<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB


(Mark One)

/x/  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the quarterly period ended March 31, 1997

/ /  Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from __________ to __________

Commission file number 1-13890


                  BUREAU OF ELECTRONIC PUBLISHING, INC.
--------------------------------------------------------------------------------
       (Exact Name of Small Business Issuer as Specified in its charter)


         DELAWARE                                 22-2894444
-----------------------------------         ----------------------
(State or other jurisdiction of                 (I.R.S.Employer
 incorporation or organization)               Identification No.)


                 745 Alexander Road, Princeton, New Jersey 08540
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (609) 514-1600
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report)


         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes   X      No



                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                        BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS

         Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.

Yes _____    No _____

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:   4,647,619 at May 15, 1997



<PAGE>

                      BUREAU OF ELECTRONIC PUBLISHING, INC.


Part I:                    FINANCIAL INFORMATION


Item 1.           Financial Statements

         The Financial Statements commence at page F-1.

Item 2.           Management's Discussion and Analysis or Plan of
                  Operations

         The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and Notes thereto included elsewhere in
this Form 10-QSB. On January 23, 1997 the Agreement and Plan of Merger between
the Company, the Company's British Virgin Islands ("BVI") subsidiary, Pacific
Chemical Group Limited ("PCG"), and Jinan Chemical Fibre Corporation ("JCF")
(the "Agreement") was simultaneously executed and closed. Pursuant to the
Agreement, at the closing the Company's BVI subsidiary merged into PCG in a
merger carried out pursuant to the laws of the BVI (the "Merger"). In connection
with the Merger, the stockholders of PCG transferred 100% ownership of PCG to
the Company and the stockholders of PCG received an aggregate of 833,671.66
shares of Series A Preferred Stock of the Company. Each share of Series A
Preferred Stock is automatically convertible into 100 shares of the Company's
Common Stock when the number of authorized shares of the Company's Common Stock
is increased to 300,000,000. As a result of the Merger, PCG became a
wholly-owned subsidiary of the Company and the former stockholders of PCG
acquired control of a substantial majority of the voting stock of the Company.

         PCG owns 51% and JCF owns 49% of a joint venture, Jinan Dayang Chemical
Fibre Corporation (the "Joint Venture"). PCG's only asset is its 51% interest in
the Joint Venture. The Joint Venture has succeeded to the business of
manufacturing and sale of purified terephthalic acid ("PTA") conducted by JCF's
No. 1 Plant in Jinan, People's Republic of China ("PRC"). No. 1 Plant is
principally engaged in the manufacture of PTA for further processing by other
production units of JCF into polyester chip, film, staple and filament. The
Company's multimedia education products business carried out prior to the Merger
has been substantially discontinued. The Financial Statements and Notes and
discussion below relate primarily to the business of the Joint Venture after the
date of the closing of the Merger.

Working Capital and Liquidity

         On a pro forma basis, the Company had working capital of
$12,257,000 at March 31, 1997.  Plant No. 1's working capital was
Rmb 12,164,000.  The Company believes that the Company and Plant

                                        2
<PAGE>






No. 1 have sufficient working capital to carry out their normal
operations for the next 12 months.

         Pursuant to the Agreement, the Company is required to pay $14,995,000
in cash as its capital contribution for its equity interests in the Joint
Venture (the "Purchase Price"). To date, US$2,000,000 of the Purchase Price has
been paid. In the event that the full Purchase Price is not paid by February
1999, for whatever reason including the lack of ability to finance, the Company
may forfeit its claim on its equity interests in the Joint Venture. The Company
currently does not have the resources to pay the remainder of the Purchase
Price. The Company intends to finance the payment of the remainder of the
Purchase Price through the public or private sale of its equities. The company
does not currently have any commitments or arrangements with respect to the
financing of the remainder of the Purchase Price.

         In connection with the Merger, the Company carried out a private
placement to obtain funds to be used in the operations of the Joint Venture and
to defray certain costs of the Merger. The Company has issued in the private
placement 18.25 shares of Series B Convertible Preferred Stock ("Series B
Preferred"), and 500,000 shares of Series C Convertible Preferred Stock ("Series
C Preferred"). The Company has also agreed to issue shares of a Series D
Convertible Preferred Stock ("Series D Preferred") convertible into 500,000
shares of Common Stock although that series of Preferred Stock has not yet been
created. Each share of Series B Preferred Stock is automatically convertible
into 100,000 shares of the Company's Common Stock when the number of authorized
shares of the Company's Common Stock is increased to 300,000,000 at a price
which is equal to the lesser of (a) US$1.00 or (b) 75% of the average of the
closing bid price of one share of Common Stock during the last five trading days
immediately prior to the date of such conversion. Each share of Series C and
Series D Preferred Stock is automatically convertible into two shares of the
Company's Common Stock at $.50 per share when the number of authorized shares of
the Company's Common Stock is increased to 300,000,000. The Company has received
total proceeds of approximately $2,800,000 from the private placement.

Results of Operations

         In late 1996, the Company substantially discontinued its previous
business operations and in January 1997 completed the Merger. On a pro forma
basis the Company had net income after provision for income taxes of $4,002,000
in the three months ended March 31, 1997 (the "1997 Period"). Pro forma sales
were $17,357,000 in the 1997 Period. Due to the change in the Company's
business, prior periods of the Company's historical operations are not
comparable.

         The Company's principal asset is its 51% interest in the Joint

                                        3


<PAGE>


Venture which operates the business of Plant No. 1. Almost all of Plant No. 1's
sales are to other units of JCF. Pro forma sales for the 1997 and 1996 Periods
are based upon prices set by a government price bureau. Sales of Plant No. 1
were Rmb 143,981,000 in the 1997 Period as compared to Rmb 200,706,000 in the
three months ended March 31, 1996 (the "1996 Period"). The decrease in sales was
due to a decline of approximately 40% in the price established by the government
price bureau. Actual tonnage of PTA produced and sold increased by approximately
18% from the 1996 Period to the 1997 Period. JCF and the Joint Venture have
entered into an agreement which permits the Joint Venture to set the price of
PTA at the Joint Venture's choice of the government price bureau or the general
market price of PTA. The Company believes that this agreement will help
alleviate some of the effect of price swings on revenues.

         Plant No. 1's cost of goods sold also declined from Rmb 131,877,000 in
the 1996 Period to Rmb 75,589,000 in the 1997 Period. This decline was
principally due to a decline in raw material costs. As a result primarily of the
decline in cost of goods sold and a small decease in general and administrative
expenses, Plant No. 1's income from operations before income taxes increased
slightly from Rmb 64,711,000 in the 1996 Period to Rmb 65,091,000 in the 1997
Period.

         For purposes of these financial statements, translation of amounts from
Chinese Renminbi into United States dollars has been made at the rate of $1.00 =
Rmb8.2955 announced by the Bank of China on March 17, 1997. No representation is
made that the Renminbi amounts could have been, or could be, converted into
United States dollars at that rate on March 17, 1997 or at any other certain
rate.

         In recent years, the economy of the PRC has experienced periods of
rapid economic expansion and high rates of inflation, which have led to the
adoption by the central government, from time to time, of various inflation
control measures designed to regulate growth and contain inflation. High
inflation may cause the government to take other actions which could inhibit
economic activity in the PRC and may thereby adversely affect continued economic
growth. Such actions could have a material adverse effect on the Company's
results of operation, financial condition and/or expansion plans. In 1996 and to
date in 1997, Plant No. 1's operations have not been materially affected by
inflation.


                                        4

<PAGE>



Part II:          OTHER INFORMATION


Item 1.           Legal Proceedings

         The Company is not currently involved in any material legal
proceedings.


Item 2.           Changes in Securities

         On January 23, 1997 the Company completed the Merger. In connection
with the Merger, the stockholders of PCG received an aggregate of 833,671.66
shares of Series A Preferred Stock of the Company. Each share of Series A
Preferred Stock is automatically convertible into 100 shares of the Company's
Common Stock when the number of authorized shares of the Company's Common Stock
is increased to 300,000,000, has 100 votes per share and votes with the Common
Stock as one class, and has a preference of $100 per share in the event of
liquidation. In connection with the Company's private placement, other series of
Preferred stock were created and issued as described more fully in "Management's
Discussion and Analysis or Plan of Operations -- Working Capital and Liquidity."

Item 3.           Defaults Upon Senior Securities

         None.

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

         No matters were submitted to a vote of security holders in the first
quarter of 1997. In May 1997, holders of Common Stock representing approximately
55.5% of the Company's outstanding Common Stock executed written consents to the
following actions:

1.       an increase in the authorized number of shares of Common
         Stock, par value $.001 per share, to 300,000,000, and an
         increase in the authorized number of shares of Preferred
         Stock, par value $.001 per share, to 3,000,000,

2.       a change in the Company's name to Pacific Chemical, Inc.,

3.       a reverse stock split of the Company's Common Stock in a ratio
         of between four-to-one and ten-to-one, with the specific ratio
         to be determined at the discretion of the Company's Board of
         Directors (the Board having selected a ratio of six-to-one),
         and

4.       ratification of issuance of Series A and Series B Preferred
         Stock having voting rights in excess of one vote per share.

         The foregoing actions will be effective 20 days after the

                                        5

<PAGE>



distribution of an Information Statement relating thereto to the
Company's stockholders.

Item 5.           Other Information

         None.


Item 6.           Exhibits and Reports on Form 8-K

         (a) Exhibits

<TABLE>

<S>      <C> 

3.1      Certificate of Incorporation of the Company, as amended (1)(4)
3.2      By-laws of the Company (1)
4.1      Form of Representative's Warrant Agreement between the Company and Meyers Pollock Robbins, Inc., with
         form of warrant attached  (1)
4.2      Form of Warrant Agreement between the Company and Continental Stock
         Transfer & Trust Company with form of warrant attached (1)
4.3      Warrants issued by the Company to Richard M.H. Thompson & Associates, Inc. expiring November 23,
         1999 and April 21, 2000 (1)
10.1     Distribution Agreement dated February 10, 1993 between the Company and Softkat, a division of Baker
         & Taylor, Inc. (1)
10.2     Distribution Agreement dated January 15, 1992, as amended on February 10, 1993, between the Company
         and Merisel, Inc. (1)
10.3     CD-ROM Development Agreement dated June 21, 1994 between the Company and Simon & Schuster, Inc.
         (1)
10.4     License Agreement dated September 21, 1992 between Bureau Development, Inc. and Viking Penguin (1)
10.5     Software Development Agreement dated December 7, 1992 between Bureau Development, Inc. and Prentice
         Hall General Reference, a Division of Simon & Schuster, Inc. (1)
10.6     Amended and Restated Bureau of Electronic Publishing, Inc. 1994 Stock Option Plan (1)
10.7     Assignment and Assumption Agreement dated September 30, 1994 between the Company and Bureau
         Development, Inc. (1)
10.8     Agreement dated August 10, 1995 by and between Chelsea House Publishers and
         the Company (2)
10.9     Agreement dated August 2, 1995 by and between American
         Management Association and the Company (3)
10.10    Lease dated January 25, 1996
         between the Company and Lester M. Entin Associates (3)
10.11    Agreement and Plan of Merger dated January 23, 1997, by and among the
         Company, BEPI Acquisition Corporation, Pacific Chemical Group Limited
         ("PCG"), and Jinan Chemical Fibre Corporation ("JCF") (4)
10.12    Joint Venture Agreement, dated as of February 9, 1996, by and among PCG
         and JCF (4)
11       Calculation of Net Loss per Common Share
27       Financial Data Schedule

</TABLE>


-------------------------------------------
(1)      Incorporated by reference to the Company's registration statement on
         Form SB-2 (File #33-93474) filed on June 15, 1995.

(2)      Incorporated by reference to the Company's Form 10-QSB for the period 
         ended June 30, 1995.

(3)      Incorporated by reference to the Company's Form 10-KSB for the year 
         ended December 31, 1995.

(4)      Incorporated by reference to the Company's Form 8-K filed 
         February 7, 1997.



<PAGE>

         (b) Reports on Form 8-K

         A report on Form 8-K reporting the closing of the Merger was filed on
February 7, 1997. It contained Item 1 - Changes in Control of Registrant, Item 2
- Acquisition or Disposition of Assets, Item 5 - Other Events (relating to the
issuance of Preferred Stock in a private placement), and Item 7(c) - Exhibits.
Amended reports on Form 8-K/A were filed on April 8 and 22, 1997 containing Item
7(a) and (b) - Financial Statements relating to the Merger.

                                        6

<PAGE>


                      BUREAU OF ELECTRONIC PUBLISHING, INC.


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                         BUREAU OF ELECTRONIC PUBLISHING, INC.



                                                  /s/ J. S. Pan
                                         -----------------------------------
                                         J. S. Pan, Vice President and Chief
                                         Financial Officer



         May 20, 1997

                                        7



<PAGE>

                    HISTORICAL STATEMENTS OF EXPENDITURES OF
                 PACIFIC CHEMICAL GROUP LIMITED, JINAN DA YANG
                       CHEMICAL FIBRE COMPANY LIMITED AND
               JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE, AND
              UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                         FROM CONTINUING OPERATIONS OF
                     BUREAU OF ELECTRONIC PUBLISHING, INC.
                      FOR THE QUARTER ENDED MARCH 31, 1997
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                        Historical Statement of Expenditure
                              -------------------------------------------------------------------------------------------
                                                                                   Jinan Da Yang       Jinan Chemical
                                     Bureau of                Pacific Chemical     Chemical Fibre    Fibre Corporation            
                              Electronic Publishing, Inc.       Group Limited      Company Limited        -Plant One        
                                        US$                         US$                 Rmb                 Rmb                
<S>                           <C>                            <C>                 <C>                 <C>                       
Sales                                   --                                   --                  --                  --        
                              ---------------------------    ------------------- ------------------- -------------------       
Cost of goods sold                      --                                   --                  --            (75,589)        
                                                                                                                               
General and                                                                                                                 
    administrative                                                                                                          
    expenses                          (113)                                  --                  --             (3,301)        
                              ---------------------------    ------------------- ------------------- -------------------       
        Total costs and                                                                                                     
            expenses                  (113)                                  --                  --            (78,890)        
                              ---------------------------    ------------------- ------------------- -------------------       
(Loss) income from                                                                                                          
    operations before                                                                                                       
    income taxes                      (113)                                  --                  --            (78,890)        
                                                                                                                            
Equity in Loss of Investment                                                                                                
    in Joint Venture                    (3)                                  --                  --                  --     
                                                                                                                            
Interest Income                                                                                                             
    (Expense), net                       7                                   --                  --                  --     
                                                                                                                            
Other Income                             4                                   --                  --                  --     
                                                                                                                            
Provision for income                    --                                                                                  
    taxes                                                                    --                  --                  --        
                              ---------------------------    ------------------- ------------------- -------------------    
(Loss) income from continuing                                                                                               
    operations before                                                                                                       
    minority interest                   --                                   --                  --              (78,890)        
Minority interests                      --                                   --                  --                  --        
                              ---------------------------    ------------------- ------------------- -------------------
(Loss) income from continuing

     operations                       (105)                                  --                  --              (78,890)

Loss from operation of 
    discontinued multimedia
     business                         (176)                                  --                  --                  --
                              ---------------------------    ------------------- ------------------- -------------------

Net (loss) income                     (281)                                  --                  --              (78,890)
                              ---------------------------    ------------------- ------------------- -------------------
<CAPTION>
                                                                                   Pro forma Consolidated            
                                                        Pro forma                 Statement of Income of Bureau of       
                                                        Adjustment                  Electronic Publishing, Inc.          
                                             Note           Rmb                        Rmb                 US$             
                                            <C>         <C>                     <C>                  <C>                     
Sales                                       (1)                143,981                    143,981              17,357  
                                                                                ------------------- -------------------
Cost of goods sold                          (2)                  4,229                    (80,619)             (9,718) 
                                            (3)                   (489)                                                
                                            (4)                 (8,770)                                                
                                            (5)                     --                                                 
General and                                                                                                            
    administrative                                                                                                     
    expenses                                                                               (4,238)               (511) 
                                                                                ------------------- -------------------
        Total costs and                                                                                                
            expenses                                                                      (79,827)             (9,623) 
                                                                                ------------------- -------------------
(Loss) income from                                                                                                     
    operations before                                                                                                  
    income taxes                                                                           64,154               7,734  
                                                                                                                       
Equity in Loss of Investment                                                                                           
    in Joint Venture                                                                          (25)                 (3) 
                                                                                                                       
Interest Income                                                                                                        
    (Expense), net                                                                             58                   7  
                                                                                                                       
Other Income                                                                                   33                   4  
                                                                                                                       
Provision for income                                                                                                   
    taxes                                   (6)                     --                         --                  --      
(Loss) income from continuing operations                                                                               
    before minority interest                                                                                           
                                                                                ------------------- -------------------
                                                                                           64,220               7,742  
Minority interests                          (7)                 29,568                    (29,568)             (3,564)    
                                                                                ------------------- -------------------
                                                                                                                   
(Loss) income from continuing operations                                                   34,652               4,178  
                                                                                                                   
Loss from operation of discontinued
   multimedia software business                                                            (1,460)               (176)
                                                                                ------------------- -------------------   

Net (loss) income                                                                          33,192               4,002
                                                                                ------------------- -------------------   

Pro Forma Consolidated Income from 
  continuing operations per Common Shares
  Outstanding                                                                                                   $0.04 

Pro Forma Consolidated Loss from  operations
  of discontinued business per Common Shares
  Outstanding                                                                                                   $0.00 

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

Pro Forma Consolidated Net Income Per
  Common Shares Outstanding                                                                                     $0.04 
                                                                                                    ===================   
Common Shares Outstanding                                                                                  91,283,557 
                                                                                                    ===================
</TABLE>                     

Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.

        The accompanying notes are an integral part of these statements.

                                     F-1



<PAGE>

                  Jinan Chemical Fibre Corporation - Plant One
                           Statement of Expenditures
                      For the Quarter Ended March 31, 1997
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                   1996                      1997
                                                               ------------------------- -------------------------
                                                                                    Rmb                       Rmb

<S>                                                            <C>                       <C>    
Sales                                                                           200,706                   143,981
                                                               ------------------------- -------------------------
Cost of goods sold                                                              131,877                    75,589
General and administrative expenses                                               4,118                     3,301
                                                               ------------------------- -------------------------
        Total costs and expenses                                                135,995                    78,890
(Loss) income from operations before income taxes                                64,711                    65,091
                                                               ------------------------- -------------------------
</TABLE>



        The accompanying notes are an integral part of these statements.

                                     F-2



<PAGE>

Notes to Statement of Expenditures

1.       Sales:
         January-March 1997                 21,109 tons
         January-March 1996                 17,925 tons

2.       Sales, unit price:
         January-March 1997                 (from the Price Bureau) Rmb 8,050
                                            per ton, or Rmb 6,880 per ton 
                                            before tax 
         January-March 1996                 (as audited by Arthur Andersen) 
                                            Rmb 13,100 per ton, or Rmb 11,197
                                            per ton before tax

3.       PX unit price (reflected in cost of goods sold)
         1997              Rmb 2,906 per ton before tax (actual price)
         1996              Rmb 6,865 per ton before tax
                           The original audited PX unit price was Rmb 6,760 per
                           ton before tax. The adjusted pro forma PX unit price
                           was Rmb 4,046 per ton before tax, which was the
                           average PX unit price for 1996. In accordance with
                           the "PX Pricing Amendment Agreement," the agreed
                           upon PX unit price was high during the period of
                           January-March 1996; therefore, the price of Rmb
                           6,865 per ton was used in the statement.

                                     F-3



<PAGE>

               HISTORICAL BALANCE SHEETS/STATEMENT OF NET ASSETS
                   OF BUREAU OF ELECTRONIC PUBLISHING, INC.,
                 PACIFIC CHEMICAL GROUP LIMITED, JINAN DA YANG
                       CHEMICAL FIBRE COMPANY LIMITED AND
               JINAN CHEMICAL FIBRE CORPORATION - PLANT ONE, AND
               UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET OF
                     BUREAU OF ELECTRONIC PUBLISHING, INC.
                              AS OF MARCH 31, 1997
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                     Historical Balance Sheet/Statement of Net Assets
                          -----------------------------------------------------------------------
                                                               Jinan Da Yang     Jinan Chemical
                             Bureau of          Pacific        Chemical Fibre        Fibre                                  
                             Electronic     Chemical Group        Company       Corporation-                      Pro forma    
                          Publishing, Inc.      Limited           Limited          Plant One        Note          Adjustment   
                          ----------------      -------           -------          ---------        ----          ----------   
                                US$               US$               Rmb               Rmb                            Rmb       
<S>                       <C>                  <C>               <C>              <C>               <C>         <C>
ASSETS
Current assets
    Cash at bank                     1,079                21                                        (8)              121,479
    Accounts receivable                 14                                                   126                            
    Inventories and
        spare parts, net                                                                  19,824                            
    Prepayments and
        other current
        assets                         123                                                27,748                            
                          ----------------- ----------------- ----------------- -----------------                           
    Total current assets             1,216                21                              47,698                            
Fixed assets, net                      164                             116,255           266,930    (9)             (278,363)
                                                                                                    (10)              38,558
Investment in joint
    venture                          1,223                                                                                  
Other assets                             6                                                                                  
                          ----------------- ----------------- ----------------- -----------------                           
    Total assets                     2,609                21           116,255           314,628                            
                          ----------------- ----------------- ----------------- -----------------                           
LIABILITIES
Current liabilities
    Accounts payable                    85               122                              33,981                            
    Accrued expenses
        and other
        liabilities                     70                                                 1,553                            
    Amount due to JCFC                                                                              (9)                1,372
                                                                                                    (10)              38,558
                          ----------------- ----------------- ----------------- -----------------                           




<CAPTION>
                              Pro forma Consolidated Balance
                              Sheet of Bureau of Electronic
                                     Publishing, Inc.
                                     ----------------
                                  Rmb               US$
<S>                          <C>                <C>   
ASSETS
Current assets
    Cash at bank                     130,604            15,744
    Accounts receivable                  242                29
    Inventories and
        spare parts, net              19,824             2,390
    Prepayments and
        other current
        assets                        28,768             3,468     
                            ----------------- -----------------
    Total current assets             179,438            21,631
Fixed assets, net                    145,382            17,525
                          
Investment in joint
    venture                           10,145             1,223
Other assets                              50                 6
                            ----------------- -----------------
    Total assets                     335,015            40,385
                            ----------------- -----------------
LIABILITIES
Current liabilities
    Accounts payable                  35,698             4,303
    Accrued expenses
        and other
        liabilities                    2,134               257
    Amount due to JCFC                39,930             4,814
                          
                            ----------------- -----------------

</TABLE>

                                     F-4



<PAGE>
<TABLE>
<CAPTION>
                                     Historical Balance Sheet/Statement of Net Assets
                          -----------------------------------------------------------------------
                                                               Jinan Da Yang     Jinan Chemical
                             Bureau of          Pacific        Chemical Fibre        Fibre                                  
                             Electronic     Chemical Group        Company       Corporation-                      Pro forma    
                          Publishing, Inc.      Limited           Limited          Plant One        Note          Adjustment   
                          ----------------      -------           -------          ---------        ----          ----------   
                                US$               US$               Rmb               Rmb                            Rmb       
<S>                       <C>                  <C>               <C>              <C>               <C>         <C>

    Total current
        liabilities                    155               122                              35,534                            
                          ----------------- ----------------- ----------------- -----------------                           
Minority interest                                                                                   (7)              116,896
                          ----------------- ----------------- ----------------- -----------------                           
INVESTORS' EQUITY
(DEFICIT)
Share capital                            6                 8           116,896                      (7)             (116,896)
                                                                                                    (8)              121,479
Appreciation of share
    value / Additional
    paid-in capital                 10,088                15                                                                
Warrants                               335                                                                                  
Accumulated deficit                 (7,975)             (124)             (641)                                              
                          ----------------- ----------------- ----------------- -----------------                           
    Investors' equity
        (deficit)                    2,454              (101)          116,255                                              
                          ================= ================= ================= =================                           
Total liabilities and
    investors'
(deficit)                            2,609                21           116,255            35,534                            
    equity
                          ================= ================= ================= =================                           


<CAPTION>
                              Pro forma Consolidated Balance
                              Sheet of Bureau of Electronic
                                     Publishing, Inc.
                                     ----------------
                                  Rmb               US$
<S>                          <C>                <C>   

    Total current
        liabilities                   77,762             9,374
                            ----------------- -----------------
Minority interest                    116,896            14,091
                            ----------------- -----------------
INVESTORS' EQUITY
(DEFICIT)
Share capital                        121,595            14,658
                          
Appreciation of share
    value / Additional
    paid-in capital                   83,809            10,103
Warrants                               2,779               335
Accumulated deficit                  (67,826)           (8,176)
                            ----------------- -----------------
    Investors' equity
        (deficit)                    140,357            16,920
                            ----------------- -----------------
Total liabilities and
    investors'
(deficit)                            335,015            40,385
    equity
                            ================= =================
</TABLE>

Translation of amounts from Renminbi (Rmb) into United States dollars (US$) for
the convenience of the reader has been made at the rate of US$1.00=Rmb8.2955
announced by the Bank of China on March 17, 1997. No representation is made
that the Renminbi amounts could have been, or could be, converted into United
States dollars at that rate on March 17, 1997 or at any other certain rate.


        The accompanying notes are an integral part of these statements.

                                     F-5

<PAGE>

                     BUREAU OF ELECTRONIC PUBLISHING, INC.
                          NOTES TO UNAUDITED PRO FORMA
                       CONSOLIDATED FINANCIAL STATEMENTS



A description of pro forma adjustments is as follows:

1.   To record sales revenue in relation to the transfer of products to other
     production units of JCFC based on the sales prices set by the Price
     Bureau.

2.   To adjust for the decrease in depreciation expense based on the cost of
     fixed assets contributed by JCFC to Jinan Da Yang.

3.   To adjust for additional utility charges imposed by JCFC for the supply of
     utilities to Jinan Da Yang.

4.   To record operating lease rentals in respect of land, buildings and
     equipment which will be leased to Jinan Da Yang.

5.   To adjust for the changes in production costs as a result of the purchase
     of a major raw material, P-Xylene directly from JCFC based on the
     prevailing market prices at the dates of production. The market prices of
     P-Xylene used for computation of this pro forma adjustment are based on
     prices quoted on a confirmation reply from a major supplier of JCFC.

6.   Under the Income Tax Law of the People's Republic of China (the "PRC")
     concerning Enterprises with Foreign Investments and Foreign Enterprises
     and related regulations, a Sino-foreign joint venture may, on application
     with the relevant tax bureau, be eligible for a tax holiday. If Jinan Da
     Yang qualifies for a tax holiday, it will be exempted from PRC income tax
     for two years starting from the first profitable year of operations and
     50% reduction in the three years thereafter. No provision for income taxes
     has been made in the unaudited pro forma consolidated statement of income
     on the basis that Jinan Da Yang would have been eligible for a tax holiday
     in 1996.

     Jinan Da Yang may also be liable to other taxes such as business tax and
     other local taxes.

7.   To record minority interests of JCFC.

8.   Neither Bureau of Electronic Publishing, Inc. nor Pacific Chemical
     currently has the financial resources to make the US$14,995,000 capital
     contribution to Jinan Da Yang and must seek external financing. The pro
     forma financial statements assume this financing will be in the form of
     additional capital contributions from the existing shareholders of Bureau
     of Electronic Publishing, Inc. or Pacific Chemical. There is no assurance
     that Bureau of Electronic Publishing, Inc. or Pacific Chemical will be
     successful in raising the funds required to make its capital contribution.
     Accordingly, there is no assurance that Jinan Da Yang will become

     operational.

9.   To record the amount due to JCFC assuming the transfer of all assets and
     liabilities directly related and/or attributable to Plant One other than
     fixed assets.

10.  To record the one-off license and know-how fee for the use of certain
     fixed assets of Plant One to be transferred from Plant One to Jinan Da
     Yang.

                                     F-6

<PAGE>

                    BUREAU OF ELECTRONIC PUBLISHING, INC.

            UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF CASH FLOW

                  FOR THE THREE MONTHS ENDED MARCH 31, 1997
                            (Amounts in thousands)


<TABLE>
<CAPTION>
                                                                Bureau of         Pacific      Jinan Da Yang      Jinan Chemical
                                                                Electronic        Chemical     Chemical Fibre   Fibre Corporation
                                                              Publishing, Inc.  Group Limited  Company Limited      Plant-One
                                                              ----------------  -------------  ---------------  -----------------   
                                                                    US$              US$             Rmb               Rmb
<S>                                                           <C>               <C>            <C>              <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:                                               
   Net loss                                                             (281)                                            (78,890)
                                                              ---------------                                   -----------------
                                                                                    
Adjustments to reconcile net loss to net                                            
   cash used in operating activities                                                
        Depreciation of property and equipment                             7                                              11,433
        Equity in loss of investment in joint venture                      3
        Changes in operating assets and liabilities-                                
            Decrease (increase) in accounts receivable                    55                                                  47
            Decrease in inventories and spare parts                       34                                              25,931
            (Increase) decrease in prepaid expenses 
                and other current assets                                (100)                                            (11,082)
            (Decrease) increase in accounts payable,                                           
                accrued expenses, and other current                                 
                liabilities                                             (203)                                            (26,329)
                                                             ---------------                                   -----------------
                Total adjustments                                       (204)                                                  0  
                                                             ---------------                                   -----------------
                Net cash used in operating activities                   (485)                                            (78,890)
                                                             ---------------                                   -----------------
                                                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:                                               
                                                                                    
        Purchase of property and equipment                              (150) 
        Increase in prepublication costs                                   0
        Investment in joint venture -
         Jinan Chem Fibre                                             (1,000)     
                                                             ---------------   
             Net cash used in investing activities                    (1,150)
                                                             ---------------   
                                                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:                                               

        Net cash transferred from Jinan Chemical                                    

         Fibre-head office                                                                                                78,890
        Proceeds from issuance of preferred 
         stock-series A, net                                              79
        Proceeds from issuance of preferred 
         stock-series B, net                                           1,279
        Proceeds from issuance of preferred 
         stock-series C, net                                             500
        Issuance of common stock to pay liablities,
         net                                                             128
                                                              ---------------   -------------  ---------------  -----------------
          Net cash provided by financing activities                    1,986                                              78,890
                                                              ---------------   -------------  ---------------  -----------------
          Net increase (decrease) in cash and
           cash equivalents                                              351                                                  --

CASH and CASH EQUIVALENTS, beginning of period                           728              21                                  --
                                                              ---------------   -------------                   -----------------

CASH and CASH EQUIVALENTS, end of period                             $ 1,079              21                                  --
                                                              ===============   =============                   =================
                                                                                    
SUPPLEMENTAL CASH FLOW DISCLOSURES:                                                 
                                                                                    
      Cash paid during the period for interest                           $ 0              --               --                 --

      Cash paid during the period for taxes                                0              --               --                 --
                                                              ===============   =============  ===============  =================


<CAPTION>
                                                                                      
                                                                                                  Pro Forma Consolidated 
                                                                                Pro Forma     Statement of Cash Flow of Bureau
                                                                Note            Adjustment     of Electronic Publishing, Inc.
                                                             -------------     -------------  ---------------  -----------------   
                                                                                    Rmb             Rmb               US$
<S>                                                           <C>               <C>           <C>              <C>   
CASH FLOWS FROM OPERATING ACTIVITIES:                                               
   Net loss                                                                                         (81,221)            (9,791)
                                                                                              ---------------  -----------------   
                                                                                    
Adjustments to reconcile net loss to net                                            
   cash used in operating activities                                                
        Depreciation of property and equipment                                                       11,491              1,385
        Equity in loss of investment in joint venture                                                    25                  3
        Changes in operating assets and liabilities-                                
            Decrease (increase) in accounts 
              receivable                                                                                503                 61 
            Decrease in inventories
                and spare parts                                                                      26,213              3,161
            (Increase) decrease in prepaid expenses 
                and other current assets                                                            (11,920)            (1,437)  
            (Increase) in other assets                                                         
            (Decrease) increase in accounts payable,                                           
                accrued expenses, and other current                                 
                liabilities                                                                         (28,013)            (3,377)
                                                                                             ---------------  -----------------   
                Total adjustments                                                                    (1,701)              (204)
                                                                                             ---------------  -----------------   
                Net cash used in operating activities                                               (82,922)            (9,995)
                                                                                             ---------------  -----------------   
                                                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:                                               
                                                                                    
        Purchase of property and equipment                                                           (1,244)              (150)
        Investment in joint venture - 
         Jinan Chem Fibre                                                                            (8,296)            (1,000)
                                                                                             ---------------  -----------------   
             Net cash used in investing activities                                                   (9,540)            (1,150)
                                                                                             ---------------  -----------------   
                                                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:                                               

        Net cash transferred from Jinan Chemical                                    
         Fibre-head office                                                                           78,890              9,510
        Proceeds from issuance of preferred 
         stock-series A, net                                                                            655                 79
        Proceeds from issuance of preferred 
         stock-series B, net                                                                         10,609              1,279
        Proceeds from issuance of preferred 
         stock-series C, net                                                                          4,148                500
        Issuance of common stock to pay liablities,

         net                                                                                          1,062                128
                                                                                             ---------------  -----------------   
          Net cash provided by financing activities                                                  95,364             11,496
                                                                                             ---------------  -----------------   
          Net increase in cash and
           cash equivalents                                                                           2,902                351

          Pro Forma adjustment to cash                                (8)                            (2,902)              (351)

CASH and CASH EQUIVALENTS, beginning of period                        (8)          124,391          130,604             15,744

CASH and CASH EQUIVALENTS, end of period                              (8)          121,479          130,604             15,744
                                                                              =============  ===============  =================
                                                                                    
SUPPLEMENTAL CASH FLOW DISCLOSURES:                                                 
                                                                                    
      Cash paid during the period for interest                         --                --               --                 --

      Cash paid during the period for taxes                            --                --               --                 --
                                                            =============     =============  ===============  =================
</TABLE>

The accompanying notes are an integral part of these statements.


<PAGE>

                    BUREAU OF ELECTRONIC PUBLISHING, INC.

UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                  FOR THE THREE MONTHS ENDED MARCH 31, 1997
                            (Amounts in thousands)


<TABLE>
<CAPTION>    
                                                                Bureau of Electronic Publishing, Inc.
                               ----------------------------------------------------------------------------------------------------
                                                                              US $

                                Issued and             Issued and            Issued and
                               Outstanding            Outstanding           Outstanding            Additional      
                                Preferred               Common                Common                Paid-in     Accumulated
                                 Shares      Amount     Shares      Amount   Warrants     Amount    Capital      (Deficit)    Total
                               -----------   ------   -----------   ------  -----------   ------   ----------   -----------   -----
<S>                            <C>           <C>      <C>           <C>     <C>           <C>      <C>          <C>          <C>

BALANCE - December 31, 1996            0      $  0        4,520      $  5      1,340       $ 335    $  8,103     ($ 7,694)   $  749

  Issuance of common stock             0         0          128         0          0           0         128            0       128

  Issuance of preferred stock
    - Series A                       834         1            0         0          0           0          78            0        79

  Issuance of preferred stock  
    - Series B                         0         0            0         0          0           0       1,279            0     1,279

  Issuance of preferred stock
    - Series C                       500         0            0         0          0           0         500            0       500

  Pro Forma adjustment to
    reflect increase in cash
    from 1/1/97 to 3/31/97

Net loss for the three months 
  ended March 31, 1997                 0         0            0         0          0            0          0         (281)     (281)
                                   -----      ----        -----      ----      -----       ------    -------      -------    ------

Balance - March 31, 1997           1,334      $  1        4,648      $  5      1,340       $  335    $10,088      $(7,975)   $2,454
                                   =====      ====        =====      ====      =====       ======    =======      =======    ======
</TABLE>

       The accompanying notes are an integral part of these statements.


<PAGE>                      

<TABLE>
<CAPTION>
                                                                                Jinan Da Yang Chemical Fibre
                                           Pacific Chemical Group Limited              Company Limited
                                         ----------------------------------   ----------------------------------      
                                                       US $                                 Rmb

                                                   Additional                           Additional   
                                          Share      Paid-in    Accumulated    Share      Paid-in     Accumulated
                                         Capital     Capital     (Deficit)    Capital     Capital      (Deficit)
                                         -------   ----------   -----------   -------   -----------   -----------   
<S>                                      <C>       <C>           <C>          <C>       <C>           <C>   

BALANCE - December 31, 1996                  8           15          (124)    116,896          0          (641)

  Issuance of common stock           

  Issuance of preferred stock
    - Series A                       

  Issuance of preferred stock  
    - Series B                       

  Issuance of preferred stock
    - Series C                       

  Pro Forma adjustment to
    reflect increase in Cash
    from 1/1/97 to 3/31/97

Net loss for the three months 
  ended March 31, 1997                       0            0             0           0          0             0   
                                         -----         ----         -----     -------      -----         -----   

Balance - March 31, 1997                     8           15          (124)    116,896          0          (641)
                                         =====         ====         =====     =======      =====         ===== 

<CAPTION>
                                               Jinan Chemical Fibre
                                              Corporation Plant One                             Pro Forma Adjustment  
                                         ----------------------------------             ----------------------------------      
                                                      Rmb                                              Rmb

                                                   Additional                                      Additional   
                                          Share     Paid-in     Accumulated             Share       Paid-in      Accumulated
                                         Capital    Capital      (Deficit)    Note      Capital     Capital       (Deficit)
                                         -------   ----------   -----------   ----      -------   -----------   -----------   
<S>                                      <C>       <C>           <C>          <C>      <C>         <C>           <C>    

BALANCE - December 31, 1996                  0            0            0      (7)      (116,896)  

  Issuance of common stock                                                    (8)       121,479

  Issuance of preferred stock
    - Series A                       

  Issuance of preferred stock  
    - Series B                       

  Issuance of preferred stock
    - Series C                       

  Pro Forma adjustment to
    reflect increase in Cash
    from 1/1/97 to 3/31/97

Net loss for the three months 
  ended March 31, 1997                       0            0            0             
                                         -----         ----        -----             

Balance - March 31, 1997                     0            0            0     
                                         =====         ====        =====     
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                      Pro Forma Consolidated Statement of                                             
                                       Changes in Shareholders' Equity of                                             
                                      Bureau of Electronic Publishing, Inc.                                           
                                 ----------------------------------------------   -----------------------------------------------
                                       Rmb                                                 US $                 
                                         Additional                                       Additional                             
                                  Share    Paid-in           Accumulated           Share   Paid-in             Accumulated       
                                 Capital   Capital  Warrants  (Deficit)   Total   Capital  Capital   Warrants  (Deficit)   Total 
                                 ------- ---------- -------- -----------  -----   ------- ---------  -------- -----------  ----- 
<S>                              <C>     <C>         <C>     <C>         <C>      <C>     <C>        <C>      <C>         <C>    
BALANCE - December 31, 1996      124,499    67,343    2,779    (65,495)  129,126   15,008   8,118      335       (7,895)  15,566 
                                          
  Issuance of common stock                   1,062                         1,062              128                            128  
                                          
  Issuance of preferred stock                                                                                                    
    - Series A                                 647                           647               78                             78 
                                          
  Issuance of preferred stock                                                                                                    
    - Series B                              10,609                        10,609            1,279                          1,279 
                                          
  Issuance of preferred stock                                                                                                    
    - Series C                               4,148                         4,148              500                            500 
                                          
  Pro Forma adjustment to                                                                                                        
    reflect increase in Cash                                                                                                     
    from 1/1/97 to 3/31/97 (8)    (2,904)                                 (2,904)(8) (350)                                  (350) 
                                                                      
Net loss for the three months                                                                                                    
  ended March 31, 1997                 0         0        0      (2,331)  (2,331)               0        0         (281)    (281) 
                                 -------    ------    -----     -------  -------    ------   ------    ----       ------   ------ 
                                          
Balance - March 31, 1997         121,595    83,809    2,779     (67,826) 140,357   14,658   10,103     335       (8,176)  16,920 
                                 =======    ======    =====     =======  =======   ======   ======     ===       ======   ====== 
</TABLE>                         

<PAGE>

                      BUREAU OF ELECTRONIC PUBLISHING, INC.

                      NOTES TO THE FINANCIAL STATEMENTS


1.  FINANCIAL STATEMENTS

The balance sheet/statement of net assets as of March 31, 1997 and the related
statement of expenditure, shareholders equity and cash flow for the period ended
March 31, 1997 have been prepared by Bureau of Electronic Publishing, Inc.
("BEPI"), without audit, in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows of BEPI for the interim period
presented have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the December 31, 1996 audited financial statements
and notes thereto included with Form 10-KSB and the unaudited pro forma
financial information included in Form 8-K/A filed in April 1997. The statement
of expenditure for the three month period ended March 31, 1997 is not
necessarily indicative of the operating results for the full year.



2.  ORGANIZATION AND PRINCIPAL ACTIVITY

Jinan Da Yang Chemical Fibre Company Limited (the "Company") was incorporated in
the People's Republic of China (the "PRC") on March 27, 1996 as a Sino-foreign
equity joint venture enterprise.

Based on a joint venture agreement dated February 9, 1996 between Pacific
Chemical Group Limited ("Pacific Chemical"), a company incorporated in the
British Virgin Islands and Jinan Chemical Fibre Corporation ("JCFC"), a company
incorporated in the PRC, the Company was established.  Pursuant to the aforesaid
agreement, Pacific Chemical will pay US$14,995,000 in cash as its capital
contribution for 51% of the equity interest in the Company.  JCFC will own 49%
of the equity interest in the Company and will contribute to the Company part of
its production facilities and other assets including certain machinery and
equipment, valued at US$14,425,000, based on PRC regulations as its capital
investment.  JCFC has also agreed to lease to the Company certain production
equipment, land and buildings of Plant One with an estimated valuation of
approximately Rmb 259 million for an annual payment of Rmb 35,083,000 for a
period of three years.  The rental charges will be adjusted and mutually agreed
by JCFC and Pacific Chemical after the initial three years' rental period.  The
Company will also succeed to the business of manufacturing and sale of Purified
Terephthalic Acid ("PTA") currently conducted by a production plant of JCFC.

During the period, JCFC contributed machinery and equipment of valued at
US$14,425,000 to the Joint Venture.  However, as of December 31, 1996, the

injection of assets by Pacific Chemical and the transfer of operations of a
production plant of JCFC to the Company had not been completed.  The machinery
and equipment injected by JCFC to the Company is being used by JCFC for its own
operations without charge pending completion of the capital contribution by
Pacific Chemical.

Other key provisions of the joint venture agreement and related supplemental
agreements between JCFC and Pacific Chemical included the following:

o  the joint venture period of the Company is 50 years commencing from the
   formation of the Company on March 27, 1996;

o  the profit and loss sharing ratio of the Company is the same as the 
   percentage of equity interests held by the respective investors;

o  the Company's Board of Directors consists of 7 members; 3 designated by JCFC
   and 4 designated by Pacific Chemical;

                                     F-7

<PAGE>

1.  ORGANIZATION AND PRINCIPAL ACTIVITY (Cont'd)

o  the production of the Company will first serve the demand of JCFC's annual
   production requirements;

o  the Company will guarantee approximately 70,000 tons of PTA per annum to
   supply to JCFC at sales prices set by the PRC Price Bureau; 

o  JCFC will provide management and administrative services to the Company for a
   management fee; and

o  JCFC will transfer to the Company the right to use electricity and water, 
   and the Company will pay JCFC a one-off license and know-how fee for the 
   use of certain fixed assets of JCFC.  The total cost to the Company will be 
   approximately Rmb 62.6 million; and 

o  JCFC will purchase certain raw materials for the Company.  Such raw materials
   will be sold to the Company based on the prevailing market prices of such raw
   materials at the date of utilization for production by the Company.

The Company conducts its operations in the PRC and accordingly is subject to
special considerations and significant risks not typically associated with
investments in equity securities of United States and Western European
companies. These include risks associated with, among others, political,
economic and legal environments and foreign currency exchange. These risks are
described further in the following paragraphs:

a.  Political Environment

    The Company's results may be adversely affected by changes in the 
    political and social conditions in the PRC and by, among other things,
    changes in governmental policies with respect to laws and regulations,

    inflationary measures, currency conversion and remittance abroad, and rates
    and methods of taxation.  While the PRC government is expected to continue
    its economic reform policies, many of the reforms are new or experimental
    and may be refined or changed.  It is also possible that a change in the PRC
    leadership could lead to changes in economic policy.

b.  Economic Environment

    The economy of the PRC differs significantly from the United States economy
    in many respects, including its structure, levels of development and capital
    reinvestment, growth rate, government involvement, resource allocation,
    self- sufficiency, rate of inflation and balance of payments position.  The
    adoption of economic reform policies since 1978 has resulted in a gradual
    reduction in the role of state economic plans in the allocation of
    resources, pricing and management of such assets, an increased emphasis on
    the utilization of market forces, and rapid growth in the PRC economy. 
    However, such growth has been uneven among various regions of the country
    and among various sectors of the economy.

                                     F-8


<PAGE>

1.  ORGANIZATION AND PRINCIPAL ACTIVITY (Cont'd)

b.  Economic Environment (Cont'd)

    In recent years, the PRC economy has experienced periods of rapid economic
    expansion and high rates of inflation, which have led to the adoption by the
    central government from time to time of various corrective measures designed
    to regulate growth and contain inflation.  High inflation may cause the
    government to take other actions which could inhibit economic activity in
    the PRC and may thereby delay planned expansion.  Such actions could
    adversely affect the Company's results of operations and expansion plans.

c.  Legal Environment

    The PRC's legal system is based on written statutes under which prior court
    decisions may be cited as authority but do not have binding precedential
    effect. The PRC's legal system is relatively new, and the government is
    still in the process of developing a comprehensive system of laws, a process
    that has been ongoing since 1979.  Considerable progress has been made in
    the promulgation of laws and regulations dealing with economic matters such
    as corporate organization and governance, foreign investment, commerce,
    taxation and trade.  Such legislation has significantly enhanced the
    protection afforded to foreign investors.  However, experience with respect
    to the implementation, interpretation and enforcement of such laws is
    limited.

d.  Foreign Currency Exchange

    The Company expects that substantially all of its revenue will be
    denominated in Renminbi.  A portion of the future profits of the Company, if

    any, will need to be converted to other currencies to meet its foreign
    currency obligations such as payment of dividends declared.  Both the
    conversion of Renminbi into foreign currencies and the remittance of foreign
    currencies abroad require PRC government approvals.

    No assurance can be given that the Company will be able to convert
    sufficient amounts of foreign currencies in the PRC foreign exchange market
    in the future for payment of dividends.

2.  BASIS OF PRESENTATION

    The accompanying financial statements were prepared in accordance with
    generally accepted accounting principles in the United States of America
    ("US GAAP").  This basis of accounting differs from that used in the
    statutory accounts of the Company, which are prepared in accordance with the
    accounting principles and other relevant financial regulations applicable to
    Sino-foreign equity joint venture enterprises as established by the Ministry
    of Finance of the PRC.

                                     F-9



<PAGE>

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

a.  Taxation

    (i) Income Taxes
 
    Pursuant to the relevant income tax laws applicable to Sino-foreign equity
    joint venture enterprises in the PRC, the Company is subject to PRC income
    taxes at the applicable tax rate (currently 33%) on the taxable income as
    reported in its statutory accounts.  In accordance with the provisions of
    the same income tax laws, the Company will be fully exempted from income
    taxes for two years starting from the first profit-making year followed by a
    50% reduction for the next three years.

    Pursuant to the relevant income tax laws applicable to state-owned
    enterprises in the PRC, JCFC is subject to PRC income taxes at the
    applicable tax rate (currently 33%) on the taxable income as reported in its
    statutory accounts.

    As one of the production units of JCFC, the majority of the Plant One's
    products are transferred to other production units for further processing.
    Since Plant One itself does not maintain a separate set of accounting
    records, all of its income tax liabilities, if any are borne by JCFC.
    Accordingly, no income taxes have been provided in Plant One's financial
    statements.

    (ii) Valued-added Tax

    Plant One's sales are subject to VAT which is the principal indirect tax on

    the sales of tangible goods and the provision of certain specified 
    services. The general VAT rate applicable to Plant One's products is 17%.

b.  Fixed Assets and Depreciation

    Machinery and equipment are stated at cost less accumulated depreciation. 
    Depreciation of machinery and equipment is computed using the straight-line
    method over the assets' estimated useful lives of 14 years after taking into
    account the estimated residual value of 5% of the costs of the fixed assets.

c.  Use of Estimates

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

d.  Cash and Cash Equivalents

    The Company considers cash on hand, cash on deposit with banks and 
    temporary investments having a maturity of three months or less to be cash
    equivalents.

e.  Inventories

    Inventories are stated at the lower of cost, on a first-in, first-out basis,
    or net realizable value.  Provision is made for obsolete, slow moving or
    defective items, where appropriate.

f.  Foreign Currency Translation

    Renminbi is not freely convertible into foreign currencies.  All foreign
    exchange transactions involving Renminbi must take place either through the
    Bank of China or other institutions authorized to buy and sell foreign
    currencies, or at a Foreign Exchange Adjustment Center.

    Foreign currency transactions are translated into Renminbi at the exchange
    rates at the dates of the transactions.  Monetary assets and liabilities
    denominated in foreign currencies are translated into Renminbi using the
    exchange rates prevailing at the balance sheet dates. The resulting exchange
    differences are recorded in the statements of expenditures.

g.  Pro Forma Net Income Per Common Share

    Pro forma net income per common share has been computed by dividing pro
    forma consolidated net income by the weighted number of common shares
    outstanding assuming full conversion of issued and outstanding preferred
    shares. As required by the Securities and Exchange Commission rules, all
    warrants, options and shares issued within one year of the public offering
    at less than the public offering price are assumed to be outstanding for
    each year presented for purposes of the per share calculation. All other
    warrants and options have not been considered in the computation of pro
    forma net income per common share as they would be anti-dilutive.
                                     F-10