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

                                    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, 1999
                         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)

20 Maple Avenue                                               10504
Armonk, New York                                            (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (914) 273-8620

           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 616,981 shares of voting stock held
by non-affiliates of the Registrant as of March 24, 2000 (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 $327,000.

         The number of shares of Common Stock of the Registrant outstanding as
of March 24, 2000 was1,656,981.

<PAGE>
                                                      PART I


ITEM 1. BUSINESS.

General
-------

         DirectCom, Inc. ("DirectCom" or the "Company"), established in 1989, is
a full service direct marketing company providing direct marketing services to
direct marketers. These services include 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 abandoned its database services business in 1999, which
included strategic consulting, data warehouse development, data mining, list
processing and data enhancement. The Company's decision to discontinue this line
of business was a result of the departure of two former executive's responsible
for this business and the loss of a large client for these services.

         DirectCom is headquartered in Armonk, New York, where it 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., 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; (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.

DirectCom Products and Services
-------------------------------

         DirectCom provides customized services for a specific component of a
client's advertising or marketing program, such as 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.

         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 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.

<PAGE>

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. Two customers, Capital One and American Express, accounted for more
than 10% of DirectCom's sales revenues in 1999. Capital One ceased to be a
client of the Company effective December 1999. Capital One accounted for
approximately 43% of the Company's 1999 revenue. The Company is actively seeking
new clients to minimize the financial impact of losing Capital One as a client.
In addition, DirectCom's customers include, among others, AT&T, First USA, and
Grey, Inc.. 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 trade companies as
Axciom Corporation, Harte-Hanks Communications, Fair Isaac & Company, May &
Speh, Metromail Corporation, Big Flower Holdings and World Color Press.

Employees
---------

         DirectCom employed a total of 80 people as of December 31, 1999,
comprised of eight people in its creative business and 72 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 RIS Paper and Finch, Pruyn &
Company. Color Graphics purchases most of its ink from larger suppliers
of ink, including Monarch Color Corp. and Flint Ink. Raw materials inventory is
maintained on a just-in-time basis.


                                       3
<PAGE>

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 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 in Armonk, New York with its affiliate,
North American Communications, Inc. ("NAC"). The Company has left its former
headquarters at 3 Garret Mountain Plaza, West Paterson, New Jersey 07424, where
it 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.
The Company is attempting to sublet this office space.

         Color Graphics 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 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
1999.


                                       4
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR 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, 1999, there were 590 shareholders of DirectCom's
Common Stock.

         DirectCom has not issued 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, 1999,
1998, 1997, 1996 AND 1995, HAS BEEN DERIVED FROM THE FINANCIAL STATEMENTS,
INCLUDING THE BALANCE SHEETS AS OF DECEMBER 31, 1999 AND DECEMBER 31, 1998, AND
THE RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE EACH OF THE THREE
YEARS IN THE PERIOD ENDED DECEMBER 31, 1999, 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>

                                                    1999           1998            1997           1996           1995
STATEMENT OF OPERATIONS DATA
<S>                                                <C>             <C>             <C>             <C>             <C>
   NET REVENUE                                     $ 17,881,930    $ 20,374,662    $ 20,592,828    $  7,120,764    $  1,377,421
   COSTS AND EXPENSES                                15,506,773      17,405,862      17,596,593       6,235,948       1,341,570
   OTHER INCOME (EXPENSES)                              (34,404)        (40,137)        (19,833)         74,961             -
   PROVISION FOR INCOME TAXES                           952,100       1,200,000       1,331,760         383,640          14,220
                                                   ------------    ------------    ------------    ------------    ------------
   INCOME FROM CONTINUING OPERATIONS                  1,388,653       1,728,663       1,644,642         576,138          21,631
   INCOME (LOSS) FROM DISCONTINUED OPERATIONS          (743,748)        135,571         (32,048)        493,134          80,951
   MINORITY INTEREST IN NET INCOME OF
    SUBSIDIARY                                         (111,442)        (97,783)       (230,484)        (56,064)            -
                                                   ------------    ------------    ------------    ------------    ------------
  NET INCOME                                       $    533,463    $  1,766,451    $  1,382,110    $  1,013,208    $    102,582
                                                   ============    ============    ============    ============    ============

BASIC EARNINGS PER SHARE CONTINUING OPERATIONS     $       0.41    $       0.53    $       0.46    $       0.17    $       0.01

DILUTED EARNINGS PER SHARE CONTINUING              $       0.41    $       0.52    $       0.45    $       0.17    $       0.01
OPERATIONS

BALANCE SHEET DATA
   TOTAL ASSETS - CONTINUING OPERATIONS            $ 10,013,929    $ 13,102,491    $ 12,888,888    $  9,195,571   $  1,858,505
   TOTAL ASSETS - DISCONTINUED OPERATIONS                48,304       1,195,649       1,410,880       1,038,237         563,905
   TOTAL ASSETS                                      10,062,233      14,298,140      14,299,768      10,233,808       2,422,410
   TOTAL LIABILITIES - CONTINUING OPERATIONS          7,790,455       9,251,999      11,045,742       8,266,285       1,524,126
   TOTAL LIABILITIES - DISCONTINUED OPERATIONS          159,400         289,326         263,662         509,269         653,239
   TOTAL LIABILITIES                                  7,949,855       9,541,325      11,309,404       8,775,554       2,177,365
   SHAREHOLDERS' EQUITY (DEFICIT)                  $  2,112,378    $  4,756,815    $  2,990,364    $  1,458,254    $    245,045
</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. re-evaluated the Company's directional and growth strategies
during 1999. The Company's main focus of attention in this evaluation process
was directed toward its database operations. The database operations consisted
primarily of customer database management and maintenance services for its
clients. The Company has phased out these services, as of September 30, 1999. As
part of this process, the Company relocated their headquarters to Armonk, New
York.

The Company continues to pursue its goal of providing seamless, integrated
marketing and printing services to direct marketers through its printing and
agency operations. DirectCom's strategy is to provide unmatched values in
consulting, fulfillment, agency creative, production management, printing and
direct mail to deliver 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,

                                              1999
                                              ----

                             Agency           Printing            Total
                             ------           --------            -----

Revenues                   $ 7,969,108       $ 9,912,822      $ 17,881,930
Gross profit               $ 1,965,098       $ 4,295,999      $  6,261,097
Operating income           $   941,396       $ 1,399,357      $  2,340,753

                                              1998
                                              ----
Revenues                   $ 8,286,738      $ 12,087,924      $ 20,374,662
Gross profit               $ 2,741,637      $  5,229,542      $  7,971,179
Operating income           $ 1,578,135      $  1,350,528      $  2,928,663

                                              1997
                                              ----
Revenues                   $ 6,035,215      $ 14,557,613      $ 20,592,828
Gross profit               $   680,837      $  6,815,584      $  7,496,421
Operating income           $   672,199      $  2,304,203      $  2,976,402


Revenues
--------

Net revenue decreased $2,492,732 from $20,374,662 in 1998 to $17,881,930 in
1999. The revenue decline is primarily attributed to the printing segment of the
Company. The printing revenue decrease relates to decreased production for a
specific customer, due to the customer restructuring their pricing requirements.
Color Graphics made every effort to meet the competitive pricing structure, but
made a conscious decision not to forego product quality. The agency segment
experienced a revenue decline during the second half of 1999, due to the loss of
a significant customer. Management believes the loss of this common significant
customer may have short-term adverse impact on future earnings of the Company,
but anticipates the Company will remain competitive and anticipates replacing
the revenue loss through the establishment of relationships with new agency and
printing customers. Net revenue decreased $218,166 from $20,592,828 in 1997 to
$20,374,662 in 1998. The revenue loss was primarily attributed to the printing
segment and the loss of two significant printing customers. The agency increase
in revenue resulted primarily from increased sales to existing customers.

Customers in the banking and credit card industry accounted for 75%, 84% and 92%
of the Company's revenues in 1999, 1998 and 1997,respectively.


                                       7
<PAGE>
Cost of Revenue
---------------

The Company's cost of revenue, as a percentage of net revenues, was 65%, 60.9%
and 63.6% in 1999, 1998 and 1997, respectively.

The agency cost of revenue in 1999, in comparison to agency revenues, increased
8.4% from 1998 and decreased 21.8% in 1998 as compared to 1997. The current
period cost of revenue increase as a percentage of agency revenue, other costs,
accounts for 5% of the increase. The increase resulted from outsourcing several
agency creative projects that yielded a lower profit in addition to increased
costs associated with salary expenses. The related company activity accounts for
3.4% of the current increase. The 1998 decrease resulted primarily from a
decrease in related company costs.

The printing cost of revenue in 1999, as a percentage of printing revenue,
remained relatively consistent producing less that a percentage point
fluctuation in comparison to 1998. The 1998 printing cost of revenue increase
resulted 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 decreased $1,023,367 in 1999 as
compared to 1998 and increased $725,987 in 1998 as compared to 1997. The current
period decrease resulted primarily from expenditures associated with the
relocation of Color Graphics in 1998, a decrease in insurance expenditures due a
change in the Company's insurance coverage from a self insured plan, a reduction
in the bad debt and legal expense. The increase in 1998 expenses resulted
primarily from expenditures associated with moving expenses for the relocation
of Color Graphics. Additional increases resulted from insurance expenses related
to the Company being self insured and incurring a few significant claims.

Interest Expense
----------------

Interest expense decreased $241,233 in 1999 as compared to 1998 and increased
$113,107 in 1998 as compared to 1997. The current period decrease relates to the
decrease principle balances due on long term debt. 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.

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 $809 in 1999 as compared to 1998
and decreased $127,551 in 1998 as compared to 1997. The decreases resulted
primarily from the continued reduction in depreciable value of prior property,
plant and equipment purchases. Depreciation recorded on the prior year additions
did not offset the reductions in depreciation based or increase in fully
depreciated assets.

                                       8
<PAGE>

Other income (expense)
----------------------

During 1999, the Company entered into a lease agreement with a related party
resulting in proceeds of $140,000 (Note 9). In 1998, the Company sold certain
fully depreciated assets for total proceeds of $199,749. Also, the Company wrote
off assets with a net book value of $73,500.

Provision for Income Taxes
--------------------------

Provision for income taxes decreased $247,900 in 1999 as compared to 1998 and
decreased $131,760 in 1998 as compared to 1997. The decrease in 1999 is due to
the decrease in taxable income. A reconciliation of the effective tax rate is
included in Note 16 of Notes to Consolidated Financial Statements. The effective
tax rate was 40.7%, 41.0% and 44.7% for the years ended December 31, 1999, 1998
and 1997, respectively.

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

<TABLE>
<CAPTION>

                                             1999          1998            1997
                                             ----          ----            ----
<S>                                     <C>            <C>             <C>
Working capital                         $ 1,854,089    $ 3,257,849     $ 3,552,203
Cash                                      1,560,893      3,026,447       2,837,427
Cash - restricted                                 -              -       1,400,000
Cash provided by operating activities     2,176,085      1,472,827       5,777,447
Cash used in investing activities           317,528        881,854       2,335,135
Cash used in financing activities         3,597,784        783,871         109,424
</TABLE>

Working capital decreased $1,403,760 at December 31, 1999 as compared to
December 31, 1998, primarily as a result of decreased cash, decreased
receivables and a decrease in inventory. Working capital decreased $294,354 at
December 31, 1998 as compared to December 31, 1997, primarily as a result of the
expenditure of restricted cash for the renovation, remodeling and moving
expenses associated with the relocation of Color Graphics.

The increase in cash flows from operations in 1999 as compared to 1998 resulted
primarily from strong cash collections. 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 decrease of cash used in investing activities in 1999 as compared to 1998
resulted from decreased capital expenditures. 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 increase in cash used in financing activities in 1999 as compared to 1998
resulted from the Company's purchase of 2,005,002 shares of its common stock.
The 1998 as compared to 1997 increase in financing activity resulted from the
reduction in the Company's long term debt.

At December 31, 1998, the Company had outstanding debt of $5,449,127 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, 2000.

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.


                                       10
<PAGE>

Impact of Year 2000 Issues
----------------------------

DirectCom experienced no year 2000 - related disruptions to business operations.
The Company will continue to monitor its information systems to assess whether
its systems are at risk of misinterpreting any future dates and will develop, if
needed, appropriate contingent plans to prevent any system malfunction or
correct any system failures. The Company has not been informed of any such
problem experienced by its suppliers or customers.

However, it is too soon to conclude that there will not be any problem arising
from the Year 2000 problem. The Company will continue to monitor its significant
vendors of goods and services and customers with respect to any Year 2000
problems they may encounter, as those issues may effect the Company's ability to
continue operations, or might adversely affect its financial position, results
of operations and cash flows. At this time, the Company does not believe that
these potential problems will materially impact the ability to continue it
operations or effect its financial statements. Any delays, mistakes, or failures
could have a significant impact in the Company's financial condition and
profitability.

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.

We have audited the consolidated financial statements and the financial
statement schedule of DirectCom, Inc., and subsidiary as of and for the year
ended December 31, 1999, listed in Item 14(a) of this Form 10-K. These financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of DirectCom, Inc.
and Subsidiary as of December 31, 1999, and the consolidated results of their
operations and their cash flows for the year ended December 31, 1999, in
conformity with generally accepted accounting principles. In addition, 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.

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


S/ Goff, Ellenbogen, Backa & Alfera, LLC


March 24, 2000
Pittsburgh, Pennsylvania


                                       12
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS



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

In our opinion, the consolidated balance sheet as of December 31, 1998 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two years in the period ended December 31, 1998 present
fairly, in all material respects, the financial position, results of operations
and cash flows of DirectCom, Inc. and its subsidiaries at December 31, 1998 and
for each of the two years in the period ended December 31, 1998, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, 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. We have not audited the consolidated financial
statements of DirectCom, Inc. for any period subsequent to December 31, 1998.

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


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
McLean, Virginia
March 5, 1999


                                       13
<PAGE>
                                 DIRECTCOM, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                    ASSETS
                                                                                           December 31,
                                                                                 ------------------------------
                                                                                     1999            1998
<S>                                                                                 <C>            <C>
CURRENT ASSETS
    Cash                                                                            $ 1,560,893    $ 3,026,447
    Accounts receivable, net of allowance for doubtful accounts of
     $176,220 in 1999 and $162,172 in 1998                                              842,398      1,883,927
    Accounts receivable - related company                                               195,496              -
    Inventory                                                                           297,799        509,009
    Prepaid and other current assets                                                    145,182        152,281
                                                                                    -----------     ----------
         Total current assets                                                         3,041,768      5,571,664
PROPERTY, PLANT AND EQUIPMENT, Net                                                    6,393,502      6,943,055
OTHER ASSETS                                                                            583,659        587,772
NET ASSETS (LIABILITIES) OF DISCONTINUED OPERATIONS                                    (111,096)      906,323
                                                                                    -----------     ----------

TOTAL ASSETS                                                                       $ 9,907,833   $ 14,008,814
                                                                                   ============  ============

                                     LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Current maturities of long-term debt                                                384,476        404,910
    Accounts payable                                                                    192,557        306,362
    Accounts payable - related company                                                        -      1,094,567
    Income taxes payable                                                                204,894        214,909
    Accrued expenses and other current liabilities                                      334,994        293,067
    Deferred revenue                                                                     70,758              -
                                                                                    -----------     ----------
         Total current liabilities                                                    1,187,679      2,313,815
LONG-TERM DEBT                                                                        5,064,651      5,464,101
DEFERRED INCOME TAXES                                                                   531,600        574,000
MINORITY INTEREST                                                                     1,011,525        900,083
                                                                                    -----------     ----------
         TOTAL LIABILITIES                                                            7,795,455      9,251,999
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: 3,661,983 and 3,421,983 shares, respectively, of which 2,325,002
     shares in 1999 and 320,000 shares in 1998 are held as treasury stock.                   38             34
    Paid-in capital                                                                     659,777        650,181
    Retained earnings                                                                 4,945,063      4,411,600
                                                                                    -----------     ----------
                                                                                      5,604,878      5,061,815
    Less treasury stock, at cost                                                     (3,492,500)      (305,000)
                                                                                    -----------     ----------
         TOTAL SHAREHOLDERS' EQUITY                                                   2,112,378      4,756,815
                                                                                    -----------     ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                         $ 9,907,833   $ 14,008,814
                                                                                   ============  ============

</TABLE>

                 See notes to consolidated financial statements


                                       14
<PAGE>


                                 DIRECTCOM, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                      1999            1998           1997
                                                                                      ----            ----           ----
<S>                                                                                 <C>            <C>            <C>
REVENUES
  Agency                                                                            $ 7,969,108    $ 8,286,738    $ 6,035,215
  Printing                                                                            7,649,801     10,021,179     13,084,090
  Printing - related company                                                          2,263,021      2,066,745      1,473,523
                                                                                    -----------    -----------     ----------
        Total revenues                                                               17,881,930     20,374,662     20,592,828

COST OF REVENUE
  Agency - related company                                                            5,556,655      5,497,579      4,799,400
  Agency - other                                                                        447,355         47,522        554,978
  Printing                                                                            5,390,788      6,548,421      7,412,553
  Printing - related company                                                            226,035        309,961        329,476
                                                                                    -----------    -----------     ----------
        Total cost of revenue                                                        11,620,833     12,403,483     13,096,407

  Selling, general and
    administrative expenses                                                           1,701,333      2,724,700      1,998,713
  Administrative fee - related party (Note 8)                                         1,320,077      1,570,932      1,667,175
  Depreciation and amortization                                                         705,938        706,747        834,298
                                                                                    -----------    -----------     ----------
        Total costs and expenses                                                     15,348,181     17,405,862     17,596,593
                                                                                    -----------    -----------     ----------

OTHER INCOME (EXPENSE)
  Interest expense                                                                     (202,242)      (443,475)      (330,368)
  Gain on sale of equipment                                                                   -        199,749              -
  Loss on disposal of assets                                                                  -        (73,500)             -
  Share on investee loss (Note 8)                                                      (158,592)             -              -
  Rental income - related party                                                         140,000              -              -
  Miscellaneous income                                                                   27,838        277,089        310,535
                                                                                    -----------    -----------     ----------

        Total other income (expense)                                                   (192,996)       (40,137)       (19,833)
                                                                                    -----------    -----------     ----------

Income from continuing operations before income taxes,
  minority interest and discontinued operations                                       2,340,753      2,928,663      2,976,402
Provision for income taxes                                                              952,100      1,200,000      1,331,760
                                                                                    -----------    -----------     ----------
Income from continuing operations before minority interest and
 discontinued operations                                                              1,388,653      1,728,663      1,644,642
Minority interest in income of subsidiary                                               111,442         97,783        230,484
                                                                                    -----------    -----------     ----------

Income from continuing operations                                                     1,277,211      1,630,880      1,414,158
Income (loss) from discontinued operations (Note 3)                                    (743,748)       135,571        (32,048)
                                                                                    -----------    -----------     ----------

Net income                                                                           $  533,463    $ 1,766,451    $ 1,382,110
                                                                                     ==========   ============    ===========

BASIC EARNINGS PER SHARE
       Continuing operations                                                            $ 0.41         $ 0.53         $ 0.46
                                                                                        =======        =======        ======
       Discontinued operations                                                          $ (0.24)       $ 0.04         $ (0.01)
                                                                                        =======        =======        =======

DILUTED EARNINGS PER SHARE
       Continuing operations                                                            $  0.41        $ 0.52         $ 0.45
                                                                                        =======        ======         ======
       Discontinued operations                                                          $ (0.24)       $ 0.04         $ (0.01)
                                                                                        =======        ======         =======

</TABLE>


                 See notes to consolidated financial statements.

                                       15
<PAGE>


                                        DIRECTCOM, INC.

                        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                              Common Stock
                                              -------------
                                         Number                       Paid - in      Retained          Treasury
                                        of Shares        Amount        Capital       Earnings            Stock            Total
                                        ---------        ------        -------       --------            -----            -----

<S>                                    <C>               <C>         <C>          <C>                <C>               <C>
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           3,421,983             34       650,181      2,645,149          (305,000)         2,990,364

Net income                                  -               -              -       1,766,451                -           1,766,451
                                      ----------      ----------     --------     ----------         ---------          ---------

Balance at December 31, 1998           3,421,983             34       650,181      4,411,600          (305,000)         4,756,815
                                      ==========      =========      ========     ==========         =========          =========

Exercise of options                      240,000              4         9,596            -                  -               9,600

Purchase of treasury stock                  -               -              -             -           (3,187,500)       (3,187,500)

Net income                                  -               -              -        533,463                 -             533,463
                                      ----------      ----------     --------     ----------         ---------          ---------

Balance at December 31, 1999          3,661,983             38        659,777      4,945,063        (3,492,500)         2,112,378
                                      ==========      =========      ========      =========         =========          =========

</TABLE>



                                       16
<PAGE>





                                 DIRECTCOM, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                     1999            1998           1997
                                                                                     ----            ----           ----
<S>                                                                                 <C>            <C>            <C>
Cash flows from operating activities:
    Net income                                                                      $ 1,277,211    $ 1,630,980    $ 1,414,158
    Adjustments to reconcile net income
        to net cash provided by operating activities:
        Depreciation and amortization                                                   705,938        706,747        834,298
        Bad debt expense                                                                 14,048         60,000         95,906
        Share of investee loss                                                          158,592              -              -
        Buyout of stock option                                                                -              -        500,000
        Minority interest                                                               111,442         97,783        230,484
        Deferred taxes                                                                  (42,400)         1,000         30,800
        Gain on sale of equipment                                                             -       (199,749)             -
        Loss on asset disposal                                                                -         73,500              -
        (Increase) decrease in:
           Accounts receivable                                                        1,027,481       (442,215)     2,639,019
           Accounts receivable - related company                                       (195,496)
           Inventory                                                                    211,210        (58,172)        15,280
           Prepaid and other current assets                                               7,098        664,936       (428,097)
           Other assets                                                                   6,663         46,672       (316,094)
        Increase (decrease) in:
           Accounts payable                                                            (113,805)        22,599       (154,783)
           Accounts payable - related company                                        (1,094,567)    (1,208,991)     1,932,243
           Income taxes payable                                                         (10,015)       132,062       (620,635)
           Accrued expenses and other current liabilities                                41,927        (54,325)      (395,132)
           Long term liabilities                                                              -              -              -
           Deferred revenue                                                              70,758              -              -
                                                                                     ----------     ----------     ----------

                 Net cash provided by operating activities                            2,176,085      1,472,827      5,777,447
                                                                                     ----------     ----------     ----------

Cash flows from investing activities:
       Purchase of furniture and equipment                                             (149,174)    (2,231,603)      (972,135)
       Investment in partnership                                                       (175,000)      (250,000)             -
       Proceeds from sale of equipment                                                    6,646        199,749         37,000
      Change in restricted cash                                                              -       1,400,000     (1,400,000)
                                                                                     ----------     ----------     ----------

                 Net cash used in investing activities                                 (317,528)      (881,854)    (2,335,135)
                                                                                     ----------     ----------     ----------

Cash flows from financing activities:
        Repayments of notes payable                                                           -              -       (459,418)
        Repayments of long-term debt                                                   (419,884)      (783,871)      (210,006)
        Proceeds from issuance of long-term debt                                              -              -      1,400,000
        Repayments of long-term debt - related company                                        -              -       (990,000)
        Sale of common stock                                                                  -              -        150,000
        Purchase of treasury stock                                                   (3,187,500)             -              -
        Exercised stock options                                                           9,600              -              -
                                                                                     ----------     ----------     ----------

                 Net cash used in financing activities                               (3,597,784)      (783,871)      (109,424)
                                                                                     ----------     ----------     ----------

Net cash (used) provided by discontinued operations                                     273,673        381,918     (1,576,091)
                                                                                     ----------     ----------     ----------

Net (decrease) increase in cash                                                      (1,465,554)       189,020      1,756,797

Cash at beginning of period                                                           3,026,447      2,837,427      1,080,630
                                                                                     ----------     ----------     ----------

Cash at end of period                                                               $ 1,560,893    $ 3,026,447    $ 2,837,427
                                                                                    ============   ============   ===========

</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 advertising and marketing services and maintains offices in
Armonk, New York 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, 1999, the Company's uninsured cash balances on
deposit, per the bank's records, in excess of insured limits totaled $1,054,227.

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, 1999.


REVENUE RECOGNITION

The Company provides creative, marketing 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, 1999, 1998 and 1997 were $14,317, $2,468 and $2,950, 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.

COMPREHENSIVE INCOME

The Company has no item of comprehensive income to report.

ACCOUNTING PRONOUNCEMENTS

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 - DISCONTINUED OPERATIONS

Effective September 30, 1999 the Company decided to close its database
operations in West Paterson, New Jersey. Accordingly, the results of the
database operations are shown as discontinued operations with prior years
restated in accordance with Accounting Principles Board Opinion No. 30.
Components of amounts reflected in the statements of income, balance sheets and
statements of cash flow are as follows:
<TABLE>
<CAPTION>
                                                               1999             1998             1997
                                                               ----             ----             ----
<S>                                                       <C>              <C>              <C>
Statement of income data
        Revenues                                          $ 1,498,871      $ 4,026,162      $ 4,514,955
        Costs and expenses                                 (1,951,004)      (3,785,691)      (4,570,363)
                                                           -----------      -----------      -----------
        Operating income                                     (452,133)         240,471          (55,408)
        Income tax benefit (expense)                         188,700          (104,900)          23,360
                                                           -----------      -----------      -----------
        Income (loss)                                        (263,433)      $  135,571        $ (32,048)
                                                           ===========      ===========      ===========

        Provision for loss during phase out period           (805,215)
        Income tax benefit                                   324,900
                                                             -------
        Income (loss)                                        (480,315)
                                                             ---------
                                                           $ (743,748)
                                                           ===========
Balance sheet data
        Current Assets                                          1,304          614,599          741,052
        Property plant and equipment, net                           -          430,412          519,388
        Other assets                                           47,000          150,638          150,441
        Current liabilities                                    21,500          221,440          220,832
        Non current liabilities                               137,900           67,885           42,830
                                                           -----------      -----------      -----------
        Net assets (liabilities) of discontinued
         operations                                          (111,096)         906,323        1,147,218
                                                           ===========      ===========      ===========
Cash flow data
        Cash flow from operations                           $ 261,458        $ 526,800      $(1,123,786)
        Cash flow from investments                             12,215         (144,882)        (445,130)
        Cash flow from financing activities                        -                -            (7,175)
                                                           -----------      -----------      -----------
        Cash provided (used) by discontinued operations    $  273,673        $ 381,918       $(1,576,091)
                                                           ==========       ===========      ============
</TABLE>

                                       21
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 4 - 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
Statement of income data 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 was repaid during 1999, after offsetting the
$200,000 advanced to the consultant in June 1998.

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.


NOTE 5 - INVENTORIES

Inventories consist of the following:
                                           December 31,
                                       1999             1998
                                       ----             ----

Paper                              $ 155,552        $ 282,706
Other raw materials                   69,376           67,178
Work-in-process                       72,871          159,125
                                   ----------       ---------
                                   $ 297,799        $ 509,009
                                   ==========       =========

NOTE 6 - PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consist of the following:

                                              December 31,
                                          1999             1998
                                          ----             ----

Deferred income taxes                  $ 106,000        $ 101,000
Prepaid income taxes                           -           25,765
Other current assets                      39,182           25,516
                                      ----------       ----------
                                       $ 145,182        $ 152,281
                                      ==========       ==========

                                       22
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 7 - PROPERTY PLANT AND EQUIPMENT

Property plant and equipment consist of the following:

                                                          December 31,
                                                      1999             1998
                                                      ----             ----

        Machinery and equipment                   $ 4,686,741      $ 4,436,118
        Building and land                           3,779,193        3,699,539
        Office furniture and equipment                 94,559          101,205
        Transportation equipment                       24,901           24,901
        Computer equipment and software                33,607           30,297
        Leasehold improvements                          9,117            9,117
        Construction in Progress                            -          184,414
                                                  -----------      -----------
                                                    8,628,118        8,485,591
        Accumulated depreciation and amortization  (2,234,616)      (1,542,536)
                                                  -----------      -----------

                                                  $ 6,393,502      $ 6,943,055
                                                  ===========      ===========

NOTE 8 - OTHER ASSETS

Other assets consist of the following:

                                                         December 31,
                                                     1999             1998
                                                     ----             ----

        Cash surrender value of life insurance       $ 55,913         $ 48,993
        Deposits                                            -              200
        Debt issuance costs                           255,167          269,026
        Investment in affiliate                       266,409          250,000
        Other                                           6,170           19,553
                                                  -----------       ----------
                                                  $   583,659        $ 587,772
                                                  ===========       ==========

In the fourth quarter of 1998, the Company invested $250,000 in Direct Sort,
L.P., representing a 50% interest in this entity. The Company is accounting for
this investment under the equity method of accounting. During 1999, the Company
invested an additional $175,000 in DirectSort L.P.. The Company's investment was
reduced by $158,591, representing its share of the operating loss of Direct Sort
L.P. for 1999.

                                       23
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)



NOTE 9 - 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 RECEIVABLE -- ACCOUNTS PAYABLE - RELATED COMPANY

The accounts receivable - related company at December 31, 1999 represents
amounts due the Company from NAC for printing services and lease revenue. Offset
against the related party receivable are payables due NAC in the amount of
$230,789 at December 31, 1999.

The accounts payable - related company at December 31, 1998 represents amounts
due to NAC for printing and mailing services. Offsets against the related party
payable are receivables due from NAC in the amount of $60,567 at December 31,
1998.

LEASE REVENUE -- RELATED COMPANY

During 1999, the Company agreed to lease NAC equipment under two operating
leases. The lease terms are three years, cancelable upon a thirty day notice by
either party, without penalty.

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,
1999, 1998, and 1997, the expense recorded for these services was approximately
$9,000, $12,000, and $28,300, respectively. As of December 31, 1999 there was no
amount payable for these services.

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, 1999, 1998 and 1997 was $64,500, $40,066 and
$94,032, respectively. As of December 31, 1999 there was no amount payable for
these services.


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, 1999, 1998 and 1997, the administrative fee was
$1,320,077, $1,570,932 and $1,667,175, respectively. The amount due NAC as of
December 31, 1999 and 1998 is $149,300 and $469,768, respectively.

                                       24
<PAGE>

                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 10 - LINES OF CREDIT

At December 31, 1999 and 1998 the Company has available a revolving line of
credit, which expires on June 30, 2000, in the maximum aggregate principal
amount of $1,000,000 with interest payable monthly, which expires on June 30,
2000, at the lender's basic rate plus 1 percent (8.98 percent at December 31,
1999). 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, 1999 and 1998,
respectively.

At December 31, 1999, the Company's subsidiary, Color Graphics, had a revolving
line of credit with United States National Bank, which expires on June 30, 2000,
in the maximum aggregate principal amount of $2,500,000 with interest payable
monthly at the lender's rate plus 1% (8.98 percent at December 31, 1999). The
Company intends to renew this revolving line of credit upon expiration. The loan
agreement permits borrowing on a percentage of qualified accounts receivable 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 11. There were no borrowings outstanding under
this line of credit at December 31, 1999 and 1998, respectively.

NOTE 11 - LONG-TERM DEBT

Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                    1998              1998
                                                                                    ----              ----
<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 10
for collateral guarantees).                                                       $ 2,469,127      $ 2,729,011

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.                                                                      2,980,000        3,090,000

Promissory note B payable to a consultant with interest at 8%
due on April 10, 1999 (Note 4).                                                             -           50,000
                                                                                  -----------      -----------

                                                                                    5,449,127        5,869,011
                          Less: Current maturities                                    384,476          404,910
                                                                                  -----------      -----------
                                                                                  $ 5,064,651      $ 5,464,101
                                                                                  ============     ===========
</TABLE>

                                       25
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 11 - LONG-TERM DEBT (Continued)

At December 31, 1999 the scheduled principal payments on the debt are as
follows:

                        2000                    $   384,476
                        2001                        418,012
                        2002                        453,778
                        2003                        492,719
                        2004                        534,839
                        Thereafter                3,165,303
                                                -----------
                                                $ 5,449,127
                                                ===========


In connection with the note payable to Chase Manhattan Trust Company, N.A. the
Company's subsidiary has signed an agreement as guarantor of the letter of
credit aggregating $3,058,904. This letter of credit expires on December 22,
2002.


NOTE 12 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

                                            December 31,
                                        1999             1998
                                        ----             ----

Accrued payroll                     $ 121,129        $ 121,989
Accrued vacation                      131,014          125,059
Accrued healthcare                          -           25,650
Accrued expenses - other               82,851           20,369
                                    ----------       ---------
                                    $ 334,994        $ 293,067
                                    ==========       =========

NOTE 13 - LEASES

The Company leases its Wilmington, Delaware office facility under a
noncancelable operating lease, which expires April 30, 2001. The future minimum
lease payments at December 31, 1999 under the agreements and other operating
leases are as follows:


                         2000          37,000
                         2001          12,532
                                     --------
                                     $ 49,533
                                     ========


Rent expense was $40,020, $312,675 and $451,840 for the years ended December 31,
1999, 1998 and 1997, respectively.

                                       26
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 14 - 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 $24,054, $19,054 and $26,144
for the years ended December 31, 1999, 1998 and 1997, respectively.

NOTE 15 - 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.

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. During 1999, options to purchase
240,000 shares at $.04 per share were exercised. No stock options have been
granted since 1996. As of December 31, 1999, options to purchase 100,000 shares
of Common Stock at $.04 per share were outstanding of which 68,333 shares were
vested. Options for 493,333 shares were available for future grant under the
plan at December 31, 1999. 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).

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.

Treasury Stock

On December 27, 1999, the Company purchased 2,005,002 of common stock for
$3,187,500.

                                       27
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 16 - INCOME TAXES

The provision for income taxes consists of the following:

                                                Year Ended December 31,
                                          1999           1998            1997
                                          ----           ----            ----
Current provision:
           Federal                    $  774,500     $   938,500    $   955,500
           State                         225,000         273,000        275,900
                                      ----------     -----------    -----------
                 Total current           999,500       1,211,500      1,231,400
                                      ----------     -----------    -----------

Deferred (benefit) provision:
           Federal                        (36,800)         (8,800)       76,760
           State                          (10,600)         (2,700)       23,600
                                      ----------     -----------    -----------
                 Total deferred           (47,400)        (11,500)      100,360
                                      ----------     -----------    -----------

                 Total                $  952,100     $ 1,200,000    $ 1,331,760
                                      ==========     ===========    ===========


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

                                                      1999     1998      1997
                                                      ----     ----      ----

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                              0.1       0.3       1.1
   Accruals                                              -       0.6       3.8
   Other                                               0.7       0.2      (0.1)
                                                       ----      ----     -----

                                                      40.7%     41.0%     44.7%
                                                      =====     =====     =====

                                       28
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 16 - INCOME TAXES (Continued)

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

                                             Year Ended December 31,
                                               1999           1998
                                               ----           ----
Deferred tax liabilities:
  Depreciation                            $ (531,000)     $ (572,327)
                                          ----------      ----------
     Total deferred tax liabilities         (531,000)       (572,327)
                                          ----------      ----------

Deferred tax assets
  Accounts receivable                         48,000          45,580
  Accruals                                    52,406          50,024
  Other                                        5,594           3,723
                                          ----------      ----------
     Total deferred tax assets               106,000          99,327
                                          ----------      ----------

     Net                                  $ (425,000)     $ (473,000)
                                          ==========      ==========

Recorded as:

  Prepaid and other current assets        $  106,000      $  101,000
  Deferred income taxes                     (531,000)       (574,000)
                                          ----------      ----------
                                          $ (425,000)     $ (473,000)
                                          ==========      ==========



NOTE 17 - 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 18%
interest in 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, 1999 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.

Other

The Company is a guarantor of a term note of NAC. As of December 31, 1999, the
outstanding balance of this obligation was approximately $542,000.

                                       29
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 18 - SEGMENT INFORMATION

The Company organizes its business into two segments based on its product and
service offerings: 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.

        1999                  Agency         Printing          Total
        ----                  -------        ---------         -----

             Revenues      $ 7,969,109    $  10,196,425     $  18,165,534
             EBITDA          1,560,527        2,840,646         4,401,173

        1998                  Agency         Printing          Total
        ----                 -------        ---------          -----

             Revenues      $ 8,286,738    $  12,531,313     $  20,818,051
             EBITDA          2,291,462        2,955,017         5,246,479

        1997                  Agency         Printing          Total
        ----                 -------         ---------         -----

             Revenues      $ 6,035,215     $ 15,126,516      $ 21,161,731
             EBITDA            827,999        4,669,709         5,497,708



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, 1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
REVENUES                                      1999               1998                1997
                                              ----               ----                ----
<S>                                     <C>                  <C>                 <C>
Total segment revenues                  $  18,165,534        $ 20,818,051        $ 21,161,731
Elimination of intercompany revenue          (283,604)           (443,389)           (568,903)
                                        -------------        ------------        ------------
Consolidated revenues                   $  17,881,930        $ 20,374,662        $ 20,592,828
                                        =============       =============        ============

EBITDA                                       1999               1998                1997
                                             ----               ----                ----

Total EBITDA for reportable segments    $   4,401,172        $ 5,246,479         $ 5,497,708
Management fee                             (1,320,077)         (1,570,932)         (1,667,175)
Interest expense                             (202,242)           (443,475)           (330,368)
Depreciation and amortization                (705,938)           (706,747)           (834,298)
Other income                                 167,838              403,338             310,535
                                        -------------        ------------        ------------
Consolidated income before taxes        $   2,340,753        $  2,928,663         $ 2,976,402
</TABLE>

                                       30
<PAGE>
                                 DIRECTCOM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 18 - SEGMENT INFORMATION (Continued)

At December 31, 1999 and 1998, approximately 56% and 95%, 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, 1999, 1998 and 1997
the Company earned approximately 74%, 82% and 80%, respectively, of its total
revenues from customers in the banking and credit card industries.

One customer accounted for 43% and 70% of the Company's total revenues for the
year ended December 31, 1999 and 1998, respectively. One customer individually
constituted approximately 28%, 19% and 40%, respectively, of total revenues for
the year ended December 31, 1999, 1998 and 1997.


NOTE 19 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
                                                         Years Ended December 31,
                                                     1999          1998         1997
                                                     ----          ----         ----
<S>                                               <C>          <C>           <C>
Cash paid during the period for:

   Interest                                       $  324,294   $   393,285   $  362,598
                                                  =========    ==========    ==========
   Income taxes                                   $  717,250   $   582,238   $2,472,502
                                                  =========    ==========    ==========
Noncash investing and financing activities
   Issuance of note payable for land and building $        -   $         -   $1,800,000
                                                  =========    ==========    ==========
</TABLE>

                                       31
<PAGE>

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

DECEMBER 31, 1997                                 $12,000        $95,905       $ (780)       $107,125
                                                  =======        =======       ======        ========
DECEMBER 31, 1998                                 $107,125       $60,000       $(4,953)      $162,172
                                                  ========       =======       =======       ========
DECEMBER 31, 1999                                 $162,172       $14,048       $     --      $176,220
                                                  ========       =======       ========      ========
</TABLE>


                                       32
<PAGE>



 ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

     Effective as of March 15, 2000, the Company retained the services of Goff
Ellenbogen Backa & Alfera, LLC ("GEBA") as the Company's certifying accountant
for the performance of accounting and financial reporting services. GEBA
replaces Thompson Dugan, PC ("Thompson"), the firm that was engaged by
Registrant on August 9, 1999 as the independent accountants of the Company. The
Company's decision to dismiss Thompson was a result of the Company's decision to
remain with the individual at Thompson who was primarily responsible for
performing such accounting and financial reporting services when he recently
decided to join GEBA.

                                       33
<PAGE>


                                 DIRECTCOM, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Names, Ages and Positions of the Directors and Executive Officers
-----------------------------------------------------------------
<TABLE>
<CAPTION>
                  Name                               Age               Position
                  ----                               ---               --------
<S>                <C>                              <C>                <C>
         Nicholas Robinson                           34                President and Chairman of the Board,
                                                                         Chief Executive Officer
         Robert W. Paltrow                           58                Director, Secretary and Treasurer
         Robert E. Herman                            38                Director
         Anthony Nardiello                           57                President, Color Graphics
</TABLE>

         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 2002 and Mr. Robinson serves as a director until DirectCom's annual
meeting in 2003. Officers are elected by the Board and serve at the discretion
of the Board.

         Effective February 5, 1999, Messrs. Robert Bzezensky, formerly
President of the Company, and Steven Gasner, formerly a Vice President of the
Company, resigned from the Company. They were the former executives principally
responsible for the Company's database services line of business that the
Company has discontinued. Mr. Robinson now serves as President of the Company.

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

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

         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. 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 Bylaws 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 1999.


                                       34
<PAGE>
<TABLE>
<CAPTION>
                                            Summary Compensation 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 Robsinon        1999       $140,000
  Chairman & CEO         1998       $128,314           --             --              --             --              --
                         1997       $120,000           --             --              --             --              --
Anthony Nardiello        1999       $325,000           --             --              --             --              --
  President, Color       1998       $325,000           --             --              --             --              --
  Graphics               1997       $325,000       $ 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.

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.


                                       35
<PAGE>

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 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 objective. 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
placed at risk in order to provide an incentive toward sustained high
performance. No officer received a bonus in 1999 since the Company did not
attain its projected financial goals.

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


                                       36
<PAGE>

following the Company's 1-for-12 reverse stock split effective September 4,
1997. As of December 31, 1999, options to purchase a total of 100,000 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.
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

                                       37
<PAGE>

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 contributions. Since
inception of the 401(k) Plan in 1993, DirectCom has made no matching
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.


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

         The following table sets forth certain information, as of December 31,
1999, 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.
<TABLE>
<CAPTION>

Name and Address                                              Number of Shares          % of Class
of Beneficial Owner                                         Beneficially Owned(1)       Outstanding (2)
-------------------                                         ---------------------       ---------------

<S>                                                                <C>                         <C>
Wye Investments, a Limited Partnership                             360,000(3)                  22%

c/o Michael Herman, General Partner
North American Communications, Inc.
Route 22 and Route 220, Wye Switches
Duncansville, PA  16635



Aspetong Partners                                                  360,000(4)                  22%

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

Nicholas Robinson                                                  240,000                     14%

Robert E. Herman                                                    80,000(5)(3)                5%
North American Communications, Inc.
Route 22 and 220, Wye Switches
Duncansville, PA  16835

All officers & directors as a                                    1,040,000(4)                  63%
group (two persons)
---------------
</TABLE>

(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)      The Company purchased 2,005,002 shares of Common Stock previously owned
         by First Commercial and Finance Corp. Establishment in November 1999
         for $3,187,500.

(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.

                                       38
<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.


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 1999, DirectCom purchased
from NAC $5,782,690 in mailing services. In addition, NAC is a guarantor of
DirectCom's $3,500,000 revolving line of credit and with U.S. Bank and DirectCom
is guarantor of NAC's $542,000 term loan due October 1, 2006 with U.S. Bank.
Finally, DirectCom entered into a Management Agreement December 15, 1997 with
NAC under which DirectCom paid 7% of its fiscal 1999 net revenues or $1,320,077
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.


                                       39
<PAGE>

                                     PART IV


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

(a)      1.       FINANCIAL STATEMENTS

         The following financial statements are files as a part of this report:
<TABLE>
<CAPTION>
                                                                                                                 Page
                                                                                                                 ----
<S>                                                                                                               <C>
         Report of Independent Public Accountants.............................................................    12
         Report of Independent Public Accountants.............................................................    13
         Consolidated Financial Statements:
              Balance Sheets as of December 31, 1999 and 1998.................................................    14
              Statements of Operations for the years ended December 31, 1999, 1998 and 1997...................    15
              Statements of Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997.........    16
              Statements of Cash Flows  for the years ended December 31, 1999, 1998 and 1997..................    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.................................................................    32

         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 Armonk, New York 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                                                                              ___

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


<PAGE>
<TABLE>
<CAPTION>


<S>      <C>                                                                                                      <C>
         21        List of Subsidiaries                                                                           ___

         27        Financial Data Schedule (filed herewith)                                                       ___

(b)      DirectCom did not file any reports on Form 8-K during the fourth quarter of
         1999.
</TABLE>


<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                                            April 14, 2000
     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.

<TABLE>
<CAPTION>
                                                          Title                         Date
                                                          -----                         ----
<S>                                                       <C>                            <C>
By:  /s/Nicholas Robinson                                 President and Chief           April 14, 2000
     ---------------------------------                    Executive Officer
       Nicholas Robinson Chairman of the Board



By:  /s/ Robert W. Paltrow                                Director,                     April 14, 2000
     ---------------------------------                    Secretary/Treasurer
       Robert W. Paltrow



By:  /s/ Robert E. Herman                                 Director                      April 14, 2000
     --------------------------------
       Robert E. Herman

</TABLE>