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                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 ---------------

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1998
                         Commission File Number 0-22475
                              --------------------

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


        Delaware                                       22-2942013
(State or other jurisdiction of     (IRS Employer Identification No.)
incorporation or organization)

3 Garret Mountain Plaza, Suite 202A                              07424
West Paterson, New Jersey                                    (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (973) 523-2500

           Securities Registered Pursuant To Section 12(b) of The Act:

     Title of each class            Name of each exchange on which registered
     -------------------            -----------------------------------------
           None                                    None

           Securities Registered Pursuant To Section 12(g) of The Act:

    Title of each class             Name of each exchange on which registered
    -------------------             -----------------------------------------
Common stock, .00001 par value                    Over the counter


        Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 ____

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

        The aggregate market value of the 2,221,983 shares of voting stock held
by non-affiliates of the Registrant as of March 24, 1998 (based on the aggregate
market value of the stock computed by reference to the price at which the stock
was most recently sold in an arm's-length transaction) was $1,177,651.

        The number of shares of Common Stock of the Registrant outstanding as of
March 24, 1999 was 3,421,983.


<PAGE>


                                     PART I

ITEM 1. BUSINESS.

General

        DirectCom, Inc. ("DirectCom" or the "Company"), established in 1989, is
a full service direct marketing company. DirectCom provides turnkey database
marketing products and services to direct marketers. These services include data
warehouse development and management, data mining, direct mail creative
development, campaign management, and direct mail production. DirectCom assists
its customers in devising marketing strategies that focus on relationship
marketing, and developing marketing programs to improve customer acquisition,
retention, and activation.

        DirectCom is headquartered in West Paterson, New Jersey, where it builds
and maintains client data warehouses and manages direct marketing programs.
DirectCom has a Wilmington, Delaware office where it provides creative services
in which graphic artists and copywriters prepare direct mail packages to achieve
a client's marketing objectives. Once a prospective mail piece has been chosen
by a client, DirectCom can print the promotional material at its subsidiary,
Color Graphics, Inc. (Color Graphics), located in Mt. Laurel, New Jersey.

Business Strategy

        DirectCom is implementing the following strategy: (1) the expansion of
its existing customer base through targeted business development in selected
industries; (2) growth through joint ventures and strategic acquisitions; (3)
cross selling of services to existing customers; and (4) introduction of new
products and services.

        In 1998, DirectCom entered into a joint venture with MRC Direct Mail,
Inc. to form Direct Sort, LLC to engage principally in direct mail sorting.

        In accordance with its acquisition strategy, DirectCom successfully
completed the acquisition in October 1996 of Color Graphics, a company engaged
in printing promotional material for direct mail distribution. DirectCom's
acquisition of Color Graphics was intended to achieve a vertically integrated
company to provide database marketing products and services to direct marketers.

DirectCom Products and Services

        DirectCom provides customized services for a specific component of a
client's advertising or marketing program, such as database analysis, data
processing, direct mail creative design, list strategy, production of the
printed insert or envelope product, and packaging and mailing. Alternatively,
DirectCom can provide a turnkey service whereby it assumes responsibility for
the entire project, from marketing planning, design and production of the direct
mail marketing materials, and the actual mailing of the finished printed
products. For information and disclosures regarding the Company's business
segments, see Note 17 to the consolidated financial statements.

        Database Services

        DirectCom database services include strategic consulting, data warehouse
development, data mining, list processing and data enhancement. In a typical
engagement, a client supplies DirectCom with customer data from its operational
systems. These files can include current and historical customer information
such as name and address, demographic data, purchase transactions and payment
history. DirectCom supplements the client's file through the use of outside
computer services (i.e., credit bureaus and list companies) and enhances the
client's database with additional variables such as age, income factors and
geographic location. DirectCom develops detailed statistics that measure a
customer's current actual profit contribution, as well as a customer's future
profit potential. From this additional information a client learns about its
customers, their behavior and their relative value. DirectCom provides data
mining services whereby it develops predictive models to forecast various
customer behaviors. DirectCom appends the resulting model scores to each
customer record in the client's database. Based upon these scores, clients are
better able to focus their marketing efforts to sell new and different products
to their existing customers.


                                       2
<PAGE>

        List Processing Services

        List processing includes the preparation and generation of comprehensive
name and address lists which are used for direct marketing promotions. DirectCom
assists its clients in developing the criteria for selecting names from the
client's database to solicit for specific marketing campaigns. DirectCom
customizes a list processing solution by utilizing a variety of commercial and
proprietary software products, such as Address Conversion and Reformat, Address
Standardization and Merge/Purge.

        Creative and Production Services

        DirectCom engages in creative services and production services through
DirectLine Productions, a division of DirectCom located in its Wilmington,
Delaware office, and its subsidiary, Color Graphics, respectively. DirectCom
provides its client with agency creative services associated with the design and
development of direct marketing promotion materials. DirectCom also provides
production management services whereby it supervises and oversees the entire
creative and direct mail production process on behalf of its clients. These
services include campaign planning, vendor selection and coordination,
production quality assurance and program results analysis.

        Production services enable DirectCom to be a one-stop direct marketing
firm. Once a prospective mail piece has been chosen by a client, DirectCom
either prints the promotional material at Color Graphics' facilities or bids the
print work and production of the direct mail to its affiliate, North American
Communications, Inc., or to a third party capable of completing the project in a
timely fashion. Color Graphics has six major multi-color web presses, with gas
and UV drying capability that can print up to 12 colors. Color Graphics also has
bindery capabilities, including letter folding, foil embossing and card and
label affixing.

Markets and Marketing

        DirectCom's market for its services is nationwide and is not confined to
any specific sector or type of business. Currently, management has focused its
marketing efforts primarily on financial institutions and insurance companies.
One customer, Capital One, accounted for 59% of DirectCom's sales revenues in
1998. The loss of this financial institution could have a material adverse
effect on DirectCom. In addition, DirectCom's customers include, among others,
Fleet Credit Card Services, American Express Company, AT&T, MBNA America Bank
National Association, MCI Communications Corp. and Bank of New York (Delaware).
DirectCom markets its services primarily through referrals, client
recommendations, print advertising, industry trade shows and conferences.

        Management believes that the comprehensive, integrated character of its
services and its expertise in information-based marketing techniques offer
clients a unique and highly effective approach to direct mail advertising and
marketing. DirectCom is able to analyze data provided by clients to develop
effective marketing campaigns, produce the marketing material, analyze the
results of the programs to further refine and improve the effectiveness of
future marketing efforts. Management believes that its customized services
provide its clients with products best suited to each client's needs.

        DirectCom's marketing strategy is to increase the awareness of its
existing customers of the broad range of DirectCom's services, emphasizing
DirectCom's comprehensive, integrated capabilities. In this way, DirectCom plans
to focus on increasing its share of the business of existing customers.

Competition

        The direct mail advertising and marketing market is highly competitive
and fragmented. Because the direct mail advertising and marketing service
industry is price sensitive, DirectCom believes that its business will remain
susceptible to price competition for the foreseeable future. To date, Color
Graphics competes primarily on the basis of its high quality and large volume
capabilities and to a much lesser extent on the basis of price. The largest
competitors of DirectCom include such major national publicly traded companies
as Axciom Corporation, Harte-Hanks Communications, Fair Isaac & Company, May &
Speh, Metromail Corporation, Big Flower Holdings and World Color Press.

                                       3
<PAGE>

Employees

        DirectCom employed a total of 135 people as of December 31, 1998,
comprised of 43 people in its database analysis and creative business and 92
people in its Color Graphics subsidiary.

Environmental Matters

        DirectCom believes that it is substantially in compliance with all
regulations concerning the discharge of materials into the environment, and such
regulations have not had a material effect on the capital expenditures or
operations for DirectCom.

Raw Materials

        The principal raw materials used by Color Graphics are paper and ink.
Paper is purchased directly from major paper producers, including Union Camp,
and indirectly from paper merchants, including Resource Net International and
Clifford Paper. Color Graphics purchases most of its ink from larger suppliers
of ink, including Flint Ink and Sun Chemical Corporation. Raw materials
inventory is maintained on a just-in-time basis.

Forward-Looking Statements

        This report contains forward-looking statements based upon management's
current plans and expectations, related to, among other matters, the proposed
business activities of DirectCom and management's estimate of amounts that are
not yet determinable. Such statements involve risks and uncertainties which may
cause actual future activities and results of operations to be materially
different from that suggested in this report, including among others, the loss
of one or more significant customers and risks associated with industry
consolidation, acquisitions and competition.

ITEM 2. PROPERTIES.

        DirectCom is headquartered at 3 Garret Mountain Plaza, West Paterson,
New Jersey 07424. DirectCom leases approximately 10,000 square feet under a
lease which commenced March 1, 1997 and expires May 1, 2002, with an option to
renew for a five year term.

        Color Graphics owns and occupies a 66,100 square foot building on
approximately four acres of land in Mount Laurel, New Jersey. DirectCom also
leases its office in Wilmington, Delaware that consists of 800 square feet.
That lease expires April 30, 2001 with an option to renew for a three year term.

ITEM 3.  LEGAL PROCEEDINGS.

        There is no material litigation or other legal proceeding pending
against DirectCom.

        Color Graphics has been notified by the Equal Employment Opportunity
Commission ("EEOC") of a charge of discrimination under Title VII of the Civil
Rights Act of 1964 by an individual employed as a press helper alleging
discrimination in payment and promotion. The complainant seeks an unspecified
amount of compensatory damages. The case is pending before the New Jersey
Department of Law and Public Safety, Division of Civil Rights (Docket No.
EC22RB-30973). DirectCom intends to vigorously contest these allegations.

        Color Graphics also has been named by Mutual Pharmaceutical Company,
Inc. ("Mutual") in a letter dated November 17, 1995 as a potentially responsible
party in a Notice of Intent to File a Lawsuit for claims under environmental
laws. Mutual also stated its intention to proceed against other former tenants
of 1120-1170 Orthodox Street, Philadelphia, Pennsylvania. Among the intended
defendants listed by Mutual were Action Arms, Limited and Orthodox Associates
which owned and operated the Geigy Chemical/Action Arms Parcel of the site from
approximately 1978 through 1993 and who owned and operated the Reading Railroad
Parcel of the Site from approximately 1987 through 1993. Also included as
potential defendants

                                       4
<PAGE>
were Ciba-Geigy Corp. Color Graphics' involvement arose as a result of its
purchase of PennScan Forms, Inc. which had occupied the building located on the
two acre site from 1975 through 1979. This matter has not reached the stage
where significant liability has been assessed against DirectCom. No further
actions have been taken by Mutual since its letter dated November 17, 1995.
DirectCom has evaluated the matter and believes that it will not give rise to a
material charge to earnings or a material amount of capital expenditures. This
assessment is notwithstanding the ability of DirectCom to recover on existing
insurance policies or from other parties which DirectCom believes will be held
as joint and several obligors under any such liabilities. However, future
developments could alter these conclusions. Management does not believe,
however, that there is a likelihood of a material adverse affect on the
financial condition of Color Graphics or DirectCom in these circumstances.

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

        No matters were submitted to a vote of security holders of DirectCom
through the solicitation of proxies or otherwise during the fourth quarter of
1998.

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

        DirectCom's common stock (the "Common Stock") is not regularly traded
and there is no established public trading market for these securities.

        As of December 31, 1998, there were 592 shareholders of DirectCom's
Common Stock.

        DirectCom has not declared any dividends to its shareholders since its
inception. There are no material restrictions that could limit or restrict
management from declaring any such dividends in the future. At the current time,
management has no intention to declare any dividends in the forthcoming fiscal
year.

                                       5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

THE FOLLOWING DATA INSOFAR AS IT RELATES TO THE YEARS ENDED DECEMBER 31, 1998,
1997, 1996, 1995 AND 1994, HAS BEEN DERIVED FROM THE FINANCIAL STATEMENTS,
INCLUDING THE CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997, AND
THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE EACH OF
THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1998, AND NOTES THERETO
APPEARING ELSEWHERE HEREIN. FOR A MORE DETAILED DISCUSSION OF THE RESPECTIVE
PERIODS OF THE COMPANY'S REVENUES, EXPENSES, ASSETS AND LIABILITIES SEE
MANAGEMENT'S DISCUSSION AND ANALYSIS- (A) RESULTS OF OPERATIONS AND (B)
LIQUIDITY AND CAPITAL RESOURCES.
<TABLE>
<CAPTION>

                                                     YEAR ENDED DECEMBER 31,

                                          1998          1997            1996           1995            1994
<S>                                   <C>            <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA
   NET REVENUE                        $24,400,824    $25,107,783     $11,142,521     $4,665,599      $2,700,281
   COSTS AND EXPENSES                  21,235,859     22,124,607       9,268,768      4,502,677       2,328,425
   OTHER INCOME (EXPENSES)                  4,269        (62,182)        (61,340)           -               -
   PROVISION FOR INCOME TAXES           1,305,000      1,308,400         743,140         60,340         158,375
                                       ----------     ----------        --------        -------         -------
   INCOME FROM CONTINUING OPERATIONS    1,864,234      1,612,594       1,069,273        102,582         213,481
   INCOME (LOSS) FROM DISCONTINUED
       OPERATIONS                             -              -               -              -           (18,131)
   MINORITY INTEREST IN NET INCOME
       OF SUBSIDIARY                      (97,783)      (230,484)        (56,064)           -               -
                                       ----------     ----------        --------        -------         -------
  NET INCOME                            1,766,451      1,382,110       1,013,209        102,582         195,350
                                       ==========     ==========      ==========       ========         =======


BASIC EARNINGS PER SHARE                 $   0.57       $   0.45        $   0.34       $   0.08        $   0.15

DILUTED EARNINGS PER SHARE               $   0.56       $   0.44        $   0.33       $   0.07        $   0.14

BALANCE SHEET DATA
   TOTAL ASSETS - CONTINUING
     OPERATIONS                       $14,298,140    $14,299,768     $10,233,808     $2,422,410      $  997,060
   TOTAL ASSETS - DISCONTINUED
     OPERATIONS                               -              -               -              -           126,102
   TOTAL ASSETS                        14,298,140     14,299,768      10,233,808      2,422,410       1,123,162
   TOTAL  LIABILITIES - CONTINUING
   OPERATIONS                           9,541,325     11,309,404       8,775,554      2,177,365         867,670
   TOTAL  LIABILITIES - DISCONTINUED
   OPERATIONS                                 -              -               -              -           113,029
   TOTAL LIABILITIES                    9,541,325     11,309,404       8,775,554      2,177,365         980,699

   SHAREHOLDERS' EQUITY                $4,756,815     $2,990,364      $1,458,254      $ 245,045      $  142,463
</TABLE>



PREVIOUSLY REPORTED AMOUNTS HAVE BEEN RESTATED TO SEGREGATE THE RESULTS OF
DISCONTINUED OPERATIONS FROM CONTINUING OPERATIONS.

                                       6
<PAGE>

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

PERIODS ENDED DECEMBER 31, 1998, DECEMBER 31, 1997 AND DECEMBER 31, 1996

GENERAL

DirectCom, Inc. has focused its growth strategy on acquiring complementary
database and direct mail marketing companies. DirectCom is expanding its
capabilities through the recent partnership investment in DirectSort. The
Company will continue to pursue strategic acquisitions of businesses that
complement or augment the existing mix of the Company's capabilities. The
Company continues to pursue its goal of providing seamless, integrated
database-marketing and printing services to direct marketers. These services
include database management and data warehousing, predictive modeling, marketing
strategy consulting, fulfillment, agency creative, production management,
printing and direct mail production. DirectCom's strategy is to provide
unmatched value in each of these areas. With vertically integrated, closed loop
capabilities, DirectCom can deliver to its customers a lower cost of production,
reduced production cycles and a greater degree of control over the quality of
each element of the campaign.

(a)     RESULTS OF OPERATIONS

                                           Year Ended December 31,

                                                   1998
                                                   ----
                                     Database          Printing        Total
                                     --------          ---------       -----
              Revenues             $  12,312,900   $   12,087,924  $  24,400,824
              Gross profit         $   4,884,680   $    5,229,542  $  10,114,222
              Operating income     $   1,818,706   $    1,350,528  $   3,169,234

                                                   1997
                                                   ----
              Revenues             $  10,550,170   $   14,557,613  $  25,107,783
              Gross profit         $   3,111,653   $    6,815,584  $   9,927,237
              Operating income     $     616,791   $    2,304,203  $   2,920,994

                                                   1996
                                                   ----
              Revenues             $   7,855,093   $    3,287,428  $  11,142,521
              Gross profit         $   2,713,384   $    1,367,508  $   4,080,892
              Operating income     $   1,256,448   $      555,965  $   1,812,413



Revenues

Net revenue decreased $706,959 from $25,107,783 in 1997 to $24,400,824 in 1998.
The revenue decrease was primarily attributed to the loss of two significant
printing customers. The revenue loss is being offset by increased sales to
existing customers in addition to sales to new customers. Management does not
believe this loss will have any adverse impact on future earnings of the Company
and anticipates the printing revenues will continue to increase throughout the
coming year. Net revenues increased $13,965,262 from $11,142,521 in 1996 to
$25,107,783 in 1997. The net revenue increase during 1997 was primarily
attributable to the acquisition of Color Graphics which generated 59% of
consolidated net revenues for 1997, as compared to 30% of the consolidated net
revenues for 1996. The 1997 growth in revenue resulted from expanded direct mail
printing services to customers in the credit card and lettershop industries,
including Capital One, Citibank and Communications Concept, Inc..

                                       7
<PAGE>

The database and agency revenue increased 17% in 1998. This increase resulted
primarily from sales to existing customers. The increased database and agency
revenue during 1997 resulted from increased sales to existing customers,
including Capital One, Bank of New York (Delaware) and Fleet Corporation in
addition to sales to several new clients including Daytimers, Inc. and Bank
United.

Customers in the banking industry accounted for 80%, 95% and 97% of the
Company's database revenues in 1998, 1997 and 1996.

Cost of Revenue

The Company's cost of revenue, as a percentage of net revenues, was 58.5%, 60.5%
and 63.4% in 1998, 1997 and 1996, respectively. The year to year comparative
decreases resulted primarily from decreased printing cost of revenue, as a
percentage of printing revenue during 1998 offset by an increase in the database
cost of revenue, as a percentage of database revenue.

The cost of revenue for database in 1998, in comparison to database revenues,
decreased 10% from 1997 and increased 5% in 1997 as compared to 1996. The 1998
decrease resulted primarily from the continued development of internal resources
to fulfill production requirements. The 1997 increase was a result of costs
associated with salary expenses due to additional staffing requirements to
maintain increased production demands.

The printing cost of revenue in 1998, as a percentage of printing revenue,
increased 3.5% from 1997 and decreased 5.3% in 1997 as compared to 1996. The
current period cost of revenue as a percentage of printing revenue-related
company accounts for 3.3% of the increase, resulting primarily from a related
party providing printing services during the relocation of Color Graphics, which
caused substantial downtime of the Company's presses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $903,068 in 1998 as
compared to 1997 and increased $1,506,048 in 1997 as compared to 1996. The
increase in 1998 expenses resulted primarily from expenditures associated with
moving expenses for the relocation of Color Graphics. Additional increases
resulted from advertising expenses relating to the Company's growth and
marketing efforts and insurance expenses related to the Company being self
insured and incurring a few significant claims. The increase in expenses was
offset by a decrease in expenditures relating to consulting expenses, database
expenses and supplies related to computer expenses and the Company's adherence
to cost controls to reduce expenditures. The increase in 1997 expenses resulted
primarily from the acquisition of Color Graphics, increased database expenses
related to computer equipment upgrades and supplies and increased lease expense
associated with the relocation, in March 1997, of the database corporate office
and the costs incurred for the move.

Interest Expense

Interest expense increased $33,989 in 1998 and $253,189 in 1997 as compared to
the prior period. The 1998 increase resulted primarily from interest incurred on
a loan agreement with the New Jersey Economic Development Authority for
borrowings associated with the purchase of a building, related land and
renovations for the relocation of Color Graphics. The 1997 increase resulted
from Color Graphics' equipment loans and revolving line of credit.

Depreciation and Amortization

Depreciation and amortization expenses relate to the depreciation of capital
assets. The Company's policy is to amortize goodwill over a fifteen year period.
Depreciation and amortization expense decreased $96,177 in 1998 and increased
$700,874 in 1997. The decrease resulted primarily from the continued reduction
in depreciable value of prior property, plant and equipment purchases.
Depreciation recorded on current year additions did not offset the reductions in
depreciation based or increase in fully depreciated assets. The 1997 increase
relates to the acquisition of Color Graphics, Inc., accounting for approximately
80% of the increase.

Other income (expense)

During 1998, the Company sold certain fully depreciated assets for total
proceeds of $199,749. Also, the

                                       8
<PAGE>

Company wrote off assets with a net book value of $73,500. Miscellaneous income
primarily represents interest income on the Company's cash deposits.

Provision for Income Taxes

Provision for income taxes decreased $3,400 in 1998 and increased $565,260 in
1997. The increase in 1997 was due to the increase in taxable income. A
reconciliation of the effective tax rate is included in Note 15 of Notes to
Consolidated Financial Statements. The effective tax rate was 41.2%, 44.2% and
41% for the years ended December 31, 1998, 1997 and 1996, respectively. The
higher rate in 1997 was based on certain non-deductible expenses in the
calculation of the 1997 tax provision.

Inflation

Inflation and price increases do not materially affect the Company's gross
profit margin as contract prices are adjusted at the same time increases are
implemented by outside vendors.

                                       9
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

                                       1998          1997           1996
                                       ----          ----           ----
     Working capital                $3,630,122     $4,077,593     $2,705,915
     Cash                            3,026,447      2,837,427      1,080,630
     Cash-restricted                        -       1,400,000             -
     Cash provided by                
       operating activities          1,999,627      4,653,661      1,341,056
     Cash used in investing          
       activities                    1,026,736      2,780,265        345,346
     Cash used in financing
       activities                      783,871        116,599        435,945


Working capital decreased $447,471 at December 31, 1998 as compared to December
31, 1997, primarily as a result of decreased cash, the expenditure of restricted
cash for the renovation, remodeling and moving expenses associated with the
relocation of Color Graphics, and a decrease in prepaid taxes. Working capital
increased $1,371,678 at December 31, 1997 as compared to 1996 due primarily to
increased cash flow from operations which resulted in higher cash levels.

The decrease in cash flows from operations in 1998 as compared to 1997 resulted
primarily from payment of the related party management fee for both the prior
year and through the third quarter of 1998 totaling $3,038,537. The increase in
cash flows from operations in 1997 compared to 1996 resulted primarily from
improved profitability and strong cash collections.

The decrease of cash used in investing activities in 1998 as compared to 1997
resulted from utilizing the restricted cash for capital expenditures relating to
the renovations and remodeling of the Color Graphics location. The prior year
increase resulted primarily from increased capital expenditures relating to the
printing segment, Color Graphics, acquired in October 1996. In December 1997,
the Company purchased a 66,100 square foot building and approximately 4 acres of
land for approximately $1,800,000, in New Jersey to relocate the Color Graphics,
Inc. operation. The acquisition was financed through a bond issue in the amount
of $3,200,000 (Note 10). Color Graphics current year expenditures account for
approximately 94% of property, plant and equipment and 86% of the expenditures
in 1997. The Company expects to continue to invest in capital assets to support
its growth.

The cash used in financing activity resulted from the reduction in the Company's
long term debt. In December 1997, the Company obtained $3,200,000 in funding,
financed through a bond issue from New Jersey Economic Development Authority and
administered by Chase Manhattan Trust Company, N.A. (Note 10). The Company
utilized approximately $1,800,000, of these funds to purchase a building and
land, the balance, $1,400,000, was classified as proceeds from issuance of long
term debt and was utilized to pay for improvements to the building and
relocation of the equipment. Additionally, the Company reduced a portion of
their long term debt obligation through repayment of a related party note, in
addition to repayment of its lines of credit in 1997.

At December 31, 1998, the Company had outstanding debt of $5,869,011 in the form
of notes payable.

At December 31, 1998 the Company had no borrowings outstanding under its lines
of credit and the available balance was approximately $3,500,000.

The Company anticipates that current cash balances as well as anticipated cash
flows from operations will provide sufficient funds to meet its working capital
and capital expenditure needs at least through December 31, 1999. However, if
the pace or size of the Company's acquisition or capital expenditure activities
increase, then additional debt or financing may be necessary.

                                       10
<PAGE>
 Impact of Inflation

Although the Company has not attempted to calculate the effect of inflation,
management does not believe inflation has had a material effect on results of
operations. Material increases in costs and expenses, particularly packaging,
raw materials and labor costs, in the future, could have a significant impact on
the Company's operating results to the extent that the effect of such increases
cannot be transferred to its customers.

Impact of Year 2000 Issues

The Company continues its effort in assessing its computer applications to
insure their functionality with respect to the "Year 2000" millennium change.
The assessment phase has been completed and remediation and compliance testing
are currently being scheduled and executed. The Company currently anticipates
that all the work will be completed by the end of the third quarter 1999. There
can be no assurance that the Company will be successful in its effort to resolve
all Year 2000 issues. If required modifications to existing software and
conversions to new software are not made, or are not completed in a timely
fashion, the Year 2000 issue could have a material impact on the operations of
the Company.

The expenses of the Year 2000 project are being funded through operating cash
flows. There can be no assurance that these related expenses will not be
material to the Company or that the Company will be able to resolve in a timely
manner any issues that may arise in these areas. Since a number of steps remain
to be performed, the Company has not yet determined the total Year 2000
compliance expense and related potential effect on the Company's financial
position.

The Company has not initiated formal communication with significant suppliers to
determine the extent to which the Company's operations are vulnerable to those
third parties' failure to remediate its own Year 2000 issues. The Company does
have information concerning the Year 2000 compliance status of its customers. In
the event that any of the Company's significant customers and suppliers do not
successfully and timely achieve Year 2000 compliance, the Company's business or
operations could be adversely affected materially.

The Company has not yet fully developed a comprehensive contingency plan to
address situations that may result if the Company is unable to achieve Year 2000
readiness of its critical operations, but is expected to have a plan in place by
the end of the second quarter 1999. There can be no assurance that the Company
will be able to develop a contingency plan that will adequately address issues
that may arise in the year 2000.

The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. To date, management estimates that the cost related to the
Year 2000 remediation efforts have been approximately $10,000. The forthcoming
Year 2000 compliance expenditures have been estimated by management not to
exceed an additional $20,000. There can be no assurance that these estimates
will be achieved and actual results could differ materially from those
anticipated.

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements made by the Company in its disclosures to
the public. This Form 10-K and the foregoing Management's Discussion and
Analysis of Financial Condition and Results of Operations contain
forward-looking statements as defined by such Act that involve risks and
uncertainties that could cause actual results to differ materially. Factors that
may affect the Company's future performance include, among others, the loss of
one or more significant customers and risks associated with industry
consolidation, acquisitions and competition. Readers are cautioned not to rely
on forward-looking statements.


                                       11
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




                       REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and
Shareholders of DirectCom, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under item 14(a)(1) present fairly, in all material respects, the
consolidated financial position of DirectCom, Inc. and its subsidiaries at
December 31, 1998 and 1997, and the consolidated results of their operations and
their cash flows for the years then ended, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule for the years ended December 31, 1998 and 1997 listed in the index
appearing under item 14(a)(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

As disclosed in the notes to the financial statements, DirectCom, Inc. has
extensive transactions and relationships with North American Communications,
Inc. a related party.



                                                     PricewaterhouseCoopers LLP

Pittsburgh, Pennsylvania
March 5, 1999



                                       12
<PAGE>

Thompson Dugan, PC


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




March 20, 1997



To the Board of Directors and
Shareholders of DirectCom, Inc.


We have audited the accompanying consolidated balance sheet of DirectCom, Inc.,
and subsidiary as of December 31, 1996, and the related consolidated statements
of operations, shareholders' equity and cash flows the year ended December 31,
1996. Our audit also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and the schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and schedule based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
DirectCom, Inc. and subsidiary as of December 31, 1996, and the consolidated
results of their operations and their cash flows for the year December 31, 1996,
in conformity with generally accepted accounting principles. Also, in our
opinion, the financial statement schedule, referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects, the information required to be included therein.


                                       13
<PAGE>

                                   DIRECTCOM, INC.

                             CONSOLIDATED BALANCE SHEETS


                                     ASSETS

                                                          December 31,
                                                      1998           1997
                                                      ----           ----

 CURRENT ASSETS
     Cash                                          $ 3,026,447    $ 2,837,427
     Cash - restricted                                      -       1,400,000
     Accounts receivable, net of allowance for
      doubtful accounts of $188,218 in 1998 and
        $121,171 in 1997                             2,448,507      2,200,749
     Inventory                                         509,009        450,837
     Prepaid and other current assets                  249,300        903,232
                                                --------------  -------------
          Total current assets                       6,233,263      7,792,245
 PROPERTY, PLANT AND EQUIPMENT, Net                  7,373,467      6,002,779
 OTHER ASSETS                                          691,410        504,744
                                                --------------  -------------

 TOTAL ASSETS                                     $ 14,298,140   $ 14,299,768
                                                ==============  =============

                        LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES
     Current maturities of long-term debt           $  404,910     $  437,430
     Accounts payable                                  372,047        351,931
     Accounts payable - related company              1,107,941      2,315,860
     Income taxes payable                              214,909         82,847
     Accrued expenses and other current
       liabilities                                     473,334        526,584
     Deferred revenue                                   30,000              -
                                                --------------  -------------
          Total current liabilities                  2,603,141      3,714,652
 LONG-TERM DEBT                                      5,464,101      6,215,452
 DEFERRED INCOME TAXES                                 574,000        577,000
 MINORITY INTEREST                                     900,083        802,300
                                                --------------  -------------
          TOTAL LIABILITIES                          9,541,325     11,309,404
 SHAREHOLDERS' EQUITY
    Preferred stock $.00001 par value - 
     authorized 10,000,000 shares;
     issued and outstanding: none                            -              -
    Common stock $.00001 par value - 
     authorized 60,000,000 shares;
     issued: 3,421,983 shares of which 
     320,000 shares are held as treasury stock.             34             34
     Paid-in capital                                   650,181        650,181
     Retained earnings                               4,411,600      2,645,149
                                                --------------  -------------
                                                     5,061,815      3,295,364
     Less treasury stock, at cost                     (305,000)      (305,000)
                                                --------------  -------------
          TOTAL SHAREHOLDERS' EQUITY                 4,756,815      2,990,364
                                                --------------  -------------

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $ 14,298,140   $ 14,299,768
                                                ==============  =============


                   SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       14
<PAGE>
<TABLE>
<CAPTION>

                                 DIRECTCOM, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                   Years Ended December 31,
                                                 1998         1997        1996
                                                 ----         ----        ----
<S>                                            <C>          <C>          <C>
REVENUES
  Database                                     $12,312,900  $10,550,170  $7,855,093
  Printing                                      10,021,179   13,084,090   2,614,628
  Printing - Related Company                     2,066,745    1,473,523     672,800
                                                ----------   ----------  ----------
        Total Revenues                          24,400,824   25,107,783  11,142,521

COST OF REVENUE
  Database - Related Company                     5,497,579    4,799,400   4,070,042
  Database - Other                               1,930,641    2,639,117   1,071,667
  Printing                                       6,548,421    7,412,553   1,919,920
  Printing - related company                       309,961      329,476           -
                                                ----------   ----------  ----------
        Total cost of revenue                   14,286,602   15,180,546   7,061,629

  Selling, general and
    administrative expenses                      4,288,655    3,385,587   1,879,539
  Administrative fee - related party (note 8)    1,728,305    1,780,000          -
  Depreciation and amortization                    932,297    1,028,474     327,600
  Buyout of stock option (note 3)                        -      750,000           -
                                                ----------   ----------  ----------
        Total costs and expenses                21,235,859   22,124,607   9,268,768
                                              -----------   -----------   ---------
OTHER INCOME (EXPENSE)
  Gain on sale of equipment                        199,749            -           -
  Interest expense                                (414,685)    (380,696)   (127,507)
  Loss on disposal of assets                       (73,500)           -           -
  Miscellaneous income                             292,705      318,514      66,167
                                                  --------     --------      ------
                                                     4,269      (62,182)    (61,340)
                                                     -----     --------    --------
Income before income taxes
  and minority interest                          3,169,234    2,920,994   1,812,413
Provision for income taxes                       1,305,000    1,308,400     743,140
                                                ----------   ----------     -------
Income before minority interest                  1,864,234    1,612,594   1,069,273
Minority interest in income of subsidiary           97,783      230,484      56,064
                                                   -------     --------      ------

Net income                                     $ 1,766,451  $ 1,382,110 $ 1,013,209
                                                ==========   ==========   =========

BASIC EARNINGS PER SHARE                       $      0.57  $      0.45 $      0.34
                                               ===========  =========== ===========

DILUTED EARNINGS PER SHARE                     $      0.56  $      0.44 $      0.33
                                               ===========  =========== ===========
</TABLE>


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       15
<PAGE>
<TABLE>
<CAPTION>

                                                    DIRECTCOM,INC.

                                     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                             Common Stock
                                             ------------
                                         Number                Paid-in      Retained      Treasury
                                        of Shares   Amount     Capital      Earnings        Stock         Total
                                        ---------   --------   ---------   -----------   ----------    -----------


<S>                 <C>                  <C>            <C>          <C>         <C>           <C>           <C>        
Balance at December 31, 1995            1,336,981   $     13   $     202   $   249,830   $   (5,000)   $   245,045

Purchase of treasury stock                                                                 (300,000)      (300,000)

Common stock issued in exchange for
  convertible debenture                 2,005,002         20     499,980     -              -              500,000

Net Income                              -             -          -           1,013,209      -            1,013,209
                                        ---------   --------   ---------   -----------   ----------    -----------
Balance at December 31, 1996            3,341,983         33     500,182     1,263,039     (305,000)     1,458,254

Issuance of common stock                   80,000          1     149,999     -              -              150,000

Net Income                              -             -          -           1,382,110      -            1,382,110
                                        ---------   --------   ---------   -----------   ----------    -----------
Balance at December 31, 1997            3,421,989         34     650,181     2,645,149     (305,000)     2,990,364

Net Income                              -             -          -           1,766,451      -            1,766,451
                                        ---------   --------   ---------   -----------   ----------    -----------
Balance at Decmeber 31, 1998            3,421,989   $     34   $ 650,181   $ 4,411,600   $ (305,000)   $ 4,756,815
                                        =========   ========   =========   ===========   ==========    ===========
</TABLE>

                                       16
<PAGE>
<TABLE>
<CAPTION>

                                    DIRECTCOM, INC.

                         CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                YEARS ENDED DECEMBER 31,
                                                              1998        1997       1996
                                                             ----        ----       ----
<S>                                                      <C>          <C>         <C>
Cash flows from operating activities:
    Net income                                           $1,766,451   $1,382,110  $1,013,209
    Adjustments to reconcile net income
        to net cash provided by operating activities:
        Depreciation and amortization                       932,297    1,028,474     327,600
        Bad debt expense                                     72,000      107,906      24,000
        Buyout of stock option                                    -      500,000           -
        Minority interest                                    97,783      230,484      56,064
        Deferred taxes                                      (18,000)      73,800       2,760
        Gain on sale of equipment                          (199,749)      (1,925)          -
        Loss on asset disposal                               73,500            -           -
        (increase) decrease in: (excluding effects
          of acquisition)
           Accounts receivable                             (319,758)   1,927,983     527,341
           Inventory                                        (58,172)      15,280      67,471
           Prepaid and other current assets                 668,932     (519,973)     23,824
           Other assets                                      63,334     (325,643)      6,434
        Increase (decrease) in: (excluding effects
          of acquisition)
           Accounts payable                                  20,116     (412,982)    267,855
           Accounts payable - related company            (1,207,919)   1,944,545  (1,521,890)
           Income taxes payable                             132,062     (620,635)    664,979
           Accrued expenses and other current
             liabilities                                    (53,250)    (292,192)    (90,528)
           Long term liabilities                                  -     (284,096)    (84,238)
           Deferred  revenue                                 30,000      (99,475)     56,175
                                                          ---------    ---------   ---------
              Net cash provided by operating
               activities                                 1,999,627    4,653,661   1,341,056
                                                          ---------    ---------   ---------
Cash flows from investing activities:
        Business acquisition, net of cash acquired                -            -     (91,470)
        Purchase of furniture and equipment              (2,376,485)  (1,417,265)   (253,876)
        Proceeds from the sale of equipment                 199,749       37,000           -
        Change in restricted cash                         1,400,000   (1,400,000)          -
        Investment in partnership                          (250,000)           -           -
                                                          ---------    ---------   ---------
           Net cash used in investing
             activities                                  (1,026,736)  (2,780,265)   (345,346)
                                                          ---------    ---------   ---------
Cash flows from financing activities:
        Repayments of notes payable                               -     (466,593) (1,562,930)
        Repayments of long-term debt                       (783,871)    (210,006)    (73,015)
        Proceeds from issuance of
          long-term debt                                          -    1,400,000           -
        Proceeds from issuance of long-term debt -
           related company                                        -            -   1,000,000
        Repayments of long-term debt - related
          company                                                 -     (990,000)          -
        Sale of common stock
                                                                  -      150,000           -
        Purchase of treasury stock                                -            -    (300,000)
        Sale of debenture                                         -            -     500,000
                                                          ---------    ---------   ---------
           Net cash used in financing
             activities                                    (783,871)    (116,599)   (435,945)
                                                          ---------      -------    ---------
Net increase in cash                                        189,020    1,756,797     559,765

Cash at beginning of year                                 2,837,427    1,080,630     520,865
                                                         ----------   ----------     -------

Cash at end of year                                      $3,026,447   $2,837,427  $1,080,630
                                                         ==========   ==========   =========
</TABLE>
                    SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       17
<PAGE>

                                 DIRECTCOM, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

DirectCom, Inc. (the Company), is a Delaware corporation. On September 5, 1997
the Company, previously called North American Integrated Marketing, Inc.,
changed its name to DirectCom, Inc.. The Company is a direct mail response
agency specializing in database and advertising and marketing services and
maintains offices in West Paterson, New Jersey and Wilmington, Delaware. In
October 1996, the Company entered the printing business with the acquisition of
82% of the stock of Color Graphics, Inc. (Color Graphics), which is located in
Mt. Laurel, New Jersey.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its 82% owned subsidiary, Color Graphics. All intercompany transactions and
balances between companies have been eliminated. The consolidated financial
statements reflect a minority interest representing the remaining 18% ownership
of Color Graphics.

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.

INVENTORIES

Paper inventory is stated at last in, first out (LIFO) cost. The LIFO value is
not materially different from the current cost of such inventory. All other
inventory is stated at the lower of cost (first in, first out) or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is recorded at cost. Depreciation is computed
using the straight line and accelerated methods based on estimated useful lives
of the assets, which range from five to twenty years. Leasehold improvements are
amortized over the shorter of the estimated useful lives or lease terms, as
appropriate.

The cost of renewals and betterments that extend the lives or production
capacities of properties is capitalized. Expenditures for normal repairs and
maintenance are charged to operations as incurred. The cost of property and
equipment retired or otherwise disposed of and the related accumulated
depreciation or amortization are removed from the accounts and any resulting
gain or loss is reflected in current operations.

                                       18
<PAGE>

                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)


ASSET IMPAIRMENT

The Company periodically evaluates the recoverability of its long-lived assets.
This evaluation consists of a comparison of the carrying value of the assets
with the assets' expected future cash flows, undiscounted and without interest
costs. Estimates of expected future cash flows represent management's best
estimate based on reasonable and supportable assumptions and projections. If the
expected future cash flow, undiscounted and without interest charges, exceeds
the carrying value of the asset, no impairment is recognized. Impairment losses
are measured as the difference between the carrying value of the long-lived
assets and their fair value.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and accounts
receivable. The Company generally provides its products and services to
companies in the United States and generally grants uncollateralized credit
terms to its customers. The Company generates a significant portion of its
revenue from the banking and credit card industries.

The Company maintains cash balances at several financial institutions. Accounts
at each institution are insured by the Federal Deposit Insurance Corporation up
to $100,000. At December 31, 1998, the Company's uninsured cash balances on
deposit, per the bank's records, in excess of insured limits totaled $2,826,448.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of current assets and current liabilities approximate fair
value because of their short term nature. Based on the borrowing rates currently
available to the Company for loans similar in terms and average maturities, the
stated value of long term debt approximated fair value at December 31, 1998.


REVENUE RECOGNITION

The Company provides database services by preparing marketing reports and direct
marketing mailing lists and printing services by providing printed material for
direct mail packages. Services are provided on a project-by-project basis under
periodic service arrangements that extend up to one year. Revenue and related
costs are recognized on a project-by-project basis in the period in which the
services are provided.

Deferred revenues arise when invoices are sent prior to performing services.

ADVERTISING COSTS

The Company expenses all advertising costs as incurred. Advertising costs
included in selling, general and administrative expenses for the years ended
December 31, 1998, 1997 and 1996 were $186,365, $62,240 and $75,857,
respectively.

                                       19
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)


INCOME TAXES

Deferred income taxes are provided under the asset and liability method. The
Company recognizes deferred tax liabilities and assets for the expected future
income tax consequences of events that have been recognized in the Company's
financial statements. Under this method, deferred tax assets and liabilities are
determined based on temporary differences between the financial statement
carrying amounts and the tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the temporary differences are expected to
reverse. Income tax expense consists of the Company's current liability for
federal and state taxes and the change in the Company's deferred income tax
assets and liabilities.

STOCK BASED COMPENSATION

Statement of Financial Accounting Standards No. 123, (SFAS 123), "Accounting for
Stock-Based Compensation", allows companies to account for employee stock-based
compensation either under the provisions of SFAS 123 or under the provisions of
Accounting Principle Board Opinion No. 25 (APB 25), "Accounting for Stock Issued
to Employees." However, SFAS 123 requires pro forma disclosure in the notes to
the financial statements as if the measurement provisions of SFAS 123 had been
adopted. The Company has continued to account for its stock-based compensation
in accordance with the provisions of APB 25.

EARNINGS PER SHARE

Basic earnings per share is computed based on the weighted average number of
outstanding common shares for the period. Diluted earnings per share adjusts the
weighted average for the potential dilution that could occur if stock options,
warrants or other convertible securities were exercised or converted into common
stock.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" is effective for the year ended December 31, 1998. SFAS No. 130
establishes standards for reporting comprehensive income in a full set of
general purpose financial statements either in the statement of operations or in
a separate statement. The Company has no items of comprehensive income to
report.

In 1998, the Company adopted Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information". FAS
131 supercedes FAS 14, "Financial Reporting for Segments of a Business
Enterprise", replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. FAS 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of FAS 131 did not affect results of operations or financial
position but did affect the disclosure of segment information.

                                       20
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This Statement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company will be
required to adopt this new accounting standard by January 1, 2000. Management
does not anticipate early adoption. The Company believes that the effect of the
adoption of SFAS No. 133 will not be material.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation.

NOTE 3 - ACQUISITIONS

Effective October 1, 1996, pursuant to a Stock Purchase Agreement dated
September 30, 1996, the Company acquired 82% of the outstanding common stock of
Color Graphics for a total consideration of $1,909,283. The consideration
consisted of $1,000,000 in cash paid by the Company, $286,000 in cash paid by
Color Graphics, the assumption of liabilities totaling $250,000 and the transfer
of a life insurance policy valued at $210,806 by Color Graphics. In addition,
the Company assigned a value of $162,477 to a receivable that had previously
been written off.

In addition, the Company granted to a consultant an option to acquire 10 percent
of the Color Graphics stock at an exercise price of $1,058.82 per share or
$30,000 in the aggregate through September 30, 2001 for his role in consummating
the acquisition. During 1997, the Company entered into an agreement with the
consultant to buy out this option for $750,000. The Company paid $250,000 in
cash in 1997 relative to this agreement and entered into two promissory notes
for the remaining $500,000. The first note for $250,000 was repaid during 1998
and the second note for $250,000 is due in April 1999. In June 1998, the Company
advanced the consultant $200,000 with principal and interest at 8% per annum due
to the Company in April 1999. The related agreement gives the Company the right
to offset amounts outstanding from the consultant against the amounts due to the
consultant. As a result, the outstanding amount due to the consultant as of
December 31, 1998 was $50,000 (See Note 10). The Company recorded a $750,000
expense in the Consolidated Statement of Operations for the year ended December
31, 1997 relative to this agreement.

The acquisition was accounted for as a purchase, and the excess of the fair
value of the net assets acquired over the total consideration (negative
goodwill) of $2,309,730 was netted against "Property, Plant and Equipment" in
the accompanying consolidated balance sheet and is being amortized over a period
consistent with the useful life of the related equipment purchased from Color
Graphics. The results of operations of Color Graphics are included in the
statements of operations beginning on October 1, 1996.

                                       21
<PAGE>

                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 4 - INVENTORIES

Inventories consist of the following:


                                            December 31,
                                       1998               1997
                                       ----               ----
     Paper                         $  282,706       $   293,373
     Other raw materials               67,178            93,823
     Work-in-process                  159,125            63,641
                                   ----------       -----------
                                   $  509,009       $   450,837
                                   ==========       ===========

NOTE 5 - PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consist of the following:


                                            December 31,
                                       1998               1997
                                       ----               ----
     Deferred income taxes         $  148,000       $   133,000
     Refundable state taxes                 -            13,876
     Prepaid income taxes              25,765           676,591
     Other current assets              75,535            79,765
                                   ----------       -----------
                                   $  249,300       $   903,232
                                   ==========       ===========

NOTE 6 - PROPERTY PLANT AND EQUIPMENT

Property plant and equipment consist of the following:

                                            December 31,
                                       1998               1997
                                       ----               ----
     Machinery and equipment       $4,436,118       $ 3,949,949
     Building and land              3,699,539         1,800,000
     Office furniture and
      equipment                       154,081            98,618
     Transportation equipment          88,528            88,528
     Computer equipment and
       software                       973,041           830,983
     Leasehold improvements            36,951            88,319
     Construction in Progress         184,414           608,500
                                   ----------       -----------
                                    9,572,672         7,464,897
     Accumulated depreciation
       and amortization            (2,199,205)       (1,462,118)
                                   ----------       -----------

                                   $7,373,467       $ 6,002,779
                                   ==========       ===========

                                       22
<PAGE>

                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 7 - OTHER ASSETS

Other assets consist of the following:


                                            December 31,
                                       1998               1997
                                       ----               ----
     Cash surrender value
       of life insurance           $  127,767        $  111,153
     Deposits                             200            37,942
     Debt issuance costs              269,026           303,178
     Investment in partnership        250,000                 -
     Other                             44,417            52,471
                                   ----------         ---------
                                   $  691,410         $ 504,744
                                   ----------         ---------

In the fourth quarter of 1998, the Company invested $250,000 in DirectSort,
L.P., representing a 49.5% interest, in this entity. The Company is accounting
for this investment under the equity method of accounting.

NOTE 8 - RELATED-PARTY TRANSACTIONS

Certain of the Company's major shareholders also exercise control over North
American Communications, Inc. (NAC), an affiliated company that has extensive
transactions with the Company. The Company's related party revenue is generated
through printed materials for direct mail packages for NAC. The Company's
related party expenses, provided by NAC, result from the purchases of
production, printing and mailing services for direct mail packages to integrate
into the Company's printing and production requirements. Additionally, related
party expenses include certain salary and insurance expenses.


ACCOUNTS PAYABLE - RELATED COMPANY

The accounts payable - related company at December 31, 1998 and 1997 represents
amounts due to NAC for printing and mailing services. Offset against the related
party payable are receivables due from NAC of $60,567 and $358,063 at December
31, 1998 and 1997, respectively, for printing services provided to NAC.

NOTE PAYABLE - RELATED COMPANY

During 1996, the Company borrowed $1,000,000 from NAC to partially finance the
acquisition of Color Graphics. The uncollateralized loan was represented by a
promissory note bearing interest at 8%, and payable in monthly installments of
$5,000 plus interest with payment in full due September 30, 2006. This note was
repaid in 1997, with cash generated from operations. Interest expense related to
this note was $46,499 and $26,665 for the years ended December 31, 1997 and
1996, respectively.

No borrowings were outstanding with NAC at December 31, 1998 and 1997,
respectively.

                                       23
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 8 - RELATED-PARTY TRANSACTIONS (Continued)

OTHER EXPENSES

Salary Expense

Certain NAC employees perform services for the Company. Salary expense was
recorded by the Company based on an estimate of the related NAC employees' time
devoted to performing services for the Company. For the years ended December 31,
1998, 1997, and 1996, the expense recorded for these services was approximately
$42,000, $80,000 and $51,000, respectively. As of December 31, 1998 and 1997,
the amount payable for these services was $9,000 and $17,625, respectively.

Insurance Expense

Insurance coverage is provided to the Company and NAC under one policy.
Insurance expense attributable to the Company was based on sales, number of
employees or specific identification of insured property. Insurance expense for
the years ended December 31, 1998, 1997 and 1996 was $49,026, $102,742 and
$9,910, respectively. As of December 31, 1998 and 1997, the amount payable for
the provided coverage was $10,814 and $48,744, respectively.


Administrative Fee

On December 15, 1997, the Company entered into a management agreement with NAC.
The agreement provides for administrative, consulting and management support
services. This fee is computed based on 7% of consolidated revenues. For the
years ended December 31, 1998 and 1997, the administrative fee was $1,728,305
and $1,780,000, respectively. The amount due NAC as of December 31, 1998 is
$469,768.

NOTE 9 - LINES OF CREDIT

At December 31, 1998 and 1997 the Company has available a revolving line of
credit, which expires on June 30, 1999, in the maximum aggregate principal
amount of $1,000,000 with interest payable monthly, which expires on June 30,
1999, at the lender's basic rate plus 1 percent (8.12 percent at December 31,
1998). The Company intends to renew this revolving line of credit upon
expiration. Borrowings are used to provide working capital to fund inventory
purchases and for payment of certain other costs approved by the lender
incidental to the loan. The borrowings under the line of credit are
collateralized by the Company's receivables, equipment and fixtures. The
repayment of the loan is guaranteed by NAC. In addition, a subordination
agreement was executed by NAC and the shareholders of the Company. There were no
borrowings outstanding under this line of credit at December 31, 1998 and 1997,
respectively.

At December 31, 1998, the Company's subsidiary, Color Graphics, had a revolving
line of credit with United States National Bank, which expires on June 30, 1999,
in the maximum aggregate principal amount of $2,500,000 with interest payable
monthly at the lender's rate plus 1% (8.12 percent at December 31, 1998). The
Company intends to renew this revolving line of credit upon expiration. The loan
agreement permits borrowing on a percentage of qualified accounts receivable

                                       24
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 9 - LINES OF CREDIT (Continued)

and inventory as defined in the agreement. The borrowings under this line of
credit are collateralized by the subsidiary's accounts receivable and equipment
and guaranteed by the Company and NAC. This debt is cross collateralized with
the term financing described in Note 10. There were no borrowings outstanding
under this line of credit at December 31, 1998 and 1997, respectively.

NOTE 10 -LONG-TERM DEBT
<TABLE>
<CAPTION>

Long-term debt consists of the following:
                                                                                                December 31,
                                                                                         1998                  1997
                                                                                         ----                  ----
<S>                                                                                   <C>                 <C>
Note payable to United States National Bank in monthly installments of principal
and interest at $42,092, including interest at 9.73%, through the year 2001. The
note payments will then be reset for the next five years, through maturity in
2006, based on interest rates as specified in the agreement (see Note 9 for
collateral guarantees).                                                               $ 2,729,011         $ 2,952,882

Note payable to Chase Manhattan Trust Company, N.A. with a maturity date of
December 1, 2017, interest payable monthly at 4% per annum and an annual
principal payment as prescribed in the agreement.                                       3,090,000           3,200,000

Promissory note A payable to a consultant with interest at 8% (Note 3).                         -             250,000

Promissory note B payable to a consultant with interest at 8% due on April 10,
1999 (Note 3).                                                                             50,000             250,000
                                                                                       ----------          ----------

                                                                                        5,869,011           6,652,882
                                     Less: Current maturities                             404,910             437,430
                                                                                      -----------         -----------
                                                                                      $ 5,464,101         $ 6,215,452
                                                                                      ===========         ===========
</TABLE>

                                       25
<PAGE>


                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 10 - LONG-TERM DEBT (Continued)

 At December 31, 1998 the scheduled principal payments on the debt are as
follows:

                     1999              $   404,910
                     2000                  384,476
                     2001                  418,012
                     2002                  453,778
                     2003                  492,719
                     Thereafter          3,715,116
                                       -----------
                                       $ 5,869,011
                                       ===========



NOTE 11 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the
following:
                                             December 31,
                                          1998           1997
                                          ----           ----
     Accrued payroll                  $  189,740      $  160,186
     Accrued vacation                    125,059         130,708
     Accrued rent                         37,885          45,645
     Accrued healthcare                   40,650          60,000
     Accrued expenses - other             80,000         130,045
                                      ----------      ----------
                                      $  473,334      $  526,584
                                      ----------      ----------


NOTE 12 - LEASES

The Company leases its office facilities under noncancelable operating leases,
which expire on various dates through May 1, 2002. In some cases, the lease
requires the Company to pay for insurance, operating expenses and a portion of
the real estate taxes. The future minimum lease payments at December 31, 1998
under the agreements and other operating leases are as follows:

                     1999              $  192,024
                     2000                 198,452
                     2001                 178,653
                     2002                  70,028
                                       ----------
                                       $  639,157
                                       ==========

                                       26
<PAGE>

                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 12 - LEASES (Continued)

Rent expense was $467,546 $597,648 and $191,593 for the years ended December 31,
1998, 1997 and 1996, respectively.

NOTE 13 - EMPLOYEE BENEFITS

The Company and its subsidiary have two voluntary retirement plans that cover
all eligible employees. Effective January 1, 1997, both plans provide for annual
matching contributions by the Company at the discretion of the Company's board
of directors. Contributions to the plans totaled $36,644 and $35,070 for the
years ended December 31, 1998 and 1997, respectively. The Company did not make a
contribution for the year ended December 31, 1996.

NOTE 14 - SHAREHOLDERS' EQUITY

Common Stock

In April 1997, the stockholders approved a proposal to adopt certain amendments
to the Company's Certificate of Incorporation to (1) effect a 1 for 12 reverse
stock split of the Company's common stock and (2) change the total number of
shares the Company is authorized to issue to 70,000,000 shares, consisting of
60,000,000 of common stock, having a par value of $.00001 per share and
10,000,000 shares of preferred stock, having a par value of $.00001 per share.
All references in the accompanying consolidated financial statements to the
number of common shares and per-share amounts for all years prior to 1997 have
been restated to reflect the reverse stock split.

Stock Option Plan

In March 1996, the Company adopted the Stock Option Plan ("Plan") which provided
for the issuance of non-qualified stock options and incentive stock options as
well as stock appreciation rights (in connection with options) to eligible
employees, an officer, consultants and advisors of the Company. Under the terms
of this plan, options to purchase 833,333 shares of Common Stock were reserved
for issuance and are generally granted at not less than fair market value. They
become exercisable as established by the Board of Directors or the Compensation
Committee, and generally expire ten years from the date of grant. In 1996,
340,000 stock options were granted. No stock options were granted in 1998 or
1997. As of December 31, 1998, options to purchase 340,000 shares of Common
Stock at $.48 per share were outstanding of which 308,333 shares were vested.
Options for 493,333 shares were available for future grant under the plan at
December 31, 1998. To date, the Company has not issued any stock appreciation
rights under this plan.

The fair value of the options granted was estimated using a valuation model with
the following assumptions: dividend yield of 0%, expected volatility of 0%,
risk-free interest rate of 6.5% and expected term of 5 years. The weighted
average fair value of options granted in 1996 was $.60 per share. The weighted
average remaining contractual life of the options outstanding was approximately
9 years. Had the Company followed SFAS 123 rather that APB25, the reported net
income for the year ended December 31, 1996 would have been approximately
$928,200 ($.39 per share).


                                       27
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 14 - SHAREHOLDERS' EQUITY (Continued)

Restricted Stock Plan

Effective January 1, 1992, the Company adopted a Restricted Stock Plan. The
Restricted Stock Plan authorizes the issuance of 16,667 shares of restricted
stock to certain key employees of the Company over a five-year period. Employees
become vested in shares of restricted stock issued to them for the current
fiscal year if they remain continuously employed by the Company for the entire
fiscal year. If the employee separates from service on or before the last day of
such fiscal year (other than for separations from service due to death,
disability or unjust termination), all shares of the Company's stock allocated
to that employee for such fiscal year shall be forfeited. Once vested, all
restrictions on the shares issued expire. The number of shares issued under this
plan totaled 3,333 at December 31, 1998 and 1997. There have been no shares of
restricted stock issued to employees since 1993.

NOTE 15 - INCOME TAXES

The provision for income taxes consists of the following:

                                              Year Ended December 31,
                                           1998        1997         1996
                                           ----        ----         ----
     Current provision:
           Federal                    $ 1,025,000   $   958,000   $  577,800
           State                          298,000       276,600      168,100
                                      -----------   -----------   ----------
               Total current            1,323,000     1,234,600      745,900
                                      -----------   -----------   ----------
     Deferred (benefit) provision:
            Federal                       (13,840)       56,200          600
            State                          (4,160)       17,600       (3,360)
                                      -----------   -----------   ----------
                Total deferred            (18,000)       73,800       (2,760)
                                      -----------   -----------   ----------
                Total                 $ 1,305,000   $ 1,308,400   $  743,140
                                      -----------   -----------   ----------

                                       28
<PAGE>

                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 15 - INCOME TAXES - (Continued)

The federal statutory rate differs from the Company's effective income tax rate
on income from continuing operations as follows:

                                          1998   1997    1996
                                          ----   ----    ----
   Federal statutory income tax rate     34.0%   34.0%   34.0%
   Increase (reduction) in the tax
      rate resulting from:                
State income tax, net of federal effect   5.9     5.9     5.9
    Nondeductible expenses                0.5     1.2     1.1
    Accruals                              0.6     3.8     -
    Other                                 0.2    (0.1)    -
                                        -----    ----    ----
                                         41.2%   44.8%   41.0%
                                        =====    ====    ====


The components of the deferred tax asset and liabilities, as reflected on the
consolidated balance sheets, consist of the following:

                                                  Year ended December 31,

                                                    1998           1997    
                                                    ----           ----    
   Deferred tax liabilities:
    Depreciation                                 $(572,327)    $(578,499)  
                                                  --------       -------   
     Total deferred tax liabilities               (572,327)     (578,499)  
                                                  --------      --------   

   Deferred tax assets
    Accounts receivable                             75,287        48,395   
    Accruals                                        65,178        76,829   
    Other                                            5,862         9,275   
                                                     -----        ------   
     Total deferred tax assets                     146,327       134,499   
                                                    ------       -------   

     Net                                         $(426,000)    $(444,000)  
                                                  ========     =========   


   Recorded as:

    Prepaid and other current assets             $ 148,000     $ 133,000
    Deferred income taxes                         (574,000)     (577,000)
                                                  --------      --------
                                                 $(426,000)    $(444,000)
                                                 ---------     ---------


                                       29
<PAGE>



                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 16 - COMMITMENTS AND CONTINGENCIES

General

The Company is subject to various legal proceedings and claims, either asserted
or unasserted, which arise in the ordinary course of business. Management does
not believe that the outcome of any of these legal matters will have a material
adverse effect on the Company's consolidated results of operations, consolidated
financial position or consolidated cash flows.

Employment Contract

The Company has entered into an employment contract with an officer of the
Company for a five year term ending September 30, 2001. Under the terms of the
agreement the officer will receive an annual base salary of $325,000 and fringe
benefits, including a company automobile, health and disability insurance. In
addition, the officer has the right to require the Company to purchase his
common stock of Color Graphics, Inc. at a price equal to its fair market value
as determined by an independent appraisal, exercisable at any time after the
earlier of October 1, 2001 or his termination of employment for whatever reason.
As of December 31, 1998 management has not obtained an independent appraisal and
cannot reasonably estimate the fair market value of the 18% interest in Color
Graphics common stock. The Company has a similar right to purchase the stock on
the same terms. In the event of the officer's death, the first $1,000,000 of the
purchase price of common stock will be paid from the officer's life insurance
policy paid for by the Company.

NOTE 17 - SEGMENT INFORMATION 

The Company organizes its business into three segments based on its product and
service offerings: database, advertising and marketing agency, and printing
services.

The accounting policies of the segments are the same as those described in the
"Summary of Significant Accounting Policies." Segment data includes intercompany
common customer revenues for contracted services between segments. Management
evaluates the performance of the Company's segments based on EBITDA exclusive of
the administrative fee, other income and extraordinary items.

The table below presents information about the Company's segments.

 1998                 DATABASE         AGENCY         PRINTING          TOTAL
 ----                 ---------       -------         ---------         -----

     Revenues       $4,026,162      $8,286,738     $12,531,313      $24,844,213

     EBITDA            579,088       2,291,463       2,955,017        5,825,568


 1997                 DATABASE         AGENCY         PRINTING          TOTAL
 ----                 ---------        -------        ---------         -----

     Revenues       $4,514,955      $6,035,215     $15,126,516      $25,676,686

     EBITDA          1,111,716         827,999       5,238,963        7,178,678


 1996                 DATABASE         AGENCY         PRINTING          TOTAL
 ----                 ---------        -------        ---------         -----

     Revenues       $4,021,757      $3,833,336      $3,287,428      $11,142,521

     EBITDA            992,329         296,072         912,952        2,201,353



                                       30
<PAGE>




                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 17 - SEGMENT INFORMATION (Continued)

A reconciliation of the total segment revenues to total consolidated revenues
and the total segment EBITDA to total consolidated income before income taxes
for the years ended December 31, 1998 and 1997 is as follows:

REVENUES                                     1998          1997          1996
                                             -----         -----         ----

Total segment revenues                  $24,844,213   $25,676,686   $11,142,521
Elimination of intercompany revenue        (443,389)     (568,903)            -
                                        -----------   -----------   -----------

Consolidated revenues                    $24,400,824  $25,107,783   $11,142,521
                                         ===========  ============  ===========


EBITDA                                       1998          1997          1996
                                             -----         -----         ----


Total EBITDA for reportable segments     $5,825,568    $6,541,650    $2,201,353
Management fee                           (1,728,305)   (1,780,000)            -
Buyout of stock option                            -      (750,000)            -
Interest expense                           (414,685)     (380,696)     (127,507)

Depreciation and amortization              (932,297)   (1,028,474)     (327,600)
Other income                                418,953       318,514        66,167
                                            -------       -------        ------

Consolidated income before taxes         $3,169,234    $2,920,994    $1,812,413
                                         ==========    ==========    ==========






At December 31, 1998 and 1997, approximately 65% and 53%, respectively, of the
Company's accounts receivable balance was due from customers in the banking and
credit card industry. During the years ended December 31, 1998, 1997 and 1996
the Company earned approximately 80%, 73% and 80%, respectively, of its total
revenues from customers in the banking and credit card industries.

One customer accounted for 59% of the Company's total revenues for the year
ended December 31, 1998. Two customers individually constituted approximately
28% and 19%, respectively, of total revenues for the year ended December 31,
1997 and two customers individually constituted approximately 26% and 13%,
respectively, of net revenues, for the year ended December 31, 1996.

                                       31
<PAGE>

                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

 NOTE 18 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>

                                                  Years Ended December 31,
                                             1998           1997           1996
                                             ----           ----           ----
Cash paid during the period for:


<S>                                     <C>             <C>                 <C>
    Interest                           $  393,285      $   362,596         $  119,195
                                       ==========      ===========         ==========
    Income taxes                       $  562,236      $ 2,472,502         $   70,921
                                       ==========      ===========         ==========

Noncash investing and financing 
     activities
    Issuance of note payable for 
     land and building                 $        -      $ 1,800,000         $        -
                                       ==========       ===========        ==========

    Issuance of common stock in 
     exchange for convertible 
     debenture                         $        -      $         -         $  500,000
                                       ==========       ==========          ==========

    In connection with the acquisition
     of Color Graphics,assets acquired
     and liabilities assumed were as 
     follows:
    Fair value of assest acquired      $        -      $         -         $9,783,500
    Less: Cash paid                             -                -         (1,000,000)
                                       ----------      -----------         ----------
    Liabilities assumed                $        -      $         -         $8,783,500
                                       ==========       ===========         ==========

    Acquisition of option
     Cost of option                    $        -      $   750,000         $        -
     Debt incurred                              -         (500,000)                 -
                                       ----------      -----------         ----------
     Cash paid                         $        -      $   250,000         $        -
                                       ==========      ===========         ==========
</TABLE>

                                       32
<PAGE>


SCHEDULE II
                                    DIRECTCOM, INC.
                           VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
<S>     <C> 
                                 BALANCE AT  ADDITIONS                    BALANCE AT
                                 BEGINNING   CHARGED                      END OF    
CLASSIFICATION                   OF PERIOD   TO OPERATIONS    WRITE OFFS  PERIOD    
--------------                   ---------   -------------    ----------  ------    
                                                                          

Allowance for doubtful accounts
    Year ended:


December 31, 1996                 $ 29,093   $  24,000       $       -    $  53,093
                                  ========   =========       =========    =========
                                                            
                                                            
                                                            
                                                            
December 31, 1997                 $ 53,093   $ 107,906       $ (39,828)   $ 121,171
                                  ========   =========       =========    =========
                                                            
                                                            
                                                            
                                                            
December 31, 1998                $ 121,171   $ 72,000        $ (4,953)    $ 188,218
                                 =========   ========        ========     =========
</TABLE>



ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE.
        None.



                                       33
<PAGE>
                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Names, Ages and Positions of the Directors and Executive Officers
-----------------------------------------------------------------

               Name            Age       Position
               ----            ---       --------
        Robert J. Bzezensky    59        President
        Nicholas Robinson      33        Chairman of the Board,
                                           Chief Executive Officer
        Steven Gasner          50        Vice President
        Robert W. Paltrow      57        Director, Secretary and Treasurer
        Robert E. Herman       37        Director
        Anthony Nardiello      56        President, Color Graphics

     The current members of DirectCom's Board of Directors are Nicholas
Robinson, Robert W. Paltrow and Robert E. Herman. Nicholas Robinson serves as
Chairman of the Board. Mr. Robinson is Mr. Paltrow's son-in-law. Directors are
elected for staggered terms at the annual meeting of stockholders and remain in
office until their successors are elected and qualified or until their earlier
resignation or removal. Mr. Herman serves as a director until DirectCom's annual
meeting in 2001, Mr. Paltrow serves as a director until DirectCom's annual
meeting in 1999 and Mr. Robinson serves as a director until DirectCom's annual
meeting in 2000. Officers are elected by the Board and serve at the discretion
of the Board.

     Effective February 5, 1999, Messrs. Bzezensky and Gasner resigned from the
Company. Mr. Robinson now serves as President of the Company.

Business Experience of the Directors and Executive Officers
-----------------------------------------------------------

     Robert J. Bzezensky served as the President of DirectCom, a position he
held since January 1989, before resigning effective February 5, 1999. Between
1987 and 1989, he served as the President of North American Information
Services, Inc. ("NAIS"), a direct mail response agency specializing in database
services which was a predecessor to DirectCom. Mr. Bzezensky's prior employment
experience includes service as the Vice President, Sales and Marketing with
Della Femina Travisano and Partners Direct Ltd.; a senior consultant with CACI,
Inc., a leading marketing information and systems supplier; the Director of
Marketing for R.H. Donnelley; Vice President of Marketing for Metro Mail
Corporation; and Vice President of Mail Marketing with John Blair Marketing.

     Nicholas Robinson serves as the Chief Executive Officer of DirectCom and
Chairman of the Board, positions he has held since October 1, 1994. Effective
February 5, 1999, Mr. Robinson also serves as President of the Company. Mr.
Robinson previously served as a database consultant for the Systems Integration
Practice of Andersen Consulting.

     Steven Gasner was Vice President, Database Marketing, for DirectCom, a
position he held since January 1989, before resigning effective February 5,
1999. Between 1987 and 1989, he had served as the Vice President of NAIS. Mr.
Gasner's prior employment experience includes service as the Director of
Information Management with Citicorp Retail Services and with American Express;
Vice President-Data Base Marketing with the Direct Marketing Group; and Vice
President-Data Base Marketing with Della Femina Travisanao and Partners Direct
Ltd.

     Robert W. Paltrow is the Secretary and Treasurer and a director of
DirectCom, positions he has held since January 1989. From 1981 through 1996, Mr.
Paltrow served as President of North American Communications, Inc., a direct
mail production company affiliated with DirectCom.

     Robert E. Herman is President of North American Communications, Inc. Mr.
Herman has been employed at North American Communications since 1992 in various
departments and became its President in 1995.

     Anthony Nardiello has been President of Color Graphics since 1985 and was
Vice President of Color Graphics from 1976-1985.

ITEM 11.  EXECUTIVE COMPENSATION.

     Both the officers and directors may receive a set remuneration from
DirectCom, and reimbursements are also made for any expenses incurred on behalf
of DirectCom. DirectCom's By-

                                       34
<PAGE>

Laws provide that directors may be paid their expenses, if any, and may be paid
a fixed sum for attendance of each Board of Directors meeting. The current
directors have waived any reimbursement of expenses or fees for attending
meetings.

        The following table sets forth certain information regarding
compensation paid during each of the last three fiscal years to DirectCom's
Chief Executive Officer and each of DirectCom's four other most highly
compensated executive officers whose annual compensation exceeded $100,000 in
fiscal 1998.


Summary Compensation Table
--------------------------
<TABLE>

                                                                                    Long-Term
                                                                                  Compensation
                                      Annual Compensation                             Awards
                                      -------------------                             ------
                                                                                                                     Securities
                                                                                 Other          Restricted         Underlying All
Name and Principal          Fiscal                                               Annual           Stock             Options/SAR
    Other Position           Year            Salary              Bonus        Compensation(1)                    Award(s)
    --------------           ----            ------              -----        ---------------                    --------
                            Grants         Compensation
                            ---------------------------
<S>                           <C>             <C>                  <C>           <C>               <C>            <C>         <C>

Nicholas Robinson            1998           $128,314               --             --                --             --          --
  Chairman & CEO             1997           $120,000               --             --                --             --          --
                             1996           $131,591               --             --                --          240,000(3)     --
Robert J. Bzezensky          1998           $158,882            $18,500           --                --             --          --
  President                  1997           $150,000            $21,055           --                --             --          --
                             1996           $176,376            $31,146           --                --             --          --
Steven Gasner                1998           $158,712            $18,500           --                --             --          --
  Vice President             1997           $150,000            $21,055           --                --             --          --
                             1996           $176,100            $31,146           --                --             --          --
Anthony Nardiello            1998           $172,605              --              --                --             --          --
President,                   1997           $325,000              --              --                --             --          --
Color Graphics               1996           $325,000(2)         $71,608           --                --             --          --
</TABLE>

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

(1)     Since the Common Stock is infrequently traded, the fair market value of
        the Common Stock has been assumed to be $.53 per share based upon the
        most recent arm's-length sale of the Common Stock in May 1997 to Allen &
        Co.

(2)     DirectCom's financial statements show only the portion paid since
        DirectCom's acquisition of Color Graphics effective October 1, 1996.

 (3)    The original grant of 2,880,000  options was reduced to 240,000 options
        in light of  DirectCom's  1-for-12  reverse stock split  effective
        September 4,1997.


                                       35
<PAGE>

Stock Options
-------------

        No options were granted to the executive officers listed in the Summary
Compensation Table ("Named Executive Officers").

        The following table provides information relating to the value of
unexercised options held by the Named Executive Officers at the end of fiscal
1998. No options were exercised by the Named Executive Officers.

                                                   VALUE OF UNEXERCISED
                         TOTAL NUMBER OF             IN-THE-MONEY
                        UNEXERCISED OPTIONS (#)    OPTIONS AT YEAR END
                        -----------------------    -------------------
                   Exercisable    Unexercisable    Exercisable    Unexercisable
                   -----------    -------------    -----------    -------------
Nicholas Robinson   240,000            -            $25,000(1)         -
------------------------

(1)     Since the Common Stock is infrequently traded, the fair market value of
        the Common Stock underlying the options has been assumed to be $.53 per
        share based upon the most recent arm's-length sale of Common Stock in
        May 1997 to Allen & Co.

Employment Contracts
--------------------

        DirectCom has entered into an employment contract with Anthony
Nardiello, President of Color Graphics. The agreement is for a five year term
ending September 30, 2001. The contract may be terminated by DirectCom if Mr.
Nardiello (i) competes with DirectCom, unless such competition is consented to
by DirectCom, (ii) commits any material misrepresentation, dishonesty or theft
against DirectCom, (iii) dies or suffers a disability making him incapable of
performing his essential duties or (iv) commits acts of gross misconduct. Under
the terms of his Employment Contract, Mr. Nardiello receives an annual base
salary of $325,000 and fringe benefits, including a Company automobile, health
and disability insurance. In addition, Mr. Nardiello has the right to require
DirectCom to purchase his Color Graphics common stock (18% of the outstanding
common stock of Color Graphics) at a price equal to its fair market value as
determined by an independent appraisal, exercisable at any time after the
earlier of October 1, 2001 or his termination of employment for whatever reason.
DirectCom has a similar right to purchase Mr. Nardiello's stock on the same
terms. In the event of Mr. Nardiello's death, the first $1,000,000 of the
purchase price for his Color Graphics common stock will be paid from the life
insurance policy for Mr. Nardiello paid for by DirectCom.

Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

        Nicholas Robinson, Chief Executive Officer of DirectCom, and Robert W.
Paltrow, Secretary/Treasurer of DirectCom, also serve on DirectCom's Board of
Directors and on DirectCom's Compensation Committee.

Report of the Board of Directors on Executive Compensation

        The compensation for the Company's executive officers was determined by
the Board of Directors. It is the policy of the Board of Directors that a
significant portion of the annual compensation of the Company's Chief Executive
Officer and other executive officers should be directly linked to the Company's
Chief Executive Officer and other executive officers should be directly linked
to the Company's performance, as well as each individual's contribution. The
Company's compensation programs are designed to provide competitive financial
rewards for successfully meeting the Company's strategic and operating
objectives, with the purposes of retaining personnel and supporting a
performance-oriented environment.

        The compensation of the Company's Chief Executive Officer and other
executive officers is comprised of base salary, as well as cash and stock
incentives based on annual and long-term results of the Company. Increases in
base salary, if any will be based on individual performance, level of
responsibilities and the Company's overall performance.

        Changes in Mr. Robinson's compensation, if any, would be determined by
the Committee based upon its subjective analysis of his performance and the
Company's overall performance. All executive

                                       36
<PAGE>

officers' salaries, including the salary of Mr. Robinson, were reduced to
provide more compensation through bonuses.

        The Company has an incentive compensation program, which rewards the
Company's executive officers based upon the Committee's subjective determination
concerning individual performance and the Company's achievement of its internal
financial objectives. Executive officers become entitled to receive a bonus
based upon the Company's operating profit and an evaluation of each executive
officer's contribution to such operating profit. Through this plan, a
significant portion of each executive officer's annual total compensation is
place at risk in order to provide an incentive toward sustained high
performance. For fiscal 1998, the Company met its projected financial goals and,
as a result, two of the Company's three executive officers received bonus
payments under this plan.

In addition, it has been the policy of the Committee to utilize stock options to
provide a link between compensation and the market performance of the Company's
stock, and to focus attention of management on the enhancement to shareholder
value. In this regard, in fiscal 1996, the Company's Chief Executive Officer,
Mr. Robinson, was granted options to acquire shares of common stock. If the
efforts of the executive officers create additional value for the Company's
shareholders, evidenced by increases in the Company's stock price, the Company's
executive officers will also benefit through appreciation of the potential value
of outstanding options. The Committee believes that the long-term nature of
stock options also encourages executive officers to remain in the employ of the
Company.

Compensation Committee

Nicholas Robinson
Robert W. Paltrow

1996 Stock Option Plan
----------------------

        DirectCom believes that stock option plans provide long term incentives
to its key employees, directors and consultants and encourage the ownership of
DirectCom's Common Stock. In March 1996, DirectCom adopted the Stock Option Plan
("Plan") which provides for the grant of stock options as well as other types of
stock and incentive awards.

        STOCK OPTIONS. The Plan authorizes the grant of nonqualified stock
options to employees, consultants and advisors of DirectCom and its
subsidiaries. Incentive stock options may only be granted to employees of
DirectCom and its subsidiaries. A total of 10,000,000 shares of Common Stock
were authorized for issuance under the Plan which have been reduced to 833,333
shares of Common Stock following the Company's 1-for-12 reverse stock split
effective September 4, 1997. As of December 31, 1998, options to purchase a
total of 340,000 shares of Common Stock were outstanding under the Plan and none
of these options have been exercised. The exercise price of a nonqualified stock
option may be determined by the Board of Directors or the Compensation Committee
in its discretion. The exercise price of an incentive stock option may not be
less than the fair market value of the Common Stock on the date of grant (110%
of the fair market value in the case of an incentive stock option granted to a
stockholder owning in excess of 10% of the Common Stock). The value of Common
Stock (determined at the time of grant) that may be subject to incentive stock
options that become exercisable by any one employee in any one year is limited
by the Internal Revenue Code ("Code") to $100,000. The maximum term of stock
options granted under the Plan is ten years from the date of grant. The Board of
Directors or Compensation Committee shall determine the extent to which an
option shall become and/or remain exercisable in the event of the termination of
employment or service of a participant under certain circumstances, including
retirement, death or disability, subject to certain limitations for incentive
stock options. Under the Plan, the exercise price of an option is payable by the
participant in cash or, in the discretion of the Board of Directors or
Compensation Committee, in Common Stock or a combination of cash and Common
Stock.

        STOCK APPRECIATION RIGHTS. A stock appreciation right may be granted in
connection with an option, either at the time of grant or at any time thereafter
during the term of the option. A stock appreciation right granted in connection
with an option entitled the holder, upon exercise, to surrender the related
option and receive a payment based on the difference between the exercise price
of the related option and the fair market value of DirectCom's Common Stock on
the date of exercise. A stock appreciation right granted in connection with an
option is exercisable only at such time or times as the related option is
exercisable and expires no later than the time when the related option expires.

                                       37
<PAGE>

A stock appreciation right also may be granted without relationship to an option
and will be exercisable as determined by the Board of Directors or Compensation
Committee, but in no event after ten years from the date of grant. A stock
appreciation right granted without relationship to an option entitles the
holder, upon exercise, to a payment based on the difference between the base
price assigned to the stock appreciation right by the Compensation
Committee on the date of grant and the fair market value of DirectCom's Common
Stock on the date of exercise. Payment to the holder in connection with the
exercise of a stock appreciation right may be in cash or shares of Common Stock
or in a combination of cash and shares.

        ADMINISTRATION. The Plan shall be administered by the Board of Directors
or Compensation Committee or such other committee as may be appointed by the
Board. Subject to the limitations set forth in the Plan, the Board of Directors
or Compensation Committee has the authority to determine the persons to whom
awards will be granted, the time at which awards will be granted, the number of
shares, units or other rights subject to each award, the exercise, base or
purchase price of an award (if any), the time or times at which the award will
become vested, exercisable or payable and the duration of the award. The Board
of Directors or Compensation Committee may provide for the acceleration of the
vesting or exercise period of an award at any time prior to its termination or
upon the occurrence of specified events. With the consent of the affected
participant, the Board of Directors or Compensation Committee has the authority
to cancel and replace awards previously granted with new options for the same or
a different number of shares and having a higher or lower exercise or base
price, and may amend the terms of any outstanding awards to provide for an
exercise or base price that is higher or lower than the current exercise or base
price.

        RESERVATION OF SHARES. DirectCom has authorized and reserved 833,333
shares of Common Stock for issuance under the Plan. The shares may be unissued
shares or treasury shares. If any shares of Common Stock that are the subject of
an award are not issued or transferred and cease to be issuable or transferable
for any reason, such shares will no longer be charged against such maximum share
limitation and may again be made subject to awards under the Plan. In the event
of certain corporate reorganizations, recapitalizations, or other specified
corporate transactions affecting DirectCom or the Common Stock, proportionate
adjustments may be made to the number of shares available for grant and to the
number of shares and prices under outstanding awards made before the event.

        TERM AND AMENDMENT. The Plan has a term of ten years, subject to earlier
termination or amendment by the Board of Directors. All awards granted under the
Plan prior to its termination remain outstanding until exercised, paid or
terminated in accordance with their terms. The Board of Directors may amend the
Plan at any time, except that shareholder approval is required for certain
amendments to the extent necessary for purposes of Rule 16b-3 under the
Securities Exchange Act of 1934.

401(k) Savings and Retirement Plan
----------------------------------
        In 1993, DirectCom adopted the provisions of the amended and restated
North American Integrated Marketing 401 (k) Plan (the "401(k) Plan"), a
tax-qualified plan covering all eligible employees, as defined therein. Each
eligible employee may elect to reduce his or her current compensation by 15%,
subject to the statutory limit (a maximum of $10,000 in 1998) and have the
amount of the reduction contributed to the 401(k) Plan. For fiscal 1996
DirectCom had discretion to match employee contribution. Since inception of the
401(k) Plan in 1993, DirectCom had not made any contributions. Effective January
1, 1997, DirectCom has agreed to match 25% up to the first 6% of compensation
that eligible employees contribute to the 401(k) Plan. In addition, DirectCom
may also make discretionary contributions, as defined in the 401(k) Plan, each
year on behalf of all eligible participants.

                                       38
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following table sets forth certain information, as of December 31,
1998, with regard to the beneficial ownership of the Common Stock by (i) each
person known by DirectCom to be the beneficial owner of more than 5% of its
outstanding Common Stock, (ii) the Named Executive Officers and directors and
key employees of DirectCom individually and (iii) the executive officers and
directors of DirectCom as a group.

Name and Address                         Number of Shares           % of  Class
of Beneficial Owner                      Beneficially Owned(1)      Outstanding
-------------------                      ---------------------      -----------

First Commercial and Finance Corp.       2,005,002(2)               65%
  Establishment
c/o Dr. Danni Rothschild
10 Manesse Street
Zurich 800 Switzerland

Wye Investments, a Limited Partnership      360,000(3)             11.6%

c/o Michael Herman, General Partner
North American Communications, Inc.
Route 22 and Route 220, Wye Switches
Duncansville, PA  16635                     360,000(4)             11.6%

c/o Robert W. Paltrow, General Partner
20 Maple Avenue
Armonk, NY  10504

Nicholas Robinson                           240,000(5)              7.7%

Robert J. Bzezensky                          80,000(6)              2.6%

Steven Gasner                                80,000(7)              2.6%

Robert E. Herman                             80,000(5)(3)           2.6%
North American Communications, Inc.
Route 22 and 220, Wye Switches
Duncansville, PA  16635

All officers & directors as a             3,205,002(5)              104%
group (four persons)

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

(1)     Except as otherwise indicated in the footnotes to this table and
        pursuant to applicable community property laws, each stockholder has
        sole voting and investment power with respect to the Common Stock
        listed.

(2)     First Commercial and Finance Corp. Establishment, pursuant to a May 17,
        1996 Convertible Debenture Purchase Agreement with DirectCom, entered
        into a five year irrevocable proxy (effective until September 24, 2001)
        in favor of Nicholas Robinson, DirectCom's Chief Executive Officer, to
        vote all its Common Stock in his discretion. Mr. Robinson may be deemed
        to be the beneficial owner of these shares.

(3)     Represents shares owned directly by Wye Investments, which shares could
        be deemed to be beneficially owned by Mr. Michael Herman as General
        Partner of Wye Investments. Mr. Michael Herman, as General Partner of
        Wye Investments, owns directly only a 1% interest in Wye Investments.
        Robert E. Herman, son of Michael Herman, is a limited partner in Wye
        Investments with a 14% interest in Wye Investment.

(4)     Represents shares owned directly by Aspetong Partners, L.P. which shares
        could be deemed to be beneficially owned by Mr. Paltrow as General
        Partner of Aspetong Partners, L.P. Mr. Paltrow, as General Partner of
        Aspetong Partners, holds directly only a 1% interest in Aspetong
        Partners.

                                       39
<PAGE>

(5)     Represents shares issuable pursuant to stock options that may be
        exercised within 60 days from December 31, 1997. Such shares are not
        deemed outstanding for computing the percentage of beneficial ownership
        of any other person.

(6)     Mr. Bzezensky resigned from the Company effective February 5, 1999.

(7)     Mr. Gasner resigned from the Company effective February 5, 1999.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        North American Communications, Inc. ("NAC"), an affiliate of DirectCom,
is one of several suppliers of mailing services and is awarded contracts by
DirectCom. Robert W. Paltrow, a director of DirectCom, is General Partner of
Aspetong Partners, L.P. which owns 50% of the issued and outstanding stock of
NAC. Wye Investments owns the other 50% of the issued and outstanding stock of
NAC. Mr. Paltrow also is a director of NAC. For fiscal 1998, DirectCom purchased
from NAC $5,497,579 in mailing services. NAC assigned to DirectCom, effective
January 1, 1996, its lease to the Wilmington, Delaware office. In addition, NAC
is a guarantor of DirectCom's $2,500,000 revolving line of credit with United
States National Bank. Finally, DirectCom entered into a Management Agreement
dated December 15, 1997 with NAC under which DirectCom paid 7% of its fiscal
1998 net revenues or $1,728,305 for sales and administrative support services,
client referrals, strategic advice, etc.

        In January 1998, DirectCom agreed to sell 80,000 shares of DirectCom's
Common Stock held as treasury stock to Seth Kanegis, Robert W. Paltrow's
son-in-law, for $150,000. As of December 31, 1998 these shares have not been
sold to Mr. Kenegis. This offer has not been rescinded and is still applicable
as of December 31, 1998.
                                       40
<PAGE>

PART IV

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

(a)     1.     FINANCIAL STATEMENTS
<TABLE>

        The following financial statements are files as a part of this report:
<S>                                    <C>                                             <C>
                                                                                       Page
                                                                                       ----
        Report of Independent Accountants.............................................. 12
        Report of Independent Accountants.............................................. 13
        Consolidated Financial Statements:
             Balance Sheets as of December 31, 1998 and 1997........................... 14
             Statements of Operations for the years ended December 31, 1998, 1997
                and 1996............................................................... 15
             Statements of Shareholders' Equity for the years ended December 31, 1998,
               1997 and 1996........................................................... 16
             Statements of Cash Flows  for the years ended December 31, 1998,
               1997 and 1996........................................................... 17
            Notes to Consolidated Financial Statements................................. 18

(a)     2.     FINANCIAL STATEMENT SCHEDULES

        The following financial statement schedule is filed as part of this report:
                                                                                       Page
                                                                                       ----
        II Valuation of Qualifying Accounts............................................ 33

        All other schedules are omitted because they are not required or the
         required information is shown in the financial statements or notes
         thereto.


(a)     3      Exhibits:                                                                Page
               --------                                                                 ----

        3.1     Amended and Restated Certificate of Incorporation.
                The Certificate of Ownership and Merger was filed with
                DirectCom's Form 10-K on April 20, 1990 and
                is hereby incorporated by reference.                                      ___

        3.2     Bylaws of the Corporation already have been filed with
                DirectCom's prior Registration Statement effective May 18, 1989
                and are hereby incorporated by reference.                                 N/A

        4.1     Form of Common Stock Certificate (specimen) has been filed with
                DirectCom's Registration Statement effective May 18, 1989, and
                is hereby incorporated by reference.                                      N/A

        10.1    Office Lease Agreement between Garrett Mountain                           ___
                Office Center Associates-I and DirectCom, with
                regard to the West Paterson, New Jersey office has
                been filed with DirectCom's 10-K for the year
                ended December 31, 1996 and is hereby incorporated
                by reference.

        10.2    Stock Option Plan has been filed with DirectCom's 10K for the
                year ended December 31, 1997 and is hereby incorporated
                by reference.                                                             ___

        11.1    Statement regarding the computation of per-share earnings is
                included in Note 2 to Financial Statements on sequentially
                numbered page 20 and is hereby incorporated by reference.                 N/A


        21      List of Subsidiaries has been filed with DirectCom's 10-K for
                the year ended Decemer 31, 1997 and is hereby incorporated
                by reference.                                                             ___
                                       41
<PAGE>

        27      Financial Data Schedule (filed herewith)                                   44
</TABLE>

(b)             DirectCom did not file any reports on Form 8-K during the
                fourth quarter of 1998.


                                       42
<PAGE>




SIGNATURES

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

DIRECTCOM, Inc.



By:  /s/Nicholas Robinson
     --------------------
       Nicholas Robinson                                         March 31, 1999
       Chief Executive Officer and Chairman of the Board





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



                                          Title                    Date
                                          -----                    ----

By:/s/Nicholas Robinson                  President and Chief      March 31, 1999
   ---------------------------------     Executive Officer
   Nicholas Robinson Chairman of the Board



By:/s/ Robert W. Paltrow                 Director,                March 31, 1999
   ---------------------------------     Secretary/Treasurer
     Robert W. Paltrow



By:/s/ Robert E. Herman                  Director                 March 31, 1999
   --------------------------------
     Robert E. Herman

                                       43