U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
|X|       ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934

For the fiscal year ended: November 30, 1997

|_|       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934

For the transition period from ________________ to ______________.

Commission file Number:  0-18686

                        PAK MAIL CENTERS OF AMERICA, INC.
                  ---------------------------------------------
                 (Name of small business issuer in its charter)

            Colorado                                             89-0934575
---------------------------------                            -------------------
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

3033 South Parker Road, Suite 1200, Aurora, Colorado                80014
----------------------------------------------------               --------
    (Address of principal executive offices)                      (Zip Code)

Issuer's telephone number: 303-752-3500

Securities registered under Section 12(b) of the Exchange Act:  NONE

Securities registered under Section 12(g) of the Exchange Act: 
          Common Stock, par value $.001 per share

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,  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 Issuer's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The Issuer's revenues for its most recent fiscal year were $4,164,330.

The aggregate market value of the Issuer's voting stock held as of a recent date
by  nonaffiliates  of the Issuer  cannot be  ascertained  due to the  absence of
reliable  information  as to quoted  prices with respect to the Issuer's  common
stock.

As of February 26, 1997, the Issuer had 2,989,483 shares of its $0.001 par value
common stock issued and outstanding.

Transitional small business disclosure format:   YES      NO  X
                                                    -----   -----
 
<PAGE>




                        PAK MAIL CENTERS OF AMERICA, INC.
                         1997 FORM 10-KSB ANNUAL REPORT
                                TABLE OF CONTENTS



PART I                                                                  Page No.
------                                                                  --------

Item 1.     Description of Business..........................................1

Item 2.     Description of Property..........................................6

Item 3.     Legal Proceedings................................................7

Item 4.     Submission of Matters to Vote of Security Holders................7

PART II
-------

Item 5.     Market for Common Equity and Related Stockholder Matters.........8

Item 6.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations .............................9

Item 7.     Financial Statements............................................12

Item 8.     Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure.............................12

Part III
--------

Item 9.     Directors, Executive Officers, Promoters and Control
            Persons; Compliance with Section 16(a) of the Exchange Act......13

Item 10.    Executive Compensation..........................................15

Item 11.    Security Ownership of Certain Beneficial Owners and Management..18

Item 12.    Certain Relationships and Related Transactions..................10

Item 13.    Exhibits and Reports on Form 8-K ...............................20

            Signatures......................................................21



<PAGE>



                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

     (a) Business  Development.  Pak Mail Centers of America, Inc. (the "Issuer"
or "Company") was incorporated in the State of Colorado on January 27, 1984. The
Issuer is principally  engaged in  franchising  of retail service  centers which
specialize in the packaging and shipping business ("Pak Mail Centers"). Pak Mail
Centers  typically  provide  mailbox  service,  parcel  shipping and  receiving,
packaging,  freight forwarding and other communications and information products
and  services  to  commercial  and  residential  customers  through a variety of
carriers  and may offer a variety  of related  items  such as  stamps,  greeting
cards,  stationery supplies,  keys and passport photographs.  On March 24, 1995,
the Company effected a reverse stock split whereby each pre-reverse  stock split
share of common stock was reclassified and changed into  one-fiftieth of a share
of common  stock on a  post-reverse  stock  split  basis.  The  total  number of
outstanding  shares of common stock was reduced from 149,474,125 to 2,989,483 as
a result of the reverse stock split.  In February 1998,  holders of the Series A
and Series B Preferred Stock exchanged the Series A and Series B Preferred Stock
for a new Series C Preferred  Stock and 10 year  warrants  to  purchase  884,264
shares of the Company's  common stock at $0.10 each.  The new Series C Preferred
Stock  has a 6%  annual  dividend  that is  payable  on March  31 of each  year,
beginning in 1999.  Effective November 30, 1997, the holders of the Series A and
Series B Preferred  Stock agreed that they had no further  rights,  and that the
Company had no further  obligations,  with  respect to the Series A and Series B
Preferred Stock.

     (b) Business of Issuer.

          (1)(2)  Principal  Products or  Services;  Distribution  Methods.  The
Issuer's  principal  business is the marketing of Pak Mail Center franchises and
its principal source of revenues is derived from royalties and franchise fees as
well as from the sale of certain  equipment,  supplies,  forms and  materials to
franchisees.  As of February 16, 1998, there were 325 individual  franchises and
28 area agreements in existence.

Franchise Program
-----------------

     The  Company  offers  individual  franchise  agreements  and area  director
marketing agreements. Individual franchisees are granted the nonexclusive right,
within a specified  area, to use the Pak Mail name and trademarks as well as Pak
Mail's  proprietary  operating  procedures,  techniques,  forms,  equipment  and
advertising  presentation.  Area marketers and, under a previously  offered area
franchise  program,  area  developers  are  granted  rights  to sell  individual
franchises for the Company in designated  areas and are required to provide site
selection  and  start  up  assistance  and  continuing  support  for  individual
franchisees  within those areas.  The Company  locates  prospective  franchisees
through advertising,  referrals from existing franchisees, the marketing efforts
of its area marketers and developers, and, to a small extent, through the use of
franchise brokers.


                                       1

<PAGE>



Franchise Agreements, Fees and Related Matters
----------------------------------------------

     Individual Franchises

     Each  individual   franchisee  enters  into  a  franchise   agreement  (the
"Franchise  Agreement")  with the  Company.  The  Franchise  Agreement  requires
payment  of an  initial  franchise  fee of  $23,950,  although  franchisees  who
initially  commit to acquire  more than one  franchise  are eligible for certain
discounts and may be eligible for financing of the discounted  initial franchise
fees for second and subsequent Centers.  Individual franchisees are also charged
an initial fee ranging between $571 and $890 for a grand opening advertising and
marketing  program  which is  provided  by the Company at or around the time the
individual  franchisee  commences  operation  of a Pak Mail  Center.  Under  the
Company's current standard  Franchise  Agreement,  individual  franchisees pay a
sliding  scale  monthly  royalty in each  calendar  year of five percent for the
first $200,000 of the  franchisee's  royalty based  revenues,  four and one-half
percent for the next  $50,000 of royalty  based  revenues,  four percent for the
next $50,000 of royalty based revenues,  three and one-half percent for the next
$50,000 of royalty based  revenues,  and then three  percent for all  subsequent
royalty based  revenues  received in that calendar  year. No royalty fee is paid
with respect to revenues from postage  stamps.  Individual  franchisees are also
required  to pay an  advertising  fee each month in the amount of two percent of
royalty  based  revenues,  with the  exception of  franchisees  operating  under
agreements  entered  into  prior  to  March  1990  who  are  required  to pay an
advertising fee of one percent of gross revenues.  The advertising fees are held
in a separate  legal trust  controlled  by the  Company.  These fees are used in
connection with the  formulation  and execution of national  advertising and for
other marketing purposes. The Company's current standard Franchise Agreement has
a term of ten years.  With the approval of the Company,  the  franchisee has the
right to transfer and assign the Franchise Agreement.

     Area Director Marketing Agreement

     Each area marketer franchisee enters into an area marketing agreement which
requires  the payment of an initial  fee based upon  several  factors  including
population and other demographic  factors in the designated  geographic  region.
The area  director  marketing  agreement  grants  the right to  market  and sell
franchises  within  a  specified  territory.  When an  area  marketer  sells  an
individual franchise in its territory, the Company typically receives 60% of the
individual  franchise fee and the area marketer  receives 40%. The area marketer
receives 50% of the royalties  paid to the company by individual  franchisees in
its territory.  If an individual  franchise is sold in an area where there is no
area  marketer,  the Company  retains 100% of all fees and royalties paid by the
franchisee.  There may be  variations  in the terms of  specific  area  director
marketing  agreements  based on special  circumstances  affecting the geographic
area and the area marketer.


                                       2

<PAGE>



     Area Developer Franchises

     The  Company  no  longer  offers  area  developer  agreements.  Under  area
developer  agreements   previously  entered  into,  initial  franchise  fees  of
individual  franchises  within an area are generally divided 60% and 40% between
the Company and the area  franchisee,  respectively.  Generally,  the individual
franchise  royalty  fees are  divided  equally  between the Company and the area
franchisee.  All franchise  fees and royalties are paid directly to the Company,
which  then  remits  the  portion  of fees  owed  to the  area  franchisee.  For
individual  franchisees  in  locations  which  are  not  encompassed  by an area
franchise, all fees and royalties are retained by the Company.

     International Area Franchises

     The Company's  international area franchise  agreements require the payment
of an initial franchise fee based upon several factors including  population and
other demographic  factors in the designated  country or geographic  region. The
Company often finances a portion of the area  franchise  fee. The  international
area franchise is responsible for individual franchise marketing, site selection
assistance and lease negotiation,  on-site training and continuing local support
of the individual franchisees within their areas.

     Generally,  the division of initial franchise fees of individual franchises
within an international area and the individual franchise royalty fees within an
international  area is  negotiated  on a case by case basis.  As of November 30,
1997,  there were four  international  franchise  agreements  in existence  with
respect to geographic  areas in the Mexican  cities of Mexico City,  Guadalajara
and  Monterrey,  respectively,  and an area covering the Mexican  states of Baja
California  and  Sonora  and  the  countries  of  Chile,  Argentina,  Venezuela,
Australia,  New Zealand and Japan.  Because of the large  number of factors that
exist with respect to different  countries  and different  geographic  locations
within a given  country  which may  affect  the terms of an  international  area
franchise  agreement,  the specific terms of  international  area franchises may
vary significantly from one another.

     Related Matters

     The Company provides  various training and support to its franchisees.  The
Company furnishes to each franchisee an operations manual, which sets forth many
of the Company's  standards and  specifications  and contains certain provisions
designed  to  ensure  uniformity  in the  quality  of the Pak Mail  Center,  and
provides updates thereto.  In addition,  each franchisee is required to attend a
12 day training class with regard to packaging,  pricing and available  shipping
and mailing  services;  preparation  and execution of marketing and placement of


                                        3

<PAGE>



advertising;  record  keeping  and  systems  operation;  use of forms  and forms
management;   soliciting  and  servicing   customers;   selecting  and  training
personnel;  and stock location and operation.  There is no charge for the class,
but franchisees pay their own expenses, including travel, lodging and meals. The
Company also provides an initial  advertising and marketing program at or around
the time that a franchisee opens the Pak Mail Center.

     The Company offers to franchisees  various equipment,  supplies,  forms and
materials  necessary or useful in connection  with the operation of the Pak Mail
Center,  although,  with  the  exception  of  required  computer  software,  the
franchisees  are not required to purchase such items from the Company.  Prior to
and upon the opening of a new franchisee's Pak Mail Center,  the Company or area
franchisee provides  additional on site training to the franchisee.  The Company
maintains  ongoing  communications  with its franchisees  designed to inform the
franchisees of new services to be provided by the Company,  marketing techniques
and other operational aspects of the Pak Mail system.

Services
--------

     The typical Pak Mail Center  offers a wide range of services  and  products
for personal and business support, communications services and convenience items
and services.  The type and importance of particular  services and products vary
from Center to Center.  Prices for services  and products are set by  individual
franchisees and depend on competitive  conditions in their respective  franchise
locations.

     Major  services  and  products  offered at typical  retail Pak Mail Centers
include the following:

     Shipping and Receiving.  Pak Mail Centers offer shipping services through a
variety of carriers  and can assist the  customer in  selecting  the fastest and
most cost  effective  method of  sending  goods.  Pak Mail  Centers  also act as
receiving agents for goods shipped to their  customers.  Pak Mail Centers advise
customers as to the  packaging  requirements  of the various  carriers,  provide
packaging of items for shipment and sell packaging materials.

     Business  Support  Products and Services.  Small businesses are often major
users of a Pak Mail Center.  Pak Mail Centers  provide a small  business  with a
variety of business  services and  products  such as mailbox  rental,  telephone
message service,  notary public  services,  telecopy  transmission,  copying and
office supplies.

     Communications  Services. Pak Mail Centers may offer customers a wide range
of  communications  services  such as  telecopies,  wire  transfer  of funds and
electronic mail and Internet access.


                                       4

<PAGE>



     Convenience   Items  and  Services.   Pak  Mail  Centers   generally  offer
convenience  items such as postage  stamps,  envelopes,  custom  rubber  stamps,
laminating,  passport and identification  photos and keys. Most Pak Mail Centers
also offer office supplies, greeting cards, gift wrapping and other gift items.

     Insurance. Also available at the customer's option is loss damage insurance
which can be purchased  either  through the courier's  insurance  carrier and/or
separate  parcel  insurance  which is  available  on an as needed basis from the
Company's  carrier.  The insurance prices for the Company's  insurance vary from
those charged by couriers.

     Private  Mailbox  Service.  Pak Mail Centers  usually offer private mailbox
rentals. Mailbox rental fees vary based on the size of the box, the rental terms
and the location of the Pak Mail Center.

          (3) Status of Product.  There has been no public  announcement of, nor
has the Company  otherwise  made public  information  about,  any new product or
service of the Company  requiring  the  investment  by the Company of a material
amount  of its total  assets or which is  otherwise  material  to the  Company's
operations.

          (4)  Competition.  The Company and its  franchisees  face  competition
primarily  from  independent  packaging and shipping  service  centers and other
franchised operations offering similar products and services. Mail Boxes Etc. is
the largest competitor. The Company's franchising approach and the operations of
a Pak Mail  Center are not unique or  patentable  and can be imitated by others.
Although the Company and its franchisees offer services similar to those offered
by the U.S.  Postal  Service,  such as  private  mail  box  service  and  parcel
handling,  the U.S.  Postal  Service  does not  offer  certain  of the  business
support, communications and personal services offered by most Pak Mail Centers.

          (5) Raw Materials and Supplies.  The Company  purchases  materials for
resale to its  franchisees.  These  materials  are  available  from a variety of
suppliers,  and the Company has not  experienced  any delays in  obtaining  such
materials.
                       
          (6)  Customer  Dependence.  The Company  does not depend upon a single
customer,  or a few  customers,  for its  revenues,  the loss of any one or more
which would have a material adverse effect on the Company.
                       
          (7) Patents, Trademarks, Licenses, Etc. The Company has registered the
service mark "Pak Mail" and the Pak Mail logo on the  Principal  Register of the
United States Patent and Trademark Office. The service mark registration expires
in 2000, and the logo expires in 2005.



                                       5
<PAGE>

                       
          (8)(9) Government Regulations

     The Federal Trade  Commission has adopted a rule that requires  franchisors
to make certain  disclosures  to prospective  franchisees  prior to the offer or
sale of franchises.  This rule requires the disclosure of information  necessary
for a  franchisee  to make an  informed  decision  as to whether to enter into a
franchise relationship and delineates the circumstances in which franchisors may
make  predictions  on future sales,  income and profits.  Failure to comply with
this rule  constitutes  an unfair or deceptive act or practice under the Federal
Trade Commission Act.

     Numerous states have adopted laws regulating  franchise  operations and the
franchisor/franchisee  relationship.  Applicable franchise laws vary from filing
and  disclosure  requirements  in  the  offer  and  sale  of  franchises  to the
application of statutory standards  regulating the establishment and termination
of franchise  relationships.  Although the foregoing  matters may result in some
modification of the Company's franchising  activities and the legal inability to
enforce all of the terms of its  franchise  agreements in certain  states,  such
inabilities have not had a material adverse effect on the operations or business
of the Company to date. However,  the law applicable to franchise operations and
relationships  is subject to change,  and the  Company is unable to predict  the
effect,   if  any,  on  its  operations  of  additional  laws,   regulations  or
restrictions  that may be enacted or promulgated or of court  decisions that may
be adverse to the franchise industry.

          (10) Research and Development. The Company has not engaged in material
research and development activities during its last two fiscal years.
                        
          (11)  Environmental  Regulation.  Compliance  with federal,  state and
local  environmental  law  provisions  does not have any material  effect on the
capital expenditures, earnings and competitive position of the Company.
                        
          (12) Employees. As of December 31, 1997, the Company had 20 employees,
all of whom are full time employees.
                       
ITEM 2. DESCRIPTION OF PROPERTY

     The Company's executive offices are located in approximately  12,000 square
feet of office space in Aurora,  Colorado  under a lease  expiring in April 2000
with a base rental  currently at  approximately  $12,300 per month and rising to
approximately  $13,300 per month by the end of the term. The offices are in good
condition.


                                       6
<PAGE>


ITEM 3. LEGAL PROCEEDINGS

     None.


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

     No matter  was  submitted  during the  fourth  quarter  of the fiscal  year
covered by this report to a vote of the Company's security holders.















                                        7


<PAGE>



                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     (a) Market Information.
        
     The Company's common stock is sporadically  traded in the  over-the-counter
market.  During fiscal 1997 and 1996 there was no established trading market for
the Company's  common stock,  and the Company has been unable to obtain reliable
information as to quoted prices with respect to the common stock.

     (b) Holders.
     
     As of February  17,  1998,  the Company had 1,186  holders of record of its
$0.001 par value common stock.

     (c) Dividends.
        
     The Company has not declared cash dividends on its common stock in the last
two fiscal years and in any subsequent period for which financial information is
required.  The Company  does not  anticipate  paying any cash  dividends  in the
foreseeable future.

     (d) Recent Sales of Unregistered Securities
        
     On January 26,  1998,  the Company  designated  2,500  shares of its no par
value preferred stock as Series C Preferred  Stock. In November 1997, the holder
of the Company's Series A Preferred Stock and the holder of the Company's Series
B Preferred  Stock  offered to exchange  their shares of preferred  stock for an
equal  number  of  shares  of Series C  Preferred  Stock,  and for a warrant  to
purchase shares of common stock of the Company. On February 4, 1997, the Company
issued  1,216.668 shares and 1,000 shares of the Series C Preferred Stock to two
shareholders in exchange for their shares of Series A Preferred Stock and Series
B Preferred  Stock,  respectively.  In  connection  with this  transaction,  the
Company issued  warrants to the former  holders of Series A Preferred  Stock and
Series B Preferred Stock to purchase 604,264 and 280,000 shares of the Company's
common stock,  respectively.  The warrants  have an exercise  price of $0.10 per
share and expire on November 30, 2007.



                                       8
<PAGE>


     The offer and sale of the Series C Preferred  Stock and warrants  were made
in reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended  ("Securities  Act"). In connection with such
offer, the purchasers represented that they were " accredited investors" as that
term is defined in Regulation D adopted under the Securities  Act, and that they
were  provided  access to  complete  information  concerning  the  Company.  The
purchasers have represented that they will hold the Series C Preferred Stock for
the  purchaser's   own  account  and  that  they  have  no  present   agreement,
understanding or arrangement to subdivide,  sell, assign,  transfer or otherwise
dispose  of all or part of the  Series C  Preferred  to any other  person..  The
purchasers further agreed that they understood that the Series C Preferred Stock
had not been  registered  under the Securities Act and that the purchaser  could
not  resell  the  securities  without  compliance  with  the  provisions  of the
Securities Act of 1933, as amended.  All  certificates  issued to the purchasers
were  impressed  with  a  restrictive   legend   advising  that  the  securities
represented  by the  certificates  may  not be  sold,  transferred,  pledged  or
hypothecated  without  having first been  registered or the  availability  of an
exemption from registration established.  No underwriters were involved in these
transactions and no commissions were paid by the Company.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Liquidity and Capital Resources
-------------------------------

     The Company experienced cash flow deficiencies from operating activities of
$31,561  during the fiscal year ended  November  30, 1997  compared to cash flow
deficiencies of $149,182 during the fiscal year ended November 30, 1996.  During
the fiscal year ended November 30, 1996,  the  deficiency  was financed  through
payments  received on notes  receivable  and $100,000 in loans issued from D. P.
Kelly and  Associates,  L.P. During the fiscal year ended November 30, 1997, the
deficiency was financed through payments received on notes receivable.

     At  November  30,  1997,  the  average  age  of  accounts   receivable  was
approximately 49 days.  Accounts  receivable  relate primarily to royalties from
franchisees and sales of equipment, supplies and services. Royalties are payable
on a monthly basis and invoices for equipment, supplies and services are payable
within 30 days. The Company continues to take an aggressive approach to managing
accounts  receivable  and reducing the average age by  implementing  a proactive
collection  system and hiring the personnel to maintain it. The Company believes
that cash flow from operating activities will be adequate to cover capital needs
for the next 12 months.  The Company does not have any material  commitments for
capital expenditures to be incurred in the next 12 months.

Results of Operations
---------------------



                                       9
<PAGE>


     Fiscal 1997 Compared to Fiscal 1996
     -----------------------------------

     The Company recorded a profit of $327,920 in the fiscal year ended November
30, 1997,  including  an income tax benefit of $136,100 due to recent  operating
profits.  The net income  before  income tax benefit was $191,820 as compared to
$51,957 in the fiscal year ended  November 30, 1996.  The $139,863  increase was
attributable to an increase in revenues (up 19.9% from $3,472,593 to $4,164,330)
offset by a lesser  increase in costs and expenses (up 16.1% from  $3,420,633 to
$3,972,510).

     The $691,737 increase in revenues during the fiscal year ended November 30,
1997 is primarily  attributable  to increases in individual  franchise  fees (up
58.3% from $728,268 to  $1,152,990),  royalties from  franchisees (up 10.2% from
$1,767,023  to  $1,947,464)  and sales of  equipment,  supplies and services (up
11.0% from  $673,870 to  $748,148)  offset by a decrease in area  representative
fees (down 10.1% from $257,261 to $231,194).

     The $424,722  increase in individual  franchise  fees is  represented by an
increase in franchise sales recognized during the fiscal year ended November 30,
1997 compared to the fiscal year ended  November 30, 1996 and a differing mix of
per  franchise  revenue  recognition.  The Company  awarded 54 and 35 individual
franchises  during the fiscal year ended  November  30, 1997 and the fiscal year
ended  November 30, 1996,  respectively.  In the fiscal year ended  November 30,
1997,  the  Company  recognized  revenue on 49 of the 54  individual  franchises
awarded. In addition,  the revenue from three individual  franchises awarded and
deferred in 1996,  was  recognized  in the fiscal year ended  November 30, 1997.
There were five  individual  franchises  awarded but deferred as of November 30,
1997.

     The $180,441  increase in royalties from  franchisees is due to an increase
in the  average  sales  volume  per  store and the  number  of  stores  open and
operating throughout the year.

     The $74,278 increase in sales of equipment, supplies and services primarily
relates to the  decrease  in the number of new stores  opened in the fiscal year
ended November 30, 1997.

     The $26,067  decrease in area  representative  fees represents one domestic
award and two  international  awards  during the fiscal year ended  November 30,
1997  compared to one domestic  award during the fiscal year ended  November 30,
1996.  Although the Company awarded more new areas in fiscal 1997, only the cash
down payments of the 2 international franchises were recognized as income during
fiscal 1997. The note portions of the 2  international  franchises were deferred
as of November 30, 1997,  and will be  recognized  at the time the note payments
are received.



                                       10

<PAGE>



     The $551,874  increase in costs and expenses is primarily  attributable  to
increases in other selling,  general and administrative  expenses (up 10.1% from
$1,604,325 to $1,765,735), cost of sales of equipment, supplies and services (up
11.6% from $605,195 to $675,685),  commissions on franchise sales (up 48.1% from
$414,773 to $614,449)  and  royalties  paid to area  franchisees  (up 22.9% from
$551,497 to $677,555).

     The $161,410 increase in other selling, general and administrative expenses
is  primarily  due  to  increases  in  convention,  personnel,  and  travel  and
entertainment costs during fiscal 1997.

     The $70,490  increase in cost of sales of equipment,  supplies and services
primarily  relates to the  increase  in the  number of new stores  opened in the
fiscal year ended November 30, 1997.

     The $199,676  increase in  commissions  is primarily  due to the  increased
number of individual and area franchise  sales made during the fiscal year ended
November 30, 1997  compared to the same prior year period and the  differing mix
of commissions per franchise.

     The  $126,058  increase  in  royalties  paid  to  area  franchisees  is due
primarily to the higher  proportion of stores  operating  within area franchisee
regions  during the fiscal year ended  November  30,  1997  compared to the same
prior year period.

     The Company is aware of the issues  associated with the programming code in
existing  computer systems as the year 2000 approaches.  The "year 2000" problem
is pervasive and complex as virtually every computer  operation will be affected
in some way by the  rollover  of the  two-digit  year  value to 00. The issue is
whether computer systems will properly recognize date-sensitive information when
the  year  changes  to  2000.  Systems  that  do  not  properly  recognize  such
information could generate erroneous data or cause a system to fail.

     The  Company  is  utilizing  internal  resources  to  identify,  correct or
reprogram, and test its systems for year 2000 compliance. It is anticipated that
all   reprogramming   efforts  will  be  completed  in  fiscal  1998.  To  date,
confirmations  have been received from the Company's primary  processing vendors
that plans are being developed to address processing of transactions in the year
2000.  Management  believes that the costs of compliance and potential impact on
operations will not be material.

     The foregoing discussion contains certain forward looking statements within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities  Exchange  Act of 1934,  which are intended to be covered by the safe
harbors created thereby.  These  statements  include the plans and objectives of
management for future operations, including plans and objectives relating to the
development of the Company.  The forward looking statements  included herein are
based on current  expectations  that involve  numerous risks and  uncertainties.
Assumptions  relating to the foregoing  involve judgments with respect to, among
other things,  future  economic,  competitive  and market  conditions and future



                                       11

<PAGE>


business  decisions,  all of  which  are  difficult  or  impossible  to  predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that the assumptions  underlying the forward looking statements
are reasonable, any of the assumptions could be inaccurate and, therefore, there
can be no assurance that the forward  looking  statements  included in this Form
10-KSB  will prove to be  accurate.  In light of the  significant  uncertainties
inherent in the forward looking  statements  included  herein,  the inclusion of
such information  should not be regarded as a  representation  by the Company or
any  other  person  that  the  objectives  and  plans  of the  Company  will  be
achieved.

ITEM 7. FINANCIAL STATEMENTS

     See Financial Statements in this report following the signature page.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     During the Company's  two most recent fiscal years and any interim  period,
the principal  independent  accountant of the Company did not resign (or decline
to stand for re-election) and was not dismissed.






                                       12


<PAGE>



                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

     (a) Identification of Directors and Executive Officers.
        
     The present term of office of each  director will expire at the next annual
meeting of  shareholders.  The  executive  officers  of the  Company are elected
annually at the first  meeting of the  Company's  Board of Directors  held after
each annual meeting of shareholders.  Each executive  officer holds office until
his or  her  successor  is  duly  elected  and  qualified  or  until  his or her
resignation  or until he or she shall be removed in the manner  provided  by the
Company's Bylaws. The name, position with the Company,  the age of each director
and  executive  officer,  and the  period  during  which  each has served are as
follows:

<TABLE>
<CAPTION>



Name, Age and                      Director or          Principal Occupation
Position in the Company            Officer Since        During the Last Five Years
-----------------------            -------------        --------------------------

<S>                                <C>                  <C>                               
John E. Kelly, 57                  September, 1989      Executive officer of the
(President, Chief Executive                             Company since September, 1989.
Officer and Director)        

P. Evan Lasky, 56                  March, 1988          Executive officer of the
(Executive Vice President                               Company since March, 1988.
and Chief Operating Officer)

Raymond S. Goshorn, 39             December, 1988       Executive officer of the
(Chief Financial Officer,                               Company since December, 1988.
Treasurer, Secretary)

Tonya D. Sarina, 36                December, 1996       Executive officer of the
(Vice President of Sales                                Company since December 1996;  
and Marketing)                                          Marketing manager of the Company
                                                        from March, 1991 through November, 1996.

Alex Zai, 38                       May, 1996            Executive officer of the
(Vice President of                                      Company since May, 1996; 
Store Operations)                                       director of store operations 
                                                        of the Company since April, 1994.


                                       13

<PAGE>



Name, Age and                      Director or          Principal Occupation
Position in the Company            Officer Since        During the Last Five Years
-----------------------            -------------        --------------------------

J. S. Corcoran, 54                 September, 1989      Self-employed as a business 
(Director)                                              consultant since October, 1996.
                                                        Executive officer of D.P. Kelly 
                                                        & Associates L.P., a firm offering 
                                                        management services, from November, 1988 
                                                        to January, 1997; executive officer of 
                                                        Envirodyne Industries, Inc., a manufacturer
                                                        of food packaging from June, 1989 to March, 1996.

John W. Grant, 73                  September, 1989      Retired since September, 1987.
(Director)

F. Edward Gustafson, 56            September, 1989      Executive officer of D.P. Kelly & Associates L.P.,
(Director)                                              a firm offering management services, since November, 
                                                        1988; executive officer of Envirodyne Industries, Inc., 
                                                        a manufacturer of food packaging and food service supplies,
                                                        since June, 1989; director of Envirodyne Industries, Inc. 
                                                        since December, 1993; executive officer of Viskase Corporation, 
                                                        a wholly-owned subsidiary of Envirodyne Industries, Inc.,
                                                        from February, 1990 to August, 1993.

William F. White, 67               September, 1989      Executive officer of Whitnell & Co., an investment 
(Director)                                              advisory firm, since January, 1988; executive officer 
                                                        of Donegal, Inc., an investment management firm, since
                                                        January, 1991.




                                       14
</TABLE>


<PAGE>



     (b) Identification of Certain Significant Employees.


     Not Applicable.

     (c) Family Relationships.

     Not Applicable.

     (d) Involvement in Certain Legal Proceedings.

     J.S.  Corcoran  was an executive  officer of  Envirodyne  Industries,  Inc,
("Envirodyne") until March, 1996 and F. Edward Gustafson is an executive officer
and a director  of  Envirodyne.  On January  7, 1993,  Envirodyne  and its major
domestic  subsidiaries  filed voluntary  petitions pursuant to Chapter 11 of the
United States  Bankruptcy Code. On December 31, 1993,  Envirodyne  consummated a
plan of reorganization and emerged from bankruptcy.

     (e) Compliance With Section 16(a) of the Exchange Act.

     Not Applicable.

ITEM 10. EXECUTIVE COMPENSATION

     Cash Compensation.
     ------------------

     The  following  table shows all cash  compensation  paid by the Company for
services rendered during the fiscal years ended November 30, 1997,  November 30,
1996 and  November  30,  1995 to John E. Kelly and P. Evan Lasky  (there were no
other  executive  officers of the Company whose annual salary and bonus exceeded
$100,000).






                                       15


<PAGE>



                           SUMMARY COMPENSATION TABLE




Name and                                                            Other Annual
Principal Position       Fiscal Year        Salary      Bonus       Compensation
------------------       -----------        ------      -----       ------------

John E. Kelly               1997           $131,040    $16,630(1)     $7,980(2)
President and Chief         1996           $126,000    $33,600(1)     $7,980(2)
Executive Officer           1995           $120,000    $21,895(1)     $7,980(2)

P. Evan Lasky               1997           $ 91,000    $11,000(1)        -0-
Executive Vice              1996           $ 86,000    $16,583(1)        -0-
President and Chief         1995           $ 80,500    $10,183(1)        -0-
Operating Officer


     (1)  Bonus  was paid in the  fiscal  year  indicated  but with  respect  to
performance in the prior fiscal year.

     (2) The amount for each of fiscal 1997,  1996 and 1995 consists of a $4,800
car allowance and $3,180 of country club dues.

     Option/SAR Grants and Long-Term Incentive Plans.
     ------------------------------------------------

     Not Applicable.

     Compensation of Directors--Standard Arrangement.
     ------------------------------------------------

     Members of the Board of Directors, other than members who are also officers
of the  Company,  are  entitled to receive a fee of $2,000 per year and $250 for
each attended  meeting of the Board of Directors. 

     Compensation of Directors--Other Arrangements.
     ----------------------------------------------

     Not Applicable.

     Employment  Contracts and  Termination  of Employment and Change of Control
--------------------------------------------------------------------------------
Arrangements.
-------------

     Not Applicable.





                                       16

<PAGE>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     (a) Security Ownership of Certain Beneficial Owners.

     The  following  persons  are the only  persons  known to the Company who on
February 16, 1998, owned  beneficially  more than 5% of the Company's $0.001 par
value common stock, its only class of outstanding voting securities:



                                           Amount and Nature of         Percent
Name and Address of Beneficial Owner      Beneficial Ownership(1)       of Class
------------------------------------      -----------------------       --------

Pak Mail Investment Partnership L.P.            1,800,000                 60.2%
701 Harger Road, Suite 190
Oak Brook, Illinois 60521

Janie M. D'Addio                                 188,833(2)                6.3%
c/o Security Manufacturing Corporation
815 South Main Street
Grapevine, Texas 76051

     (1) The beneficial owners listed have sole voting and investment power with
respect to the shares shown unless otherwise indicated.


     (2) Information  with respect to Ms. D'Addio's common stock is given to the
best of the Company's knowledge.

     (b) Security Ownership of Management.
         
     The  following  table  shows as of  February  16,  1998,  the shares of the
Company's  $0.001 par value common stock  beneficially  owned by each  director,
each  executive  officer and by all the  executive  officers and  directors as a
group:

Name and Address of              Amount and Nature of 
 Beneficial Holder               Beneficial Ownership           Percent of Class
 -----------------               --------------------           ----------------

J. S. Corcoran                        1,000(1)                         (5)
701 Harger Road, Suite 190   
Oak Brook, Illinois 60521  
         
Raymond S. Goshorn                     1,000                           (5)
3033 S Parker Rd Suite 1200
Aurora Colorado 80014      
                

                                       17

<PAGE>



Name and Address of              Amount and Nature of 
 Beneficial Holder               Beneficial Ownership           Percent of Class
 -----------------               --------------------           ----------------


John W. Grant                           800(2)                         (5)
701 Harger Road, Suite 190
Oak Brook, Illinois 60521             

F. Edward Gustafson                  20,000(1)(3)                      (5)
701 Harger Road, Suite 190
Illinois 60521                

John E. Kelly                         12,000(4)                        (5)
3033 S Parker Rd Suite 1200 
Aurora, Colorado 80014

William F. White                        2,000                          (5)
701 Harger Road, Suite 190
Oak Brook, Illinois 60521            

P. Evan Lasky                            -0-                           (5)
3033 S Parker Rd Suite 1200
Aurora, Colorado 80014              

Tonya D. Sarina                          -0-                           (5)
3033 S Parker Rd Suite 1200 
Aurora, Colorado 80014                

Alex Zai                                 112                           (5)
3033 S Parker Rd Suite 1200
Aurora, Colorado 80014 
     
All directors and officers             36,912(1)                       1.2% 
as a group (9 persons)    



     (1) Excludes  1,800,000 shares of common stock owned by Pak Mail Investment
Partners, L.P. ("PMIP"). Mr. Corcoran and Mr. Gustafson are officers,  directors
and shareholders of Wexford Corporation,  which exercises control over PMIP, and
therefore  may be deemed to have the  ability to vote or  dispose of  securities
owned by PMIP. Messrs.  Corcoran and Gustafson disclaim beneficial  ownership of
the shares of common stock owned by PMIP.

     (2) Shares owned jointly by Mr. Grant and his wife.

     (3)  Includes  6,000  shares  of  common  stock  owned  by Mr.  Gustafson's
children, for whom he acts as custodian.



                                       18
<PAGE>



     (4)  Excludes  8,000  shares of  common  stock  that Mr.  Kelly has not yet
purchased  pursuant to a Stock Purchase Agreement dated July 15, 1990. See "Item
10. Executive Compensation".

     (5) Less than 1%.

     (c) Changes in Control. Not Applicable.
         
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     (a)(b)  Transactions  With  Management  and  Others  and  Certain  Business
Relationships.

     The Company  purchases  mailboxes from Security  Manufacturing  Corporation
("Security") for resale to the Company's franchisees.  Security is controlled by
Janie M. D'Addio,  who owns 6.3% of the Company's $0.001 par value common stock.
During  fiscal 1997 and fiscal  1996,  the Company  made  purchases in the total
amounts of $82,128 and $64,300, respectively, from Security.

     (c) Parent  Companies.  PMIP owns a  controlling  interest  in the  Company
through  its  ownership  of  1,800,000  shares  of  common  stock,  representing
approximately 60.2% of the outstanding common stock.
             
     In February 1998,  holders of the Series A and Series B Preferred  Stock of
the Company exchanged the Series A and Series B Preferred Stock for a new Series
C  Preferred  Stock  and 10 year  warrants  to  purchase  884,264  shares of the
Company's  common stock at $0.10 each. The new Series C Preferred Stock has a 6%
annual  dividend  that is payable on March 31 of each year,  beginning  in 1999.
Effective  November 30, 1997, the holders of the Series A and Series B Preferred
Stock  agreed  that they had no  further  rights,  and that the  Company  had no
further obligations, with respect to the Series A and Series B Preferred Stock.

     (d) Transactions With Promoters. Not Applicable.





                                       19

<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

(3)(a)    Articles of Incorporation  incorporated by reference to Exhibit (3)(a)
          of the  Company's  Annual  Report on Form  10-KSB for the fiscal  year
          ended November 30, 1995.

(3)(b)    Articles of Amendment to the Articles of Incorporation  filed with the
          Colorado Secretary of State on January 26, 1998.

(3)(c)    Bylaws  incorporated  by reference  to Exhibit  3(b) of the  Company's
          Annual Report on Form 10-K dated March 13, 1992.

(4)(a)    Letter of Exchange of Series A Preferred  Stock for Series C Preferred
          Stock.

(4)(b)    Letter of Exchange of Series B Preferred  Stock for Series C Preferred
          Stock.

(4)(c)    Warrant to Purchase  Shares of Common Stock granted in connection with
          exchange of Series A Preferred Stock for Series C Preferred Stock.

(4)(d)    Warrant to Purchase  Shares of Common Stock granted in connection with
          exchange of Series B Preferred Stock for Series C Preferred Stock.

(10)(a)   Stock Purchase  Agreement dated as of July 15, 1990 by and between the
          Company and John E. Kelly incorporated by reference to Exhibit (10)(1)
          of the  Company's  Annual  Report on Form  10-KSB for the fiscal  year
          ended November 30, 1996.

(10)(b)   Individual Franchise Agreement.

(10)(c)   Agreement by and between  Security  Manufacturing  Corporation and the
          Company  dated July 10,  1995  incorporated  by  reference  to Exhibit
          (10)(3) of the  Company's  Annual Report on Form 10-KSB for the fiscal
          year ended November 30, 1996.

(10)(d)   Pak Mail Centers of America, Inc. Management Incentive Plan for Fiscal
          Year 1997.

(21)      Subsidiaries of the Registrant.

(27)      Financial Data Schedule



     (b)  8-K Reports. None.

                                       20


<PAGE>



                                   SIGNATURES

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

                                        PAK MAIL CENTERS OF AMERICA, INC.,
                                        a Colorado corporation

                                        By:
                                           -------------------------------------
                                           John E. Kelly, President and
                                           Chief Executive Officer


                                        By:
                                           -------------------------------------
                                           Raymond S. Goshorn, Chief Financial
                                           Officer, Treasurer and Secretary

     Dated: February 26, 1998.

     In  accordance  with the Exchange Act, 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 and Title              Signature                         Date
--------------              ---------                         ----

J.S. Corcoran                                                 February ___, 1998
Director                    ------------------------

John W. Grant                                                 February ___, 1998
Director                    ------------------------


F. Edward Gustafson                                           February ___, 1998
Director                    ------------------------


John E. Kelly                                                 February ___, 1998
Director                    ------------------------


William F. White                                              February ___, 1998
Director                    ------------------------

                                       21


<PAGE>


                        PAK MAIL CENTERS OF AMERICA, INC.
                                 AND SUBSIDIARY

                            Financial Statements and
                          Independent Auditors' Report
                           November 30, 1997 and 1996*




<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY





                   Index to Consolidated Financial Statements


                                                                         Page
                                                                         ----


Independent Auditors' Report.............................................F - 1

Financial Statements

        Consolidated Balance Sheets - November 30, 1997 and 1996.........F - 2

        Consolidated Statements of Income - For the
         Years Ended November 30, 1997 and 1996..........................F - 3

        Consolidated Statement of Stockholders' Equity -
         For the Years Ended November 30, 1997 and 1996..................F - 4

        Consolidated Statements of Cash Flows - For the
         Years Ended November 30, 1997 and 1996..........................F - 5

Notes to Consolidated Financial Statements...............................F - 6

Accompanying Schedule

       Independent Auditors' Report on Accompanying Schedule.............F - 17

       Schedule of Selling, General and Administrative Expenses..........F - 18







<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
Pak Mail Centers of America, Inc. and Subsidiary
Aurora, Colorado


We have audited the accompanying consolidated balance sheets of Pak Mail Centers
of  America,  Inc.  and  Subsidiary  as of November  30, 1997 and 1996,  and the
related consolidated statements of income,  stockholders' equity, and cash flows
for the years  then  ended.  These  consolidated  financial  statements  are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Pak Mail Centers of
America,  Inc. and  Subsidiary as of November 30, 1997 and 1996, and the results
of their  operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.




                                           /s/  Ehrhardt Keefe Steiner & Hottman
                                           -------------------------------------
                                           Ehrhardt Keefe Steiner & Hottman PC

January 15, 1998
Denver, Colorado

                                     F - 1

<PAGE>
<TABLE>
<CAPTION>
                   PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                              Consolidated Balance Sheets

                                                                    November 30,
                                                            --------------------------
                                                                1997           1996
                                        Assets              -----------    -----------

Current assets
<S>                                                         <C>            <C>        
    Cash and cash equivalents                               $    87,405    $    72,179
    Restricted cash (Note 7)                                     23,780         80,293
    Accounts receivable, net of allowance of
      $101,039 (1997) and $115,572 (1996)
                                                                262,791        264,879
    Inventories                                                  34,514         33,769
    Prepaid expenses and other current assets                    31,805         38,448
    Deferred income tax benefit - current                       136,100           --
                                                            -----------    -----------
              Total current assets                              576,395        489,568
                                                            -----------    -----------

Furniture and equipment, net of accumulated
  depreciation (Note 2)                                          61,892         35,692
                                                            -----------    -----------

Other assets
    Notes receivable, net (Note 3)                              722,478        618,771
    Investments in non-operating assets held for sale              --           20,000
    Deposits and other                                           90,130         52,185
    Deferred franchise costs, net of accumulated
      amortization of $36,360 (1997) and $13,367 (1996)
                                                                175,943        146,955
    Capitalized software costs                                  124,202           --
                                                            -----------    -----------
              Total other assets                              1,112,753        837,911
                                                            -----------    -----------

                                                            $ 1,751,040    $ 1,363,171
                                                            ===========    ===========

                         Liabilities and Stockholders' Equity

Current liabilities
    Current portion of long-term debt (Note 4)              $   100,000    $    15,276
    Trade accounts payable                                      284,355        249,723
    Accrued commissions                                          52,950         22,149
    Other accrued expenses                                       18,580         45,376
    Due to advertising fund (Note 6)                             23,780         60,343
                                                            -----------    -----------
              Total current liabilities                         479,665        392,867
                                                            -----------    -----------

Deferred revenue                                                533,518        460,367

Long-term debt (Note 4)                                            --          100,000

Commitments (Notes 10 and 11)

Stockholders' equity (Note 5)
    Series A redeemable preferred stock,
      $1,000 par value; 8%  cumulative; 1,500
      shares authorized; 1,216.668 shares
      issued  and outstanding                                      --        1,216,668
    Series B redeemable preferred stock,
      $1,000 par value; 8%  cumulative; 1,000
      shares authorized; 1,000 shares issued
      and outstanding                                              --        1,000,000
    Series C redeemable preferred stock,
      $1,000 par value; 6% cumulative;                            
      2,500 shares authorized 2,216.668 shares issued
      and outstanding (liquidation preference $2,216,668)     2,216,668           --
    Common stock, $.001 par value; 200,000,000
      shares authorized, 2,989,483 shares
      issued and outstanding                                      2,990          2,990
    Additional paid-in capital                                5,026,453      5,026,453
    Accumulated deficit                                      (6,508,254)    (6,836,174)
                                                            -----------    -----------
              Total stockholders' equity                        737,857        409,937
                                                            -----------    -----------

                                                            $ 1,751,040    $ 1,363,171
                                                            ===========    ===========

                   See notes to consolidated financial statements.

                                         F - 2

</TABLE>

<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY


                        Consolidated Statements of Income


                                                           For the Years Ended
                                                               November 30,
                                                         -----------------------
                                                            1997         1996
                                                         ----------   ----------
Revenue
    Royalties from franchisees                           $1,947,464   $1,767,023
    Individual franchise fees                             1,152,990      728,268
    Sales of equipment, supplies, and services              748,148      673,870
    Area franchise fees, net                                231,194      257,261
    Interest income                                          16,723       24,583
    Other                                                    67,811       21,588
                                                         ----------   ----------
                                                          4,164,330    3,472,593
                                                         ----------   ----------
Costs and expenses
    Selling, general and administrative                   1,765,735    1,604,325
    Cost of sales of equipment, supplies
      and services (Note 9)
                                                            675,685      605,195
    Royalties paid to area franchisees                      677,555      551,497
    Commissions on franchise sales                          614,449      414,773
    Advertising                                             178,783      181,323
    Loss on investment in assets held for resale               --         13,921
    Depreciation and amortization                            57,810       44,629
    Interest                                                  2,493        4,973
                                                         ----------   ----------
                                                          3,972,510    3,420,636
                                                         ----------   ----------

 Net income before income tax benefit                       191,820       51,957

 Income tax benefit (Note 8)                                136,100         --
                                                         ----------   ----------

 Net income                                              $  327,920   $   51,957
                                                         ==========   ==========

 Net income per common share                                    .11          .02
                                                         ==========   ==========

 Weighted average common shares outstanding               2,989,483    2,989,483
                                                         ==========   ==========








                See notes to consolidated financial statements.

                                      F - 3


<PAGE>
<TABLE>
<CAPTION>




                                      Consolidated Statement of Stockholders' Equity
                                      For the Years Ended November 30, 1997 and 1996


                                            Preferred Stock               Preferred Stock               Preferred Stock       
                                                Series A                      Series B                      Series C          
                                         Shares         Amount          Shares         Amount         Shares        Amount    
                                       -----------    -----------    -----------    -----------    -----------   -----------  

<S>                                    <C>            <C>            <C>            <C>            <C>           <C> 
Balance, November 30, 1995               1,216.668    $ 1,216,668          1,000    $ 1,000,000           --     $      --   

Net income                                    --             --             --             --             --            --   
                                       -----------    -----------    -----------    -----------    -----------   -----------

 Balance, November 30, 1996              1,216.668      1,216,668          1,000      1,000,000           --            --   

Exchange of Series A and B for
   Series C preferred stock (Note 5)    (1,216.668)    (1,216,668)        (1,000)    (1,000,000)     2,216.668     2,216,668

Net income                                    --             --             --             --             --            --   
                                       -----------    -----------    -----------    -----------    -----------   -----------

 Balance, November 30, 1997                   --      $      --             --      $      --        2,216.668   $ 2,216,668
                                       ===========    ===========    ===========    ===========    ===========   ===========



                                      Consolidated Statement of Stockholders' Equity  
                                      For the Years Ended November 30, 1997 and 1996  
                                                       (Continued)

                                                                    Additional                      Total      
                                              Common Stock           paid-in      Accumulated    Stockholders' 
                                          Shares        Amount       Capital        Deficit         Equity     
                                       -----------   -----------   -----------    -----------    -----------   
                                      
Balance, November 30, 1998               2,989.483   $     2,990   $ 5,026,453    $(6,888,131)   $   357,980

Net income                                    --            --            --           51,957         51,957
                                       -----------   -----------   -----------    -----------    -----------

 Balance, November 30, 1996              2,989.483         2,990     5,026,453     (6,836,174)       409,937

Exchange of Series A and B for
   Series C preferred stock (Note 5)          --            --            --             --             --

Net income                                    --            --            --          327,920        327,920
                                       -----------   -----------   -----------    -----------    -----------

 Balance, November 30, 1997              2,989.483   $     2,990   $ 5,026,453    $(6,508,254)   $   737,857
                                       ===========   ===========   ===========    ===========    ===========




                             See notes to consolidated financial statements.

                                                F - 4


</TABLE>

<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY


                      Consolidated Statements of Cash Flows


                                                          For the Years Ended
                                                              November 30,
                                                         -----------------------
                                                           1997          1996
                                                         ---------    ----------
Cash flows from operating activities
    Net income                                           $ 327,920    $  51,957
                                                         ---------    ---------
    Adjustments to reconcile net income to net cash
      used by operating activities                            
        Depreciation and amortization                       55,114       44,629
        Provision for loss on accounts receivable          (14,533)     (43,789)
        Provision for loss on notes receivable                  36       17,100
        Net loss on investment in non-operating
          assets held for sale                                --         13,921
        Discount on notes receivable                          --         (1,628)
        Deferred franchise costs                           (51,981)     (13,717)
        Franchise fee revenue financed through
          notes receivable                                 (95,816)     (24,500)
        Deferred income taxes                             (136,100)        --
        Changes in operating assets and liabilities -
            Accounts receivable                             16,621      114,287
            Inventories                                       (745)      12,669
            Prepaid expenses and other current assets        6,643        2,470
            Deposits and other                             (37,945)       1,931
            Trade accounts payable                          34,632     (111,267)
            Accrued expenses                                 4,005      (52,287)
            Due to advertising fund                        (36,563)      28,026
            Deferred revenue                              (102,849)    (188,984)
                                                         ---------    ---------
                                                          (359,481)    (201,139)
                                                         ---------    ---------
            Net cash used by operating activities          (31,561)    (149,182)
                                                         ---------    ---------

    Cash flows from investing activities
        Capital expenditures                               (58,321)     (18,759)
        Capitalized software costs                        (124,202)        --
        Proceeds from sale of assets held for sale          20,000         --
        Payments on notes receivable                       168,073      195,842
                                                         ---------    ---------
            Net cash provided by investing activities        5,550      177,083
                                                         ---------    ---------

    Cash flows from financing activities
        Payments on long-term debt                         (15,276)     (29,728)
        Proceeds from long-term debt                          --        100,000
        Decrease (increase) in restricted cash              56,513      (47,976)
                                                         ---------    ---------
            Net cash provided by financing activities       41,237       22,296
                                                         ---------    ---------

    Net increase in cash and cash equivalents               15,226       50,197

    Cash and cash equivalents, beginning of year            72,179       21,982
                                                         ---------    ---------

    Cash and cash equivalents, end of year               $  87,405    $  72,179
                                                         =========    =========


Supplemental disclosure of cash flow information -
     Cash paid during the year for interest was approximately  $2,500 (1997) and
     $5,000 (1996).

Supplemental schedule of non-cash investing and financing activities:
     At November 30, 1997 and 1996  $176,000  and  $198,866 of notes  receivable
     additions are included in deferred revenue.


                 See notes to consolidated financial statements.

                                      F - 5


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 1 - Organization and Summary of Significant Accounting Policies
--------------------------------------------------------------------

Organization
------------

Pak Mail Centers of America,  Inc. was  incorporated  in Colorado in 1984 and is
engaged in the business of marketing and franchising Pak Mail Retail and Service
Centers which  specialize  in custom  packaging of items to be mailed or shipped
throughout the United States and Mexico.

The consolidated  financial  statements include the accounts of Pak Mail Centers
of America,  Inc. and its wholly owned subsidiary,  Pak Mail Crating and Freight
Service,  Inc.,  collectively  referred  to  as  the  Company.  All  significant
intercompany transactions and balances have been eliminated in consolidation.

The following table summarizes the number of Pak Mail Retail and Service Centers
in operation during the last two fiscal years:
                                                         November 30,
                                                      ----------------
                                                      1997        1996
                                                      ----        ----
Franchises:
    Franchise centers in operation                     299         272
    Rights to franchise centers sold
      and not in operation                               5          16
                                                       ---         ---

                                                       304         288
                                                       ===         ===


Cash and Cash Equivalents
-------------------------

The Company  considers cash on hand and investments with original  maturities of
three months or less to be cash equivalents.

Fair Value of Financial Instruments
-----------------------------------

The  carrying  amounts  of  financial   instruments   including  cash,  accounts
receivable,  accounts payable and accrued expenses approximate fair values as of
November  30,  1997,  as a result  of the  relatively  short  maturity  of these
instruments.

The fair value of the notes  receivable  approximate  the carrying value because
both the stated rate and discount  rate on the notes  approximate  the estimated
current market rate.

Based on rates  currently  available to the Company for debt which is similar to
the  terms  on the  remaining  maturities,  the  fair  value  of  existing  debt
approximates its carrying value.

                                      F - 6


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 1 - Organization and Summary of Significant Accounting Policies (continued)
--------------------------------------------------------------------------------

Inventories
-----------

Inventories consist of equipment and supplies held for resale to franchisees for
use at their store locations or held at corporate owned stores for resale to the
public  and are  stated  at the  lower  of  cost  (determined  on the  first-in,
first-out method) or market.

Property and Equipment
----------------------

Property and equipment are stated at cost.  Depreciation  is computed  using the
straight-line method over an estimated useful life of three years.

Investments in Assets Held for Sale
-----------------------------------

Investments in assets held for sale are stores which have been  repurchased from
franchisees or built-out by the Company and are stated at cost which  management
believes approximates, or is lower than, market.

Franchise Fee Revenue Recognition
---------------------------------

The  Company  has  awarded  franchise  rights  under  the  following   franchise
agreements:

*    Individual  franchise  agreement - Right to operate one store at a location
     to be  determined.  Franchise  fees  are  payable  in  cash or  notes  upon
     execution of agreement.

*    Area  franchise  agreement  - Right to develop  stores  within a  specified
     geographic   area.  The  area  franchise  fee  (based  upon  the  estimated
     development  potential  of the  area) is  payable  in cash and  notes  upon
     execution  of  the  franchise   agreement.   Upon  awarding  of  individual
     franchises within the franchise area, the Company typically receives 60% of
     the individual  franchise fee and the area developer receives 40%. The area
     developer receives 50% to 60% of the royalties from individual  franchisees
     within the area.

*    Area  director  marketing  agreement - Right to market and sell  franchises
     within a specified  geographic region. The marketing fee is payable in cash
     and notes upon execution of the director marketing agreement.  Upon selling
     of individual  franchises within the area, the Company  typically  receives
     60% of the individual franchise fee and the area director receives 40%. The
     area director  receives 50% of the royalties  from  individual  franchisees
     within the area.

                                      F - 7


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 1 - Organization and Summary of Significant Accounting Policies (continued)
--------------------------------------------------------------------------------

Franchise Fee Revenue Recognition (continued)
---------------------------------------------

Individual  franchise  fees outside a developer  area are  recognized as revenue
when all  material  services  and  conditions  relating  to the sale  have  been
substantially   performed  by  the  Company  and  the  franchise  has  commenced
operations.

Domestic  area  franchise  fees are  deferred  and  recognized  as  revenue on a
straight-line  basis as the stores within the area are opened or upon completion
of the  initial  training  program  depending  on the  terms  of the  agreement.
Individual  franchise  fees within a domestic  developer  area are recognized as
revenue when all material services and conditions relating to the sale have been
substantially performed by the Company, principally site selection and training.

Area director  marketing  fees are  recognized as income upon  completion of the
initial  training by the area director and  collection of the marketing fee. The
Company has the option to terminate the agreement  before  training is completed
at which time the marketing fee is refundable.

Foreign  area  franchise  fees are  deferred  and  recognized  as  revenue  upon
completion  of the  material  service  to the area  developer,  which is initial
training to the area developer,  and upon collection of notes  receivable  being
reasonably  assured.  The Company does not  participate in any franchise fees or
royalties for franchises sold within the foreign area, however,  the Company has
agreed to train all new franchisees for a flat fee.

Royalties From Franchisees
--------------------------

Royalties  from  franchisees  are based upon a percentage  of each  franchisee's
sales and are recognized  when earned based upon reported sales activity by each
franchisee.

Software Revenue Recognition
----------------------------

The Company's  products are  generally  licensed to  franchisees  for a one-time
initial fee and  subsequent  annual  license and  maintenance  fees. The initial
license  fee is  recognized  as revenue  upon  execution  of a signed  contract,
delivery of licensed  software and when the Company believes that the collection
of the receivable is probable.

Net Income Per Common Share
---------------------------

Income per common  share is  determined  by dividing  net income  applicable  to
common stock by the weighted average number of common shares  outstanding during
the year.  Common stock  equivalents have been excluded as their effect would be
immaterial.

                                      F - 8


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 1 - Organization and Summary of Significant Accounting Policies (continued)
--------------------------------------------------------------------------------

Income Taxes
------------

The Company  recognizes  deferred  tax  liabilities  and assets for the expected
future tax  consequences  of events  that have been  included  in the  financial
statements  or tax returns.  Under this method,  deferred  tax  liabilities  and
assets are determined based on the difference  between the financial  statements
and tax basis of assets and  liabilities  using the  enacted tax rates in effect
for the year in which the differences  are expected to reverse.  The measurement
of  deferred  tax  assets is  reduced,  if  necessary,  by the amount of any tax
benefits that, based on available evidence, are not expected to be realized.

Deferred Franchise Costs
------------------------

Costs related to the development of the franchise operations are capitalized and
amortized  over the  expected  period of benefit of five years.  These costs are
primarily comprised of costs incurred to develop the franchise documents.

Incremental direct development costs, such as commissions, are deferred, but not
in excess of the deferred  revenue and are expensed  when the related  franchise
fee revenue is recognized.

Capitalized Software Costs
--------------------------

Capitalized  software costs consist of costs of internally  developed  software.
Capitalization   of  internally   developed   software  costs  begins  upon  the
establishment of the technological  feasibility of a product. The recoverability
of capitalized software costs requires  considerable judgment by management with
respect  to  certain   external   factors,   including,   but  not  limited  to,
technological feasibility, anticipated future gross revenues, estimated economic
life  and  changes  in  software  and  hardware  technologies.  Amortization  of
internally  developed software costs is provided on a product-  by-product basis
using the greater of the amount  computed by the  straight-line  method over the
remaining  economic  life  of the  product.  Generally,  an  original  estimated
economic life of three years is assigned to capitalized software costs.

Concentration of Credit Risk
----------------------------

Financial instruments which potentially subject the Company to concentrations of
credit  risk  consist  of cash and cash  equivalents,  and  accounts  and  notes
receivable  from  franchisees,  area  developers  and marketing  directors.  The
Company places its temporary cash  investments in high credit quality  financial
institutions. To reduce credit risk, the Company reserves the right to terminate
franchise agreements for non-payment of amounts owed. Additionally,  at November
30, 1997,  approximately  $370,000 of notes  receivable are offset by comparable
amounts in deferred revenue.

                                      F - 9


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 1 - Organization and Summary of Significant Accounting Policies (continued)
--------------------------------------------------------------------------------

Concentration of Credit Risk (continued)
----------------------------------------

At November 30, 1997, the Company had approximately  $35,000 of cash deposits in
excess of federally insured limits.

Use of Estimates
----------------

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

The  Company  has  recorded  an  allowance  for  doubtful  collection  on  notes
receivable  of  approximately  $53,000 (Note 3). This  allowance is  continually
reviewed based upon changes in the nature of the notes  receivable  outstanding.
Accordingly,  the  allowance  is  subject to changes  due to  circumstances  not
presently known.

Accounting Standards Not Yet Adopted
------------------------------------

In December 1997, the FASB issued  statement No. 128,  "Earnings Per Share" (FAS
128). FAS 128  establishes  standards for computing and presenting  earnings per
share. FAS 128 is effective for transactions entered into in fiscal years ending
after December 15, 1997. The Company currently computes earnings per share under
the provisions for Accounting  Principles  Board Opinion No. 15, as permitted by
FAS 128.

In December 1997, the FASB issued  Statement No. 130,  "Reporting  Comprehensive
Income" (FAS 130).  FAS 130  incorporates  the  all-inclusive  concept of income
recognition.  It requires  that all items that are required to be  recognized as
comprehensive  income  (adjustments  to  equity)  be  reported  in  a  financial
statement  that is  displayed  with  the  same  prominence  as  other  financial
statements.  FAS 130 is effective for fiscal years  beginning after December 15,
1997, consequently, the Company has not yet adopted FAS 130.

                                     F - 10


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 2 - Furniture and Equipment
--------------------------------

Furniture and equipment consists of the following:
                                                            November 30,
                                                    ----------------------------
                                                       1997              1996
                                                    ---------         ----------
Office equipment                                    $ 305,167         $ 247,937
Furniture and fixtures                                143,563           142,472
                                                    ---------         ---------
                                                      448,730           390,409
Less accumulated depreciation                        (386,838)         (354,717)
                                                    ---------         ---------

                                                    $  61,892         $  35,692
                                                    =========         =========



Note 3 - Notes Receivable
-------------------------

Notes  receivable  consist of franchise fees and area developer fees financed by
the Company. The notes are collateralized by the underlying franchise agreements
and by essentially all of the franchisees' assets incidental to the operation of
the franchise center and the majority of the notes are personally  guaranteed by
the owners of each franchise.

Notes receivable consist of the following:
                                                              November 30,
                                                         ----------------------
                                                           1997         1996
                                                         ---------    ---------
Non-interest-bearing notes; interest imputed
   at 8%, net of unamortized discounts
   of $6,513 (1997 and 1996)
                                                         $ 479,073    $ 367,118

Interest-bearing notes; interest rates from 6% to 8%       296,538      304,750
                                                         ---------    ---------
                                                           775,611      671,868
       Less allowance for doubtful collections             (53,133)     (53,097)
                                                         ---------    ---------

                                                         $ 722,478    $ 618,771
                                                         =========    =========


It is the  Company's  policy not to impute  interest  on these  notes  until the
earnings  process  is  complete.  Included  in these  notes  are  financed  area
developer  fees, the maturities of which are based upon the expected  opening of
franchises within the area.

                                     F - 11


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 3 - Notes Receivable (continued)
-------------------------------------

Future minimum  principal  payments to be received  pursuant to the notes are as
follows:

           Year Ending November 30,
           ------------------------

                    1998                               $  463,107
                    1999                                  209,688
                    2000                                   67,139
                    2001                                   33,027
                    2002                                    2,525
                   Thereafter                               6,638
                                                       ----------
                                                          782,124
                       Less unamortized discount          (6,513)
                                                       ---------- 

                                                       $  775,611
                                                       ==========


At the time the notes receivable are executed, the Company reserves an allowance
for doubtful collections. The provision for uncollectible amounts is continually
reviewed and adjusted to maintain the allowance at a level  considered  adequate
to  cover  future  losses.  The  allowance  is  management's  best  estimate  of
uncollectible  amounts and is determined based on historical  performance of the
notes which is tracked by the Company on an ongoing basis. The losses ultimately
incurred could differ  materially in the near term from the amounts estimated in
determining the allowance.


Note 4 - Long-Term Debt
-----------------------
                                                              November 30,
                                                       ------------------------
                                                          1997           1996
                                                       ---------      ---------
Unsecured note payable - paid in full
  during fiscal year 1997                              $    --        $  15,276

Note  payable -  affiliate,  interest at
  2% over prime  (8.25% at  November 30,
  1997). This note was paid in full
  subsequent to year end 

                                                         100,000        100,000
                                                       ---------      ---------
                                                         100,000        115,276
       Less current portion                             (100,000)       (15,276)
                                                       ---------      ---------

                                                       $    --        $ 100,000
                                                       =========      =========



                                     F - 12


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 5 - Stockholders' Equity
-----------------------------

Dividends on the Series A and Series B Preferred  Stock accrue at 8%  commencing
on the date of issuance and are payable annually,  subject to certain cumulative
net income requirements which were not achieved by the Company.

Effective  November  30,  1997,  all holders of Series A and B  Preferred  Stock
exchanged their Series A and B Preferred Stock for 2,216.660  shares of Series C
Preferred Stock. Dividends on the Series C Preferred Stock will accrue at 6% per
year  commencing  December 1, 1997.  Dividends are payable  annually  commencing
March 31,  1999 and each March 31  thereafter  for the  previous  year end.  The
preferred stock does not vote although holders of 51% must approve certain items
such as any change in control,  sale of the Company or a sale of the majority of
the  Company's  assets.  The Series C  Preferred  Stock may be  redeemed  at the
Company's option any time at $1,000 per share plus accrued dividends.

As an  incentive  to exchange for the Series C preferred  stock,  the  preferred
shareholders were granted a total of 884,264 common stock warrants. There was no
fair value attributed to the warrants as no material imputed value was estimated
in the Company pricing model.

The fair values of the warrants  granted are  estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants:  dividend yield of 0; expected  volatility of 133%;
discount rate of 5.25% and expected lives of 10 years.


Note 6 - Advertising Fund
-------------------------

The Company has established an advertising  trust to administer  funds collected
from  franchisees for  advertising.  The  advertising  trust is a separate legal
entity,  and  therefore,  the Company is not  contingently  liable for any trust
liabilities  incurred;  nor is the trust activity  reflected in the accompanying
consolidated financial statements.


Note 7 - Restricted Cash
------------------------

At November 30, 1997 and 1996, the amounts due the advertising  trust of $23,780
and $60,343,  respectively,  are included in restricted  cash.  In addition,  at
November  30,  1996,  $19,950 of  franchisee  fees were held in  escrow,  in the
Company's name, to be released upon the related franchise opening.

                                     F - 13


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 8 - Income Taxes
---------------------

During 1997, the Company  utilized  approximately  $80,000 in net operating loss
carryforwards to offset current taxable income.  This resulted in tax savings of
approximately  $28,000.  In addition the Company reduced its operating valuation
allowance  on its  remaining  net  operating  loss  carryforward  resulting in a
deferred  tax asset of $136,100.  This  estimate is based on the  Company's  two
consecutive years of taxable income.

The components of long-term deferred tax assets are as follows:
                                                            November 30,
                                                   ----------------------------
                                                       1997             1996
                                                   -----------      -----------
Deferred tax assets
       Net operating loss carryforward             $ 2,058,718      $ 2,086,000
       Reserves and other deferrals                     54,633           78,000
       Depreciation and amortization                   (26,497)          15,000
                                                   -----------      -----------
              Total deferred tax assets              2,086,854        2,179,000
       Valuation allowance                          (1,950,754)      (2,179,000)
                                                   -----------      -----------

                                                   $   136,100      $      --
                                                   ===========      ===========


At November 30, 1997, the Company has net operating loss  carryforwards  for tax
purposes of  approximately  $6,055,055.  If not used, these  carryforwards  will
expire in varying amounts during the years 1999 to 2009.


Note 9 - Related Party Transactions
-----------------------------------

The Company purchases certain equipment for resale through an exclusive supplier
agreement with a stockholder and former director of the Company.  Purchases were
$82,128 and $64,300, in 1997 and 1996, respectively.


Note 10 - Employee Benefit Plan
-------------------------------

Effective  December 1, 1991, the Company  established the Pak Mail 401(k) Profit
Sharing  Plan (the Plan).  All  employees of the Company who are 21 years of age
and have completed one year of eligibility  service, as defined, may participate
in the Plan.  Participants may make tax deferred  contributions in any amount up
to the  maximum  allowable  under  current  federal tax laws.  The Company  will
contribute an amount equal to 50% of each participant's contribution, limited to
3% of the  participant's  compensation as defined in the Plan. Costs incurred by
the Company in connection with the Plan were approximately $6,794 and $9,200 for
the years ended November 30, 1997 and 1996, respectively.


                                     F - 14


<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements




Note 11 - Commitments
---------------------

Operating Lease Commitments
---------------------------

The  Company  leases  office  space and  office  equipment  under  noncancelable
operating  leases.   Aggregate  future  minimum  rental  commitments  for  these
operating leases as of November 30, 1997 are as follows:

         Year Ending November 30,
         ------------------------

                   1998                  $ 170,994
                   1999                    173,976
                   2000                     95,832
                   2001                      9,450
                                         ---------

                                         $ 450,252
                                         =========


Rental  expense  for  1997 and 1996 was  approximately  $210,000  and  $208,000,
respectively.



                                     F - 15


<PAGE>





                              ACCOMPANYING SCHEDULE




                                     F - 16

<PAGE>






              INDEPENDENT AUDITORS' REPORT ON ACCOMPANYING SCHEDULE





To the Board of Directors
Pak Mail Centers of America, Inc. and Subsidiary
Aurora, Colorado


Our audits  were  conducted  for the  purpose of forming an opinion on the basic
financial  statements taken as a whole.  The accompanying  schedule is presented
for  purposes of  additional  analysis  and is not a required  part of the basic
financial  statements.  Such  information  has been  subjected  to the  auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.





                                             Ehrhardt Keefe Steiner & Hottman PC


January 15, 1998
Denver, Colorado







                                     F - 17
<PAGE>


                PAK MAIL CENTERS OF AMERICA, INC. AND SUBSIDIARY



            Schedule of Selling, General and Administrative Expenses


                                                         For the Year Ended
                                                             November 30,
                                                     ---------------------------
                                                        1997             1996
                                                     ----------       ----------
General and Administrative Expenses
    Salaries and bonuses                             $  813,814       $  736,896
    Repairs and maintenance                               7,020            8,116
    Rent                                                209,861          207,938
    Operating insurance                                   6,114            7,350
    Payroll taxes                                        58,169           57,453
    Employee benefits                                    34,883           42,389
    Supplies                                             15,675           10,709
    Training                                             38,202           19,663
    Trade shows                                          12,285           13,768
    Telephone                                            56,569           45,619
    Freight                                               7,904            9,118
    Health insurance                                     59,812           58,901
    Other taxes                                          10,874            5,977
    Contract labor                                        5,531           13,475
    Professional services                               108,243          119,642
    Travel and entertainment                            164,185           76,218
    Bad debts, net of recoveries                         25,158           46,172
    Dues and fees                                        18,406           26,735
    Printing                                             26,051           30,418
    Subscriptions                                         3,890            5,201
    Postage                                              19,714           19,452
    Miscellaneous expense and other                      62,218           41,898
    Donations                                             1,157            1,217
                                                     ----------       ----------

                                                     $1,765,735       $1,604,325
                                                     ==========       ==========



                                     F - 18


<PAGE>


                                  EXHIBIT INDEX

(3)(a)    Articles of Incorporation  incorporated by reference to Exhibit (3)(a)
          of the  Company's  Annual  Report on Form  10-KSB for the fiscal  year
          ended November 30, 1995.

(3)(b)    Articles of Amendment to the Articles of Incorporation  filed with the
          Colorado Secretary of State on January 26, 1998.

(3)(c)    Bylaws  incorporated  by reference  to Exhibit  3(b) of the  Company's
          Annual Report on Form 10-K dated March 13, 1992.

(4)(a)    Letter of Exchange of Series A Preferred  Stock for Series C Preferred
          Stock.

(4)(b)    Letter of Exchange of Series B Preferred  Stock for Series C Preferred
          Stock.

(4)(c)    Warrant to Purchase  Shares of Common Stock granted in connection with
          exchange of Series A Preferred Stock for Series C Preferred Stock.

(4)(d)    Warrant to Purchase  Shares of Common Stock granted in connection with
          exchange of Series B Preferred Stock for Series C Preferred Stock.

(10)(a)   Stock Purchase  Agreement dated as of July 15, 1990 by and between the
          Company and John E. Kelly incorporated by reference to Exhibit (10)(1)
          of the  Company's  Annual  Report on Form  10-KSB for the fiscal  year
          ended November 30, 1996.

(10)(b)   Individual Franchise Agreement.

(10)(c)   Agreement by and between  Security  Manufacturing  Corporation and the
          Company  dated July 10,  1995  incorporated  by  reference  to Exhibit
          (10)(3) of the  Company's  Annual Report on Form 10-KSB for the fiscal
          year ended November 30, 1996.

(10)(d)   Pak Mail Centers of America, Inc. Management Incentive Plan for Fiscal
          Year 1997.

(21)      Subsidiaries of the Registrant.

(27)      Financial Data Schedule