SUPERMAIL INTERNATIONAL INC, 10KSB40, 1997-03-31

SUPERMAIL INTERNATIONAL INC
10KSB40, 1997-03-31
FUNCTIONS RELATED TO DEPOSITORY BANKING, NEC

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<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[Fee Required]
For the Fiscal Year Ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from _____________ to________________

Commission File Number 0-16894

SUPERMAIL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Utah 87-0423053
(State of Incorporation) (IRS Employer Identification No.)

2201 Park Towne Circle, Suite 200, Sacramento, California 95825
(address of principal executive offices)

Issuer's telephone number: (916) 483-1131

Securities Registered Pursuant to Section 12(b) of the Act:None
Securities Registered Pursuant to Section 12(g) of the Act:Common Stock

Check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

Issuer's revenue for the year ended December 31, 1996: $4,545,008

Aggregate market value of the voting stock held by non-affiliates
of the registrant as of March __, 1997: $_________
The total number of shares outstanding of each of the Issuers's
classes of common stock as of March __, 1997, was 7,646,853 of a single
class of $.06 par value per share common stock.

Documents Incorporated by Reference:
None

Transitional Small Business Disclosure Format: Yes ; No X
<PAGE>

Supermail International, Inc.

Table of Contents

PART I
ITEM 1 Description of Business 3
ITEM 2 Description of Properties 5
ITEM 3 Legal Proceedings 7
ITEM 4 Submission of Matters to a Vote of Security Holders 7
PART II
ITEM 5 Market for Common Equity and
Related Stockholder Matters 8
ITEM 6 Management's Discussion and Analysis 9
ITEM 7 Consolidated Financial Statements and
Independent Auditors' Report 12
ITEM 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 29
PART III
ITEM 9 Directors and Executive Officers of the Registrant 30
ITEM 10 Executive Compensation 31
ITEM 11 Security Ownership of Certain Beneficial Owners
and Management 32
ITEM 12 Certain Relationships and Related Transactions 33
ITEM 13 Exhibits and Reports on Form 8-K 34
SIGNATURES 37

<PAGE>
PART I

ITEM 1 Description of Business

General Description of Business

Supermail International, Inc. (the "Company") was incorporated in Utah
on October 12, 1979. The operations of the Company are carried out
through its wholly-owned subsidiary, Supermail International of Utah,
Inc. (the "Utah subsidiary").

The Company offers a wide range of non-banking financial and
communication services through its 22 retail service centers. These
services include check cashing, money transfer and money orders
through American Express, food stamp distribution, and utility
payments. Other services and products offered through the Company's
retail outlets include telegrams, Mailgrams, telex, facsimile
transmissions, overnight courier and delivery services, California
lottery and lotto sales, postal services, packaging and shipping
services, peso exchange, and transit tickets sales. While some
services and products are not offered at every retail center, all
stores provide check cashing, money transfer, money orders, utility
payment collection, and electronic mail services including
telegrams, Mailgrams, facsimile and tax services. Check cashing and
money transfer revenues accounted for 51% and 35%, respectively of
the Company's total revenues during 1996.

The Company commenced operations with the opening of its first retail
outlet in San Francisco, California, during October 1985. By the end of
1986 the Company operated 11 retail centers throughout California
and in Reno, Nevada. These centers were acquired by purchasing them
from existing operators and taking over Western Union turnkey locations.
The Company's business during 1986 consisted primarily of electronic
mail and Western Union money transfer services.

During 1987, the Company determined that the best way to increase
revenues was a combination of acquisitions and additional services
offered at existing retail outlets. Electronic mail and money
transfer accounted for approximately 90% of total revenues during
1987, thus, the Company decided it would be prudent to expand its
revenues with other products and services. The Company determined
that check cashing was a good complement to the existing revenue
base because check cashing was similar in nature; and the Company
would be servicing the same customer base and utilizing existing
plant and equipment. The Company started check cashing in December
1987 at its Sacramento, California, retail outlet. As of January
1992, the Company began offering money transfer service through
MoneyGram(formerly American Express).

On September 12, 1995, the Company entered into a license agreement
with a retail department store chain on the east coast to install
kiosks in some of their stores (a kiosk is a secured portable
booth). The Company opened one kiosks in February and March 1996.
If this pilot program is successful, it could result in installing
kiosks in many of this retail chains 300+ locations. These kiosks
will provide services similar to those currently offered by the
Company.
<PAGE>
The Company continues to look for opportunities to increase its existing
revenue base. The Company intends to continue its expansion in 1997
through opening or acquiring additional check cashing locations. The
actual number and estimated cost of these centers depends upon the cash
flow generated from operations and available financing. Locations for
future centers are expected to be in high traffic suburban areas such as
malls, regional shopping centers, and commercial business districts.

Description of Store Operations

As of December 31, 1996, the Company operated 22 retail service centers,
20 in California, one in Virginia and one Maryland.

The typical service center requires about 1,200 square feet and
employs an average of three people. The stores' hours are
coordinated with those of other stores and shops in the vicinity.
Generally, the hours are from 8 a.m. to 9 p.m., six days a week with
many outlets open on Sundays from 8 a.m. to 6 p.m. During 1994, the
Company opened two Mega-stores which are larger than the existing
store locations. The Mega-stores occupy approximately 2,500 square
feet and have 10 to 12 teller windows. All of the centers consist
of a public lobby separated from the work area by a counter and a
bulletproof barrier. The Company offers a variety of payment
methods depending on the type of service selected by the customer.
Check cashing revenues are collected by deducting the amount due
from the customer's check. The Company requires money transfers,
money orders, transit tickets, lottery and lotto sales, and postal
services to be paid for in cash. Other products and services may be
paid for using cash or credit cards. Selected customers, who have
established accounts, may charge certain products and services on
account. Accounts receivable are due ten days from the date of the
invoice.

Each of the Company's retail centers is equipped with Company owned
computer hardware and software, MoneyGram (money transfer) leased
computers and software, Integrated Payment Systems automatic money
order dispensers, facsimile, photocopier and telex equipment.

Management and Business Conditions

The majority of the Company's senior management have all been employed
by the Company since its inception and have extensive background and
experience in financial and business management. The Company's district
supervisors and store managers have an average of five years management
experience. The Company has an extensive training program for both
managers and retail store personnel. The Company makes every effort to
retain and promote employees from within the organization. No special
professional licenses or franchises are necessary to carry on the
Company's current business operations. The Company is in compliance
with all state and federal laws which regulate its business. The
Company is not aware of any pending legislation which would materially
affect the Company's business or operations.
<PAGE>
The Company's customers consist primarily of individuals and businesses
who do not regularly use banks, savings and loans, or credit unions.
This market is estimated to be in excess of 25% of the United States
adult population, according to the American Bankers Association. The
Company does not compete with traditional financial institutions but
instead competes with other check cashing companies. The Company cashes
primarily payroll checks, social security checks and other government
entitlement checks. The Company charges between 1.00% and 3.5% to cash
a check. The average fee is less than 1.5%, which is lower than most of
the Company's competition. The Company's policy is to offer its
services through convenient retail locations, with fast friendly service
and competitive pricing. The Company believes this positions it to
effectively meet competition whenever it occurs.

The Company offers Western Union telegrams, international messages,
telex and Mailgram messages on a non-contractual basis. These services
are offered in accordance with tariffs filed with the Federal
Communications Commission by Western Union and other Western Union
policies and procedures in existence from time to time.

On December 22, 1995, the Company amended its contracts with
MonwyGram to offer money transfer service for an additional
seven-years. This agreement provides for receipt of an up-front
signing bonus of $2,000,000, future incentives for opening new
MoneyGram Service locations and certain other payments to the
Company over the seven-year period. MoneyGram currently makes
monthly payments to the Company for earned commissions on services
provided to customers based upon the type of transaction performed,
on a per transaction or percentage of customer fee basis as
specified in the agency agreement. The agreement also provides for
guaranteed minimum payments, which are paid quarterly when earned
commissions do not meet the guaranteed amounts. MoneyGram furnishes
the Company, at MoneyGram's expense, equipment, signage, and forms
necessary for providing their services.

The Company believes that termination of this agency agreement with
MoneyGram could have a material adverse effect on the
Company's operations. MoneyGram money transfer service
currently accounts for 35% of the Company's total revenues.
MoneyGram may terminate its contract with the Company for the
following reasons: if the Company fails to remit monies' due
MoneyGram under the trust agreement; if there is a material
adverse change in the financial condition of the Company; if the
Company does not obtain MoneyGram's prior consent to any
sale, merger, or transfer of ownership of the Company; or if the
Company fails to comply with state or federal laws regulating the
Company's business.

The Company markets its services by means of advertisements in local
newspapers, Yellow Pages, bus benches, flyers, direct mail, radio,
television, personal contact with large organizations which may use the
Company's services, and through high-visibility signage strategically
located in each center's servicing area. The Company has received
trademark protection for the words "Supermail International."
<PAGE>
Employees

At December 31, 1995, the Company had 74 employees. Of these, 20 were
full-time salaried, 45 were full-time hourly, and 9 were part-time
hourly employees. Corporate headquarters employs 12 full-time salaried
employees who devote all of their time to the management of the Company.
The remaining 62 employees provide financial and other related services
in the Company's retail service centers. The Company plans to hire
additional personnel as needed to accommodate planned growth. The
employees of the Company are not subject to collective bargaining and
the Company does not have a pension or other retirement plan. The
Company considers its relations with its employees to be excellent.

ITEM 2 Description of Properties

The Company occupies a 4,600-square foot office at 2201 Park Towne
Circle in Sacramento, California, which serves as corporate
headquarters. The Company leases these premises through June 1999
at a monthly lease rental amount of $3,454.

The Company also holds leases for twenty-four service centers. The
Company cannot guarantee that the lessors will renew these leases.
However, it has no reason to believe that the leases will not be
renewed. The Company also believes that it can find alternative
locations at comparable rents.

Set forth below is information concerning Company locations as of
December 31, 1996:

Location Type Sq. Ft. Expiration

719 J Street
Sacramento, CA 95814 Leased 2,800 04/01/97

5803 N. Figueroa Street
Los Angeles, CA 90042 Leased 900 01/15/97

2430 Broadway
Oakland, CA 94612 Leased 2,018 10/31/97

161 W. San Fernando Street
San Jose, CA 95113 Leased 1,500 04/30/98

110 S. El Camino Real
San Mateo, CA 94401 Leased 1,000 Monthly

2400 E. Florence Ave.
Huntington Park, CA 90255 Leased 1,850 01/31/99

11009 Burbank Blvd. #123
North Hollywood, CA 91601 Leased 808 01/17/97

6371 Selma Avenue
Hollywood, Ca 90028 Leased 1,203 08/01/98
<PAGE>
6219 Van Nuys Blvd.
Van Nuys, CA 91401 Leased 1,200 Monthly

3970 University Ave.
Riverside, CA 92501 Leased 1,210 08/15/97

11849 Braddock Drive
Culver City, CA 90230 Leased 736 Monthly

6740 Reseda Blvd.
Reseda, CA 91335 Leased(1) 2,365 09/10/00

6320 S. Compton Avenue
Los Angeles, CA 90001 Leased 600 Monthly

461 Blossom Hill Road #H2
San Jose, CA 95123 Leased(2) 1,015 4/30/97

2688 E. Florence Avenue
Huntington Park, CA 90255 Leased 1,750 09/15/98

450 Sansome Street
San Francisco, CA 94111 Leased 1,835 01/21/97

231 East 17th Street
Santa Ana, CA 92706 Leased 1,246 02/01/00

1706 Long Beach Blvd.
Long Beach, CA 90813 Leased(2) 1,306 12/14/98

260 S. Normandie Ave.
Los Angeles, CA 90004 Leased 982 04/30/97

7201 S. Pacific Blvd.
Huntington Park, CA 90004 Leased(1) 1,600 01/31/01

10167 Folsom Blvd.
Rancho Cordova, CA 95670 Leased 1,200 Monthly

111 W. Pacific Coast Hwy. #D
Wilmington, CA 90744 Leased 1,154 11/18/98

6751 Wilson Blvd.
Falls Church, VA 22042 Leased 400 Monthly

9033 Central Avenue
Capitol Hts., MD 20784 Leased 400 Monthly
- --------------
(1) New Mega-store opened in 1996.
(2) Closed stores still under lease.

ITEM 3 Legal Proceedings

The Company is party to a dispute that alleges breach of a lease by
tenant Franklin-Lord, Inc., and subsequent suit against Franklin-Lord
and several signatories to a purported guaranty of the tenant's lease
obligations. These signatories include several principals of the
tenant, and the Company. The plaintiff alleges damages of approximately
$146,000 through February 1997.
<PAGE>
The Company is defending the action on the grounds that its execution
of the guaranty was conditioned on the closing of a transaction with
Franklin-Lord that was never consumated. The Company is also cross-
complaining against Franklin-Lord for indemnity as primary obligor, and
against the other signatories for contribution as co-obligors.

ITEM 4 Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II

ITEM 5 Market for Common Equity and Related Stockholder Matters

Market Information

The Company's common stock trades on The Nasdaq OTC Bulletin Board
under the symbol SPML. The following table sets forth by quarter
the high and the low prices reported by the "real-time" sales and
price information system of the Nasdaq Small-Cap Market and Nasdaq
Trading and Market Services of the Company's common stock for 1996
and 1995.

MARKET INFORMATION

1996 Price Per Share

High Low
------ -----
First Quarter $1.05 $0.14
Second Quarter 0.57 0.28
Third Quarter 0.73 0.40
Fourth Quarter 0.45 0.18

1995 High Low
------ -----
First Quarter $1.44 $0.78
Second Quarter 0.94 0.38
Third Quarter 0.75 0.07
Fourth Quarter 0.38 0.13

Holders

As of December 31, 1996, there were 2,971 stockholders of record.
However, based upon information supplied by the Company's transfer
records, brokers and nominees with respect to shares held in street
name, the Company calculates it has approximately 5,000 total
shareholders.

Dividends

The Company has not declared or paid any dividends on its common stock.
The Company plans to reinvest any earnings toward continued expansion
efforts at this time.

<PAGE>
ITEM 6 Management's Discussion and Analysis

LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents decreased $396,432 to $1,818,877 as of December 31,
1996 compared to $2,215,309 for the same period in 1995. Cash was
provided by operating activities of $212,124 and used in investing and
financing activities of $476,555 and $132,001, respectively.

Net working capital increased $567,347 to $860,470 as of December 31,
1996 compared to $293,123 for the same period in 1995. This increase
was the result of receiving signing and new stores' bonuses of $2,000,000
and $150,000, respectively, from MoneyGram for amending the Company's
agreement to offer MoneyGram services for an additional seven years,
and building three new stores during the fiscal year.

Though working capital has increased, the Company has had to borrow money
on a short-term basis to support its higher check cashing volume.
The Company received and repaid $2,519,500 in borrowings from outside
parties during the year ended December 31, 1996. In addition to this
financing activity, the Company repaid advances from an officer and made
principal payments of $96,144 and $35,867, respectively.

Cash used in investing activities is primarily the result of cost incurred
for construction of four new service locations. Two kioks under its
license agreement with a retail department store chain on the east coast
and two Mega stores (One Mega store was a relocation of a smaller store)
in southern California were opened during the fiscal year.

During 1996 and early 1997, the Company has taken a stringent look at all
aspects of the business in an effort to reduce its losses and achieve a
positive cash flow position. These efforts have resulted in closing six
unprofitable service centers in 1996 (includes the five locations on the
Navajo nation) and two in early 1997. In addition, the Company has reduced
expenses, developed a new marketing strategy and added more services.
Closure of these eight stores should have a major impact on the operating
results for 1997 since these stores contributed in excess of $230,000 of
the loss for 1996. All expense categories are being evaluated and the
Company has already taken steps to reduce its major expenses such as
payroll, bank service charges, rent and telephone expense for 1997.
Other expenses will be evaluated on an ongoing basis to make cuts as
deemed feasible. Our marketing strategy is structured based on customer
demands.

During 1997, the Company will sell its marketable securities and settle its
two outstanding note receivables. The total monies to be received from
these future sources of working capital are uncertain due to the volatility
of a Small-Cap stock and the cash resources available from the debtors. It
should be noted that the Company has received a default judgement from the
$30,000 debtor and is working out the settlement terms with the $200,000
debtor. The settlement terms being discussed are stock of a publicly
traded company (which can be sold), cash and stock in this debtor's company
this is in the process of an IPO.

Based on its existing working capital and ability to borrow monies on a
temporary basis, the Company believes it will have sufficient resources
to finance its operating requirements for 1997. In addition, the
Company is evaluating various financing sources including working lines
of credit, loans and equity investments to finance the Company's planned
expansion.
<PAGE>
RESULTS OF OPERATIONS (1996 AS COMPARED TO 1995)

Revenues

Revenues increased $126,410 or 2.9% to $4,545,008 for the year ended
December 31, 1996, compared to revenues of $4,418,598 for the year ended
December 31, 1995. This increase was the result of increases in money
transfer, lottery and transit ticket revenues of $268,543, $47,299 and
$38,036, respectively, offset by a decrease in check cashing revenues
of $235,201.

Money transfer revenues increased as a result of amortizing
approximately $303,000 of the $2,150,000 signing and new store
bonuses received in 1996. This increased amortization was offset by
decreases in money transfer revenues at the six service center
locations closed in 1995 and six in 1996. Activity at the remaining stores
was relatively flat with money transfer revenues at stores opened in
1996 offsetting decreases experienced at other stores. Lottery and
transit ticket revenues increased as a result of opening two Mega
stores in 1996.

The decrease in check cashing revenues was primarily the result of
discontinuing the service to one of the Company's corporate accounts
and closure of six service centers in 1995 and six in 1996. These
decreases were offset by increased check cashing revenues at one of the
Mega stores and revenues at the new service centers opened in 1996. Check
cashing revenues at the location servicing the corporate account has
decreased approximately $130,000. The Company decided to discontinue
the service to the corporate account due to the high exposure to bad
checks. The six locations closed in 1995 and six in 1996 represented
approximately $254,000 in decreased check cashing revenues for 1996
as compared to 1995. These decreases were offset by an approximate
$108,000 and $115,000 increase in check cashing revenues at other
stores and the new service centers opened in 1996. In addition,
some service centers have experienced decreases due to various price
promotions from competing money transfer providers that have had an
effect on our check cashing revenues.

Operating Expenses

Operating expenses consist of costs of providing services (cost of
sales) and general and administrative expenses. Total operating
expenses increased $193,783 or 3.7% to $5,501,085 for the year ended
December 31, 1996, compared to 1995.

General and administrative expenses increased $202,197 or 4.0% to
$5,290,462 for the year ended December 31, 1996, compared to 1995.
This increase resulted primarily from a $230,003, $36,981, $23,459
and $22,390 increase in payroll, bad debt, repairs and maintenance
and depreciation expense, respectively, offset by decreases of $54,489,
$51,427 and $45,959 in advertising, accounting and legal expenses,
respectively.

Payroll expenses increased due to several factors including hiring a
Chief Information Officer, merit increases, increases in the minimum
store clerk wage from $6.00 to $7.00, significant overtime pay due to
staff shortages and payroll associated with the three new four stores
opened in 1996. Thesse increases were offset by payroll decreases at
the six service centers closed in 1995 and six in 1996.
<PAGE>
Bad debt expense as a percentage of check cashing revenues increased
from 10.4% to 13.0% for 1996 as compared to 1995. This increase was
primarily the result of approximately $60,000 in checks outstanding
at December 31, 1995 being written-off in 1996 due to uncollectibility.

Repairs and maintenance increased due to painting and minor repairs on
several of the existing locations during 1996.

Depreciation expense increased due to the opening of four service
centers in 1996.

Advertising expense decreased as a result of reviewing the existing
advertising program and making revisions where appropriate. In addition,
a $28,400 advertising reimbursement receivable for 1994 was written-off
to advertising expense in 1995 thus overstating 1995's expense.

Accounting fees decreased as a result of reorganzing the accounting
department which made for a more efficient year end external audit.

Legal expense decreased as a result of settling a legal dispute in 1996.
Significant legal expense was incurred on this dispute in 1995.

Operating Loss

Operating loss increased $67,373 or 7.5% to $956,077 for the year ended
December 31, 1996, compared to an operating loss of $888,704 for the
year ended December 31, 1995. However, if the operating loss is adjusted
by the approximate $140,000 loss incurred by stores closed during 1996,
the operating loss for 1996 would have been approximately $816,000 which
is lower than the operating loss for 1995.

Other Income (Expenses)

Overall, other net expenses increased $66,813 for the year ended December
31, 1996, as compared to 1995. This increase is primarily the result of
the write-off of a software program recorded on the books with a basis of
$225,000 offset by a decrease in nonoperating legal expense of $188,636.
The software program was written-off due to the purchase of a new point
of sale program in December 1996. The old software program was due from an
outside vendor but never received. The Company is in the process of
obtaining a legal judgement from the outside vendor for failure to supply
the software. In 1995, the Company incurred legal cost associated with a
case involving the State of Arizona and a business that the Company had
dealings with in a prior year. The Company was not named in the case but
obtained legal counsel to represent certain officers, directors and
employees during the investigation.

<PAGE>
ITEM 7 Consolidated Financial Statements and Independent Auditors'
Report
<PAGE>

Report of Independent Certified Public Accountants

Board of Directors and Stockholders
Supermail International, Inc.

We have audited the accompanying consolidated balance sheet of
Supermail International, Inc. and subsidiary as of December 31, 1996,
and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended
December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Supermail International, Inc. and subsidary as of
December 31, 1996, and the consolidated results of their operations and
cash flows for each of the two years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 11, 1997
<PAGE>

SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET

December 31, 1996

ASSETS

Current assets:
Cash and equivalents $1,818,877
Trade accounts receivable, less allowance for
doubtful accounts of $240,691 291,257
Officer receivables 9,473
Notes receivable 154,000
Investment in marketable securities 199,999
Prepaid expenses 177,124
Other current assets 27,153
---------
Total current assets 2,677,883
---------
Property and equipment, net 1,260,389
---------
Intangible assets:
Covenants not to compete, net 34,469
Goodwill, net 291,860
Other intangibles, net 267,597
---------
593,926
---------
Other 90,807
---------
$4,623,005
=========

See accompanying notes to consolidated financial statements.

<PAGE>

SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET, Continued

December 31, 1996

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of capitalized leases payable $ 48,661
Accounts payable 207,315
Advances from officer 24,380
Accrued liabilities:
Accrued payroll, payroll taxes and benefits 97,637
Accrued money order and
money transfer drafts payable 1,365,013
Other 74,407
---------
Total current liabilities 1,817,413

Capitalized leases payable, net of current maturities 263,914
Deferred income 1,802,783
---------
Total liabilities 3,884,110
---------

Commitments (Notes 9 and 12)

Stockholders' equity:

Preferred stock - no par value; authorized 50,000
shares; none issued and outstanding
Common stock - par value $.06 per share; authorized
15,000,000, issued and outstanding 7,646,853 458,811
Additional paid-in capital 19,204,375
Accumulated deficit (15,898,729)
----------
3,764,457
Less receivables from officers, directors and
others related to issuance of common stock-
1,107,666 shares held under notes receivable (3,025,562)
---------
Total stockholders' equity 738,895
---------
$ 4,623,005
=========

See accompanying notes to consolidated financial statements.
<PAGE>

SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 1996 and 1995

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

Sales and commissions $4,545,008 $4,418,598
Operating expenses 5,501,085 5,307,302
--------- ---------
Operating loss (956,077) (888,704)
--------- ---------
Other income (expense):
Interest income 7,307 3,462
Interest expense (40,818) (35,572)
Loss on disposal of assets (251,961) (20,216)
Other, net (25,940) (192,273)
--------- ---------
(311,412) (244,599)
--------- ---------
Loss before income taxes (1,267,489) (1,133,303)

Income taxes (12,700) (2,700)
--------- ---------
Net loss $(1,280,189) $(1,136,003)
========== =========

Net loss per common share $ (0.17) $ (0.12)
========== =========
Weighted average common
shares outstanding 7,646,853 9,537,862
========= =========

See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 1994 and 1995
<CAPTION>

-----Common Stock-----
Number of Par Additional Accumulated Notes
Shares Value Paid-in-Capital Deficit Receivable Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 9,782,177 $586,930 $21,359,720 $(13,482,537) $(5,324,026) $ 3,140,087
Cancellation of stock purchased
with notes receivable (2,175,000) (130,500) (2,167,964) - 2,298,464 -
Net loss - - - (1,136,003) - (1,136,003)
------------------------------------------------------------------------------------
Balance at December 31, 1995 7,607,177 456,430 19,191,756 (14,618,540) (3,025,562) 2,004,084
Stock issued in liew of cash
compensation 39,676 2,381 12,619 15,000
Net loss (1,280,189) (1,280,189)
------------------------------------------------------------------------------------
Balance at December 31, 1996 7,646,853 $458,811 $19,204,375 $(15,898,729) $(3,025,562) $ (738,895)
====================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
SUPERMAIL INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996 and 1995

1996 1995
------------ ----------
Cash flows from operating activities:
Net loss $(1,280,189) $(1,136,003)
---------- ----------
Adjustments to reconcile net loss
to net cash provided by (used) in
operating activities:
Depreciation and amortization 344,596 313,330
Loss on disposal of assets 234,772 20,216
Issuance of common stock for
services rendered 15,000 -
Change in assets and liabilities:
Decrease in trade accounts receivable 14,789 68,544
(Increase) decrease in prepaid expenses (79,203) 101,407
(Increase) decrease in other current assets (7,108) 39,393
(Decrease) increase in accounts payable (4,949) 157,092
Increase in accrued payroll, payroll taxes
and benefits 6,436 4,807
(Decrease)increase in accrued
drafts payable (724,819) 617,935
Increase (decrease) in other
accrued liabilities 2,116 (169,762)
Increase (decrease) in income
taxes payable 10,000 (36,845)
Increase (decrease) in deferred income 1,680,683 (122,100)
---------- ---------
Net cash provided by (used in)
operating activities 212,124 (141,976)
---------- ---------
Cash flows from investing activities:
Proceeds on sale of assets 1,700 17,000
Loan under a note receivable - (30,000)
Capital expenditures (463,889) (145,357)
Advances (made to) collected from officers
and directors, net (9,194) 7,096
(Increase) decrease in other
long-term assets (5,172) 8,033
---------- ---------
Net cash used in investing activities (476,555) (143,228)
---------- ---------
Cash flows from financing activities:
Proceeds from short-term borrowings 2,519,500 1,221,000
Repayments of short-term borrowings (2,519,500) (1,221,000)
Proceeds from advances from officers and
employee - 304,600
Payments on advances from officers and
employee (96,144) (184,076)
Principal payments on debt (35,857) (10,720)
Net cash (used in) provided ---------- ---------
by financing activities (132,001) 109,804
---------- ----------
Net decrease in cash and equivalents (396,432) (175,400)
Cash and equivalents at beginning of year 2,215,309 2,390,709
---------- ----------
Cash and equivalents at end of year $ 1,818,877 $2,215,309
========== =========
See accompanying notes to consolidated financial statements
<PAGE>
SUPERMAIL INTERNATIONAL, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Line of Business

The consolidated financial statements include the accounts of Supermail
International, Inc. (the Company), and its wholly-owned subsidiary,
Supermail International of Utah, Inc. The Company offers a wide range of
non-banking financial and communication services through its retail
service centers. These services include check cashing, money transfer
and money orders through MoneyGram and Integrated Payment Systems and
food stamp distribution. The Company's concentration of customers is
in the states of California, Virginia and Maryland.

(b) Basis of Presentation

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. The Company has had a
history of net losses over the past several years and has an accumulated
deficit of $15,898,729 at December 31, 1996.

In view of the matters described in the preceeding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to continue
to meet its financing requirements and to succeed in its future operations.
The consolidated financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.

During the past year, management closed several unprofitable locations,
entered into an agreement with MoneyGram that provided a $2 million upfront
bonus and a bonus for each new store opened over the next seven years, opened
two new Mega-stores and generated positive cash flows from operations.
During 1997, the Company plans to open five Mega-stores, close one
unprofitable service center, and has already taken steps to reduce major
expenses such as payroll, bank service charges, rent and telephone expense.
In addition, the Company plans to sell its investment in marketable
securities and collect on its notes receivable which will result in
additional cash flow of approximately $350,000.

In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
(d) Marketable Equity Securities

The Company accounts for marketable equity securities in accordance
with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
(FAS 115).

Management determines the appropriate classification of its investments
in equity securities at the time of purchase and reevaluates such
determination at each balance date. Securities available for sale are
carried at fair value, with the unrealized gains and losses, net of
tax, reported in a separate component of stockholders'equity. At
December 31, 1996, the Company had no investments that qualified as
trading or held to maturity.

Marketable equity securities are valued based quoted market prices.

(e) Property and Equipment

Property and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized as income for the period. The cost
of maintenance and repairs is charged to expense as incurred;
significant renewals and betterments are capitalized.

Leasehold improvements are amortized over the lesser of the lease term
or the estimated useful life of the asset.

During 1996, the Company wrote-off assets associated with the closure of
six service centers and computer software. The software program was
written-off due to the purchase of a new point of sale program in
December 1996. The old software program was due from an outside vendor
but never received. These write-offs resulted in a loss on disposal of
assets totaling $251,961 for the year ended December 31, 1996.

(f) Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes."

(g) Loss Per Share

Loss per share is computed using the weighted average number of shares
outstanding, including common stock equivalents (stock options
outstanding during the period), except where the inclusion of these
common stock equivalents would produce an anti-dilutive effect. In 1996
and 1995, common stock equivalents have not been used in computing the
weighted average number of shares because of the anti-dilutive effects.
The calculation of fully diluted loss per share does not differ
materially from primary loss per share for 1996 and 1995.

(h) Reclassifications

Certain reclassifications have been made to the 1995 financial
statements in order to conform with the 1996 presentation.
<PAGE>
(i) Statements of Cash Flows

Cash and equivalents include cash on hand and cash in banks. Cash
equivalents are considered to be all highly liquid debt instruments
purchased with a maturity of three months or less at the date of
purchase.

(j) Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash, accounts receivable, accounts payable,
and accrued expenses, the carrying amounts approximate fair value due to
their short maturities. The amounts shown for captialized lease obligations
also approximate fair value because current interest rates offered to the
Company for similar leases are substantially the same.

(2) RELATED PARTY TRANSACTIONS

During 1996, repayment of advances to officer amounted to $96,144.
These advances have no specific repayment terms and carry interest
rates from 9% to 19% per annum. Of the $24,380 balance owed at
December 31, 1996, an officer has the option of converting the balance
into restricted common stock at $.03 per share. In addition, advances
to officers increased $9,194 in 1996.

(3) SIGNIFICANT SUPPLIER

The Company's money transfer services have been provided through one
supplier during 1996 and 1995. Services provided through this supplier
resulted in commissions of approximately $1,579,000 and $1,311,000 for
1996 and 1995, respectively and a corresponding receivable of
approximately $205,000 at December 31, 1996.

Money transfer revenues constituted 35% and 30% of total revenues during
1996 and 1995, respectively. Under the terms of the agreement, the
Company's money transfer supplier may terminate the agency agreement for
the following reasons: if the Company fails to remit monies due under
the trust agreement; if there is a material adverse change in the
financial condition of the Company; if the Company does not obtain the
supplier's prior consent to any sale, merger, or transfer of ownership
of the Company; or if the Company fails to comply with state or federal
laws which regulate the Company's business. As permitted by the
agreement, the Company commingles trust funds held for the money
transfer supplier with its own funds. As a result a substantial portion
of the cash balance is held in trust for payment of amounts due the
money transfer supplier at December 31, 1996. In the ordinary course of
business this amount is settled within a few business days.

(4) NOTES RECEIVABLE

The Company has a $200,000 note receivable reduced by a valuation
allowance of $76,000 from a privately held corporation that bears
interest at 8.5% per annum and is due December 31, 1995. This note
is in default and the Company is working with its legal counsel and
management of the privately held corporation on a settlement. This note
is partially collateralized by common stock of a publicly traded company.
<PAGE>
In addition, the Company has a $30,000 note receivable from a publicly
held corporation that bears interest at 8.5% per annum and was due May
23, 1995. The note is in default and the Company has obtained a default
judgement. This note is collateralized by common stock which has a market
value in excess of the amount owed to the Company.

(5) MARKETABLE SECURITIES

The Company's marketable equity securities have been classified as
available-for-sale, at December 31, 1996. These securites have a cost
and fair value of $199,999.

(6) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1996, consists of the following:

Estimated
Useful Life
------------

Equipment $1,219,041 3 - 10 years
Leasehold improvements 1,194,731 5 - 12 years
Construction in progress 14,250
---------
2,428,022
Less accumulated depreciation
and amortization 1,167,633
---------
$1,260,389
=========

Depreciation expense in 1996 and 1995 was $215,504 and $193,114,
respectively.

(7) INTANGIBLE ASSETS

Intangible assets at December 31, 1996, consists of the following

Amortization
Period
------------
Covenants not to compete $573,063 5 - 10 years
Less accumulated amortization 538,594
-------
$ 34,469
=======

Goodwill $461,076 5 - 20 years
Less accumulated amortization 169,216
-------
$291,860
=======
<PAGE>
Food stamp contract $50,000 14 years
Organization/start-up costs 275,832 5 years
Beneficial leases 37,525 9 - 13 years
-------
Subtotal 363,357
Less accumulated amortization 95,760
-------
$267,597
=======

Amortization charged to expense in 1996 and 1995 was $129,092 and
$120,216 respectively.

Covenants not to compete, food stamp contract, and beneficial leases are
being amortized over the term of the contracts using the straight-line
method. Organization costs and goodwill are being amortized over their
estimated useful lives using the straight-line method.

During 1996, the Company incurred start-up costs $34,168 associated with
the development of new markets for existing products. These costs are
being amortized over five-years.

(8) INCOME TAXES

As of December 31, 1996, the Company had federal net operating loss
carryforwards of approximately $5,800,000 which expire at various
amounts through 2010.

The income tax effect of temporary timing differences between financial
and income tax reporting that give rise to a significant portion of the
deferred income tax assets and liabilities at December 31, 1996, under
the provisions of SFAS 109, are as follows:

Deferred Income Taxes
---------------------------
Assets (Liabilities)
------------ ------------
Net operating loss carryforwards $2,143,000
Officer and Director option
compensation expense 2,216,000
Signing bonus agreement 721,000
Difference between book and tax
basis of fixed assets 122,000
Difference between book and tax
basis of intangible assets $(41,000)
Allowance for doubtful accounts 146,000
------------ ------------
5,298,000 (41,000)
Less valuation allowance 5,257,000
------------ ------------
Net long-term deferred $ 41,000 $(41,000)
============ ============
The net change in the valuation allowance for the year ended December
31, 1996 was an increase of $338,000.
<PAGE>
Income tax expense consists of:

1995 1994
---------- ----------
Federal $ (10,000) $ -
State (2,700) (3,415)
-------- --------
$ (2,700) $ (3,415)
======== ========

The Company's tax expense for 1996 and 1995 consists of minimum
California and Utah tax and the Company's federal tax expense consists
of amounts due under the alternative minimum tax.

(9) LEASES

The Company is obligated under capital leases that expire at various
dates during the next five years. Equipment under capital leases was
$366,439 and related amortization was $33,855 as of December 31, 1996.

The Company also leases certain real estate for its corporate office and
service center operations, as well as certain equipment under long-term
lease agreements ranging from one to five years.

Future minimum lease payments under noncancelable operating leases and
the present value of future minimum capital lease payments as of
December 31, 1996, are:

Capital Operating
Leases Leases
------- ---------
1997 $ 93,014 $ 442,134
1998 105,457 332,273
1999 101,686 176,587
2000 77,273 112,506
2001 71,040 6,078
Thereafter 2,002 -
------- ---------
Total minimum lease payments 450,472 $1,069,578
=========
Less: Amount representing interest
(at 16% - 18%) 137,897
-------
Present value of net minimum
capital lease payments 312,575

Less current maturities 48,661
-------
$ 263,914
=======

Rent expense under operating leases in 1996 and 1995 amounted to
$773,112 and $775,228, respectively.
<PAGE>
(10) STOCKHOLDERS' EQUITY

(a) Common Stock Transactions

On March 17, 1994, the Company entered into an agreement to issue
1,000,000 shares of the Company's common stock in exchange for 2,500,000
shares of a privately held, start-up corporation. The privately held
corporation sold the Company's stock pursuant to Regulation S in
exchange for notes receivable and expects to collect $1,000,000 on these
notes which has been used as the basis for valuing this transaction in
the Company's financial statements. The Company's investment in the
privately held corporation has been netted against stockholders' equity
until the notes receivable are collected in full.

In September 1994, the Company sold 1,000,000 shares of the privately
held corporation discussed above for $2.00 per share. Consideration for
this sale was a $2,000,000 note receivable, bearing interest at 8% per
annum; due on August 31, 1995. These notes are in default and the
Company is determining its course of action due. This transaction has
not been accounted for in the financial statements due to the uncertainty
of collection.

During 1994, the Company received $2,623,688 in cash and notes
receivable, net of selling costs of $208,408 from the issuance of
1,594,250 shares of common stock valued at $1.75 to $2.00 per share in
connection with restricted stock private placements and a Regulation S
offering. Notes receivable from the Regulation S offering of $1,775,456
bearing interest at 8% per annum; due in June 1995, are outstanding at
December 31, 1996 and are shown as a reduction of Stockholders' Equity.
These notes are in default and the Company is the process of canceling
the shares not paid for and held by the Company's former legal counsel.

On February 16, 1996, the Board of Directors authorized the cancellation
of 2,175,000 shares of restricted common stock along with the related
notes receivable and accumulated interest to certain officers, directors
and employees of the Company. This transaction was reported as of
November 20, 1995, the date new options were granted and cancellation of
these shares was contemplated.

(b) Incentive Compensation Plan

The 1987 Incentive Compensation Plan provides for granting up to 416,667
shares of common stock to key employees at an exercise price of at least
the fair market value at the time of grant. Options granted expire five
years from date of grant. The Plan has 11,667 shares under option which
are reserved and ungranted as of December 31, 1996.

On November 20, 1995, the Company's Board of Directors approved the
grant of a two-year option to purchase 2,820,000 shares of common stock
to certain officers, directors and employees at $0.13 per share, the
bid price on the date of grant. Said options, when exercised, will be
subject to nonrecourse promissory notes and the related shares will be
registered under an S-3 registration statement or other registratio as
recommended by legal counsel. As of December 31, 1996, no options
were exercised.
<PAGE>
The Company has adopted only the disclosure provisions of Statement of
Financial Accounting ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." It applies Accounting Principles Bulletin ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations in accounting for its plans and does not recognize
compensation expense for its stock-based compensation plans other than
for restricted stock and options issued to outside third parties. If the
Company had elected to recognize compensation expense based upon the fair
value at the grant date for awards under this plan consistent with the
methodology prescribed by SFAS 123, the Company's net loss and loss per
share would be reduced to the pro forma amounts indicated below:

Year Ended December 31,
--------------------------
1996 1995
------------ ------------
Net loss
As reported $(1,280,189) $(1,136,003)
Pro forma $(1,280,189) $(1,361,603)
Loss per share
As reported $ (0.17) $ (0.12)
Pro forma $ (0.17) $ (0.14)

These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related
to grants made before 1995. The fair value of these options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions ended December 31, 1996): dividend
yields of 0%; expected volatility of 110%; risk-free interest rate of 7%;
and expected life of 2 years. The weighted-average fair value of options
granted during the year ended December 31, 1995 for which the exercise price
equals the market price on the grant date was $0.08, and the weighted-
average exercise price was $0.13.

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 the expected stock price
volatility. Because the Company's employee stock options have character-
istics significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.

On April 22, 1994, The Company's Board of Directors approved the grant
of an option to purchase 100,000 shares of restricted common stock to
each of the three new board members at $3.00 per share, the market price
on the date of grant. These options are exercisable for a five-year
period commencing November 24, 1994. As of December 31, 1996, no
options were exercised.
<PAGE>
(11) DEFERRED INCOME

On December 22, 1995, the Company amended its agreement with MoneyGram
to offer money transfer services. This amendment extended the term of
the original agreement for seven years beginning in 1996. As consideration
for signing this amendment, the Company received an up-front signing bonus
of $2,000,000, and certain guaranteed payments and future incentives for
opening new MoneyGram service locations over the term of the agreement.
During the third quarter of 1996, the Company received $150,000 in new
store bonuses. The signing and new store bonuses are being amortized over
the life of the agreement on a straight-line basis. The other terms and
condition in the original agreement, as described in note 3, remain the
same.

(12) COMMITMENTS

(a) Employment Contracts

The Board of Directors approved employment agreements for certain key
officers and employees ranging from one to five years. These proposed
agreements provide for minimum annual compensation of $340,000 and
bonuses to be determined by the compensation committee. The Company is
in the process of finalizing the agreements.

On December 1, 1988, the Company entered into a deferred compensation
agreement with the Company's Chief Executive Officer (CEO). Under terms
of the agreement, upon retirement from active and daily employment
following her sixty-fifth birthday, the Company will pay as deferred
compensation for past services rendered to the Company the amount of
$134,508 payable in ten equal installments. The liability will be
funded by a split-dollar life insurance policy on her life. The yearly
premium is withheld from her established salary and paid by the Company
directly. She will be obligated to repay the Company the guaranteed
cash surrender value ("CS") and the Company will retain collateral
assignment of the CS. CS of the policy based upon industry annuity
tables will equal the deferred compensation due to the Company's CEO at
age 65. Accruals are made currently under the terms of the agreement.

(b) Litigation

The Company is subject to legal proceedings which arise in the ordinary
course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially
affect the financial position, results of operation or cash flow of the
Company.
<PAGE>
(13) SUPPLEMENTAL CASH FLOW DISCLOSURE

Supplemental disclosures of cash flow information:

Cash paid during the year for:
1996 1995
---------- ----------
Interest $40,818 $35,572
Income taxes 2,700 2,700

Supplemental schedule of noncash investing and financing activities:

The Company acquired equipment under capital leases during 1996 totaling
$315,852.

(14) OTHER EXPENSES, NET

Other expenses, net, for the years ended December 31, 1996 and 1995
consisted of the following:

1995 1994
---------- ----------
Nonoperating legal costs $(13,356) $(155,603)
Consulting costs (1,000) (18,180)
Other (11,584) (18,490)
-------- -------
$(25,940) $(192,273)
======== =======

(15) CONCENTRATION OF CREDIT RISK

The Company has a large number of customers in each category of
revenues. Returned checks pose the largest credit risk for the Company.
In 1996 the Company cashed approximately 42,000 checks totaling
approximately $13,701,000 each month. The Company maintains surplus
cash balances in two separate banks. At December 31, 1996, the Company
has balances of approximately $1,040,000 in excess of the $100,000
insurance amount provided by the Federal Deposit Insurance Corporation
(FDIC). In order to mitigate credit risk, the majority of the Company's
surplus cash balances are carried in one of California's largest banks.

<PAGE>
ITEM 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None
<PAGE>
PART III

ITEM 9 Directors and Executive Officers of the Registrant

The following is a list of Company directors who have served during the
periods indicated as provided below:

Name Age Position with the Company Since
- -------------- --- ------------------------- --------
Bradley D. Cox 34 Director 1991
John J. Feliz 38 Director 1995
Kurt Lee 36 Chief Financial Officer 1995
Umberto Umbertino 38 Director, President
and Chief Operating Officer 1993
Christine A. Umbertino 41 Director, Chairperson of
the Board and Chief Executive
Officer 1985
Mercedes Veiga 44 Director, Senior Vice President
and Secretary 1995

Information About Individual Directors

BRADLEY D. COX, age 34, has been a Director of the Company since
February 1991. He is currently active as President of MC Consulting
Group, a retail spa and sauna company in San Mateo, California.
Mr. Cox is also active as owner of Paradise Valley Group, an export and
trading company conducting business in the United States and Japan.

JOHN J. FELIZ, age 38, has been a Director of the Company since
November 1995. He has been a Space Planner with the State of
California Office of Real Estate and Design in Sacramento, Ca since
1990 and also the proprietor of Feliz Interior since 1989. He is a
graduate of Interior Architecture from the University of Oregon in
1983. He taught at the University of Oregon and is presently a
professor at American River College in Sacramento, California.

Kurt Lee, age 36, has been the Chief Financial Officer of the
Company since December 1, 1995. Prior to joining the Company, he
was a senior manager with a public accounting firm. Mr. Lee has been
a licensed CPA in the state of California since 1986 and is a graduate
of the University of Southern California in 1983.

UMBERTO UMBERTINO, age 38, was appointed to the Board of Directors
effective September 29, 1993. Mr. Umbertino was appointed President
effective December 15, 1993. Mr. Umbertino has been employed by the
Company since 1985 and has been Vice President in charge of Operations
since 1987. Mr. Umbertino is the brother of Christine A. Umbertino.

CHRISTINE A. UMBERTINO, age 41, has been an Officer and Director of the
Company since 1985. She became President and Chief Operating Officer of
the Company in 1987, was elected Chief Executive Officer effective April
1, 1988 and was elected Chairperson of the Board effective September 29,
1992.

MERCEDES VEIGA, age 44, was appointed to the Board in 1995. She has
been Secretary of the Company since 1987. Ms. Veiga was promoted to
Senior Vice President effective December 15, 1993.
<PAGE>

ITEM 10 Executive Compensation

Summary Compensation Table

Annual Compensation

Name and Stock(Option) All Other
Principal Position Year Salary($) Number Compensation($)(1)
- ------------------ ---- --------- ------------ ------------------
Christine Umbertino 1996 $172,625 - $5,000
Chairperson and Chief 1995 $162,000 1,400,000 $5,000
Executive Officer 1994 $151,958 - $5,000

(1) On December 1, 1988, the Company entered into a deferred
compensation agreement with the Company's CEO. Under the terms of
the agreement, upon retirement from active and daily employment
following her sixty-fifth (65th) birthday, the Company will pay a
deferred compensation for past services rendered to the company in the
amount of $134,508, payable in ten (10) equal installments. The
liability will be funded by a split dollar life insurance policy on her
life. The yearly premium is withheld from her established salary and
paid by the Company directly. She will be obligated to repay the
Company the guaranteed cash surrender value ("CSV") and the Company will
retain collateral assignment of the CSV. CSV of the policy based upon
industry annuity tables will equal the deferred compensation due the
president at age 65.

Employment Contracts

The Company has entered into a five-year employment agreement with
Christine A. Umbertino as Chairperson of the Board and Chief Executive
Officer of the Company. The agreement calls for a five-year term
commencing as of January 1, 1994, and ending December 31, 1999. The
term is, however, extended by one year for each year completed unless
either party terminated upon twenty (20) days notice before the end of a
calendar year. Pursuant to the agreement, Ms. Umbertino's salary is
$150,000, subject to increases as the Board may determine. In addition,
Ms. Umbertino is to receive a bonus in an amount determined by the Board
of Directors. The bonus shall not be less than five (5%) percent of the
increase in consolidated operating income (as such term is defined in
the Agreement) from the prior year but not to exceed 200% of her prior
year compensation.

Options

The Company's directors currently serve without cash compensation. They
are reimbursed for certain travel related and other out-of-pocket
expenses incurred to attend Board of Directors and stockholder meetings.

ITEM 11 Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of March 15, 1996,
regarding the share ownership of each officer and director or each
person who is known to the Company to have been a beneficial owner of
more than 5% of any class of stock of the Company:

Amount and
Nature of
Name and Address of Beneficial Percent
Title of Class Beneficial Ownership Ownership of Class
- -------------- ---------------------- ---------- --------
Common Christine A. Umbertino 1,516,667 (1)(2) 14.63%
2201 Park Towne Circle (3)
Sacramento, CA 95825

Common Umberto Umbertino 509,267 (1)(2) 4.91%
Director, President and (3)
Chief Operating Officer
2201 Park Towne Circle
Sacramento, CA 92825

Common Bradley D. Cox 206,904 (1)(2) 1.99%
Director (3)
#12 Dockside Circle
Redwood Shores, CA 94065

Common John J. Feliz 20,000 (1)(3) .19%
Director
400 R Street, #500
Sacramento, CA 95816

Common Kurt Lee 100,000 (1)(3) .96%
Chief Financial Officer
2201 Park Towne Circle
Sacramento, CA 95825

Common Mercedes Veiga 510,959 (1)(2) 4.93%
Secretary and Senior (3)
Vice President
2201 Park Towne Circle
Sacramento, CA 95825
--------- --------
2,863,797 27.61%
========= ========
Footnotes to Tables

(1) Beneficial owner has sole voting power and sole investment power, to
the Company's knowledge.
<PAGE>
(2) The Company holds the following number of shares listed in the table
for payment of non-recourse promissory notes used to exercise
options for the following named persons:

Christine A. Umbertino 116,667
Umberto Umbertino 8,333
Mercedes Veiga 8,333

(3) Includes shares' which may be acquired by officers and directors by
exercise o options. Total shares exercisable under options for the
named persons is as follows:

Christine A. Umbertino 1,400,000
Umberto Umbertino 500,000
Mercedes Veiga 500,000
Brad D. Cox 200,000
Kurt Lee 100,000
John J. Feliz 20,000

The ownership percentage figures for each person listed in this note
are computed by increasing the shares outstanding by the total
number of such options.

ITEM 12 Certain Relationships and Related Transactions

All transactions with affiliates of the Company are on terms no
less favorable than could be obtained with unaffiliated third parties.

ITEM 13 Exhibits and Reports on Form 8-K

a. List separately all documents filed as part of the report

(a)(1) Financial Statements Pages
-----
Independent Auditors' Report. 14
Consolidated Balance Sheets, December 31, 1996. 15-16
Consolidated Statements of operations, Years Ended
December 31, 1996 and 1995. 17
Consolidated Statements of Stockholders' Equity, Years
Ended December 31, 1996 and 1995. 18
Consolidated Statements of Cash Flows, Years Ended
December 31, 1996 and 1995. 19
Notes to Consolidated Financial Statements. 20

(a)(3) Exhibits Required by Item 601 of Regulation S-K

The following are filed as Exhibits to this registration form. The
numbers refer to the Exhibit Table of Item 601 of Regulation S-K. The
Exhibits are contained in a separate bound volume of this Form 10-K.

2. Not applicable
3.1-a Revised Articles of Incorporation of Omicron Industries, Inc.
3.2-a Amendment to Articles of Incorporation (changing name
to Supermail International, Inc.)
3.3-a Registrant's Bylaws, as amended
3.4-b Amendment to Articles of Incorporation (effecting 6-for-1
reverse stock split and changing par value to $0.06 per share)
4.1 Not applicable
9. Not applicable
10.2-a Registrant's 1987 Incentive Compensation Plan
<PAGE>
10.8-a Lease for 4 Embarcadero Center, Lobby Level, San Francisco,
California 94111
10.19-a Lease for 2201 Park Towne Circle,Sacramento, California 95825
10.28-c Incentive Compensation Agreement (including detail schedule)
10.30-d Lease for 719 J Street, Sacramento, California 95814
10.31-d Lease for 161 W. San Fernando St., San Jose, California 95113
10.32-d Lease for 110 S. El Camino Real, San Mateo, California 95501
10.34-d Lease for 4035 Market Street, Riverside, California 92501
10.35-d Lease for 7020 Reseda Blvd., Reseda, California 91335
10.36-d Lease for 6318 S. Compton Ave., Los Angeles, California 90001
10.37-d Lease for 2688 E. Florence Ave., Huntington Park, California
90255
10.38-d Lease for 303 San Fernando Road, Los Angeles, California 90031
10.41-e SSGR, Inc. Purchase Agreement
10.42-e General Check Cashing Co. Limited Partnership Agreement
10.43-c Lease for 6219 Van Nuys Blvd., Van Nuys, California 91401
10.44-c Lease for 5803 N. Figueroa St., Los Angeles, California 90042
10.45-c Lease for 1883 Daly St. #104, Los Angeles, California 90031
10.46-c Lease for 461 Blossom Hill Rd. #H2, San Jose, California 95123
10.47-c Lease extension and amendment for 1777 S. Winchester Blvd.,
Campbell, California 95008
10.48-c Exercise of option to extend lease for 303
San Fernando Road, Los Angeles, California 90031
10.49-c Lease for 450 Sansome Street, San Francisco, California 94111
10.50-c Lease for 231 East 17th Street, Santa Ana, California 92706
10.51-c Lease for 10167 Folsom Blvd., Rancho Cordova, California 95670
10.52-c Lease for 2800 Broadway #3, Sacramento, California 95817
10.53-c Lease for 5702 Watt Ave., North Highlands, California 95660
10.54-c Lease for 10330 Arlington Ave. #2, Riverside, California 92505
10.55-c MoneyGram Agency and Trust Agreement between Registrant and
American Express Travel Related Services Company, Inc.
10.56-c Money Order Trust Agreement between Registrant and American
Express Travel Related Services Company, Inc.
10.57-c Lease for 719 J Street, Sacramento, California 95814
10.58-c Lease for 110 S. El Camino Real, San Mateo, California 94401
10.59-b Amendment to lease for 11849 Braddock Drive, Culver City,
California 90230
10.60-b Letter of agreement with J. R. Bothe & Co. regarding financial
public relations services
10.61-b Amendment to lease for 10167 Folsom Blvd., Rancho Cordova,
California 95670
10.62-f Lease for Hwy. 191 TSEYI' Shopping Center (next to Basha's),
Chinle Arizona 86503
10.63-f Lease for 111 W. Pacific Coast Hwy. # D, Wilmington, California
90744
10.64-f Hamclo Financial Services Inc., Purchase Agreement
10.65-f Lease for 1706 Long Beach Blvd., Long Beach, California 90813
10.66-f Lease extension for 2800 Broadway # 3, Sacramento,
California 95817
10.67-f Money Order Trust Agreement between Registrant and American
Express Travel Related Services Company, Inc. for Navajo
Check Cashing
10.68-f MoneyGram Agency and Trust Agreement between Registrant
and American Express Travel Related Services Company, Inc.
for Navajo Check Cashing
10.69-f Contract with the Navajo Nation governing Company operations
on the reservation
<PAGE>
10.70-g Exchange of stock between Ultra-Male Center, Inc. and the
Company 10.71-i Lease for 260 S. Normandie Ave.,
Los Angeles, California 90004
10.72-i Lease for 2400 E. Florence Ave., Huntington Park,
California 90255
10.73-i Lease for 3970 University Ave., Riverside, California 92501
10.74-i Lease for 2688 E. Florence Ave., Huntington Park,
California 90255
10.75-i Lease for Junction Hwy 57 & Route 9, Crownpoint,
New Mexico 87313
10.76-i Lease for Hwy 666, Shiprock, New Mexico 87420
10.77-i Lease for Junction Hwy 264 & Route 12, Window Rock,
Arizona 86515
10.78-i Lease for Hwy 160 & Hwy 163, Kayenta, Arizona 86033
10.79-j Lease for 6740 Reseda Blvd #A&B, Reseda, California 91335
10.80-j Lease for 229 & 231 E. 17th Street, Santa Ana, California 92706
10.81-j Lease extension for 10167 Folsom Blvd, Rancho Cordova,
California 95670
11.-c Statement re computation of per share earnings for the
years ended 1991, 1990 and 1989. See page 24.
12-18. Not applicable.
21.-h Subsidiaries of the registrant.
23-27 Not applicable.
28.-h Form 8, dated September 12, 1988 - Item 6. Compensation,
pages 30-31.
(b) Reports on FORM 8-K. None
___________________________
a Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10 filed May 4, 1988, File No. 0-16894.

h Exhibit is incorporated by reference to the exhibit number 22 in
Registrant's Form 8 dated September 12, 1988, File No. 0-16894.

d Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated March 27, 1990, File
No. 0-16894.

e Exhibit is incorporated by reference to Exhibit 30 and Exhibit
31 in Registrant's Form 10-K dated March 27, 1990, File
No. 0-16894.

c Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated March 29, 1991,
File No. 0-16894.

b Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated March 30, 1993, File No.
0-16894

f Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-K dated April 14, 1994, File
No. 0-16894

g Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-Q dated May 13, 1994

i Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-KSB dated June 5, 1995, File No.0-16894

j Exhibit is incorporated by reference to the same exhibit number
in Registrant's Form 10-KSB dated March 30, 1996, File.0-16894
<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.

Supermail International, Inc.
(Registrant)

By /s/ Christine A. Umbertino Date March 28,1997
Christine A. Umbertino
Chief Executive Officer

Pursuant to 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.

By /s/ Christine A. Umbertino Date March 28, 1997
Christine A. Umbertino
Chief Executive Officer and Director

By /s/ Umberto Umbertino Date March 28, 1997
Umberto Umbertino
President & Director

By /s/ Kurt Lee Date March 28, 1997
Kurt Lee
Chief Financial Officer

By /s/ Mercedes Veiga Date March 28, 1997
Merecedes Veiga
Director

By /s/ John J. Feliz Date March 28, 1997
John J. Feliz
Director

By /s/ Bradley D. Cox Date March 28, 1997
Bradley D. Cox
Director

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,818,877
<SECURITIES> 199,999
<RECEIVABLES> 531,948
<ALLOWANCES> 240,691
<INVENTORY> 0
<CURRENT-ASSETS> 2,677,883
<PP&E> 2,428,022
<DEPRECIATION> 1,167,633
<TOTAL-ASSETS> 4,623,005
<CURRENT-LIABILITIES> 1,817,413
<BONDS> 0
<COMMON> 458,811
0
0
<OTHER-SE> 280,084
<TOTAL-LIABILITY-AND-EQUITY> 4,623,005
<SALES> 4,545,008
<TOTAL-REVENUES> 4,545,008
<CGS> 0
<TOTAL-COSTS> 5,501,085
<OTHER-EXPENSES> 270,594
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,818
<INCOME-PRETAX> (1,267,489)
<INCOME-TAX> 12,700
<INCOME-CONTINUING> (1,280,189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,280,189)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)

</TABLE>

LEASE AGREEMENT

BETWEEN

AND

AND SEVERALLY LIABLE

TABLE OF CONTENTS
-----------------

PARAGRAPH SUBJECT PAGE
- --------- ------- ----
1 BASIC LEASE PROVISION ............................ 1
2 PREMISES.......................................... 3
3 USE AND STORE NAME ............................... 3
4 MINIMUM RENT; COMMENCEMENT DATE; COST OF
LIVING INCREASES................................ 3
5 TERM.............................................. 5
6 SECURITY DEPOSIT.................................. 5
7 ADDITIONAL CHARGES................................ 5
A. PERCENTAGE RENT.............................. 5
B. ADJUSTMENTS.................................. 7
8 USES PROHIBITED................................... 11
9 COMPLIANCE WITH LAW............................... 11
10 ALTERATIONS AND ADDITIONS......................... 11
11 REPAIRS AND MAINTENANCE........................... 12
12 LIENS............................................. 13
13 ASSIGNMENTS AND SUBLETTING........................ 14
14 INDEMNITY AND INSURANCE........................... 16
15 UTILITIES......................................... 19
16 PERSONAL PROPERTY TAXES........................... 19
17 RULES AND REGULATIONS............................. 19
18 HOLDING OVER...................................... 19
19 ENTRY OF LANDLORD................................. 19
20 TENANT'S DEFAULT.................................. 20
21 REMEDIES IN DEFAULT............................... 21
22 DEFAULT BY LANDLORD............................... 22
23 RECONSTRUCTION.................................... 22
24 EMINENT DOMAIN.................................... 23
25 PARKING AND COMMON AREA........................... 24
26 SIGNS............................................. 25
27 AUCTIONS.......................................... 25
28 DISPLAYS; APPEARANCE OF PREMISES.................. 26
29 USE AND OPERATIONS................................ 26
30 PROMOTIONAL FUND.................................. 27
31 GENERAL PROVISIONS................................ 27
32 INTEREST INCREASES PASS-THROUGH................... 31
33 BROKERS........................................... 31
<PAGE>

EXHIBITS
- --------

Exhibit A - Site Plan
Exhibit A-1 - Legal Description
Exhibit B - Description of Landlord and Tenant Work
Exhibit C - Sign Criteria

<PAGE>

LEASE AGREEMENT
---------------

Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the premises hereinafter described, on the terms and conditions as set forth
in this Lease Agreement, hereinafter called "this Lease".

1. BASIC LEASE PROVISIONS
----------------------
The words and figures as set forth in paragraphs 1A through 35 and
Exhibits A through C, both inclusive, are part of this Lease wherever
appropriate reference is made thereto, unless they are expressly modified
elsewhere in this Lease.

A. Date of Execution: As of January 25, 1996.
B. Landlord: Aghajan Khoubian Family Trust
C. Tenant: Supermail International, Inc.
D. Guarantor: None
E. Tenant's Store Name: Supermail International
Check Cashing and Money Transfer
F. Shopping Center: The property particularly described in Exhibit A-1
depicted on the Site Plan marked Exhibit A, located at:
County: Los Angeles
State: California
Address or nearest streets: Pacific and Florence
G. Premises: The area shown by hatchmarks in Exhibit A containing the
following approximate measurements:
Frontage: 35'6" feet
Depth: 45" feet
Gross Floor Area: 1,600 feet
H. Purpose: The premises will be used for "Check Cashing, Money
Transfer, Money Orders, and Long Distance Telephone
Services"
H.1.Exclusive:
The premises will not be used for Travel Agency and
Insurance.
I. Commencement Date: The date which is the date that this lease Sign
days after the "Turn-Over Date" (As defined in Paragraph 4.B of
this Lease).
J. Term: Five years, commencing on the first day of the first full
calendar month following the Commencement Date, plus the period
from the Commencement Date to the first day of the first full
calendar month following the Commencment Date, unless the
Commencement Date occurs on the first day of a calendar month, in
which event said ---- year period shall commence on the Commencement
Date. Tenant shall have the right to extend the Term of the Lease
for three term of five years subject to and in accordance with the
terms and provisions of Paragraph 34 to the Rider annexed to this
Lease.

K. Minimum Rent:
2/1/96 - 1/31/97 Year 1: $5,000 per month
2/1/97 - 1/31/98 Year 2: $5,250 per month
2/1/98 - 1/31/99 Year 3: $5,512.50 per month
2/1/99 - 1/31/00 Year 4: $5,788.12 per month
2/1/00 - 1/31/01 Year 5: $6,077.53 per month

Options periods will be negotiated at market rate for year 6, and then the
minimum monthly rent will be increased 5% annualy for seventh year and
after.

L. Initial Monthly Adjustments: $656 per month
M. Initial Promotional fund Dues: None
N. Prepaid Rent: $5,000 for the First month of the term of this lease.
O. Security Deposit: $10,000
P. Percentage Rent Rate: 5%
Q. Landlord's Address and Phone Number for Notices:
Aghajan Khoubian Family Trust
8323 Reseda Blvd. Suite #207
Northridge, CA 91324
Tel: (818) 773-8778, Fax nr. (818) 773-8775
R. Tenant's Address and Phone Number For Notices:
Supermail International Inc.
2201 Park Towne Circle, Suite #200
Sacramento, Ca 95825
Tel: (916) 483-1131 Fax: (916) 487-7788
S. Additional Basic Lease Provision:
S.1. Tenant shall have the option to extend the term of this lease
for three additional five years periods, which will be negotiated
three month before expiration of the lease with a written request from
Tenant to Landlord
S.2. The rent from Jan 25, 1996 till Feb 29, 1996 shall be free
S.3. The Premises is Leasing "As Is, Where Is" and tenant is
responsible for any improvement, License and City or County Approval,
landlord has no obligation for this.
S.4. Tenant is Aware that there is a Check cashing business in the
Center and accept this. Landlord will not lease for the: Check
cashing, Money Transfer and Order and Long-Distance Telephone, but
Landlord has the Right to put payphone in the center.

Note: The remaining part of this lease was not available at the
time of preparing this report.

This Addendum dated December 22, 1995 shall act to amend, modify,
supplement or augment that certain MoneyGram Agency and Trust Agreement
("Agreement") in effect, as of the date hereof, by and between AMERICAN
EXPRESS TRAVEL RELATED SERVICES COMPANY, INC. ("Amex") and SUPERMAIL
INTERNATIONAL ("Agent"). The terms used herein shall be consistent with
those used in the Agreement.

In consideration of the promises and the mutual covenants of the parties
hereinafter set forth to be paid, kept and performed, it is agreed as
follows:
1. Notwithstanding anything in the Agreement to the contrary, this
Addendum effectuates an extension of the initial Term of the
Agreement for a period of seven (7) years form the date hereof.
Additionally, upon expiration of such seven (7) year Initial Term,
the Agreement shall continue in effect until terminated by either
party by providing the other party with no less than one hundred
eighty (180) days prior written notice.

2. The following Sections of Subsections of the Agreement are hereby
deleted: Section 22 and Subsections 2.1,2.2,2.4. All of the
remaining Sections of Subsections of the Agreement are hereby
renumbered accordingly.

3. The new Subsection shall be inserted into the "Additional Services
to be Provided by Amex" Section of the Agreement, reading as follows:

"Amex agrees to provide Agent with a personal computer at each
Location for Agent's use to provide Money Transfer Services
during the Initial Term. Agent agrees to use such personal
computer for no less than ninety percent (90%) of Agent's money
transfers. If Agent uses such personal computer for less than
ninety percent (90%) of Agent's money transfers during any one
month period, Amex may remove such personal computer from any
such Agent's Location."

4. A new Section entitled "Indemnification, Limitation of Damages"
shall be inserted into the Agreement, reading as follows:

"(a) Agent shall reiburse, indemnify and hold Amex, it parents,
affiliateds, directors, officers, employees and assigns harmless
from all losses, claims, demands, actions, suits, proceedings or
judgements, including costs, expenses and reasonable attorney's
fee's assessed against Amex resulting in whole or in part, from
actions or omissions, whether done negligently or otherwise, by
Agent, its agents, directors officers, employees or representatives
arising out of the violation of any laws, rules, regulations or
ordinances by Agent. The indemnification obligations set forth
hereinabove shall survive the termination of this Agreement."

"(b) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
AMEX'S MONETARY LIABILITY TO AGENT UNDER THIS AGREEMENT SHALL BE
LIMITED TO ACTUAL DAMAGES SUFFERED BY AGENT, AND IN ANY EVENT AMEX
SHALL NOT BE LIABLE TO AGENT FOR ANY OTHER DAMAGES OF AGENT INCLUDING
CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, INCIDENTAL, LOSS OF
PROFITS, PUNITIVE OR ANY OTHER DAMAGES."

5. The "Assignment" Section of the Agreement is hereby revised to the
extent to allow for the inclusion of the following language:

"Amex may also assign any or all of its rights or obligations under
this Agreement to any third party and/or Integrated Payment Systems,
Inc. (IPS) and its assignees, upon notice to Agent but without the
consent of Agent, and any assignee of Amex may provide money transfer
services to Agent in a new name;provided, however, that such assignee
shall be obligated to assume all of the duties or obligations
assigned by Amex."

6. The following language shall be added to the existing "Advertising"
Section of the Agreement:

"Amex and Agent agree to participate in an fund cooperative adver-
tisements for MoneyGram Money Transfer Services. Any and all
advertisement or marketing materials shall be approved by Amex prior
to the production or distribution of such advertisement or marketing
materials. Amex agrees to spend and pay to or for the benefit of
Agent, two (2) times the amount the Agent spends on such approved
advertising and marketing materials; provided, however, Amex shall
not spend more than $ ----- per Location per year under this
Subsection. The parties agree that the advertising and marketing
expenditures referred to above shall not be expended without the
prior consent of both parties, which consent shall not be
unreasonably withheld by either party."

7. Notwithstanding anything in the Agreement to the contrary, Amex
agrees to spend a maximum amount of $------- , to promote MoneyGram
during the Ames pilot program, at the Ames pilot stores located in
the Washington, DC and Boston, Massachusetts market areas.

8. Notwithstanding anything in the Agreement to the contrary, during
the full term of the Agreement Amex shall be Agent's sole and
exclusive source for money transfer services.

9. Notwithstanding anything in the Agreement to the contrary Amex,
withing sixty days after the date hereof, agrees to pay Agent a bonus
in an amount of $---------.

a. Alist of the Money Transfer Services Locations currently owned
or leased by Agent, which are free to sell MoneyGram as of the date
hereof, are set forth on Exhibit A, which is attached hereto and
made a part hereof. If Agent should cease for any reason, including
but not limited to the sale (unless the Agreement is assumed by the
buyer of Agent's Location and Amex consents to such assumption,
which consent shall not be unreasonably withheld) or closing of
Locations, to offer MoneyGram services for sale at any Location
listed on Exhibit A at any time during the Initial Term of the
Agreement, or unless Agent otherwise provides a replacement location,
for any such Location which ceases to offer MoneyGram services (to
Amex's reasonable satisfaction), then Amex may by notice to Agent,
demand prepayment of an amount calculated as provided in the next
sentence (the "Bonus Rebate") which shall be repaid no later than
thirty (30) days after the demand for repayment is made. The Bonus
Rebate shall be calculated as provided in the next sentence (the
"Bonus Rebate") which shall be repaid no later than thiry (30) days
after the demand for repayment is made. The Bonus Rebate shall be
calculated by multiplying the proportionate amount of bonus,
applicable to such Location, by a number arrived at by dividing the
number of days remaining from the date such Location stops selling
MoneyGram services through the seventh anniversary of the Start Date
by 2555 (number of days in the seven year period from the date
hereof to the seventh anniversay thereof).

10. Notwithstanding anything in the Agreement to the contrary, Amex also
agrees to pay Agent an additional bonus for any new Locations,
("Location Bonus") implementing Money Transfer Services after the date
hereof. All such Locations shall be added to Exhibit "A", and
identified as a new Location, as applicable. The amount of the
Location bonus will be calculated in the following manner. Any
Location added by Agent in the first year of the Initial Term of the
Agreement will receive from Amex a $---- start-up bonus within 60
days of its state date with an additional $---- to be paid to Agent
as a Performance Bonus if and when Agent's new Location reaches a
transaction level of 5,000 transactions (total of both Send and
Receive transactions) over any given consecutive 12 month period,
during the Initial Term. Any Location added by Agent in the second
year of the Initial Term of the Agreement will receive from Amex, a
$---- start-up Bonus within 60 days of its start date with an
additional $---- to be paid to Agent as a Performance Bonus if and
when Agent's new Location reaches a transaction level of 5,000
transactions (total of both Send and Receive transactions) over any
given consecutive 12 month period, during the Initial Term. Any
Location added by Agent in the third year of the Initial Term of
the Agreement will receive from Amex as a $---- start-up Bonus within
60 days of its start date with an additional $---- to be paid to Agent
as a Performance Bonus if and when Agent's new Location reaches a
transaction level of 5,000 transactions (total of both Send and
Receive transactions) over any given consecutive 12 month period,
during the Initial Term. Any Location added by Agent in the fourth
year of the Initial Term of the Agreement will receive from Amex a
$---- start-up Bonus within 60 days of its start date with an
additional $---- to be paid to Agent as a Performance Bonus if and
when Agent's new Location reaches a transaction level of 5,000
transactions) over any given consecutive 12 month period, during
the initial Term. Any Location added by Agent in the fifth year of
the Initial Term of the Agreement will receive from Amex a $----
start-up bonus within 60 days of its start date with an additional
$---- to be paid to Agent as a Performance Bonus if and when
Agent's new Location reaches a transaction level of 5,000 transactions
(total of both Send and Receive transactions) over any given con-
secutive 12 month period, during the Initial Term. Any Location
added by Agent in the sixth year of the Initial Term of the
Agreement will receive from Amex a $---- start-up bonus within
60 days of its start date with an additional $---- to be paid to
Agent as a Performance Bonus if and when Agent's new Location reaches
a transaction level of 5,000 transactions (total of both Send and
Receive transactions) over any given consecutive 12 month period,
during the Initial Term. Any location added by Agent in the seventh
year of the Initial Term of the Agreement will receive from Amex a
$---- start-up bonus within 60 days of its start date with an
additional $---- to be paid to Agent as a Performance Bonus if and
when Agent's new Location reaches a transaction level of 5,000
transactions (total of both Send and Receive transactions) over any
given consecutive 12 month period, during the Initial Term.

a. If agent should cease for any reason, including but not limited
to the sale (unless the Agreement is assumed by the buyer of
Agent's Location and Amex consents to such assumption, which
consent shall not be unreasonably withheld) or closing of
Locations, to offer MoneyGram services for sale at any Location,
identified as a new Location, listed on Exhibit A at any time
during the Initial Term of the Agreement, or unless Agent
otherwise provides a replacement Location, for any such new
Location, for any such new Location which ceases to offer Money
Gram services (to Amex's reasonable satisfaction), then Amex
may, by notice to Agent, demand repayment of an amount calculated
as provided in the next sentence (the "Location/Performance Bonus
Rebate") which shall be repaid no later than thirty (30) days
after the demand for repayment is made. The Location/Performance
Bonus Rebate shall be calculated by multiplying the proportionate
amount of Location/Performance Bonus, applicable to such Location
by a number arrived at by dividing the number of days remaining
from the date such Location by a number arrived at by dividing
the number of days remaining from the date hereof by 2555 (the
number of days in the seven year period from the date hereof, to
the seventh anniversary thereof).

11. Notwithstanding anything in the Agreement to the contrary, Amex
agrees to guarantee that Agent receives minimum annual MoneyGram
commission payments pursuant to the following schedule: subject to
the conditions set forth below, for the MoneyGram services Amex
agrees to pay Agent amounts (the "Guaranteed Minimum Payment(s)")
determined as follows: with respect to the first year (the "First
Year") following the date hereof, Amex will pay Agent a sum equal
to the amount, if any, by which the sum of $----- exceeds Agent's
actual commissions earned for such Year, with respect to the
second year (the "Second Year") following the date hereof, Ames
will pay Agent a sum equal to the amount, if any, by which the
sum of $---- exceeds Agent's actual Commission earned for such
Year, with respect to the third year (the "Third Year") following
the date hereof, Amex will pay Agent a sum equal to the amount, if
any, by which the sum of $---- exceeds Agent's actual Commissions
earned for such Year, with respect to the fourth year (the "fourth
Year") following the date hereof, Amex will pay Agent a sum equal to
the amount, if any, by which the sum of $---- exceeds Agent's actual
Commissions earned for such Year, with respect to the fifth year
(the "Fifth Year") following the date hereof, Amex will pay Agent a
sum equal to the amount, if any, by which the sum of $----exceeds
Agent's actual Commissions earned for such year, with respect to the
sixth year (the "sixth Year") following the date hereof, Amex will
pay Agent a sum equal to the amount, if any, by which the sum of
$---- exceeds Agent's actual Commissions earned for such year,
with respect to the seventh year (the "Seventh Year") following the
date hereof, Amex will pay Agent a sum equal to the amount, if any,
by which the sum of $----exceeds Agent's actual Commissions earned
for such year.

12. Notwithstanding anythin in the Agreement to the contrary, Agent shall
comply with all of Amex's "ISDN" requirements with respect to all
Transfer Initiation transactions.

13. Any Schedules attached to this Addendum shall automatically replace
any counterpart Schedules that are, as of the date hereof, attached
to the Agreement. Any other Schedules attached to the Agreement
that are impacted by the revisions incorporated in this Addendum
are either deleted or revised accordingly.

14. All other terms, conditions and provisions of the Agreement which
are not otherwise altered, affected or impacted by the terms,
conditions and provisions contained herein, shall remain in full
force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their duly authorized representatives, as of the date first
above written.

SUPERMAIL INTERNATIONAL AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY, INC.

By: Christine A. Umbertino By: Isaac Lasky
Title: CEO Title: Office of the President