SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)

 X   ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
___    
     ACT OF 1934

___  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (D)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM __________.

                         Commission File Number 0-24234

                   For the fiscal year ended December 31, 1996

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

                     Delaware                               11-3101034
(State or other jurisdiction of incorporation)            (IRS Employer
                                                        Identification No.)

             5 Malcolm Hoyt Drive, Newburyport, Massachusetts 01950
                    (Address of principal executive officers)

Registrant's telephone number, including area code  (508) 462-7300

Securities registered pursuant to Section 12(b) of the Act:  None

Securities  registered  pursuant to Section 12(g) of the Act:  Common Stock $.01
par value Title of Class

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the  preceding  12 months and (2) has been subject to such filing for the
past 90 days.
                              Yes  X       No __

Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein,  and will not be contained,  to the best
of the registrant's  knowledge,  in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of March 31, 1997, was $5,164,827.

The number of shares of all classes of the registrant's  common stock at March
31, 1997: 4,158,207.


                        Exhibit Index     Number of
                        Located on        Pages Comprising
                        Page 23           This Report 77


<PAGE>



Item 1. BUSINESS

General

      The Company is one of only two U.S.  manufacturers  of all components used
in the hot stamping process:  machinery,  foils, tooling, and dies. Hot stamping
is a dry process for marking,  labeling and  decorating  products that uses heat
and pressure to apply a design or lettering to a flat,  contoured or cylindrical
shaped  surface.  A foil consists of a plastic backing with a fine metallized or
pigmented  coating on one side. The coating may consist of a single color,  such
as metallized gold used for embossed lettering,  or may include complex designs,
including  trademarks and holographic (or diffractive)  designs. The coated side
of the foil is placed  against the  surface to be stamped,  and a die is pressed
against the other side to affix the design and, if desired,  to give  texture to
the  design.  The process  requires a stamping  press,  stamping  die or roller,
tooling for  supporting  or  locating  the part to be marked or  decorated,  and
stamping foil. Hot stamping foil varies from bright  metallic and pigment colors
through printed designs such as wood-grains,  multi-color transfers, diffraction
patterns and  holograms.  The foils can be applied with stamping  machinery to a
wide variety of products to decorate,  to label, or to increase their eye appeal
at point of sale. Such products include  greeting cards,  hardback and paperback
book  covers,  wine  labels,  cosmetic  and other paper and  plastic  packaging,
household appliances and electronics, plastic housewares, automotive components,
medical devices, credit cards and sporting goods.

      Foils are manufactured by the Company's subsidiary, Foilmark Manufacturing
Corporation ("FMC"),  which also produces  holographic (i.e.,  three-dimensional
effect)  hot  stamping  foils and  embossed  polypropylene  film for  packaging.
Kensol-Olsenmark, Inc. another subsidiary of the Company, marketed as KF Systems
(Kensol-Franklin)   manufactures  hot  stamp  application  machinery,  including
vertical presses, roll-on presses and specialized machines targeted at the label
and credit card  industries,  as well as custom  designed and built hot stamping
systems for specific  purposes.  Dies and tooling are manufactured by the Kensol
Tool and Die Division of  Kensol-Olsenmark,  Inc. The Company's foils, tools and
dies can be used on Kensol-Franklin  machines as well as on machines produced by
other manufacturers.

      In August 1995 the  Company  acquired  substantially  all of the assets of
Imtran  Industries,  Inc., a  manufacturer  of pad  printing and silk  screening
equipment  and related  supplies.  Pad printing is a marking and an  enhancement
process in which ink decoration is applied to products and packaging.  There are
two basic methods of printing and decorating, the wet marking method and the dry
method of hot stamping.  The pad printing  method of product  identification  is
used extensively in the medical device, sporting goods and appliance industries.

      The Company's (i) foils and (ii) machinery, tooling and dies accounted for
approximately  62% and 38%,  respectively,  of its net sales for the fiscal year
ended December 31, 1996.



                                       2
<PAGE>



History

      Kensol-Olsenmark,   Inc.  was   established   in  New  York  in  1924  and
manufactured  marking devices and indelible inks for the laundry,  fur and shirt
industries,  as well as hot stamping machinery.  After World War II, the Company
took advantage of the tremendous  growth in the plastic's  industry by marketing
plastic  decorating  equipment and supplies.  In 1977, FMC was incorporated as a
separate company to manufacture hot stamping foil. The Company began making dies
and related tooling in June 1991.

      In 1992,  the Company  acquired a foil  stamping  machinery  manufacturer,
Franklin  Manufacturing  Corporation,   which  increased  the  Company's  annual
machinery  sales  by 136% in  that  year as  compared  to the  prior  year.  The
acquisition enabled the Company to produce specialized  machines targeted at the
label and credit card  industries.  In December 1992, the Company entered into a
joint venture with Arrow Coated  Products  Limited,  an Indian  corporation,  in
order to expand  its  sales of hot  stamping  foil in the Far East.  To date the
joint venture revenues are minimal.  Also in 1992,  F.M.F.  Properties,  Inc. (a
corporation  holding the Melville real property)  merged into  Kensol-Olsenmark,
Inc.,  and Foil  Properties  (a  partnership  holding the  Newburyport  real and
personal property) merged into Foilmark Manufacturing Corporation.

      The Company  opened an office in China in July 1994 in order to expand its
sales  into the  growing  markets  for hot  stamping  foil in China.  To date no
significant  sales have been generated,  although the office was instrumental in
obtaining a $560,000 contract with China Banknote for producing debit cards. The
contract was completed in February 1996.

      In November 1994,  Foilmark  Holographics,  Inc. ("FHI"),  a subsidiary of
FMC,  repurchased  the shares of FHI held by Graham Ridout and Roger Wratten and
terminated  the Joint Venture  Agreement  between FMC and  Embossing  Technology
Limited  ("ETL") and Ridout.  The total share price paid under the Agreement was
$300,000 and was  distributed  based on  shareholdings.  FHI agreed to pay ETL a
royalty  payment  equivalent to 2.5% of the value of invoices  issued by FHI for
Holographic products produced using ETL equipment, technology and know-how, with
a minimum  royalty  payment  of  $100,000  during the first  three  year  period
following  the  Agreement.  On December  29,  1994,  FHI was merged into FMC and
ceased  to exist as a  separate  corporation.  FHI  continues  to  operate  as a
division of FMC.

      In November  1994,  the Company  purchased  West  Foils,  Inc.  through an
exchange of stock and cash from its owner and former president, Edward Sullivan.
The  agreements  included  an  Agreement  of  Exchange,  a  Registration  Rights
Agreement with Sullivan, an Employment Agreement, and a Voting Agreement between
certain  Foilmark  shareholders.  The Company paid Sullivan  $750,000 and issued
153,847 shares of common stock.  Edward Sullivan was appointed Director and Vice
President - West Coast  Operations of Foilmark and Director,  Vice President and
General  Manager of West Foils.  Under his four-year  employment  agreement with
West  Foils,  he  receives  a base  salary of  $120,000  plus 15% of West  Foils
earnings over a base amount of $300,000 per annum.  Mr. Sullivan and the Company
mutually  agreed to terminate his employment  contract  effective as of December
31,  1996.  The  Company and Mr.  Sullivan  entered  into a two year  consulting
agreement effective on January 1, 1997.



                                       3
<PAGE>



      In  December  1994,  following  consolidation  of  the  Company's  machine
operations in Norwood, Massachusetts, the Company merged Kensol-Olsenmark, Inc.,
a New York  corporation,  into a newly  incorporated  Kensol-Olsenmark,  Inc., a
Delaware corporation.

      In June 1995, the Company entered into an agreement with the Massachusetts
Industrial  Finance  Agency  (MIFA)  which  issued  a $4.4  million  tax  exempt
Industrial  Development  Bond  (IDB),  the net  proceeds  of which  were used to
purchase  production  and  manufacturing  equipment  for  the  Newburyport  foil
manufacturing  facility  and the  Norwood  hot  stamping  machine  manufacturing
location.  Both sites were expanded  through the  construction of an addition of
approximately  10,000 square feet in Norwood and a 4,000 square foot addition at
Newburyport.

      In August 1995, the Company  acquired  substantially  all of the assets of
Imtran Industries, Inc., a Newburyport,  Massachusetts based manufacturer of pad
printing equipment and a distributor of related supplies.  Consideration for the
transaction  was $2.95 million in cash and 257,044  shares of common stock.  The
acquisition  allowed  Foilmark to enter into the pad printing  field,  a marking
enhancement  process  in  which  ink  decoration  is  applied  to  products  and
packaging. As part of the acquisition agreement,  Imtran's prior owners, Kenneth
Harris and Steven  Meredith,  will remain as Vice Presidents and a Consultant to
the Company,  respectively,  for three years. In addition, by agreement, Kenneth
Harris was elected as director of the Company.

      In March 1996, the Company established the "FOILMARK TECHNOLOGY GROUP", to
unify the  KENSOL-OLSENMARK  hot stamping  and the IMTRAN pad transfer  printing
subsidiaries.  This was  accompanied  by a  consolidation  of all  machinery and
related  supplies  operations in a dedicated,  modern  facility in  Newburyport,
Massachusetts.  The Norwood,  Massachusetts location is currently being used for
component parts manufacturing for both the hot stamping and pad printing product
lines.

Products and Processes

      Hot Stamping and Holographic  Foils. Hot stamping foil  represented  $23.2
million (or 62%) of the Company's net sales in 1996 as compared to $23.5 million
(or 64%) of the  Company's  net sales in 1995 and $18.7  million or (61%) of net
sales in 1994. Hot stamping foil is used for decorative and marking  purposes on
a wide array of  products,  including  cosmetic  packaging,  book  covers,  wine
labels,  greeting  cards,  credit  cards,  toys,  and  automotive  and appliance
components.

      The  Company's  foil  products   currently  include  (i)  metallized  foil
(metallic effect), (ii) pigmented foil (different colors),  (iii) diffraction or
"prismatic" foil (shattering effect),  (iv) holographic foil  (three-dimensional
effect),  (v)  printed  pattern  foils (for the picture  frame and graphic  arts
industry),  (vi) Infra-Red heat  reflective  films,  (vii) and specialty  coated
films.  Metallized foil decorates a product with a brilliant  metallic  imprint,
typically in gold or silver,  and constitutes a majority of the Company's sales.
Diffraction and holographic foils (metallized foil embossed with two-dimensional
and  three-dimensional  images)  represent  the fastest  growing  segment of the
market and are used in a variety of decorative  applications on products such as
gift wrap and gift boxes,  packaging  applications,  greeting cards,  and



                                       4
<PAGE>



trophy  components.  In addition  holographic  foils are increasingly  used as a
security  device for credit  cards,  computer  software and high value  products
packaging due to the difficulty of recreating a hologram.

      Foilmark  manufactures  foils  in its  Newburyport,  Massachusetts  plant.
Metallized hot stamping foils, in their simplest form are constructed by coating
a number of thin films of  coatings  onto a carrier  composed of a thin layer of
vaporized  aluminum  sandwiched  between a top coat (also known as "color coat")
and an adhesive coat (also known as "sizing coat").  A thin layer of aluminum or
chrome is added to  create a  metallic  finish.  An image is  embossed  onto the
coatings to create  diffraction and holographic  foils.  The construction of the
composite  and the  number  of layers  varies  slightly  according  to the final
application.

      Machinery and Tooling.  Hot stamping and pad printing  machines,  tooling,
dies and supplies  constituted $14.0 million (or 38%) of the Company's net sales
in 1996,  as compared to $13.3  million (or 36%) of the  Company's  net sales in
1995 and  $11.9  million  (or 39%) of net  sales in 1994.  Spare  parts  for the
Company's machines represent approximately 35% of total machine sales.

      Foilmark  manufactures  machines in Newburyport,  Massachusetts  under the
Kensol, Franklin, KF System and Foilmark Technology Group (FTG) trade names. The
Company's line of machinery consists of standard machines and customized systems
designed for specific applications.  The prices for the Company's machines range
from $4,000 to $75,000 for  standard  machines  and from $25,000 to $300,000 for
customized systems.  The line of standard vertical presses is available in seven
pressure ranges from 1/2 to 15 tons. Standard presses perform hot stamping,  die
cutting and label  laminating  functions.  Customized  systems  include  roll-on
machines,  high tonnage vertical  presses,  and automated  systems.  Most of the
machines utilize microprocessor based controls.

      The machine  manufacturing process is handled by six departments or areas.
(1) The engineering  department is responsible  for ongoing machine  development
and improvement. Specialized equipment design, automation and customized tooling
are also handled in this  department.  This department is equipped with computer
aided design ("CAD") capability to maximize  engineering  productivity.  (2) The
machinery  department  manufactures  machine components and tooling. The Company
utilizes  vertical,  horizontal and turning machining centers to ensure accuracy
and  repeatability.  These are integrated with the engineering  department's CAD
system  through  a  computer  aided  manufacturing  ("CAM")  system.  (3) In the
finishing  department,  components  are deburred,  ground,  sanded,  cleaned and
painted.  (4) The  standard  assembly  area is where the basic line or  vertical
presses are assembled.  (5) In the special assembly area, technicians modify the
standard  machines to incorporate high speed feeding devices,  tooling and other
special components to meet customer requirements. The special assembly area also
assembles  roll-on,  rotary,  high tonnage  presses and complex custom  designed
machines.  (6) The die and tooling department  manufactures support fixtures and
silicone rubber tooling products,  including sheets and rollers. This department
also has an in-house art  department  and camera  facilities  as well as etching
equipment for the magnesium dies.



                                       5
<PAGE>



      During the first half of 1996, the Company  consolidated  certain portions
of the hot-stamp manufacturing facility in Norwood,  Massachusetts to the Imtran
facility in Newburyport,  Massachusetts.  The transfer included the engineering,
assembly, sales, customer and technical service groups. High volume machining of
components  remains in the Norwood facility.  The consolidation was completed in
June 1996 and eliminated certain duplications of overhead.

Pad Printing

      Foilmark  manufactures  its line of  Imtran  pad  printing  equipment  and
supplies in Newburyport, Massachusetts. The Company's line of equipment consists
of three  standard  models as well as customized  systems  designed for specific
applications.  The prices for the Company's  standard machines range from $7,000
to $24,000  and for custom  systems  range from  $20,000 to  $200,000.  Standard
presses  are used to apply  images from a dot to 10" x 10".  Customized  systems
include machines with automatic feeding devices such as shuttles, turntables and
carousels.  They also include  multiple  headed machines and those with advanced
automation.

      The  manufacturing  operation at Imtran  consists of five  departments  or
areas.  (1) The  engineering  department  is  responsible  for  ongoing  machine
development  and  improvement.  Specialized  equipment  design,  automation  and
customized tooling are also handled by this department.  All design work is done
on through computer aided design (CAD) to maximize engineering productivity. (2)
The machining group  manufactures all of the machine components and tooling used
in the  manufacture  of the  systems.  This group  utilizes  computer  numerical
control equipment as well as conventional  machine tools. (3) The assembly group
is responsible for the assembly of standard and customized  systems.  This group
is also  responsible for marrying high speed feeders,  tooling and other devices
to meet  specific  customer  requirements.  (4) The  technical  service group is
responsible  for the  final  set up of  equipment  once it is  completed  by the
assembly group. The technical service group is also responsible for in house and
field training.  They also field calls from customers with regard to application
issues.  (5) The supply group is responsible for the manufacture of rubber pads,
inks,  etched steel  printing  plates or cliches,  silk screens and other supply
items.  This  department  also includes an in-house art  department.  This group
includes the silicone rubber tooling manufacture (Kensol Tool & Die, or KTD) for
hot stamping  systems that was relocated  after the  acquisition of Imtran.  KTD
consolidated  its art department  into Imtran's.  Included in the manufacture of
silicon  dies is  magnesium  etching for dies and molds as well as high  tonnage
presses for their manufacture.  This group also manufactures silicon rollers for
hot-stamping and laminating.

Sales, Marketing and Customers

      The  Company  has  12   full-time   and  outside   sales  people  and  one
manufacturers  representative  domestically (who is compensated on a commission
basis),  along with 17 inside sales support  personnel.  The Company markets its
products and services by the way of industry  trade shows,  advertising,  public
relations, telemarketing, direct mail, and the Company's Internet web site.



                                       6
<PAGE>



      The Company has a diverse  customer  base,  and seeks to emphasize  custom
foil  and  equipment  and the  use of its  foil on a  broad  range  of  consumer
products.  The Company's  products are sold to more than 5,000 active  customers
worldwide  ranging  from small  companies  to Fortune 500  companies.  No single
customer  accounted  for more  than 4% of  total  net  sales of foil,  machines,
tooling  and dies in  1996.  Of the  largest  15  customers,  eleven  have  been
customers  for five  years or more.  Distributors  sell the  Company's  products
worldwide on terms of either letters of credit or open account.  The Company has
worked with the distributors on an exclusive and non-exclusive basis for periods
ranging from two to fifteen years.  Foreign  customers  accounted for 16% of net
sales in 1996 and 13% of net sales in 1995.

      The Company sells its foil directly, through domestic and foreign jobbers,
and indirectly through distributors. No foil customer accounted for more than 7%
of total net  sales of foil in 1996.  Hot  stamping  foils  manufactured  by the
Company are sold  domestically  under private label by 4 distributors.  Terms of
sale for hot stamping foils are typically "net 30".

      The  Company  sells  its  machinery  directly  or  through  manufacturer's
representatives.  No machine  customer  accounted  for more than 4% of total net
sales of machines in 1996.  Terms of sale for hot stamp  machines are  typically
one-third  down,  one-third prior to shipment and the balance "net 30". Terms of
sale for pad print  machines are 30% down, 60% prior to shipment and the balance
"net 30" days.

      Backlog does not play a significant role in the sale of foil,  although it
is  significant  in the sale of  machinery  due to the longer  time  required to
manufacture  machines.  At December  31, 1996  backlog  was $4.4  million  which
included a  contract  worth $2 million to supply  China  North  Industries  with
equipment to manufacture,  convert, and apply hot stamping foils and holographic
products  to meet the  growing  demand in China.  This  equipment  for China was
shipped  February  28,  1997.  Comparable  backlog at December 31, 1995 was $1.9
million.

Foreign Sales

      The Company's  foreign sales are made  principally to customers in Western
Europe,  Peoples Republic of China,  Mexico, and South and Central America.  All
foreign sales are payable in U.S. dollars and, therefore,  settlement amounts do
not fluctuate with changes in exchange  rates.  No single country  accounted for
more than 6% of the Company's sales in any of the periods presented below:

                                                        Percent of
                          Total Foreign Sales          Company Sales
                          -------------------          -------------
Year 1996.................    $5,981,700                    16%
Year 1995.................    $4,655,000                    13%
Year 1994.................    $4,203,000                    14%
Year 1993.................    $5,154,000                    19%
Year 1992.................    $3,326,000                    13%



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<PAGE>



Research and Development

      The  engineering  department  and  chemistry  lab is  responsible  for the
Company's  ongoing  product  development  and  improvement,  as well as  quality
control.  The  department  consists  of a team  of 25  chemists,  engineers  and
technicians.  The  Company's  research and  development  program  focuses on the
development of new products and applications.  The Company expenses its research
and  development  costs as  incurred.  Such  expenses  amounted to $776,526  and
$684,253 in 1994, 1995 and approximately $650,000 in 1996.

Competition

      The product enhancement  industry in which the Company competes includes a
large number of foreign and domestic competitors. The Company estimates that the
present  worldwide  market for the products in which  Foilmark  competes is $840
million in annual sales of foil and $535  million in annual sales of  machinery,
tools,  dies and  supplies.  With  regard to foil,  the  Company  competes  with
approximately  25   manufacturers   worldwide  and  believes  that  it  supplies
approximately  3% of the world market.  With regard to machines,  which includes
both hot stamping and pad printing, the Company competes internationally with 15
primary  manufacturers  and several  smaller  companies and believes it supplies
approximately 2% of the world market.

      Competition  is based on price,  variety of products,  quality of products
and services.  Some  competitors  have greater  financial  resources while other
competitors,  especially  foreign,  may have lower cost  structures  or exchange
rates that may affect the Company's  competitive position. A worldwide excess of
manufacturing  capacity  of  stamping  foils  beginning  in 1992 and  continuing
through 1996 has caused severe price competition.  Accordingly,  the Company had
to reduce its selling prices in order to maintain its market share. However, the
Company believes that its product quality, long-standing customer relationships,
proprietary  machinery and processes,  continuity of management and  experienced
personnel are competitive advantages. In addition, the Company has a competitive
advantage as the only one of two  companies  in the U.S.  that  manufacture  and
distribute  all  components  of the hot stamping and pad printing  process which
includes machines,  foils, tooling, dies and supplies,  giving it the ability to
produce a complete turn-key package for both hot stamping and pad printing.  The
hot stamping and pad printing  industries in general have certain  technological
barriers to entry.  The process and  machinery  for the  production of hot stamp
foils  have been  developed  based on years of  research  and  development,  and
require a blend of art and chemistry  based on years of experience  working with
foils for a broad range of  applications,  in order to produce  competitive high
quality foils.

Raw Materials and Supplies

      The  Company  is not  dependent  on any  one  supplier  for any of its raw
materials.  The  Company  purchases  the main  component  of its foil  products,
polyester  film,  from a variety  of  different  suppliers.  During  1996,  more
polyester was available due to a number of new polyester  production  lines that
went into production.  The increased output enabled  polyester prices world wide
to stabilize.  The cost of polyester remained  relatively constant in 1996 after
experiencing a 25% increase during 1995. All raw materials used in manufacturing
foil are readily available on terms favorable to the Company.



                                       8
<PAGE>



Safety and Environmental Matters

      The  Company's  operations  are  subject  to  federal,   state  and  local
environmental  laws and regulations that impose  limitations on the discharge of
pollutants  into the air,  and  water and  establish  standards  for  treatment,
storage and disposal of solid and hazardous wastes. The Company believes that it
is currently in material  compliance with all applicable  environmental laws and
regulations  relating to its material business  operations.  The Company has not
been sanctioned by any regulatory  body with respect to this matter.  Insofar as
future  laws and  regulations  relating  to the  environment  may be  adopted or
interpretations of existing laws and regulations relating to the environment may
change,  new  requirements  may be  imposed  on  the  Company  regarding  future
activities  which  may  create  liability  retroactively  with  respect  to past
activities. Failure to comply with applicable laws and regulations could subject
the Company to monetary  damages and  injunctive  actions  that could  adversely
affect the Company's financial performance.

Patents, Trademarks and Proprietary Information

      While the Company owns certain patents,  trademarks and logos, the Company
relies heavily upon trade secrets,  know-how and other proprietary  information.
Management believes that patent and trademark protection are not material to the
Company's  business.  Certain  key  employees  of the  Company  are  parties  to
employment agreements providing for confidentiality and the assignment of rights
to innovations developed by them while employed by the Company. The Company also
requires all key  employees to enter into  confidentiality  and  non-competition
agreements  to  protect  its  confidential  information.  However,  there  is no
assurance that those  agreements  would be enforceable if they were breached or,
if enforced, that they would adequately protect the Company.

Employees

      At December  31,  1996,  the Company  employed  approximately  250 people,
including 143 in manufacturing,  32 in sales and sales support,  37 in technical
and development,  and 38 in administrative and management positions. None of the
Company's  employees are  represented by a union and the Company is not aware of
any efforts to unionize any employees of the Company.  The Company believes that
its relationship with its employees is satisfactory.

      The  executive  officers of the Company have  extensive  experience in the
decorating and product enhancement industry.



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<PAGE>



Item 2            PROPERTIES

      The principal properties of the Company are:

                                   Square
      Location                     Footage    Status
      --------                     -------    ------
Newburyport, MA

  Foil Manufacturing.............   52,000    Own

  Corporate Office...............    4,000    Own

  Warehouse......................    2,000    Month-to-month

  Pad Print, Machine
  Manufacturing, Tool and Die....   27,500    Lease (Expires July 2000)(2)

Melville, NY

  Foil Distribution..............   20,000    Own (1)

  Subleased to Third Party.......   20,000    Own (1)

Norwood, MA

  Component Parts
  Manufacturing..................   36,000    Own (1)

Newbury Park, CA

  Foil Distribution..............    7,000    Lease (Expires in April 2002)(2)

-------------
(1)   These properties are subject to mortgages.
(2)   See Note 14 to the  Notes to  Consolidated  Financial  Statements  for the
      aggregate amounts of the Company's lease commitments.



                                       10
<PAGE>



      The foil manufacturing  facility in Newburyport,  MA currently operates at
70% of capacity with two 10 hour shifts and one  overlapping  9 hour shift.  The
tool and die facility in Newburyport  currently operates at approximately 80% of
capacity  with  one  10  hour  shift.  The  machine  manufacturing  facility  in
Newburyport,  Massachusetts is currently being utilized at approximately  70% of
capacity  with  one 10 hour  shift.  The pad  print  manufacturing  facility  in
Newburyport is operating at 60% of capacity with one 8-hour shift. The component
parts  manufacturing  facility in Norwood operates at 90% of capacity with three
8-hour shifts.

      In 1994, the Company consolidated its machinery  manufacturing  operations
by transferring all machine  manufacturing from the Melville,  New York plant to
the Norwood,  Massachusetts  plant. In conjunction with the  consolidation,  the
Company  expanded its existing  machinery  manufacturing  operations in Norwood,
Massachusetts.  In 1995, the Company built a 10,000 square foot extension to the
existing Norwood  building after  purchasing  18,000 square feet adjacent to the
existing  property for $75,000.  Total cost of the 10,000  square foot  addition
including land was $450,000.

      Also in 1995,  the Company  added 4,000 square feet to the  existing  foil
manufacturing  facility at a cost of  $280,000.  The purpose of the addition was
for expansion of the Holographic Division.

      In June 1996, the Kensol hot stamping plant in Norwood,  Massachusetts was
transferred   to  the  Imtran   Foilmark   facility   located  in   Newburyport,
Massachusetts  in  order  to  combine  machine  manufacturing  operations.   The
machining operation that manufactures components for both Kensol and Imtran will
remain in a portion of the Norwood  facility with the balance of the facility to
be leased to a third party as an additional revenue source for the Company.

Item 3. LEGAL PROCEEDINGS

      For all of 1996,  the Company was a defendant  in a group of  consolidated
lawsuits  brought in 1995  alleging  personal  injuries  arising  out of a motor
vehicle accident involving a vehicle leased by one of the Company's subsidiaries
and operated by an employee of that subsidiary. Plaintiffs sought damages for an
amount significantly in excess of the Company's insurance policy limits.  During
1996 the Company settled two (2) of the cases within the limits of its liability
insurance  policy.  On April 8, 1997 the Company  settled the remaining cases by
agreeing to pay $200,000.00 to the remaining Plaintiffs.  In connection with the
settlement,  the  Company's  liability  carrier  paid the  balance of the amount
available  under the policy after giving affect to the prior  settlement.  These
settlements have been confirmed by the Superior Court and Dismissal Stipulations
have been entered dismissing the litigation with prejudice.


                                       11
<PAGE>



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

      No matters were submitted to a vote of security  holders during the fourth
quarter of the fiscal year covered by this report.

                                     PART 11

Item  5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The  Company's  Common Stock is traded on NASDAQ - National  Market System
under the trading symbol  "FLMK".  The range of high and low closing sale prices
for the Common Stock as reported on NASDAQ - NMS by quarter is set forth below.

Quarter Ended                                       High Sale         Low Sale
-------------                                       ---------         --------
March 31, 1995 .............................          7-1/8            5-5/8
June 30, 1995 ..............................          8-1/8            4-1/8
September 30, 1995 .........................          9                7
December 31, 1995 ..........................          8-1/8            6
March 31, 1996 .............................          6-1/2            3-5/8
June 30, 1996 ..............................          4-3/4            3-3/8
September 30, 1996 .........................          3-3/8            2-5/8
December 31, 1996 ..........................          3                2-1/8
March 31, 1997  ............................          3                1-15/16




      As of March 31, 1997,  there were  approximately  77 holders of record and
approximately 800 beneficial owners of the Common Stock.

      The Company has never paid dividends on capital stock. The Company intends
to retain  earnings to finance  future  operations  and  expansion  and does not
expect to pay any cash dividends within the foreseeable  future.  The Company is
currently  restricted from declaring or paying dividends under the provisions of
its bank loan agreements.  See Note 9 of the Notes to the Consolidated Financial
Statements.



                                       12
<PAGE>



Item  6 SELECTED FINANCIAL DATA





                          Foilmark, Inc. & Subsidiaries

                            Years Ended December 31,

                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                          Dec 31,            Dec 31,          Dec 31,          Dec 31,          Dec 31,
Operations:                                1996              1995(d)          1994(c)          1993             1992(a),(b)
                                         --------          --------         --------         --------         --------
<S>                                      <C>               <C>              <C>              <C>              <C>     
Revenue:                                 $ 37,191          $ 36,807         $ 30,584         $ 27,553         $ 25,289

Income (Loss) From Operations                (510)            3,476            2,531            2,169            1,945

Net Income (Loss):                         (1,040)            1,843            1,265              840              857

Earnings (Loss) Per Share:                  (0.25)             0.46             0.44             0.42             --

Weighted Average Common and
Common Equivalent Shares
Outstanding:                                4,142             3,999            2,900            2,000             --


Financial Condition:

Total Assets:                            $ 40,332          $ 37,952         $ 26,499         $ 21,779         $ 19,610

Total Long-term Debt:                      12,165            10,732            3,401            6,784            7,214

Working Capital:                           12,782            11,766           10,120            5,700            5,036

Stockholders' Equity:                      18,250            19,243           16,178            6,682            5,686
</TABLE>


(a) Prior to March 1992, the Company's  financial  statements were composed of a
combination of entities all of which were wholly-owned by substantially the same
individuals.  In March 1992,  substantially  all of the  ownership  interests in
these entities were contributed to the Company. This consolidation was accounted
for in a manner similar to a pooling-of-interests,  whereby stock in the Company
was distributed for the equity interests in the pre-existing entities.

On March 17, 1992, the Company acquired all of the outstanding stock of Franklin
Manufacturing Corporation. This acquisition was accounted for as a purchase.



                                       13
<PAGE>



(b) On December 18, 1992, the Company's  subsidiary,  FMC,  entered into a joint
venture  agreement  with  Embossing  Technology  Limited for a 50% interest in a
joint  venture  called  Foilmark  Holographics,  Inc.  This  investment is being
accounted for using the equity method.

(c) Effective October 1, 1994, the Company acquired all of the outstanding stock
of West Foils,  Inc., a California  company engaged in the distribution of foils
for $750,000 in cash and 153,847 shares of common stock of the Company.

(d) On August 21, 1995, the Company acquired substantially all of the assets and
assumed  certain  liabilities  of Imtran  Industries,  Inc. The acquired  assets
consist  primarily of equipment and other property used in the  manufacture  and
distribution of pad printing  equipment.  The Company has transferred all of the
assets of the newly formed wholly owned subsidiary called Imtran Foilmark,  Inc.
which will continue operations in the pad printing business.


Item 7  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      The Company and its subsidiaries and their  representatives  may from time
to time make written or oral statements,  including  statements contained in the
Company's  filings with the Securities and Exchange  Commission (SEC) and in its
reports to  shareholders,  including  this annual  report  which  constitute  or
contain  "forward-looking  statements"  as that term is defined  in the  Private
Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations
and releases.

      All statements  other than statements of historical facts included in this
annual  report  regarding  the  Company's  financial  position and operating and
strategic  initiatives and addressing industry  developments are forward-looking
statements.  Where,  in  any  forward-looking  statement,  the  Company,  or its
management,  express  an  expectation  or  belief  as to  future  results,  such
expectation  or  belief  is  expressed  in good  faith  and  believed  to have a
reasonable  basis,  but  there  can  be  no  assurance  that  the  statement  of
expectation or belief will result or be achieved or accomplished.  Factors which
could cause actual results to differ materially from those anticipated,  include
but are not limited to general  economic,  financial  and  business  conditions;
competition  in the  product  enhancement  industry,  and  particularly  the hot
stamping sector;  the  availability  and cost of raw materials;  the success and
costs of the Company's  consolidation and integration  efforts; the availability
and terms of capital;  the business  abilities  and judgment of  personnel;  the
costs and effects of legal  proceedings;  the impacts of unusual items resulting
from  ongoing  evaluations  of  business  strategies;  and  changes in  business
strategy.



                                       14
<PAGE>



GENERAL

      1996 was a difficult  year for the  Company.  In spite of a 1% increase in
sales to $37,190,611,  Foilmark  incurred a loss of $831,201 or $0.20 per share.
Industry wide demand for the Company's foil products were flat for most of 1996,
leading to world wide  overcapacity.  This resulted in severe pricing  pressures
adversely  impacting  Foilmark's  revenues  and  margins  for most of the  year.
Although  demand  for the  Company's  foil  products  strengthened  in the third
quarter  of 1996  compared  to the  prior six  months,  softness  in the  market
appeared  again in the  fourth  quarter  and  sales  declined  by 8.8%  over the
comparable 1995 quarter.  For the year ended December 31, 1996, total foil sales
were $187,000  below 1995 sales level at $23.2  million,  in spite of additional
manufacturing  capacity available for most of 1996.  Additionally,  the delay in
delivery  of  Foilmark's  new   state-of-the-art   metallizer,   and  continuing
difficulties in integrating  new higher speed  manufacturing  equipment  further
contributed to the loss.  Polyester film, the main component of the foil product
which had increased in cost by 25% in 1995 remained relatively constant for most
of 1996.  Due to the over  capacity in the market,  it was not  possible to pass
along the higher  polyester  costs to customers.  This resulted in lower margins
for most of 1996, also contributing to the loss.

      Hot stamping  machinery also experienced a soft market in 1996 which began
in the third  quarter of 1995.  The decline in demand  extended  to  specialized
machines as well as  standard  machines  and pad  printing  systems.  To improve
profitability and  efficiencies,  and to better meet the changing demands of the
market place in hot stamping  machinery,  the Company  announced in January 1996
the transfer of  substantially  all of its  operations  from the Kensol plant in
Norwood,  Massachusetts to the Imtran-Foilmark manufacturing facility located in
Newburyport,  Massachusetts.  The  purpose  of the move was to share  resources,
thereby reducing  overhead at the Imtran facility and improving margins for both
the hot  stamping  and pad  printing  machinery  business.  The move  which  was
anticipated  to be  completed  in  March  1996  at a cost  of  $200,000  was not
finalized until June.  Production  delays of manufactured  parts associated with
the move and unexpected loss of personnel not immediately replaced, continued to
adversely impact sales and profitability.  Machinery shipments and manufacturing
efficiencies  were  severely  affected and the vacancies in key  production  and
support  personnel  were not filled until the fourth  quarter.  Shipments of the
higher priced and higher margin credit card and label  machines were  especially
affected  by the  production  delays of  component  parts and the  manufacturing
inefficiencies  caused by the  consolidation.  This  resulted  in reduced  gross
profits.

      Due to a change in market conditions affecting hot stamping machinery,  in
December  1996 the Company  decided to streamline  the standard  product line by
reducing  the wide variety of models and options then  presently  available.  In
line with this  decision  the Company  wrote off  approximately  $500,000 in its
inventory of models that will be discontinued.  By reducing the number of models
available,  certain  duplications  will be  eliminated,  enabling the Company to
manufacture larger quantities of fewer products. It is anticipated these actions
will result in better gross margins, better efficiencies and lower inventories.



                                       15
<PAGE>



      The  state-of-the-art  metallizer was delivered in October 1996, installed
and tested  during the balance of the year,  and became  operational  in January
1997. This in-house  metallization  capability for all of the foil manufacturing
requirements,  together with a stabilization in the price of polyester film, the
main  component of the Company's  foil  products,  should allow the foil product
line to return to higher and more traditional profit margins in 1997.

      In July 1996,  the  Company  announced  receipt of a contract in excess of
$2,000,000 to supply China North  Industries Corp. with equipment and technology
to manufacture, convert and apply hot stamping foils and holographic products to
meet the growing demand in China. The technology was approved and transferred in
December  1996 to China North  Industries  and the  equipment was shipped in the
1997 first quarter.

LIQUIDITY AND CAPITAL RESOURCES

      On December 17, 1996 the Company  refinanced two existing  mortgages,  one
which  matured in October  1996 in the amount of  $830,587  and the other in the
amount of $654,113  due January  2000 to one fifteen  (15) year  mortgage in the
amount of $1,997,500 at the bank's prime interest rate or LIBOR plus 2% compared
to prime plus 1 1/4%. This transaction  increased the Company's  working capital
by approximately $200,000.

      During 1996 the Company used  $1,335,552 of the revolving  credit facility
for working capital purposes and capital  expenditures.  As of December 31, 1996
the Company had $439,448  available  under its revolving  credit  facility.  The
Company has  historically  depended upon funds generated from operations and its
borrowings to provide both short and long term  liquidity.  The Company  expects
these  sources of  liquidity  to be  sufficient  to supply its  working  capital
requirements in the foreseeable future.

      Capital  expenditures  for the year ended  December  31, 1996  amounted to
$2,328,534  compared to  $3,886,398  for the  comparable  1995 period.  The 1996
capital  expenditures  were  incurred  in  connection  with  the  relocation  of
facilities  from  Norwood to  Newburyport  and the  balance of the 1995  capital
expansion program which carried over into 1996. Planned capital expenditures for
1997 are minimal.

      As of December 31, 1996 the Company had working  capital of $12.9  million
compared  to  $11.8  million  in the  prior  year.  The  increase  is  partially
attributable to the refinancing of the two mortgages over fifteen years,  and to
the use of the revolving credit line.

      The terms of the various long term debt  agreements  require,  among other
things that the Company maintain certain amounts of net worth, ratios of current
assets to current  liabilities,  total  liabilities  to tangible  net worth plus
subordinated  liabilities,  and debt service coverage and restrict the amount of
capital  expenditures,  and the payment of dividends.  At December 31, 1996, the
Company was not in compliance  with certain of these covenants for which waivers
were received from the lenders.

      As of March 31,  1997,  the Company  has  amended  the six million  dollar
($6,000,000) revolving credit agreement.  The amended agreement does not require
principal  payments  prior to June 10, 1998 and has less  restrictive  financial
ratio covenants than the Company had prior to the amendment.

                                       16
<PAGE>



RESULTS OF OPERATIONS

Fiscal 1996 compared to Fiscal 1995

      Net Sales for the year  ended  December  31,  1996  increased  1% to $37.2
million from $36.8 in 1995. Foil sales declined by $.2 million to $23.2 compared
to $23.4  million in 1995.  Machinery  sales  increased  by $.6 million to $14.0
million  compared  to $13.4  million.  Included in the 1996  revenues  were $4.6
million in pad print machine  sales  compared to $1.5 million from the Company's
Imtran division acquired in August 1995 and not comparable for the complete year
1995.  Excluding  Imtran  from 1996  sales,  there would have been a decrease of
7.7%.

      The  decrease  in foil  sales was  generally  due to a soft  market  which
continued  for  all  of  1996.  In  addition,   foil  sales  suffered  from  the
unanticipated  delay in installation of a vacuum  metallizer and difficulties in
locating  satisfactory  outsourcing  vendors  for a  portion  of  the  Company's
metallizing needs until the end of the second quarter.

      Machinery  sales,  as a result of the Imtran pad  printing  product  line,
increased  4.2% over 1995.  Hot  stamping  machinery  declined  by 21.2% in 1996
compared to the  comparable  1995 period as a result of plant  relocation  and a
general  softness in the industry for the  Company's  standard  machine  product
line.

      Gross profit  declined by $2,750,229 or 24.1% in 1996 compared to the year
ended  December 31, 1995.  Gross profit as a percentage of net sales declined to
23.3% in 1996 compared to 31.0% for the comparable twelve month period in 1995.

      Gross  profit  in 1996 was  adversely  impacted  by the  world  wide  over
capacity in hot stamping  foils.  While at the same time,  polyester  film,  the
primary raw material in the foil manufacturing process,  significantly increased
in cost. In order to maintain market share the Company either reduced or did not
increase  prices  sufficient to affect  increased  costs.  Furthermore,  margins
suffered from the unanticipated delay in the installation of the metallizer, and
difficulties in locating appropriate outsourcing  opportunities for a portion of
its  metallizing  needs.  In  addition,   manufacturing   difficulties  in  foil
production  as a result of the start-up of new  production  equipment  placed in
service at the end of 1995, adversely affected  efficiencies,  causing a decline
in gross profit.

      Margins in the  machinery  product  line were  adversely  impacted  by the
relocation  of  the   machinery   manufacturing   facilities   from  Norwood  to
Newburyport,  Ma.  Manufacturing  efficiencies  suffered  due to  delays  in the
receipt of  manufactured  parts,  which resulted in increased  costs,  decreased
productivity and lower margins. In addition,  the Company incurred approximately
$200,000 in additional  operating costs in connection with the relocation of the
manufacturing  facilities  from Norwood to Newburyport,  Massachusetts,  a write
down of $500,000 hot stamping machinery  inventory of models that will no longer
be manufactured, and facility consolidation costs of $100,000.




                                       17
<PAGE>



      Selling,  General and  Administrative  Expenses increased by $1,236,123 to
$9,174,753,  a  15.6%  increase  over  fiscal  1995.  Most of the  increase  was
attributable to the Imtran acquisition in August 1995 which was not included for
eight (8) months of 1995.  The  balance  of the  increase  was due to  increased
amortization costs in connection with the Imtran acquisition.

      Income From  Operations  for the fiscal year ended  December 31, 1996, the
Company  incurred a loss from  operations  of  $510,106  compared to income from
operations of $3,476,246  for fiscal 1995. The primary reason for the decline in
income from  operations  was the 24.1%  reduction in gross  profit,  caused by a
reduction  in  gross  profit  margins  to  23.3%  in 1996  compared  to 31.0% in
comparable 1995, on a 1% increase in revenues.

      Additionally,  the Company  incurred a 15.6% increase in selling,  general
and  administrative  expenses  due in part to the Imtran  acquisition  without a
corresponding increase in total revenues.

      Interest expense increased by 119.4% to $914,711 up from $416,940 for year
ended December  31,1995.  The higher  interest  expense was due primarily to the
increase  in bank  debt,  the  proceeds  of  which  were  used to fund  the 1995
expansion projects at the Company's Massachusetts  facilities, to acquire Imtran
in August 1995 and to provide required working capital in 1996.

      Settlement  of litigation  in  connection  with the personal  injury claim
filed  against the Company and  described in its prior  financial  statement and
filings was  settled in April  1997.  The Company has accrued and is included in
the 1996 financials  $305,000 to cover the cost of the settlement and additional
settlement costs above the insurance coverage.

      Provision  For  Income  Taxes for the year  ended  December  31,1996  were
recorded as a benefit of $477,971 at an effective rate of 31.5%, as a result of
a pre-tax loss of $1,518,097. For the year ended December 31,1995, the provision
for  income  taxes  was  $1,330,000  on pre tax  income of  $3,173,326,  with an
effective tax rate of 41.9%.

      Net Loss.  for the twelve  months ended  December  31,1996 was  $1,040,126
compared to a net income of $1,843,326 for the comparable 1995 period.  Net loss
in 1996 was the  result of a decline  in gross  profit,  increased  amortization
costs associated with the Imtran acquisition,  $200,000 in additional  operating
costs  incurred  in  connection  with  consolidating   machinery  operations  in
Newburyport,  facility  consolidation  costs  of  $100,000,  and  the  increased
operating costs due to the 1996 plant expansion without a corresponding increase
in revenues.  In addition the Company has written down  $500,000 in hot stamping
machinery inventory of models that will no longer be manufactured.  Furthermore,
the Company has accrued  $305,000 in the 1996 net loss before benefit for income
taxes as a result of the  settlement  in  connection  with the  personal  injury
litigation filed against the Company in January 1995.



                                       18
<PAGE>



RESULTS OF OPERATIONS

Fiscal 1995 compared to Fiscal 1994

      Net Sales for the year ended  December 31, 1995  increased  20.3% to $36.8
million  from $30.7  million in 1994.  Machine  sales  increased  12.5% to $13.4
million from $12.0 million in the prior year, and foil sales  increased 25.1% to
$23.4  million  from $18.7  million as of December  31,  1994.  The  increase in
machine sales was solely  attributable  to the  acquisition  of Imtran in August
1995 whose sales  contributed $1.5 million.  The increase in foil sales resulted
in part due to the inclusion of West Foils (acquired in October 1994) for a full
twelve months in 1995 as compared to a three month period in 1994,  resulting in
an increase of $1.7 million in fiscal 1995 versus  fiscal  1994.  The balance of
the  increase  was from  improved  market  penetration  in both the domestic and
foreign markets.

      Gross Profit increased to $11.4 million from the fiscal 1994 level of $8.9
million,  a 28.0%  increase.  West Foils  contributed  $1.3  million  and Imtran
contributed  $860,000  or  84.6%  or  the  overall  increase  in  gross  profit.
Specifically,  the  increase in gross  profits  related to increases in sales of
higher margin products from the Foilmark Holographic Images division of Foilmark
Manufacturing  and West Foils.  In addition,  the newly acquired  Imtran product
line of pad printing  machines and supplies  provided  gross margins higher than
hot  stamping  machines  and  foils.  The  delay  in  completion  of the  vacuum
metallizer had no material effect on gross profit in 1995.

      Selling General and Administrative Expenses increased $1.6 million to $7.9
million  compared to $6.4 million for fiscal 1994. For the fiscal years 1995 and
1994 expenses as a percentage of sales were 21.6% and 20.9%, respectively.  Most
of the increase in expenses was  attributable  to the  acquisition of West Foils
and Imtran.  As a result,  the year to year figures are not  comparable  as West
Foils was only  included in the last  quarter of 1994 and Imtran was acquired in
August 1995. In addition,  there were increased advertising and other associated
selling  costs  in 1995 as the  Company  attempted  to  maintain  market  share.
Further,  the Company experienced in 1995 the full impact of the ancillary costs
associated with being a public company.

      Income From  Operations  increased  by  $950,000 or 37.4% to $3.5  million
compared to $2.5 million in fiscal 1994.  As a percentage  of net sales,  income
from  operations  increased  from  8.3% to 9.4%.  This  increase  was due to the
increase in foil sales on higher margin  products and the  acquisition of Imtran
offset in part, by increases in associated selling and administrative expenses.



                                       19
<PAGE>



      Interest  Expense  declined to $417,000  from $513,000 for the fiscal year
1995 compared to fiscal 1994, an 18.8% decrease.  Interest  expense  declined in
part as a result of the use of the  proceeds  of the  Company's  initial  public
offering in June 1994 to retire various long and short term bank debt as well as
stockholders'  debt.  Interest  expense  for the last six months of fiscal  1995
increased  $46,000 over the  comparable  period in fiscal 1994 due to the use of
various bank loans in June 1995 to fund the  expansion  project at the Company's
Newburyport  and  Norwood,  Massachusetts  facilities  and the  line  of  credit
borrowings used to acquire Imtran in August 1995 and to provide working capital.

      Provision  For Income Taxes  increased to $1.3 million in fiscal 1995 from
$897,000 in fiscal 1994.  The increase in the provision for taxes was due to the
increased profits of the Company in 1995. The effective tax rates were 41.9% and
41.5%  respectively,  in fiscal 1995 and 1994. The Company's  effective tax rate
was lower than would  otherwise  be  expected  in fiscal 1994 as a result of the
proceeds  received from a life insurance  policy on an executive  officer of the
Company that was not subject to income taxes.

      Net  income  increased  45.7% to $1.8  million  in  fiscal  1995 from $1.3
million in fiscal 1994. The increase was  attributable  to both higher sales and
increased gross profit.

      Effects of Inflation

      During the two year period ended  December 31, 1996 inflation did not have
a  significant  impact on the  Company's  operations.  However,  there can be no
assurance  that the Company's  business will not be affected by inflation in the
future.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Attached  hereto  and  filed  as  part of this  report  are the  financial
statements and supplementary data listed in the list of Financial Statements and
Schedules under Item 14 hereof.

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

            Not applicable.



                                       20
<PAGE>



                                   PART III

Item  10. DIRECTORS AND EXECUTIVE OFFICERS

      The  information  called for by Item 10 is  incorporated by reference from
the 1997 Proxy  Statement  which is to be filed with the Securities and Exchange
Commission  pursuant to Regulation  14A within 120 days of the end of the fiscal
year covered by this report.


Item  11. EXECUTIVE COMPENSATION

      The  information  called for by Item 11 is  incorporated by reference from
the 1997 Proxy  Statement  which is to be filed with the Securities and Exchange
Commission  pursuant to Regulation  14A within 120 days of the end of the fiscal
year covered by this report.


Item  12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The  information  called for by Item 12 is  incorporated by reference from
the 1997 Proxy  Statement  which is to be filed with the Securities and Exchange
Commission  pursuant to Regulation  14A within 120 days of the end of the fiscal
year covered by this report.


Item  13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The  information  called for by Item 13 is  incorporated by reference from
the 1997 Proxy  Statement  which is to be filed with the Securities and Exchange
Commission  pursuant to Regulation  14A within 120 days of the end of the fiscal
year covered by this report.



                                       21
<PAGE>

                                     PART IV

<TABLE>
<CAPTION>
Item 14.  EXHIBITS,FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      <C>    <S>                                                                     <C>
      (a)   Financial Statements, Financial Statement Schedules and Exhibits:

            (1)   Financial  Statements and Supplementary Data - See Form 10-K -
                  Item 8

            (2)   Financial Statements and Schedules:

                  Independent Auditors' Report                                          F-1

                  Consolidated Balance Sheets - December 31, 1996 and 1995              F-2

                  Consolidated Statement of Operations - Years Ended F-3
                  December 31, 1996, 1995 and 1994 Consolidated Statement of
                  Stockholders Equity - Years Ended F-4 December 31, 1996, 1995
                  and 1994

                  Consolidated Statements of Cash Flows - Years Ended                   F-5
                  December 31, 1996, 1995 and 1994

                  Notes to Consolidated Financial Statements                            F-6

                  For the three years ended December 31, 1996
                  Schedule II - Valuation and Qualifying Accounts                       S-1

                  Other   schedules  are  omitted  because  of  the  absence  of
                  conditions  under  which  they are  required  or  because  the
                  required  information is given in the financial  statements of
                  notes thereto.

                  (3)  Index of Exhibits:

                  The  following  is a list of  exhibits  files  as part of this
                  Annual  Report on Form  10-K.  For  exhibits  incorporated  by
                  reference  the location of the exhibit in the previous  filing
                  is indicated in parenthesis.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                  Number                                                                               Form 10-K
                  ------                                                                               ---------

                  Articles and By-Law Instruments:
                  <C>  <S>                                                                             <C>
                  3.1  Restated Certificate of Incorporation (1)
                  3.2  Restated By-Laws
                  3.3  Specimen Stock Certificate (8)
                  3.4  1995 Restated Certificate of Incorporation (9)
                  3.5  1995 Restated By-Laws (9)

                  Voting Trust Agreements:
                  9.1  Voting Agreement dated 11/17/94 between certain Shareholders (7)

                  Other Material Contracts:
                  10.1  Form of Employment Agreements (1)
                  10.2  1993 Stock Option Plan (3)
                  10.3  First Amendment to Chemical Bank Loan dated 5/21/93 (1)
                  10.4  Foilmark Holographics, Inc. Joint Venture Agreement (1)
                  10.5  Arrow Coated Products ltd, technical Collaboration Agreement (1)
                  10.6  Agreement for the Purchase of Patents (1)
                  10.7  Agreement to Acquire Franklin Manufacturing Corp. (1)
                  10.8  Stock Redemption Agreement dated 10/10/92 (1)
                  10.9  Agreement to Purchase Equipment between FHI and ETL (2)
                  10.10 Registration Rights Agreement between the Company and Mintz (2)
                  10.11 Mintz Waiver Agreement (2)
                  10.12 Mintz Employment Agreement (2)
                  10.13 Stockholders Agreement (2)
                  10.14 Form of Employee Stock Grant Agreement (3)
                  10.15 Form of Employee Stock Restriction Agreement (3)
                  10.16 Form of Promissory Note and Schedule of Notes (3)
                  10.17 Form of January 1994 Shareholder Note and Schedule of Notes (3)
                  10.18 Option of Agreement for Norwood Plant Expansion (3)
                  10.19 China Sales and Distribution Agreement (4)
                  10.20 Sublease of 40 Melville Park Road (5)
                  10.21 Foilmark Holographics, Inc. Stock Purchase Agreement (7)
                  10.22 Sales and Licensing Agreement with Embossing Technology Limited (7)
                  10.23 Acquisition Agreement for West Foils, Inc. (7)
                  10.24 Registration Rights Agreement with Edward Sullivan (7)
                  10.25 1995 $1.2 Million Chemical Bank Term Loan Agreement (9)
                  10.26 1995 $4,400,000 Industrial Revenue Bond Loan Agreement (9)
                  10.27 1995 Employee Stock Purchase Plan (9)
                  10.28 1995 Employee Stock Options Plan (9)
                  10.29 Asset Purchase Agreement between Imtran Industries, Inc. et al and Foilmark,
                          Inc. (10)
                  10.40 Consulting Agreement with Martin A. Olsen dated December 31, 1995 (11)
                  10.41 Registration Rights agreement between Foilmark, Inc. and Martin A. Olsen,
                          dated December 31, 1995 (11)
                  10.42 Amended and Restated Employee Stock Purchase Plan, dated
                          January 31, 1996 (11)
                  10.43 Amended and Restated Employee Stock Option Plan as of
                          January 31, 1996 (11)
                  10.44 Annual Incentive Compensation Plan January 2, 1996 (12)
                  10.45 1997 Waiver and Amendment, Chase Bank
                  10.46 1997 Waiver and Amendment, Fleet Bank
                  10.47 1997 Consulting Agreement with Edward Sullivan
                  10.48 1997 Waiver and Amendment to Term Loan, Chase Bank
                  13.1  Annual Report to Security Holders*
</TABLE>

                  Subsidiaries:
                  21.1  The following is a list of all subsidiaries of the
                          Registrant, the jurisdiction of incorporation, and the
                          percentage of shares owned by each such subsidiary.

<TABLE>
<CAPTION>
                  Name                               Incorporated      Ownership
                  ----                               ------------      ---------
                  <S>                                <C>               <C>
                  Kensol-Olsenmark, Inc.             Delaware          100%
                  Foilmark Manufacturing Corp.       Delaware          100%
                  Kensolmark, Inc.                   Barbados          100%
                  West Foils, Inc.                   California        100%
</TABLE>

      The  following  footnote  references  are  to  documents  incorporated  by
reference herein:

     (1)  Exhibits to Form S-1 filed October 25, 1993.
     (2)  Exhibits to Form S-1 Amendment No. 1 filed December 3, 1993.
     (3)  Exhibits to Form S-1 Amendment No. 2 filed May 9, 1994.
     (4)  Exhibits to Form S-1 Amendment No. 3 filed June 17, 1994.
     (5)  Form 10-Q filed August 8, 1994.
     (6)  Form 10-Q filed November 3, 1994.
     (7)  Form 8-K filed November 30, 1994.
     (8)  Form 8-A filed May 24, 1994. To be filed pursuant to
          Regulation 14A within 120 days of the end of the fiscal
          year covered by this report.
     (9)  Exhibits to Form 10-Q for the Quarter ending June 30, 1995.
     (10) Exhibits to Form 8-K filed on September 1, 1995.
     (11) Exhibits to Form 10-K filed on March 30, 1996.
     (12) Exhibits to Form 10-Q filed on April 30, 1996.

<PAGE>



                          INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

Board of Directors and Stockholders
Foilmark, Inc. and Subsidiaries:

We have audited the accompanying  consolidated balance sheets of Foilmark,  Inc.
and subsidiaries as of December 31, 1996 and 1995, and the related  consolidated
statements of  operations,  Stockholders'  equity and cash flows for each of the
years in the three-year  period ended December 31, 1996. In connection  with our
audits  of the  consolidated  financial  statements,  we have also  audited  the
related  financial  statement  schedule  as  listed  in  item 14  (a)(2).  These
consolidated  financial  statements  and  financial  statement  schedule are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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
Foilmark,  Inc. and  subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted  accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly in all material  respects,  the  information  set forth
therein.


/s/ KPMG Peat Marwick LLP
Providence, Rhode Island
April 14, 1997




                                       F-1
<PAGE>



                         FOILMARK, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                           December 31, 1996 and 1995


<TABLE>
<CAPTION>
                                                                              1996          1995
                                                                              ----          ----
<S>                                                                       <C>           <C>        
                                       Assets
Current assets:
  Cash                                                                    $   199,923       464,256
  Accounts receivable - trade (less allowance for doubtful
    accounts of $539,000 and $299,000 in 1996 and 1995)                     5,730,924     5,933,109
  Inventories                                                              13,910,815    11,556,163
  Other current assets (including $40,000 due from
    an affiliate in 1996 and 1995)                                            206,952       317,655
  Income taxes receivable                                                     491,915          --
  Deferred income taxes                                                       760,246      307,000
                                                                          -----------   -----------
    Total current assets                                                   21,300,775    18,578,183

Property, plant and equipment, net - at cost                               12,518,552    11,541,702
Bond and mortgage financing costs (net of accumulated amortization
  of $344,055 and $247,258 in 1996 and 1995, respectively)                    533,868       442,580
Intangible assets, net                                                      5,840,242     6,184,297
Other assets                                                                  138,680       167,772
Cash - restricted                                                                --       1,037,590
                                                                          -----------   -----------
                                                                          $40,332,117    37,952,124
                                                                          ===========   ===========

                           Liabilities and Stockholders' Equity
Current liabilities:
  Current installments of notes payable - stockholders                    $   132,113       200,433
  Current installments of other long-term debt                              1,385,598     1,823,899
  Accounts payable and accrued expenses                                     6,173,197     4,716,111
  Customer deposits                                                           827,812        71,232
                                                                          -----------   -----------
    Total current liabilities                                               8,518,720     6,811,675

Long-term debt:
  Notes payable to stockholders, net of current installments                  767,054       903,494
  Other long-term debt, net of current installments                        11,398,034     9,828,629
                                                                          -----------   -----------
                                                                           12,165,088    10,732,123
Deferred income taxes                                                       1,398,528     1,165,000
                                                                          -----------   -----------

Commitments and contingencies (Notes 14 and 18)

Stockholders' equity:
  Common stock ($.01 par value; 10,000,000 shares authorized;
    4,151,719 and 4,135,844 shares issued and outstanding
    in 1996 and 1995, respectively)                                            41,517        41,358
  Additional paid-in capital                                               13,364,404    13,317,982
  Retained earnings                                                         4,843,860     5,883,986
                                                                          -----------   -----------
    Total stockholders' equity                                             18,249,781    19,243,326
                                                                          -----------   -----------
                                                                          $40,332,117    37,952,124
                                                                          ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements



                                       F-2
<PAGE>



                         FOILMARK, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

                  Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                    1996            1995            1994
                                                    ----            ----            ----
<S>                                            <C>               <C>             <C>       
Net sales                                      $ 37,190,611      36,806,783      30,583,751
Cost of Sales                                    28,525,964      25,391,907      21,663,327
                                               ------------    ------------    ------------

    Gross profit                                  8,664,647      11,414,876       8,920,424

Selling, general and administrative expenses      9,174,753       7,938,630       6,389,522
                                               ------------    ------------    ------------

                                                   (510,106)      3,476,246       2,530,902
                                               ------------    ------------    ------------

Other income (expense):
     Interest expense - net                        (914,711)       (416,940)       (513,455)
     Other income                                   211,720         114,020         144,677
     Settlement of litigation (note 18)            (305,000)             -                -
                                               ------------    ------------    ------------

         Income (loss) before income taxes       (1,518,097)      3,173,326       2,162,124

Income tax (benefit) expense                       (477,971)      1,330,000         897,000
                                               ------------    ------------    ------------

         Net income (loss)                       (1,040,126)      1,843,326       1,265,124
                                               ============    ============    ============

Net income (loss) per share                            (.25)            .46             .44
                                               ============    ============    ============

Weighted average number of common and
   common equivalent shares outstanding           4,142,318       3,999,263       2,900,489
                                               ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>



                         FOILMARK, INC. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                  Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                        Additional
                                              Common      paid-in       Retained
                                              stock       capital       earnings        Total
                                              -----       -------       --------        -----
<S>                                      <C>             <C>           <C>            <C>      
Balance at December 31, 1993             $    20,000     3,886,038     2,775,536      6,681,574

Shares issued in initial public
 offering                                     17,250     7,650,345          --
                                                                                      7,667,595
Shares issued under stock grants                --          24,356          --           24,356
Shares issues in acquisition of West
   Foils, Inc.                                 1,538       537,887          --          539,425
Net income                                      --            --       1,265,124      1,265,124
                                         -----------   -----------   -----------    -----------

Balance at December 31, 1994                  38,788    12,098,626     4,040,660     16,178,074

Shares issued under stock grants                --           6,926          --            6,926
Shares issued in acquisition of Imtran
    Industries, Inc.                           2,570     1,212,430          --
                                                                                      1,215,000
Net income                                      --            --       1,843,326      1,843,326
                                         -----------   -----------   -----------    -----------

Balance at December 31, 1995                  41,358    13,317,982     5,883,986     19,243,326

Shares issued under stock grants                --           8,923          --            8,923

Shares issued under benefit plans                159        37,499          --
                                                                                         37,658
Net loss                                        --            --      (1,040,126)    (1,040,126)
                                         -----------   -----------   -----------    -----------

Balance at December 31, 1996             $    41,517    13,364,404     4,843,860     18,249,781
                                         ===========   ===========   ===========    ===========
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>



                         FOILMARK, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1996, 1995 and 1994


<TABLE>
<CAPTION>
                                                                     1996           1995           1994
                                                                     ----           ----           ----
<S>                                                             <C>              <C>            <C>      
Cash flows from operating activities:
  Net income (loss)                                             $  (1,040,126)   1,843,326      1,265,124
  Adjustments to reconcile net income (loss) to net
    cash provided by operating activities:
      Depreciation                                                1,351,685        913,629        865,560
                                                                    344,055        299,383        239,798
      Issuance of common stock to employees
        under stock grants                                            8,923          6,926         24,356
      Provision for doubtful accounts                               240,000        137,000         40,000
      Deferred taxes                                               (219,718)      (146,000)       130,385
      Change in assets and liabilities, net of
        effects from the purchase of the companies:
        Increase in accounts receivable                             (37,815)      (736,361)      (503,466)
        Increase in inventories                                  (2,354,652)    (1,504,300)    (1,684,287)
        Increase in income taxes receivable                        (491,915)          --             --
        Decrease (increase) in bond and mortgage
          financing costs and other assets                           48,507       (500,365)       574,764
        Increase (decrease) in accounts payable
          and accrued expenses                                    (1,457,086)      993,908       (704,019)
        Increase (decrease) in customer deposits                    756,580       (248,793)      (295,456)
        Increase (decrease) in income taxes payable                    --         (274,244)       274,244
                                                                -----------    -----------    -----------
      Net cash provided by operating activities                      62,610        784,109        227,003
                                                                -----------    -----------    -----------

Cash flows from investing activities:
  Capital expenditures                                           (2,328,535)    (3,886,398)    (1,279,641)
  Increase (decrease) in cash restricted                          1,037,590     (1,037,590)          --
  Payment for the purchase of companies, net of cash acquired          --             --         (949,603)
                                                                -----------    -----------    -----------
      Net cash used in investing activities                      (1,290,945)    (4,923,988)    (2,229,244)
                                                                -----------    -----------    -----------

Cash flows from financing activities:
  Proceeds from shares issued in public offering                       --             --        7,667,595
  Proceeds of other long-term debt                                3,667,770      5,892,631           --
  Repayments of note payable - bank                              (2,536,646)    (1,200,000)       (50,000)
  Payments of notes payable to stockholders                        (204,780)      (815,202)      (817,587)
  Payments of other long-term debt                                     --             --       (4,133,180)
  Proceeds from shares issued under benefit plans                    37,658           --             --
                                                                -----------    -----------    -----------
      Net cash provided by financing activities                     964,002      3,877,429      2,666,828
                                                                -----------    -----------    -----------

Net increase (decrease) in cash                                    (264,333)      (262,450)       664,587

Cash - beginning of year                                            464,256        726,706         62,119
                                                                -----------    -----------    -----------
Cash - end of year                                              $   199,923        464,256        726,706
                                                                ===========    ===========    ===========
</TABLE>



                                      F-5
<PAGE>



                         FOILMARK, INC. AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, Continued



<TABLE>
<CAPTION>
                                                                     1996           1995           1994
                                                                     ----           ----           ----
<S>                                                                <C>             <C>            <C>      
Supplemental disclosure of cash flow information

Cash paid during the year for:
  Interest ..........................................              $893,392        416,940        506,965
                                                                   --------       --------       --------

  Income taxes ......................................              $129,100        905,000        399,550
                                                                   ========       ========       ========

Supplemental schedule of noncash investing
  and financing activities

Capitalized lease relating to the purchase of
  computer equipment ................................              $   --             --          347,338
                                                                   ========       ========       ========
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>



                        Foilmark, Inc. & Subsidiaries
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
                          December 31, 1996 and 1995

(1) The Company

Foilmark,  Inc.  (the  "Company"  or  "Foilmark")  is a  leading  United  States
manufacturer  of all  components  used in the hot stamping  process:  machinery,
foils, tooling and dies. Hot stamping is a dry process for marking, labeling and
decorating  products  that uses heat and pressure to apply a design or lettering
to a flat,  contoured or cylindrical  shaped surface.  The Company sells its hot
stamping   machines   to   the   appliance,   television   cabinet,   television
manufacturing,  automotive  and  pharmaceutical  industries.  In  addition,  the
Company  produces  and sells hot  stamping  foils for the  graphics  and general
plastic  industries.  The Company also  manufactures pad printing  equipment and
supplies for ink decoration of various products.

(2) Summary of Significant Accounting Policies

(a) Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly-owned   subsidiaries.   All  material   intercompany   balances  and
transactions are eliminated in consolidation.

(b) Inventories

Inventories are stated at the lower of cost or market.  Cost is determined using
the first-in, first-out method.

(c) Property,  Plant and Equipment

Property,  plant and equipment are stated at cost.  Depreciation  is computed as
follows:

                                                                    Estimated
                                    Methods                         Useful Life
                                    -------                         -----------
Building and improvements           Straight-line and accelerated   15-45 years
Machinery, furniture and fixtures   Straight-line and accelerated    3-10 years
Automobiles                         Straight-line                       3 years

(d) Bond and Mortgage Financing Costs

Bond and mortgage  financing  costs are  amortized  over the life of the related
obligations.

(e) Income Taxes

Income taxes are accounted for under the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carry  forwards.  Deferred tax assets and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

(f) Research and Development

The Company  incurs costs in the research  and  development  of new products and
applications.  Such costs are  expensed as incurred and amounted to $650,000 and
$684,253,  and $776,526 for the years ended  December 31, 1996,  1995,  and 1994
respectively, and were included as a component of cost of sales.



                                      F-6
<PAGE>



(g) Use of Estimates

Management  of the  Company  has  made a number  of  estimates  and  assumptions
relating  to the  reporting  of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities  to prepare  these  financial  statements in
conformity with generally accepted accounting  principles.  Actual results could
differ from those estimates.

(h)  Impairment of Long-Lived  Assets to be Disposed of

The  Company  adopted  the  provisions  of  SFAS  No.  121,  Accounting  for the
Impairment of Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996.  This  Statement  requires that  long-lived  assets and certain
identifiable  intangibles be reviewed for impairment  whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceed the fair value of the assets.  Assets to be disposed
of are reported at the lower of the carrying  amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.

(i) Stock Option Plan

Prior to January 1, 1996,  the Company  accounted  for its stock  option plan in
accordance  with the provisions of Accounting  Principles  Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees,  and related  interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying  stock  exceeded the exercise  price.  On
January 1, 1996, the Company  adopted SFAS No. 123,  Accounting for  Stock-Based
Compensation,  which  permits  entities to recognize as expense over the vesting
period  the  fair  value  of all  stock-based  awards  on  the  date  of  grant.
Alternatively,  SFAS No.  123 also  allows  entities  to  continue  to apply the
provisions  of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based  method defined in SFAS No. 123 had been
applied.  The Company has  elected to  continue to apply the  provisions  of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

(j) Reclassification

Certain  reclassifications  were made to prior year  amounts in order to conform
with current year presentations

(3) Manufacturing Facilities Consolidation

In  the  first  quarter  of  1996,  the  Company   consolidated   its  machinery
manufacturing operations by transferring a portion of machine manufacturing from
the  Norwood,  Massachusetts  plant to the  Newburyport,  Massachusetts,  Imtran
Foilmark facility. Costs incurred in this move totaled approximately $200,000 in
1996, and were included in cost of goods sold.  Cost of goods sold in 1996 also
includes approximately $100,000 in other facility consolidation costs.

(4) Acquisitions

(a) West Foils, Inc.

Effective  October 1, 1994, the Company acquired all of the outstanding stock of
West Foils, Inc., a California company engaged in the distribution of foils, for
$750,000 in cash and 153,847  shares of common stock of the Company.  The common
stock  was  valued at  approximately  $540,000  based  upon an  appraisal  by an
investment  company.  The cash  portion  of the  purchase  price  was paid  from
borrowings  under the  Company's  line of credit  agreement  with its bank.  The
acquisition  has been  accounted for as a purchase and the operating  results of
West Foils, Inc. are included in the consolidated statement of earnings from the
date of  acquisition.  The  excess of the total  acquisition  cost over the fair
value of assets acquired, amounting to approximately $786,000 is being amortized
on the straight line basis over 20 years.



                                      F-7
<PAGE>



In  connection  with the  acquisition,  the Company  entered into an  employment
agreement with the former shareholder of West Foils, Inc. Under the terms of the
employment agreement,  the Company is obligated to pay a base salary of $120,000
per year plus 15% of West Foils  earnings over $300,000 per year, in each of the
next two years.  The  employment  agreement  terminated  on December 31, 1996 by
mutual agreement.  The former  shareholder is now serving as a consultant to the
Company pursuant to a two year consulting agreement.

(b) Imtran

On August 21, 1995,  the Company  acquired  substantially  all of the assets and
assumed  certain  liabilities  of Imtran  Industries,  Inc. The acquired  assets
consist  primarily of equipment and other property used in the  manufacture  and
distribution of pad printing  equipment.  The Company has transferred all of the
assets to a newly formed  wholly-owned  subsidiary  Imtran Foilmark,  Inc. which
will continue  operations in the pad printing  business.  The aggregate purchase
price of $4.9  million  was paid  through  a $3.7  million  borrowing  under the
Company's  available  line of credit and the  issuance of 257,044  shares of the
Company's  common stock (which was valued at $1,215,000  based upon  appraisal.)
The acquisition, which was accounted for as a purchase, resulted in an excess of
cost over fair value of assets acquired of approximately $3.9 million,  which is
being amortized on the straight line basis over 20 years.

The following unaudited pro forma consolidated results of operations assume that
the West Foils and Imtran  acquisitions  occurred on January 1, 1994 and reflect
the  historical  operations of the purchased  businesses  adjusted for increased
interest expenses as a result of borrowings and increased  amortization,  net of
applicable income taxes resulting from the acquisitions:

                                                     1995                1994
                                                     ----                ----
Net sales ..............................         $39,384,000         $34,433,000
Net income .............................           1,915,000           1,317,000
Net income per share ...................                 .46                 .42

The pro forma results of operations are not necessarily indicative of the actual
results of operations  that would have  occurred had the purchases  been made at
the beginning of the period, or of results which may occur in the future.

(5) Inventories

Inventory balances consist of the following:

                                                   1996                  1995
                                                   ----                  ----
Raw materials ......................           $   795,856           $ 1,885,377
Work-in-progress ...................             3,768,067             1,837,471
Finished goods .....................             9,346,892             7,833,315
                                                ----------            ----------
                                                13,910,815            11,556,163
                                                ==========            ==========

Polyester,  the  primary  raw  material  in foil  manufacturing,  is  subject to
fluctuations in price depending on industry supply and demand.

                                      F-8
<PAGE>



(6) Property, Plant and Equipment

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

                                                       1996              1995
                                                       ----              ----
Land .......................................       $   697,404       $   697,404
Building and improvements ..................         7,106,686         6,492,023
Machinery, furniture and fixtures ..........        13,336,891        11,633,509
Automobiles ................................           112,553           102,063
                                                   -----------       -----------
                                                    21,253,534        18,924,999
Less accumulated depreciation ..............         8,734,982         7,383,297
                                                   -----------       -----------
                                                    12,518,552        11,541,702
                                                   ===========       ===========

Depreciation expense amounted to $1,351,685, $913,629 and $865,560 for the years
ended December 31, 1996, 1995 and 1994 respectively.

(7) Intangible Assets

Intangible assets at December 31, 1996 and 1995 include the following:

<TABLE>
<CAPTION>
                                                                                              Amortization
                                                               1996              1995            Period
                                                               ----              ----            ------
<S>                                                         <C>               <C>               <C>     
Excess of cost over fair value of assets acquired...        $5,768,759        $5,768,759        20 Years
Covenant not to compete.............................           325,000           325,000        10 Years
Patents.............................................           363,156           363,156        17 Years
Trademarks..........................................           157,063           157,063        20 Years
                                                            ----------        ----------
                                                             6,613,978         6,613,978
Less: accumulated amortization ....................            773,736           429,681
                                                            ----------        ----------
                                                             5,840,242         6,184,297
                                                            ==========        ==========
</TABLE>

The Company assesses the recoverability of the excess of cost over fair value of
assets acquired annually based upon the projected undiscounted future cash flows
of the acquired entity with any diminution in value recorded when identified.

Amortization expense of $344,055,  $299,383, and $239,798 relating to intangible
assets was charged to operations in 1996, 1995 and 1994, respectively.

(8) Notes Payable - Stockholders

Notes payable to stockholders' consist of the following:

<TABLE>
<CAPTION>
                                                                                                           1996               1995
                                                                                                           ----               ----
<S>                                                                                                   <C>                <C>        
Notes  payable to  stockholders  with  interest  at 6% and  balance due in equal
quarterly  installments  through  December 31, 2003,  subordinated to bank notes
and/or industrial revenue bonds ..............................................................        $   182,675        $   206,568

Promissory notes to a stockholder,
subordinated except for monthly installments
through the due date to industrial development
revenue bonds, bearing a stated interest rate of 6% due in
</TABLE>



                                      F-9
<PAGE>



<TABLE>
<CAPTION>
                                                                                                           1996               1995
                                                                                                           ----               ----
<S>                                                                                                   <C>                <C>        
quarterly installments of $10,357 including interest
through 2003 .................................................................................            156,265            187,150

Notes due to a  stockholder  in  connection  with the  acquisition  of  Franklin
Manufacturing  Corporation.  Payable in aggregate monthly installments of $8,500
through March 1997 including interest at
approximately 6.5% ...........................................................................             25,400            129,879

Notes due to former  stockholders,  payable in semi-annual  payments of $19,911,
which include interest at 6% per annum.  Payments began May 1, 1993 and continue
through November 1, 2007, subordinated
through the due date .........................................................................            534,827            580,330
                                                                                                        ---------          ---------

Total notes payable stockholders .............................................................            899,167          1,103,927
Less current installments ....................................................................            132,113            200,433
                                                                                                        ---------          ---------

Notes payable-stockholders, excluding
current installments .........................................................................            767,054            903,494
                                                                                                        ---------          ---------

Interest  amounting  to $57,935,  $66,381,  and  $175,000 in 1996,  1995,  1994,
respectively, was paid to the Company's stockholders or other related parties.


(9) Other Long-Term Debt
Other long-term debt consists of the following:

<CAPTION>
                                                                                                           1996               1995
                                                                                                           ----               ----
<S>                                                                                                   <C>                <C>        
Borrowings under revolving credit loan financing
agreement, see (a) ...........................................................................        $ 5,560,552        $ 4,225,000

Borrowings under The Massachusetts Industrial
Financing Agreement, see (b) .................................................................          4,100,000          4,400,000

Mortgage  note payable in  quarterly  installments  of $33,292 plus  interest at
LIBOR + 2% (5.56% at December 31, 1996,) with a final payment of $699,126 due
January 17, 2007; secured by real property with
a depreciated cost of $2,939,509, see (c) ....................................................          1,997,500               --

Borrowings under financing agreement, interest
at prime (8.25% at December 31, 1996) payable
monthly, through June 1999, see (d) ..........................................................            775,000          1,200,000

Capital lease obligation payable in quarterly
installments of $21,379, including interest at 6%,
through March 1999 ...........................................................................            179,404            241,121

Mortgage loans payable, interest at prime(8.25%
at December 31, 1996) see (e) ................................................................            171,176               --
</TABLE>



                                      F-10
<PAGE>



<TABLE>
<CAPTION>
                                                                                                           1996               1995
                                                                                                           ----               ----
<S>                                                                                                   <C>                <C>        

Second  mortgage  payable - This mortgage is payable in monthly  installments of
$6,541 plus interest at prime plus 1-1/4% per annum through  January 1, 2000 and
a final payment of $399,068 due January 24, 2000 .............................................               --              719,577

Mortgage loan payable,  interest at prime plus 1-1/4% per annum,  due in monthly
installments of $6,667 plus interest to October 1, 1996, and a final
payment of $806,627 due October 1, 1996 ......................................................               --              866,830
                                                                                                       ----------          ---------

Total other long-term debt ...................................................................         12,783,632         11,652,528
Less current installments ....................................................................          1,385,598          1,823,899
                                                                                                       ----------          ---------

Other long-term debt, excluding current installments .........................................         11,398,034          9,828,629
                                                                                                       ==========          =========
</TABLE>

(a) In 1995, the Company entered into an unsecured  revolving  credit  agreement
with two banks  that  permits  the  Company  to borrow  up to  $6,000,000  at an
interest  rate that  equals  the  Reserve  Adjusted  LIBOR rate plus 2% (5.56 at
December 31, 1996). The Company must pay a quarterly commitment fee of 1/4 of 1%
per  annum  on the  average  daily  amount  of the  available  revolving  credit
commitment.  Borrowings  under the revolver include two term notes. A $2,316,617
term note shall be payable in sixty monthly installments beginning September 30,
1996.  A $1,158,333  term note shall be payable in full on June 30, 1998.  As of
December 31, 1996, the Company had an outstanding total of $5,560,552, under the
revolving  credit  agreement.  As of March 31, 1997, the Company has amended the
agreement.  The amended agreement does not require  principal  payments prior to
June 30, 1998 and has less restrictive financial ratio covenants.

(b) In 1995, the Company  entered into a financing  agreement with the Company's
primary bank and the State of Massachusetts (MIFA Industrial Development Revenue
Bonds)  that  permitted  the  Company to borrow up to  $4,400,000  at the bank's
fluctuating  seven day  interest  rate (5.56% and 5.1% at December  31, 1996 and
1995).  The Company must pay a monthly  commitment  fee of 1/12th of one percent
(1%) per annum on the average daily stated  amount of the letter of credit.  The
bonds are subject to  mandatory  redemption  through  sinking  fund  installment
payments  prior to  maturity  on each  June 1 as  follows:  $400,000  for  years
1997-2005, and $100,000 for years 2006 - 2010.

(c) In 1996, the Company entered into a financing agreement with two banks which
provides  for a ten year  mortgage  note  payable,  in the  principal  amount of
$1,997,500.  Approximately  $1,484,000  was  used  to  refinance  the  Company's
previously existing mortgages.

(d) In 1995, the Company  borrowed  $1,200,000  from a bank. Such borrowings are
repayable in 48 equal monthly installments  beginning July 31, 1995. Interest is
payable  monthly at the bank's prime rate.  The agreement  allows for a one time
election by the Company to convert the interest rate to a fixed rate.

(e) In 1996, the Company  borrowed  $180,250 under two mortgage loan agreements.
The mortgages are payable  monthly plus interest at 7.75%. At December 31, 1996,
a building with a net book value of $217,000 was pledged as collateral  for this
loan.

The terms of the various long term debt agreements require,  among other things,
that the  Company  maintain  certain  amounts of tangible  net worth,  ratios of
current assets to current  liabilities,  total liabilities to tangible net worth
plus subordinated liabilities, and debt service coverage and restrict the amount
of capital expenditures, and the payment of dividends. At December 31, 1996, the
Company was not in compliance  with certain of these covenants for which waivers
were received from the lenders.



                                      F-11
<PAGE>



The Company  requested,  and obtained,  amendments to the various  agreements to
change the financial  ratio  covenants  and the Company has assessed  based upon
projected  operations it is probable  that it will meet these amended  covenants
over the next year.  If the  Company  fails to meet the  covenants,  the lenders
under the Agreement have the right to demand repayment of the debt.

Maturities of all long term debt are as follows:

                            Total          Stockholders          Other
                            -----          ------------          -----
Year ending December 31:
1997 .................    1,517,711           132,113         1,385,598
1998 .................    4,853,714           112,922         4,740,792
1999 .................    1,315,934           119,827         1,196,107
2000 .................    1,482,085           127,155         1,354,930
2001 .................      780,453           105,915           674,538
Thereafter ...........    3,732,902           301,235         3,431,667
                         ----------        ----------        ----------
                         13,682,799           899,167        12,783,632
                         ==========           =======        ==========

(10) Employee Retirement Plans

The  Company  maintains  a profit  sharing  plan  for the  benefit  of  eligible
employees of certain subsidiaries. Contributions are made at the sole discretion
of the Board of Directors,  but may not exceed the amounts deductible for income
tax purposes.  Contributions  are first allocated based upon an integration with
the  social  security  taxable  wage base and the  remainder  based  upon  total
eligible  compensation.  There  was no  expense  under  the  plan  during  1996.
Retirement plan expense  amounted to $122,000 and $168,000 in the years 1995 and
1994, respectively.

The Company also maintains a profit sharing plan which conforms with Section 401
(k) of the Internal  Revenue Code.  Contributions  are made  exclusively  by the
participants. The Company does not contribute to the Plan.

The Company does not pay post-retirement or other post-employment benefits.

(11) Income Taxes

The provision for income tax (benefit)  expense for the years ended December 31,
1996, 1995, and 1994 is as follows:

                                   1996              1995            1994
                                   ----              ----            ----
Federal:
  Current ..............       $  (312,486)       $ 1,169,000        $   553,000
  Deferred .............           (75,808)        (109,000)            96,000
                               -----------        -----------        -----------
                                  (388,294)         1,060,000            649,000
                               -----------        -----------        -----------

State:
  Current ..............            54,233            307,000            213,615
  Deferred .............          (143,910)           (37,000)            34,385
                               -----------        -----------        -----------
                                   (89,677)           270,000            248,000
                               -----------        -----------        -----------
                               $  (477,971)         1,330,000            897,000
                               ===========        ===========        ===========



                                      F-12
<PAGE>



Income tax (benefit)  expense for the years ended  December 31, 1996,  1995, and
1994 differed from the amounts  computed by applying the U.S. federal income tax
rate of 34% to  pretax  income  from  continuing  operations  as a result of the
following:

<TABLE>
<CAPTION>
                                                           1996         1995          1994
                                                           ----         ----          ----
<S>                                                      <C>         <C>          <C>       
Computed "expected" tax (benefit) expense ..........     (516,153)   $1,079,000   $  735,000

Increase (reduction) in income taxes resulting from:
Nondeductible expenses .............................       71,819        51,000       18,000

State and local income taxes, net of
federal income tax benefit .........................      (59,187)      178,000      178,000

Other, net .........................................       25,550        22,000      (34,000)
                                                       ----------    ----------   ----------
                                                         (477,971)    1,330,000      897,000
                                                       ==========    ==========   ==========
</TABLE>

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and  deferred tax  liabilities  at December 31, 1996,
and 1995 are presented below:

                                                          1996           1995
                                                          ----           ----
Deferred tax assets:
Accounts receivable principally due to allowance
for doubtful accounts .............................  $   214,190    $    81,000
Inventories, cost capitalization ..................      226,177        137,000
Unrealized inventory write downs ..................      138,855           --
Reserve for settlement of litigaton................       96,075           --
Compensated absences, principally due to accrual
for financial reporting purposes ..................       53,450         89,000

Net state operating loss carry forward ............       88,400           --
Other .............................................       93,876
                                                      ----------     ---------- 
Net deferred tax assets ...........................      911,023        307,000
                                                      ==========     ========== 
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation and capitalized interest ..........   (1,549,305)    (1,165,000)
                                                      ----------     ---------- 
Total gross deferred liabilities ..................   (1,549,305)    (1,165,000)
                                                      ----------     ---------- 
Net deferred tax liability ........................     (638,282)      (858,000)
                                                      ==========     ========== 

As of December 31, 1996 and 1995 no  valuation  allowance  has been  established
relative to the deferred tax assets.  In assessing the realizability of deferred
tax assets,  management  considers  whether it is more likely than not that some
portion or all of the  deferred  tax assets will not be  realized.  The ultimate
realization  of deferred tax assets is dependent  upon the  generation of future
taxable income during the periods in which those  temporary  differences  become
deductible.   Management  considers  the  scheduled  reversal  of  deferred  tax
liabilities,  carryback  availability,  and projected  future  taxable income in
making this  assessment.  Based upon the level of historical  taxable income and
projections  for future  taxable  income over the periods which the deferred tax
assets are  deductible,management  believes  that it is more likely than not the
Company will realize the benefits of these deductible differences. The amount of
the deferred tax asset considered  realizable,  however, could be reduced in the
near term if estimates of future  taxable income during  thecarryforward  period
are reduced.

(12) Stockholders' Equity



                                      F-13
<PAGE>



(a) Stock Grants

Since 1986 the Company has granted  61,992 shares of its common stock to certain
key  employees.  The grants are recorded at net book value which was  considered
the fair  market  value on the  date of the  grant,  as  determined  by  Company
management.  Granted  shares  vest 20% per year  beginning  on the  December  31
immediately  after the grant.  As of December  31,  1996,  2,035  shares  remain
unvested. Deferred compensation expense is recorded by the Company for the value
of the grants  that have not  vested.  Deferred  compensation  expense  has been
netted  with  additional  paid-in  capital  in  the  accompanying   consolidated
statements  of  stockholders'  equity.  No shares were granted in 1996 and 1995.
Compensation expense of $8,923, $6,926, and $24,356 relating to these grants was
recorded for the years ended December 31, 1996, 1995 and 1994, respectively.

(b) Stock Option Plan

The Company had two stock option plans in effect at December 31, 1996:  The 1993
Employees Stock Option Plan (1993 Plan) and the 1995 Employees Stock Option Plan
(1995 Plan) (collectively the "plans").

The 1993 and 1995  Employees  Stock Option Plans provide for the issuance to key
employees and officers a maximum of 200,000 and 400,000  shares of common stock,
respectively, in the form of stock options. Stock options issued under the Plans
may be granted as "Incentive  Stock Options" (as defined by the Internal Revenue
Code of 1986) or  nonqualified  stock  options.  Options may be  exercised  only
within ten years from the date of grant.

Effective September 1, 1994, certain  officer/shareholders  agreed to cancel and
rescind stock options to purchase  18,700 and 17,400 shares  respectively of the
Company's  authorized but unissued  common stock  previously  granted to them in
1993  in  accordance  with  the  1993  Plan.  Effective  May  5,  1995,  certain
officers/shareholders  agreed to cancel and  rescind  stock  options to purchase
88,900 shares of the Company's  authorized but unissued common stock  previously
granted to them in 1993 in  accordance  with the 1993 Plan.  Stock  options  for
160,150 shares of common stock with an exercise price of $5.50 per share, remain
outstanding. As a result of the cancellation, 39,850 shares remain available for
granting under the 1993 Plan.

At December 31, 1996,  there were 39,850  additional  shares available for grant
under the 1993 Plan and 352,050 additional shares available under the 1995 Plan.
The per share  weighted-average  fair value of stock options granted during 1995
and 1996 was $2.48 and $2.29  respectively  on the date of grant using the Black
Scholes option-pricing model with the following  weightied-average  assumptions:
1993 Plan - expected dividend yield 0%, risk-free interest rate of 5.95%, and an
expected  life of 5 years;  1995 Plan - expected  dividend  yield 0%,  risk free
interest rate of 6.03%, and an expected life of 5 years. The expected volatility
rate was 39% for both plans.

The  Company  applies  APB  Opinion  No.  25 in  accounting  for its  Plan  and,
accordingly,  no compensation  cost has been recognized for its stock options in
the financial statements.  Had the Company determined compensation cost based on
the fair value at the grant date for its stock  options  under SFAS No. 123, the
Company's net income would have been reduced to the pro forma amounts  indicated
below:

                                                       1996            1995
                                                       ----            ----
     Net income        As reported ...........    $(1,040,126)     $1,843,326
                       Pro forma .............     (1,287,965)      1,611,642
     EPS               As reported ...........           (.25)            .46
                       Pro forma .............           (.31)            .40

Pro forma net income  (loss)  reflects  only  options  granted in 1996 and 1995.
Compensation cost is reflected over the options' vesting period of 1 year.



                                      F-14
<PAGE>



The following table summarizes the activity in the Plan:

                                                              Weighted-Average
                                           Number               Option price
                                         of  Shares              per Share
                                         --  ------              ---------
Outstanding,                             
  January 1, 1994................         125,000                 $7.35
Rescinded........................         (36,100)                 7.70
                                          -------                ---------
Balance,                                 
 December 31, 1994...............          88,900                  7.35
  Rescinded......................         (88,900)                 7.35
   Granted.......................         160,150                  5.50
                                          -------                ---------
Balance,                                 
 December 31, 1995...............         160,150                  5.50
   Granted.......................          47,950                  4.50
                                          -------                ---------
Balance,                                 
 December 31, 1996...............         208,100                 $5.27
                                          =======                =========
                                    
At  December  31,  1996 the number of options  exercisable  was  160,150  with a
weighted-average  exercise price of $5.50.  At December 31, 1995 no options were
exercisable.

(c) Employee Stock Purchase Plan

The  Employee  Stock  Purchase  Plan  (the  "ESPP")  covers   substantially  all
employees. The ESPP allows eligible employees the right to purchase common stock
every  eight  weeks at 85% of the  average  market  price  during the eight week
period.  As of  December  31,  1996 there were  400,000  shares of common  stock
reserved for the ESPP.  The number of shares  issued under the plan in 1996 were
15,828 shares for $37,658.

(13) Foreign Sales

The Company's foreign sales are made principally to customers in Western Europe,
Taiwan,  Peoples  Republic  of China,  Mexico,  South and Central  America.  All
foreign sales are payable in U.S. dollars.  No single country accounted for more
than 5% of the Company's  sales.  Such sales amounted to $5,981,700,  $4,655,000
and  $4,203,000  for  the  years  ended  December  31,  1996,   1995,  and  1994
respectively.

(14) Commitments

Rental Commitments

The Company's  minimum  annual  rentals under various  non-cancelable  operating
leases for  warehouse  space,  equipment and autos  expiring  through 2000 is as
follows:

Year ending December 31:
------------------------
1997 ................................................                   $356,207
1998 ................................................                    314,673
1999 ................................................                    269,111
2000 ................................................                    154,761
2001 ................................................                     75,330

Rental expense under operating  leases was $438,000,  $150,000,  and $175,000 in
1996,  1995 and 1994,  respectively.  Rent expense of $30,000 per annum was paid
for the years ended  December 31, 1995,  and 1994 to an entity  wholly-owned  by
certain stockholders of the Company.



                                      F-15
<PAGE>



(15) Business and Credit Concentrations

The Company's  customers are located  primarily  throughout  the United  States.
There  were  no  accounts  receivable  from a  customer  greater  than 5% of the
Company's total stockholders' equity at December 31, 1996.

(16) Quarterly Results of Operations (Unaudited)

The following  table sets forth  quarterly  financial  information  for 1996 and
1995:

                          Net          Gross          Net      Net income(loss)
                         sales         profit        income       per share
                         -----         ------        ------       ---------
1996:
First  quarter ...   $ 8,846,000   $ 2,246,000   $  (183,000)       $(.04)
Second quarter ...    10,162,000     2,888,000       143,000          .03
Third quarter ....     9,564,000     2,588,000        70,000          .02
Fourth quarter ...     8,619,000       943,000    (1,070,000)        (.26)
                     -----------   -----------   -----------         ----
Total ............    37,191,000     8,665,000   $(1,040,000)       $(.25)
                     -----------   -----------   -----------         ----

1995:
First quarter ....   $ 9,668,000   $ 2,979,000   $   523,000         $.14
Second quarter ...     9,131,000     3,036,000       594,000          .15
Third quarter ....     8,813,000     2,790,000       480,000          .12
Fourth quarter ...     9,195,000     2,610,000       246,000          .06
                     -----------   -----------   -----------         ----
Total ............   $36,807,000   $11,415,000   $ 1,843,000         $.46
                     -----------   -----------   -----------         ----

1994:
First quarter ....   $ 7,401,000   $ 2,084,000   $   231,000         $.12
Second quarter ...     7,918,000     2,471,000       247,000          .12
Third quarter ....     7,859,000     2,113,000       279,000          .08
Fourth quarter ...     7,406,000     2,252,000       509,000          .13
                     -----------   -----------   -----------         ----
Total ............   $30,584,000   $ 8,920,000   $ 1,265,000         $.44
                     ===========   ===========   ===========         ====

The fourth quarter of 1996 includes a $500,000  write down of inventory  related
to  discontinued  products and  $100,000 in facility  relocation  expenses.  The
fourth quarter of 1996 also include a $305,000  settlement of a lawsuit,  (note
18).

The fourth  quarter of 1994 includes  $100,000 in proceeds from a life insurance
policy covering the Company's former director and executive vice president.  The
effective  tax rate in the fourth  quarter of 1994 was lower than the  effective
rate for the entire  year in order to adjust the  Company's  tax  expense to the
required amount.

(17) Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

Accounts  receivables-trade,  other  current  assets,  notes  payable  to banks,
accounts  payables and accrued  expenses,  customer deposits and deferred income
taxes.  The carrying  amounts of these financial  instruments  approximate  fair
value because of the short maturity of those instruments.

Notes  payable-stockholders  and other  long-term  debt:  The fair  value of the
Company's  long-term debt is estimated by  discounting  the future cash flows of
each  instrument  at rates  currently  offered to the Company  for similar  debt
instruments  of comparable  maturities by the Company's  bank.  Such fair values
approximated carrying values at December 31, 1996 and 1995.



                                      F-16
<PAGE>



(18) Commitments and Contingencies

For all of 1996, the Company was a defendant in a group of consolidated lawsuits
brought  in 1995  alleging  personal  injuries  arising  out of a motor  vehicle
accident  involving a vehicle  leased by one of the Company's  subsidiaries  and
operated by an employee of that  subsidiary.  Plaintiffs  sought  damages for an
amount significantly in excess of the Company's insurance policy limits.  During
1996 the Company settled two (2) of the cases within the limits of its liability
insurance  policy.  On April 8, 1997 the Company  settled the remaining cases by
agreeing to pay $200,000.00 to the remaining Plaintiffs.  In connection with the
settlement,  the  Company's  liability  carrier  paid the  balance of the amount
available  under the policy after giving effect to the prior  settlement.  These
settlements have been confirmed by the Superior Court and Dismissal Stipulations
have been entered  dismissing the  litigation  with  prejudice.  The Company has
recorded $305,000 to cover the cost of the settlement in excess of the insurance
proceeds and additional settlement related costs.

The Company is involved in various other claims and legal actions arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's consolidated financial position, results of operations or liquidity.


                                      F-17
<PAGE>



                                                                      Schedule 1

                         FOILMARK, INC. AND SUBSIDIARIES

                  Schedule of Valuation and Qualifying Accounts

                  Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
Col. A                     Col. B           Col. C            Col. D            Col. E           Col. F
------                     ------           ------            ------            ------           ------
                           Balance at       Charged to                                           Balance
                           beginning        cost and                                             at end of
Classification             of period        expense           Deductions (1)    Other            period
--------------             ---------        -------           ----------        -----            ------
<S>                        <C>              <C>                    <C>          <C>             <C>     
For the year ended
December 31, 1994:
Allowance for doubtful
accounts (deducted from
accounts receivable)       $122,000         $  40,000               --           --             $162,000

For the year ended
December 31, 1995:
Allowance for doubtful
accounts (deducted from
accounts receivable)        162,000           137,000               --           --              299,000

For the year ended
December 31, 1996:
Allowance for doubtful
accounts (deducted from
accounts receivable)        299,000           240,000               --           --              539,000
</TABLE>


(1)   Deductions  relate to  uncollectible  accounts  charged  off to  valuation
      accounts, net of recoveries


                                       S-1


<PAGE>


                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(g) of the  Securities
Exchange Act of 1934,  the Registrant has duly caused this document to be signed
on its behalf by the undersigned, thereunto duly authorized.

FOILMARK, INC.

By:       /s/ Frank J. Olsen, Jr.                         Date:   April 11, 1997
    -------------------------------------
         Frank J. Olsen, Jr., President

      Pursuant to the  requirements  of the Securities  Exchange Act of 1934, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

           Signature                Capacity                        Date
           ---------                --------                        ----
/s/ Frank J. Olsen, Jr.       Chairman of the Board            April 11, 1997
------------------------      Chief Executive Officer
Frank J. Olsen, Jr.

/s/ Philip Leibel             Vice President - Finance         April 11, 1997
------------------------      Chief Financial Officer
Philip Leibel                 

/s/ Leonard A. Mintz          Senior Vice President            April 11, 1997
------------------------      & Director
Leonard A. Mintz

/s/ Wilhelm P. Kutsch         Senior Vice President            April 11, 1997
------------------------      & Director
Wilhelm P. Kutsch

/s/ Edward Sullivan           Vice President -                 April 11, 1997
------------------------      West Coast Operations
Edward Sullivan               & Director

/s/ Carol J. Robie            Vice President -                 April 11, 1997
------------------------      Administration & Director
Carol J. Robie

/s/ Kenneth Harris            Vice President -                 April 11, 1997
------------------------      Pad Print Operations
Kenneth Harris                & Director

/s/ Martin A. Olsen           Chairman of the Board            April 11, 1997
------------------------      Emeritus & Director
Martin A. Olsen



                                       22
<PAGE>



           Signature                Capacity                        Date
           ---------                --------                        ----
/s/ Michael J. Bertuch        Director                         April 11, 1997
------------------------
Michael J. Bertuch

/s/ Michael Foster            Director                         April 11, 1997
------------------------
Michael Foster



                                       23