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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------

                                   FORM 10-KSB

                 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1997

                                       OR

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
             For the transition period from _________ to _________.

                         Commission file number 1-13856

                             SEL-LEB MARKETING, INC.
              (Exact name of small business issuer in its charter)

        New York                                       11-3180295
 (State of incorporation)                  (I.R.S. Employer Identification No.)

 495 River Street, Paterson, New Jersey                  07524
(Address of principal executive offices)               (Zip Code)

         Issuer's telephone number, including area code: (973) 225-9880

Securities registered pursuant to Section 12(b) of the Act:

                                                        Name of each exchange on
           Title of each class                             which registered
           -------------------                          ------------------------
      Common Stock, $.01 par value                      Boston Stock Exchange

Redeemable Warrant to Purchase Common Stock             Boston Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
                                (Title of Class)

                   Redeemable Warrant to Purchase Common Stock
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter

period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes /X/ No / /

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. /X/

The issuer's revenues for its most recent fiscal year were $17,374,041.

The aggregate market value of voting stock held by non-affiliates of the
registrant on March 24, 1998 was approximately $1,719,750. On such date, the
closing price of the issuer's common stock was $.40625 per share. Solely for the
purposes of this calculation, shares beneficially owned by directors, executive
officers and stockholders of the issuer that beneficially own more than 10% of
the issuer's voting stock have been excluded, except such shares, if any, with
respect to which such directors and officers disclaim beneficial ownership. Such
exclusion should not be deemed a determination or admission by the issuer that
such individuals are, in fact, affiliates of the registrant.

The number of shares of the registrant's Common Stock, $.01 par value,
outstanding on March 24, 1998 was 8,712,727.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Company's Proxy Statement in connection with its Annual Meeting
scheduled to be held on May 27, 1998 are incorporated in Part III. The Company's
Proxy Statement will be filed within 120 days after December 31, 1997.

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                             SEL-LEB MARKETING, INC.
                          Annual Report on Form 10-KSB
                   For the Fiscal Year Ended December 31, 1997


                                Table of Contents
                                -----------------

<TABLE>
<CAPTION>
                                                                                  Page
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<S>                                                                               <C>
PART I

     Item 1.    Description of Business                                              3
     Item 2.    Description of Property                                             12
     Item 3.    Legal Proceedings                                                   12
     Item 4.    Submission of Matters to a Vote of Security Holders                 12

PART II

     Item 5.    Market for Common Equity and Related Stockholder Matters            13
     Item 6.    Management's Discussion and Analysis or Plan of Operation           14
     Item 7.    Financial Statements                                                17
     Item 8.    Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure                                 18

PART III

     Item 9.    Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act                   18
     Item 10.   Executive Compensation                                              18
     Item 11.   Security Ownership of Certain Beneficial Owners and Management      19
     Item 12.   Certain Relationships and Related Transactions                      19
     Item 13.   Exhibits and Reports on Form 8-K                                    19
</TABLE>

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                                     PART I


Item 1.  Description of Business

General

         Sel-Leb Marketing, Inc. (the "Company") is primarily engaged in the
distribution and marketing of consumer merchandise to retail sellers such as
mass merchandisers, discount chain stores and food, drug and electronic
retailers. The Company's business presently consists of the following
activities: (i) developing, marketing and selling the Company's own proprietary
brands of budget-line health, beauty aid and cosmetic products, which are
manufactured for the Company by contract manufacturers, (ii) opportunistic
purchasing and secondary sourcing (i.e., distributing merchandise on a wholesale
basis outside of normal distribution channels to retail merchants) of a broad
range of name-brand and off-brand products such as health and beauty aids,
cosmetics, fragrances, kitchen items and other household items, and (iii)
developing, marketing and selling, or otherwise facilitating the development,
marketing or sale of, products to be promoted by celebrity spokespersons and
sold to mass merchandise retailers, as well as products which will "tie in" to
specific television shows and be sold by the Company either on television in
connection with those shows, with the intent to thereafter sell such products to
mass merchandise retailers, or directly to mass merchandise retailers. The
Company's strategy is to capitalize on increased consumer demand for value and
convenience resulting from the increased acceptance by consumers of mass
merchandisers, electronic retailers and other mass marketing retail outlets, as
well as on the popularity of consumer products endorsed by celebrity
spokespersons.

         The Company, which was incorporated under the laws of the State of New
York in September 1993, consummated in July 1995 an initial public offering (the
"IPO") of units (the "Units"), each Unit consisting of one share of common
stock, par value $.01 per share ("Common Stock"), and one redeemable warrant to
purchase one share of Common Stock (the "Warrants"). Immediately following the
issuance of the Units in the IPO, the Common Stock and Warrants became
separately tradeable and transferable. On May 18, 1995, Linette Cosmetics, Inc.
("Linette Cosmetics"), a corporation founded in 1985 by Harold Markowitz, the
Chairman of the Board of the Company, and Jorge Lazaro, the Executive Vice
President and Secretary of the Company, was merged with and into the Company,
with the Company as the surviving corporation (the "Linette Merger"). Prior to
the Linette Merger, all of the outstanding capital stock of Linette Cosmetics
was owned by Mr. Markowitz, Mr. Lazaro and Paul Sharp, the President and Chief
Executive Officer of the Company, who together comprised the shareholders of the
Company until the IPO. In addition, immediately prior to the consummation of the
IPO, each of Messrs. Markowitz, Sharp and Lazaro contributed to the Company his
20% equity interest in Lea Cosmetics, Inc. ("Lea Cosmetics") and the Company
acquired from the remaining shareholder his 40% equity interest in Lea Cosmetics
(the "Lea Acquisition"). As a result, Lea Cosmetics became a wholly-owned
subsidiary of the Company and, on August 3, 1995, Lea Cosmetics was merged with
and into the Company, with the Company as the surviving corporation.


         In September 1997, the Company and RBCJJ Associates, LLC ("RBCJJ"), an
unaffiliated third party, formed Ales Signature, Ltd., a New York corporation
("Ales"), for the purpose of acquiring from SBC Corporation, Inc. ("SBC") a line
of women's cosmetic, corrective and treatment products (e.g., blemish creams and
eye creams) sold under the Signature(R) name. In connection with such formation,
the Company acquired a 90% equity interest in Ales and RBCJJ acquired the
remaining 10% equity interest in Ales. On October 23, 1997, Ales consummated the
acquisition of the Signature(R) line, and in

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connection therewith acquired from SBC, for approximately $670,000, (i) all
rights of SBC in and to certain trademarks (including the Signature
Solutions(TM) mark and the Signature Beauty Care(R), Giraffe(R), Groomer's
Secret(R), Lip Set(R) and Salon Essence(R) registered trademarks) and (ii)
finished products and other inventory (including works in progress and component
parts) related to the product lines bearing the acquired trademarks.

         Unless otherwise specified herein, references to the "Company" shall
refer collectively to Sel-Leb Marketing, Inc. and its subsidiary Ales Signature,
Ltd.

         Sale of Proprietary Brand Name Products. The Company is currently
engaged in the development, marketing and sale of its own proprietary brand name
budget-line health, beauty aid and cosmetic products. The Company's beauty aid
and cosmetic products include budget-line lipsticks, lip pencils, nail polishes
and eye pencils, which are manufactured in a variety of colors and are sold
under the Linette(R), Zia(R), Loud Music(TM), Ghoul Tools(TM), Signature
Solutions(TM) and Signature Beauty Care(R) brand names to retail chains and
other mass merchandisers located throughout the United States. All of the
Company's proprietary beauty aid and cosmetic products are manufactured and
supplied by third parties in accordance with the Company's specifications. The
Company purchases all materials for these products (including raw materials and
packaging) through individually placed purchase orders to various suppliers.
During the fiscal year ended December 31, 1997, no such supplier accounted for
more than 10% of such purchases other than Worldwide Packaging, Inc., which
accounted for approximately 10.2% of such purchases. The Company has credit
arrangements with such suppliers that allow it to purchase merchandise on credit
with payment generally due 30 days after purchase. To date, the Company has not
experienced any shortages of or difficulties in obtaining the raw materials used
in its products or the materials used for the packaging of its products.
Furthermore, the Company believes that alternate sources of supply for such
materials are readily available and that the loss of any one of its suppliers
would not have a material adverse effect. The Company believes that it has good
relationships with the suppliers of raw materials and packaging for its
proprietary products.

         Typically, materials purchased by the Company for its proprietary
beauty aid and cosmetic products are delivered by the suppliers to the Company's
warehouse facilities. Thereafter, the Company delivers such materials, on an
as-needed basis, to its contract manufacturers, which are engaged by the Company
to provide filling services and perform quality control with respect to the

finished products. During the fiscal year ended December 31, 1997, one such
contract manufacturer -- LPD Packaging, Inc. -- accounted for approximately 90%
of the Company's filling services. All products are manufactured pursuant to the
Company's specifications on a purchase order basis. Once completed, the products
are delivered to the Company, which packages the products and distributes the
finished products to its customers. Although the Company believes that its
contract manufacturers have the capacity to produce volumes of the Company's
products sufficient to meet the Company's foreseeable needs, there can be no
assurance of such. Furthermore, although the Company believes that it has a good
relationship with its contract manufacturers and that the Company will continue
to obtain its finished beauty aid and cosmetic products from such manufacturers
in the foreseeable future, the Company does not have written contracts with its
manufacturers and there can therefore be no assurance of such. In the event the
Company were to experience difficulties with or the loss of services of its
present manufacturers, the Company believes that it would be able to retain the
services of other manufacturers; however, there can be no assurance that such
services could be retained on a timely basis or on terms as favorable as those
with its present manufacturers.

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         As part of the Company's strategy of taking advantage of the growth in
mass merchandising and value retailing, the Company will seek to expand its
existing proprietary brand name product lines as well as continue to introduce
new brand name products, thereby providing the Company with a supply of products
and making the Company less reliant on third party and/or opportunistic sources
of merchandise. The Company may also seek to acquire rights to additional
proprietary product lines through licensing or other arrangements, although
there can be no assurance of such.

         Opportunistic Purchasing and Secondary Sourcing Activities. The Company
acts as a secondary sourcer of a broad range of name-brand and off-brand
merchandise, including health and beauty aids, cosmetics, fragrances, kitchen
items and other household products. The Company acquires its merchandise in
negotiated purchases either directly from consumer goods manufacturers or from
wholesalers, retailers, financially distressed businesses, duty-free
distributors and other secondary sources located in the United States and, to a
very limited extent, in Europe, and sells the merchandise to retail chains and
other mass merchandisers located throughout the United States. During the year
ended December 31, 1997, the Company purchased merchandise from over 50
different suppliers and sold the merchandise to over 30 different retailers,
including, among others, BJ's Wholesale Club and McCrory's Stores, which
accounted for approximately 33% and 5%, respectively, of the Company's net
opportunistic sales in 1997. The Company believes that its longstanding
relationships with many of its suppliers and customers are important to the
secondary sourcing activities of the Company, and that its relationship with its
suppliers and customers are good.

         In connection with its distribution activities, the Company has the
ability to repackage merchandise acquired by it or to provide other value-added
services at the request of a customer. For example, if the Company were to
acquire merchandise which had been packaged by the manufacturer as a four-pack

item (i.e., four items to the package), the Company could, if requested by the
customer, repackage the item as a ten-pack item prior to delivery of the
merchandise to the customer. Likewise, at a customer's request, the Company has
the ability to package several different items together to create a gift or
bonus package. The Company believes that its ability to provide such value-added
services allows it to service the ongoing needs of its customers and to enhance
its sales and customer relations.

         Because the Company focuses on the opportunistic acquisition of
merchandise (other than designer fragrances) such as purchases of closed-out,
overstocked and/or change-of-packaging brand name items, the Company is
generally able to purchase such merchandise at a discount below wholesale cost.
The Company then sells the merchandise to discount retailers and other mass
merchandisers who seek to purchase products at discount prices in order to
supplement their normal inventory purchases or for special promotions. The
merchandise is sold at prices that are above the Company's cost, although at
prices that are still generally below wholesale. Although the Company typically
purchases merchandise before it has located customers for such merchandise, it
has sold substantially all merchandise acquired by it in each of the last three
fiscal years.

         The Company purchases the name-brand and off-brand merchandise which it
sells to retailers from over 50 suppliers, including consumer goods
manufacturers, wholesalers, retailers, financially distressed businesses,
duty-free distributors and other secondary sources. The Company is continually
seeking to locate new sources of merchandise. Generally, the Company will be
contacted by a manufacturer or other supplier when such supplier has excess
merchandise that is available for resale through the secondary market;
alternatively, the Company will also contact a supplier if it becomes aware that
the supplier has merchandise which it desires to sell. Although certain
suppliers may have provided a majority or all of a particular type of product or
particular category of merchandise, no supplier

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accounted for more than 10% of the Company's total merchandise purchases for the
year ended December 31, 1997. During the year ended December 31, 1997,
substantially all of the Company's secondary sourcing merchandise was purchased
from domestic suppliers, with the remainder being purchased from suppliers
located in Europe. The Company believes that the loss of any one of its
suppliers would not have a material adverse effect on the Company and that
alternative sources of merchandise are readily available in all existing product
categories as well as additional product categories.

         All merchandise is purchased by the Company from its suppliers through
individually placed purchase orders. The Company does not have any contractual
relationships with any of its suppliers and depends, instead, on its ongoing
relationships and prior dealings with such suppliers to obtain merchandise at
favorable prices when it becomes available to secondary suppliers. The Company
believes that such ongoing relationships with its suppliers have resulted from
its prior dealings with such suppliers, in many cases over a period of years,
and its reliability and strength as a customer. Several of the Company's

principals have been involved in the opportunistic purchasing business for more
than 20 years and have developed many on-going contacts with suppliers.

         Currently, all purchasing and pricing decisions with respect to the
Company's opportunistic purchasing activities are made by Paul Sharp, the
Company's President and Chief Executive Officer, and Jorge Lazaro, the Company's
Executive Vice President, who locate sources of merchandise and determine
whether any given product will be suitable for wholesale distribution to mass
merchandise retailers or other customers. Generally, the Company believes that
it has the ability to sell all merchandise that is acquired by it. The Company
has credit arrangements with substantially all of its existing suppliers,
thereby allowing the Company to purchase merchandise on account. Generally, such
credit arrangements allow the Company to purchase merchandise with payment
generally due 30 days after the purchase. However, in certain cases the Company
purchases merchandise with payment made upon the receipt of goods in order to
enable the Company to obtain favorable prices.

         The Company also acts as a wholesale distributor of prestige, designer
fragrances. Historically, manufacturers of such fragrances have sold their
products primarily to leading department stores. As a result, mass merchandisers
have traditionally only been able to obtain such items from secondary sources
such as the Company. Typically, the Company purchases these fragrances from
other secondary sources such as export and import companies, duty-free
distributors and department stores which are liquidating their excess inventory.
Unlike other merchandise which is acquired by the Company at prices that are
significantly below wholesale, the Company purchases the prestige fragrances at
above-wholesale prices (although still well below their normal retail price).
The Company, in turn, sells such items to mass merchandisers. The Company
believes that sales of such fragrances will continue to constitute a portion of
its sales, although there can be no assurance of such.

         The Company believes that a portion of the prestige fragrances
purchased by it may include trademarked products manufactured in foreign
countries and trademarked products manufactured in the United States that may
have been sold to foreign distributors. From time to time, United States
trademark owners and their licensees and trade associations have initiated
litigation or administrative agency proceedings seeking to halt the importation
into the United States of such foreign manufactured or previously exported
trademarked products. Although the Company is not currently the subject of any
such legal or administrative actions, and is not aware of any such threatened
legal or administrative actions, there can be no assurance that the Company's
business activities will not become the subject of such actions in the future,
or that future judicial, legislative or administrative agency action will not
limit

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or eliminate some or all of the secondary sources of supply of prestige
fragrances used by the Company. However, the Company believes that any future
limitation on or elimination of its sources of supply for prestige fragrances
for sale to its customers would not have a material adverse effect on the
Company, although there can be no assurance of such.


         Development of "Celebrity-Endorsed" and Television "Tie-in" Products.
The Company believes that the increasing popularity of consumer products
endorsed by celebrities, as well as products which "tie-in" to specific
television shows, may provide significant future opportunities for the Company.
Accordingly, the Company is seeking to develop products for promotion by
celebrity spokespersons and television "tie-in" products, which products would
be sold by the Company to mass merchandising and electronic retailers. In this
connection, the Company will seek to enter into agreements with celebrities for
whom it believes it will be able to successfully develop products which will
have consumer appeal, as well as agreements pursuant to which it will be able to
develop television "tie-in" products which the Company believes will have
consumer appeal.

         In 1996, the Company entered into an arrangement with Regis Philbin,
co-host of the television program Live with Regis and Kathie Lee, and Beau
Brummel ("Beau Brummel"), a leading New York City clothier, involving a line of
menswear accessories to be promoted by Mr. Philbin. Pursuant to such
arrangement, the Company provided a portion of the financing required in
connection with Mr. Philbin's live television appearances on QVC Network in
December 1996 and March 1997. The Company and Beau Brummel subsequently
formalized this relationship by forming Beau Brummel Sel-Leb Marketing, Inc.
("BBSLM"), a joint venture, of which each of the Company and Beau Brummel hold a
47.5% equity interest and a third party holds the remaining 5% equity interest.
Pursuant to the terms of an agreement between such parties relating to the
operation of BBSLM, Beau Brummel is responsible for designing the clothing and
accessories line promoted by Mr. Philbin, and the Company is responsible for the
day-to-day operations of BBSLM, including the marketing and promotion of the
product line. BBSLM, in turn, entered into an agreement with each of Mr. Philbin
and QVC, Inc.("QVC"). Under BBSLM's agreement with Mr. Philbin, Mr. Philbin
granted to BBSLM the right to use his name, autograph and likeness in connection
with the promotion and distribution of the menswear products, and agreed to
appear on the QVC Network to promote such products. In consideration therefor,
BBSLM agreed to pay to Mr. Philbin a specified percentage of the proceeds from
the sale of the menswear products. The agreement further provided for Mr.
Philbin to receive specified guaranteed payments from BBSLM following each of
his appearances on QVC and provided that, in the event QVC submitted purchase
orders to BBSLM following any appearance by Mr. Philbin which were not
sufficient to generate the specified royalty payments, BBSLM was entitled to
terminate its agreement with Mr. Philbin. BBSLM's agreement with Mr. Philbin was
for a one-year term which ended in March 1998. Since the termination of such
agreement, BBSLM has been operating pursuant to an informal arrangement with Mr.
Philbin on substantially the same terms as described herein, and is currently in
discussions with Mr. Philbin to renew the formal agreement between them.
However, there can be no assurance that BBSLM and Mr. Philbin will renew their
prior agreement or, if renewed, as to the terms and conditions thereof. BBSLM
has also entered into an agreement with QVC, pursuant to which BBSLM has granted
to QVC the exclusive right to promote the product line through direct response
television and through retail stores operated by QVC and its affiliates, and has
agreed to cause Mr. Philbin to make at least eight appearances on the QVC
Network each year to promote the menswear products. The agreement between BBSLM
and QVC is for an initial term of three years commencing March 1997, and is
subject to automatic renewal for additional three-year periods unless BBSLM
shall notify QVC prior to the expiration of the initial term or any such renewal

period of its desire to terminate the agreement and, during such term, net
purchases of products by QVC shall have been less than a specified minimum
amount. In addition, BBSLM shall have the right

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to terminate the agreement following either the first or second year of the
initial term thereof in the event certain specified minimum net purchase
requirements are not met during such year. Pursuant to BBSLM's agreements with
Mr. Philbin and QVC, Mr. Philbin appeared on the QVC Network on three occasions
during 1997.

         In September 1996, the Company entered into an arrangement with ACI,
Inc. ("ACI"), a developer and marketer of cosmetic products, relating to the
distribution and marketing of products endorsed by celebrity spokespersons
through electronic media and other retail channels. Pursuant to this
arrangement, the Company will provide the financing required in connection with
developing, marketing and distributing the products to be promoted by such
celebrities and sold in the retail market. All profits and losses (after giving
effect to any royalty payments required to be made to celebrity spokespersons)
resulting from the sale of such products are to be divided equally between the
Company and ACI. To date, the Company has provided the financing for a line of
cosmetics developed by ACI (including, without limitation, lipsticks, blushes
and other beauty products) which are being promoted by a leading make-up artist
and sold through the electronic media. There can be no assurance that any other
products will be developed by ACI and financed by the Company pursuant to this
agreement or that any such products that are developed will meet with consumer
acceptance or provide significant revenues for the Company.

         In October 1996, the Company entered into an agreement with Viacom
Consumer Products, Inc. ("VCP") pursuant to which VCP has granted to the Company
a license to use the designs, trademarks, service marks, logos, visual
representations, characters and characterizations of the television series
Clueless(R) in connection with the manufacture and distribution in the United
States of a Clueless(R) line of cosmetics (including, among others, nail care
products, lip stick products, cologne fragrances, mass market gift sets,
signature gift sets and children's gift sets). Pursuant to the agreement, the
Company has the exclusive right to sell such items in mass market stores,
grocery stores, drug stores, beauty outlets, discount chain stores and wholesale
clubs, and the non-exclusive right to sell such items in toy stores and
department stores; provided, however, that under certain conditions (including
failure to make a timely royalty payment or failure to meet certain sales
targets), the Company's exclusive rights shall become non-exclusive. The Company
is required under the agreement to pay to VCP a specified royalty fee on all
items sold by the Company pursuant to the agreement, and has paid to VCP a
non-returnable advance of $90,000 (subject to reduction in the event certain
episodes of the show are not picked up for broadcast) to be applied against the
Company's royalty payments. In addition, the Company shall be required to pay to
VCP on March 31, 1998 a guarantee of $225,000, less the amount of the
non-returnable advance paid by the Company to VCP and the aggregate amount of
royalties paid by the Company to VCP through such date. Furthermore, the Company
is also required under the agreement to spend a designated amount each year on

advertising for the Clueless(R) cosmetics line. The agreement commenced on
October 15, 1996 and will continue, subject to certain conditions, until October
31, 1999; provided, however, that in the event the Company shall have met
certain royalty targets during the initial term, the Company shall have the
right to extend the agreement for an additional two-year period, subject to
payment of an additional advance and an additional guarantee; and provided
further that, in the event Clueless(R) is not picked up for broadcast under
certain circumstances, the Company shall have the option to terminate the
agreement. During 1997, the Company commenced manufacturing a line of
Clueless(R) lipsticks, nail polishes and mascaras, which line was launched in
March 1997. As in the case of its own proprietary brand name products, the
Company manufactures the Clueless(R) products by acquiring the raw materials
therefor from various suppliers and delivering such materials to its contract
manufacturers, which provide filling services and deliver finished products to
the Company for packaging and delivery to the Company's customers. There can be
no assurance that the Clueless(R) products will continue to meet

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with consumer acceptance or that the Clueless(R) show will continue to be
broadcast during the anticipated term of the agreement.

         In January 1997, the Company entered into an agreement with Bell Abbott
Haussmann Inc. ("BAHI") pursuant to which the Company has been granted the
exclusive right to use the trademark "Jabot(R)" in connection with the
production, marketing and distribution of certain cosmetic and fragrance items
(including, without limitation, perfumes, colognes, toilet water, talcum powder,
bath gels and personal deodorants) in the United States and Canada, and has also
been granted the exclusive right to use the trademark "Jabot for the Young and
the Restless Generation(R)" in connection with the marketing and distribution of
such items in Canada. The "Jabot(R)" and "Jabot for the Young and the Restless
Generation(R)" marks were inspired by the fictional name of a cosmetics company
featured on a leading daytime television drama. Pursuant to the agreement, the
Company has the right to sell the cosmetic and fragrance items through various
retail distribution channels, including mass merchandisers, retail stores,
catalogues, electronic media, direct response advertising, mail order,
telemarketing and other similar retail channels. The Company is required under
the agreement to pay to BAHI a specified royalty fee on all items sold by the
Company pursuant to the agreement, and has paid to BAHI a nonrefundable $10,000
advance to be applied against the Company's royalty payments. The agreement is
for a term of five years commencing March 31, 1997, and shall be automatically
extended for an additional term of five years and a second additional term of
ten years, in each case subject to certain minimum royalty payments having been
met during the preceding term, and thereafter to subsequent additional terms of
five years unless either party does not wish to extend the term of the
agreement. As of the date hereof, the Company has developed prototypes of
products to be included in the "Jabot(R)" and "Jabot for the Young and the
Restless Generation(R)" product lines; however, no such products have been sold
by the Company as of the date hereof. There can be no assurance that the Company
will be successful in selling such products or that any such products developed
by the Company will meet with consumer acceptance.


         Although the Company is seeking to develop the "celebrity-endorsed" and
"television tie-in" product area of its business, including by marketing and
distributing in the traditional retail market merchandise which is originally
offered for sale on television or by developing products to be promoted by
celebrities and sold directly in such traditional markets, there can be no
assurance that the Company will be successful in its endeavors. To date, the
Company has not generated a significant amount of revenues from such celebrity
products, and there can be no assurance that it will be able to successfully
develop any such products or that any such products developed by the Company
will meet with consumer acceptance. In addition, except as described above, as
of the date hereof the Company has no agreements, understandings or commitments
related to such plan of development.

Inventory

         Merchandise acquired by the Company in connection with its
opportunistic purchasing activities for resale to its mass market customers is
generally shipped by the supplier to the Company's warehouse facility, which is
located in Paterson, New Jersey, or, in certain situations, is shipped by the
supplier directly to a customer from whom the Company has received a purchase
order. The Company utilizes its Paterson facility for the centralized receipt of
goods from suppliers, as well as the storage of inventory and the shipment of
inventory to its customers. In addition, value-added services such as
repackaging of goods are also performed at this facility.

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         Typically, all raw materials purchased by the Company for its
proprietary beauty aid and cosmetic products, as well as for the products sold
under the Clueless(R) name, are delivered to the Company's warehouse facility.
Thereafter, the Company delivers such materials, on an as-needed basis, to its
contract manufacturers, which provide filling services and perform quality
control with respect to the finished products. Once completed, the products are
delivered to the Company, which packages the products and distributes the
finished goods from its warehouse to its customers.

         In 1996, the Company uncovered the theft of certain of its inventory
from its former warehouse facilities located in North Bergen, New Jersey. The
Company believes that the amount of inventory involved was approximately
$103,000. The loss of such inventory during the year ended December 31, 1996 had
an adverse effect on the results of operations of the Company for the fiscal
year ended December 31, 1996. Although the Company has filed a notice of claim
with its insurance carrier with respect to this matter, the Company's current
insurance policy provides coverage for employee theft for only up to $100,000
per incident, with a $10,000 deductible. There can be no assurance that the
Company will be successful in its claim under such insurance policy.

Competition

         The areas of business in which the Company engages are highly
competitive businesses. The secondary sourcing business is characterized by
intense competition, both in the products sold and in the retaining of

relationships with suppliers and customers. With respect to its ability to
obtain merchandise, the Company competes with other secondary sources, as well
as with wholesale distributors and retailers. The Company believes that its
ability to purchase a broad array of merchandise at competitive prices is
critical to its success. With respect to sales to its customers, the Company
competes with other secondary suppliers of merchandise, as well as with
manufacturers who sell directly to retail merchandisers. In addition, with
respect to products sold under the Company's Linette(R), Zia(R), Loud Music(TM),
Ghoul Tools(TM), Signature Solutions(TM) and Signature Beauty Care(R) brand
names, the Company competes with other manufacturers at the retail store level
for shelf space and promotional space. Many of the Company's existing or
potential competitors are well established companies and have or will have
substantially greater financial, marketing and other resources than the Company.
The Company believes that it competes on the basis of value, product assortment
and availability, service to customers and reputation, as well as on the basis
of its long-standing and well-established relationships with both its suppliers
and customers. Although the Company believes that it will be able to compete
effectively on the basis of such factors, there can be no assurance of such.

         In connection with its "celebrity-endorsed" products business, the
Company competes or will compete with manufacturers and marketing organizations
that seek out celebrities to endorse products and assist in marketing programs
for their merchandise. In addition, the Company believes that virtually all
celebrities have agents who can negotiate directly with retailers in order to
secure marketing contracts on their behalf. The Company believes that it
competes on the basis of its ability to design products which are consistent
with the celebrities' respective preferences and characters and to provide such
products to retailers at competitive prices. Furthermore, although the Company
is not aware of any other entities which currently manufacture, market or
develop television "tie-in" products to be sold on television during the airing
of the related program, the Company believes that any such products developed by
the Company will compete with other products sold in the electronic retailing
market (including through television infomercials and interactive television
shopping networks), and that these products, as well as the Clueless(R) line of
cosmetics sold by the Company, will compete with other products sold in the
traditional retail market which relate to characters or themes of television
shows or

                                       10

<PAGE>

movies. The Company believes that it will compete on the basis of the unique
nature of such television "tie-in" products, as well as on its ability to
provide such products at competitive prices.

Trademark and Servicemark Protection

         Products developed by the Company are sold under the Linette(R),
Zia(R), Signature Solutions(R) and Signature Beauty Care(R) trademarks and the
Loud Music(TM) and Ghoul Tools(TM) marks. The Company has registered the
Linette(R) and Zia(R) trademarks with the United States Patent and Trademark
Office (the "Trademark Office") and, in connection with the acquisition of the
product lines from SBC, Ales acquired all of SBC's rights in and to the

Signature Solutions(R) mark and the Signature Beauty Care(R), Giraffe(R),
Groomer's Secret(R), Lip Set(R) and Salon Essence(R) trademarks. However, there
can be no assurance that these marks do not or will not violate the proprietary
rights of others, that such marks would be upheld if challenged or that the
Company would not be prevented from using its trademarks. The Company has also
applied to the Trademark Office for the registration of the trademarks Loud
Music(TM), Ghoul Tools(TM) and Signature Solutions(R), the trademarks under
which the Company sells certain proprietary cosmetics products. There can be no
assurance that registration of such trademarks will be granted by the Trademark
Office. In addition, the Company has also applied to the Trademark Office to
register certain other trademarks which it intends to use in the future in
connection with its own proprietary brand name products, and intends to register
other brand names chosen by the Company for its own line of products. However,
there can be no assurance that the Company will be able to register any such
marks.

         Pursuant to the Company's agreement with VCP, the Company has been
granted a license to use the designs, trademarks, service marks, logos, visual
representations, characters and characterizations of the television series
Clueless(R) in connection with the manufacture and distribution in the United
States of a Clueless(R) line of cosmetics (including, among others, nail care
products, lip stick products, cologne fragrances, mass market gift sets,
signature gift sets and children's gift sets). In addition, pursuant to the
Company's agreement with BAHI, the Company has been granted the exclusive right
to use the trademark "Jabot(R)" in connection with the production, marketing and
distribution of certain cosmetic and fragrance items (including, without
limitation, perfumes, colognes, toilet water, talcum powder, bath gels and
personal deodorants) in the United States and Canada, and has also been granted
the exclusive right to use the trademark "Jabot for the Young and the Restless
Generation(R)" in connection with the marketing and distribution of such items
in Canada.

Personnel

         The Company currently employs 18 full-time salaried employees and
approximately 45 hourly employees (the exact number of which fluctuates from
time to time based on the Company's needs). The terms of employment of the
Company's hourly employees are governed by a collective bargaining agreement
which commenced on September 1, 1997 and continues for a term of five years.
Management believes that its employee relations are good.

Insurance

         To date, no material product liability claims have been made against
the Company; however, as a distributor of merchandise, including health and
beauty aids, cosmetics, fragrances and household items, the Company could be
exposed to possible liability claims from others for personal injury or property
damage due to design or manufacturing defects or otherwise. The Company
maintains a product liability insurance policy that has a $1,000,000 per
occurrence limit and a $2,000,000 aggregate limit, and a

                                       11

<PAGE>


$3,000,000 umbrella liability insurance policy to cover claims in excess of the
limits of its product liability insurance. In addition, the Company believes
that the suppliers from whom it purchases such merchandise, including the
manufacturers thereof, maintain adequate levels of product liability insurance.
The Company also maintains other insurance, including insurance relating to
property and personal injury, which the Company believes is similar to that
maintained by comparable businesses and in amounts which the Company currently
considers adequate. The Company believes that its insurance coverage, including
without limitation its product liability coverage, is adequate in light of prior
experience and future expectations. Nevertheless, a partially or completely
uninsured claim against the Company, if successful and of sufficient magnitude,
could have a material adverse effect on the Company.


Item 2.  Description of Property.

         The Company's principal executive offices are located at 495 River
Street, Paterson, New Jersey, 07524. Such premises include approximately 50,500
square feet of office and warehouse space. The lease is for a period of five
years commencing April 1, 1997, at a monthly rent (including tax) of $13,120 in
the first two years, $20,666 in the third year and $24,833 in the fourth and
fifth years. In addition, in connection with such lease, the Company purchased
certain machinery and equipment from the lessor at a cost of $110,000. The
Company is also obligated to reimburse the lessor in the third, fourth and fifth
years of the lease for the Company's proportionate share of any increases in
real estate taxes and assessments over the amount of such taxes and assessments
during calendar year 1997.

         The Company also leases approximately 10,000 square feet of storage
space in Middletown, New York from LPD Packaging, Inc., one of the contract
manufacturers of certain of the Company's beauty aid and cosmetic products,
which space the Company uses to warehouse materials and finished products.
Pursuant to the Company's written agreement with such lessor, the Company leased
such space during 1997 at an annual rent of $35,000 and will lease the space
during 1998 at the same rate. The Company also leases public warehouse space
from time to time on an as-needed basis for the storage of inventory.

         The Company believes that the space afforded by its properties is
adequate for the current needs of its business.


Item 3.  Legal Proceedings.

         Except for proceedings in the normal course of business, the Company is
not a party to or involved in any pending legal proceedings.


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

         The Company did not submit any matters to the vote of security holders
during the fourth quarter of the fiscal year ended December 31, 1997.

                                       12


<PAGE>

                                     PART II

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

         A.       Market Information.

         The shares of Common Stock of the Company commenced trading on the
Nasdaq Small Capitalization Market under the symbol "SELB" on July 13, 1995. The
range of high and low reported closing sales prices for the Common Stock as
reported by Nasdaq during the fiscal years ended December 31, 1996 and 1997 were
as follows:


                                                          High         Low
                                                          ----         ---
Fiscal Year 1996(1)

Quarter Ended:

         March 31, 1996.......................           $5.375       $4.50

         June 30, 1996........................           $8.250       $6.00

         September 30, 1996...................           $7.750       $5.625

         December 31, 1996....................           $7.625       $5.125


Fiscal Year 1997

Quarter Ended:

         March 31, 1997.......................           $6.75        $5.25

         June 30, 1997........................           $5.50        $1.25

         September 30, 1997...................           $2.75        $1.00

         December 31, 1997....................           $2.50        $0.75

-------------------
    (1)  All share prices prior to February 29, 1996 have been adjusted to give
         effect to a three-for-one stock split which was effected by the Company
         in the form of a share distribution on February 29, 1996 (the "Share
         Distribution"). Pursuant to the Share Distribution, each holder of
         record of Common Stock on February 2, 1996 received two additional
         shares of Common Stock for each share held on such date.


         The prices set forth above reflect inter dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual

transactions.

                                       13

<PAGE>

         B.       Holders.

         On March 24, 1998, as reported by the Company's transfer agent, shares
of Common Stock were held by 42 persons, based on the number of record holders,
including several holders who are nominees for an undetermined number of
beneficial owners.

         C.       Dividends.

         Prior to the Linette Merger, the Company and Linette Cosmetics were
treated as S Corporations for federal and certain state income tax purposes. As
a result, earnings of such companies during such period were taxed directly to
Harold Markowitz, the Chairman of the Board of the Company, Paul Sharp, the
President and Chief Executive Officer of the Company, and Jorge Lazaro, the
Executive Vice President and Secretary of the Company, who comprised all of the
shareholders of the Company and Linette Cosmetics during such period, rather
than to the Company or Linette Cosmetics, as the case may be. On May 17, 1995,
the Company declared a distribution payable to such shareholders in an amount
equal to the taxes payable on the earnings of the Company during the period from
the date of its formation on September 21, 1993 (and, in the case of Linette
Cosmetics, from January 1, 1994) to the date of the consummation of the Linette
Merger (the "S Corporation Distribution"), such distribution to be payable
following the consummation of the IPO after the amount thereof had been
determined. In September and October of 1995, the Company paid the S Corporation
Distribution to Messrs. Markowitz, Sharp and Lazaro in an aggregate amount of
approximately $156,250.

         Other than the S Corporation Distribution, the Company has not declared
or paid a cash dividend on its Common Stock since its inception. The payment by
the Company of dividends, if any, is within the discretion of the Board of
Directors and will depend on the Company's earnings, if any, its capital
requirements and financial condition, as well as other relevant factors. The
Board of Directors does not intend to declare any dividends in the foreseeable
future, but instead intends to retain earnings, if any, for use in the Company's
business operations.


Item 6.  Management's Discussion and Analysis or Plan of Operation

         The following discussion and analysis of the Company's results of
operations, liquidity and financial condition should be read in conjunction with
the Financial Statements of the Company and related notes thereto.

Results of Operations

Fiscal Year 1997 Compared to Fiscal Year 1996

         Net sales for the year ended December 31, 1997 were $17,283,523

compared to $13,318,088 for the fiscal year ended December 31, 1996,
representing an increase of approximately 30%. This increase in net sales
resulted from increases in sales of the Company's own proprietary brand name
line of beauty aids and cosmetics, increases in sales of merchandise acquired in
connection with the Company's opportunistic purchasing business, and the
introduction of a new line of cosmetics pursuant to the Company's arrangement
with ACI, which line is being sold through the electronic media.

                                       14

<PAGE>

         Commission income decreased for the fiscal year ended December 31, 1997
to $90,518 from $204,658 for the comparable period in 1996. This decrease in
commission income reflects the Company's emphasis on selling its own proprietary
products rather than acting as an agent for the sale of other companies'
products.

         Cost of sales increased from $10,601,237 in 1996 to $12,988,952 in
1997. However, the cost of goods sold as a percentage of net sales decreased
from 79.6% in 1996 to 75.2% in 1997. This decrease is due primarily to higher
profit margins generated by sales of the Company's own proprietary brand name
line of cosmetics and reflects the fact that, in 1996, the cost of goods sold
was adversely affected by a theft of inventory which was uncovered by the
Company in the fourth quarter of 1996 and which management believes was in the
amount of approximately $103,000.

         Selling, general and administrative ("SG&A") expenses increased by
$1,551,560 from $2,631,839 in 1996 to $4,183,399 in 1997. Generally, the
principal components of the Company's SG&A expenses are payroll, rent,
commission, royalties, insurance, legal, accounting and other fees paid to third
parties and travel and promotional expenses. The increase in SG&A expenses
resulted primarily from (i) increased costs incurred by the Company in
connection with the Company's having hired outside sales representatives and, in
connection therewith, having incurred commission expenses of approximately
$200,000 in 1997 as compared to approximately $75,000 in 1996, (ii) the sale of
product lines on which it incurred royalty expenses of approximately $308,000 in
1997 as compared to $32,000 in 1996, (iii) other SG&A costs associated with the
line of cosmetics being sold pursuant to the ACI agreement of approximately
$190,000, (iv) the Company's having increased its staffing to perform the
selling, distribution and other functions related to existing and new product
lines at a cost of approximately $353,000 and (v) the Company's having increased
its selling, travel, development and advertising expenses for existing and new
product lines by approximately $306,000 from the 1996 amount. In addition, the
Company moved its operations to a new and larger facility in 1997 to support
current and planned increases in sales levels and, as a result, occupancy costs
increased by $76,000 from the 1996 amount.

         As a result of the increase in the cost of sales and the increase in
SG&A expenses, total operating expenses increased from $13,233,076 in 1996 to
$17,172,351 in 1997. As a result of these increased operating expenses,
operating income decreased from approximately $290,000 in 1996 to $202,000 in
1997.


         The Company's net interest costs increased from $16,475 in 1996 to
$149,278 in 1997 primarily as a result of additional borrowings under the
Company's revolving line of credit and the new term loan.

         The Company's provision for income taxes decreased from approximately
$118,000 in 1996 to approximately $24,000 in 1997 resulting from the overall
reduction in income.

         As a result of the above, the Company's net income decreased by
approximately $130,000 from approximately $158,000 in 1996 to $28,000 in 1997.

         Although the Company has historically incurred operating losses in the
fourth quarter of each fiscal year, the 1997 fourth quarter loss was accentuated
by the fact that a significant amount of sales involved either promotional items
which have lower profit margins or items subject to royalties. In addition, the
Company has built up its infrastructure, as detailed above, to support
anticipated sales growth in 1998, although there can be no assurance that such
anticipated growth will occur. Finally, the Company's earnings were adversely
affected in the fourth quarter by the

                                       15

<PAGE>

financing costs incurred in connection with the Company's having secured
additional financing arrangements in the latter portion of 1997.

         The acquisition of the product lines from SBC in October 1997 did not
have a material impact on the Company's 1997 results of operations.

Liquidity and Capital Resources

         During 1997, an aggregate of 444,250 shares of Common Stock were issued
by the Company upon the exercise of warrants and options, resulting in net
proceeds to the Company of $735,789. In addition, during 1997, the Company
borrowed an additional $1,100,000 under its revolving line of credit described
below. The proceeds resulting from the option and warrant exercises and the
additional borrowings were used by the Company primarily for the purchase of
additional inventory, consisting primarily of the Company's proprietary brand
name lines of beauty aids and cosmetics.

         At December 31, 1997, the Company had working capital of $7,107,954 and
cash and cash equivalents in the amount of $249,688. The Company's principal
cash requirement is for the acquisition of inventory. In 1997, the Company
increased the amount of its inventory by approximately $2,100,000 to
approximately $5,814,000 at December 31, 1997. A portion of this increase was
financed by increased borrowings under the Company's revolving credit
arrangement and term loan described below.

         On November 6, 1995, the Company entered into a Loan and Security
Agreement (the "Original Loan Agreement") with Summit Bank (formerly known as
United Jersey Bank) (the "Lender") pursuant to which it obtained a revolving
line of credit for general working capital purposes in an aggregate principal
amount of up to $2,000,000, subject to a borrowing base limitation. The line of
credit bore interest at fluctuating rates per annum based on the "Prevailing

Base Rate" (as defined in the Original Loan Agreement) of the Lender. The Loan
Agreement terminated on July 31, 1997 and, subsequent thereto, the Company
borrowed funds from the Lender pursuant to an informal, non-binding arrangement
on the same terms as the Original Loan Agreement. The Company and the Lender
reinstated the Original Loan Agreement on September 22, 1997. As of September
30, 1997, the Company had outstanding $2,000,000 under this line of credit. Any
funds borrowed by the Company were secured primarily by the inventory and
receivables of the Company.

         On October 22, 1997, the Company and Ales entered into a new Loan and
Security Agreement with the Lender (the "Current Loan Agreement"). The Current
Loan Agreement provides for the continuation through May 31, 1998 of the
Company's existing line of credit arrangement providing for borrowings of up to
the lesser of $2,000,000 or prescribed levels of eligible accounts receivable
and inventories on substantially the same terms as under the Original Loan
Agreement. As of December 31, 1997 and March 26, 1998, the Company had
outstanding $1,400,000 and $1,700,000, respectively, under this line of credit.
Although the Company is currently in discussions to extend the maturity of, and
increase the amount available under its line of credit arrangement, there can be
no assurance that such renewal and amendment will be consummated or, if
consummated, as to the timing or terms thereof.

         Pursuant to the Current Loan Agreement, the Company and Ales also
obtained from the Lender a three-year, $1 million term loan to finance the
acquisition by Ales of certain assets from SBC, a manufacturer of cosmetics,
skin care and treatment products. The term loan bears interest at the
"Prevailing Base Rate" plus .25%, and the outstanding principal amount of the
loan is payable in installments, with $150,000 payable on each of August 31,
1998 and 1999 and the balance payable on

                                       16

<PAGE>

August 31, 2000. In connection with the acquisition, which was consummated on
October 23, 1997, Ales acquired, for approximately $670,000, inventory and
certain other assets, as well as trademarks and trade names including Signature
Solutions(TM) and Signature Beauty Care(R). The balance of the proceeds from the
term loan were used for working capital purposes.

         On September 26, 1997, in connection with the relocation of its office
and warehouse facilities to Paterson, New Jersey, the Company borrowed $100,000
from the Paterson Restoration Corporation. The loan, which bears interest at 6%
per annum, provides for monthly payments of principal and interest in the amount
of $1,461 through October 1, 2004 and is secured by a second priority lien on
all new machinery and equipment purchased by the Company. The proceeds of the
loan are to be used for the purchase of fixed assets.

         The Company anticipates that its working capital, together with
anticipated cash flow from the Company's operations will be sufficient to
satisfy the Company's cash requirements for at least twelve months. In the event
the Company's plans change (due to unanticipated expenses or difficulties or
otherwise), or if the working capital and projected cash flow otherwise prove
insufficient to fund operations, the Company could be required to seek

additional financing sooner than currently anticipated. Except for the Current
Loan Agreement, which expires on May 31, 1998, the Company has no current
arrangements with respect to, or sources of, additional financing. Accordingly,
there can be no assurance that additional financing will be available to the
Company when needed, on commercially reasonable terms, or at all. The Company's
inability to obtain such additional financing could have a material adverse
effect on the Company's long-term liquidity and on the proposed business
expansion plans of the Company.

         The Company recognizes the need to assure that its operations will not
be adversely impacted by Year 2000 software failures. The impact on operations
is currently being evaluated. In 1998, management will begin to identify the
revisions, if any, needed to be made to ensure that the Company will be able to
process information beyond 1999 without disruption. Software revisions are
expected to be performed by Company employees and the total estimated cost for
achieving Year 2000 compliance is not anticipated to be material to its
financial position or results of operations.

Cautionary Statement

         This Annual Report on Form 10-KSB contains certain forward-looking
statements, including statements concerning the adequacy of the Company's
sources of cash to finance its current and future operations. Actual results
could differ materially from those projected as a result of various factors,
including but not limited to general trends in the retail industry, the ability
of the Company to successfully implement its expansion plans, consumer
acceptance of any products developed and sold by the Company, and the ability of
the Company to develop its "celebrity" product business.


Item 7.  Financial Statements

         The financial statements of the Company are set forth in a separate
section of this Annual Report on Form 10-KSB. See "Item 13. Exhibits and Reports
on Form 8-K" and the Index to Financial Statements on page F-1 of this Annual
Report on Form 10-KSB.

                                       17

<PAGE>

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         On December 16, 1997, the Company dismissed Goldstein Golub Kessler &
Company, P.C. (the "Former Accountant") as the Company's independent
accountants. The reports of the Former Accountant on the Company's financial
statements for the fiscal years ended December 31, 1995 and 1996 did not contain
an adverse opinion or disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope or accounting principle. The Company's Audit
Committee and Board of Directors participated in and approved the decision to
change independent accountants. There were no disagreements with the Former

Accountant for the fiscal years ended December 31, 1995 and 1996 or for the
interim periods subsequent to December 31, 1996 through the date of the Former
Accountant's dismissal, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of the Former Accountant,
would have caused them to make reference thereto in their reports on the
financial statements for such years. No events of the kind set forth in Item
304(a)(1)(iv)(B) of Regulation S-B occurred during the fiscal years ended
December 31, 1995 and 1996 or during any of the interim periods subsequent to
December 31, 1996 through the date of the Former Accountant's dismissal.

         The Former Accountant furnished the Company with a letter addressed to
the Securities and Exchange Commission (the "Commission") stating that it agreed
with the above statements. A copy of this letter was included as an exhibit to
the Company's Current Report on Form 8-K filed with the Commission on December
22, 1997.

         Effective December 17, 1997, the Company engaged J.H. Cohn LLP (the
"New Accountant") as its new independent accountants. During the fiscal years
ended December 31, 1995 and 1996 and the interim periods subsequent to December
31, 1996 through the date of the New Accountant's engagement, the Company did
not (i) consult with the New Accountant on the application of accounting
principles to a specified transaction, either completed or proposed, (ii)
consult with the New Accountant on the type of audit opinion that might be
rendered on the Company's financial statements or (iii) receive either written
or oral advice from the New Accountant that was an important factor in reaching
a decision as to an accounting, auditing or financial reporting issue.

                                   PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

         See the section captioned "Election of Directors" included in the
Company's Proxy Statement in connection with its Annual Meeting scheduled to be
held on May 27, 1998, which section is incorporated herein by reference.


Item 10. Executive Compensation

         See the section captioned "Executive Compensation" included in the
Company's Proxy Statement in connection with its Annual Meeting scheduled to be
held on May 27, 1998, which section is incorporated herein by reference.

                                       18

<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

         (a)  Security Ownership of Certain Beneficial Owners

         See the section captioned "Principal Shareholders of the Company"
included in the Company's Proxy Statement in connection with its Annual Meeting

scheduled to be held on May 27, 1998, which section is incorporated herein by
reference.

         (b)  Security Ownership of Directors and Officers


         See the section captioned "Principal Shareholders of the Company"
included in the Company's Proxy Statement in connection with its Annual Meeting
scheduled to be held on May 27, 1998, which section is incorporated herein by
reference.

         (c)  Changes in Control

         The Company knows of no contractual arrangements which may, at a
subsequent date, result in a change of control of the Company.


Item 12.          Certain Relationships and Related Transactions

         See the section captioned "Certain Transactions" included in the
Company's Proxy Statement in connection with its Annual Meeting scheduled to be
held May 27, 1998, which section is incorporated herein by reference.


Item 13. Exhibits and Reports on Form 8-K

         (a)  Exhibits

         (1) The financial statements of the Company and the report thereon
         listed on the Index to Financial Statements on page F-1 hereof are
         being filed as part of this Annual Report on Form 10-KSB.

         (2) The following exhibits are being filed as part of this Annual
         Report on Form 10-KSB:

         1.1      Underwriting Agreement dated July 13, 1995 between the Company
                  and Duke & Co., Inc. (incorporated by reference to Exhibit
                  10.1 to the Company's Quarterly Report on Form 10-QSB for the
                  quarterly period ended September 30, 1995).

                                       19

<PAGE>

         2.1      Agreement and Plan of Merger of Lea Cosmetics, Inc. into the
                  Company dated July 31, 1995, together with Certificate of
                  Merger filed with the Secretary of State of the State of
                  Delaware on August 3, 1995 (incorporated by reference to
                  Exhibit 2.1 to the Company's Annual Report on Form 10-KSB for
                  the fiscal year ended December 31, 1995).

         3.1      Certificate of Incorporation of the Company, as amended
                  (incorporated by reference to Exhibit 3.1 to the Company's
                  Annual Report on Form 10-KSB for the fiscal year ended

                  December 31, 1995).

         3.2      Amended and Restated By-Laws of the Company (incorporated by
                  reference to Exhibit 3.2 to the Company's Quarterly Report on
                  Form 10-QSB for the quarterly period ended June 30, 1995).

         4.1      Form of Certificate for Common Stock (incorporated by
                  reference to Exhibit 4.1 to Amendment No. 2 to the Company's
                  Registration Statement on Form SB-2 (Registration
                  No. 33-88134), as filed with the Securities and Exchange
                  Commission on June 28, 1995 ("Amendment No. 2")).

         4.2      Warrant Agreement dated as of July 20, 1995 between the
                  Company, Continental Stock Transfer & Trust Company and Duke &
                  Co., Inc. (incorporated by reference to Exhibit 4.1 to the
                  Company's Quarterly Report on Form 10-QSB for the quarterly
                  period ended June 30, 1995).

         4.3      Form of Warrant Certificate (incorporated by reference to
                  Exhibit 4.3 to Amendment No. 2).

         4.4      Underwriter's Warrant dated July 20, 1995, issued by the
                  Company to Duke & Co., Inc. (incorporated by reference to
                  Exhibit 4.2 to the Company's Quarterly Report on Form 10-QSB
                  for the quarterly period ended June 30, 1995).

         4.5      Warrant and Registration Agreement dated as of July 20, 1995
                  between the Company and Jan Mirsky (incorporated by reference
                  to Exhibit 4.5 to the Company's Annual Report on Form 10-KSB
                  for the fiscal year ended December 31, 1995).

         4.6      Registration Rights Agreement dated as of May 19, 1995 between
                  the Company and Wellington Corporation N.V. (incorporated by
                  reference to Exhibit 4.7 to Amendment No. 1 to the Company's
                  Registration Statement on Form SB-2 (Registration No. 33-
                  88134), as filed with the Securities and Exchange Commission
                  on May 24, 1995 ("Amendment No. 1")).

         4.7      1995 Stock Option Plan of the Registrant (incorporated by
                  reference to Exhibit 4.3 to the Company's Quarterly Report on
                  Form 10-QSB for the period ended June 30, 1995).

         4.8      1995 Nonemployee Directors' Stock Option Plan of the
                  Registrant (incorporated by reference to Exhibit 10.3 to the
                  Company's Quarterly Report on Form 10-QSB for the period ended
                  June 30, 1995).

                                       20

<PAGE>

         4.9      Form of Stock Option Agreements under the 1995 Stock Option
                  Plan (incorporated by reference to Exhibit 4.3 to the
                  Company's Registration Statement on Form S-8, as filed with

                  the Commission on January 10, 1997).

         4.10     Form of Stock Option Agreement under the 1995 Nonemployee
                  Directors' Stock Option Plan (incorporated by reference to
                  Exhibit 4.4 to the Company's Registration Statement on Form
                  S-8, as filed with the Commission on January 10, 1997).

         10.1     Financial Advisory and Investment Banking Agreement, dated as
                  of July 20, 1995, between the Company and Duke & Co., Inc.
                  (incorporated by reference to Exhibit 10.4 to the Company's
                  Quarterly Report on Form 10-QSB for the quarterly period ended
                  June 30, 1995).

         10.2     Employment Agreement dated as of June 30, 1995 between the
                  Company and Harold Markowitz (incorporated by reference to
                  Exhibit 10.7 to the Company's Quarterly Report on Form 10-QSB
                  for the quarterly period ended June 30, 1995).

         10.3     Employment Agreement dated as of June 30, 1995 between the
                  Company and Paul Sharp (incorporated by reference to Exhibit
                  10.8 to the Company's Quarterly Report on Form 10-QSB for the
                  quarterly period ended June 30, 1995).

         10.4     Employment Agreement dated as of June 30, 1995 between the
                  Company and Jan Mirsky (incorporated by reference to Exhibit
                  10.9 to the Company's Quarterly Report on Form 10-QSB for the
                  quarterly period ended June 30, 1995).

         10.5     Employment Agreement dated as of June 30, 1995 between the
                  Company and Jorge Lazaro (incorporated by reference to Exhibit
                  10.10 to the Company's Quarterly Report on Form 10-QSB for the
                  quarterly period ended June 30, 1995).

         10.6     Employment Agreement dated as of September 27, 1995 between
                  the Company and Jack Koegel (incorporated by reference to
                  Exhibit 10.19 to the Company's Annual Report on Form 10-KSB
                  for the fiscal year ended December 31, 1995).

         10.7     Subscription Agreement executed May 19, 1995 by Wellington
                  Corporation N.V. (incorporated by reference to Exhibit 10.20
                  to Amendment No. 2).

         10.8     Agreement dated as of July 8, 1995 between Larry H. Pallini
                  and the Company (incorporated by reference to Exhibit 10.21 to
                  the Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1995).

         10.9     Contribution Agreement dated as of July 13, 1996 by and among
                  the Company and Harold Markowitz, Paul Sharp and Jorge Lazaro
                  (incorporated by reference to Exhibit 10.13 to the Company's
                  Quarterly Report on Form 10-QSB for the quarterly period ended
                  September 30, 1995).

                                       21


<PAGE>

         10.10    Debt Conversion Agreement dated as of July 13, 1995 by and
                  among the Company, Harold Markowitz, Paul Sharp and Jorge
                  Lazaro (incorporated by reference to Exhibit 10.14 to the
                  Company's Quarterly Report on Form 10-QSB for the quarterly
                  period ended September 30, 1995).

         10.11    Trademark License Agreement dated January 28, 1997 between
                  Bell Abbott Haussmann Inc. and the Company (incorporated by
                  reference to Exhibit 10.25 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1996).

         10.12    Letter Agreement between the Company and LPD Packaging, Inc
                  (incorporated by reference to Exhibit 10.26 to the Company's
                  Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 1995).

         10.13    Merchandising License Agreement dated as of October 16, 1996
                  between Viacom Consumer Products, Inc. and the Company
                  (incorporated by reference to Exhibit 10.27 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended December
                  31, 1996).

         10.14    Lease dated as of February 5, 1997 between Bascom Corp. and
                  the Company (incorporated by reference to Exhibit 10.28 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1996).

         10.15    Shareholders Agreement dated June 26, 1996 among Sel-Leb
                  Marketing, Inc., B.B. Associates, LLC, Seth Markowitz and Beau
                  Brummel Sel-Leb Marketing, Inc. (incorporated by reference to
                  Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
                  for the quarterly period ended March 31, 1997).

         10.16    Agreement dated as of January 2, 1997 between QVC, Inc. and
                  Beau Brummel Sel-Leb Marketing, Inc. (incorporated by
                  reference to Exhibit 10.2 to the Company's Quarterly Report on
                  Form 10-Q for the quarterly period ended March 31, 1997).

         10.17    Product Promotion Agreement dated as of April 1997 between
                  Philbin Enterprises and Beau Brummel Sel-Leb Marketing, Inc.
                  (incorporated by reference to Exhibit 10.3 to the Company's
                  Quarterly Report on Form 10-Q for the quarterly period ended
                  March 31, 1997).

         10.18    Loan and Security Agreement dated October 22, 1997 between
                  Summit Bank, the Company and Ales (incorporated by reference
                  to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
                  for the quarterly period ended September 30, 1997).

         10.19    Environmental Indemnity Agreement dated October 22, 1997
                  between the Company, Ales and Summit Bank (incorporated by

                  reference to Exhibit 10.3 to the Company's Quarterly Report on
                  Form 10-Q for the quarterly period ended September 30, 1997).

         10.20    Security Agreement dated September 26, 1997 between the
                  Company and Paterson Restoration Corporation (incorporated by
                  reference to Exhibit 10.4 to the Company's Quarterly Report on
                  Form 10-Q for the quarterly period ended September 30, 1997).

                                       22

<PAGE>

         10.21    Stockholder's Agreement between RBCJJ Associates LLC and the
                  Company (incorporated by reference to Exhibit 10.5 to the
                  Company's Quarterly Report on Form 10-Q for the quarterly
                  period ended September 30, 1997).

         10.22    Asset Purchase Agreement dated as of September 15, 1997
                  between SBC Corporation, Inc. and Ales (incorporated by
                  reference to Exhibit 10.6 to the Company's Quarterly Report on
                  Form 10-Q for the quarterly period ended September 30, 1997).

         10.23    Collective Bargaining Agreement dated September 1, 1997
                  between Local 300-S Production Service & Sales District
                  Council I.U.C. AFL-CIO and the Company.

         11.1     Statement re: computation of per share earnings (not required
                  because the relevant computation can be clearly determined
                  from material contained in the financial statements).

         21       Subsidiaries of the Company.

         23.1     Consent of Goldstein Golub Kessler & Company, P.C.

         23.2     Consent of J.H. Cohn LLP.

         27       Financial Data Schedule.

         (b)  Reports on Form 8-K

                  On December 22, 1997, the Company filed a Current Report on
         Form 8-K in which the Company disclosed, pursuant to Item 4 thereof, a
         change in its certifying accountant.

                                       23

<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                          SEL-LEB MARKETING, INC.
                                          (Registrant)


                                          By:  /s/ Harold Markowitz
                                             -------------------------
                                             Harold Markowitz
                                             Chairman of the Board

                                           Date:  March 31, 1998

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

            Name                       Title                           Date
            ----                       -----                           ----

 /s/ Harold Markowitz      Chairman of the Board and Director     March 31, 1998
-------------------------
  Harold Markowitz



 /s/ Paul Sharp            President, Chief Executive Officer     March 31, 1998
-------------------------  and Director
  Paul Sharp               (principal executive officer)



 /s/ Jan S. Mirsky         Executive Vice President - Finance,    March 31, 1998
-------------------------  Chief Operating Officer and Director
  Jan S. Mirsky            (principal financial and accounting
                           officer)


 /s/ Jack Koegel           Vice Chairman of the Board and         March 31, 1998
-------------------------  Director
  Jack Koegel


 /s/ Jorge Lazaro          Executive Vice President, Secretary    March 31, 1998
-------------------------  and Director
  Jorge Lazaro

                                       24

<PAGE>


 /s/ Stanley R. Goodman    Director                               March 31, 1998
-------------------------
  Stanley R. Goodman



 /s/ Edward C. Ross        Director                               March 31, 1998
-------------------------
  Edward C. Ross



 /s/ L. Douglas Bailey     Director                               March 31, 1998
-------------------------
  L. Douglas Bailey



                                       25

<PAGE>

                     SEL-LEB MARKETING, INC. AND SUBSIDIARY
                          INDEX TO FINANCIAL STATEMENTS

Report of Independent Public Accountants                  F-2

Independent Auditor's Report                              F-3

Consolidated Financial Statements:

   Balance Sheet                                          F-4
   Statements of Income                                   F-5
   Statements of Stockholders' Equity                     F-6
   Statements of Cash Flows                               F-7
   Notes to Financial Statements                   F-8 - F-18


                                     F-1


<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
Sel-Leb Marketing, Inc.

We have audited the accompanying consolidated balance sheet of SEL-LEB
MARKETING, INC. AND SUBSIDIARY as of December 31, 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit 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 audit provides 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 Sel-Leb
Marketing, Inc. and Subsidiary as of December 31, 1997, and their results of
operations and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

We also audited the adjustments described in Note 1 that were applied to
restate basic and diluted earnings per share in the 1996 consolidated
financial statements in accordance with Statement of Financial Accounting
Standards No. 128, Earnings per Share. In our opinion, such adjustments are
appropriate and have been properly applied.

J.H. COHN LLP

Roseland, New Jersey
March 24, 1998

                                     F-2

<PAGE>

INDEPENDENT AUDITOR'S REPORT

The Board of Directors
Sel-Leb Marketing, Inc.

We have audited the accompanying statements of income, stockholders' equity,
and cash flows of Sel-Leb Marketing, Inc. for the year ended December 31,
1996 (prior to the effects on such financial statements of the adoption of
Statement of Financial Accounting Standards No. 128, "Earning per Share" and
the resultant restatement of the Company's earnings per share for the year
ended December 31, 1996 as discussed in Note 1). These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Sel-Leb
Marketing, Inc. for the year ended December 31, 1996 (prior to the effects on
such financial statements of the adoption of Statement of Financial
Accounting Standards No. 128, "Earnings per Share" and the resultant
restatement of the Company's earnings per share for the year ended December
31, 1996 as discussed in Note 1) in conformity with generally accepted
accounting principles.

GOLDSTEIN, GOLUB, KESSLER & COMPANY, P.C.
New York, New York

March 23, 1997

                                     F-3

<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEET


December 31, 1997

ASSETS

Current Assets:
<TABLE>
<S>                                                                                               <C>

  Cash and cash equivalents                                                                          $   249,688
  Accounts receivable, less allowance for doubtful accounts of $202,810                                2,959,996
  Inventory                                                                                            5,814,673
  Due from officer                                                                                        25,136
  Prepaid expenses and other current assets                                                              835,856
  Deferred tax asset, net                                                                                173,655
                                                                                                         -------

          Total current assets                                                                        10,059,004

Property and equipment - at cost, net of accumulated depreciation and
  amortization                                                                                           474,252

Goodwill, net of accumulated amortization of $59,099                                                     321,669

Other assets                                                                                              51,655
                                                                                                         -------
          Total                                                                                      $10,906,580
                                                                                                     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

  Note payable - bank                                                                                $ 1,400,000
  Current portion of long-term debt                                                                      161,975
  Accounts payable                                                                                     1,159,203
  Accrued expenses and other current liabilities                                                         229,872
                                                                                                         -------
          Total current liabilities                                                                    2,951,050

Long-term debt, net of current portion                                                                   933,642
                                                                                                         -------
          Total liabilities                                                                            3,884,692
                                                                                                      ----------
Commitments and Contingency

Stockholders' Equity:

  Common stock - $.01 par value; authorized 40,000,000 shares, issued and

    outstanding 8,712,727 shares                                                                          87,127
  Additional paid-in capital                                                                           6,363,859
  Retained earnings                                                                                      615,902
  Less receivable in connection with equity transactions                                                (45,000)
                                                                                                        --------

          Total stockholders' equity                                                                   7,021,888
                                                                                                       ---------
          Total Liabilities and Stockholders' Equity                                                 $10,906,580
                                                                                                     ===========
See Notes to Consolidated Financial Statements

</TABLE>

                                     F-4


<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Years ended December 31,                                                                1997                1996
<S>                                                                              <C>                 <C>

Revenue:
  Net sales                                                                      $17,283,523         $13,318,088
  Commission income                                                                   90,518             204,658
                                                                                      ------             -------

Total revenue                                                                     17,374,041          13,522,746
                                                                                  ----------          ----------

Operating expenses:

  Cost of sales                                                                   12,988,952          10,601,237
  Selling, general and administrative expenses                                     4,183,399           2,631,839
                                                                                   ---------           ---------

Total operating expenses                                                          17,172,351          13,233,076
                                                                                  ----------          ----------

Operating income                                                                     201,690             289,670

Other income (expense):
  Interest expense, net of interest income of $2,136 and $11,755                   (149,278)            (16,475)
  Other                                                                              (1,145)               2,540
                                                                                     -------               -----

Income before income taxes                                                            51,267             275,735

Provision for income taxes                                                            23,623             118,000
                                                                                      ------             -------

Net income                                                                        $   27,644         $   157,735
                                                                                  ==========         ===========

Net earnings per share - basic                                                    $        -         $       .02
                                                                                  ==========         ===========

Net earnings per share - diluted                                                  $        -         $       .01
                                                                                  ==========         ===========
</TABLE>

See Notes to Consolidated Financial Statements

                                     F-5

<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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

                                                                                                       Receivable
                                                                           Additional                 in Connection
                                                     Common Stock           Paid-In       Retained     with Equity    Stockholders'
                                             Shares               Amount    Capital       Earnings     Transactions       Equity
                                             ------               ------    -------       --------     ------------       ------
<S>                                          <C>                <C>        <C>            <C>         <C>              <C>

Balance at January 1, 1996 (A)                 7,440,000        $74,400    $4,136,563     $430,523                     $4,641,486
Net proceeds from exercise of warrants           813,477          8,135     1,424,198                 $(60,000)         1,372,333
Proceeds from exercise of stock options           15,000            150        24,850                                      25,000
Discounts on loans payable to stockholders                                     46,901                                      46,901
Net income                                                                                 157,735                        157,735
                                               ---------       ---------    ---------     --------     -------         ----------

Balance at December 31, 1996                   8,268,477         82,685     5,632,512      588,258     (60,000)         6,243,455
Net proceeds from exercise of warrants           293,250          2,932       435,546                                     438,478
Net proceeds from exercise of stock options      151,000          1,510       295,801                                     297,311
Payment of receivables in connection with
  equity transactions                                                                                   15,000             15,000
Net income                                                                                  27,644                         27,644
                                               ---------       ---------    ---------     --------     -------         ----------
Balance at December 31, 1997                   8,712,727        $87,127    $6,363,859     $615,902    $(45,000)        $7,021,888
                                               =========       ========    ==========     ========     =======         ==========

</TABLE>


(A)  Reflects a 3 for 1 stock split in February 1996
See Notes to Consolidated Financial Statements

                                     F-6


<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,                                                                  1997             1996
                                                                                          ----             ----
<S>                                                                              <C>              <C>
Operating activities:

  Net income                                                                     $      27,644    $     157,735
  Adjustments to reconcile net income to net cash used in operating
activities:
    Depreciation and amortization                                                      230,023          136,128
    Deferred income tax benefit                                                        (78,655)         (43,000)
    Allowance for doubtful accounts                                                    229,000          175,000
    Changes in operating assets and liabilitites:

      Accounts receivable                                                               58,816       (1,246,999)
      Inventory                                                                     (1,498,549)      (1,276,038)
      Prepaid expenses and other current assets                                       (532,921)          48,760
      Other assets                                                                       8,470          (56,514)
      Accounts payable and accrued expenses                                            (31,534)         479,367
      Due to affiliate                                                                 (64,398)         (53,912)
      Income taxes payable                                                            (186,522)         (83,003)
                                                                                     ---------         --------

          Net cash used in operating activities                                     (1,838,626)      (1,762,476)
                                                                                   -----------      -----------

Investing activities:
  Purchase of property and equipment                                                  (317,630)        (192,916)
  Amounts due from officer                                                                              (23,274)
                                                                                     ---------        ---------
          Net cash used in investing activities                                       (317,630)        (216,190)
                                                                                     ---------        ---------

Financing activities:
  Net proceeds from note payable - bank                                              1,100,000          300,000
  Net proceeds from long-term debt                                                     430,000                -
  Repayment of long-term debt to related parties and others                             (4,383)        (422,099)
  Net proceeds from exercise of warrants                                               438,478        1,372,333
  Proceeds from exercise of stock options                                              297,311           25,000
  Collection of receivable in connection with sale of warrant                           15,000                -
                                                                                       -------           ------

          Net cash provided by financing activities                                  2,276,406        1,275,234
                                                                                     ---------        ---------

Net increase (decrease) in cash and cash equivalents                                   120,150         (703,432)
Cash and cash equivalents at beginning of year                                         129,538          832,970
                                                                                       -------          -------


Cash and cash equivalents at end of year                                          $    249,688      $   129,538
                                                                                  ============      ===========

Supplemental disclosures of cash flow information:

  Cash paid during the year for:
    Interest                                                                      $    130,544      $    31,357
                                                                                  ============      ===========

    Income taxes                                                                  $    400,714      $   244,003
                                                                                  ============      ===========

Supplemental schedule of noncash investing and financing activities:

In March 1996, the Company received a $46,901 discount on its notes payable
to stockholders.

</TABLE>

See Notes to Consolidated Financial Statements

                                     F-7


<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION,                The accompanying consolidated financial
   AND SIGNIFICANT              statements include the accounts of Sel-Leb
   ACCOUNTING                   Marketing, Inc. (a New York corporation) and
   POLICIES:                    Ales Signature, Ltd. ("Ales"), its 90%-owned
                                subsidiary (collectively, the "Company"). The
                                Company is primarily engaged in the
                                manufacturing, distribution and marketing of
                                cosmetics and consumer products through mass
                                merchandisers, discount chain stores and
                                food, drug and electronic retailers. Ales was
                                formed in September 1997 and commenced
                                operations on October 23, 1997. All
                                significant intercompany accounts and
                                transactions have been eliminated in
                                consolidation.

                                The preparation of financial statements in
                                conformity with generally accepted accounting
                                principles requires management to make
                                estimates and assumptions that affect certain
                                reported amounts and disclosures.
                                Accordingly, actual results could differ from
                                those estimates.

                                Inventory, consisting primarily of finished
                                goods, is stated at the lower of cost,
                                determined by the first-in, first-out method,
                                or market.

                                Property and equipment is stated at cost.
                                Depreciation of property and equipment is
                                computed using the straight-line method over
                                the estimated useful lives of the related
                                assets. Amortization of leasehold
                                improvements is provided for over the term of
                                the lease.

                                Sales revenue is recognized upon the shipment
                                of the related product.

                                Commission income is recognized upon the sale
                                of the related product.

                                Product development costs are expensed as
                                incurred. Such costs amounted to
                                approximately $69,000 and $134,000 for 1997
                                and 1996, respectively.


                                Advertising costs are charged to operations
                                when incurred. Advertising costs amounted to
                                approximately $228,000 and $27,000 in 1997 and
                                1996, respectively.

                                The Company considers all highly liquid
                                investments with a maturity of three months
                                or less when acquired to be cash equivalents.
                                At December 31, 1997, the Company maintained
                                its cash and cash equivalents primarily in
                                money market accounts with high quality
                                financial institutions. At times, such
                                investments may exceed federally insured
                                limits. Management does not believe that
                                significant credit risk exists at December
                                31, 1997.

                                In the opinion of management, the fair values
                                of cash and cash equivalents and the amount
                                due from officer approximate the carrying
                                amounts due to their short-term nature.

                                In accordance with the provisions of
                                Accounting Principles Board Opinion No. 25,
                                Accounting for Stock Issued to Employees, the
                                Company will recognize compensation costs as
                                a result of the issuance of stock options
                                based on the excess, if any, of the fair
                                value of the underlying stock at the date of
                                grant or award (or at an appropriate
                                subsequent measurement date) over the amount
                                the employee must pay to acquire the stock.
                                Therefore, the Company will not be required
                                to recognize compensation

                                     F-8
<PAGE>
                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                expense as a result of any grants of stock
                                options at an exercise price that is equivalent
                                to or greater than fair value. The Company will
                                also make pro forma disclosures, as required by
                                Statement of Financial Accounting Standards No.
                                123, Accounting for Stock-Based Compensation,
                                of net income or loss as if a fair value based
                                method of accounting for stock options had been
                                applied if such amounts differ materially from
                                the historical amounts.

                                The Company records the excess of cost over the
                                fair value of net assets acquired as goodwill

                                and amortizes it using the straight-line method
                                over periods not exceeding 10 years. The
                                Company continually reviews goodwill to
                                evaluate whether changes have occurred that
                                would suggest goodwill may be impaired based on
                                the estimated undiscounted cash flows of the
                                entity acquired over the remaining amortization
                                period. If this review indicates that the
                                remaining estimated useful life of goodwill
                                requires revision or that the goodwill is not
                                recoverable, the carrying amount of the
                                goodwill is reduced by the estimated shortfall
                                of cash flows on a discounted basis.

                                Effective December 31, 1997, the Company
                                adopted the provisions of Statement of
                                Financial Accounting Standards No. 128, Earning
                                Per Share, which establishes the new standard
                                for computation and presentation of net
                                earnings per share. Under the new requirements
                                both basic and diluted net earnings per share
                                are presented. All prior period net earnings
                                per share information has been restated. Prior
                                to the adoption of Statement 128, the Company
                                presented primary and, if appropriate, fully
                                diluted earnings per share. Primary and fully
                                diluted earnings per share were calculated by
                                dividing net income by the weighted average
                                number of common shares outstanding plus the
                                additional common shares that would have been
                                outstanding assuming all potentially dilutive
                                common shares were issued during the reporting
                                period and the treasury stock method had been
                                applied. The Company reported primary earnings
                                per share of $.02 in 1996; it was not required
                                to present fully diluted earnings per share.

                                Basic net earnings per common share is
                                calculated by dividing net income, less
                                dividends on preferred shares, if any, by the
                                weighted average common shares outstanding
                                during the period.

                                The calculation of diluted net earnings per
                                share is similar to that of basic net earnings
                                per share, except that the denominator is
                                increased to include the number of additional
                                common shares that would have been outstanding
                                if all potentially dilutive common shares,
                                principally those issuable upon exercise of
                                stock options and warrants under the treasury
                                stock method, were issued at the beginning of
                                the reporting period.


                                In June 1997, the Financial Accounting
                                Standards Board (the "FASB") issued Statement
                                No. 130, Reporting Comprehensive Income.
                                Statement 130 establishes standards for the
                                reporting and display of comprehensive income
                                and its components in a full set of general
                                purpose financial statements. Statement 130
                                requires that all items that are required to be
                                recognized under accounting standards as
                                components of comprehensive income be reported
                                in a financial statement that is displayed with
                                the same prominence as other financial
                                statements. Statement 130 is effective for fis-

                                     F-9

<PAGE>
                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                cal years beginning after December 15, 1997.
                                The Company does not expect to be
                                significantly impacted by the adoption of
                                Statement 130.

                                In June 1997, the FASB issued Statement of
                                Financial Accounting Standards No. 131,
                                Disclosures about Segments of an Enterprise
                                and Related Information. Statement 131
                                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. It also establishes standards for
                                related disclosures about products and
                                services, geographic areas and major
                                customers. Statement 131 is effective for
                                financial statements for fiscal years
                                beginning after December 15, 1997 and,
                                therefore, the Company will adopt the new
                                requirements retroactively in 1998.
                                Management has not completed its review of
                                Statement 131, but anticipates that the
                                adoption of this Statement will increase the
                                number of reported segments.

2.  ACQUISITION:                During September 1997, the Company and an
                                unrelated third party formed Ales for the
                                purpose of acquiring the line of cosmetics
                                and other beauty products from SBC
                                Corporation, Inc. ("SBC") that manufactures
                                mid-priced cosmetic, skin care and treatment
                                products. The Company received a 90% equity
                                interest in Ales and the third party received
                                the remaining 10% equity interest. The
                                Company acquired the beauty products line on
                                October 23, 1997 for $670,000, which was paid
                                in cash and funded by a portion of the
                                proceeds of the Company's term loan (see Note
                                6) transferred directly to the seller
                                (accordingly, the payment is not reflected in
                                the accompanying 1997 consolidated statement
                                of cash flows).

                                The acquisition was accounted for as a
                                purchase and, accordingly, the results of
                                operations of the acquired product line have

                                been included in the accompanying 1997
                                consolidated statement of operations from the
                                date of acquisition. Costs of acquisition of
                                approximately $570,000 and $100,000 were
                                allocated to inventories and goodwill,
                                respectively. Unaudited pro forma information
                                giving effect to the acquisition, as if the
                                acquisition took place on January 1, 1996,
                                follows:
<TABLE>
<CAPTION>

                                                                       1997                 1996
                                                                       ----                 ----
                                <S>                                 <C>                   <C>

                                Revenue                             $17,936,552           $14,085,257
                                Net income                              135,825               287,551
                                Net earnings per share - basic              .02                   .04
                                Net earnings per share - diluted         -                        .02
</TABLE>

                                    F-10


<PAGE>
                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. PROPERTY AND          Property and equipment consists of the following:
   EQUIPMENT:

<TABLE>
<CAPTION>
                                                                                                   Estimated
                                                                                                  Useful Life
                                                                                                  -----------
<S>                                                                                  <C>          <C>
                                Machinery and equipment                              $386,913     5 to 7 years
                                Display fixtures                                      303,648     2 to 3 years
                                Computer equipment                                     84,013     3 to 5 years
                                Leasehold improvements                                 51,141         10 years
                                                                                     --------
                                                                                      825,715
                                Less accumulated depreciation and
                                    amortization                                      351,463
                                                                                     --------
                                Total                                                $474,252
                                                                                     ========
</TABLE>
                                Depreciation expense aggregated $199,629 and
                                $109,073 in 1997 and 1996, respectively.

4.  COMMITMENTS:                During 1996, the Company entered into a
                                noncancelable operating lease for office and
                                warehouse facilities which commenced on April
                                1, 1997 and expires on March 31, 2002. The
                                lease also requires payments for real estate
                                taxes and other operating costs. The Company
                                leases warehouse and production facilities
                                from one of its contract manufacturers under
                                a noncancelable operating lease which expires
                                on December 31, 1998.

                                The future minimum rental payments under the
                                leases are as follows:

                                Year ending December 31,

                                   1998                            $185,000
                                   1999                             223,500
                                   2000                             285,500
                                   2001                             298,000
                                   2002                              74,500
                                                                   --------
                                           Total                 $1,066,500
                                                                 ==========
                                    F-11

<PAGE>
                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                Rent expense for 1997 and 1996 amounted to
                                approximately $212,000 and $141,000,
                                respectively.

                                The Company has entered into employment
                                agreements with five officers which expire at
                                various times through July 2000.

                                The aggregate minimum commitment for future
                                salaries is as follows:

                                Year ending December 31,

                                   1998                         $565,000
                                   1999                          375,000
                                   2000                          187,500
                                                                 -------
                                               Total          $1,127,500
                                                              ==========

                                The Company has various promotional and
                                licensing agreements whereby it pays royalty
                                fees to celebrities and/or licensors based
                                upon a percentage of net sales attributable
                                to the celebrities' appearances or sales of
                                the licensor's products. Royalty fees charged
                                to operations amounted to approximately
                                $308,000 and $32,000 for 1997 and 1996,
                                respectively.

                                The Company has a license agreement to sell
                                certain cosmetic products under the
                                licensor's trademark. The agreement expires
                                on October 31, 1999 and the Company has the
                                option to extend the agreement for an
                                additional two years upon the achievement of
                                certain sales volume. The agreement requires
                                the Company to make royalty payments of 10%
                                of licensed sales, as defined. The Company is
                                required to pay a minimum royalty of $225,000
                                by March 31, 1998, of which approximately
                                $150,000 has been paid as of December 31,
                                1997, and to commit to minimum advertising
                                expenditures of $50,000 annually through the
                                expiration of the agreement.

5. LINE OF CREDIT:              Note payable - bank consists of
                                outstanding borrowings drawn under a
                                $2,000,000 revolving credit agreement which

                                expires on May 31, 1998. Borrowings under the
                                credit agreement bear interest, payable
                                monthly, at the bank's prevailing base rate
                                (8.5% at December 31, 1997). The loan is
                                collateralized by substantially all of the
                                assets of the Company. In the opinion of
                                management, the fair value of the note
                                payable approximates the carrying amount due
                                to the short-term nature of the instrument.

6. LONG-TERM DEBT:              At December 31, 1997, long-term debt
                                consists of the following loans:
<TABLE>

                                <S>                                                                 <C>

                                Bank term loan (A)                                                    $1,000,000
                                Paterson Restoration Corporation loan (B)                                 95,617
                                                                                                      ----------
                                                                                                       1,095,617
                                Less current portion                                                     161,975
                                                                                                      ----------
                                Long-term debt                                                        $  933,642
                                                                                                      ==========
</TABLE>

                                    F-12



<PAGE>
                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                (A) The loan agreement requires monthly
                                interest payments at the bank's prevailing
                                base rate plus .25% (an effective rate of
                                8.75% at December 31, 1997) and a principal
                                payment of $150,000 each August until 2000
                                when the unpaid balance is due. This loan is
                                secured by substantially all of the assets of
                                the Company.

                                (B) The loan was obtained by the Company in
                                connection with the relocation of its office
                                and warehouse facilities to Paterson, New
                                Jersey and was used for the purchase of fixed
                                assets. The loan bears interest at 6%. The
                                loan is payable in monthly installments of
                                $1,461 for principal and interest through
                                October 1, 2004, at which time the unpaid
                                balance is due. The loan is secured by a
                                second lien on the Company's machinery and
                                equipment.

7.  OPTIONS AND                 The Company has a Stock Option Plan (the
    WARRANTS:                   "Option Plan") in which 1,350,000
                                common shares have been reserved for future
                                issuance. The Option Plan provides
                                for the issuance of incentive stock options
                                and nonincentive stock options for the sale
                                of shares of common stock to employees of the
                                Company at a price not less than the fair
                                market value of the shares on the date of the
                                option grant, provided that the exercise
                                price of any incentive stock option granted
                                to an employee owning more than 10% of the
                                outstanding common shares of the Company may
                                not be less than 110% of the fair market
                                value of the shares on the date of the
                                incentive stock option grant. The term of
                                each option and the manner of exercise are
                                determined by the board of directors.
                                Employees are fully vested in the options
                                three years after the date of grant and the
                                options are exercisable up to 10 years after
                                the date of the grant.

                                In addition, the Company has a Nonemployee
                                Directors' Stock Option Plan (the "Directors'
                                Plan") in which 300,000 common shares have
                                been reserved for future issuance. The
                                Directors' Plan provides for the sale of

                                shares of common stock to nonemployee
                                directors of the Company at a price not less
                                than the fair market value of the shares on
                                the date of the option grant. The term of
                                each option and the manner of exercise is
                                determined by the board of directors, but in
                                no case can the options be exercisable 10
                                years beyond the date of grant. Upon election
                                to the board of directors, and after each
                                reelection, each nonemployee director is
                                granted an option to purchase 5,000 common
                                shares exercisable upon the date of grant.

                                A summary of the status of the Company's
                                options as of December 31, 1997 and 1996 and
                                changes during the years then ended is
                                presented below:

                                    F-13
<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

                                                                     1997                         1996
                                                                     ----                         ----


                                                                           Weighted-                     Weighted-
                                                             Shares         Average         Shares       Average
                                                               or          Exercise           or         Exercise
                                                             Price           Price          Price         Price
                                                             -----           -----          -----         -----
                                <S>                         <C>             <C>           <C>             <C>
                                Outstanding at
                                  beginning of year         1,218,500       $2.52         1,114,500       $2.06
                                Granted (A)                   274,500        1.64           169,000        6.00
                                Canceled (A)                 (140,750)       4.60           (50,000)       4.33
                                Exercised                    (151,000)       1.97           (15,000)       1.67
                                                             --------                     ---------

                                Outstanding at
                                  end of year               1,201,250       $2.14         1,218,500       $2.52
                                                            =========       =====         =========       =====

                                Options
                                  exercisable
                                  at year-end                 755,000                       609,500
                                                              =======                       =======

                                Weighted-average
                                  fair value of
                                  options granted
                                  during the year               $1.29                         $2.69
                                                                =====                         =====
</TABLE>
                                (A) Includes 84,500 options that were
                                re-priced from $5.63 to $.50 per share in
                                1997.

                                The following table summarizes information
                                about fixed stock options outstanding at
                                December 31, 1997:
<TABLE>
<CAPTION>

                                       Options Outstanding                         Options Exercisable
                                       -------------------                         -------------------
                                                          Weighted-
                                                           Average      Weighted-                   Weighted-
                              Range of                    Remaining      Average                     Average
                              Exercise       Number      Contractual    Exercise       Number        Exercise
                               Prices      Outstanding       Life         Price      Exercisable      Price
                               ------      -----------       ----         -----      -----------      -----
                             <S>           <C>               <C>          <C>        <C>             <C>

                             $.50 - $1.63    155,500         9.29         $.81          55,875       $.71
                                $1.67        570,750         7.54         1.67         417,750       1.67
                             $1.75 $2.75     398,000         8.07         2.63         249,750       2.70
                             $5.25-$7.00      77,000         8.74         5.86          31,625       5.99
                                           ---------                                   -------
                             $.50 - $7.00  1,201,250         8.02         2.14         755,000       2.12
                             ============  =========         ====         ====         =======       ====

</TABLE>
                                    F-14
<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                The Company has elected, in accordance with
                                the provisions of Statement 123, to apply the
                                current accounting rules under APB Opinion
                                No. 25 and related interpretations in
                                accounting for its stock options and,
                                accordingly, has presented the
                                disclosure-only information as required by
                                Statement 123. Pro forma information as if
                                the Company had elected to recognize
                                compensation cost based on the fair value of
                                the options at the grant date as prescribed
                                by Statement 123, and the related amounts

                                reported in the accompanying consolidated
                                statements of operations are set forth below:

<TABLE>
<CAPTION>

                                                                                  1997                1996
                                                                                  ----                ----
                             <S>                                           <C>                    <C>

                             Net income - as reported                          $   27,644         $ 157,735
                             Net loss - pro forma                                (326,181)         (106,211)
                             Basic earnings per share - as reported                     -               .02
                                                                               ==========         =========
                             Diluted earnings per share - as reported                   -               .01
                                                                               ==========         =========
                             Basic earnings (loss) per share - pro
                                forma                                                (.04)             (.01)
                                                                               ==========         =========
                             Diluted earnings (loss) per share - pro
                                forma                                                   -             (.01)
                                                                               ==========         =========
</TABLE>
                                The fair value of each option granted is
                                estimated on the date of grant using the
                                Black-Scholes option-pricing model with the
                                following weighted-average assumptions used
                                for 1997 and 1996: expected volatility of
                                40.0%, risk-free interest rate of 6.3%,
                                expected lives of five years; and no expected
                                dividends.

                                At December 31, 1997, the Company has
                                outstanding warrants to purchase 5,803,968
                                shares of the Company's common stock. The
                                warrants are exercisable through March 21,
                                2000 at exercise prices ranging from $.64 to
                                $2.00.

                                Warrants to purchase 293,250 and 813,477
                                shares of common stock were exercised and net
                                proceeds to the Company amounted to $438,478
                                and $1,372,333 in 1997 and 1996,
                                respectively.

                                    F-15
<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              At December 31, 1997, common stock was
                              reserved for the following reasons:


                              Exercise of stock options               1,201,250
                              Exercise of warrants                    5,803,968
                                                                      ---------
                                  Total                               7,005,218
                                                                      =========

8. INCOME TAXES:              The deferred tax asset is attributable
                              to temporary differences related
                              to the following:

                              Inventory                               $ 105,000
                              Allowance for bad debts                    80,000
                                                                      ---------
                                                                        185,000

                              Other                                     (11,345)
                                                                      ---------
                                   Net deferred tax asset             $ 173,655
                                                                      =========

                              The net provision for income taxes consists of
                              the following provisions (credits):

                                                  1997          1996
                                                  ----          ----
                              Federal:

                                Current         $85,569      $170,000
                                Deferred        (55,155)      (43,000)
                                               --------      --------

                              Totals             30,414       127,000
                                                 ------       -------

                              State:

                                Current          16,709        (9,000)
                                Deferred        (23,500)
                                                -------       -------
                              Totals             (6,791)       (9,000)
                                                -------       -------

                              Totals            $23,623      $118,000
                                                =======      ========

                              The provision for income taxes differs from the
                              amount computed using the federal statutory
                              rate of 34% as a result of the following:

                                    F-16


<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                              1997          1996
                                                                                              ----          ----
                             <S>                                                              <C>           <C>

                             Tax at federal statutory rate                                     34%           34%
                             Increase (decrease):
                               State income taxes, net of federal income
                                 tax effect                                                    (8)            2
                               Permanent differences                                           37             7
                               Sur-tax exemption and other items                              (18)             -
                                                                                              ---            ---

                             Totals                                                            45%           43%
                                                                                               ===           ===
</TABLE>

9.  SIGNIFICANT               During 1997, approximately 33% and 9% of the
    CUSTOMERS:                Company's sales were to two customers. During
                              1996, approximately 36% and 10% of the
                              Company's sales were to two customers. As of
                              December 31, 1997, approximately 33% of
                              accounts receivable are due from one customer.

10. LITIGATION:               The Company is involved in various
                              claims and lawsuits incidental to its business.
                              Management believes that the probable
                              resolution of such contingencies will not
                              materially affect the financial position or
                              results of operations of the Company.

11. EARNINGS PER              The following table summarizes the
    SHARE:                    calculation of basic and diluted net earnings
                              per common share for 1997 and 1996:

<TABLE>
<CAPTION>

                                                                                         1997             1996
                                                                                         ----             ----
                              <S>                                                  <C>                  <C>
                              Numerator:

                              Net income                                                 $27,644        $157,735
                                                                                         =======        ========
                              Denominators:


                              Weighted-average shares for basic net
                                earnings per share                                     8,667,983       7,659,359

                              Plus effect of diluted securities -
                                stock options and warrants                                             4,617,251
                                                                                      ----------      ----------
                              Weighted average shares
                                outstanding for diluted net earnings
                                per share                                              8,667,983      12,276,610
                                                                                      ==========      ==========

                              Net earnings per share - basic                          $       -       $      .02
                                                                                      ==========      ==========

                              Net earnings per share - diluted                        $       -       $      .01
                                                                                      ==========      ==========
</TABLE>

                                    F-17
<PAGE>

                    SEL-LEB MARKETING, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              At December 31, 1997 and 1996, there were
                              7,005,218 and 7,315,712 shares, respectively,
                              of common stock issuable upon exercise of stock
                              options and warrants excluded for the
                              calculation of the effects of dilutive
                              securities under the treasury stock method
                              because the exercise prices of the options were
                              greater than the average market value of the
                              common shares.

                                    * * *

                                    F-18