the Company
has assigned to the credit card company, as collateral, a bank account with a
minimum balance of $25,000, which is included in restricted cash. This account
had a balance of approximately $31,000 and $30,000 as of August 31, 1995 and
1994, respectively. In addition, $35,000 and $500,000 as of August 31, 1995 and
1994, respectively, are included in restricted cash and relate to the overdraft
facility, which is more fully described in Note 2 of the consolidated financial
statements.

Additionally, at August 31, 1995, the Company owned a $500,000 par value FNMA
discount note with a scheduled maturity of September 8, 1995. This note was
held by a bank and restricted in relation to the Company's overdraft facility.

(d) Floral Orders

The flowers-by-wire service comprises the Company's primary business. The
Company produces membership directories which are distributed to the members,
electronically links members through its FloraNet system and processes charge
cards through its FloraCash system.

- 24 -
<PAGE> 27

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Floral and other order processing net revenues are generally recorded upon
receipt of a reporting document prepared by the florist who delivers the order
to the ultimate recipient. In most instances the florist delivers the order
prior to notifying the Company of the delivery. Net revenues represent gross
amounts of floral orders and related fees charged by the florist who takes the
order, less amounts due to the florist who ultimately fills the order. For
certain types of orders taken directly from customers by the Company's order
entry department, net revenue and related cost are recorded upon receipt of the
order from the customer.

(e) Member Dues and Directory Advertising

Member dues and fees are billed monthly and recognized as income at that time.
Directory advertising fees are recognized each month a florist displays an ad
in the directory, whereas fees for the directory itself are recognized in the
month the directory is released to members.

(f) Recognition of Service and Collection Fees

The service and collection fees and interest income relating to accounts that
have been canceled are not recognized as income until collected.

(g) Allowance for Doubtful Accounts

Provisions for doubtful member accounts receivable are based upon the Company's
collection experience and management's continuous evaluation of accounts
receivable.

Credit risk is inherent in the floral wire service industry. Consequently, to
reduce this risk the Company reviews new member applications for credit
worthiness. If a florist applying for membership does not meet certain credit
standards the florists application for membership is usually declined. Once a
florist has been accepted as a member the account is monitored by accounts
receivable analysts who maintain continuous direct contact with the florist. If
the account becomes delinquent, the florist is turned over to a collection
agency to begin immediate collection procedures.

- 25 -
<PAGE> 28

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

(h) Property and Equipment Depreciation

The provisions for depreciation and amortization are computed using the
straight-line method for financial reporting purposes with the following
estimated useful lives:

<TABLE>
<CAPTION>
Description Estimated Useful Lives
---------------------------------------------------------
<S> <C>
Fixtures and equipment 2 to 10 years
Computer systems 3 to 10 years
Communication systems 2 to 5 years
Leasehold improvements 3 to 13 years
</TABLE>

(i) Amortization of Excess of Cost Over Net Assets (Goodwill)

Goodwill of $1,995,000 arose prior to October 31, 1970 and, therefore, is not
required to be amortized.

At August 31, 1995 and 1994 the Company analyzed goodwill from an undiscounted
cash flow approach, using cash provided from operations and expected future
cash flows as the cash flow stream. After reviewing the results management is
of the opinion that goodwill has not been impaired.

(j) Income Taxes

The Company reports income taxes in accordance with the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Certain items (primarily bad debt expense and depreciation) are accounted for
on a different basis for financial than for income tax reporting purposes.

(k) Weighted Average Number of Shares Outstanding

The weighted average number of shares outstanding is adjusted to recognize the
dilutive effect, if any, of outstanding stock options and the weighted average
conversion rights of the 9-1/2% convertible subordinated notes.

(l) Classification of Consolidated Statements of Cash Flows

Certain items have been reclassified to conform to the current year
presentation.

- 26 -
<PAGE> 29

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

2. Convertible Subordinated and Other Debt

In July 1986, the Company issued $4,000,000 in 9-1/2% convertible subordinated
notes which mature on June 30, 1996. Interest on the notes is payable
semiannually on June 30 and December 31. When issued, the notes were
convertible into 888,888 shares of common stock at a conversion price of $4.50
per share. The notes are convertible at any time prior to maturity and are
callable by the Company.

Under a restructuring agreement in December 1988, the Company exchanged $1
million of the outstanding notes for 627,451 shares of its common stock at an
exchange price of $1.59375 per share, which represented the average of the bid
and asked prices of such common stock on November 1, 1988. The conversion price
of the remaining notes outstanding was then reduced to $3.00 per share. Also,
the Company agreed to redeem $1 million of the remaining notes from 50% of its
net income beginning in 1989 and annually thereafter, until the $1 million is
fully redeemed. Subsequent to year-end, the notes were restructured and their
maturity extended to September 15, 1996 (see Note 10).

At August 31, 1995, other long-term debt includes:

A 5% subordinated debenture in the amount of $80,000, maturing in 1998 with
interest payable annually on December 31, a note payable to Andy Williams,
Chairman of the Board, in the amount of $68,000, with principal and interest
payments due monthly, bearing interest at 8-1/2%, maturing December, 1999, and
three promissory notes due to Citrus Bank of Vero Beach, Florida aggregating
$103,000, bearing interest ranging from prime plus one to prime plus two
percent (9.75% to 10.75% at August 31, 1995) and guaranteed by the Chairman of
the Board. Principal and interest payments on the Citrus Bank notes are due
monthly and vary depending on the interest rate, with the final payment due
November 9, 1998.

A note payable to Citrus Bank in the amount of $216,000, with principal and
interest payments due monthly, bearing interest at prime plus one percent
(9.75% at August 31, 1995), maturing November 2000, and guaranteed by the
Chairman of the Board.

At August 31, 1995 the Company had available a $575,000 line of credit with PNC
Bank. This line matures on September 15, 1995. The Company has on deposit with
PNC Bank investments and cash totaling $535,000 as collateral for this line of
credit.

- 27 -
<PAGE> 30

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

2. Convertible Subordinated and Other Debt (continued)

At August 31, 1994, other long-term debt included:

A 5% subordinated debenture in the amount of $80,000, maturing in 1998 with
interest payable annually on December 31, the noncurrent balance on installment
notes secured by vehicles, and three promissory notes due to Citrus Bank of
Vero Beach, Florida aggregating $142,000, bearing interest at prime plus two
percent (9.75% at August 31, 1994) and guaranteed by the Chairman of the Board.
Principal and interest payments on the Citrus Bank notes are due monthly and
vary depending on the interest rate, with the final payment due November 9,
1998.

Required payments on debt are as follows:

<TABLE>
<S> <C>
1996 $ 466,000
1997 2,667,000
1998 103,000
1999 166,000
2000 77,000
Thereafter 21,000
----------
$3,500,000
==========
</TABLE>

3. Leases

Obligations of the Company for annual payments under various operating leases
for buildings and equipment are as follows:

<TABLE>
<CAPTION>
Minimum
Lease
Payments
--------
<S> <C>
1996 $145,000
1997 136,000
1998 64,000
1999 48,000
2000 19,000
--------
$412,000
========
</TABLE>

- 28 -
<PAGE> 31

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

3. Leases (continued)

Total rental expense for years 1995, 1994 and 1993 was $242,000, $367,000 and
$326,000, respectively. Of these amounts, annual rentals for office facilities
for years 1995, 1994 and 1993 were $123,000, $185,000 and $152,000,
respectively. The Company's building lease for its Vero Beach location (annual
rental $33,000) is with a relative of the Chairman of the Board of Directors.

4. Contingencies

In October 1989, Bellerose Floral, Inc. (Bellerose) of Bayside, N.Y., an
affiliate of 800-FLOWERS, Inc. became a Florafax member florist, and Florafax
agreed to provide certain telecommunications services to Bellerose for a fee.
GTE/MR was engaged by Florafax to provide order-entry services to Florafax and
to customers of Florafax, including Bellerose.

- 29 -
<PAGE> 32

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

4. Contingencies (continued)

affirmed. The Company and GTE/MR have each petitioned the Oklahoma Supreme
Court for writ of certiorari to review the portions of the Oklahoma Court of
Appeals decision adverse to their respective interests, and both of the parties
appeals have been granted. There are no assurances that the Company will obtain
a favorable ruling from the Oklahoma Supreme Court.

The Company's legal counsel has tried this case on a contingency fee basis and,
accordingly, the Company has incurred minimal attorneys fees related to this
litigation. However, the agreement between the Company and its legal counsel
stipulates that the Company's attorneys are to receive 40% of the net proceeds
from the case. Consequently, the Company is to receive 60% of the ultimate
proceeds, less certain expenses. Recognition of any of these amounts will not
be reflected in the financial statements until ultimate resolution.

Other

The Company is involved in various disputes involving routine business matters,
the resolution of all of which in management's opinion will not have a material
adverse affect upon the Company.

5. Stockholders' Investment and Stock Options

The Company has an incentive stock option plan under which both qualified and
nonqualified options have been granted to key management personnel and to
members of the Board of Directors. At August 31, 1995, 281,250 shares of the
Company's common stock were authorized by the plan; options covering 31,250
shares have been exercised, options covering 35,000 shares have expired, and
options covering 215,000 shares were reserved for the grant of future options.

In 1993, the Company granted other options to purchase 400,000 shares of common
stock at its fair market value on the date of grant ($0.10 per share) to
members of the Board of Directors in lieu of cash directors' fees. All of these
options had been exercised as of August 31, 1994.

In November 1994 the Company granted options to purchase 300,000 shares of
common stock at its fair market value on the date of grant ($0.20 per share) to
certain officers and directors. As of August 31, 1995 none of these options had
been exercised.

- 30 -
<PAGE> 33

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

5. Stockholders' Investment and Stock Options (continued)

In February 1995 the Company granted options to purchase 100,000 shares of
common stock at its fair market value on the date of grant ($0.25 per share) to
certain marketing consultants of the Company. As of August 31, 1995 none of
these options had been exercised.

Information regarding stock options for years 1995, 1994 and 1993 is as
follows:

<TABLE>
<CAPTION>
Exercise
Number Price Total
of Range Per Exercise
Shares Share Price
-----------------------------------------------
<S> <C> <C> <C>
Shares under option at August 31,
1995 400,000 $.20 to $.25 $ 85,000
1994 - - -
1993 115,000 $10 to $1.60 109,000

Options granted during year ended
August 31,
1995 400,000 $.20 to $.25 85,000
1994 - - -
1993 400,000 $0.10 40,000

Options exercised during year
ended August 31,
1995 - - -
1994 50,000 $0.10 5,000
1993 350,000 $0.10 35,000

Options expired or canceled
during year ended August 31,
1995 - - -
1994 65,000 $1.60 -
1993 117,020 $1.60 to $2.875 199,982

Options exercisable at August 31, 1995 400,000

Shares reserved at August 31, 1995
for:
Stock option plan 215,000
Conversion of 9-1/2% convertible
subordinated notes 1,177,823
---------
1,392,823
=========
</TABLE>

- 31 -
<PAGE> 34

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

5. Stockholders' Investment and Stock Options (continued)

During 1995 the Company granted a total of 245,000 shares of common stock to
certain employees and marketing consultants of the Company. These grants were
charged to expense based on the market price of the Company's stock on the date
of the grant.

6. Income Taxes

At August 31, 1995, the Company had net operating loss carryforwards for income
tax purposes of approximately $7,000,000 that expire in varying amounts in
years 2001 through 2009. As realization of the net operating loss carryforward
is not more likely than not, the Company has recorded a valuation allowance
against the net deferred tax asset which is principally comprised of the net
operating loss carryforward. Unused investment tax credits of $264,000 expire
in varying amounts in 1996 through 2001.

7. Acquisitions

On March 10, 1994 the Company purchased from Andy Williams, Chairman of the
Board, certain assets, primarily trademarks and rights to telephone numbers, of
Savannah Floral Services, Inc. ("Savannah"). Subsequent to the purchase of
these assets they were transferred to The Flower Club, Inc. ("Flower Club"), a
subsidiary of the Company. The acquisition cost consisted of a $105,000 note
payable to Mr. Williams and the satisfaction of $193,000 of accounts receivable
from Savannah. In addition, the former owner of Savannah has executed a
consulting and noncompete agreement with Florafax.

8. Divestitures

During 1993 the Company disposed of all shares of U.S. Credit by transferring
said shares and all assets of U.S. Credit to Floyd Cox, former Chairman of the
Board of Directors. Loss on the disposal of U.S. Credit was approximately
$164,000. In addition to receiving the aforementioned shares of U.S. Credit
Mr. Cox also entered into a severance agreement whereby he was compensated
approximately $136,000.

9. Industry Segments

The Company's operations include Flowers-by-Wire and charge card processing for
its member florists and charge card processing for customers not involved in
the floral industry, which is considered a separate business segment. Net
revenues related to charge

- 32 -
<PAGE> 35

Florafax International, Inc.

Notes to Consolidated Financial Statements (continued)

9. Industry Segments (continued)

card processing for customers outside the floral industry amounted to
approximately $1,253,000, $1,231,000 and $873,000 for 1995, 1994 and 1993,
respectively. Operating income for this segment before allocating direct
general and administrative expenses related directly to the operations amounted
to approximately $1,122,000, $982,000 and $705,000 for 1995, 1994 and 1993,
respectively. After allocation of direct general and administrative costs the
nonfloral segment experienced operating income (losses) of approximately
$77,000 in 1995, ($377,000) in 1994 and ($329,000) in 1993.

The nonfloral segment had depreciation and capital expenditures amounting to
$55,000 and $43,000 in 1995, $91,000 and $25,000 in 1994 and $119,000 and
$54,000 in 1993, respectively.

Aggregate identifiable assets, net of appropriate reserves, related to charge
card processing customers outside the floral industry at August 31, 1995, 1994
and 1993 were approximately $227,000, $301,000 and $128,000, respectively.

Net revenues related to customers within the floral industry amounted to
approximately $5,793,000, $5,862,000 and $6,291,000 for 1995, 1994 and 1993,
respectively. Operating income for this segment before allocating direct
general and administrative expenses related directly to the operations amounted
to approximately $4,485,000, $4,734,000 and $4,270,000 for 1995, 1994 and 1993,
respectively. After allocation of direct general and administrative costs the
floral segment experienced operating income of approximately $1,521,000 in
1995, $970,000 in 1994 and $861,000 in 1993.

The floral segment had depreciation and capital expenditures amounting to
$333,000 and $93,000 in 1995, $296,000 and $363,000 in 1994 and $390,000 and
$152,000 in 1993, respectively.

Aggregate identifiable assets, net of appropriate reserves, related to
customers within the floral industry at August 31, 1995, 1994 and 1993 were
approximately $3,910,000, $4,144,000 and $4,679,000, respectively.

10. Subsequent Events

- 33 -
<PAGE> 36

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

- 34 -
<PAGE> 37

PART III

Item 10. ITEMS 10, 11, 12 AND 13 ARE INCORPORATED BY REFERENCE TO THE COMPANY'S
DEFINITIVE PROXY STATEMENT, PURSUANT TO REGULATION 14A, WHICH WILL
INVOLVE THE ELECTION OF DIRECTORS. HOWEVER, IF SUCH DEFINITIVE PROXY
STATEMENT IS NOT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WITHIN 120 DAYS FOLLOWING AUGUST 31, 1995, SUCH ITEMS WILL BE FILED AS
AN AMENDMENT TO THIS FORM 10-K UNDER A COVER OF A FORM 8 NOT LATER
THAN THE END OF THE 120-DAY PERIOD.

- 35 -
<PAGE> 38

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
(a) 1. Financial Statements

Included in Part II of this report:
Report of Independent Auditors 17
Consolidated Balance Sheets at August 31, 1995 and 1994 18
Consolidated Statements of Operations for the years
ended August 31, 1995, 1994 and 1993 20
Consolidated Statements of Changes in Stockholders'
Equity (Net Capital Deficiency) for the years ended
August 31, 1995, 1994 and 1993 21
Consolidated Statements of Cash Flows for the years
ended August 31, 1995, 1994 and 1993 22
Notes to Consolidated Financial Statements 24
2. Financial Statement Schedule

Included in Part IV of this report:

Schedule VIII - Valuation and Qualifying Accounts 38
</TABLE>

All other schedules are omitted because of the absence of conditions under
which they are required (not present or not considered material) or because the
required information is included in the financial statements or notes thereto.

3. Exhibits

Exhibit Reference

The following agreements were entered into during the current fiscal year and,
accordingly, are included as exhibits to this 10-KSB.

(10) Material Contracts

(a) Promissory Note to Citrus Bank dated August 31, 1995.

(b) Fifth Addendum dated November 21, 1994 to Agreement dated
December 3, 1992 by and between Registrant and PNC Bank
Kentucky, Inc.

- 36 -
<PAGE> 39

The following items have been included as exhibits in filings by the Company in
a previous year and, accordingly, are incorporated hereby reference.

Exhibit Reference

(10) Material Contracts

(a) Convertible subordinated notes due to Clark Estates maturing
June 30, 1996.

(b) Subordinated debentures maturing in 1998.

(c) Agreement dated December 3, 1993, Addendum, Second Addendum,
Third Addendum and Fourth Addendum thereto by and between the
Registrant and Citizens Fidelity Bank and Trust Company (now
PNC Bank, Kentucky, Inc.).

(d) Purchase Agreement for certain assets formerly owned by
Savannah Floral Services, Inc. dated March 10, 1994.

(e) Note Payable to Andrew Williams dated March 10, 1994.

(f) Promissory Note to Citrus Bank dated November 9, 1993.

(g) Promissory Note to Citrus Bank dated November 17, 1993.

(h) Promissory Note to Citrus Bank dated January 25, 1994.

(i) Loan to James H. West, Director, President and Chief Financial
Officer, dated August 28, 1994

(j) Consulting agreement with David Harper of Ventura County
California dated December 10, 1993

(22) Subsidiaries of the Registrant

(3) Articles of incorporation and Bylaws of the Registrant, as amended.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of fiscal 1995.

- 37 -
<PAGE> 40

Florafax International, Inc.

Schedule VIII

Valuation and Qualifying Accounts

Years ended August 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>
Balance at Additions Write-offs Balance
Beginning Charged to Net of at End
Description of Period Expense Recoveries of Period
- ---------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
August 31, 1995 $ 819 $173 $286 $706
August 31, 1994 789 413 383 819
August 31, 1993 1,297 400 908 789
</TABLE>

- 38 -
<PAGE> 41
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

Florafax International, Inc.

Dated: December 12, 1995 James H. West /s/
----------------------------
James H. West
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Andrew W. Williams /s/ Chairman of the Board
- ----------------------- -------------------
Andrew W. Williams December 12, 1995

James H. West /s/ Director
- ----------------------- -------------------
James H. West December 12, 1995

T. Craig Benson /s/ Director
- ----------------------- -------------------
T. Craig Benson December 12, 1995

Solomon O. Howell /s/ Director
- ----------------------- -------------------
Solomon O. Howell December 12, 1995

William E. Mercer /s/ Director
- ----------------------- -------------------
William E. Mercer December 12, 1995

Glenn R. Massey /s/ Director
- ----------------------- -------------------
Glenn R. Massey December 12, 1995

Kenneth G. Puttick /s/ Director
- ----------------------- -------------------
Kenneth G. Puttick December 12, 1995
<PAGE> 42

<TABLE>
<S> <C> <C>
DIRECTORS AND
PRINCIPAL OCCUPATIONS OFFICERS OFFICES
- --------------------- -------- -------

T. CRAIG BENSON* ANDREW W. WILLIAMS CORPORATE HEADQUARTERS
President, Corporate Equities Chairman of the Board and 8075 20th Street
Division of Service Chief Executive Officer Vero Beach, Florida 32966
Corporation International 407-563-0263
Houston, Texas JAMES H. WEST
President and Chief Financial
SOLOMON O. HOWELL, JR. *+ Officer FORM 10-K
Secretary-Treasurer ---------
H&N Constructors, Inc. KELLY S. MCMAKIN
Louisville, Kentucky Vice President, Treasurer A copy of the exhibits
and Secretary accompanying the Form 10-K
GLENN R. MASSEY* report filed with The Securities
Sales Manager for KVUE-TV & Exchange Commission can be
Houston, Texas AUDITORS obtained by writing to:
-------- Kelly S. McMakin
WILLIAM E. MERCER*+ 8075 20th Street
Chairman of the Board and ERNST & YOUNG Vero Beach, Florida 32966
Chief Executive Officer 3900 One Williams Center
Southwest Guaranty Trust Tulsa, Oklahoma 74172
Company
Houston, Texas
CORPORATE COUNSEL
KENNETH G. PUTTICK*+ -----------------
Owner of Ken Puttick Buick-
Cadillac GRAY, GILLILAND & GOLD, P.C.
Vero Beach, Florida 400 Perimeter Center Terrace
Suite 1050 North Terraces
JAMES H. WEST Atlanta, Georgia 30346
President of
Florafax International, Inc.
Vero Beach, Florida TRANSFER AGENT
AND REGISTRAR
ANDREW W. WILLIAMS -------------
Chairman of the Board
Florafax International, Inc. MELLON SECURITIES TRUST COMPANY
Certified Public Accountant 120 Broadway
Andrew W. Williams, P.A. New York, New York 10271
Vero Beach, Florida
</TABLE>

+Member of audit committee
*Member of compensation committee

- 39 -

<PAGE> 1
ITEM 14, 3. - EXHIBITS, (10)(a)

PROMISSORY NOTE

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$250,000.00 08-31-1995 11-30-2000 1531034 113 RJR /s/ RJR
- ---------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ---------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FLORAFAX INTERNATIONAL, INC. LENDER: CITRUS BANK, N.A.
(TIN: 41-0719036) VERO BEACH OFFICE
2345 14TH AVENUE, SUITE #7 1717 INDIAN RIVER BOULEVARD
VERO BEACH, FL 32960 VERO BEACH, FL 32960

================================================================================

PRINCIPAL AMOUNT: $250,000.00 DATE OF NOTE: AUGUST 31, 1995

PROMISE TO PAY. FLORAFAX INTERNATIONAL, INC. ("BORROWER") PROMISES TO PAY TO
CITRUS BANK, N.A. ("Lender"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF TWO HUNDRED FIFTY THOUSAND & 00/100 DOLLARS
($250,000.00), TOGETHER WITH INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM
AUGUST 31, 1995, UNTIL PAID IN FULL.

PAYMENT. SUBJECT TO ANY PAYMENT CHANGES RESULTING FROM CHANGES IN THE INDEX,
BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN ACCORDANCE
WITH THE FOLLOWING PAYMENT SCHEDULE:

3 CONSECUTIVE MONTHLY INTEREST PAYMENTS, BEGINNING SEPTEMBER 30, 1995,
WITH INTEREST CALCULATED ON THE UNPAID PRINCIPAL BALANCES AT AN
INTEREST RATE OF 1.000 PERCENTAGE POINTS OVER THE INDEX DESCRIBED
BELOW; AND 60 CONSECUTIVE MONTHLY PRINCIPAL AND INTEREST PAYMENTS IN
THE INITIAL AMOUNT OF $5,329.30 EACH, BEGINNING DECEMBER 30, 1995,
WITH INTEREST CALCULATED ON THE UNPAID PRINCIPAL BALANCES AT AN
INTEREST RATE OF 1.000 PERCENTAGE POINTS OVER THE INDEX DESCRIBED
BELOW. BORROWER'S FINAL PAYMENT OF $5,329.30 WILL BE DUE ON NOVEMBER
30, 2000. THIS ESTIMATED FINAL PAYMENT IS BASED ON THE ASSUMPTION
THAT ALL PAYMENTS WILL BE MADE EXACTLY AS SCHEDULED AND THAT THE INDEX
DOES NOT CHANGE; THE ACTUAL FINAL PAYMENT WILL BE FOR ALL PRINCIPAL
AND ACCRUED INTEREST NOT YET PAID, TOGETHER WITH ANY OTHER UNPAID
AMOUNTS UNDER THIS NOTE.

Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may designate
in writing. Unless otherwise agreed or required by applicable law, payments
will be applied first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may or
may not be the lowest rate available from Lender at any given time. Lender will
tell Borrower the current index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. THE INDEX
CURRENTLY IS 9.000% PER ANNUM. THE INTEREST RATE OR RATES TO BE APPLIED TO THE
UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE THE RATE OR RATES SET FORTH ABOVE
IN THE "PAYMENT" SECTION. NOTWITHSTANDING ANY OTHER PROVISION OF THIS NOTE, THE
VARIABLE INTEREST RATE OR RATES PROVIDED FOR IN THIS NOTE WILL BE SUBJECT TO
THE FOLLOWING MINIMUM AND MAXIMUM RATES. NOTICE: Under no circumstances will
the effective rate of interest on this Note be less than 8.000% per annum or
more than the maximum rate allowed by applicable law. Whenever increases occur
in the interest rate, Lender, at its option, may do one or more of the
following: (a) increase Borrower's payments to ensure Borrower's loan will pay
off by its original final maturity date, (b) increase Borrower's payments to
cover accruing interest, (c) increase the number of Borrower's payments, and
(d) continue Borrower's payments at the same amount and increase Borrower's
final payment.

PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Note, Borrower understands that Lender is entitled
to A MINIMUM INTEREST CHARGE OF $2.00. Other than Borrower's obligation to pay
any minimum interest charge, Borrower may pay without penalty all or a portion
of the amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will reduce
the principal balance due and may result in Borrower making fewer payments.

LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $99.00, WHICHEVER IS LESS.

DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any of the events described in this default section occurs
with respect to any guarantor of this Note. (h) A material adverse change
occurs in Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired. (i) LENDER IN GOOD
FAITH DEEMS ITSELF INSECURE.

If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within fifteen (15) days;
or (b) if the cure requires more than fifteen (15) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient to cure
the default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 18.000% per
annum, if and to the extent that the increase does not cause the interest rate
to exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender the amount of these costs and expenses, which includes, subject
to any limits under applicable law, Lender's reasonable attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including reasonable
attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any
anticipated post-judgment collection services. If not prohibited by applicable
law, Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER
IN THE STATE OF FLORIDA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF INDIAN RIVER COUNTY, THE
STATE OF FLORIDA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL
IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER
AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF FLORIDA.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.

RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on this Note against any and all such
accounts.

GARNISHMENT. Borrower consents to the issuance of a continuing writ of
garnishment or attachment against Borrower's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in part,
any money judgment entered in favor of Lender.

COLLATERAL. This Note is secured by a Commercial Security Agreement from
Florafax International, Inc. and The Flower Club, Inc. to Lender of even date
and an Assignment of Deposit Account from Florafax International, Inc. and
Andrew W. Williams to Lender of even date.
<PAGE> 2

08-31-1995 PROMISSORY NOTE Page 2
Loan No 1531034 (Continued)

================================================================================

GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Borrower does not
agree or intend to pay, and Lender does not agree or intend to contract for,
charge, collect, take, reserve or receive (collectively referred to herein as
"charge or collect"), any amount in the nature of interest or in the nature of
a fee for this loan, which would in any way or event (including demand,
prepayment, or acceleration) cause Lender to charge or collect more for this
loan than the maximum Lender would be permitted to charge or collect by federal
law or the law of the State of Florida (as applicable). Any such excess
interest or unauthorized fee shall, instead of anything stated to the contrary,
be applied first to reduce the principal balance of this loan, and when the
principal has been paid in full, be refunded to Borrower. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note, and
unless otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

<TABLE>
<S> <C>
BORROWER: FLORIDA DOCUMENTARY STAMP TAX REQUIRED BY LAW IN
THE AMOUNT OF $875.00 HAS BEEN PAID DIRECTLY TO
FLORAFAX INTERNATIONAL, INC. THE DEPARTMENT OF REVENUE. CERTIFICATE
REGISTRATION #65-0136500-41-01
By: /s/ James H. West
------------------------------------
JAMES H. WEST, PRESIDENT
</TABLE>

================================================================================
Variable Rate. Irregular. LASER PRO, Reg. U.S. Pat. & T.M. Off.,
Ver. 3.20b(c) 1995 CFI ProServices, Inc.
All rights reserved. [FL-D20 E3.20 P3.20 1531034.LN]

<PAGE> 1
ITEM 14, 3. - EXHIBITS, (10)(b)

FIFTH ADDENDUM

THIS FIFTH ADDENDUM, made and entered into this 21st day of
November, 1994, by and between PNC BANK, KENTUCKY, INC. (formerly Citizens
Fidelity Bank and Trust Company) ("PNC" or "Bank"), a banking corporation
organized under the laws of the Commonwealth of Kentucky, 500 West Jefferson
Street, Louisville, Kentucky 40202; and FLORAFAX INTERNATIONAL, INC.
("Florafax"), a corporation organized under the laws of the State of Delaware,
4175 South Memorial Drive, Tulsa, Oklahoma 74145, as a Fifth Addendum to that
certain Agreement by and between PNC and Florafax made and entered into on the
3rd day of December, 1992 ("Agreement"), that certain Addendum by and between
PNC and Florafax made and entered into on the 15th day of January, 1993
("Addendum"), that certain Second Addendum by and between PNC and Florafax made
and entered into on the 3rd day of July, 1993 ("Second Addendum"), that certain
Third Addendum by and between PNC and Florafax made and entered into on the
15th day of November, 1993 ("Third Addendum"), and that certain Fourth Addendum
by and between PNC and Florafax made and entered into on the 15th day of
February, 1994 ("Fourth Addendum") (collectively, the Agreement, the Addendum,
the Second Addendum, the Third Addendum, the Fourth Addendum and the Fifth
Addendum constitute the "Agreements").

In consideration of PNC agreeing to extend the termination
date of the ISO Agreement and the Merchant Agreement with Florafax and
extending the period in which PNC provides an extension of credit to Florafax
to cover overdrafts as provided in the Agreement, Addendum, Second Addendum,
Third Addendum and Fourth Addendum, Florafax and PNC agree as follows:

1. Florafax reaffirms each of its obligations, duties,
liabilities and responsibilities to PNC under the terms and provisions of the
ISO Agreement, the Merchant Agreement, the Agreement, the Addendum, the Second
Addendum, the Third Addendum and the Fourth Addendum. Florafax acknowledges
and agrees that PNC is not in default under any of the terms and provisions of
the Merchant Agreement, the ISO Agreement, the Agreement, the Addendum, the
Second Addendum, the Third Addendum or the Fourth Addendum.

2. Florafax and PNC agree that the ISO Agreement,
Merchant Agreement, Agreement, Addendum, Second Addendum, Third Addendum and
Fourth Addendum are amended and modified by the terms hereof to terminate on
September 30, 1995, unless the termination date is further modified by the
terms and provisions herein, and termination of the Agreements on said date
shall proceed in accordance with the provisions for winding down the agreement
between the parties as set forth in the ISO Agreement and in the Merchant
Agreement.

3. The current extension of credit provided to Florafax
by PNC, in an amount up to the maximum of One Million Two Hundred Thousand
Dollars ($1,200,000), will be continued until November 15,
<PAGE> 2

1994, and beginning on November 15, 1994, the amount of the extension of credit
provided and available to Florafax will be reduced by the amount set forth
below until such time as the maximum amount of the extension of credit equals
the Five Hundred Thousand Dollars ($500,000) now maintained in the Collateral
Fund -

November 15, 1994, through March 15, 1995 - $50,000
reduction per month

April 15, 1995, through September 15, 1995 - $75,000
reduction per month

The principal amount outstanding on the extension of credit shall continue to
bear interest at the current floating rate of interest of one and one-half
percent over the Prime Rate, such rate being that rate of interest most
recently announced by PNC Bank, Kentucky, Inc., at its main office in
Louisville, Kentucky as its "Prime Rate," it being understood that such rate is
not necessarily the lowest rate offered by PNC Bank, Kentucky, Inc. to its
commercial borrowers.

4. The reductions in the extension of credit set forth
above in paragraph 3 shall apply and be made regardless of whether Florafax
changes merchant processors during the term of the Agreements.

5. The merchant processing fee charged to Florafax by
PNC shall be increased by five basis points effective November 1, 1994, and
Florafax shall pay the increased fee, including all processing charges passed
through to PNC by National Bancard Corporation ("NaBANCO") and such other
applicable charges under the Agreements.

6. Florafax shall be responsible for all costs and
expenses incurred by PNC or Florafax to ensure Florafax's compliance with
applicable VISA and MasterCard ISO/MSP requirements. Florafax shall pay all
such costs and expenses of PNC as billed by PNC.

7. Florafax agrees that for voice authorizations
beginning on the date set forth herein, it shall pay the increased amounts
which follow:

A. Florafax shall pay to PNC One Thousand Five
Hundred Dollars ($1,500) per month for voice authorizations beginning
with the November, 1994 invoice from PNC.

B. Florafax shall pay to PNC Four Thousand
Dollars ($4,000) per month to reimburse PNC for past due voice
authorizations, totalling as of October 31, 1994, $34,476 and

2
<PAGE> 3

shall pay such amount until all billings have been paid in full in
accordance with the terms and provisions of the Agreements.

C. In the event PNC negotiates the outsourcing
of voice authorizations processing for Florafax, Florafax shall
convert all Florafax merchants to the selected processor within sixty
(60) days of notification from PNC. Florafax further agrees that it
shall pay all costs necessary to convert to the selected processor and
will communicate any changes required to each Florafax merchant.
Florafax understands that the costs of voice authorizations from the
selected processor will be passed through to Florafax by PNC and
Florafax shall pay all such costs as billed.

8. Florafax shall pay to PNC as conversion fees the
following:

A. Florafax shall pay to PNC Two Thousand
Dollars ($2,000) per month beginning November 1, 1994, to reimburse
PNC for the conversion fee paid by PNC to NaBANCO and the payment
required hereunder shall continue until such time as the conversion
fee paid by PNC to NaBANCO has been reimbursed in full.

B. Florafax shall pay any deconversion fees
charged to PNC by NaBANCO should Florafax find another credit card
processor. Florafax shall pay all deconversion fees as billed by PNC.

9. A default on or a breach by Florafax of any covenant,
representation or obligation under this Fifth Addendum or any of the
Agreements, shall be considered a default and breach under the Agreements,
triggering all action which PNC may take under such documents, including
terminating this Fifth Addendum at PNC's discretion.

10. PNC and Florafax agree that neither the terms and
provisions of this Fifth Addendum nor those in the Fourth Addendum, the Third
Addendum, the Second Addendum, the Addendum or the Agreement shall in any way
negate the obligation, duties and responsibilities of any party to the Merchant
Agreement and ISO Agreement, except that the Merchant Agreement and ISO
Agreement shall terminate on September 1, 1995, or as stated herein, and such
termination shall proceed in accordance with the provisions for winding down of
the agreement between the parties as set forth in the ISO Agreement and in the
Merchant Agreement.

11. Florafax agrees that the funds deposited and held in
the Collateral Fund are being provided to and held by PNC as

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<PAGE> 4

collateral for the extension of credit by PNC, and PNC may exercise rights of
recovery against such fund in the event of a default by Florafax under the ISO
Agreement, the Merchant Agreement, the Agreement, the Addendum, the Second
Addendum, the Third Addendum, the Fourth Addendum, this Fifth Addendum, the
Credit Card Processing Agreement by and between Florafax and SCI Funeral
Services, Inc., made and entered into effective the 8th day of March, 1993, or
the Agreement by and between Florafax, PNC, SCI Funeral Services, Inc. and
Service Corporation International, entered into to be effective March 8, 1993.

12. During the term of the Agreements as set forth herein
if the extension of credit terminates by its own terms or is terminated by PNC
due to a breach or violation of the Agreements by Florafax, PNC shall be
entitled to retain and hold up to Two Hundred Twenty-five Thousand Dollars
($225,000) of the amounts on deposit in the Collateral Fund as security funds
for chargebacks and other liabilities pursuant to the terms and provisions of
the ISO Agreement.

13. The amount of security funds required pursuant to
Section 9(1) of the ISO Agreement under the terms and conditions stated therein
shall be Two Hundred Twenty-five Thousand Dollars ($225,000) at the time the
ISO Agreement is terminated and Florafax shall deposit, at that time the
additional amount needed to bring the total amount of security funds to be held
by PNC, including the Collateral Fund, to Two Hundred Twenty-five Thousand
Dollars ($225,000).

14. Notwithstanding the provisions of paragraphs 12 and
13 above, Florafax shall maintain in the Collateral Fund during the terms of
the Agreements not less than Five Hundred Thousand Dollars ($500,000) and on
termination of the Agreements shall maintain in the Collateral Fund to be used
as security funds under the ISO Agreement Two Hundred Twenty-five Thousand
Dollars ($225,000).

15. The parties agree that the terms and provisions of
the ISO Agreement, Merchant Agreement, Agreement, Addendum, Second Addendum,
Third Addendum and Fourth Addendum not modified by the provisions of the Fifth
Addendum shall remain in full force and effect for the term stated herein.

16. Terms not defined in this Fifth Addendum shall have
the meanings assigned to them in the Agreement, the Addendum, the Second
Addendum, the Third Addendum and the Fourth Addendum.

17. This Fifth Addendum shall be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky.

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<PAGE> 5

IN WITNESS WHEREOF, the parties by their duly authorized
officers, have executed and delivered this Fifth Addendum the day and year
first above written.

PNC BANK, KENTUCKY, INC.

By: /s/ ?
--------------------------------------------
Authorized Officer
Executive Vice President

FLORAFAX INTERNATIONAL, INC.

By: /s/ Andrew W. Williams
--------------------------------------------
Andrew W. Williams
Chairman

<PAGE> 1
ITEM 14., 3. - EXHIBITS, (10)(c)

LEASE AGREEMENT

STATE OF FLORIDA )
)
COUNTY OF ST. LUCIA )

This LEASE AGREEMENT (hereinafter called the "Lease") made and entered
into by and between Alvin W. Wunderlich, Jr., Trustee of the Alvin W.
Wunderlich, Sr., Trust Number 1 (hereinafter called "Landlord"), and Florafax
International, Inc. (hereinafter called "Tenant"):

W I T N E S S E T H :

ARTICLE I

Term

1.1 The term of the Lease shall commence on April 1, 1995 (the
"Commencement Date") and shall terminate on March 31, 2000.

1.2 Tenant shall have the option to extend the term of this Lease
for two (2) successive additional terms of five (5) years each upon the terms
and conditions as set froth herein. Tenant shall give Landlord written notice
of its intention to exercise the option to extend at least one hundred twenty
(120) days prior to the expiration of the original term of the Lease, or the
extended term, as the case may be. Rent for each extension period shall be as
provided in the Addendum One.

ARTICLE II

Leased Premises

2.1 Lessor agrees to lease to Lessee and Lessee hereby agrees to
lease to Lessor, for the use and occupancy for general and administrative
office space and related uses only, the real property being described in
Exhibit "A" attached hereto and incorporated herein by reference, and the
improvements located thereon, said real property and improvements (the "Leased
Premises"), being depicted on the Site Plan attached hereto as Exhibit "!3"
(the "Site Plan", situated in the City of Vero Beach, County of St. Lucia,
Florida.

ARTICLE III

Rent

3.1 Tenant covenants and agrees to Day Landlord as annual rental
for the Demised Premises $33,000.00 (hereinafter called "Rent").
<PAGE> 2

3.2 Rent shall be payable beginning on the Commencement Date in
equal monthly installments of $2,750.00 in advance on the first day of each
calendar month during the original term, and each extended term, hereof. If the
Commencement Date does not fall on the first day of a calendar month, rent from
the Commencement Date through the last day of the month in which the
Commencement Date falls shall be prorated and paid on the Commencement Date.

3.3 The aforesaid rentals and all other payments of the Tenant
herein provided shall be made to the Landlord at such place and to such person
as Landlord shall from time to time designate by written notice to Tenant given
at least thirty (30) days prior to the due date of such payment.

ARTICLE IV

Taxes and Assessments

4.1 Tenant shall, at its sole expense, pay all taxes, assessments,
solid waste disposal fees, rates, charges, levies and encumbrances affecting
the Leased Premises prior to the time when the same may become delinquent under
applicable law, or as soon as reasonably possible after receipt of notice of
each said charge. Landlord covenants to deliver to Tenant, promptly after
receipt, all notices for said charges. Failure of Landlord to deliver such
notice to Tenant prior to the time when the same may become delinquent, shall
excuse Tenant from any default which Landlord may allege due to failure to pay
prior to such time.

ARTICLE V

Utility Services

5.1 Tenant shall, at its sole expense, furnish such utility
services as it requires to the Leased Premises, including, but not limited to
electricity, potable water, sanitary sewer, heating, ventilation and air
conditioning, and telephone services. The cost of all such services consumed by
the Tenant in the Leased Premises shall be paid by the Tenant. Landlord shall
provide a separate meter and sewers for Tenant, separate and apart from the
Tenant occupying the building on the northern portion of the property adjacent
to the Leased Premises, as depicted on the Site Plan.

ARTICLE VI

Construction Liens

6.1 Tenant covenants and agrees that it will not alter nor permit
any construction, laborers, or materialmen's liens to be filed or placed
against the Leased Premises, or Landlord's interest therein, and which arises
out of the conduct of Tenant, its agents, or employees, and that it will
indemnify and save Landlord harmless from all loss or damage resulting to
Landlord on account of such liens. Tenant may promptly pay and discharge, or in
good faith and by appropriate legal proceedings contest the validity of, all
such liens and claims that may at any time be filed against the Leased Premises
or any Improvement thereon. If Tenant fails to pay

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<PAGE> 3

and discharge such liens or institute appropriate legal proceedings within
thirty (30) days after written notice from Landlord to Tenant, Landlord shall
have the right, at its option, to pay off and discharge the same or any portion
thereof, and the amount so paid in connection therewith shall be deemed to be
additional rent due from Tenant to Landlord to be paid at the time of the next
installment falling due.

ARTICLE VII

Conformance to Laws and Restrictions: Use

7.1 Tenant shall use the Leased Premises for general and
administrative offices and related uses and for no other purpose. Tenant will,
at its own expense, and without cost and expense to Landlord, at all times
during the term hereof, observe and comply with all lawful requirements, rules,
regulations, laws and ordinances of any state, county, municipality, the United
States Government, or other legally constituted authority to the extent that
said laws may affect the operation of its business at the Leased Premises.
Tenant will not use or knowingly permit any of the Leased Premises to be used
for any illegal or immoral business or occupation or purpose, or use or
knowingly permit the same to be used so as to constitute a nuisance.

7.2 Notwithstanding the provisions of this Article, if Tenant in
good faith and by appropriate legal proceedings contests the validity or
applicability of any such law, ordinance, rule, regulation or restriction, then
so long as such proceeding is prosecuted with diligence, Tenant shall not be
deemed to be in default hereunder for noncompliance therewith, until a final
decision in such proceeding has been rendered sustaining the validity or
applicability thereof. Tenant shall have the right to appeal any final decree
or decision to the highest court or other body having jurisdiction in the
matter and during the period of such appeals, Tenant shall not be in default
hereunder so long as Landlord is not subjected to any penalty on account
thereof.

ARTICLE VIII

Indemnification: Attorneys' Fees

8.1 Each party covenants and agrees that in case the other party
shall without any default on its part be made a party to any litigation
commenced by the other, or by a third party against the Landlord or Tenant, or
both, involving this Lease or the Leased Premises, then ail costs and expenses
incurred by Landlord or Tenant as the case may be in connection with such
litigation, including reasonable attorneys' fees shall be paid by the party at
fault.

8.2 Except as contemplated by Section 10.3 hereof, each party will
indemnify and save the other harmless against all claims, demands, suits and
judgments, and loss, damage or bodily injury to any person, property, or estate
caused by or accruing by reason of such parties' negligent act or omission, and
against all loss, legal costs and charges, including reasonable attorneys' fees
that the other may incur as a result of any such claim.

8.3 Each party covenants and agrees to pay to the other all costs
and expenses which such other Party may reasonably incur, including reasonable
attorneys' fees, in enforcing the covenants and agreement in this Lease.

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<PAGE> 4

ARTICLE IX

Improvements to Leased Premises

9.1 Tenant shall not make any structural alterations in, or
additions to, the Leased Premises without the consent of the Landlord, which
consent Landlord agrees not to unreasonably withhold, condition or delay.
Notwithstanding the terms of the immediately preceding sentence, Tenant may
make such interior alterations, additions and improvements as it may deem to be
advisable to the Leased Premises without obtaining Landlord's consent. Tenant
acknowledges that the branch bank building located on the northern portion of
the property adjacent to the Leased Premises may be expanded so long as it does
not interfere with Tenant's use of the Leased Premises at any time during the
term of this Lease. Tenant agrees that Landlord may relocate the retention pond
from its current location on the adjacent property to another location on the
Leased Premises, and to allow the Tenant of said adjacent property to drain its
storm water run-off onto such relocated pond so long as it does not interfere
with the use of the Leased Premises by Tenant or result in any undesirable
changes to the Leased Premises, as determined in Tenant's sole discretion. The
expense of such relocation and the maintenance of such retention pond shall be
paid by the Landlord.

9.2 Tenant agrees that it will without any charge, cost, expense
or liability to or on the part of Landlord, keep and maintain or cause to be
kept and maintained the Leased Premises in good repair and condition,
reasonable wear and tear excepted, and to make all needed repairs and
replacements, promptly as and when the same shall or may be needed.

9.3 Landlord shall have the right, at its option, at all
reasonable times during normal business hours, to enter upon and inspect and
view the condition of the Leased Premises, subject to such security
restrictions as Tenant may deem necessary for the protection of the operations.

9.4 Tenant covenants and agrees that at the expiration of the term
of this Lease or any extension thereof, or at the sooner termination thereof by
forfeiture or otherwise, it will quietly and peaceably deliver up to Landlord
possession of the Leased Premises and all structures and improvements affixed
to the realty thereon, and appurtenances, in good order and condition, ordinary
wear and tear, damages by fire, depreciation, the elements, and unavoidable
casualty excepted. Any trade fixtures including any and all signage placed on
the Leased Premises by Tenant, subtenant, licensees, concessionaires, and
anyone holding or claiming under Tenant shall remain its or their property and
may be removed from the Leased Premises by such owner provided it is not in
default in the performance of any of its obligations in the instrument under
which it holds possession. Tenant agrees to repair any damage caused by removal
from the premises of any trade fixtures back to a rentable condition.

ARTICLE X

Casualty

10.1 If the Leased Premises shall be damaged by fire or other
casualty which can be insured against under standard fire and extended coverage
insurance policies, the damage

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<PAGE> 5

shall be repaired by and at the expense of Tenant to the same condition as it
existed prior to the casualty, but only after Tenant has actually received the
proceeds payable under such plan, and only in an amount not exceeding said
proceeds. Such repairs shall be completed as soon as reasonably and as
expeditiously as possible, but in all events they shall be completed within 270
days after the casualty. In the event Tenant fails to repair or restore the
Leased Premises in accordance with the terms of this lease, or does not
commence such repairs or restoration within sixty (60) days after the casualty,
Landlord may terminate this Lease by notice to Tenant, in which event Landlord
shall, as its sole remedy other than termination and its sole compensation, be
entitled to receive the proceeds of all insurance carried on the Leased
Premises. Notwithstanding the foregoing, if the Leased Premises is totally
destroyed by fire or other casualty, or as a result of damage from fire or
other casualty more than fifty percent (50%) of the Leased Premises is rendered
untenantable, Landlord or Tenant shall have the right and option to terminate
this Lease as of the date of such casualty by notice to the other given within
thirty (30) days thereafter. In such event, the proceeds of all insurance
carried on the Leased Premises shall be paid to the Landlord and this Lease and
the obligations of Tenant hereunder shall cease immediately. If the option to
cancel is not exercised, Landlord shall pay any proceeds received by it to
Tenant and Tenant shall repair and restore the Leased Premises to its former
condition within 270 days after the casualty. During any period of time in
which the Leased Premises or any portion thereof is rendered untenantable by
fire or other casualty, the rent shall abate proportionately to the area
rendered untenantable for the period of time during which this condition
exists. So long as the Lease is not terminated Tenant shall be entitled to use
the Leased Premises for its intended purpose.

10.2 Tenant agrees that it will keep the Leased Premises insured
against loss or damage by fire and other insurable risks in an amount of not
less than the full insurable value thereof in standard forms of fire insurance
policies with extended coverage. Tenant shall upon request of Landlord deliver
to Tenant certificates of insurance that the insurance required under this
Article is being maintained, showing Landlord as the loss payee.

10.3 Landlord and Tenant each hereby waives any right of recovery
it may have against the other for loss to the Leased Premises caused by fire or
other peril regardless of how such loss was caused, and although such loss may
have been due to the negligence of the other party, its agents and employees.
All policies of insurance carried by Tenant on the improvements on the Leased
Premises shall contain a provision that they are not invalidated by the
foregoing waiver. Such waiver, however, shall cease to be effective if the
existence thereof precludes Tenant from obtaining any policy. If Tenant incurs
any additional premiums due to the existence of such waiver, it shall upon its
request be reimbursed therefor by the Landlord, unless waived.

ARTICLE XI

Abatement of Rents

11.1 Damage to or destruction of the Leased Premises caused by fire
or any other casualty shall cause an immediate proportionate and equitable
abatement of rent due hereunder, effective as of the date of the casualty, or
until it is determined that Tenant intends not to repair.

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<PAGE> 6
ARTICLE XII

Appropriation For Public Use

12.1 In the case of Taking [the term "Taking" as used in this
Article XII shall mean (i) condemnation by any governmental body or authority
of the Leased Premises or any part thereof, or (ii) a voluntary transfer by
Landlord in lieu of (ii) above], the first party learning thereof will promptly
give notice to the other. If the portion of the Leased Premises remaining after
such Taking (and after restoration) would not be reasonably suitable for the
use by Tenant in the operation of its business as it existed immediately prior
to the Taking, then Tenant may within sixty (60) days after the date of such
Taking give notice to Landlord of Tenant's intention to terminate this Lease on
the first day of the first month immediately following the giving of such
notice. All rents, taxes and other charges shall be prorated as of the date of
deprivation of possession and landlord shall refund to Tenant all rents and
other charges paid by Tenant with respect to any period subsequent to such
date.

12.2 If Tenant elects not to terminate this Lease by reason of any
Taking as aforesaid, this Lease shall not terminate, but as of the date of such
Taking, the rental under this Lease shall be equitably adjusted. If the parties
are unable to agree upon the adjustment, each shall appoint a competent
appraiser familiar with corporate office buildings in the Leased Premises's
market area, and the adjustment shall be the average of the adjustments
determined by the two appraisers.

12.3 If this lease is not terminated, Tenant shall promptly restore
the Leased Premises to the condition (but only to the extent reasonably
possible and to the extent proceeds are received by Tenant under Section 12.4
hereof,) it was in prior to the Taking.

12.4 Subject to the rights of a mortgagee (which right is hereby
granted to any mortgagee) to receive any award with respect to the Leased
Premises, and notwithstanding anything to this Article to the contrary, Tenant
shall be entitled, to the extent provided by law, to compensation for the value
of the unexpired term of this Lease. It shall also be entitled to a separate
award for loss of any leasehold improvements, fixtures, lost profits and moving
expenses. Landlord shall be entitled to all other awards made with respect to
a Taking of the Leased Premises or any part thereof.

12.5 In the event of any governmental action not resulting in a
taking but still creating a right to compensation therefor, such as, without
limiting the generality of the foregoing, the changing of the grade of any
street which the Leased Premises abut, or if less than the leasehold title of
to all or any portion of the Leased Premises shall be so taken for any such sue
or occupancy, this Lease shall continue in full force and effect and without
reduction of abatement of rent, and the rights of the Landlord and Tenant to
any compensation or award resulting therefrom shall be governed by applicable
law.

ARTICLE XIII

Warranties of Title

13.1 Landlord warrants that the Tenant shall and may peaceably and
quietly have, hold and enjoy the Leased Premises without let or hindrance of
and from the Landlord or any

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<PAGE> 7

other person, provided that the Tenant pays the rent herein reserved and
performs each and every covenant and agreement herein on its part to be
performed.

ARTICLE XIV

Assignment and Subletting

14.1 Tenant shall have the right to assign this Lease, or sublet
any part of the Leased Premises to accommodate consolidation, mergers,
intercompany transactions and the like, and to any affiliate company for use by
such affiliate. Any other assignment or subletting shall require the prior
written consent of the Landlord, such consent not to be unreasonably withheld.
No subletting or assignment shall relieve Tenant of its obligations hereunder.
Tenant may not encumber the Leased Premises at any time.

ARTICLE XV

Events of Default

15.1 If any default in the payment of rent shall continue for
fifteen (15) days after Landlord has given written notice to Tenant of such
non-payment, or any other default on the part of the Tenant under this Lease
shall continue for fifteen (15) days after written notice of the default shall
have been delivered to the Tenant, then Landlord may re-enter the Leased
Premises and terminate this Lease and all improvements erected on the Leased
Premises shall become the property of Landlord; provided, however, that if any
default of Tenant, except non-payment of rent, is of such a nature that it
cannot be corrected within the fifteen (15) day period, Tenant shall be allowed
whatever additional time is reasonably necessary to cure the default.

15.2 If Tenant defaults hereunder, Landlord may after the notice
periods provided in Section 15.1, terminate this Lease, and with appropriate
legal process take possession of the Leased Premises, and remove Tenant or any
other occupant. Landlord shall be entitled to recover as damages from Tenant an
amount equal to the balance of the rent, together with all expenses incurred in
connection therewith, including reasonable attorneys' fees and the costs of
reletting the Premises. Tenant shall be credited, however, with any net amounts
received by the Landlord from the reletting of the Leased Premises and with the
fair rental value of the Leased Premises for the balance of the term as of the
date possession is surrendered. No act of the Landlord shall be considered as
an acceptance of a surrender of the premises unless in writing.

15.3 Notwithstanding any other provisions in this Lease, in the
event Tenant or its successor or assigns shall become insolvent, bankrupt or
make an assignment for the benefit of creditors, or if it or their interest
hereunder shall be levied upon or sold under execution of legal process or in
the event the bank to be operated in the Leased Premises is closed, or is taken
over by any banking or other supervisory authority, Landlord may terminate the
Lease but only with the concurrence of such banking or other supervisory
authority; provided that in the event this Lease is terminated, the maximum
claim of landlord for damages or indemnity for injury resulting from the
rejection or abandonment of the unexpired Lease term shall in no event be in an
amount exceeding the rent reserved by the Lease, without acceleration up to
such date.

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<PAGE> 8

ARTICLE XVI

Notices

16.1 All notices required to be served on Landlord shall be
sufficiently served by delivering the same to Landlord at 616 Azalea Lane, Vero
Beach, Florida, 32963, or any other address hereafter designated by Landlord in
writing, or by mailing the same by certified United States mail, postage
prepaid, addressed to Landlord in the manner hereinabove set forth and shall be
deemed delivered two (2) days after posting.

16.2 All notices required to be served on Tenant shall be served
upon Tenant c/o Andrew W. Williams, 616 Azalea Lane, Vero Beach, Florida,
32963, or at such other address as may be designated by the Tenant in writing.
Delivery shall be by certified United States mail, postage prepaid, addressed
to the Tenant at the address set forth hereinabove, and shall be deemed given
two days after posting, or delivery may be made by overnight courier such as
Federal Express, in which case the notice shall be deemed given one day after
mailing.

ARTICLE XVII

Estoppel Certificate

17.1 Each party agrees that it will at any time and from time to
time upon not less than ten (10) days prior request by the other, execute,
acknowledge and deliver to the other a statement in writing certifying that
this Lease is unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified, and
stating the modifications, and if applicable, the reason it is not in full
force and effect) and if so, the dates to which rent and any other charges have
been paid in advance.

ARTICLE XVIII

Submission of Lease

18.1 The submissions of this Lease for examination does not
constitute an offer to lease and the Lease shall be effective only upon
execution and delivery hereof by both Landlord and Tenant.

ARTICLE XIX

Priority

19.1 Tenant agrees that this Lease shall be subordinate to any
mortgage or the lien which may hereafter encumber the Leased Premises, provided
that Landlord furnishes to Tenant an instrument in recordable form expected by
the holder of such lien agreeing not to disturb Tenant's possession of the
Leased Premises under this Lease so long as Tenant is not in default hereunder,
and agreeing to assume Landlord's obligations hereunder from and after

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<PAGE> 9

the date of acquisition of title to the Leased Premises by such holder. In the
event that any proceedings are brought for the foreclosure of any mortgage by
any holder furnishing such agreements, Tenant shall attorn to the purchaser at
any such foreclosure sale and shall recognize such purchaser as the Landlord
under this Lease.

19.2 In the event the holder of any lien requires the recording of
this Lease or in the event either party wishes to record this Lease, the
parties agree to execute a short form of this Lease for such purpose which
short form will contain such provisions hereof as may be designated by either
party except that rent and other charges will not be disclosed. The cost of
recording the short form of this Lease shall be paid by the party desiring to
record it.

ARTICLE XX

Waivers

20.1 All rights and remedies of Landlord and Tenant enumerated
herein shall be cumulative and none shall be exclusive of any other right or
remedy allowed at law or in equity. Failure by Landlord and Tenant to insist at
any time upon strict performance of any covenant, provision or condition of
this Lease or to exercise any option herein contained shall not be construed as
a waiver or relinquishment for the future of such covenant, provisions,
condition or option. Receipt by Landlord rent with knowledge of breach of any
covenant, provision or condition shall not be deemed a waiver of such breach
and no waiver by Landlord shall be deemed to have been made unless expressed in
writing and signed by Landlord. In addition to the other remedies provided in
this Lease, either party shall be entitled to restraint by injunction of the
violation or threatened violation of any covenant, provision, option or
condition of this Lease.

ARTICLE XXI

Signs

21.1 Tenant shall be entitled, without payment of any additional
sums to Landlord or any other person, to install from time to time at Tenant's
cost its standard signage on the Leased Premises.

ARTICLE XXII

Invalidity of Particular Provisions

22.1 If any clause or provision of this Lease is or becomes
illegal, invalid, or unenforceable because of present or future laws or any
rule or regulations of any governmental body or entity, effective during its
term, the intention of the parties hereto is that the remaining parts of this
Lease shall not be affected thereby unless such invalidity is essential to the
right of both parties.

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<PAGE> 10

ARTICLE XXIII

Miscellaneous Taxes

23.1 Tenant shall pay prior to delinquency all taxes assessed
against or levied upon the fixtures, furnishings, equipment and all other
personal property of Tenant located in the Leased Premises; if non-payment
thereof shall give rise to a lien on the real estate, and when possible Tenant
shall cause said fixtures, furnishings, equipment and other personal property
to be assessed and billed separately from the property of the Landlord.

ARTICLE XXIV

Brokerage

24.1 Landlord and Tenant each represent and warrant to the other
that it has dealt with no broker, agent or other person in connection with this
transaction, and that no broker, agent or other person is entitled to a
commission or fee.

ARTICLE XXV

General Provisions

25.1 All the terms, covenants and conditions of this Lease shall
inure to the benefit of and be binding upon the respective heirs, personal
representatives. successors and assigns of the parties hereto.

25.2 The headings in this Lease are for convenience only and are
not intended to define, limit or describe the scope and intent of any of the
provisions of this Lease.

25.3 This Lease contains the entire understanding of the parties
and no agreement unless incorporated herein shall be binding on either party.

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<PAGE> 11

IN WITNESS WHEREOF, the parties have hereunto set their respective
hands and seals as of the day and year first above written.

LANDLORD

/s/ Alvin W. Wunderlich, Jr.
- ---------------------------------------------------
Alvin W. Wunderlich, Jr., Trustee
of the Alvin W. Wunderlich, Sr.
Trust Number 1

TENANT

FLORAFAX INTERNATIONAL, INC.

/s/ James H. West
---------------------------------------------
By:
---------------------------------------------
Its: President
---------------------------------------------

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<PAGE> 12

EXHIBIT "A"

South 475 feet plus a contiguous portion of property to within thirty feet
(30') of the subject building all as reflected on Exhibit "B" and subject to
final legal description after preparation of the survey.

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<PAGE> 13

[MAP]

LEGAL DESCRIPTION

The west 5 acres of the East 15 acres of Tract 12
Section 1, Township 33 South, Range 38 East, according
to the last general plat of lands of the Indian River
Farms Company filed in the office of the Clerk of the
Circuit Court of St. Lucie County, Florida in Plat Book
2, page 25; said land new lying and being in Indian
River County, Florida.

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<PAGE> 14

ADDENDUM ONE

TO THAT LEASE BY AND BETWEEN:

LANDLORD: ALVIN W. WUNDERLUCH, JR., Trustee of the
Alvin w. Wunderlich, Sr., Trust Number 1
TENANT: FLORAFAX INTERNATIONAL, INC.

Landlord and Tenant herein covenant and agree that the rental payments provided
for herein shall be adjusted beginning of the sixth year and, every two years,
if the lease is extended, based upon the Cost of Living Index as herein defined
not to be less than two and one-half (2.5%) nor more than seven percent (7%)
for each two-year period, which annual rental, when determined, shall be paid
in twenty-four (24) equal monthly installments for the next two years. The
adjustment to the rent to be made pursuant to the Cost of Living Index, if
applicable, commencing on (month of closing), 2000, shall be determined by
multiplying the annual rental sum of THIRTY THREE THOUSAND AND 00/100 DOLLARS
($33,000.00) by a fraction, the numerator of which shall be the Index Figure
indicated for the last month of the rental term immediately expiring as shall
be shown by the Consumer's Price Index - the United States ALL Urban Customers
- - All Items (1982-84=100) Group, issued by the Bureau of Labor Statistics of
the United States Department of Labor, and the Index and Group for the month of
(month of closing), 1999. The product of such multiplication shall be the
amount of the total annual rental to be payable hereunder for the next ensuing
year and to be paid in twelve (12) equal monthly installments.

It is understood and agreed that the above-referenced index is now
being published monthly by the Bureau of Labor Statistics of the United States
Department of Labor. Should it be published at other intervals, the new Index
hereinafter provided for shall be arrived at from the Index or Indexes
published by said Bureau most closely approximating the next to last month in
the preceding term.

Should said Bureau of Labor Statistics change the manner of computing
such Index, the Bureau shall be requested to furnish a conversion factor
designed to adjust the new Index, and an adjustment shall be made on the basis
of such conversion factor. Should the publication of such Index be discontinued
by said Bureau, then such other Index as my be published by such Bureau most
nearly approximating said discontinued Index shall be used in making the
adjustments herein provided for. Should said Bureau discontinue the publication
of an Index approximating the Index herein contemplated, then as Index
published by another United States Governmental Agency as most nearly
approximates the Index.

<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<EXCHANGE-RATE> 1
<CASH> 2,038,000
<SECURITIES> 500,000
<RECEIVABLES> 2,254,000
<ALLOWANCES> 706,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,117,000
<PP&E> 4,288,000
<DEPRECIATION> 3,919,000
<TOTAL-ASSETS> 6,852,000
<CURRENT-LIABILITIES> 5,515,000
<BONDS> 3,034,000
<COMMON> 58,000
0
0
<OTHER-SE> (1,814,000)
<TOTAL-LIABILITY-AND-EQUITY> 6,852,000
<SALES> 0
<TOTAL-REVENUES> 7,046,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,094,000
<LOSS-PROVISION> 173,000
<INTEREST-EXPENSE> 309,000
<INCOME-PRETAX> 707,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 707,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 707,000
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12

</TABLE>