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, 1997

                                 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:           (978) 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 Regulations 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 12, 1998, was $18,239,952.

The number of shares of all classes of the registrant's common stock at March
12, 1998 = 4,169,132.

                    Exhibit Index             Number of
                    Located on                Pages Comprising
                    Page 18                   This Report = 40


<PAGE>


Item 1         BUSINESS



General

     Foilmark,  Inc. is in the business of  manufacturing  and marketing  foils,
films, and applicating systems and supplies that are used to mark and/or enhance
the customer's  items.  The Company's  primary product is the manufacture of hot
stamping  foils.  Hot stamping,  a dry process,  used for marking,  labeling and
decorating products,  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 series of coatings on one side.  The  coatings  may consist of a
single  color,  such as metallized  gold,  used for embossed  lettering,  or may
include complex  designs,  including  patterns 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.  With stamping  machinery,  the
foils can be applied 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 cards.

     Hot Stamping Foils are manufactured by the Company's  subsidiary,  Foilmark
Manufacturing   Corporation  ("FMC"),  and  its  FHI  Division,  which  produces
holographic (i.e., three-dimensional effect) and embossed film for packaging.

     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  enhancement
process,  in which ink  decoration  is applied to a multitude  of  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,  appliance,  advertising specialty,  automotive,  toy, optical apparatus,
computer equipment, and components industries.

     In  October  1997,  the  Company   announced  the   discontinuance  of  the
manufacture  of hot  stamping  machines and related  equipment by the  Company's
subsidiary,  Kensol-Olsenmark,  Inc., in order to focus on its hot stamping foil
and  holographic  film  products,  and its pad  printing  machinery  and  supply
business segments. The assets of a portion of the hot stamping equipment product
line,  consisting of vertical stamping presses,  were sold in December 1997, and
the credit  card and the chain  operated  machines  in March  1998.  The Company
ceased  manufacturing  hot stamping machines at the end of December 1997, except
to fill existing  purchase  orders  received  prior to October 15, 1997. The hot
stamping machinery product line is presented as discontinued  operations for the
year ended  December 31, 1997,  and all the financial  statements  shown in this
report have been restated accordingly.

     The  Company's  foil product line and pad printing  machinery,  tooling and
dies product line accounted for approximately  82% and 18% respectively,  of its
net sales for the fiscal year ended December 31, 1997.









                                        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 plastics  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 FMF  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. An
additional  contract for $2,760,000 was obtained  through Segue with China North
Industries,  to supply equipment to manufacture,  convert and apply hot stamping
foils and holographic products. The equipment for China was shipped in February,
1997.

     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 Mr.  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. Mr. Sullivan was appointed
Director and Vice President of West Coast Operations of Foilmark,  and Director,
Vice President and General Manager of West Foils.  Under his four year 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  December 31,
1996. Mr. Sullivan and the Company entered into a two year consulting agreement,
effective January 1, 1997.

     In December  1994,  following the  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  4,000  square  feet  in
Newburyport.








                                        3


<PAGE>


     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,  remained as Vice  President and  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.

     In June and August 1997, the Melville, New York, and Norwood, Massachusetts
real estate  was sold, with the majority of the proceeds used for
bank debt reduction.

     In  October  1997,  the  Company  announced  the   discontinuation  of  the
manufacture of the Kensol and Franklin hot stamping equipment, in order to focus
on its hot  stamping  foil and  holographic  film  products,  as well as its pad
printing machinery and supply business segments.  During the 1997 third quarter,
the Company incurred a charge of approximately  $4,000,000,  net of tax benefit,
including  restructuring  charges of  $1,153,000  for  severance and other costs
related to the discontinuation. The hot stamping equipment product line was sold
in December 1997, including the Kensol and Franklin names. In February 1998, the
credit card machinery product line was sold.

Products and Processes

     Hot Stamping and Holographic  Foils - Hot stamping foils  represented $25.7
million (77%) of the Company's net sales in 1997. In addition,  there were sales
of $1.9  million  (or 5%) in  equipment  to  manufacture,  convert and apply hot
stamping foils and holographic  products,  for a total of $27.4 million (or 82%)
of the Company's net sales in 1997. 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)  infrared 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 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
applying a number of thin  coatings  to 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.




                                        4


<PAGE>


     Pad Printing Machinery and Tooling - Pad printing machines,  tooling,  dies
and supplies  constituted  $6.0 million (or 18%) of the Company's net sales from
continuing  operations  in 1997,  as  compared  to $6.5  million (or 22%) of the
Company's net sales in 1996, and $3.3 million (or 12%) of net sales in 1995.

     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
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.  Calls from customers  regarding  application issues are fielded
through this group.  (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,  and also includes and in-house art  department.  This group
also includes the silicone rubber tooling manufacture, for hot stamping systems,
that was relocated after the acquisition. Included in the manufacture of silicon
dies is magnesium  etching for dies and molds,  as well as high tonnage  presses
for their manufacture.  Silicon rollers for hot stamping and laminating are also
manufactured by this group.

Sales, Marketing and Customers

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

     The Company has a diverse  customer  base and seeks to market its hot stamp
foil,  holographic film and supplies on a broad range of consumer products.  The
Company's  products  are sold to more than 3,500  active  customers,  worldwide,
ranging  from small  companies  to Fortune  500  companies.  No single  customer
accounted for more than 6% of total net sales of foil,  pad print  machines,  or
tooling and dies, in 1997. Of the largest 15 customers,  10 have been  customers
for five or more years.  Distributors sell the Company's products worldwide,  on
terms of either  letters of credit or open account.  The Company has worked with
distributors,  on both an exclusive and non-exclusive basis, for periods ranging
from two to fifteen years.  Foreign customers  accounted for 20% of net sales in
1997, and 14% of net sales in 1996.

     The Company sells its foil through its direct sales force, and indirectly
through distributors. No foil customer accounted for more than 7% of total net
foil sales in 1997. Hot stamping foils, manufactured by the Company, are sold
domesti   cally, under private label, by distributors. Terms of sale for hot
stamping foils are typically "net 30."





                                        5


<PAGE>


     The  Company  sells  its  pad  printing  machinery  directly,   or  through
manufacturer's representatives. No pad printing customer accounted for more than
3% of total  net  sales of  machines  in 1997.  Terms of sale for  machines  are
typically 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
has some significance in the sale of machinery,  due to the longer time required
to manufacture machines.

Foreign Sales

     The Company's  foreign sales are made  principally  to customers in Western
and Eastern Europe, South Africa, the Middle East, Mexico, and South and Central
America. Included in the 1997 foreign sales was approximately $2,000,000 shipped
to China North  Industries,  which was part of a contract to supply equipment to
manufacture, convert, and apply hot stamping foils and holographic products. The
Company does not intend to solicit this type of business in the future, as it is
not within the scope of the Company's  standard  product line. The sale to China
North Industries  accounted for 6% of the Company's total sales in 1997, and 29%
of the Company's  foreign sales.  It is expected that the loss of this business,
in the future,  will be made up with the Company's  standard product line of hot
stamping foil, pad print machines, and supplies.

     All  foreign  sales are  payable in US 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, except as disclosed above, in
any periods presented below.

                                                           Percent of
                        Total Foreign Sales               Company Sales
                        -------------------               -------------

Year 1997                   6,686,274                         20%
Year 1996                   4,092,468                         14%
Year 1995                   4,048,000                         15%

Research and Development

     The  engineering  department  and  chemistry  lab are  responsible  for the
Company's  ongoing  product  development  and  improvement,  as well as  quality
control.  The  department  consists  of a team  of 10  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 $427,000  and
$374,000 in 1995 and 1996, and approximately $540,000 in 1997.

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 $900
million in annual sales of foil and film,  and $100+ million in annual  domestic
sales of machinery,  tools, dies and supplies.  With regard to foil, the Company
competes with  approximately  30 manufacturers  worldwide,  and believes that it
supplies  approximately  3% of the world  market.  With  regard to pad  printing
machines, the Company competes with 15 primary manufacturers and several smaller
companies, and believes it supplies approximately 5% of the domestic market.





                                        6


<PAGE>


     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.  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.  The printing industry, in general, has
certain  technological  barriers to entry.  The process,  along with  machinery,
required for the production of hot stamp foils, has been perfected from years of
research and  development.  A blend of art and chemistry is necessary to produce
competitive high quality foils,  which evolved from years of experience  working
with foils for a broad range of applications.

Raw Materials and Supplies

     The  Company  is not  dependent  on any  one  supplier  for  any of its raw
materials.  The Company purchases polyester film, the main component of its foil
products,  from a variety of  different  suppliers.  All raw  materials  used in
manufacturing foil are readily available on terms favorable to the Company.

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.  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  upon 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.  It is the policy of the Company to
comply with all applicable  safety standards and laws, and to provide  employees
with a workplace free of recognized safety and health hazards.  Every effort has
been  made,  and is  currently  being  made,  in order to  maintain  an  ongoing
commitment to the safety and health of the employees.

Patents, Trademarks, and Proprietary Information

     While the Company owns certain  patents,  trademarks,  and logos, it 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 January  19,  1998,  the  Company  employed  approximately  253  people,
including  144 in  manufacturing,  33 in sales and support,  33 in technical and
development,  and 43 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.



                                        7


<PAGE>


Forward-Looking Information

     The  company  and its  subsidiaries,  and their  representatives,  may make
written or oral statements from time to time,  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 constitutes or
contains  "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,  operating  and
strategic initiatives, and addressing industry developments, are forward-looking
statements.   In  any  forward-looking  statement  where  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,  be achieved,  or be  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  (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.

Item 2                        PROPERTIES

         The principal properties of the Company are:

                                     Square
         Location                    Footage       Status                      
         --------                    -------       ------                      
Newburyport, MA                                   
                                                  
  Foil Manufacturing ..............   52,000       Own (1)                 
  Sales and Service ...............    2,000       Own (1)
  Corporate Office ................    2,000       Own (1)
                                                  
  Pad Print Manufacturing                         
  Tool and Die ....................   20,000       Lease (Expires July 2000)(2)
  Sales, service, office ..........    7,500       Lease (Expires July 2000)(2)
                                                  
  Holographic Manufacturing .......   20,000       Lease (Expires April 2002)(2)
  Financial, Accounting and                       
           Administrative offices .    5,000       Lease (Expires April 2002)(2)
                                                  
  Warehouse .......................    2,000       Month-to-month
                                                  
  Warehouse .......................    5,000       Lease (Expires July 2000)(2)
                                                  
Plainview, NY                                     
                                                  
  Foil Distribution ...............    7,298       Lease (Expires April 2002)(2)
                                                  
                                              


                                        8


<PAGE>


Newbury Park, CA

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

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

     The foil  manufacturing  facility  currently operates at 80% of capacity on
three shifts,  five days a week. The pad printing and tool and die manufacturing
facility is currently being utilized at approximately 60% of capacity with one 9
hour shift. The holographic foil manufacturing operation is at approximately 60%
of capacity with three shifts.

     In 1997,  the Company sold two  underutilized  properties  in Melville,  NY
(40,000 square feet) and Norwood, MA (36,000 square feet). Foil distribution was
relocated  from 20,000  square  feet in  Melville,  NY, to 7,298  square feet in
Plainview,  NY. The Norwood,  MA operation was  transferred  to the  Newburyport
location during 1996, with the exception of some component parts  manufacturing,
which  continued  until May 1997.  At that time it was also  transferred  to the
machinery manufacturing plant in Newburyport,  MA. The proceeds from the sale of
the two properties were used for bank debt reduction.

Item 3

Legal Proceedings

         None.

Item 4

Submissions 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.



















                                        9


<PAGE>


Item 5                          PART II

Market for Registrants' 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, 1996                                      6-1/2               3-5/8
June 30, 1996                                       4-3/4               3-3/8
September 30, 1996                                  4-1/2               2-5/8
December 31, 1996                                   3-3/8               2-1/8
March 31, 1997                                      3-3/16              1-7/8
June 30, 1997                                       4-3/4               1-13/16
September 30, 1997                                  4                   2-7/8
December 31, 1997                                   4                   2-15/16
March 12, 1998                                      4-1/2               3

     As of March 12,  1998,  there were  approximately  66 holders of record and
approximately 750 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  dividends  within  the  foreseeable  future.  The  Company is
currently restricted from declaring,  or paying dividends,  under the provisions
of  its  bank  loan  agreement.  See  Note 9 of the  Notes  to the  Consolidated
Financial Statements.























                                       10


<PAGE>







Item 6                       SELECTED FINANCIAL DATA


                          Foilmark, Inc. & Subsidiaries
                            Years Ended December 31st
                      (in thousands, except per share data)


<TABLE>
<CAPTION>

                                                  Dec 31,  Dec 31, Dec 31,   Dec 31,   Dec 31,
Continuing Operations                            1997 (c)  1996   1995 (b)  1994 (a)    1993
----------------------------------------        -------- -------- --------  --------  --------

<S>                                              <C>      <C>      <C>      <C>       <C>   
Revenue                                          33,379   29,692   26,656   20,349    16,187

Operating Income                                  2,824      707    3,438    2,556     1,981
                                                                                              
Net Income                                        1,475      189    1,895    1,409       912
                                                                                              
Earnings Per Share                                 0.35     0.05     0.47     0.47      0.46
                                                                                              
Weighted Average Shares Outstanding               4,161    4,142    3,999    2,900     2,000
                                                                                        


Financial Condition

Total Assets                                     32,082   40,332   37,952   26,499    21,779  
                                                                                                
Total Long-Term Debt                             10,750   12,165   10,732    3,401     6,784  
                                                                                                
Working Capital                                  11,757   12,782   11,766   10,120     5,700  
                                                                                                
Stockholder's Equity                             14,978   18,250   19,243   16,178     6,682  
                                                                                     
</TABLE>

                                                                        
(a) 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.

(b) 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.

(c) On October 15, 1997, the Company announced its discontinuing the manufacture
of hot stamping equipment.  Discontinuation of the hot stamping line resulted in
a one time charge of $3,894,400  and $892,076 loss from  operations,  net of tax
benefit, equal to a total loss of $4,786,476 net of tax benefit.


                                       11


<PAGE>


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

General

     In April,  1997,  the litigation  which was filed against the Company,  and
described in its prior filings and financial statements,  was settled. All costs
to settle the litigation, above the insurance coverage, had been provided for in
1996, and no additional costs were incurred during 1997.

     The state-of-the-art  vacuum metallizer,  originally scheduled for delivery
and  installation in first quarter 1996, was finally  delivered in October 1996,
and became  operational  in January 1997. The  metallizer  operated  efficiently
during all of 1997.

     In  February,  1997,  the  Company  shipped  the  equipment  and  machinery
necessary to convert and apply hot stamping  foils and  holographic  products to
China  North  Industries,  in China.  This was  associated  with a contract  for
approximately $2,000,000 to supply China North Industries with the equipment and
machinery.  Due to the excessive demands placed on the Company's  resources,  in
providing  this type of  equipment  and  services,  the  Company  will no longer
solicit similar type  contracts.  The Company intends to concentrate on the core
businesses of hot stamping and holographic  foils, and pad printing machines and
supplies.

     In June,  1997,  the Company  completed the sale of the Melville,  New York
property, and in August, 1997, the sale of the Norwood,  Massachusetts property.
Both of the locations had been under utilized. The sale of the buildings allowed
the Company to consolidate all operations into Newburyport,  Massachusetts,  and
substantially  reduce overhead.  In addition,  the net proceeds of approximately
$2,500,000  from the sale of the two buildings were used primarily for bank debt
reduction.

     The 1997  improvement  in revenues,  net income,  and gross  margins,  from
continuing operations,  compared to 1996, reflect a continuous strong demand for
Foilmark's   hot   stamping   foil  and   holographic   products.   Furthermore,
manufacturing  cost  reductions,   and  a  reduction  in  selling,  general  and
administrative  expenses,  both in total  and as a  percentage  of  sales,  also
contributed  to net income and gross  margin  improvement  in 1997,  compared to
1996.

     During the fourth quarter 1997, the Foilmark  Holographic  Images  division
(FHI)  relocated to a new 25,000  square foot  manufacturing  facility.  The new
location  contains two existing,  and will contain a third new,  micro-embossing
line, dedicated to manufacturing holographic diffraction films for packaging and
decorative  applications.  In  addition,  there  will  be  a  new  embosser  for
manufacturing  holographic  and  diffractive  hot stamping  foils.  When the new
equipment is installed  and  functional,  which is  anticipated  to occur in the
first quarter 1998,  the Company will have expanded  capability to  micro-emboss
wider width films,  along with  diffraction  and holographic hot stamping foils.
The new  equipment  will enable the FHI  Division to increase  capacity  for its
holographic  products  by  150%.  This  expansion  is in  line  with  Foilmark's
strategic plan,  which is to focus on manufacturing  high volume,  polymer based
holographic film products, utilizing advanced and emerging technologies.

Discontinued Operations

     In  October,  1997,  Foilmark  announced  that  it  was  discontinuing  the
manufacture of hot stamping machinery and related equipment in order to focus on
its hot stamping foil and holographic film products, as well as its pad printing
machinery and supply  business  segments.  Discontinuing  the  production of hot
stamping  machinery  will allow the  Company to  concentrate  on the  continuing
product lines that represent better potential for growth and profitability.



                                       12


<PAGE>


     Discontinuation   of  the  hot  stamping  line  resulted  in  a  charge  of
$3,894,400,  net of tax benefit, including costs of $1,153,000 for severance and
other related activities.  The total loss from discontinued  operations,  net of
tax benefit,  including the one time charge, was $4,786,476, or $1.15 per share,
for the year ended December 31, 1997. For the fourth quarter 1997, the loss from
discontinued operations was $150,216, or $0.04 per share.

Liquidity and Capital Resources:

     In June,  1997, the Company  concluded  refinancing  with one of its banks,
increasing the revolving  line of credit from $6 million to $10 million,  at the
same interest  rate of bank prime or LIBOR plus 2%. No  repayments  are required
until  maturity on June 30, 2000.  At the same time,  the Company  repaid a term
loan in the amount of $650,000  with its other bank,  utilizing  the proceeds of
the newly  increased  line of credit.  At December 31,  1997,  the Company had a
total of $6,595,944  outstanding  and a total of $3,404,056  available under its
revolving  credit facility.  The Company expects that cash from operations,  and
the existing credit line, will be sufficient to meet its operating needs for the
foreseeable future.

     In June,  1997,  the Company  completed the sale of the Melville,  New York
property,  and in August 1997  concluded the sale of the Norwood,  Massachusetts
property.  Both of the  properties had been under  utilized,  and the operations
were able to either consolidate into existing  facilities or relocate to smaller
less expensive property.  The combined net proceeds of approximately  $2,500,000
was used primarily for bank debt reduction and working capital purposes.

     On  October  15,  1997,  the  Company   announced  its   discontinuing  the
manufacture of hot stamping equipment,  which resulted in a charge of $3,894,400
on  disposition  of assets net of income tax benefit.  In addition,  the Company
incurred a loss from  operations  of $892,076  for the year ended  December  31,
1997,  net of tax benefit.  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,  debt service
coverage, and the payment of dividends. At December 31, 1997, the Company was in
full compliance with all of these covenants, as amended.

     On January 13, 1998,  the  Company's  principal  bank replaced its previous
bank,  on  its  borrowing,   under  the  Industrial  Development  Revenue  Bonds
originally  issued  in June,  1995.  All  existing  terms  and  conditions  were
transferred to the current  lender,  without change,  including  interest rates,
amortization and maturities.  The various  financial  covenants  required by the
Industrial  Development  Revenue  Bond  borrowing,   and  the  revolving  credit
agreement, are the same.

Results of Continuing Operations

Fiscal 1997 compared to Fiscal 1996

     Net Sales for the year ended  December 31, 1997,  increased  12.4% to $33.4
million,  from  $29.7  million  in 1996.  Foil  sales  accounted  for all of the
increase,  expanding  to $27.4  million  from $23.2  million in prior  year,  an
increase of 19.1%. Included in the 1997 total and foil sales was $1.9 million in
equipment to  manufacture,  convert and apply hot stamping foils and holographic
products,  which the Company  previously  announced  will no longer  continue to
manufacture or sell due to excessive demands placed on the Company's  resources.
Excluding the $1.9 million from the 1997 total and foil sales, the increase over
1996 would have been 6.1% and 10.8% respectively.

     The increase in foil sales was due  primarily to the  strengthening  demand
for foil products that  existed,  for most of 1997,  compared to the soft market
conditions  of 1996,  coupled with the universal  acceptance  and demand for the
recently  introduced  "OG" series hot stamping foil product line.  Additionally,
the Company  experienced  an 84% increase in sales of the  Foilmark  Holographic
division products.


                                       13


<PAGE>


     Pad print  machinery and supplies  declined by 7.7% to $6.0  million,  down
from $6.5  million in 1996.  The  decline in pad  printing  machinery  sales was
directly related to the soft market for pad print machines that existed for most
of 1997. Sales for machinery supplies continued to expand in 1997, and increased
by 24% over 1996. In order to offset the decline in machinery  sale, the Company
has reorganized the sales force by employing dedicated direct salesmen,  selling
Foilmark products exclusively.

     Gross Profit increased by $1,918,537, or 25.0%, for the year ended December
31, 1997, compared to 1996. Gross profit, as a percentage to sales,  improved to
28.8% in 1997, from 25.9% for the comparable twelve month period in 1996.

     The improvement in gross profit resulted from increased revenues,  improved
manufacturing  efficiencies  at  the  hot  stamping  foil  manufacturing  plant,
continuing expense reductions,  availability of the state-of-the-art  metallizer
for the full year,  and increased  contributions  from the Foilmark  Holographic
division.

     Gross profit from pad print machinery and supplies  declined by $265,111 as
a direct  result of the 7.7%  decline  in net sales  and the  decrease  in gross
profit percentage to sales to 37.7% in 1997 from 41.0% in 1996.

     Selling, General and Administrative Expenses declined by $197,861, or 2.8%,
for the year ended  December 31, 1997,  compared to 1996.  The reduction was due
primarily  to  changes  made  in  the  Company's  marketing  strategies.  At the
beginning  of  1997,  the  direct  outside  sales  force  was  expanded,  with a
corresponding  reduction in the number of  manufacturers  representatives.  This
strategy  provided  the Company  with more cost  effective  sales  coverage.  In
addition,  the $1.9 million sale to China had relatively no associated  selling,
general and administrative expenses, which together with the change in marketing
strategy,  resulted in a decline as a percentage  to sales to 20.3% in 1997 from
23.5% in 1996.

     Operating  Income  increased  by 299%,  to  $2,823,877  for the year  ended
December 31, 1997, as compared to $707,479 for the year ended December 31, 1996.
The primary reason for the increase in income from continuing operations was the
return to  profitability  for the foil  group,  which  accounted  for all of the
income  from  operations.  In  addition,  the  state-of-the-art  metallizer  was
available for  manufacturing for all of 1997. The ongoing cost reductions due to
efficient  operation  of  the  new  production  equipment,  new  cost  effective
formulations  and reduction in selling expenses also contributed to the increase
in income from operations.

     Interest  Expense for 1997,  at $403,201,  was $196,306  less than the 1996
expense,  or a decline of 32.7%.  As a  percentage  to sales,  interest  expense
decreased  to 1.2% for the year  ended  December  31,  1997,  from  2.0% for the
comparable 1996 period.  The decline in interest  expense was partially due to a
reduction in bank debt of $2.2 million during 1997.

     Provision  for  Income  Taxes  for the year  ended  December  31,1997,  was
$983,519, based on income from continuing operations before taxes of $2,458,798,
compared to $131,073 on pre-tax  income of $319,692 for 1996.  The effective tax
rate used was 40.0% and 41.0%, respectively, for the 1997 and 1996 years.

     Net Income for the year ended December 31, 1997, was  $1,475,279,  compared
to $188,619 for the year ended December 31, 1996. The increase in net income was
directly  attributable  to the 12.4%  increase in net sales, a 25.0% increase in
gross  profit,  and a 13.6%  decrease  in selling,  general  and  administrative
expenses as a percentage of net sales.

     As a result of the loss from  discontinued  operations,  the total net loss
for 1997 was  $3,311,197,  or $0.80 per share,  compared  to a total net loss of
$1,040,126, or $0.25 per share in 1996.



                                       14


<PAGE>


Results of Continuing Operations

Fiscal 1996 compared to Fiscal 1995

     Net Sales for the year ended  December 31, 1996 increased to $29.7 million,
from  $26.7 in 1995,  or  11.4%.  The sales  increase  was  attributable  to the
Company's Imtran  division,  acquired in August 1995, and not comparable for the
complete  1995 year.  Foil sales  declined by $.2 million to $23.2,  compared to
$23.4 million in 1995.

     The  decline  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 1996 second quarter.

     Gross Profit declined by $960,304,  or 11.1%, in 1996, compared to the year
ended December 31,1995. Gross profit, as a percentage of net sales, decreased to
25.9% in 1996,  compared to 32.4%,  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 offset 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.

     Selling,  General and Administrative  Expenses increased by $1,770,415,  to
$6,974,007,  a  34.0%  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, and higher selling
costs as a result of the industry over capacity causing a soft marketplace.

     Operating  Income for the fiscal year ended  December  31,1996  declined by
79.4%, to $707,479, from $3,438,198 for the fiscal year ended December 31, 1995.
The primary  reason for the decline in income from  operations was the reduction
in  gross  profit,  together  with a 34.0%  increase  in  selling,  general  and
administrative expenses.

     Interest  Expense  increased by $310,089,  to $599,507,  for the year ended
December 31, 1996,  from  $289,418 for the  comparable  1995 period.  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.

     Provision  for  Income  Taxes  for the  year  ended  December  31,1996  was
$131,073, an effective tax rate of 41.0%,  compared to $1,367,500,  an effective
tax rate of 41.9%, for the year ended December 31, 1995.

     Net Income  declined to $188,619 for the year ended December 31, 1996, from
$1,895,300  for the year ended  December 31, 1995.  The lower net income was the
result of a decline in gross profit,  increased  amortization  costs  associated
with the Imtran acquisition,  facility  consolidation costs of $100,000,  higher
interest  expense,  and the  increased  operating  costs  due to the 1996  plant
expansion without a corresponding increase in revenues.




                                       15


<PAGE>


EFFECTS OF  INFLATION  - During the two year period  ended  December  31,  1997,
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.

YEAR 2000 DATE CONVERSION - Management  believes that  substantially  all of its
computer  systems are year 2000 compliant,  and will be assessing the balance of
its systems to facilitate  complete 2000  compliance.  The Company is contacting
its  customers,  suppliers,  and  financial  institutions  with  which  it  does
business,  to ensure that any year 2000 issue is  resolved.  If the Company does
not complete the system  conversions  on a timely basis,  or if others with whom
the Company does business are not year 2000 compliant,  it could have a material
adverse effect on the Company's  consolidated  financial position and results of
operations.

NEW  ACCOUNTING  PRONOUNCEMENTS  -  The  Financial  Accounting  Standards  Board
recently issued SFAS No. 130, "Reporting  Comprehensive  Income." This statement
established  standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. This statement
is effective for fiscal years  beginning  after  December 15, 1997, and requires
reclassification  of  financial  statements  for earlier  periods  provided  for
comparative  purposes.  The effect of the adoption of SFAS No. 130 will not have
material impact on the Company's financial  condition,  results of operations or
cash flows. The Company will adopt this accounting  standard,  effective January
1, 1998, as required.

The  Financial   Accounting  Standards  Board  recently  issued  SFAS  No.  131,
"Disclosures  about  Segments of an Enterprise  and Related  Information."  This
statement  establishes  standards for the way that public  business  enterprises
report information about operating segments in annual financial statements,  and
requires that those  enterprises  report  selected  information  about operating
segments in interim  financial  reports issued to  shareholders.  This statement
supersedes  SFAS No. 14,  "Financial  Reporting for Segments of a Business," but
retains  the  requirement  to report  information  about major  customers.  This
statement  also  amends  SFAS  No.  94,  "Consolidation  of  All  Majority-Owned
Subsidiaries."  This statement is effective for financial  statements for period
beginning after December 15, 1997, and requires that comparative information for
earlier  years be restated.  The effect of the adoption of SFAS No. 131 will not
have a  material  impact  on  the  Company's  financial  condition,  results  of
operations  or cash flows.  The  Company  will adopt this  accounting  standard,
effective January 1, 1998.

Item 7a           QUANTITATIVE AND QUALITATIVE DISCLOSURE
                  ABOUT MARKET RISK

Not Applicable

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.






                                       16


<PAGE>


Item 10           DIRECTORS AND EXECUTIVE OFFICERS

     The information called for by Item 10 is incorporated by reference from the
1998 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
1998 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
1998 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
1998 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.

























                                       17


<PAGE>


                                     PART IV

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

(a) Financial Statements, Financial Statement Schedules and Exhibits:

(1) Financial Statements and Supplementary Data - See Form 10-K, Item 8
  
(2) Financial Statement and Schedules:

      Independent Auditors' Report                                           F-1

      Consolidated Balance Sheets - December 31, 1997 and 1996               F-2

      Consolidated  Statement of Operations - Years Ended December 31, 
          1997, 1996, and 1995                                               F-3

      Consolidated  Statement of Stockholders  Equity - Years Ended 
          December 31, 1997, 1996, and 1995                                  F-4

      Consolidated Statements of Cash Flows - Years Ended December 31, 
          1997, 1996, and 1995                                               F-5

      Notes to Consolidated Financial Statements                             F-6

      For the three years ended December 31, 1997
      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.

Number                                                                 Form 10-K

Articles and By-Law Instruments:
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)


                                       18


<PAGE>


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 (sd1)
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 $4.4 Million 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)
10.30     Consulting Agreement with Martin A. Olsen dated 12/31/95 (11)
10.31     Registration Rights Agreement between Foilmark, Inc. and Martin A. 
            Olsen, dated 12/31/95 (11)
10.32     Amended and Restated Employee Stock Purchase Plan, dated 1/31/96 (11)
10.43     Amended and Restated Employee Stock Option Plan as of 1/31/96 (11)
10.44     Annual Incentive Compensation Plan dated 1/2/96 (12)
10.45     1997 Waiver and Amendment, Chase Bank (13)
10.46     1997 Waiver and Amendment, Fleet Bank (13)
10.47     1997 Consulting Agreement with Edward Sullivan (13)
10.48     1997 Waiver and Amendment to Term Loan, Chase Bank (13)
10.49     Mulliken Way, Newburyport, Massachusetts Property Lease (14)
10.50     50 Parker Street, Newburyport, Massachusetts Property Lease (14)
10.51     120 Fairchild Avenue, Plainview, New York Property Lease (14)
10.52     1997 Non-Employee Director Stock Plan (14)
13.1      Annual Report to Security Holders *






                                       19


<PAGE>


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
     subsidiary.

Name                                              Incorporated        Ownership
----                                              ------------        ---------
                                                                       
Kensol-Olsenmark, Inc.                               Delaware            100%
Foilmark Manufacturing Corporation                   Delaware            100%
Kensolmark, Inc.                                     Barbados            100%
West Foils, Inc.                                     California          100%

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 September 1, 1995
(11)  Exhibits to Form 10-K filed March 30, 1996
(12)  Exhibits to Form 10-Q filed April 30, 1996
(13)  Exhibits to Form 10-K filed April 14, 1997
(14)  Exhibits to Form 10-Q filed August 4, 1997






















                                       20


<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:     March 27, 1998   
     -------------------------------               ----------------------
     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      March 27, 1998.  
-------------------------         Chief Executive Officer
Frank J. Olsen, Jr.                


 /s/ Philip Leibel                Vice President - Finance   March 27, 1998.
-------------------------         Chief Financial Officer
Philip Leibel                     


 /s/ Leonard A. Mintz             Senior Vice President      March 27, 1998.
-------------------------         & Director
Leonard A. Mintz                  


 /s/ Wilhelm P. Kutsch            Senior Vice President      March 27, 1998.
-------------------------         & Director
Wilhelm P. Kutsch                 


 /s/ Edward Sullivan              Vice President - West      March 27, 1998.
-------------------------         Coast Operations 
Edward Sullivan                   & Director       

                                 
 /s/ Carol J. Robie               Vice President -           March 27, 1998.
-------------------------         Administration   
Carol J. Robie                    & Director       
                                  
 
 /s/ Kenneth Harris               Vice President - Pad       March 27, 1998.
-------------------------         Print Operations
Kenneth Harris                    & Director      
                                  

 /s/ Martin A. Olsen              Chairman of the Board      March 27, 1998.
-------------------------         Emeritus & Director
Martin A. Olsen                   


                                       21

<PAGE>


 /s/ Michael J. Bertuch           Director                   March 27, 1998.
------------------------
Michael J. Bertuch


 /s/ Michael Foster               Director                   March 27, 1998.
------------------------
Michael Foster


 /s/ Thomas Schwarz               Director                   March 27, 1998.
------------------------
Thomas Schwarz







                                       22


<PAGE>


KPMG       Peat Marwick,  LLP


                          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, 1997 and 1996, 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, 1997. In connection  with our
audit 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 financial position of Foilmark,  Inc. and
subsidiaries at December 31, 1997 and 1996, and the results of their  operations
and  their  cash  flows  for each of the years in the  three-year  period  ended
December 31, 1997 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
March 3, 1998









                                       F-1


<PAGE>


                         FOILMARK, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                           December 31, 1997 and 1996
<TABLE>
<CAPTION>

Assets                                                                                1997            1996
------                                                                                ----            ----
<S>                                                                                <C>           <C>        
Current assets:
    Cash                                                                           $   795,837   $   199,923
    Accounts receivable - trade (less allowance for doubtful
       accounts of $348,000 and $339,000 in 1997 and 1996)                           4,807,705     4,864,671
    Inventories                                                                      7,884,701     9,501,682
    Other current assets                                                               211,943       185,669
    Income taxes receivable                                                          1,327,421       468,271
    Deferred income taxes                                                            1,221,135       760,246
    Current assets of discontinued operations                                          977,138     5,320,313
                                                                                   -----------   -----------
        Total current assets                                                        17,225,880    21,300,775

Property, plant and equipment, net                                                   9,150,509     9,130,741
Bond and mortgage financing costs (net of accumulated amortization
   of $98,010 and $50,130 in 1997 and 1996, respectively)                              369,295       523,636
Intangible assets, net                                                               4,520,581     4,780,658
Other assets                                                                            75,967        89,594
Note receivable                                                                        739,818          --
Non-current assets of discontinued operations                                             --       4,506,713
                                                                                    ----------    ----------
                                                                                   $32,082,050   $40,332,117
                                                                                   ===========   ===========

Liabilities and Stockholders' Equity Current liabilities:
    Current installments of notes payable - stockholders                           $   112,922   $   132,113
    Current installments of other long-term debt                                       501,220     1,385,598
    Accounts payable and accrued expenses                                            3,376,644     5,016,236
    Customer deposits                                                                  207,311       450,451
    Current liabilities of discontinued operations                                   1,270,450     1,534,322
                                                                                   -----------   -----------
        Total current liabilities                                                    5,468,547     8,518,720

Long-term debt:
     Notes payable to stockholders, net of current installments                        654,431       767,054
     Other long-term debt, net of current installments                              10,095,806    11,398,034
                                                                                   -----------   -----------
                                                                                    10,750,237    12,165,088
Deferred income taxes                                                                  884,773     1,398,528
Commitments and contingencies (note 14 and 18)

Stockholders' equity:
     Common stock ($.01 par value;  10,000,000 shares authorized;  
         4,167,355 and 4,151,719 shares issued and outstanding
         in 1997 and 1996, respectively)                                                41,673        41,517
      Additional paid-in capital                                                    13,404,157    13,364,404
      Retained earnings                                                              1,532,663     4,843,860
                                                                                   -----------   -----------
          Total stockholders' equity                                                14,978,493    18,249,781
                                                                                   -----------   -----------
                                                                                   $32,082,050   $40,332,117
                                                                                   ===========   ===========

</TABLE>

See accompanying notes to consolidated financial statements.




                                       F-2


<PAGE>


                         FOILMARK, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

                  Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>

                                                                1997            1996           1995
                                                                ----            ----           ----

<S>                                                         <C>             <C>             <C>         
Net sales                                                   $ 33,379,482    $ 29,692,240    $ 26,655,684
Cost of sales                                                 23,779,459      22,010,754      18,013,894
                                                            ------------    ------------    ------------

Gross profit                                                   9,600,023       7,681,486       8,641,790

Selling, general and administrative expenses                   6,776,146       6,974,007       5,203,592
                                                            ------------    ------------    ------------

                                                               2,823,877         707,479       3,438,198
                                                            ------------    ------------    ------------
Other income (expense):
     Interest expense - net                                     (403,201)       (599,507)       (289,418)
     Other income                                                 38,122         211,720         114,020
                                                            ------------    ------------    ------------
         Income from continuing operations
                  before income taxes                          2,458,798         319,692       3,262,800

Income tax expense                                               983,519         131,073       1,367,500
                                                            ------------    ------------    ------------

      Income from continuing operations                        1,475,279         188,619       1,895,300

Discontinued operations:
      Loss from operations, net of income tax benefit           (892,076)     (1,228,745)        (51,974)

      Loss on disposition, net of income tax benefit          (3,894,400)           --              --
                                                             ------------    ------------   ------------
                                                              (4,786,476)     (1,228,745)        (51,974)
                                                            ------------    ------------    ------------

Net income (loss)                                           $ (3,311,197)   $ (1,040,126)   $  1,843,326
                                                            ============    ============    ============

Net income (loss) per share
         From continuing operations - basic and diluted     $       0.35    $       0.05    $       0.47
         From discontinued operations - basic and diluted          (1.15)          (0.30)          (0.01)
                                                            ------------    ------------    ------------
         Net income (loss) per share - basic and diluted    $      (0.80)   $      (0.25)   $       0.46
                                                            ============    ============    ============

Weighted average shares outstanding                            4,161,463       4,142,318       3,999,263
                                                            ============    ============    ============

</TABLE>

See accompanying notes to consolidated financial statements.












                                       F-3


<PAGE>


                         FOILMARK, INC. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                  Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                           Additional
                                              Common         paid-in      Retained
                                               stock        capital       earnings         Total
                                               -----        -------       --------         -----

<S>                                        <C>            <C>            <C>             <C>         
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
                                           
Shares issued under stock grants                 --            4,136           --             4,136
Shares issued under benefit plans                 156         35,617           --
                                                                                             35,773
Net loss                                         --             --       (3,311,197)     (3,311,197)
                                           ----------   ------------   ------------    ------------
Balance at December 31, 1997               $   41,673   $ 13,404,157   $  1,532,663    $ 14,978,493
                                           ==========   ============   ============    ============
                                           
</TABLE>                                  






See accompanying notes to consolidated financial statements.


                                       F-4


<PAGE>


                         FOILMARK, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>


                                                                                1997              1996           1995
                                                                                ----              ----           ----
<S>                                                                          <C>                <C>          <C>      
Cash flows from operating activities:
    Net income from continuing operations                                    $ 1,475,279        188,619      1,895,300
    Adjustments to reconcile net income to net
       cash provided by operating activities:
          Depreciation                                                         1,285,841      1,063,852        678,563
          Amortization                                                           314,763        310,454        268,375
       Provision for doubtful accounts                                            85,000        150,000         37,000
       Deferred taxes                                                             89,117         58,289       (150,117)
       Change in assets and liabilities, net of effects of acquisitions:
          Increase in accounts receivable                                        (28,034)      (261,215)      (680,743)
              Decrease (increase) in inventories                               1,616,981     (2,302,714)    (2,083,644)
              Increase in income taxes receivable                               (859,150)      (468,271)      (274,244)
          Decrease (increase) in bond and mortgage
              financing costs and other assets                                    78,317         (4,328)      (535,410)
          (Decrease) increase in customer deposits                              (243,140)       450,451            --
          (Decrease) increase in accounts payable
          and accrued expenses                                                (1,639,592)     1,081,651        920,164
                                                                             -----------    -----------    -----------

       Net cash provided by operating activities                               2,175,382        266,788         75,244
                                                                              ----------    -----------    -----------

Net cash used in discontinued operations                                        (531,905)      (437,736)      (293,245)
                                                                             -----------    -----------    -----------

Cash flows from investing activities:
    Capital expenditures                                                      (1,305,609)    (2,103,900)    (2,891,214)
    Increase (decrease) in cash-restricted                                          --        1,037,590     (1,037,590)
                                                                              ----------    -----------    -----------

       Net cash used in investing activities                                  (1,305,609)    (1,066,310)    (3,928,804)
                                                                             -----------    -----------    -----------

    Proceeds from sale of facilities of discontinued operations                2,536,557           --              --
                                                                               ---------    -----------     -----------

Cash flows from financing activities:

       Payments of notes payable to stockholders                                (131,814)      (204,760)      (815,202)
       Proceeds of other long-term debt                                        1,512,445      3,667,750      5,892,631
       Payments of other long-term debt                                       (3,699,051)    (2,536,646)    (1,200,000)
       Proceeds from shares issued under benefit plans                            35,773         37,658            --
       Issuance of common stock to employees
          under stock grants                                                       4,136         8 ,923         6,926
                                                                             -----------    -----------    -----------


       Net cash (used for) provided by financing activities                   (2,278,511)       972,925      3,884,355
                                                                             -----------    -----------    -----------

Net increase (decrease) in cash                                                  595,914       (264,333)      (262,450)

Cash - beginning of year                                                         199,923        464,256        726,706
                                                                             -----------    -----------    -----------

Cash - end of period                                                         $   795,837    $   199,923    $   464,256
                                                                             ===========    ===========    ===========

Supplemental disclosure of cash flow information

Cash paid during the year for:

Interest                                                                     $   944,188    $   893,392    $   416,940
                                                                              ----------    -----------    -----------
                                                                             

Income taxes                                                                 $   408,000    $   129,100    $   905,000
                                                                               -----------    -----------  ----------- 

</TABLE>


See accompanying notes to consolidated financial statements.





                                       F-5


<PAGE>


                          Foilmark, Inc. & Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996

(1) The Company
Foilmark,  Inc.  (the  "Company"  or  "Foilmark")  develops,   manufactures  and
distributes hot stamping foils and holographic  films, used by the graphic arts,
plastics and  packaging  industries,  to decorate or enhance  products and their
packaging.  It also produces image transfer  equipment,  pad printing machinery,
screen printing systems and printing supplies.  Foilmark's  products are used on
such items as cosmetic packaging,  book covers, wine labels,  greeting cards and
many other  consumer  goods.  In October,  1997,  the Board of  Directors of the
Company adopted a plan to discontinue the manufacture of hot stamping  equipment
(note 3).

(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   inter-company  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:
<TABLE>
<CAPTION>

                                                                                        Estimated
                                                     Methods                            Useful Life
                                                     -------                            -----------
<S>                                         <C>                                           <C>        
Building and improvements                   Straight-line and accelerated                 15-40 years
Machinery, furniture and fixtures           Straight-line and accelerated                  3-10 years
Automobiles                                 Straight-line                                     3 years
</TABLE>

(d) Notes Receivable
Notes receivable are recorded at cost, less any required  allowance for impaired
notes  receivable.   Management,  considering  current  information  and  events
regarding the borrowers' ability to repay their obligations, considers a note to
be impaired  when it is probable  that the Company will be unable to collect all
amounts due, according to the contractual terms of the note agreement.

(e) Bond and Mortgage Financing Costs
Bond and mortgage  financing  costs are  amortized  over the life of the related
obligations.

(f)  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.

(g) 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  $540,000,
$374,000  and $427,000 for the years ended  December  31, 1997,  1996,  and 1995
respectively, and were included as a component of cost of sales.






                                       F-6


<PAGE>


(h) 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.

(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) Impairment of Long-Lived  Assets and 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.

(k) Earnings per Share
During 1997 the Company  adopted the  provisions  of SFAS No. 128,  Earnings per
Share.  Under the  provisions of SFAS No. 128, basic earnings per share replaces
primary earnings per share and the dilutive effect of stock options are excluded
from the  calculation.  Fully diluted earnings per share are replaced by diluted
earnings per share,  and include the dilutive  effect of stock options using the
treasury stock method.  All prior year earnings per share data has been restated
to conform to the  requirements of SFAS No. 128. The Company has disclosed basic
earnings per share only because  outstanding stock options were antidilutive for
all periods presented.

(3)  Discontinued Operations
In October 1997, the Company's Board of Directors  adopted a plan to discontinue
the manufacture of hot stamping equipment. Accordingly, the operating results of
the hot stamping division, including provisions for disposal of the hot stamping
line of $3,894,400,  net of tax benefit,  have been  segregated  from continuing
operations  and reported as a separate line item on the statement of operations.
The total loss from discontinued operations,  net of tax benefit,  including the
provision for  disposition,  was  $4,786,476,  or $1.15 per share,  for the year
ended  December  31, 1997.  The Company has restated its prior years'  financial
statements  to  present  the  operating  results of the hot  stamping  line as a
discontinued  operation.  The  assets and  liabilities  of such  operations,  at
December 31, 1997 and 1996, have been reflected as current or non-current assets
and liabilities of discontinued operations,  based substantially on the original
classification of such assets and liabilities.












                                       F-7


<PAGE>


The Company recorded a note receivable  related to the sale of certain assets of
the hot stamping division.  The note receivable is recorded at the present value
of future cash flows. Monthly payments of $15,000, plus interest at 6.16%, begin
July 1, 1998 and continue through June, 2004.

Operating results from discontinued operations are as follows:
<TABLE>
<CAPTION>

                                                     1997              1996            1995
                                                 --------------    -------------   ----------

<S>                                              <C>             <C>             <C>         
Net sales                                        $  6,395,424    $  7,498,371    $ 10,151,099
Costs and expenses:
Cost of sales                                       5,611,009       6,604,210       7,378,013
Selling, general and administrative expenses        1,746,681       2,111,746       2,735,038
                                                 ------------    ------------    ------------
                                                    7,357,690       8,715,956      10,113,051
Operating (loss) income                              (962,266)     (1,217,585)         38,048
Interest and other expenses                          (524,527)       (620,204)       (127,522)
                                                 ------------    ------------    ------------

Loss before income tax benefit                     (1,486,793)     (1,837,789)        (89,474)
Income tax benefit                                    594,717         609,044          37,500
                                                 ------------    ------------    ------------

Loss from operations                                 (892,076)     (1,228,745)        (51,974)
                                                 ------------    ------------    ------------

Loss on disposition, net of income tax benefit     (3,894,400)           --              --
                                                 ------------    ------------    ------------

Net loss from discontinued operations            $ (4,786,476)   $ (1,228,745)   $    (51,974)
                                                 ============    ============    ============
</TABLE>

The following summarizes assets and liabilities of the discontinued  operations,
which have been segregated in the accompanying consolidated balance sheets:


                                                    1997         1996
                                                    ----         ----
Current assets - discontinued operations:
    Accounts receivable, net                     $  459,119   $  866,253
    Inventories                                     355,000    4,409,133
    Other assets                                    163,019       44,927
                                                 ----------   ----------
                                                 $  977,138   $5,320,313
                                                 ==========   ==========

Non-current assets - discontinued operations:
    Property, plant and equipment                $     --     $3,387,811
    Intangible assets, net                             --      1,059,584
    Other non-current assets                           --         59,318
                                                 ----------   ----------
                                                 $     --     $4,506,713
                                                 ==========   ==========

Current liabilities - discontinued operations:
    Accounts payable                             $  441,662   $1,156,961
    Accrued restructuring costs                     828,788         --
    Customer deposits                                  --        377,361
                                                 ----------   ----------
                                                 $1,270,450   $1,534,322
                                                 ==========   ==========

Discontinued operations include management's estimate of the amounts expected to
be realized on the  liquidation  of the hot stamping  product line.  While these
estimates are based on an analysis of the recoverability of assets and estimated
losses during the phase-out period, actual results may differ.






                                       F-8


<PAGE>


(4) Acquisition
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 continuing  operations
assume that the Imtran  acquisition  occurred on January 1, 1995 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 acquisition:

                                                                         1995
                                                                         ====

Net sales .............................................              $29,233,000
Net income ............................................                1,967,000
Net income per share ..................................                      .47

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 at December 31, 1997 and 1996 consist of the following:

                                                     1997                  1996
                                                     ====                  ====

Raw materials ........................           $1,658,159           $  697,053
Work-in-progress .....................            2,108,422            3,335,158
Finished goods .......................            4,118,120            5,469,471
                                                 ----------           ----------
                                                 $7,884,701           $9,501,682

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

(6) Property, Plant and Equipment
Property,  plant and  equipment  at December  31, 1997 and 1996  consists of the
following:

                                                       1997                1996
                                                       ====                ====

Land .......................................       $    78,673       $    78,673
Building and improvements ..................         3,753,821         3,820,082
Machinery, furniture and fixtures ..........        12,970,912        11,613,642
Automobiles ................................           116,730           102,130
                                                   -----------       -----------
                                                    16,920,136        15,614,527
Less accumulated depreciation ..............         7,769,627         6,483,786
                                                   -----------       -----------

                                                   $ 9,150,509       $ 9,130,741
                                                   ===========       ===========






                                       F-9


<PAGE>


(7) Intangible Assets
Intangible assets at December 31, 1997 and 1996 include the following:
<TABLE>
<CAPTION>

                                                                                                                       Amortization
                                                                                   1997                 1996              Period
                                                                                   ====                 ====             =======
<S>                                                                             <C>                  <C>                  <C>     
Excess of cost over fair value of assets acquired ...................           $4,914,940           $4,918,613           20 Years
Patents .............................................................              251,846              250,000           17 Years
                                                                                ----------           ----------
                                                                                 5,166,786            5,168,613
Less: accumulated amortization ......................................              646,205              387,955
                                                                                 ---------           ----------
                                                                                $4,520,581           $4,780,658
                                                                                ==========           ==========
</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 $258,250,  $254,454 and $212,375 relating to intangible
assets was charged to operations in 1997, 1996 and 1995, respectively.

(8) Notes Payable - Stockholders
Notes  payable to  stockholders'  at December  31, 1997 and 1996  consist of the
following:
<TABLE>
<CAPTION>

                                                                                                             1997             1996
                                                                                                           ========         ========
<S>                                                                                                        <C>              <C>     
Notes due to  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 .............................................................................         $486,548         $534,827

Notes  payable to  stockholders  with  interest  at 6% and  balance due in equal
quarterly installments through 2003, subordinated to bank notes
and/or industrial revenue bonds ..................................................................          157,317          182,675

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
quarterly installments of $10,357 including interest
through 2001 .....................................................................................          123,488          156,265

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

Total notes payable stockholders .................................................................          767,353          899,167
Less current installments ........................................................................          112,922          132,113
                                                                                                           --------         --------
Notes payable-stockholders, excluding
current installments .............................................................................         $654,431         $767,054
                                                                                                           ========         ========

Interest  amounting  to $52,048,  $57,935  and  $66,381 in 1997,  1996 and 1995,
respectively, was paid to the Company's stockholders or other related parties.
</TABLE>


                                      F-10


<PAGE>


(9) Other Long-Term Debt
Other long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>

                                                                                             1997               1996
                                                                                             ====               ====
<S>                                                                                       <C>                <C>        
Borrowings under revolving credit loan financing
agreement, see (a)..............................................................          $6,595,944         $ 5,560,552

Borrowings under The Massachusetts Industrial
Financing Agreement, see (b) ...................................................           3,700,000           4,100,000

Mortgage loans payable, interest at 7.75%, see (c) .............................             162,066             171,176

Capital lease obligation payable in quarterly
installments of $21,379, including interest at 6%,
through March 1999 .............................................................              95,626             179,404

Note payable, interest at 9.95%, due in monthly
installments of $594, plus interest, through
August, 2001 ...................................................................              21,826                --

Capital lease obligation payable in monthly
installments of $464, including interest at 9.40%,
through October, 2001 ..........................................................              21,564                --

Mortgage note payable in quarterly installments of
$33,292 plus interest at LIBOR (5.56% at December
31, 1996) + 2% see (d) .........................................................                --             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
                                                                                         -----------         -----------

Total other long-term debt .....................................................          10,597,026          12,783,632
Less current installments ......................................................             501,220           1,385,598
                                                                                         -----------         -----------
Other long-term debt, excluding current installments ...........................         $10,095,806         $11,398,034
                                                                                         ===========         ===========
</TABLE>

(a) In 1995, the Company entered into an unsecured,  revolving  credit agreement
which  permitted the Company to borrow up to $6,000,000 at an interest rate that
equals the reserve  adjusted LIBOR rate (5.91% and 5.5% at December 31, 1997 and
1996) plus 2%. In 1997, the unsecured, revolving credit agreement was amended to
permit the Company to borrow up to $10,000,000. 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.  As of December 31, 1997, the Company had
an outstanding total of $6,595,944, under the revolving credit agreement.
Principal payments are not required until maturity on June 30, 2000.

(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 (5.91% and 5.56% at December 31, 1997 and
1996).  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
1998-2005,  and $100,000  for years 2006 - 2010.  At December 31, 1997 and 1996,
the sinking fund balance of $166,667 and $66,667 was included in cash.

(c) In 1996, the Company  borrowed  $180,250 under two mortgage loan agreements.
The mortgages are payable  monthly with interest at 7.75%. At December 31, 1997,
a building with a net book value of $201,150 was pledged as collateral  for this
loan.


                                      F-11


<PAGE>


(d) In August  1997,  the loans were  repaid  with the  proceeds  of the sale of
certain real estate.

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, 1997, the
Company was in compliance with these covenants.

Maturities of all long term debt are as follows:

                                   Total          Stockholders            Other
                                   -----          ------------            -----

Year ending December 31:
1998                           $   614,142        $   112,922        $   501,220
1999                               548,619            119,827            428,792
2000                             7,280,240            127,155          7,153,085
2001                               515,393            105,915            409,478
2002                               503,481             99,034            404,447
Thereafter                       1,902,504            202,500          1,700,004
                               -----------        -----------        -----------
                               $11,364,379        $   767,353        $10,597,026
                               -----------        -----------        -----------

(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  Retirement  plan expense  amounted to  $138,000,  $0 and
$122,000 in the years 1997, 1996 and 1995, 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 provide post-retirement or other post-employment benefits.

(11) Income Taxes
The provision for income tax expense from  continuing  operations  for the years
ended December 31, 1997, 1996, and 1995 is as follows:

                                     1997              1996             1995
                                     =====             ====            =====
Federal:
  Current ..............       $   727,587       $    18,551        $ 1,201,966
  Deferred .............            75,737            89,557           (112,074)
                               -----------       -----------        -----------
                                   803,324           108,108          1,089,892
                               -----------       -----------        -----------
State:
  Current ..............           166,815            54,233            315,651
  Deferred .............            13,380           (31,268)           (38,043)
                               -----------       -----------        -----------
                                   180,195            22,965            277,608
                               -----------       -----------        -----------
                               $   983,519       $   131,073        $ 1,367,500
                               ===========       ===========        ===========

Income tax benefit from discontinued operations totaled $2,881,905, $609,044 and
$37,500, respectively, for the years ended December 31, 1997, 1996 and 1995.







                                      F-12


<PAGE>


Income tax expense from  continuing  operations for the years ended December 31,
1997,  1996,  and 1995 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>

                                                 1997          1996           1995
                                                 ====          ====          =====

<S>                                        <C>           <C>            <C>        
Computed  "expected" tax expense .......   $   835,991   $   108,695    $ 1,109,352

Increase in income taxes resulting from:
Nondeductible expenses .................        21,130        26,096         52,438

State and local income taxes, net of
federal income tax benefit .............       118,929        15,157        183,020

Other, net .............................         7,469       (18,875)        22,690
                                           -----------   -----------    -----------

                                           $   983,519   $   131,073    $ 1,367,500
                                           ===========   ===========    ===========
</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, 1997,
and 1996 are presented below:

<TABLE>
<CAPTION>

                                                           1997            1996
                                                           ====            ====
Deferred tax assets:
Accounts receivable principally due to allowance
<S>                                                   <C>            <C>        
for doubtful accounts .............................   $   137,424    $   133,963
Inventories, cost capitalization ..................       133,726        181,651
Intangible assets .................................        25,850         58,555
Compensated absences, principally due to accrual
for financial reporting purposes ..................        68,237         36,135
Discontinued operations ...........................     1,153,645         89,844
Other .............................................        42,251         40,012
                                                      -----------    -----------
Net deferred tax assets ...........................     1,561,133        540,160
                                                      -----------    -----------
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation and capitalized interest ..........    (1,224,771)    (1,178,442)
                                                      -----------    -----------
Net deferred tax asset (liability) ................   $   336,362    $  (638,282)
                                                      ===========    ===========
</TABLE>

As of December 31, 1997 and 1996 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 the  carryforward  period
are reduced.

Deferred taxes are classified in the accompanying consolidated balance sheets as
follows:

                                                       1997              1996
                                                       ====              ====

Direct deferred tax asset ..................      $ 1,221,135       $   760,246
On current deferred tax liability ..........         (884,773)       (1,398,628)
                                                  -----------       -----------

Net deferred tax asset (liability) .........      $   336,362       $  (638,282)
                                                  ===========       ===========

                                      F-13


<PAGE>


(12) Stockholders' Equity
(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, 1997, no shares remain unvested.
No shares were granted in 1997 and 1996.  Compensation expense of $4,136, $8,923
and $6,926,  relating to these grants, was recorded for the years ended December
31, 1997, 1996 and 1995, respectively.

(b) Stock Option Plan
The Company had three stock option  plans in effect at December  31,  1997:  The
1993 Employees  Stock Option Plan (1993 Plan),  the 1995 Employees  Stock Option
Plan (1995 Plan) and the  Non-Employee  Directors Stock Option Plan  (Directors'
Plan).

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 these
Plans may be granted as  "Incentive  Stock  Options" (as defined by the Internal
Revenue Code of 1986) or non-qualified  stock options.  Options may be exercised
only within ten years from the date of grant.

The  Non-Employee  Directors  Stock Option Plan  provides for the  issuance,  to
non-employee  directors,  a maximum of 75,000 shares of common stock in the form
of stock options.  Stock options issued under the plan are  non-qualified  stock
options. Options may only be exercised within 10 years of the date of the grant,
and shall vest six months after the date of grant.

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.

At December 31, 1997,  there were 53,050  additional  shares available for grant
under the 1993 Plan,  354,050  additional  shares available under the 1995 Plan,
and 60,000 shares available under the Non-Employee  Directors Stock Option Plan.
The per share  weighted-average  fair value of stock options granted during 1997
and 1996 was $3.63 and $2.48 respectively,  on the date of grant using the Black
Scholes option-pricing model with the following weighted-average assumptions: In
1997,  expected dividend yield 0%, risk-free interest rate ranging from 5.53% to
5.69%,  and an expected life of 5 years.  In 1996,  expected  dividend yield 0%,
risk-free  interest rate ranging from 5.95% to 6.03%,  and an expected life of 5
years. The expected  volatility rate was 88.7% for all plans in 1997, and 39% in
1996.

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:

<TABLE>
<CAPTION>

                                                                                     1997                  1996
                                                                                    =====                  ====

<S>                                                  <C>                        <C>                       <C>     
Net income (loss) from continuing operations         As reported                $1,475,279                $188,619
                                                     Pro forma                    1,407,130                (59,223)
Net income (loss) per share - basic and diluted      As reported                       0.35                   0.05
                                                     Pro forma                         0.34                  (0.01)
</TABLE>

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options' vesting period.










                                      F-14


<PAGE>


The following table summarizes the activity in the Plan:
                                                                Weighted-Average
                                                 Number           Option price
                                                of Shares         per Share
                                                ---------         ---------
                                          
Outstanding,
January 1, 1995 ......................           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
 Granted .............................           15,000              3.79
  Forfeited ..........................          (15,200)             5.39
                                                -------              ----
  
Balance,
 December 31, 1997 ...................          207,900          $   5.61      
          === ====                              =======          ========      
                                                    

At December 31, 1997 and 1996, the number of options exercisable was 202,900 and
160,150 with a  weighted-average  exercise price of $5.21 and $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,  1997 there were  400,000  shares of common  stock
reserved  for the ESPP.  The number of shares  issued under the plan in 1997 and
1996 were 15,636 and 15,828 shares for $35,773 and $37,658 respectively.

(13)  Foreign Sales
The  Company's  foreign sales are made  principally  to customers in Western and
Eastern Europe,  South Africa,  the Middle East,  Mexico,  and South and Central
America.  All  foreign  sales are  payable in U.S.  dollars.  No single  country
accounted  for more than 6% of the  Company's  sales.  Such  sales  amounted  to
$6,686,274,  $4,092,468  and  $4,048,000  for the years ended  December 31, 997,
1996, and 1995 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 2002 are as
follows:

Year ending December 31:

1998 ................................................        $566,375
1999 ................................................         536,980
2000 ................................................         411,689
2001 ................................................         316,641
2002 ................................................          80,550
                                                             ========

Rental  expense under  operating  leases was $516,000,  $438,000 and $150,000 in
1997,  1996 and 1995,  respectively.  Rent expense of $30,000 per annum was paid
for the year  ended  December  31,  1995 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, 1997.  In addition,  no
customer  had sales  greater than 10% of  consolidated  sales for the year ended
December 31, 1997.

(16) Quarterly Results of Operations (Unaudited)

The following  table sets forth quarterly  financial  information for 1997, 1996
and 1995 (in thousands, except for per share data):

<TABLE>
<CAPTION>
                                                                                                                        Total net
                                          Income (loss)   Loss from dis-  Net    Net income (loss)     Net loss per       income
                     Net        Gross     from continuing  continued    income    per share:  con-     share: discon-   (loss) per
                    sales       profit      operations     operations    (loss)  inuing operations   tinued operations     share
                    -----       ------      ----------     ----------    ------  -----------------   -----------------     -----
<S>                <C>           <C>          <C>         <C>          <C>             <C>                 <C>             <C> 
1997:                                                                                                                     
First  quarter ..   9,801        2,472          473         (238)         235           0.11               (0.05)           0.06
Second quarter ..   7,756        2,473          361          (33)         328           0.09               (0.01)           0.08
Third quarter ...   8,417        2,495          396       (4,365)      (3,969)          0.10               (1.05)          (0.95)
Fourth quarter ..   7,405        2,160          245         (150)          95           0.06               (0.04)           0.02
                   ------        -----          ---         ----           --           ----               -----            ----
                   33,379        9,600        1,475       (4,786)      (3,311)          0.35               (1.15)          (0.80)
                   ------        -----        -----       ------       ------           ----               -----           ----- 
                                                                                                                          
1996:                                                                                                                     
First  quarter ..   7,036        1,749          (71)        (112)        (183)         (0.02)              (0.02)          (0.04)
Second quarter ..   8,352        2,392          255         (112)         143           0.06               (0.03)           0.03
Third quarter ...   7,619        2,350          294         (224)          70           0.07               (0.05)           0.02
Fourth quarter ..   6,685        1,190         (289)        (781)      (1,070)         (0.07)              (0.19)          (0.26)
                   ------        -----         ----         ----       ------          -----               -----           ----- 
                   29,692        7,681          189       (1,229)      (1,040)          0.05               (0.30)          (0.25)
                   ------        -----          ---       ------       ------           ----               -----           ----- 
                                                                                                                          
1995:                                                                                                                     
First  quarter ..   7,130        2,286          536          (15)         523           0.14                  --            0.14
Second quarter ..   6,593        2,343          607          (16)         594           0.16               (0.01)           0.15
Third quarter ...   6,275        2,097          493          (14)         480           0.12                  --            0.12
Fourth quarter ..   6,658        1,916          259           (7)         246           0.06                  --            0.06
                   ------        -----          ---           --          ---           ----                                ----
                   26,656        8,642        1,895          (52)       1,843           0.47               (0.01)           0.46
                   ------        -----        -----          ---        -----           ----               -----            ----
</TABLE>                                                                       
                                                                               

Basic and  diluted  net  income  (loss)  per share are the same for all  periods
presented.

(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, 1997 and 1996.









                                      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 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 in 1996 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, 1997, 1996 and 1995



<TABLE>
<CAPTION>
Col. A                              Col. B            Col. C        Col. D           Col. E         Col. F
------                              ------            ------        ------           ------         ------
                                    Balance at        Charged to                                    Balance at
                                    Beginning         Cost and                                      End of
Classification                      of Period         Expense       Deductions (1)   Other          Period
--------------                      ---------         -------       --------------   -----          ------
<S>                                <C>                <C>          <C>               <C>            <C>    
For the year ended December        
31, 1995:  Allowance for           
doubtful accounts (deducted        
from accounts receivable)          $  112,000         $   37,000       --             --            $149,000
                                   
For the year ended December        
31, 1996:  Allowance for           
doubtful accounts (deducted        
from accounts receivable)             149,000            150,000       --            40,000         339,000
                                   
For the year ended December        
31, 1997:  Allowance for           
doubtful accounts (deducted        
from accounts receivable)             339,000             85,000    (76,000)          --            348,000
                                   
</TABLE>                           
                                   
                                 
(1)  Deductions  relate  to  uncollectible  accounts  charged  off to  valuation
accounts, net of recoveries.





                                       S-1