ALPNET INC, 10-K405, 1998-03-27

ALPNET INC
10-K405, 1998-03-27
BUSINESS SERVICES, NEC

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1997.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.

Commission File Number 0-15512

ALPNET, INC.
------------
(Exact name of registrant as specified in its charter)

UTAH 87-0356708
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4460 SOUTH HIGHLAND DRIVE, SUITE #100, SALT LAKE CITY, UTAH 84124-3543
-------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (801) 273-6600

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
--------------------------
(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. Yes X No _____
-----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. X
-----

The aggregate market value (based on the closing price of the Common Stock
as reported by the Nasdaq Stock Market on March 13, 1998) of the voting stock
held by non-affiliates of the registrant as of March 13, 1998, was $36,797,138.

The number of shares outstanding of the registrant's Common Stock as of
March 13, 1998 was 23,344,815.

DOCUMENTS INCORPORATED BY REFERENCE

Listed below are documents from which information is incorporated by
reference herein, and the Parts of this Form 10-K into which such incorporation
by reference is made:
Definitive Proxy Statement dated March 30, 1998 - Part III of this Form
10-K.
<PAGE>

TABLE OF CONTENTS

FORM 10-K
ITEM NO. NAME OF ITEM PAGE
---------- ------------ ----
<S> <C> <C>
PART I

Item 1. Business................................................................
Item 2. Properties..............................................................
Item 3. Legal Proceedings.......................................................
Item 4. Submission of Matters to a Vote of Security Holders.....................

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...............................................................
Item 6. Selected Financial Data.................................................
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................
Item 8. Financial Statements and Supplementary Data.............................
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................

PART III

Item 10. Directors and Executive Officers of the Registrant......................
Item 11. Executive Compensation..................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management..........
Item 13. Certain Relationships and Related Transactions..........................

PART IV

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

SIGNATURES...........................................................................
</TABLE>
<PAGE>

PART I

ITEM 1. BUSINESS
- ------- --------

(A) GENERAL DEVELOPMENT OF BUSINESS
-------------------------------

ALPNET, Inc. (the "Company") is a United States publicly-owned multinational
corporation which was incorporated in the state of Utah in 1980. The Company
provides language translation, product localization, and multilingual publishing
solutions to businesses engaged in international trade.

The Company has several foreign subsidiaries, all of which are wholly-owned.
Most of the foreign subsidiaries were acquired in 1987 and 1988, although in
1994, the Company began to expand its presence in foreign markets through the
formation of additional foreign subsidiaries and branches. As of December 31,
1997, the Company has foreign subsidiaries or branches in the following
countries: Canada, United Kingdom, Ireland, Germany, France, Spain, the
Netherlands, Belgium, Singapore, Korea, China and Japan. The Korean branch of
ALPNET, Inc. was formed in 1994. ALPNET Ireland and ALPNET China were formed in
1995 and ALPNET Netherlands, ALPNET Belgium and the Japan branch of ALPNET, Inc.
were formed in 1996. The Company's Switzerland office was closed effective
December 31, 1996, and its Hong Kong office was closed in 1997.

The Company believes that it is the largest publicly-owned dedicated supplier of
worldwide translation and product localization services in the world. The
Company provides its clients with language translation, product localization,
language interpreting, language training, and multilingual desktop publishing
and printing services. The Company combines advanced technology and the
essential expertise of professional translators and localization engineers to
provide a full spectrum of services to fulfill the multilingual publishing needs
of clients in international business.

(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT
--------------------------------------------

The Company operates in one business segment: language translation and related
services.

GENERAL
-------

The Company provides a full range of language services specifically tailored to
clients engaged in international business. ALPNET translates printed and
electronic product information, brochures, operating manuals, schematics,
maintenance manuals, training materials and a host of other materials for
businesses engaged in selling products and services into the global market. The
Company also has specialized capabilities to help its customers localize the
products they sell in foreign markets. This may be as complex as the
localization of software products, or as simple as the translation of packaging
and labels.

The Company distinguishes the services it provides into three main product
lines: localization, documentation and translation. Localization is the most
extensive range of services offered to clients and is primarily offered to
clients in the information technology (IT) market. It is a turnkey service and
it encompasses a complete linguistic, technical and cultural adaptation of
products for foreign language markets. Services included under localization are
translation, glossary development, desktop publishing, printing, graphics, web
publishing, multimedia, creative tasks, authoring, and a complete range of
engineering and software testing activities. Localization requires a high level
of both technical and linguistic skills. ALPNET concentrates the specialized
resources needed for these activities in three 'hubs' located in Salt Lake City,
Singapore and Amsterdam. The three hubs act as the project management and
technical management offices for large multilingual projects while the in-
country offices perform most of the linguistic tasks.
<PAGE>

Documentation services are offered to a wide range of industrial clients in
automotive, consumer electronics, telecom, financial services, manufacturing and
other industries. The Company provides a complete service for companies that
produce product-supporting printed and electronic documentation and training
materials. Documentation services include translation, glossary development,
desktop/electronic publishing, printing, graphics and web publishing.
Documentation requires linguistic- and graphics-oriented professionals. ALPNET
concentrates specialized resources and equipment in many of its larger in-
country offices (Montreal, London, Stuttgart), while the linguistic tasks are
performed in-country.

Translation services are offered to diverse clients from all industries. The
Company provides traditional services for business clients that need the
translated text of a brochure, memorandum, sales presentation, letter, magazine
or any other text. Translation is a stand-alone service rarely requiring
additional support services. ALPNET performs translation services through its
entire network in 14 countries. Translations are in most cases outsourced to
independently contracted translators.

In some locations, ALPNET also provides interpretation services for business
meetings and conferences. This service, however, does not represent a
significant share of the Company's business.

While the exact totals are difficult to obtain due to some clients providing
jobs in more than one product line, coupled with the difficulty in classifying
jobs that contain elements of multiple product lines, management estimates the
distribution of sales of the Company in 1997 over the three product lines as
follows: localization - 45%, documentation - 40%, and translation (including
interpretation services) - 15%.

MARKET
------

Recent political and economic changes have created and expanded opportunities
for significant increases in international trade. As companies increase their
operations on a global basis, they require marketing, sales and technical
information in a wide variety of languages. Traditionally, translation services
have been supplied by in-house departments, governmental units, commercial
translation agencies and individual freelance translators. While there are
thousands of individual free-lance translators and many commercial agencies, it
appears that all but a handful of operations are too small to effectively deal
with the increasingly complex translation and multilingual publishing
requirements of large corporate businesses.

The Company is well positioned to serve such businesses. Multinational
companies are looking for a new type of service provider to replace the "cottage
labor" that has historically dominated the translation services industry. The
Company has combined its proprietary computer-based translation technology with
the expertise of professional translators to enable it to obtain a growing
market share in this expanding industry. The Company believes that the
available market is much larger than the combined revenue of the current major
providers and that no one provider accounts for a significant portion of the
commercial translation market.

MARKETING
---------

Coverage in the business press leads to the conclusion that international
business is undergoing fundamental changes, and generally, these fundamental
changes seem to be very favorable for the translation industry. Some of the
main themes in these market changes can be described as follows.

TELECOMMERCE. The information technology industry leads the way to new
distribution channels for intellectual property. Users can download software
and information from the Internet. Catalog companies have offered their
products online via multimedia web sites. Service companies have started to
offer their services online. Electronic banking, teletraining, helpdesk and
even teletranslation services are expected to be generally accepted services
within only a few years. Secure Internet payment procedures and e-cash will
complete the transactions. Telecommerce will take the 'middleman' out of the
loop and bring products straight from the publisher or manufacturer to the end-
user. This shift in the distribution model will affect many different industries
and should lead to an increase in the need for documentation and product
support.
<PAGE>

CROSS BORDER SELLING. There was a time when 'multinationals' were viewed as a
group of huge Fortune 500 companies. Today, many medium- and small-sized
companies successfully sell their products in international markets. The U.S.-
based IT companies have seen their international markets grow significantly over
the last ten years and today many of them generate a substantial portion of
their revenues from non-U.S. markets. Other industries are also following this
trend. New distribution methods and outsourcing allow small- and medium-sized
companies to reach non-U.S. markets without heavy up-front investments. Today,
the prevailing strategy is to look to non-U.S. markets as separate and
additional sources of revenue, which requires the sequential phase of product
localization in the production and distribution process. The tendency towards
similar releases ('simship') of products for home and foreign markets leads to a
view of the world as one market. The ultimate requirement the translation
industry is facing is to supply a turnkey multilingual publishing solution to
businesses who compete in this one worldwide market.

GROWTH IN TRANSLATION MARKET. As a result of the rapid internationalization of
business, coupled with the emergence of telecommerce, the translation market is
expected to grow significantly. A few years ago, OVUM, Inc., a market research
company, forecast a growth rate of 30% per year over the following five years in
the demand for translation and localization in the IT related market. OVUM
projected that ten percent of the projected market volume of $6 billion in this
market in the year 2000 would be shared among only a few of the largest service
providers. More recently, a 1997 survey among members of the Localization
Industry Standards Association (LISA) resulted in a projected industry growth
rate of about 15%.

CHANGING BUSINESS MODELS. The Internet and the emergence of telecommerce leads
to entirely new business models. Publishers provide low-end features or
information, via the Internet and free of charge, in order to raise market
exposure and to stimulate demand for high-end features or more important
information. An example of changing business models is the way people pay for
products. The widespread availability of software and information on the
Internet may lead to billing on a per usage time basis rather than on a per
product or license basis. Looking ahead, ALPNET may see a shift of its business
model towards a consumer business, where the actual user of products, rather
than the publisher, will pay for product information in the local language.

CO-MAKERSHIP. No one single company can manage the technological innovations of
its products and services, the access to global markets and at the same time
keep up with the speed of today's business developments without partnerships and
alliances. 'Coopetition' is a new term which refers to the formation of
cooperative bonds between competitors. 'Virtual companies' is a more recent
term that refers to partnerships and alliances created to serve customers or
certain market segments faster and more effectively. 'Co-makership' is the term
applied in the service industry to refer to a very close partnership between
manufacturers /publishers and a service provider, or complete outsourcing to a
service provider. The partners or allies combine their core competencies to
produce a better product for one market.

In each of the three product lines of the Company, favorable developments can be
seen as a possible result of fundamental market changes.

IN LOCALIZATION SERVICES, there is a trend towards co-makership. Software
publishers and hardware manufacturers are looking for suitable partners for a
global turnkey solution for their multilingual publishing needs. It has been
estimated that the software industry alone spends at least 1% of its total
revenues of $200 billion on localization outsourcing. On the supply side, there
are only a few localization vendors that can meet the requirements of global
coverage and vertically integrated services. The specialized localization
industry shows accelerated growth, consolidation of demand and supply, and
rising entry barriers. Capability is the number one buying criteria. Capacity
and quality are also important, but price competition is not intense in this
specialized market. There are additional growth opportunities in new value
added services, such as local content generation, multimedia and software
testing, and engineering work. The Company has been expanding its capabilities
in this area very quickly. ALPNET provides a turnkey localization service
including software translation, testing, engineering, creative work and full
international project management. Localization is currently the fastest growing
product line for the Company, and is expected to remain so for the next few
years. ALPNET is considered to be one of the major suppliers in this industry.
Existing clients are maintained and developed through very intensive and
closely-monitored client service. New clients are
<PAGE>

found through direct contact from professional sales staff of the Company, or
via industry meetings and seminars. ALPNET is a founding member of the
Localization Industry Standards Association.

DOCUMENTATION SERVICES also shows accelerated growth. However, barriers to
entry are not as high as in localization services, and there is more
competition. Documentation services is currently showing a trend towards
electronic or web publishing and software localization. This increasing
complexity of the publishing process will eventually raise the entry barrier.
Products from various industries like the automotive, telecommunications, home
electronics and medical industries are becoming more software driven and the
publishing process requires more technical skills. Another visible trend is the
change in the publishing cycle from single release/many copies (traditional
print) to many releases/single copy (web publishing). The increased frequency
of product releases leads to an increased volume of translation work. The
rapidly evolving changes in product documentation also call for the use of tools
that keep track of changes. The Company's binding factor in the provision of
documentation services is the use of its proprietary Translation Support System
("TSS"), which holds repetitive parts of text and their translations in a
database and allows the translators to focus on those parts of text that are
new. The Company currently works for most of the large automotive companies and
many telecommunications equipment and consumer electronics manufacturers. New
clients are found through teleprospecting and mailings, followed up by direct
contact with potential clients. Existing clients are maintained through
personalized client service. ALPNET is a member of the Automotive Industry
Action Group (AIAG) and is a member of the Society for Technical Communication.

TRANSLATION SERVICES are also growing, but this sector is fragmented, with many
small local and regional entities competing with ALPNET's services. The entry
barriers are very low. As a result, price is very often an important buying
criteria, often the most important. The Company offers its translation services
through Yellow Pages in the main cities of important markets like England,
Germany and France. ALPNET believes that in the future, translation services
will be more easily accessed through an online connection. For this reason, the
Company is planning to develop its Language Button and teletranslation services.
The Language Button is an icon that can be integrated in the user interface of
any software application. Clicking on this icon, the user will get access to a
language services menu including the worldwide translation resources of ALPNET.
These innovative solutions will help the Company to maintain and grow its
business in this product line that is subject to more competition. ALPNET has
built up experience in integrating its Language Button in conjunction with
online services of third parties. Based on this experience, the Company
believes it can gradually build up a new and large client base for translation
services.

In marketing the services of all three product lines, the Company believes it
has some very strong selling propositions:

- GLOBAL COVERAGE. The Company provides a complete range of the most commonly
needed languages through its network of offices in fourteen different
countries in North America, Europe and Asia.

- PROPRIETARY TRANSLATION TECHNOLOGY. The use of TSS by professional
translators ensures better quality and higher productivity. The system keeps
track of terminology and parts of text and allows the translator to translate
repetitive information only once, thus ensuring consistent use of terms and
standard phrases. Formatting codes are preserved for later use in the desktop
publishing phase.

A special version of the Company's Translation Support System, Joust Lite,
will be able to be downloaded from ALPNET's web site for use by professionals
in the industry later in 1998. The Company will make this first product
available as a freeware package in order to let users familiarize themselves
with ALPNET's translation technology. Joust Lite is a subset of the
Company's complete suite of translation tools and will offer the same full
functionality as the robust Joust Pro, whereas the demo Lite version will be
limited to the file formats it can handle and will allow the user access to
only one translation memory and one dictionary per language. Joust has been
utilized for many years by ALPNET translators throughout the world. It helps
the Company improve services to clients by reducing turnaround time,
facilitating updates, and assuring consistency throughout all documentation
and user assistance information published by clients. Today there is an
installed base of some 1,000 translators.
<PAGE>

By providing Joust Lite as a freeware package, the Company plans to expand
the installed base and grow the market awareness of ALPNET's technology.
Following up on Joust Lite, the "Pro" version will be released later in the
year. This version will no longer have the limitations of file formats or
single memories and will be made available on a subscription basis. Joust
Pro will allow remote translators to connect to the Company's servers and
share translation memories. This model fits well with the infrastructure of
the translation market, which is traditionally a teleworking industry.

- BROAD CAPABILITY. ALPNET provides a broad range of services helping
companies to bring their products to foreign markets and to publish
information internationally.

- PROFESSIONAL CLIENT SERVICE. The Company has professional client service
staff employed in multiple locations of its network assuring its clients
professional management of their localization projects and publishing
activities. A client can choose to work through a single point of contact in
the network to manage all its foreign language publishing requirements.

- INNOVATIVE STRENGTH. The Company takes a leading role in innovating the
industry and setting trends for new distribution and production methods.

MAJOR CLIENT
------------

Sales to a single client in the computer industry (Compaq Computer Corporation)
accounted for 11%, 16% and 17% of total revenues in 1997, 1996 and 1995,
respectively. Relations with this client are satisfactory and management
believes a significant portion of 1998 revenues will also be attributable to
this client. No other client accounted for more than 10% of revenues in any
year.

MANPOWER
--------

The Company requires both sales and project management personnel in order to
obtain and manage major translation projects. In all geographic locations,
sales is one of the primary responsibilities of the country manager and the
local direct sales personnel. The Company also has project managers dedicated
to specific clients. Project managers are introduced to potential clients as a
part of the sales plan and are vital for obtaining and retaining major
contracts, where the Company's management strengths can be as important as the
quality of translation itself.

BACKLOG
-------

As of December 31, 1997, the Company had a backlog of approximately $4,500,000
of translation and localization services orders compared with a backlog of
approximately $2,700,000 as of December 31, 1996. The increase in backlog in
1997 is the result of several factors, including increased market penetration in
substantially all geographic locations and a general increase in demand for the
Company's services in substantially all of the industries served by the Company.

COMPETITION
-----------

The Company believes competition in the translation market is characterized by
widely differing elements, which reflect the diverse needs of clients. At one
end of the spectrum, there are small single-site agencies with a generalist
approach that offer services generally limited to translation. At the other end
of the spectrum, there are a few large, multisite companies that offer turnkey
services (more than translation only) and that focus often on providing
'solutions' for specific industries. Between these extremes, there are all
kinds of mixed forms. In comparing ALPNET with the competition, the Company
scores well in a number of key criteria.
<PAGE>

SIZE is important in a market that has traditionally been fragmented and that is
still often referred to as a 'cottage industry.' Translation contracts are
becoming larger, especially where turnkey projects are concerned. Corporate
users want to deal with large capacity service providers. ALPNET believes,
based on available information, it is one of the top three to five companies, in
terms of translation-related revenues, in the rapidly growing global translation
market.

SINGLE VS. MULTI-SITE. This is not only a strategic choice, but also an
economic choice. Some companies in the industry seem to have chosen to remain
single-site operations. Others have made failed attempts to set up foreign
offices. Only a few companies have, after two or three years of successes and
failures, built up an international network that seems to work with relative
success. ALPNET has built up its network through a series of acquisitions, new
office expansions and other alliances, and has invested a number of years
refining these capabilities. It is fair to say that developing and maintaining
a good working network of offices is the greatest challenge that translation
service providers face. Single-site multilingual vendors will have more and
more difficulty recruiting sufficient capacity at economic prices. Multi-site
operators are facing the problem of continuously expanding their network through
acquisitions, start-ups or alliances. The cultural challenges of managing
people in relatively small (but heavily people driven) multinational companies
cannot be underestimated either. ALPNET clearly has valuable experience when it
comes to managing client projects through an international network.

SOLUTION VS. TRANSLATION ONLY. The majority of large translation service
providers were formed when new emerging industries developed an urgent demand
for a complete translation solution to which traditional suppliers could not
respond. The 'old' translation agencies still exist, but they do not seem to
grow beyond a certain size. The large suppliers offer solutions to their
clients and list services such as consulting, testing and engineering, printing,
publishing, fulfilment, etc. ALPNET believes an increasingly large part of its
business is moving to a solution-based model. Many projects are however of a
traditional nature, where clients turn to ALPNET because of a mix of capacity,
price and quality. The balanced spread over three product lines (localization,
documentation and translation) makes the Company less vulnerable to the
fluctuations in work volumes that are so typical for the information technology
sector.

OWNERSHIP. A significant number of the large translation companies are closely-
held (with or without participation of a venture capital company) or are
subsidiaries of larger multinational companies. It is typical in the
translation market for the entrepreneur/owner to function as the central
management that controls all aspects of the business, even when the companies
grow much larger and become international in scope. This ownership structure
can be a potential barrier for growth. The entrepreneur/owner experiences
increasing problems in keeping up with ongoing investment requirements, and also
often finds it difficult to adapt to new management models and replicate what
was built up in the 'home market.' Translation entrepreneurs are frequently
looking for ways to join forces, buy or sell other translation companies, or
integrate into larger businesses. Recently, several mid-sized translation
companies have been acquired by large companies in various industries. ALPNET
is the only publicly-owned company in this industry with a worldwide
professional management structure that is not part of a larger corporate
structure, thereby giving it the ability to focus specifically on operations and
growth opportunities in the translation and localization industry.

DEVELOPMENT AND CLIENT SUPPORT
------------------------------

During 1997, 1996 and 1995, the Company spent approximately $391,000, $226,000
and $170,000 respectively, on technology development and support activities.
These reflect the amounts spent on the further development and support of
technology for use within the Company. Management expects an increase in the
level of development-related expenses in 1998 as it continues to expand the
services available to its clients, including on-line capabilities.

EMPLOYEES
---------

As of December 31, 1997, the Company employed 468 persons. Due to the nature of
its business, the Company also retains, on an as-needed basis, a large number of
translators and other service professionals who are independent contractors.
<PAGE>

(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
----------------------------------------------------------------------
SALES
-----

Financial information concerning the Company's foreign and domestic operations
is presented in note 2 to the Consolidated Financial Statements included in Item
8 of this Form 10-K and is incorporated herein by reference.

ITEM 2: PROPERTIES
- ------- ----------

ALPNET's corporate headquarters are located in Salt Lake City, Utah. Sales and
production facilities used by the Company as of December 31, 1997, all of which
are leased, are listed below.
<TABLE>
<CAPTION>

Location Square Feet
-------- -----------
<S> <C>
United States
Salt Lake City, Utah 10,700
Other locations 900
Canada 14,400
United Kingdom
London/(1)/ 15,000
Other locations 9,200
Germany
Stuttgart 9,900
Other locations 5,600
Ireland, France, Spain, Netherlands, Belgium 13,900
Singapore, Korea, China, Japan 13,300

</TABLE>
/(1)/ Approximately 3,000 square feet of the London facilities are subleased
pursuant to a contract expiring in 1998.

ITEM 3: LEGAL PROCEEDINGS
- ------- -----------------

Axel Hofstadt, et al., vs. Wellshire Securities, Inc., et al., pending in the
- -------------------------------------------------------------
United States District Court for the District of Utah, Central Division, as Case
No. 2:96 CV 0327B. This action has been pending since April 9, 1996. By means
of a Third Amended Complaint, dated February 23, 1998, the Company was added as
a named defendant. This action is brought by 74 plaintiffs, all of whom are
German nationals. The Company is one of 18 named defendants.

Christa Wennemann, et al., vs. Douglas E. Brown, et al., pending in the United
- -------------------------------------------------------
States District Court for the District of Utah, Northern Division, as Case No.
94 C 967G. This action has been pending since October 6, 1994. By means of a
Fourth Amended Complaint, dated February 23, 1998, the Company was added as a
named defendant. This action is brought by 128 plaintiffs, all of whom are
German nationals. The Company is one of 19 named defendants.

In these actions, each of the named plaintiffs seek to recover monetary damages,
in amounts to be proven at trial, including punitive damages, interest, and
costs, allegedly sustained as a result of securities transaction(s) the
plaintiffs entered into with several of the other named defendants. During
1993, the Company entered into a stock purchase agreement whereby the Company
sold 3,000,000 shares of its common stock to Benitex, A.G., a Liechtenstein
company, one of the named defendants. Some of the shares of the Company's
Common Stock was sold by Benitex and/or by entities related to or under common
control with Benitex, to some of the plaintiffs. The Company has just been
served in these actions and its answers are not yet due. The Company intends to
vigorously defend the lawsuits.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------

No matters were submitted to a vote of security holders during the quarter ended
December 31, 1997.
<PAGE>

PART II

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------- ---------------------------------------------------------------------

ALPNET's Common Stock trades on The Nasdaq Stock Market under the symbol AILP.
The following table shows the range of high and low trading prices as reported
by The Nasdaq Stock Market for the years 1996 and 1997.
<TABLE>
<CAPTION>

1996 HIGH LOW
---------------------------------- ----- -----
<S> <C> <C>

Quarter ended March 31, 1996 $1.81 $1.06
Quarter ended June 30, 1996 3.06 1.31
Quarter ended September 30, 1996 3.22 1.87
Quarter ended December 31, 1996 2.75 1.44

1997 HIGH LOW
---------------------------------- ----- -----

Quarter ended March 31, 1997 $1.87 $1.06
Quarter ended June 30, 1997 1.97 .84
Quarter ended September 30, 1997 2.62 1.25
Quarter ended December 31, 1997 2.75 1.94
</TABLE>

As of March 13, 1998, there were 421 shareholders of record; however, the
Company estimates the actual number of beneficial owners approximates 4,000. No
dividends have been declared on the Company's Common Stock. The Company is
currently prohibited from paying dividends under Utah corporate law.

ITEM 6: SELECTED FINANCIAL DATA
- ------- -----------------------

The following selected financial data are derived from the Consolidated
Financial Statements of the Company. The data should be read in conjunction
with the Consolidated Financial Statements, related notes and other financial
information included herein. The income per share amounts prior to 1997 have
been restated as required to comply with Statement of Financial Accounting
Standards No. 128, Earnings Per Share. For further discussion of income per
share and the impact of Statement No. 128, see notes 1 and 5 to the Consolidated
Financial Statements.

OPERATING SUMMARY
Thousands of dollars, except per-share data
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales of services $40,795 $32,338 $26,919 $20,473 $19,459
Net income (loss) 1,588 596 621 (741) 458
Income (loss) per share - basic .09 .04 .04 (.05) .03
Income (loss) per share -
assuming dilution .06 .02 .03 (.05) .03
Cash provided by operations 753 486 1,200 (680) 375
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>

FINANCIAL SUMMARY
Thousands of dollars and shares
- ------------------------------------------------------------------------------------
AS OF DECEMBER 31 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $ 3,810 $ 2,349 $ 2,200 $ 1,187 $ 125
Total assets 21,040 17,267 14,449 13,223 12,743
Long-term debt, less current portion 489 262 220 533 1,314
Shareholders' equity 11,091 10,355 9,331 7,177 6,089
Shares of Common
Stock outstanding 23,293 17,883 16,199 15,562 15,562
Common Equivalent Shares of
Convertible Preferred Stock
outstanding 786 6,187 7,423 6,637 1,378
- ------------------------------------------------------------------------------------
</TABLE>

A majority of the Company's operations are in foreign countries. Accordingly,
the Company is significantly affected by foreign currency exchange rate
fluctuations. The following table shows what sales and results of operations
would have been for the years presented, had foreign currency exchange rates
remained at 1993 levels for all years.

PRO FORMA DATA
Thousands of dollars
- ------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pro forma sales of services at
1993 foreign currency
exchange rates $41,292 $30,790 $25,036 $20,059 $19,459
Pro forma net income (loss) at
1993 foreign currency
exchange rates 1,628 668 662 (724) 458
- ------------------------------------------------------------------------------------
</TABLE>

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------

The following Management's Discussion and Analysis should be read in conjunction
with the Consolidated Financial Statements and notes thereto.

FOREIGN OPERATIONS

The Company serves its customers from more than 30 wholly-owned offices in 14
countries. The operations of the Company are predominantly located outside the
U.S. Accordingly, the Company is subject to the effects of foreign currency
exchange rate fluctuations. For all of the Company's foreign subsidiaries, the
functional currency has been determined to be the local currency. Accordingly,
assets and liabilities are translated at year-end exchange rates, and operating
statement items are translated at weighted-average exchange rates prevailing
during the years presented. The resultant cumulative foreign currency
translation adjustments to the assets and liabilities are recorded as a separate
component of shareholders' equity. The 1997 foreign currency equity adjustment
was negative $851,000 compared to a positive adjustment of $186,000 in 1996.
Generally, when the U.S dollar strengthens against the major foreign currencies
affecting the Company, the shareholders' equity adjustment is negative since the
net assets denominated in foreign currencies are translated into fewer U.S.
dollars. This occurred in 1997, while in 1996 the opposite situation was
present. As of December 31, 1997, the cumulative net effect to the Company of
the equity adjustment from movements in foreign currency exchange rates was a
reduction of $2.1 million in shareholders' equity. A significant portion of
the cumulative foreign currency adjustment relates to changes in the recorded
amount of goodwill.
<PAGE>

In 1997, the Company recorded a net benefit of $213,000 for gains on foreign
exchange transactions. In 1996, the Company recorded a net expense of $121,000
for realized and unrealized losses on foreign exchange transactions.
Substantially all of the 1996 expense was incurred in the U.K. and a majority of
the U.K. expense represented an unrealized loss related to an unusually strong
UK(Pounds) as of December 31, 1996. Because the Company's U.K. subsidiary had a
large amount of US$ denominated receivables outstanding as of December 31, 1996,
the Company recorded an unrealized loss on those receivables in 1996. The
strengthening of the US$ against the UK(Pounds) in early 1997 meant that most of
the 1996 loss was not realized. In 1995, a net loss of $77,000 was recorded on
foreign currency transactions, and most of this loss was incurred in the U.K.

Because most of the Company's operations are located outside the U.S. and its
foreign operations' financial results must be translated into U.S. dollars, the
Company's actual and reported financial results and financial condition are
susceptible to movements in foreign currency exchange rates. Since the Company
has relatively few long-term monetary assets and liabilities denominated in
currencies other than the U.S. dollar, it does not have any ongoing hedging
programs in place to manage currency risk.

RESULTS OF OPERATIONS

The following paragraphs discuss 1997 results as compared with 1996, and 1996
results as compared with 1995, including the significant effects of fluctuating
foreign currency exchange rates.

The Company reported net income of $1,588,000 in 1997 compared to net income of
$596,000 in 1996 and net income of $621,000 in 1995. If foreign currency
exchange rates for 1997 had remained unchanged from 1996, the Company would have
recorded net income of over $1.7 million instead of $1,588,000 and therefore
currency exchange rate fluctuations had a negative effect on reported 1997
results. In 1996, the Company would have reported net income of $626,000
instead of $596,000 if currency exchange rates for 1996 had remained unchanged
from 1995 levels.

Sales of services were $40.8 million for 1997 compared to $32.3 million for 1996
and $26.9 million for 1995. The $8.5 million increase in reported sales for
1997 consisted of an increase in sales volume of $10.0 million and a $1.5
million decrease due to currency exchange rate variances. The $5.4 million
increase in reported sales for 1996 consisted of an increase in sales volume of
$6.0 million and a decrease of $.6 million due to currency exchange rate
variances. The increases in sales volume in both 1997 and 1996 are due to
increases in sales in all of the primary markets in which the Company has a
presence, but most particularly in the Company's North American, German, and
Netherlands offices in 1997 and the North American and U.K. offices in 1996.
Contributions from new offices have contributed to sales increases in both
periods.

The increases in sales volume are a result of generally expanding needs for
language related services in an increasingly global marketplace where more and
more businesses are entering foreign markets and becoming involved in worldwide
trade. Examples of this are the software and automotive industries which have
significant and increasing needs for product localization services such as those
provided by the Company. Also having a beneficial effect on sales levels is the
Company's increasing emphasis on turnkey multilingual publishing solutions and
the Company's global account strategy, which focuses on the development of long-
term partnering relationships with major clients that have ongoing translation
and localization needs.

The Company competes on the basis of capability, quality, service and
geographical proximity to clients and potential clients. The Company has opened
several new offices and expanded existing offices in recent years in order to
increase its market share in what management believes has been and will continue
to be a growth industry.

The following table shows a comparison of sales of services in each of the
Company's significant geographic areas for 1997, 1996 and 1995, along with the
effect of foreign currency exchange rate fluctuations on sales between years.
Intercompany sales are normally billed on a margin-sharing basis. All
intercompany sales are eliminated in determining the reported totals.
<PAGE>

<TABLE>
<CAPTION>
Thousands of dollars
- ------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) Increase (Decrease)
in Sales of Services Total in Sales of Services Total
due to 1997/1996 due to 1996/1995
Sales Currency Increase Sales Currency Increase
1997 1996 Volume Differences (Decrease) 1995 Volume Differences (Decrease)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 7,476 $ 5,521 $ 1,955 $ 0 $ 1,955 $ 2,463 $ 3,058 $ 0 $ 3,058
Canada 6,535 4,802 1,851 (118) 1,733 3,860 916 26 942
Europe 31,409 25,713 7,666 (1,970) 5,696 21,864 4,599 (750) 3,849
Asia 4,366 3,008 1,718 (360) 1,358 2,464 545 (1) 544
Eliminations (8,991) (6,706) (3,179) 894 (2,285) (3,732) (3,071) 97 (2,974)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SALES $40,795 $32,338 $10,011 $ (1,554) $ 8,457 $26,919 $ 6,047 $ (628) $ 5,419
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

As shown in the above table, every major geographical region reported increased
sales in both 1997 and in 1996 over the prior year.

SALES OF SERVICES BY GEOGRAPHIC AREA

U.S. sales increased 35% in 1997 over 1996, and increased 124% in 1996 over
1995. These increases were due to a rise in the number and size of projects for
both existing and new clients, especially software localization services for
companies in the computer hardware, software development and computer-based
training industries. Much of this increase is due to aggressive sales and
marketing efforts initiated in late 1995 and 1996 and, more recently, a strategy
of targeting sales efforts at specific major global companies. Management
expectations for the U.S. are for a general continuation of growth in sales,
especially to the computer and computer-based training industries, but the
amount and timing of actual orders from clients is unpredictable.

Canada's reported sales for 1997 represented an increase over 1996 of 36%.
Sales in 1996 increased 24% over 1995. These increases represent primarily
increases in sales volumes, with little effect from fluctuating foreign currency
exchange rates. The increases in sales in Canada for both 1997 and 1996 were
due primarily to ongoing aggressive marketing and sales efforts and the
procurement of new large long-term contracts. These increases in sales have
occurred despite continuing economic and political challenges in Canada. Due in
part to several new large multi-year contracts, some of which were negotiated in
1996, but which did not begin until 1997, management believes it is likely that
1998 revenues in Canada will exceed 1997 levels.

In 1997, sales in Europe of $31.4 million represented approximately 63% of the
Company's consolidated sales (prior to elimination of intercompany sales) and
grew by $5.7 million over 1996 sales levels, or by 22% year over year (30%
absent the effects of fluctuating foreign currency exchange rates). In 1997,
sales increased in every European country in which the Company has offices, but
most of the increase over 1996 was the result of growth in Germany (15% growth
rate, which would have been 32% absent the effects of foreign currency exchange
rate variances) and in the Netherlands (185% growth rate, which would have been
233% absent the effect of foreign currency exchange rate variances). The U.K.
and Germany, which represent the Company's two largest markets, accounted for
76% of Europe's total sales in 1997.

In 1996, sales in Europe of $25.7 million represented approximately 66% of the
Company's consolidated sales and grew by $3.8 million over 1995 sales levels, or
by 18% year over year. Most of this increase was the result of a 16% growth
rate in the U.K., the Company's largest single market, and in the Netherlands,
which recorded sales of over $1 million in 1996 but had no sales in 1995. The
U.K. and Germany accounted for 84% of Europe's total sales in 1996.

U.K. sales increased 9% (3% absent the effects of foreign currency exchange rate
fluctuations) in 1997 compared to 1996. The increase was due primarily to the
1997 sales attributable to CompuType (see note 3 to the Consolidated Financial
Statements) and was offset by somewhat decreased sales from the Company's
largest client, a portion of which were recorded as sales in other countries in
1997. The high rate of growth in sales in the U.K. in 1996 (16%, when
<PAGE>

compared to 1995), was due to several factors, including significantly increased
orders from the Company's largest client; a healthy local economy; and expansion
of sales efforts in all offices, including the smaller regional offices in the
central and northern areas of the U.K. Sales in this country are highly
dependent upon the number and size of orders from large clients.

In Germany, a high rate of growth was achieved in 1997 compared to 1996. The
Company's sales in Germany were unusually low in early 1996 due largely to a
sluggish economy, evidenced by the unemployment rate which increased to a 50-
year high. Despite the ongoing effects of the economy, sales were strong in
1997 as a result of focused and intensive sales and marketing efforts. Sales of
higher-margin localization services have increased as have sales of certain
lower-margin services which has resulted in effective utilization of capacity.
Management is expecting revenue growth to continue in 1997, as a result of
ongoing marketing programs, client demand, and recent reports that economic
conditions in Germany could be improving.

The German economy grew at a mild pace during most of 1995, but slowed
considerably late in the year. The slowdown continued throughout 1996 and into
1997, as many companies and industries reduced employment. Due to the effects
of the overall economic slowdown, the Company's sales in Germany increased only
5% in 1996 over 1995, but the rate of increase was 10% for the nine months ended
December 31, 1996, compared to the same nine-month period in 1995.

The Company opened offices in the Netherlands and in Ireland in late 1995 and in
Belgium in late 1996. The Switzerland office was closed in late 1996. The
Belgium office is a high volume, high quality production facility servicing the
needs of other ALPNET offices. The new European offices, along with the
investments made in human and equipment resources in existing offices in recent
years, are expected to help the Company grow its revenues in Europe as demand
for language services in this region continues to expand.

Asia's reported sales for 1997 represented an increase over 1996 of 45% (57%
absent the effects of foreign currency exchange rate fluctuations) and 1996
sales increased 22% over 1995. The Company significantly expanded its Asian
presence in late 1995 by adding an office in The People's Republic of China, and
in early 1996 by opening an office in Tokyo. Also, the Company's offices in
Singapore and Korea were expanded significantly during the latter half of 1996.
Since its opening, the China office has functioned only as a production facility
for sales made in other offices of the Company, but China is expected to begin
to sell to local companies in the future and contribute significantly to the
growth of sales in Asia in coming years. The Company's Tokyo office has also
served primarily as a production facility for sales made elsewhere in the
Company, thus allowing other offices to sell to new and existing clients that
have needs for Japanese language services.

In general, the Asian capacity developed in 1996 was underutilized in the first
quarter of 1997 and contributed to the operating loss sustained in that quarter.
Underutilization also occurred in subsequent quarters of 1997, but was much less
pronounced than earlier in the year, and the Company is now approaching a normal
utilization situation, due to increases in customer orders for work to be
produced into the major Asian languages. The Company closed its Hong Kong
office in May 1997 as a result of operating losses and declining strategic
importance. Sales of this office were not material in 1997, 1996 or 1995 and
expenses of approximately $75,000 were recorded in 1997 to recognize the costs
of closing the office. Other Asian offices are now producing most of the
Chinese work historically done by the Hong Kong office.

Management expects the increased demand for Asian language services to continue.
Many Asian countries are experiencing very high economic growth rates and,
despite the recent economic events in Asia, demand for translation and
localization for Asia markets from the business communities in the U.S. and
Europe remains at a relatively high level.

The Company's business can be impacted dramatically by changes in the strength
of the economies of the countries in which it has a presence, and results of
operations are highly influenced by general economic trends. Moreover, sales
and profitability are increasingly affected by the number and size of larger and
more complex multi-language projects. The Company experiences fluctuations in
quarterly sales and profitability levels largely as a result of the increasing
<PAGE>

number of such projects. Management expects this trend to continue.
Nevertheless, the Company expects to be able to capture increased sales in an
expanding market which is expected to result in overall long-term sales growth.

COST OF SERVICES SOLD

Cost of services sold as a percentage of sales of services has fluctuated
primarily as a result of competition in the marketplace and the volume and
nature of direct production costs of project sales in each year, especially
large projects covering several accounting periods. In the latter part of 1996
and early part of 1997, margins were negatively affected by underutilization of
capacity, especially in Asia, and to a lesser extent by a higher proportion of
low margin work in certain geographic areas. Management expects competitive
pricing pressures to continue in the foreseeable future, and perhaps even
intensify as a possible result of several recent mergers and acquisitions of
small and mid-sized translation companies. The Company is continuing its
efforts to control costs to offset the effects of these pricing pressures.
These efforts include more effective utilization of the Company's proprietary
software on medium- to small-sized projects to improve the productivity of
translators, and the development of stronger "partnerships" with clients to
enable the Company to provide higher-margin, higher-value, solution-based
services to clients.

OTHER COSTS AND EXPENSES

Selling, general and administrative expenses were $6.8 million in 1997 and
increased over prior year levels both in 1997 (by 23%, which increase would have
been 28% absent the effect of currency exchange rate fluctuations) and in 1996
(by 27%, which increase would have been 29% absent the effect of currency
exchange rate fluctuations). These increases were due to several factors,
including the overall growth of existing offices and the opening of new offices
in both years; increased marketing and sales efforts in substantially all of
the Company's markets; certain costs related to reorganizing and closing some
of the Company's underperforming offices, including the closure of the
Switzerland office in December 1996 and the Hong Kong office in May 1997; and,
to a lesser extent, the effect of increased corporate overhead costs related to
the Company's growth.

Development costs were $391,000 in 1997 compared to $226,000 in 1996 and
$170,000 in 1995. Development costs are related to the upgrading and expansion
of the Company's proprietary language translation software developed in the
early years of the Company's existence, as well as efforts related to the
development and expansion of the Company's online language service product
offering. The Company has enhanced certain features of its software and made it
compatible with more of the ever-increasing types and versions of software being
developed by the software industry which are being used by clients and potential
clients. The Company expects development costs to continue to increase in 1998
over 1997 levels, primarily because of the ongoing needs to ensure the Company's
technology is compatible with the software commonly used by businesses.

Fluctuations in the amount of goodwill amortization resulted primarily from
foreign currency exchange rate fluctuations from year to year and from the
Company's acquisition of CompuType in January 1997, which increased goodwill
amortization by about $3,000 per month.

Net interest expense was $263,000 in 1997. Interest expense increased by
$125,000 in 1997 compared to 1996 and decreased by $55,000 in 1996 compared to
1995. The increase in interest expense in 1997 was due primarily to higher
average balances outstanding under revolving lines of credit, caused by growth
in sales and related accounts receivable; increases in long-term debt used to
finance certain equipment purchases; and a term loan obtained in January 1997 to
finance a portion of the CompuType acquisition.

The decrease in interest expense in 1996 from 1995 was due primarily to
reductions in the Company's average outstanding debt levels, most notably the
conversion of $243,000 of debt owed to an affiliate to Convertible Preferred
Stock in August 1995, and to a lesser extent, a reduction in interest rates in
1996 as compared with earlier years. Interest expense in future periods is
expected to increase marginally over recent levels as the Company expects
borrowings under revolving lines of credit to increase as sales grow, and the
Company plans to continue to use long-term debt to finance certain equipment
purchases. Also, any investments beyond modest requirements related to sales
growth could require additional debt financing which would impact future levels
of interest expense.
<PAGE>

The U.S. parent company and each of its subsidiaries are separate legal and
taxable entities subject to the domestic or foreign taxes pertaining to
operations in their respective jurisdictions. For tax purposes, the U.S. parent
company, and most of its subsidiaries, have unused net operating losses from
prior years which can be utilized to reduce future years' taxable income of the
respective entities. The availability of these net operating losses is governed
by applicable domestic and foreign tax rules and regulations, some of which
limit the utilization of such losses due to minimum tax requirements and other
provisions. Income tax expense, as presented in the Consolidated Financial
Statements, represents the combined income tax expense and income tax credits of
all of the entities of the Company.

After consideration of the effect of the utilization of net operating loss
carryforwards, income tax expense was $435,000 in 1997, $223,000 in 1996, and
$160,000 in 1995. Fluctuations in the amount of income taxes arise primarily
from the varying combinations of income and losses of the Company's subsidiaries
in the various domestic and foreign tax jurisdictions, including the utilization
of net operating loss carryforwards in many of these jurisdictions. The U.S.
parent company has a net operating loss carryforward for U.S. Federal tax
purposes but has no net operating loss carryforwards for state income tax
purposes.

Note 6 to the Consolidated Financial Statements, "Income Taxes," contains
additional information pertaining to the computation of income taxes as well as
the Company's net operating loss carryforwards as of December 31, 1997.

LIQUIDITY AND SOURCES OF CAPITAL

In 1997, the Company had a positive cash flow from operations of approximately
$.8 million compared with positive cash flows from operations in 1996 of $.5
million and in 1995 of $1.2 million. In each of the years 1997, 1996 and 1995,
the Company's investing activities consisted primarily of the acquisition of
equipment needed to maintain or upgrade production capability. In 1997, the
Company's investing activities also included the acquisition of CompuType (see
note 3 to the Consolidated Financial Statements) at a cost of approximately $.5
million.

Financing activities for all years included fluctuations in the amounts utilized
under bank lines of credit used to finance the Company's working capital needs
and changes in outstanding debt used to finance equipment purchases.
Additionally, in 1997, the Company obtained a long-term loan for approximately
$330,000 which was used to finance a portion of the CompuType acquisition. In
July 1997, the Company obtained a mortgage with a bank in Spain for
approximately $150,000. The mortgage was repaid in November 1997. In 1997 and
1996, the Company's non-cash financing activities included the conversion by
certain shareholders of all outstanding shares of the Company's series B and
series C Convertible Preferred Stock to Common Stock, all as described in more
detail in note 5 to the Consolidated Financial Statements. The Company's 1995
financing activities included the conversion of $243,000 of debt owed to an
affiliate to a new series D Convertible Preferred Stock of the Company and the
sale of Common Stock for net proceeds of $194,000.

At December 31, 1997, the Company's cash and cash equivalents were approximately
$1.7 million, which represented an increase of $.7 million during 1997. At
December 31, 1997, the Company had working capital of approximately $3.8
million, compared to working capital of approximately $2.3 million at December
31, 1996. The increase in working capital during 1997 was primarily
attributable to an increase in accounts receivable during the year, due to
increased sales levels in late 1997 compared to late 1996.

The Company's primary working capital requirements relate to the funding of
accounts receivable. The Company funds some of its working capital needs with
lines of credit with financial institutions in the U.S., Canada, the U.K.,
Germany and Spain. Most of the lines of credit are secured by accounts
receivable and other assets of the Company or its subsidiaries. As of December
31, 1997, the Company had unused amounts under these lines of credit of
approximately $760,000. In February 1998, the German bank line of credit was
increased by approximately $80,000 (see note 4 to the Consolidated Financial
Statements).

Provided the Company remains profitable, the Company believes the available
amounts under lines of credit combined with current working capital are
sufficient to fund the Company's operations at current levels and enable the
Company to grow at a modest level, without the need to seek significant new
sources of capital. Most of the Company's credit
<PAGE>

facilities are subject to annual renewals and the Company expects them to be
renewed on substantially the same terms as those which currently exist. In
addition, the Company expects to be able to increase the maximum amounts which
can be borrowed under credit facilities if the Company's sales increase and if
the Company can remain profitable over the long term. Some of the financial
institutions, which have loaned funds to the Company's subsidiaries under the
credit facilities referred to above, have placed certain limits on the flow of
cash outside the respective countries. Such limitations have not been an undue
burden to the Company in the past, nor are they expected to be unduly burdensome
in the foreseeable future.

The Company has no present significant commitments for capital expenditures,
which generally consist of computer equipment and related peripheral hardware
and software. A lesser but increased portion of expenditures in 1996 was for
office furniture to equip new and growing offices. Likewise, the total level of
capital additions in 1996 increased significantly from 1995 due to expansion of
existing offices and the new offices opened in late 1995 and in 1996. Capital
expenditures in future periods are expected to vary according to the overall
growth of the Company. The Company plans to acquire and place additional
translation services workstations in its offices in connection with future
orders from customers, as such orders are received. The Company expects to
finance a certain portion of future equipment costs, with terms similar to the
financing arrangements entered into in recent years.

As described in more detail in note 3 to the Consolidated Financial Statements,
in January 1997 the Company acquired a U.K.-based business for cash of
approximately $550,000, most of which was financed. While there are no current
commitments or plans, the Company may pursue other acquisitions worldwide or
open additional offices in strategic locations, as client demands dictate and
opportunities arise. The costs to open most offices have generally not been
substantial and have been primarily related to the procurement of computers and
other translation-related equipment and, in certain instances, for office
premises. The Tokyo office, opened in early 1996, was an exception to this
general situation, due both to the larger size of that office and the high costs
of doing business in Japan. The costs of any additional offices to be opened in
the future can also be expected to vary based on size and location and could
require certain amounts of cash beyond the amount that can be generated through
operations, depending on profitability.

In December 1996, the Company closed its Switzerland office and in May 1997
closed its Hong Kong office. In addition, a reorganization of the Company's
France offices occurred during 1997. These office closures and the
reorganization have had a negative effect on cash flow of approximately $200,000
through December 31, 1997. Additional negative cash flows exceeding $100,000
could occur in years subsequent to 1997 related to the France reorganization, as
explained in more detail in note 7 to the Consolidated Financial Statements. No
other significant office closures or reorganizations are currently planned.

The Company believes it has the ability to issue additional equity securities if
necessary, but does not currently have any plans to do so. In past years, the
Company has relied on major shareholders of the Company to fund certain
obligations, but the Company currently has no firm commitments from, nor are
there any obligations of, any such shareholders to provide any debt or equity
funds to the Company. In order for the Company to fund investments beyond
modest growth in operations, such as for significantly new or expanded services
or product lines, additional debt or equity funds will likely be required.

Management believes that current working capital together with available lines
of credit will enable the Company to meet its financial obligations during 1998.
It is more difficult to assess cash flows beyond 1998 and the ability of the
Company to meet its commitments without additional sources of capital is
directly related to the Company's operations providing a positive cash flow.
Should the Company's operations fail to provide adequate funds to enable it to
meet its future financial obligations, management has the option, because of the
Company's organizational structure, to cut costs by selectively eliminating
operations which are not contributing to the Company financially, as was done by
closing the Switzerland and Hong Kong offices.

Inflation has not been a significant factor in the Company's operations.
Competition, however, has been and is expected to remain a major factor. To the
extent permitted by competition and general economic and market conditions, the
Company will pass on increased costs from inflation and operations to clients by
increasing prices.
<PAGE>

Due to prior years' operating losses, the Company and many of its subsidiaries
have net operating loss carryforwards available to offset future taxable income
in the various countries in which the Company operates. As a result, the
Company historically has not had significant income tax liabilities requiring
the expenditure of cash. The Company expects this general trend to continue for
several years into the future for certain offices acquired many years ago which
sustained large losses in previous years. The levels of net operating losses
available to offset future taxable income are generally much lower for the new
offices opened in recent years.

Substantially all of the Company's deferred tax assets at December 31, 1997 and
1996 were comprised of net operating loss carryforwards for which the Company
has provided allowances. The ability of the Company to utilize these loss
carryforwards in the future is dependent on profitable operations in the various
countries in which loss carryforwards exist, and the specific rules and
regulations governing the utilization of such losses, including the dates by
which the losses must be used.

YEAR 2000 ISSUE

The year 2000 issue refers to some computer systems' inability to recognize "00"
in the date field as the year 2000. As a result of these shortcomings, some
computers may be unable to process year-date data accurately beyond the year
1999. The Company has preliminarily assessed the potential impact of this issue
on its business and operations as being minor. With the exception of the
operations administration system for one of the Company's foreign subsidiaries,
the Company does not believe the year 2000 issue will have a material effect on
the Company's internal accounting and information systems, most of which consist
of relatively inexpensive off-the-shelf software packages. In addition, the
Company's proprietary translation software, TSS, has been year 2000 compliant
since its development in the mid-1980's.

The Company has not undertaken a comprehensive study as to whether its clients,
suppliers and service providers are year 2000 compliant. The Company's primary
vendors consist of individual translators and other service professionals who
are not expected to be materially impacted by the year 2000 issue. The Company
does have relationships with various financial institutions, which could be
materially impacted by this problem.

The Company has budgeted less than $100,000 to purchase a new operations
administration system for its foreign subsidiary referred to above. The Company
does not expect the costs to become year 2000 compliant to have a material
effect on the Company's financial statements.

NEW ACCOUNTING STANDARDS

In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FAS 130"), and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("FAS 131") were issued.

The Company will adopt FAS 130 in the first quarter of 1998 and FAS 131 at the
end of 1998. The requirements of both standards must be applied to financial
statements for interim periods. It is not anticipated that the adoption of these
statements will have a material effect on the financial statements of the
Company. Reference is made to note 1 to the Consolidated Financial Statements
for further information.

CAUTIONARY STATEMENT

The statements in this Management's Discussion and Analysis that are not based
on historical data are forward looking, including for example, information about
future sales growth in various countries in future periods; expected changes in
the levels of various expenses, including income taxes; the Company's plans for
future investments in new offices, services, or products; and financing plans
and expectations.

Forward looking statements contained in this Management's Discussion and
Analysis involve numerous risks and uncertainties that could cause actual
results to be materially different from estimated or expected results. Such
risks and
<PAGE>

uncertainties include, among many others, fluctuating foreign currency
exchange rates, changing levels of demand for the Company's services, the effect
of constantly changing general economic and political conditions in all of the
various countries in which the Company has operations, the impact of competitive
services and pricing, uncertainties caused by clients (including the timing of
projects and changes in the scope of services requested), or other risks and
uncertainties that may be disclosed from time to time in future public
statements or in documents filed with the Securities and Exchange Commission.
As a result, no assurance can be given as to future results.
<PAGE>

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------

ALPNET, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31
Thousands of dollars 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 1,711 $ 1,034
Trade accounts receivable, less allowance of
$338 in 1997 and $219 in 1996 9,772 6,529
Work-in-process 1,040 487
Prepaid expenses and other 747 949
------------------
Total current assets 13,270 8,999

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Office facilities and leasehold improvements 226 318
Equipment 5,003 4,789
------------------
5,229 5,107
Less accumulated depreciation and
amortization 3,402 3,236
------------------
Net property, equipment and leasehold improvements 1,827 1,871
------------------

OTHER ASSETS:
Goodwill, less accumulated amortization of
$3,544 in 1997 and $3,380 in 1996 5,698 6,087
Other 245 310
------------------
Total other assets 5,943 6,397
------------------

TOTAL ASSETS $ 21,040 $ 17,267
==================
</TABLE>
<PAGE>

ALPNET, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>

December 31
Thousands of dollars and shares 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Notes payable to banks $ 3,037 $ 2,396
Accounts payable 2,338 1,788
Accrued payroll and related benefits 1,187 922
Other accrued expenses 1,354 897
Deferred revenue 732 391
Income taxes payable 462 53
Current portion of long-term debt 350 203
--------------------
Total current liabilities 9,460 6,650

Long-term debt, less current portion 489 262

Commitments and contingencies (note 7)

SHAREHOLDERS' EQUITY:
Convertible Preferred Stock, no par value;
authorized 2,000 shares; issued and
outstanding 87 shares in 1997 and
719 shares in 1996 242 2,095
Common Stock, no par value; authorized
40,000 shares; issued and outstanding
23,293 shares in 1997 and 17,883
shares in 1996 42,080 40,228
Accumulated deficit (29,145) (30,733)
Equity adjustment from foreign currency translation (2,086) (1,235)
--------------------
Total shareholders' equity 11,091 10,355
--------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 21,040 $ 17,267
====================
</TABLE>

See accompanying notes.
<PAGE>

ALPNET, INC. AND SUBSIDIARIES

Consolidated Statements of Income

Year Ended December 31
Thousands of dollars and shares 1997 1996 1995
- -------------------------------------------------------------------
<S> <C> <C> <C>
SALES OF SERVICES $40,795 $32,338 $26,919
OPERATING EXPENSES:
Cost of services sold 30,927 25,256 21,027
Selling, general and
administrative expenses 6,798 5,539 4,361
Development costs 391 226 170
Amortization of goodwill 393 360 387
--------------------------------
Total operating expenses 38,509 31,381 25,945
--------------------------------

OPERATING INCOME 2,286 957 974

Interest expense, net 263 138 193
--------------------------------
Income before income taxes 2,023 819 781

Income taxes 435 223 160
--------------------------------

NET INCOME $1,588 $596 $621
================================

Income per share - basic $.09 $ .04 $ .04
================================

Income per share - assuming dilution $.06 $ .02 $ .03
================================
</TABLE>
See accompanying notes.
<PAGE>

ALPNET, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>

Equity
Adjustment
from Foreign
Preferred Stock Common Stock Accumulated Currency
Thousands of dollars and shares Shares Amount Shares Amount Deficit Translation Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1995 1,044 $ 2,894 15,562 $37,846 $(31,950) $(1,613) $ 7,177
Issuance of Preferred Stock in exchange
for long-term debt to affiliate,
net of offering costs of $1 87 242 242
Issuance of Common Stock for cash,
net of offering costs of $6 582 194 194
Exercise of stock options 55 44 44
Costs related to 1994 issuance of
Preferred Stock (9) (9)
Adjustment to guarantee liability 870 870
Net income 621 621
Foreign currency translation adjustment 192 192
---------------------------------------------------------------------------

BALANCES AT DECEMBER 31, 1995 1,131 3,127 16,199 38,954 (31,329) (1,421) 9,331
Conversion of Preferred Stock to
Common Stock (412) (1,032) 1,235 1,032
Exercise of stock options 449 22 22
Adjustment to guarantee liability 220 220
Net income 596 596
Foreign currency translation adjustment 186 186
---------------------------------------------------------------------------

BALANCES AT DECEMBER 31, 1996 719 2,095 17,883 40,228 (30,733) (1,235) 10,355
Conversion of Preferred Stock to
Common Stock (632) (1,853) 5,401 1,845 (8)
Exercise of stock Options 9 7 7
Net Income 1,588 1,588
Foreign currency translation adjustment (851) (851)
---------------------------------------------------------------------------

BALANCES AT DECEMBER 31, 1997 87 $ 242 23,293 $42,080 $(29,145) $(2,086) $11,091
===========================================================================

</TABLE>
See accompanying notes.
<PAGE>

ALPNET, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

Year Ended December 31
Thousands of dollars 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,588 $ 596 $ 621
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, equipment
and leasehold improvements 669 463 362
Amortization of goodwill 393 360 387
Net gain on disposal of property,
equipment and leasehold improvements (78) 0 0
Other 8 (178) 75
Changes in operating assets and liabilities:
Trade accounts receivable (3,541) (1,475) (523)
Accounts payable and accrued expenses 1,375 880 (56)
Other 339 (160) 334
--------------------------------
Net cash provided by operating activities 753 486 1,200

INVESTING ACTIVITIES:
Purchase of property, equipment and leasehold improvements (863) (1,403) (395)
Payment for acquisition, net of cash acquired (508) 0 0
Proceeds from sale of property, equipment and
leasehold improvements 213 0 0
--------------------------------
Net cash used in investing activities (1,158) (1,403) (395)

FINANCING ACTIVITIES:
Proceeds from notes payable to banks 835 795 264
Principal payments on notes payable to banks (58) (71) (549)
Proceeds from long-term debt 811 294 54
Principal payments on long-term debt (433) (137) (133)
Sale of Common Stock for cash, net of related costs 0 0 194
Proceeds from exercise of stock options 7 22 44
--------------------------------
Net cash provided by (used in) financing activities 1,162 903 (126)

Effect of exchange rate changes on cash (80) 15 10
--------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 677 1 689

Cash and cash equivalents at beginning of year 1,034 1,033 344
--------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,711 $1,034 $1,033
================================
CASH PAID DURING THE YEAR FOR:
Interest $261 $139 $198
Income taxes 46 199 114

</TABLE>
See accompanying notes.
<PAGE>

ALPNET, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 1997

1. SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

ALPNET, Inc. (the "Company") is a United States publicly-owned multinational
corporation. The Company provides language translation, product localization,
and multilingual publishing solutions to businesses engaged in international
trade. The principal markets for the Company's services are North America,
Western Europe, and Asia.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of ALPNET, Inc. and
its wholly-owned subsidiaries or branches located in the United States, Canada,
United Kingdom, Ireland, Germany, France, Spain, the Netherlands, Belgium,
Singapore, Korea, China and Japan. Significant intercompany accounts and
transactions have been eliminated in consolidation.

For all of the Company's foreign subsidiaries, the functional currency has been
determined to be the local currency. Accordingly, assets and liabilities are
translated at year-end exchange rates, and operating statement items are
translated at average exchange rates prevailing during the year. The resultant
cumulative translation adjustments to the assets and liabilities are recorded as
a separate component of shareholders' equity. Exchange adjustments resulting
from foreign currency transactions are included in the determination of net
income. A gain of $213,000 was recognized in 1997, and losses of $121,000 and
$77,000 were recognized in 1996 and 1995, respectively.

In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's foreign subsidiaries
are calculated based upon the local currencies. As a result, amounts related to
assets and liabilities reported on the statements of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheets.

ESTIMATES

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

CASH AND CASH EQUIVALENTS

The Company considers cash equivalents to be all highly liquid investments with
a maturity of three months or less when purchased. Cash equivalents are stated
at cost, which approximates fair value.

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements are recorded at cost.
Depreciation and amortization are calculated using the straight-line method over
estimated useful lives of 3 to 5 years for equipment and 5 to 25 years for
office facilities and leasehold improvements.
<PAGE>

GOODWILL

Goodwill consists of the excess of the purchase price over the fair value of net
assets of purchased subsidiaries and is amortized on the straight-line method
over 12 to 25 years. The Company periodically reviews goodwill for impairment
by comparing undiscounted projected income over the remaining amortization
period for each acquired subsidiary to the unamortized balance of goodwill for
each subsidiary. No impairments have been recorded for any of the years
presented.

REVENUE RECOGNITION

Revenue from services is recognized as work is performed. Clients are billed
according to the terms of purchase orders. Work-in-process represents costs on
incomplete and unbilled projects as well as revenues recognized in excess of
amounts billed. Deferred revenue arises when payments are received prior to
being earned under the terms of client purchase orders. Such revenue is
subsequently recognized as the requirements specified in the purchase orders are
completed.

Collateral is not required for receivables and allowances are provided for
uncollectible accounts.

STOCK OPTIONS

The Company continues to account for stock options using the intrinsic value
method and provides pro forma footnote disclosure of the impact of using the
fair value method.

INCOME PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share" ("FAS 128"). FAS 128 replaced the calculation of primary
and fully diluted income per share with basic and diluted income per share.
Unlike primary income per share, basic income per share excludes any dilutive
effects of options and convertible securities. Diluted income per share is
similar to the previously reported fully diluted income per share. All income
per share amounts for all periods have been presented, and where appropriate,
restated to conform to the FAS 128 requirements.

RECLASSIFICATIONS

Certain prior-year amounts have been reclassified to conform to the 1997
presentation.

NEW ACCOUNTING STANDARDS

FAS 130 requires that all items that are recognized under accounting standards
as components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. One item of
other comprehensive income that the Company will be required to display is the
equity adjustment from foreign currency translation. FAS 131 requires public
companies to report financial and descriptive information about its reportable
operating segments, on the basis that is used internally for evaluating segment
performance.

2. GEOGRAPHICAL DATA

The following selected financial data summarizes the Company's domestic and
foreign operations for financial reporting purposes. Allocations of corporate
and country overheads to domestic and foreign operations are based upon the
Company's policies for financial reporting consistently applied during the
periods. Intercompany sales are normally billed on a margin-sharing basis. All
intercompany sales are eliminated in determining the totals.

Thousands of dollars 1997 1996 1995
- ----------------------------------------------------------
<S> <C> <C> <C>
Net sales:
United States $ 7,476 $ 5,521 $ 2,463
Canada 6,535 4,802 3,860
Europe 31,409 25,713 21,864
Asia 4,366 3,008 2,464
Eliminations (8,991) (6,706) (3,732)
-----------------------------
$40,795 $ 32,338 $ 26,919
=============================

Income before income taxes:
United States $ 493 $ 598 $ 107
Canada 199 154 60
Europe 1,250 603 576
Asia 81 (536) 38
-----------------------------
$ 2,023 $ 819 $ 781
=============================

Identifiable assets:
United States $ 2,989 $ 2,077 $ 1,419
Canada 2,682 2,067 1,319
Europe 13,209 11,564 10,272
Asia 2,160 1,559 1,439
-----------------------------
$21,040 $ 17,267 $ 14,449
=============================
</TABLE>

Sales to a single client in the computer industry accounted for 11%, 16% and 17%
of total revenues in 1997, 1996 and 1995, respectively. No other client
accounted for more than 10% of revenues in any year.

3. 1997 ACQUISITION

In January 1997, the Company acquired all of the outstanding stock of CompuType
Ltd., a U.K.-based provider of specialty desktop publishing and pre-press
services, in a transaction accounted for as a purchase. The acquisition cost of
approximately $550,000 was paid in cash, and exceeded the fair values of the net
assets acquired by approximately $400,000, which excess was recorded as goodwill
and is being amortized on the straight-line method over 12 years. The
acquisition was financed primarily by (1) a (Pounds)200,000 (approximately
$330,000) term loan with the Company's U.K. bank, repayable over 5 years,
bearing interest at approximately 10%; and (2) an increase of (Pounds)100,000
(approximately $170,000) in the Company's credit facility with this bank. This
credit facility is described in more detail in note 4. CompuType's results of
operations have been included with the Company's consolidated financial results
from February 1997 forward. CompuType's 1997 sales, included in consolidated
sales of services for the year ended December 31, 1997, were approximately
$1,400,000.
<PAGE>

4. BORROWINGS

NOTES PAYABLE TO BANKS

Notes payable to banks consisted of the following at December 31:

Thousands of dollars 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Credit facility with a U.S. financial institution, interest
at 8.9%, collateralized by U.S.-based accounts receivable $ 482 $ 0
Credit facility with a Canadian bank, interest at 7%,
collateralized by the accounts receivable of the
Canadian subsidiary, guaranteed by the Company 553 639
Credit facilities with a U.K. bank, interest at 10%,
collateralized by the assets of the U.K. subsidiaries,
guaranteed by the Company 1,422 1,101
Credit facility with a German bank, interest at 9%,
collateralized by the accounts receivable of the
German subsidiary, guaranteed by the Company 439 437
Unsecured credit facility with another German bank,
interest at 9% 82 154
Credit facility with a Spanish bank, interest at 8%,
guaranteed by the Company's primary U.K. subsidiary 59 65
---------------
$3,037 $2,396
===============
</TABLE>

All of the Company's credit facilities have variable interest rates. The
interest percentages shown are the actual rates at December 31, 1997. The
weighted average interest rate on notes payable to banks was 9.1% at December
31, 1997 and 8.1% at December 31, 1996. Most of the Company's credit facilities
are subject to annual renewals and the Company expects them to be renewed on
substantially the same terms as currently exist. Occasionally, amounts
borrowed under credit facilities are allowed to exceed maximum limits for short
periods of time. Due to the short-term nature of these notes, their carrying
values at December 31, 1997 are considered to approximate their fair values.

The credit facility with the U.S. financial institution has a maximum limit of
$1,000,000 at December 31, 1997. The credit facility with the Canadian bank has
a maximum limit of Canadian $1,000,000 (approximately $700,000) at December 31,
1997, and intercompany debts have been subordinated to the bank.

The credit facilities with the U.K. bank have a maximum limit of (Pounds)900,000
(approximately $1,490,000) at December 31, 1997. Intercompany debts have been
subordinated to the bank. The bank requires the primary U.K. operating company
to maintain net equity of (Pounds)750,000 (approximately $1,240,000) and a 2:1
ratio of accounts receivable to outstanding borrowings.

The secured credit facility with a German bank had a maximum limit of DM 750,000
(approximately $420,000) at December 31, 1997. In February 1998, the limit was
increased to DM 900,000 (approximately $500,000). Intercompany debts have been
subordinated to the bank. The unsecured credit facility with another German
bank has a maximum limit of DM 200,000 (approximately $110,000) at December 31,
1997.

The credit facility with the Spanish bank has a maximum limit of PTS 9.2 million
(approximately $60,000) at December 31, 1997.
<PAGE>

LONG-TERM DEBT

Long-term debt consisted of the following at December 31:

Thousands of dollars 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Term loan with a bank in the U.K., payable in monthly installments
of approximately $6 plus interest through January 2002,
interest at 10% $ 278 $ 0
Obligations to financial institutions due at various dates through
2001, secured by certain equipment, with carrying values which
approximate outstanding debt balances, interest at 6% to 14% 511 359
Unsecured note payable to the former owner of the Company's German
subsidiary, due in monthly installments of approximately $3 plus
interest through June 1999, interest at 8% 50 97
Mortgage with a bank in Spain, repaid in 1997 0 9
-------------
839 465
Less current portion 350 203
-------------
$ 489 $262
=============
</TABLE>
The aggregate maturities of long-term debt as of December 31, 1997 were as
follows:

Thousands of dollars
-------------------------------------------------
Year Ending December 31
1998 $350
1999 258
2000 140
2001 85
2002 6
----
$839
====

Based on a discounted cash flow analysis, the carrying values of long-term debt
at December 31, 1997 are considered to approximate their fair values.

5. CAPITAL STOCK

EQUITY TRANSACTIONS

In 1995, the Company issued 87,339 shares of series D Convertible Preferred
Stock to a shareholder and director, in exchange for the cancellation of a
300,000 Swiss franc (approximately $243,000) note payable. The series D
Preferred Stock is convertible at the option of the holder into nine shares of
the Company's Common Stock, has voting rights as if the shares were already
converted, and features a 10% non-cumulative dividend subject to the discretion
of the Board of Directors.

In 1995, the Company issued 581,818 shares of restricted Common Stock to a vice
president of the Company for approximately $194,000, net of related costs. In
conjunction with this transaction, the Company granted this officer an option to
acquire 500,000 shares of restricted Common Stock at an exercise price of $.34
per share, which option was exercised in 1996.
<PAGE>

In 1996, the Company issued 1,235,292 shares of Common Stock upon conversion of
411,764 shares of series B Convertible Preferred Stock. In March 1997, the
Company issued 652,035 shares of Common Stock upon conversion of 47,647 shares
of series B Convertible Preferred Stock and 56,566 shares of series C
Convertible Preferred Stock. In December 1997, the Company issued 4,749,219
shares of Common Stock upon conversion of 527,691 shares of series C Convertible
Preferred Stock. As of December 31, 1997, only shares of series D Convertible
Preferred Stock remain outstanding.

In 1994, the Company entered into a "financial monitoring agreement" with its
largest shareholder which requires the Company, among other things, to obtain
prior approval for major financing transactions, significant asset purchases or
sale of a major portion of the Company's assets. The Company is currently
prohibited from paying dividends under Utah corporate law.

INCOME PER SHARE

The following table sets forth the computation of basic and diluted income per
share.

Thousands of dollars and shares 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator for basic and diluted
income per share - net income $ 1,588 $ 596 $ 621
============================
Denominator:
Denominator for basic income per
share - weighted-average shares 18,449 16,659 15,783
Effect of dilutive securities:
Convertible Preferred Stock 5,623 7,234 6,022
Employee stock options 1,604 2,025 1,350
----------------------------
Dilutive potential common shares 7,227 9,259 7,372
----------------------------
Denominator for diluted income per
share - adjusted weighted-average
shares and assumed conversions 25,676 25,918 23,155
============================

Income per share - basic $.09 $.04 $.04
============================
Income per share - assuming
dilution $.06 $.02 $.03
============================
</TABLE>

STOCK OPTIONS

As of December 31, 1997, the Company had three stock option plans: an incentive
stock option plan, a non-statutory stock option plan and an executive stock
option plan. The incentive stock option plan has been dormant for several years
and was terminated in early 1998. At December 31, 1997, a total of 4,102,323
shares of the Company's authorized Common Stock were reserved for ultimate
issuance under the two active plans (the "Option Plans"), of which 196,931
shares have been issued. The Company has granted non-qualified stock options to
employees, officers, and independent members of the Board of Directors under the
Option Plans.

The exercise terms of the options granted under the non-statutory stock option
plan provide that the options expire six years after date of grant and cannot be
exercised during the first year. No more than 20% of the options can be
exercised in any one year; however, any unexercised options may be accumulated
and exercised in succeeding years. The exercise terms of the options granted
under the executive stock option plan generally provide for vesting over the
period from June 1998 through June 2000. All unexercised options under this
plan expire on September 1, 2000 or when the employee terminates employment with
the Company, if sooner.
<PAGE>

The Company has elected to continue to apply Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations in accounting for its Option Plans. The alternative fair value
method of accounting prescribed by Financial Accounting Standard No. 123,
"Accounting for Stock- Based Compensation" ("FAS 123"), requires the use of
option valuation models that were not developed for use in valuing employee
stock options, as discussed below. Accordingly, under APB 25, no compensation
expense has been recognized for stock option grants because the exercise price
of stock options equals or exceeds the market price of the Company's Common
Stock on the date of grant.

If the Company had elected to account for options granted in 1997, 1996 and 1995
based on their fair value, as prescribed by FAS 123, net income and income per
share would have been reduced to the pro forma amounts shown in the table below.
All income per share amounts have been restated as required to comply with FAS
128.

Thousands of dollars 1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net income - reported $1,588 $596 $621
- pro forma 1,342 392 447
Basic net income per share - reported .09 .04 .04
- pro forma .07 .02 .03
Diluted net income per share - reported .06 .02 .03
- pro forma .05 .02 .02
</TABLE>

The fair value of each stock option grant was determined using the Black-Scholes
option pricing model and the following assumptions: expected stock price
volatility of .8 to 1.0, risk-free interest rate of 6%, weighted average
expected option lives ranging from three to four years, and no dividends. The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including expected stock price volatility. Because the
Company's stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value, in management's opinion the existing models do
not necessarily provide a reliable single measure of the fair value of stock
options. The method of accounting for stock options as defined by FAS 123 has
not been applied to options granted prior to January 1, 1995, and therefore the
resulting pro forma compensation cost may not be representative of that to be
expected in future years.

The following table is a summary of activity for the Company's Option Plans for
the years ended December 31:

<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ----------------------- -------
Weighted-Average Weighted-Average
Thousands of shares Shares Exercise Price Shares Exercise Price Shares
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of year 3,327 $ .83 3,271 $ .80 830
Granted 1,175 1.35 112 1.82 3,104
Canceled (946) 1.00 (29) .99 (608)
Exercised (9) .77 (27) .81 (55)
-------------------------------------------------------------
Outstanding at end of year 3,547 $ .96 3,327 $ .83 3,271
=============================================================

Exercisable at end of year 144 $ .99 103 $ .88 83
=============================================================

Weighted average fair value
of options granted during
the year $ .77 $1.18 $ .23
=============================================================
</TABLE>
<PAGE>

The exercise price of options exercised in 1995 ranged from $.42 to $1.13 per
share. The following table summarizes information about stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>

Thousands of shares Options Outstanding Options Exercisable
- ------------------------------------------------------------------------------------------------------------------
Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
Range of As of Remaining Average As of Average
Exercise Prices December 31, 1997 Contractual Life in Years Exercise Price December 31, 1997 Exercise Price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.42 - $0.75 1,687 2.6 $0.60 55 $0.64
$1.08 - $1.44 1,823 3.6 $1.25 85 $1.11
$2.19 - $2.92 37 5.2 $2.62 4 $2.92

</TABLE>

6. INCOME TAXES

The Company files a consolidated U.S. Federal income tax return which includes
all domestic operations. Tax returns for states within the U.S. and for foreign
subsidiaries are filed in accordance with applicable laws. The following
summarizes for income tax purposes, the domestic and foreign components of
income before income taxes for the year ended December 31:

Thousands of dollars 1997 1996 1995
- --------------------------------------------------------------
Domestic $2,444 $ 1,887 $1,295
Foreign (421) (1,068) (514)
---------------------------------
$2,023 $ 819 $ 781
=================================

Income tax expense, including the effect of net operating loss carryforwards,
consisted of the following for the year ended December 31:

Thousands of dollars 1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Current income tax expense:
Domestic income taxes:
Federal $ 50 $ 20 $ 15
State 100 70 65
Foreign income taxes 285 133 50
--------------------------------
435 223 130
Deferred foreign income
tax expense 0 0 30
--------------------------------
Total income tax expense $435 $223 $160
================================
</TABLE>
<PAGE>

Income tax expense varied from the expected statutory domestic federal income
tax amount as follows for the year ended December 31:

Thousands of dollars 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense on consolidated
income computed at the
domestic statutory federal income
tax rate $ 708 $287 $273
Effect of foreign losses on the
computation of tax expense
at domestic statutory rates 480 478 311
Utilization of U.S. net operating
losses from prior years (805) (640) (438)
Utilization of foreign net operating
losses from prior years (185) (58) (123)
Domestic state income taxes 100 70 65
Other 137 86 72
---------------------------------
Reported income tax expense $ 435 $ 223 $ 160
=================================
</TABLE>

The approximate tax effect of the temporary differences that give rise to
significant portions of deferred tax assets and liabilities are as follows for
the year ended December 31:

Thousands of dollars 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $6,600 $7,400 $7,600
Tax credit carryforwards 350 400 400
Other 100 200 100
-------------------------------------
Total deferred tax assets 7,050 8,000 8,100
Less valuation allowances (6,950) (7,800) (8,000)
-------------------------------------
Net deferred tax assets $ 100 $ 200 $ 100
=====================================
Total deferred tax liabilities $ 100 $ 200 $ 100
=====================================
</TABLE>

Due to prior years' operating losses, the Company and many of its subsidiaries
have net operating loss carryforwards available to offset future taxable income
in the various countries in which the Company operates. The U.S. parent
company has no net operating loss carryforwards for state income tax purposes.
The Company has approximately $350,000 of general business tax credit
carryforwards available to offset future U.S. federal income taxes which expire
in 1998 through 2001.

The following table summarizes by geographic region the significant available
operating loss carryforwards and the related expiration dates.

Operating
Loss Expiration
Thousands of dollars Carryforwards Dates
- --------------------------------------------------------------------------------
United States $13,100 1999 through 2003
Canada 1,200 1998 through indefinite
Europe 4,000 1998 through indefinite
Asia 800 1999 through 2002
<PAGE>

7. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

All of the Company's office space and various equipment is rented under leases
which are classified as operating leases. These leases have remaining terms of
up to 17 years. Certain of the leases for office space contain renewal options
and adjustment clauses based on consumer price indices. Total rental expense
for all operating leases was approximately $2.2 million in 1997, $1.6 million in
1996 and $1.5 million in 1995. Certain office space is subleased pursuant to a
contract expiring in 1998 with various renewal options. Total sublease rental
income was approximately $96,000 in 1997, $80,000 in 1996 and $220,000 in 1995.

At December 31, 1997, future minimum payments under noncancelable operating
leases with initial terms of one year or more and future sublease income under
noncancelable subleases with initial terms of one year or more, are as follows:

Lease Sublease
Thousands of dollars Payments Income
- ----------------------------------------------------------
Year ending December 31
1998 $1,611 $50
1999 1,476
2000 1,470
2001 1,269
2002 945
Thereafter 3,907
-------------------------------
Total minimum lease payments $10,678 $50

EMPLOYEE BENEFIT PLANS

ALPNET, Inc. has a contributory profit sharing plan ("Plan") which is designed
to meet the requirements for qualification under Section 401(k) of the U.S.
Internal Revenue Code. Under this provision, contributions by U.S. employees are
excluded from their taxable income. The Plan provides retirement benefits for
U.S. employees meeting certain eligibility requirements. Employer
contributions, which were immaterial for all years presented, are discretionary
and become fully vested after two to four years.

The Company's U.K. and Netherlands subsidiaries have defined contribution plans
which cover substantially all of their employees. Contributions are based upon
percentages of participating employees' compensation. The cost of these plans
was approximately $109,000 in 1997, $79,000 in 1996 and $61,000 in 1995.

CONTINGENT LIABILITIES

In 1997, the Company's French subsidiary terminated certain of its employees,
some of whom initiated immediate legal actions in the French legal system which
handles employment-related matters. Subsequently, other former employees
initiated similar actions. In 1996, approximately $50,000 of statutorily-
required costs related to the 1997 terminations were expensed. In 1997,
primarily in the fourth quarter, an additional $220,000 was expensed related to
the legal actions taken by specific employees, and approximately $160,000
remains accrued at December 31, 1997.

The Company believes it complied with all aspects of applicable French labor
regulations in terminating the employees and intends to defend its actions
vigorously. While the ultimate outcome of this matter cannot be determined,
management, based on the opinion of its French legal counsel, does not expect
that the outcome of the legal actions will have a material adverse effect on the
Company's results of operations or financial position.

On February 23, 1998, the Company was named as one of several defendants in two
actions. In these actions, each of the named plaintiffs, all of whom are German
nationals, seek to recover monetary damages, in amounts to be
<PAGE>

proven at trial, including punitive damages, interest, and costs, allegedly
sustained as a result of securities transactions(s) the plaintiffs entered into
with several of the other named defendants. The Company intends to vigorously
defend the lawsuits. No expense has been accrued in the financial statements for
these actions.

ACQUISITION GUARANTEE LIABILITY

In 1993, the Company recorded a guarantee liability for an unresolved matter
related to the purchase of its German subsidiary in 1988. The guarantee
liability amount fluctuated based on the trading value per share of the
Company's Common Stock. In May 1996, an increase in the market price of ALPNET
Common Stock allowed this liability to be fully satisfied without any additional
consideration being given.

8. RELATED PARTY TRANSACTION

As of December 31, 1997, the Company has a $44,700 unsecured promissory note
receivable, bearing interest at prime plus 3%, from an officer and director of
the Company. The note balance was $56,600 at December 31, 1996 and $67,200 at
December 31, 1995.
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
ALPNET, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of ALPNET, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of ALPNET Canada Inc., a subsidiary of ALPNET, Inc., which
statements reflect total assets constituting 13% as of December 31, 1997 and 12%
as of December 31, 1996, and total revenues constituting 15% in 1997, 14% in
1996 and 13% in 1995 of the related consolidated totals. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for ALPNET Canada Inc., is based
solely on the report of the other auditors.

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 and the report of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of ALPNET, Inc. and subsidiaries at December
31, 1997 and 1996, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Salt Lake City, Utah
March 13, 1998
<PAGE>

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

None.

PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------

The information with respect to directors required by Item 10 of Form 10-K is
presented in the section titled "Information About Directors and Nominees for
Director" in the Company's definitive Proxy Statement dated March 30, 1998 and
is incorporated herein by reference. The information with respect to Executive
Officers is presented in the section titled "Information About Directors and
Nominees for Director" and in the section titled "Certain Significant Employees"
in the Company's definitive Proxy Statement dated March 30, 1998 and is
incorporated herein by reference. The information with respect to other
significant employees is presented in the section titled "Certain Significant
Employees" in the Company's definitive Proxy Statement dated March 30, 1998 and
is incorporated herein by reference.

ITEM 11: EXECUTIVE COMPENSATION
- -------- ----------------------

Information required by Item 11 of Form 10-K is presented in the sections titled
"Compensation of Directors," "Executive Compensation and Related Information"
and "Compensation Pursuant to Plans" in the Company's definitive Proxy Statement
dated March 30, 1998 and is incorporated herein by reference.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------

Information required by Item 12 of Form 10-K is presented in the sections titled
"Principal Shareholders" and "Information About Directors and Nominees for
Director" in the Company's definitive Proxy Statement dated March 30, 1998 and
is incorporated herein by reference.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------

Information required by Item 13 of Form 10-K is presented in the section titled
"Certain Relationships and Related Transactions" in the Company's definitive
Proxy Statement dated March 30, 1998 and is incorporated herein by reference.

PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------

(A) (1) FINANCIAL STATEMENTS:
---------------------

The financial statements are included in Item 8, Financial Statements and
Supplementary Data, as listed in the following index:
<PAGE>

Index to Consolidated Financial Statements: Page
----
<S> <C>
Consolidated Financial Statements:
Balance Sheets as of December 31, 1997 and 1996..................................................
Statements of Income for the years ended December 31, 1997, 1996 and 1995........................
Statements of Shareholders' Equity for the years ended December 31, 1997, 1996 and 1995..........
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995....................
Notes to Consolidated Financial Statements.......................................................
Report of Independent Auditors....................................................................
</TABLE>

(2) FINANCIAL STATEMENT SCHEDULES:
------------------------------

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions and therefore have been omitted, or are not
presented because the information required is included in the financial
statements or notes thereto.

(3) LISTING OF EXHIBITS:
--------------------
<TABLE>
<CAPTION>

Exhibit Filing
No. Description Status
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Restated Articles of Incorporation, as Amended (ii)
3.2 By-Laws (iv)
4.1 Specimen Series D Preferred Stock Certificate (ii)
10.1 Stock Purchase Agreement between ALPNET, Inc. and
Benitex A.G. dated 1 July 1993, with Exhibits (i)
10.2 Debt Conversion Agreement dated 17 August 1995 between
Michael F. Eichner and ALPNET, Inc. (ii)
10.3 Stock Purchase and Sale Agreement dated 20 October 1995
between ALPNET, Inc. and Jaap van der Meer (ii)
10.4 Financial Monitoring Agreement dated 31 March 1994
between H.F. Boeckmann, II and ALPNET, Inc. (iii)
10.5 First Amendment to Financial Monitoring Agreement dated
15 September 1995 between H.F. Boeckmann, II and
ALPNET, Inc. (iii)
10.6 Second Amendment to Financial Monitoring Agreement dated
22 November 1997 between H.F. Boeckmann, II and ALPNET, Inc. (vi)
10.7 Specimen Executive Stock Option Agreement dated 17
August 1995 (iii)
21 Subsidiaries of Registrant (v)
23.1 Consent of Ernst & Young LLP, Independent Auditors (vi)
23.2 Consent of Friedman & Friedman, Independent Auditors
for Alpnet Canada Inc. (vi)
27 Financial Data Schedule (vi)
99 Opinion of Friedman & Friedman, Independent Auditors
for Alpnet Canada Inc. (vi)
</TABLE>
- --------------------------
(i) Previously filed on March 30, 1994 as an Exhibit to Form 10-K for
the year ended December 31, 1993, and incorporated herein by
reference.
(ii) Previously filed on November 13, 1995 as an Exhibit to Form 10-Q for
the quarterly period ended September 30, 1995, and incorporated
herein by reference.
(iii) Previously filed on March 28, 1996 as an Exhibit to Form 10-K for
the year ended December 31, 1995, and incorporated herein by
reference.
(iv) Previously filed on August 13, 1996 as an Exhibit to Form 10-Q for
the quarterly period ended June 30, 1996, and incorporated herein by
reference.
(v) Previously filed on August 13, 1997 as an Exhibit to Form 10-Q
for the quarterly period ended June 30, 1997, and incorporated
herein by reference.
(vi) Filed herewith.
<PAGE>

(B) REPORT ON FORM 8-K:
-------------------

The following report on Form 8-K was filed during the fourth quarter of the
year ended December 31, 1997, which is incorporated herein by reference:

Financial
Date of Statements
Report Item Reported Filed
- ----------------------------------------------------------------------------
October 23, 1997 ALPNET Announces Record
Earnings for Third Quarter 1997 N/A

The response to this portion of Item 14 is submitted as a separate section
of this report. See Item 14(a)(3) above.

(D) FINANCIAL STATEMENT SCHEDULES:
------------------------------

The response to this portion of Item 14 is submitted as a separate section
of this report. See Item 14(a)(2) above.
<PAGE>

SIGNATURES

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.

ALPNET, INC.

By: \s\ Jaap van der Meer
----------------------------
Jaap van der Meer, President

Date: 25 March 1998
----------------------------

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.
<TABLE>
<CAPTION>

<S> <C>

\s\ Michael F. Eichner 25 March 1998
- ---------------------------- ---------------------
Michael F. Eichner
Chairman of the Board of Directors

\s\ Jaap van der Meer 25 March 1998
- ---------------------------- ---------------------
Jaap van der Meer
President and Director

\s\ John W. Wittwer 25 March 1998
- ---------------------------- ---------------------
John W. Wittwer
Executive Vice President and Director

\s\ James R. Morgan 25 March 1998
- ---------------------------- ---------------------
James R. Morgan
Director

\s\ Donald N. Reeves 25 March 1998
- ---------------------------- ---------------------
Donald N. Reeves
Director

\s\ D. Kerry Stubbs 25 March 1998
- ---------------------------- ---------------------
D. Kerry Stubbs
Chief Financial and Accounting Officer
</TABLE>

<PAGE>

EXHIBIT 10.6

SECOND AMENDMENT TO
FINANCIAL MONITORING AGREEMENT

This Second Amendment to Financial Monitoring Agreement (the "SECOND AMENDMENT")
is made effective as of 22 November 1997, by and between H. F. Boeckmann II
("BOECKMANN") and ALPNET, Inc., a Utah corporation ("ALPNET" or the "COMPANY").

R E C I T A L S :
- - - - - - - -

WHEREAS, effective 31 March 1994, Boeckmann and ALPNET entered into a "Financial
Monitoring Agreement" (the "ORIGINAL AGREEMENT"); and

WHEREAS, pursuant to the terms of Paragraph 5.3 of the Original Agreement, the
Original Agreement may not be amended or modified except by a written instrument
signed by all parties affected thereby; and

WHEREAS, by means of a "First Amendment to Financial Monitoring Agreement" dated
15 September 1995 (the "FIRST AMENDMENT"), the parties amended the Original
Agreement; and

WHEREAS, each of the parties desire to again modify the Original Agreement, as
previously amended.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein set
forth, the monetary consideration herein recited and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

A M E N D M E N T:
- - - - - - - - -

A. AMENDMENT TO PARAGRAPH 4.3. The parties hereby expressly revoke and delete
--------------------------
in its entirety Paragraph 4.3 of the Original Agreement, as amended by the First
Amendment, and hereby insert the following in lieu thereof:

4.3. Boeckmann's direct and indirect holdings of ALPNET Common Stock and Common
Stock equivalents constitutes less than ten percent (10%) of the issued and
outstanding shares of ALPNET Common Stock and Common Stock equivalents. For
purposes of calculating Boeckmann's direct and indirect holdings, (i) "DIRECT"
holdings are those held in Boeckmann's name or in the name of a bank, broker or
nominee for the account of Boeckmann, or held by Boeckmann as a joint tenant,
tenant in common, tenant by the entirety, or as community property, and (ii)
"INDIRECT" holdings are those held by an entity which is an affiliate of
Boeckmann. For purposes of this Agreement, the term "affiliate" shall mean any
entity created and/or controlled by Boeckmann.

B. NO OTHER MODIFICATIONS. Except as expressly and specifically modified
----------------------
herein, all of the other terms and conditions of the Original Agreement, as
amended by the First Amendment, shall remain absolutely unchanged and in full
force and effect; provided, however, that no provision of the Original Agreement
or the First Amendment shall be interpreted in such a manner as to be
inconsistent with this Second Amendment.

C. COUNTERPARTS. This Second Amendment may be signed in any number of
------------
counterparts with the same effect as if the signatures upon any counterpart were
upon the same instrument. All signed counterparts shall be deemed to be one
original.

IN WITNESS WHEREOF, the parties have signed this Second Amendment effective as
of the day and year first set forth above.
<PAGE>

\s\ H.F. Boeckmann, II
----------------------------
H. F. BOECKMANN, II

ALPNET, INC., a Utah Corporation

By:\s\ John W. Wittwer
----------------------------
JOHN W. WITTWER
Executive Vice President

<PAGE>

E X H I B I T 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-5404) pertaining to the 1983 Non-Statutory Stock Option Plan and in
the Registration Statement (Form S-8 No. 333-06091) pertaining to the 1996
Executive Stock Option Plan of ALPNET, Inc. and subsidiaries of our report dated
March 13, 1998, with respect to the consolidated financial statements of ALPNET,
Inc. and subsidiaries included in the Annual Report (Form 10-K) for the year
ended December 31, 1997.

\s\ ERNST & YOUNG LLP

Salt Lake City, Utah
March 25, 1998

<PAGE>

E X H I B I T 2 3.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-5404) pertaining to the 1983 Non-Statutory Stock Option Plan of
ALPNET, Inc. and subsidiaries, and in the Registration Statement (Form S-8 No.
333-06091) pertaining to the ALPNET, Inc. 1996 Executive Stock Option Plan, of
our Auditors' Report dated February 13, 1998 with respect to the balance sheets
of Alpnet Canada Inc. as at December 31, 1997 and 1996 and the statements of
earnings, deficit and changes in financial position for each of the years ended
December 31, 1997, 1996 and 1995, which we have been advised is included in this
Annual Report (Form 10-K) of ALPNET, Inc. for the year ended December 31, 1997.

\s\ FRIEDMAN & FRIEDMAN

Chartered Accountants

Montreal, Quebec
March 23, 1998

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996,
AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 1,711 1,034 1,033
<SECURITIES> 0 0 0
<RECEIVABLES> 10,110 6,748 5,134
<ALLOWANCES> 338 219 156
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 13,270 8,999 7,098
<PP&E> 5,229 5,107 3,977
<DEPRECIATION> 3,402 3,236 2,997
<TOTAL-ASSETS> 21,040 17,267 14,449
<CURRENT-LIABILITIES> 9,460 6,650 4,898
<BONDS> 489 262 220
0 0 0
242 2,095 3,127
<COMMON> 42,080 40,228 38,954
<OTHER-SE> (31,231) (31,968) (32,750)
<TOTAL-LIABILITY-AND-EQUITY> 21,040 17,267 14,449
<SALES> 40,795 32,338 26,919
<TOTAL-REVENUES> 40,795 32,338 26,919
<CGS> 30,927 25,256 21,027
<TOTAL-COSTS> 30,927 25,256 21,027
<OTHER-EXPENSES> 784 586 557
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 263 138 193
<INCOME-PRETAX> 2,023 819 781
<INCOME-TAX> 435 223 160
<INCOME-CONTINUING> 1,588 596 621
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,588 596 621
<EPS-PRIMARY> .09 .04 .04
<EPS-DILUTED> .06 .02 .04

</TABLE>

<PAGE>

E X H I B I T 9 9

OPINION OF FRIEDMAN & FRIEDMAN,
INDEPENDENT AUDITORS FOR ALPNET CANADA INC.

To the Shareholder of
Alpnet Canada Inc.

We have audited the balance sheets of Alpnet Canada Inc. as at December 31, 1997
and 1996 and the statements of earnings, deficit and changes in financial
position for each of the years ended December 31, 1997, 1996 and 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance as to 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.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1997 and 1996
and the results of its operations and the changes in its financial position for
each of the years in the three year period ended December 31, 1997 in accordance
with generally accepted accounting principles.

\s\ FRIEDMAN & FRIEDMAN

Chartered Accountants

Montreal, Quebec
February 13, 1998