SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 1998
Commission File Number:  0-22745

                           JANUS AMERICAN GROUP, INC.
                 (Name of Small Business Issuer in its Charter)

         Delaware                                              13-2572712
(State or Other Jurisdiction of                              (IRS Employer
incorporation or organization)                             Identification No.)
                                            

2300 Corporate Blvd., N.W., Suite 232                          33431-8596
Boca Raton, Florida                                            (Zip Code)
(Address of principal executive offices)       

       Registrant's telephone number, including area code: (561) 997-2325

  Securities registered pursuant to Section 12(b) of the Exchange Act of 1934:

      Title of Class                  Name of each exchange on which registered
-------------------------             -----------------------------------------

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange  Act 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  Regulations  S-B is not contained in this form,  and no  disclosure  will be
contained,  to the best of  registrant's  knowledge,  in a  definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. |_|

The Registrant's revenues for the most recent fiscal year were $29,056,825.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  was  approximately  $13,450,506,  as of March  18,  1999.  It is the
position of the Company that the United  States  Lines,  Inc. and United  States
Lines (S.A.), Inc. Reorganization Trust is not an affiliate.

Number of shares of common stock outstanding as of March 17, 1999:  8,691,092

Transitional Small Business Disclosure Format:  Yes |_| No |X|

                      DOCUMENTS INCORPORATED BY REFERENCE:
Document Incorporated                                         Part of Report
   By Reference                                         Into Which Incorporated
   ------------                                         -----------------------
Proxy Statement for Annual Meeting
to be held on May 21, 1999                                     Part III

<PAGE>
                                     PART I

Item 1.           Description of Business.

Background of the Company

     Janus  American  Group,  Inc.  (the  "Company"  or  "Janus"),   a  Delaware
corporation,  is engaged in the ownership and management of hotels.  The Company
has  ownership  interests  in 18 hotels  (the  "Owned  Hotels")  and  manages an
additional 27 hotels (the hotels which are managed, but not owned by the Company
are referred to as the "Managed  Hotels" and the Owned Hotels and Managed Hotels
are collectively referred to as "Hotels").

     The Company's  executive  offices are located at 2300 Corporate  Boulevard,
N.W., Boca Raton, Florida 33431 and its telephone number is 561-997-2325.

     In April 1997, the Company  entered the hotel  business,  by acquiring from
affiliates  of Louis S. Beck  ("Beck") and Harry G. Yeaggy  ("Yeaggy"),  certain
assets relating to the hospitality  business  comprised of (i) six hotels and an
85%  interest  in a  partnership  that owns one hotel;  (ii) a hotel  management
company; (iii) a management fee sharing arrangement with Summit Hotel Management
Company,  which has since been  terminated;  and (iv) two loans, one of which is
secured  by a first  mortgage  on a hotel and the other of which is secured by a
first  mortgage on a  campground,  both of which are  personally  guaranteed  by
Messrs.  Beck and Yeaggy. In consideration,  therefore,  Messrs. Beck and Yeaggy
and Beck  Hospitality  III, Inc., a corporation  wholly-owned by them,  received
shares of the  Company's  common  stock,  par value $.01 per share (the  "Common
Stock"),  representing  approximately  43% of the  total  outstanding  shares of
Common  Stock and shares of the Series B  preferred  stock of the  Company,  par
value $.01 per share (the "Series B Preferred Stock).

     Messrs.  Beck and Yeaggy,  who are  currently  Chairman and Vice  Chairman,
respectively, of the Board of Directors of the Company, have been engaged in the
hospitality business since 1972.

     In August 1998, the Company  acquired four hotels in the area of Cleveland,
Ohio (the "Cornerstone Hotel Group") from an unrelated party.

     Effective  January 1, 1999, the Company acquired an additional seven hotels
and two hotel management  agreements from affiliates of Messrs. Beck and Yeaggy.
An unrelated third party retains a minority  interest in one of the hotels known
as the  Days  Inn,  Pompano  Beach.  As  part  of the  purchase  price  in  this
transaction,  Messrs. Beck and Yeaggy received additional shares of the Series B
Preferred Stock, all of the outstanding  shares of which are owned  beneficially
by them.

     Messrs. Beck and Yeaggy retain miscellaneous  independent  interests in the
hospitality  business.  However, they have contractually agreed with the Company
not to engage in any business that competes with the business of the Company.

     Janus is the successor to United States Lines, Inc. ("U.S.  Lines"),  which
once was one of the largest containerized cargo shipping companies in the world.
On November 24, 1986,  McLean  Industries,  Inc.,  First Colony Farms,  Inc. and
their subsidiaries U.S. Lines and United States Lines (S.A.),  Inc. ("U.S. Lines
(S.A.)")  filed  petitions  for relief  under  Chapter  11 of the United  States

                                       2
<PAGE>
Bankruptcy Code. Soon thereafter, the shipping operations of U.S. Lines and U.S.
Lines (S.A.) ceased. U.S. Lines and U.S. Lines (S.A.) emerged from bankruptcy in
1990  under  the  terms  of  the  First  Amended  and  Restated  Joint  Plan  of
Reorganization dated February 23, 1989 (the "Plan"). At that time, names of U.S.
Lines and U.S.  Lines  (S.A.)  were  changed to Janus  Industries,  Inc.  and JI
Subsidiary, Inc. ("JI Subsidiary"), respectively. On September 29, 1997 the name
of the Company was changed to Janus American Group, Inc. JI Subsidiary currently
has  no  business  activities.  See  "Description  of  Business--History  of the
Company's Reorganization."

     Prior to  entering  the  hospitality  business,  in July 1996,  the Company
acquired  substantially  all of the assets of Pre-Tek  Wireline Service Company,
Inc.  ("Pre-Tek"),  an oil and gas  engineering  services and  wireline  logging
company based in Bakersfield, California. During 1997, the Company determined to
discontinue  this line of business  and  subsequently  sold the  business to its
management effective April 1, 1998.

The Hospitality Business

     The Owned Hotels

     The Owned Hotels are located in five states and operate under  franchise or
membership agreements that provide for the use of the brand names Days Inn, Best
Western,  Knights  Inn,  Holiday Inn and Comfort Inn. One of the Owned Hotels is
located at the Kings Dominion  amusement  park near  Richmond,  Virginia and has
been  designated as the host hotel for the amusement  park. The remaining  Owned
Hotels are located either near office parks,  interstate  highways,  airports or
tourist  attractions in Ohio,  Florida,  Indiana and North  Carolina.  The Owned
Hotels  generally offer remote control cable television and a swimming pool, and
in many cases,  restaurants.  Some of them offer meeting and banquet  facilities
and room service

     The Owned Hotels are owned in fee, either directly or through  consolidated
entities.  With the  exception  of the Best Western  hotel  located at the Kings
Dominion  amusement  park and the Days Inn,  Pompano Beach,  Florida,  the Owned
Hotels are wholly owned by the Company. The Best Western Kings Quarters hotel is
owned by Kings Dominion Lodge, a general partnership in which the Company has an
85%  interest and Messrs.  Beck and Yeaggy,  through a  partnership,  have a 15%
interest.  An  unrelated  party holds a 25%  interest  in the Days Inn,  Pompano
Beach,  Florida.  Each of the Owned  Hotels is subject to mortgage  indebtedness
which is described  below.  All of such  indebtedness  is secured  solely by the
applicable hotel property and fixtures,  and is non-recourse to the other assets
of  the  Company,  with  the  exception  of  the  indebtedness  incurred  in the
acquisition of the hotels known as Holiday Inn, Independence; Holiday Inn, North
Canton;    Holiday   Inn,   Hudson;   and   Comfort   Inn,   Akron,   which   is
cross-collateralized by those hotels.







                                       3
<PAGE>

     The  following  chart  presents  a summary of the  operations  of the Owned
Hotels for calendar years ended December 31, 1998 and 1997.


<TABLE>
<CAPTION>


                                                 1998
------------------------------------------------------------------------------------------------------

HOTEL AND LOCATION                       RMS AVAIL.1           OCC%2           ADR3          Rev PAR4
------------------------------------------------------------------------------------------------------
<S>                                           <C>               <C>              <C>            <C>
DAYS INN, SHARONVILLE, OHIO                 52,195              60%           $44.37          $26.45

BEST WESTERN KINGS QUARTERS,                90,520              48%           $63.24          $30.32
DOSWELL, VIRGINIA

KNIGHTS INN, WESTERVILLE, OHIO              39,785              63%           $36.22          $22.81

KNIGHTS INN, LAFAYETTE, INDIANA             40,880              71%           $37.18          $26.52

KNIGHTS INN, MICHIGAN CITY, INDIANA         37,595              56%           $40.96          $23.08

DAYS INN CRABTREE, RALEIGH,                 44,530              68%           $47.94          $32.66
NORTH CAROLINA

DAYS INN RTP, RALEIGH,                      40,515              88%           $68.44          $60.28
NORTH CAROLINA

HOLIDAY INN, INDEPENDENCE, OHIO            132,860              65%           $84.01          $54.63

HOLIDAY INN, NORTH CANTON, OHIO             70,810              79%           $59.72          $46.97

HOLIDAY INN, HUDSON, OHIO                  105,534              63%           $76.85          $48.29

COMFORT INN, AKRON, OHIO                    48,910              64%           $56.76          $36.32

</TABLE>

















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

1    Calculation  is based on number of hotel  rooms in  service  multiplied  by
     number of days in a year.
2    Total  number of rooms sold  during a year  divided by the total  number of
     rooms available in such year.
3    Average Daily Rate equals total room revenue  (exclusive of taxes) during a
     year divided by rooms sold.
4    Revenue Per Available Room equals total room revenues  (exclusive of taxes)
     during a year, divided by rooms available for sale during such year.


                                       4
<PAGE>

<TABLE>
<CAPTION>

                                          1997
------------------------------------------------------------------------------------------------------

HOTEL AND LOCATION                         RMS AVAIL.           OCC%           ADR          Rev PAR
------------------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>           <C>             <C>
DAYS INN, SHARONVILLE, OHIO                 52,195               52%          $46.15         $23.84

BEST WESTERN KINGS QUARTERS,                91,264               50%          $56.01         $27.70
DOSWELL, VIRGINIA

KNIGHTS INN, WESTERVILLE, OHIO              39,785               71%          $34.06         $24.05

KNIGHTS INN, LAFAYETTE, INDIANA             40,880               71%          $37.23         $26.57

KNIGHTS INN, MICHIGAN CITY, INDIANA         37,595               59%          $36.74         $21.78

DAYS INN CRABTREE, RALEIGH,                 44,500               70%          $50.46         $35.51
NORTH CAROLINA

DAYS INN RTP, RALEIGH,                      40,382               91%          $67.57         $61.41
NORTH CAROLINA

HOLIDAY INN, INDEPENDENCE, OHIO            132,860             67.5%          $82.77         $51.09

HOLIDAY INN, NORTH CANTON, OHIO             71,540             75.3%          $55.96         $38.56

HOLIDAY INN, HUDSON, OHIO                  105,485             67.6%          $74.54         $46.44

COMFORT INN, AKRON, OHIO                    48,910             63.3%          $57.74         $32.95


</TABLE>


















                                       5


<PAGE>

     The  following is a description of each of the Owned Hotels:

     Days Inn Hotel, Raleigh, North Carolina.  Built in 1979, the 122 room hotel
is located on 2.79 acres on the south side of  Glenwood  Avenue in the  Crabtree
area of  Raleigh.  Glenwood  Avenue  is a major  roadway  through  the  area and
connects the  Raleigh-Durham  airport  (approximately  11 miles northwest of the
property) and  Interstate  Highway 440 (one mile  southeast).  The hotel is well
located  relative to the area's  universities  and  freeways.  The  improvements
consist  of two  two-story,  concrete  block  buildings  with  brick  and  glass
exteriors,  an outdoor swimming pool and a one-story building  consisting of the
hotel lobby and a 65 seat restaurant. Access to the guest rooms is from exterior
corridors.

     The hotel is subject to a first mortgage with a balance of $2,712,800 as of
December 31, 1998,  which amount is to be amortized on a monthly  basis  through
its maturity date of July 1, 2015. The mortgage carries a fixed interest rate of
8.875% per annum.  At December 31,  1998,  the loan was in its fourth loan year.
Prepayment  in loan years 8 through 14 is subject to a prepayment  penalty of 7%
in year 8, decreasing by 1% each year thereafter.

     Capital  Improvements in the amount of $92,396 were made to the property in
1998. Such improvements were paid from working capital and replacement reserves.
The  replacement  reserve  balance as of  December  31, 1998 was  $349,865.  The
capital  expenditures for 1999 are anticipated to cost  approximately  $389,950.
The 1999  expenditures  include  $280,000 for a major exterior  renovation.  All
expenditures  will  be paid  from  existing  replacement  reserves  and  working
capital.

     Best Western Kings Quarters, Doswell, Virginia. Built in 1977, the 248 room
hotel is located on 10.5 acres on the eastern side of Interstate  Highway 95 and
the south side of Route 30 in Hanover County (Doswell), Virginia, 20 miles north
of  Richmond,  Virginia.  The  hotel is the  "Host  Facility"  for the  adjacent
Paramount Kings Dominion theme park.

     The hotel's lobby is incorporated into one of the guest buildings. There is
a 140  seat  Denny's  restaurant  adjacent  to the  hotel  that is  owned by the
partnership  that owns the hotel. The amenities also include an outdoor swimming
pool, two tennis courts, a putting green, shuffleboard,  volleyball,  ping-pong,
horseshoes,  children's playground, video arcade, meeting room, lounge, exterior
lighting and a paved parking lot for 360 cars.

     The hotel is subject to a first mortgage with a balance of $4,938,621 as of
December 31, 1998,  which amount is to be amortized on a monthly  basis  through
January 1, 2016. The mortgage  carries a fixed interest rate of 9.75% per annum.
At December  31, 1998,  the loan was in its third loan year.  Under the terms of
the  mortgage,  the  loan may not be  prepaid  prior to the  eighth  loan  year.
Prepayment  in loan years 8 through 14 is subject to a prepayment  penalty of 7%
in year 8, decreasing by 1% each year thereafter.

     The Company  completed a major renovation of the hotel in 1998 resulting in
$284,858 in capital  improvements.  The  expenditure  was financed from existing
replacement  reserves and working capital. The replacement reserve balance as of
December 31, 1998 was $617,098.

     Days Inn,  Sharonville,  Ohio. Built in 1974, the 142 room hotel is located
along the southwest  quadrant of the  Interstate  Highway Loop 275/State Road 42
intersection.   The  property's  visibility  from  the  two  major  highways  is



                                       6
<PAGE>

considered to be excellent.  The property  consists of three two story  concrete
buildings.  The  buildings  have  both  interior  and  exterior  corridors.  The
lobby/reception   area  is   integrated   into  one  of  the  guest   buildings.
Additionally,  there is a  one-story  restaurant  located on the  property.  The
restaurant is leased to and managed by an unrelated third party.

     The hotel is subject to a first mortgage with a balance of $2,603,289 as of
December  31,  1998.  The  mortgage  requires  monthly  payments  and matures on
September  1,  2002  with  a  remaining  balance,   assuming  no  prepayment  of
approximately  $2,134,000.  The  mortgage  carries an interest  rate of 9.5% per
annum  subject to  adjustment  on September 1, 1999 to a rate equal to 300 basis
points  above the weekly  average  yield on United  States  Treasury  Securities
adjusted to a constant maturity of three years.

     The Company  spent  $44,845 in capital  expenditures  at the hotel in 1998.
These expenditures were financed from working capital.  The capital expenditures
for 1999 are anticipated to be approximately $239,825.

     Days Inn (Research Triangle),  Morrisville,  North Carolina. Built in 1987,
the 110 room  hotel is  located on  approximately  3.47 acres on Airport  Blvd.,
south of Interstate Highway 40 and the Raleigh-Durham  Airport.  The three-story
concrete  block  building  is faced  with a brick and glass  facade  and is well
located relative to area  universities,  research  facilities and freeways.  The
building has interior  corridors and a port cochere,  which provides a protected
entry into the hotel's  lobby.  Amenities  include a fitness  room,  two meeting
rooms, an outdoor swimming pool and two airport shuttle vans.

     The hotel is subject to a first mortgage with a balance of $2,782,358 as of
December 31, 1998,  which amount is to be amortized on a monthly  basis  through
its maturity date of July 1, 2015. The mortgage carries a fixed interest rate of
8.875% per annum.  At December 31,  1998,  the loan was in its fourth loan year.
Under the terms of the mortgage, the loan may not be prepaid prior to the eighth
loan year.  Prepayment  in loan  years 8 through  14 is subject to a  prepayment
penalty of 7% in year 8 decreasing by 1% in each year thereafter.

     The Company spent  $262,592 in capital  expenditures  at the hotel in 1998.
These  expenditures  were  financed from  replacement  reserve funds and working
capital.  The balance in the replacement reserve account as of December 31, 1998
was  $232,547.   The  capital  expenditures  for  1999  are  anticipated  to  be
approximately  $181,069,  and  all  expenditures  will  be  paid  from  existing
replacement reserves and working capital.

     Knights  Inn,  Westerville,  Ohio.  Built  in 1985,  the 109 room  hotel is
located on  approximately  2.85 acres at the northern line of Heather Down Road,
approximately  155 feet west of State Highway 10. The property  consists of four
one-story  modular buildings with wood trimmed stone and stucco exteriors and an
outdoor pool.  The buildings  have exterior  corridors.  The lobby consists of a
reception area and an office.

     The hotel is subject to a first  mortgage  with a balance of $985,254 as of
December 31,  1998.  The  mortgage  matures on August 1, 2001,  with a remaining
balance, assuming no prepayment, of approximately $867,000. The mortgage carries
a fixed interest rate of 8.91% per annum.  Under the terms of the mortgage,  the
loan may be prepaid in whole or in part with no prepayment penalty.


                                       7
<PAGE>

     The Company  spent  $45,572 on capital  expenditures  at the hotel in 1998.
These expenditures were financed from working capital.  The capital expenditures
for 1999 are anticipated to be approximately  $66,350, and all expenditures will
be paid from existing replacement reserves and working capital.

     Knights Inn, Michigan City,  Indiana.  Built in 1987, the 103 room hotel is
located  on  approximately  3.45  acres  on  the  north  side  of  Kieffer  Road
approximately  1/4 mile west of U.S. Highway 421. The property is highly visible
U.S. Highway 421. The property  consists of 5 one-story  modular  buildings with
wood trimmed stone and stucco exteriors.  The building have exterior  corridors.
The lobby consists of a reception area and an office.

     The hotel is subject to a first mortgage with a balance of $1,592,083 as of
December 31, 1998. The mortgage  requires  monthly payments and matures on April
1, 2006 with a remaining  balance,  assuming  no  prepayment,  of  approximately
$1,097,000.  The mortgage  carries an interest rate of 9.5% per annum subject to
adjustment  every  three  years to a rate equal  to100  basis  points  above the
defined prime rate of Provident Bank. The interest rate on the mortgage was last
adjusted  on April 1,  1997.  Under the terms of the  mortgage,  the loan may be
prepaid in whole or in part at any time with no prepayment penalty.

     The Company  spent  $85,964 on capital  expenditures  at the hotel in 1998.
Such expenditures were financed from working capital.  The capital  expenditures
for 1999 are anticipated to be approximately $123,128, and all expenditures will
be paid from existing replacement reserves and working capital.

     Knights  Inn,  Lafayette,  Indiana.  Built in 1987,  the 112 room  hotel is
located  on  approximately  3.24  acres  on the  north  side  of  State  Road 26
approximately  1/2 mile west of  Interstate  Highway 65. The  property is highly
visible  from State Road 26. The  property  consists of four  one-story  modular
buildings with wood trimmed stone and stucco  exteriors and an outdoor  swimming
pool.  The building has exterior  corridors.  The lobby  consists of a reception
area and an office.

     The hotel is subject to a first mortgage with a balance of $2,109,512 as of
December  31,  1998.  The  mortgage  matures  on April 1, 2006 with a  remaining
balance,  assuming no  prepayment,  of  approximately  $1,453,000.  The mortgage
carries an interest  rate of 9.5% per annum  subject to  adjustment  every three
years to a rate equal to 100 basis  points  above the defined  prime  rate.  The
interest  rate on the  mortgage  was last  adjusted on April 1, 1997.  Under the
terms of the  mortgage,  the loan may be prepaid in whole or in part at any time
with no prepayment penalty.

     The Company  spent  $57,324 on capital  expenditures  at the hotel in 1998.
Such expenditures were financed from working capital.  The capital  expenditures
for 1999 are anticipated to be approximately  $82,657, and all expenditures will
be paid from existing replacement reserves and working capital.

     Holiday  Inn,  Independence,  Ohio.  Built in 1974,  the 364 room  hotel is
located on approximately 8.5 acres on Rockside Road  approximately 11 miles from
Cleveland Hopkins  International Airport and approximately 8 miles from downtown
Cleveland.  The property is situated at the junction of  Interstate  Highway 480
and  Interstate  Highway 77. The property  consists of two  five-story  concrete

                                       8
<PAGE>

block,  brick and stucco buildings with 14 meeting rooms, 1 Grand Ballroom (or 4
separate  Ballrooms),  business  center,  gift  shop,  restaurant,  lounge and a
full-size indoor swimming pool.

     The hotel is subject to a first  mortgage with a balance of  $21,731,774 as
of December 31, 1998. The mortgage matures on September 1, 2008 with a remaining
balance,  assuming no prepayment,  of  approximately  $17,696,797.  The mortgage
carries an interest  rate of 8.09% per annum.  Under the terms of the  mortgage,
the loan may not be prepaid in whole or in part subject to a prepayment penalty.

     The Company spent $253,510 on capital  expenditures at the hotel1998.  Such
expenditures   were  financed  from  the   replacement   reserve.   The  capital
expenditures for 1999 are anticipated to cost  approximately  $651,460,  and all
expenditures  will  be paid  from  existing  replacement  reserves  and  working
capital.

     Holiday  Inn,  North  Canton,  Ohio.  Built in 1970,  the 196 room hotel is
located on approximately  4.75 acres on Everhard Road approximately 5 miles from
the  Akron-Canton  Regional  Airport  and  approximately  5 miles from  downtown
Canton.  The  property is situated  off of  Interstate  Highway 77. The property
consists of two three-story  concrete block and stucco  buildings with one Grand
Ballroom  (or 4 separate  Ballrooms),  two meeting  rooms,  restaurant,  lounge,
full-size outdoor swimming pool, fitness center and game room.

     The hotel is subject to a first mortgage with a balance of $5,383,100 as of
December  31, 1998.  The mortgage  matures on September 1, 2008 with a remaining
balance,  assuming no  prepayment,  of  approximately  $3,981,674.  The mortgage
carries an interest  rate of 8.09% per annum.  Under the terms of the  mortgage,
the loan may not be prepaid in whole or in part subject to a prepayment penalty.

     The Company  spent  $39,017 on capital  expenditures  at the hotel in 1998.
Such  expenditures  were  financed  from the  replacement  reserve.  The capital
expenditures  for 1999 are  anticipated to be  approximately  $288,596,  and all
expenditures  will  be paid  from  existing  replacement  reserves  and  working
capital.

     Holiday Inn, Hudson,  Ohio. Built in 1967, the 289 room hotel is located on
approximately  15 acres on Hines Hill Road  approximately 22 miles from downtown
Cleveland  and  approximately  14 miles from  downtown  Akron.  The  property is
situated at the junction of the Ohio Turnpike and Route 8. The property consists
of two two-story concrete block and stucco buildings with one Grand Ballroom (or
6 separate  Ballrooms),  six banquet  rooms,  three meeting rooms, a restaurant,
lounge,  game room, an indoor swimming pool,  outdoor swimming pool,  basketball
courts, tennis courts, volleyball courts and fitness center.

     The hotel is subject to a first  mortgage with a balance of  $13,258,376 as
of December 31, 1998. The mortgage matures on September 1, 2008 with a remaining
balance,  assuming no prepayment,  of  approximately  $10,796,669.  The mortgage
carries an interest rate of 8.09%. Under the terms of the mortgage, the loan may
not be prepaid in whole or in part subject to a prepayment penalty.

     The Company spent  $166,693 on capital  expenditures  at the hotel in 1998.
Such  expenditures  were  financed  from the  replacement  reserve.  The capital
expenditures  for 1999 are  anticipated to be  approximately  $963,034,  and all
expenditures  will  be paid  from  existing  replacement  reserves  and  working
capital.

                                       9
<PAGE>

     Comfort Inn, Akron,  Ohio.  Built in 1989, the 134 room hotel is located on
approximately  3.5  acres  on  Montrose  West  Avenue  at  the  intersection  of
Interstate  Highway  77 and Route 18. The  property  consists  of two  two-story
concrete block and brick buildings with an indoor swimming pool.

     The hotel is subject to a first mortgage with a balance of $3,489,046 as of
December  31, 1998.  The mortgage  matures on September 1, 2008 with a remaining
balance,  assuming no  prepayment,  of  approximately  $2,841,229.  The mortgage
carries an interest  rate of 8.09% per annum.  Under the terms of the  mortgage,
the loan may not be prepaid in whole or in part subject to a prepayment penalty.

     The Company  spent  $57,543 on capital  expenditures  at the hotel in 1998.
Such  expenditures  were  financed  from the  replacement  reserve.  The capital
expenditures  for 1999 are  anticipated  to be  approximately  $75,000,  and all
expenditures  will  be paid  from  existing  replacement  reserves  and  working
capital.


     Franchise Agreements

     The Company has entered into non-exclusive multi-year franchise,  licensing
or membership agreements, which allow the Company to utilize the franchise brand
name of the franchiser or licensor for the Hotels. The Company believes that its
relationships  with  nationally  recognized   franchisers  provides  significant
benefits for its existing Hotels.  The franchise  agreements require the Company
to pay annual fees,  to maintain  certain  standards  and to  implement  certain
programs that require additional  expenditures by the Company such as remodeling
or  redecorating.  The payment of annual fees,  which typically total from 8% to
12%  of  room  revenues,  covers  royalties  and  the  costs  of  marketing  and
reservation services provided by the franchisers. Franchise agreements, at their
inception,  generally  provide  for a term of 15 years and for an initial fee in
addition to annual fees payable to the franchiser.

     The Company currently has franchise or membership  relationships  with Bass
Hotels  (Holiday  Inn),  Days Inn,  Knights Inn,  Best  Western,  Choice  Hotels
(Comfort Inn) and Red Roof.  Franchise  agreements  may be terminated  if, among
other reasons,  the Company  breaches its obligations  under the agreement,  the
hotel is not operated in the ordinary  course of business or the Company becomes
financially  unstable.  There can be no assurance  that a desirable  replacement
could be available if any franchise agreements were to be terminated.  Upon such
termination  with respect to the Company's  Hotels,  the Company would incur the
costs of signage  removal and other  expenses,  possible  lost  revenues and the
costs incidental to establishing new  associations.  Through the Managed Hotels,
the Company  has  additional  relationships  with other  franchisers,  including
Howard Johnson, Ramada, Wingate and Radisson.


     Managed Hotels

     The Company  operates the Managed Hotels pursuant to management  agreements
(the "Management  Agreements")  with the owners of such Managed Hotels.  Managed
Hotels are operated  primarily  under  nationally-recognized  brand names.  Five
Managed Hotels are non-franchised properties.


                                       10
<PAGE>

     The  Company is  responsible  for all matters  relating  to the  day-to-day
operations of the Managed Hotels and is required to prepare an annual  operating
budget,  use its  reasonable  best  efforts  to market  the  hotels  and  ensure
compliance  with the terms of applicable  franchise  agreements.  The Company is
also  responsible for the retention and supervision of personnel,  necessary for
the  operation of the hotel  property.  The Company has a contract  with a third
party for this purpose. See "Operations - Hotel Personnel."

     Under the terms of the Management Agreements,  management fees are either a
flat amount or are based on a fixed  percentage of a property's  total revenues,
ranging  from 3% to 5%,  and/or  incentive  payments  based  upon net  operating
income.  Additional  fees are also  generated  from the  rendering of accounting
services.  The  Management  Agreements  generally have terms of one year to five
years and are automatically  renewed for successive similar terms, unless either
party  decides not to renew the same.  Either  party may  terminate a Management
Agreement for cause prior to a stated expiration date, except in the case of two
Management  Agreements  which  permit  termination  at any time  without  cause.
Generally,  the owner of a  property  has the right to  terminate  a  Management
Agreement upon sale of the Hotel to an unrelated  third party,  upon the payment
of a termination fee to the Company.

     In 1998, the Company  derived  management fee income from a marketing joint
venture with Summit Hotel Management  Company,  which was terminated in December
1998. The Company also derives  management fee income through a management joint
venture with DePalma  Hotel  Corporation  of Dallas,  which manages two Days Inn
hotels in Florida.


     Operations

     The Company  operates each Hotel according to a business plan  specifically
tailored  to the  characteristics  of the  Hotel  and  its  market  and  employs
centralized  management,  accounting  and  purchasing  systems to enhance  hotel
operations, reduce the costs of goods, food and beverages and increase operating
margins.

     Computerized  Reporting Systems.  The Company has a service agreement for a
hotel property  management  information  system with Computel  Computer Systems,
Inc.  ("Computel"),  a corporation  wholly-owned by Messrs. Beck and Yeaggy. The
agreement  provides a computerized  system that tracks all services  provided by
eight of the Hotels and enables  the Company to monitor a broad  spectrum of the
operations  of each Hotel  covered by the system,  including  the  occupancy and
revenues of the Hotels.  The agreement  with Computel has a term of one year and
automatically renews for successive terms of one year, unless one party notifies
the other to the contrary at least three months prior to the  termination  date.
Computel  is paid a monthly  fee of $275 per  property  for its  basic  property
management  software package and one computer terminal.  Additional monthly fees
are charged for  additional  terminals and add-on  software for services such as
guest  messaging,  call  accounting  interface,  franchise  central  reservation
interface and movie interface. On each annual renewal of the agreement, Computel
is entitled to adjust its fees to the Company commensurate with the fees charged
to other  customers.  During  1998,  as a result of  requirements  of one of the
Company's franchisors,  the Company significantly decreased the number of Hotels
utilizing the Computel system, thereby substantially decreasing the service fees
to Computel.




                                       11
<PAGE>

     Hotel Personnel. The majority of the personnel at the Hotels is provided by
Hospitality Employee Leasing Program, Inc. ("HELP"), a corporation  wholly-owned
by Messrs.  Beck and Yeaggy,  pursuant to an  agreement  with the  Company.  The
agreement has a term of one year and  automatically  renews for  successive  one
year terms,  unless one party  notifies the other to the contrary at least three
months prior to the  expiration  date.  The Company pays HELP the actual cost of
the personnel provided to it to operate the Hotels plus an administrative fee of
$8.15 per bi-monthly pay period per person provided.

     Employment and Other Governmental Regulation

     The  lodging  industry  is subject  to  numerous  federal,  state and local
government regulations,  including those relating to the preparation and sale of
food and  beverages  (such as health and liquor  license  laws) and building and
zoning  requirements.  Also,  the Company and HELP are subject to laws governing
relationships  with employees,  including minimum wage  requirements,  overtime,
working conditions and work permit requirements. The failure to obtain or retain
liquor licenses or an increase in overall wage rates,  employee benefit costs or
other costs associated with employees, could adversely affect the Company. Under
the   Americans   with   Disabilities   Act  of  1990  (the  "ADA")  all  public
accommodations  are required to meet  certain  federal  requirements  related to
access and use by disabled  persons.  While the Company  believes the Hotels are
substantially in compliance with these  requirements,  a determination  that the
Company is not in  compliance  with the ADA could  result in the  imposition  of
fines or an award  of  damages  to  private  litigants.  These  and  other  such
initiatives could adversely affect the Company.

     Under various federal,  state and local environmental laws,  ordinances and
regulations,  a current or previous  owner or operator of real  property  may be
liable for the costs of removal or remediation of hazardous or toxic  substances
on, under or in such property.  Such laws often impose liability  whether or not
the owner or operator  knew of, or was  responsible  for,  the  presence of such
hazardous or toxic substances.  In connection with the ownership or operation of
the Hotels, the Company may be potentially  liable for any such costs.  Although
the Company is not currently aware of any material  environmental claims pending
or   threatened   against  it,  no  assurance  can  be  given  that  a  material
environmental  claim will not be  asserted  against  the  Company or against the
Company and the Hotels. The cost of defending against a claim of liability or of
remediating a contaminated  property could have a material adverse effect on the
results of operations for the Company.

     Competition

     The lodging  industry  is highly  competitive  both in terms of  geographic
markets and market  segmentation.  The Hotels are in the market  segments  known
generally  as full  service,  limited  service and economy  hotels.  The Company
competes with other  franchisers of Bass Hotels (Holiday Inn), Days Inn, Knights
Inn,  Best  Western,  Choice  Hotels  (Comfort  Inn)  and Red  Roof  within  the
geographic  markets of the  applicable  Hotels and  operators  of other  similar
service type hotels.  The Managed  Hotels cover the spectrum of market  segments
and include economy,  limited service, full service mid-market hotels and higher
rated luxury properties.  Like the Company's Hotels, the Managed Hotels compete,
within  their  geographical  markets,  with  other  properties  under  the  same
franchise names, with properties  operating under other franchise names and with




                                       12

<PAGE>

independent operators.  Several owners/managers of multiple hotel properties are
larger than the Company  and have  greater  financial  and other  resources  and
better access to the capital markets than the Company.  Performance of the hotel
industry has been cyclical and is affected by general economic conditions and by
the  local  economy  where  each  hotel  is  located.  In  addition,  to  remain
competitive,  hotels must be  periodically  renovated and modernized in order to
compete with newer or more recently renovated facilities. Furthermore, shifts in
demographics or other local market changes can reduce the economic  returns from
a hotel.

     Employees

     As of December 31, 1998,  approximately  twenty full-time employees and one
part-time  employee  of  the  Company  were  engaged  in  management,   business
operations and administration of its hospitality  business. In addition, at that
date  approximately  1100 individuals  employed by HELP provided services at the
Hotels  under a  service  agreement  between  HELP  and the  Company.  See  "The
Hospitality Business--Operations."

     Growth Strategy

     Management  of the  Company  intends to pursue a program of  expanding  its
business of the management and/or  acquisition of hotels,  recreation,  resorts,
entertainment or other related entities through the marketing of its services to
the owners of properties not owned by the Company and through the acquisition of
properties either by itself or with other investors. The Company is engaged in a
marketing  program to expand  selectively  the number of hotels that it manages.
Since entering the hospitality business in April 1997, and prior to December 31,
1998,  the Company  increased  its number of Managed  Hotels by ten. The Company
also continues to review possible acquisitions of hospitality properties.  There
can be no assurance  that the Company will be  successful in pursuing its growth
strategy  due  to the  highly  competitive  nature  of the  market  and  current
limitations  on the Company's  ability to raise capital  through the issuance of
Common   Stock   and   certain   types   of   preferred    stock.    See   "Risk
Factor--Competition";  and --  "Possible  Need  for  Additional  Financing"  and
"Management's  Discussion  and  Analysis  or  Plan of  Operation--Liquidity  and
Capital Resources."


     Public Service

     The Company has signed a one-year  agreement  with  America  Responds  With
Love, Inc. ("America  Responds") under which it provides lodging at no charge at
a number of its Hotels.  While this program will from time to time  increase the
Company's  costs of  operation  without a  corresponding  increase in  revenues,
management  believes that the impact upon profitability will be immaterial,  and
regards its participation in the program as a marketing opportunity. The Company
has the right to  cancel  this  agreement  at any time  with  notice to  America
Responds.

     Investment Policies

     Generally.  The Company's  business is the management and/or acquisition of
hotels,  recreation,  entertainment  or other related  entities that the Company
believes may benefit from the Company's management expertise.

     Investments  in Real Estate or  Interests in Real  Estate.  Investments  in
properties may include the acquisition and redevelopment of existing properties,
the  acquisition  of  existing   properties  in  concert  with  a  third  party,


                                       13
<PAGE>

acquisition  of  existing  new  management  contracts  related  to  hospitality,
recreation,  health care or entertainment  properties or, in  circumstances  the
Company deems potentially  advantageous,  the acquisition of unimproved property
and the subsequent development or sale of such property.

     There is no limitation on the  percentage of the Company's  assets that may
be invested in any one  investment or in any one type of  investment,  including
the  geographic  location  or  distribution  of such  investments.  The  Company
however, intends to acquire properties and obtain management contracts that will
eventually put it in all large market cities in the United  States.  The Company
may also seek to acquire resort  properties  outside of the United  States.  The
Company's  investment  policy  may be  changed  without a vote of the  Company's
security  holders.  The  primary  purpose  of  the  Company's   acquisition  and
investment  policy is to acquire assets that will provide income to the Company.
Capital  gains  related to the  disposition  of assets  held by the Company is a
secondary consideration.

     While the Company is  unrestricted  in terms of the type of  properties  in
which it may invest, the Company intends to focus its real estate investments on
hospitality or  entertainment-related  properties  without  specific  geographic
limitations.  Financing  for  any  acquisitions  undertaken  by the  Company  is
expected  to be  provided  through  a  combination  of cash on hand,  internally
generated  cash,  capital stock  transactions  (to the extent such capital stock
transactions  can  be  accomplished   without  jeopardizing  the  Company's  net
operating loss carryforwards) and through borrowings.  There can be no assurance
that the  enumerated  sources of financing will be available to the Company on a
timely basis nor that  borrowings  by the Company will be available on terms the
Company deems acceptable,  or at all. There is no limitation as to the amount of
indebtedness  the Company may incur nor the amount or number of  mortgages  that
the Company may place on any one piece of property.

     Investment in Real Estate Mortgages.  The Company does not, within its core
business, intend to invest in real estate mortgages,  except as ancillary to the
acquisition of other assets. It is not the Company's  intention to service or to
warehouse real estate mortgages,  nor is it the Company's intention to invest in
real estate  mortgages as a passive investor in such  investments.  In 1997, the
Company acquired a mortgage on the Holiday Inn Express,  Juno Beach, Florida and
on the KOA  Campground in Kissimmee,  Florida.  Effective  January 1, 1999,  the
Company  acquired the Juno Beach property.  As of December 31, 1998, the balance
on the Kissimmee mortgage was $3,417,006.

     Securities  of or  Interests  in Persons  Primarily  Engaged in Real Estate
Activities.  The  Company  does not  intend to invest in  securities  of persons
primarily engaged in real estate activities, except where such investment may be
ancillary or incidental to  transactions  involving  hospitality,  recreation or
entertainment-related  properties or management agreements to be acquired by the
Company. In this respect,  the Company may acquire positions in corporate common
stock,  real  estate  investment  trusts,   partnerships  or  limited  liability
companies.

History of the Company's Reorganization

     Under the terms of the Plan,  (i) the United States Lines,  Inc. and United
States Lines (S.A.), Inc.  Reorganization Trust (the "Reorganization Trust") was
created for the benefit of  unsecured  creditors  of U.S.  Lines and U.S.  Lines
(S.A.);  (ii) certain assets and liabilities of U.S. Lines and U.S. Lines (S.A.)
were  transferred  to the  Reorganization  Trust;  and (iii) U.S. Lines and U.S.
Lines (S.A.) were discharged of all liabilities.



                                       14
<PAGE>

     The agreement establishing the Reorganization Trust (the "Trust Agreement")
provided for shares of stock of Janus and JI Subsidiary to be distributed to the
unsecured  creditors  as their  claims  were  allowed.  See "The  Reorganization
Trust." The Plan provided for the unsecured  creditors to hold a majority of the
outstanding stock of the reorganized  companies through the Reorganization Trust
and  further  provided  for a sale of stock to an  investor  who would  identify
investment opportunities for the reorganized companies.

     A  principal  objective  of the Plan  disclosed  in the Second  Amended and
Restated  Disclosure  Statement of McLean Industries,  Inc., First Colony Farms,
Inc.,  United States Lines and United States Lines (S.A.),  Inc.  dated February
23, 1989 (the  "Disclosure  Statement") was the preservation and maximization of
substantial net operating loss  carryforwards  ("NOLs") of U.S. Lines (S.A.) for
federal income tax purposes. The Plan designed the Company's post-reorganization
capital  structure in order to comply with the net operating loss  provisions of
the Internal  Revenue Code of 1986, as amended (the "Code"),  and to ensure that
at least one half of the  common  stock of Janus was  owned by  creditors  whose
claims were "old and cold". The term "Net NOLs" means the amount of NOLs of U.S.
Lines and U.S. Lines (S.A.) for federal income tax purposes  adjusted to reflect
reductions and related adjustments required under Code ss.382(1)(5), but subject
to Internal Revenue Service audits,  subsequent  changes in the ownership of the
Company and effects under Code ss.382,  the  application  of Code  ss.ss.269 and
384, and the consolidated  return  regulations under Code ss.1502.  See "The Net
operating  Loss  Carryforwards--Application  of Code ss.382 Under the Chapter 11
Reorganization".  Management  of the  Company  believes  that after  taking into
account these  reductions  and related  adjustments,  the NOLs  currently are at
least $500 million.

     The Reorganization Trust

     The  Reorganization  Trust  was  created  by the  Plan for the  purpose  of
resolving the disputed  claims of former  unsecured  creditors of U.S. Lines and
U.S. Lines (S.A.), marshalling the remaining assets of U.S. Lines and U.S. Lines
(S.A.), such as claims against third parties, and acting as the disbursing agent
for  distribution  to the former  creditors.  The trustee of the  Reorganization
Trust is John T.  Paulyson,  who has been employed by the  Reorganization  Trust
since its inception.

     The  Reorganization  Trust was issued stock by both Janus and JI Subsidiary
which was intended by the Plan to be distributed to the former creditors of U.S.
Lines and U.S. Lines (S.A.) as their claims were  resolved.  Five million shares
of the Company's Common Stock was originally issued to the Reorganization Trust,
all  ultimately to be  distributed  to allowed  creditors of U.S.  Lines.  As of
December 31, 1998,  4,191,170 shares have been distributed by the Reorganization
Trust to former creditors.

     The balance of 808,803 shares includes a fixed reserve of 352,850 shares of
Common Stock  established by order of the United States Bankruptcy Court for the
Southern  District of New York (the "Bankruptcy  Court") for the benefit of more
than  14,673   individuals   who  have  asserted   asbestos-related   and  other
late-manifesting personal injury claims. The resolution of these claims (and any
future  late-manifesting  asbestos and other personal injury claims) is delayed,
in part,  by a  dispute  between  the  Reorganization  Trust  and the  insurance
carriers of U.S. Lines over certain aspects of insurance coverage.  This dispute
has no impact upon the Company other than delaying  identification of individual
shareholders and prolonging the activities of the Reorganization Trust.



                                       15

<PAGE>

     The  Trust  Agreement  provides  for  the  Reorganization   Trust  to  make
contributions  to Janus and JI Subsidiary from time to time of cash on hand that
exceeds  its  projected  liabilities  and  administrative   requirements.   Such
contributions are to be made 90% to Janus and 10% to JI Subsidiary.  The Company
did not receive a  contribution  from the Trust in 1998.  Through  December  31,
1997,  an  aggregate  of  approximately  $15  million  was  transferred  by  the
Reorganization   Trust  to  the  Company.  No  additional   transfers  from  the
Reorganization  Trust  are  anticipated  until  there  is a  resolution  of  the
insurance coverage issues.

     As of December 31, 1998, the  Reorganization  Trust reported total cash and
cash equivalents of $4,059,054 of which $1,699,732 was identified as "restricted
funds". While there is no objective formula to determine the extent to which the
Reorganization  Trust assets exceed  projected  liabilities  and  administrative
requirements, management of the Company believes that more monies may ultimately
be  available  for  contribution  to  the  Company  and  JI  Subsidiary  by  the
Reorganization   Trust.   The  principal   unknown  variable  that  could  cause
substantial depletion of the unrestricted available cash and cash equivalents is
the  remaining  period  of  Reorganization  Trust  activity  and the  amount  of
professional fees necessary to resolve  outstanding  claims,  particularly,  any
asbestos or other  late-manifesting  personal injury claims. No assurance can be
given, nor is any assurance intended, that additional cash will become available
to the Company from the  Reorganization  Trust or the amount of such  additional
cash, if any.

The Net Operating Loss Carryforwards

     The following  description of the NOLs is based upon management's  analysis
of the  application of the relevant  sections of the Code to the historical NOLs
of U.S. Lines and U.S. Lines (S.A.). There can be no assurance that the Internal
Revenue Service or the courts will agree with management's  analysis.  There are
substantial risks associated with the Company's utilization of its NOLs.

     As used herein, unless otherwise defined or modified, the term "Gross NOLs"
means the total NOLs  reported to the  Internal  Revenue  Service on the federal
income tax returns of U.S. Lines and U.S. Lines (S.A.) (collectively,  the "U.S.
Lines Group"),  including any filed amended  returns,  before the application of
any reductions  and related  adjustments  described in the following  paragraphs
under this heading "The Net Operating Loss Carryforwards".  Based on its federal
income tax returns for 1985 through 1997,  Janus reported  cumulative Gross NOLs
of  approximately  $970,000,000.  Under Code  ss.172(b) as in effect  during the
relevant years,  unused NOLs expire after fifteen taxable years from the taxable
year of a loss.  Therefore,  material  amounts of these  Gross NOLs will  expire
beginning in 1999 (approximately $122,000,00 in 1999, approximately $623,000,000
in 2000,  approximately  $201,000,000 in 2001,  approximately $9,000,000 in 2002
and smaller amounts in later years).

     After  taking  into  account  the  reorganization  of the U.S.  Lines Group
pursuant  to  the  Plan  (especially  because  of  the  reductions  and  related
adjustments imposed by Code  ss.382(l)(5)),  as described in more detail in this
section  "The Net  Operating  Loss  Carryforwards",  management  of the  Company
believes the Net NOLs are currently at least $500 million, although no assurance
can be given that the Company will be able to utilize  these NOLs.  The Net NOLs
may be affected by Internal  Revenue Service audits,  subsequent  changes in the
ownership of the Company and effects under Code ss.382,  the application of Code
ss.ss.269 and 384, and the consolidated  return  regulations under Code ss.1502,
which are described below in this section.



                                       16

<PAGE>

     Cancellation of Debt Income. Under the Plan, as described in the Disclosure
Statement, unsecured indebtedness of the U.S. Lines Group with an aggregate face
amount of  approximately  $1 billion to $1.35  billion  was  canceled.  The Code
provides  that  if a  taxpayer  is the  subject  of a  bankruptcy  case  and the
cancellation  of  indebtedness  ("COD") is  pursuant  to a plan  approved by the
Bankruptcy  Court,  the amount  canceled is not required to be included in gross
income.  Instead,  if the creditors receive cash or property other than stock of
the debtor,  any amounts so excluded  from gross income  reduce  prescribed  tax
attributes  of the  debtor,  including  NOLs and the bases of the  assets of the
debtor, in a specified order of priority beginning with NOLs.

     Provided  two "de  minimis"  requirements  were  satisfied,  if a debtor in
bankruptcy  satisfied  its debt by issuing its own stock prior to the  effective
date of the Revenue  Reconciliation  Act of 1993,  the debtor  generally did not
recognize  COD income nor did it suffer NOL  reduction.  To satisfy these two de
minimis requirements former Code ss.108(e)(8)  required that (i) a creditor must
have received  more than nominal or token  shares,  and (ii) with respect to any
unsecured  creditor,  the  ratio  of the  value  of the  stock  received  by the
unsecured  creditor to the amount of its indebtedness  canceled or exchanged for
the stock must not have been less than 50% of a similar  ratio  computed for all
unsecured creditors participating in the restructuring. Both U.S. Lines and U.S.
Lines (S.A.) issued stock to their  respective  unsecured  creditors to minimize
any COD. Because the Reorganization Trust represented and acted on behalf of the
creditors of both U.S. Lines and U.S.  Lines (S.A.),  stock of both entities was
issued to the  Reorganization  Trust in order to settle  claims of  creditors of
both entities.

     Code ss.382 in General.  If a corporation  undergoes an "ownership change",
Code  ss.382  limits  the  corporation's  right to use its NOLs  each year to an
annual percentage  (based on the federal long-term  tax-exempt rate) of the fair
market  value  of the  corporation  at the  time of the  ownership  change  (the
"Section  382  Limitation").  If  an  ownership  change  under  Code  ss.382  is
triggered,  a corporation may also be restricted from utilizing certain built-in
losses and built-in deductions  recognized during a five-year recognition period
after the ownership change.

     Application of Code ss.382 Under the Chapter 11 Reorganization.  Management
does not  believe  that the U.S.  Lines  Group was  subject to the  Section  382
Limitation  because  although a 50% ownership  change was expected to occur as a
result of the transfer of stock of Janus and JI Subsidiary to the Reorganization
Trust for the benefit of the former unsecured creditors, an exception under Code
ss.382(l)(5)  is  believed  to  have  applied  as  described  as  follows.  Code
ss.382(l)(5)  provides that the Section 382 Limitation  will not apply to a loss
corporation if (1) the corporation,  immediately before the ownership change, is
under the  jurisdiction  of a court in a United  States Code Title 11 or similar
case, and (2) the shareholders and creditors of the old corporation own at least
50% of the total  voting power and value of the stock of the  corporation  after
the "ownership  change" as a result of being  shareholders  and creditors before
the change. Stock transferred to such creditors counts only if it is transferred
with  respect to "old and cold"  indebtedness  (as  defined  above).  The debtor
company U.S. Lines  requested a private letter ruling from the Internal  Revenue
Service to the effect that if a corporation or other entity held indebtedness of
U.S. Lines that was otherwise "old and cold",  the  indebtedness  would not lose
its  characterization  as "old and cold" as a result of changes in  ownership of
the  corporation  or entity.  Such a ruling was issued on December 22, 1989 (the
"IRS Ruling").  The IRS Ruling also held that the ownership change of U.S. Lines
was covered by Code  ss.382(l)(5)  and therefore the Section 382  Limitation was
not triggered as a result of the owner shift associated with the reorganization.



                                       17

<PAGE>

     Consistent with the IRS Ruling, the Company's management believes that Code
ss.382(l)(5)  applied to the transfer of Janus stock to the U.S. Lines creditors
and JI Subsidiary's stock to the U.S. Lines (S.A.) creditors.  Under former Code
ss. 382(l)(5)(C),  although the Section 382 Limitation does not apply, the Gross
NOLs originally  available to the U.S. Lines Group must  nevertheless be reduced
by Janus and JI Subsidiary to the extent of 50% of the COD income not taken into
account   by  virtue  of  the  stock   for  debt   exception   of  former   Code
ss.108(e)(10)(B)  (see  "Cancellation  of Debt Income",  above in this section).
Based on a review of its accounting and tax records related to this unrecognized
COD income conducted by the Company's  management with the assistance of outside
tax professionals, the Company's management believes that its Gross NOLs must be
reduced  and  adjusted  under  former  Code  ss.382(l)(5)(C)  in  an  amount  of
approximately  $450,000,000.  While  management of the Company believes it has a
reasonable  basis for this  calculation,  no assurance  can be provided that the
Internal Revenue Service would agree with the Company's  analysis.  After taking
into  account  these  reductions  and  related  adjustments  to the Gross  NOLs,
management of the Company believes that the Net NOLs were, at December 31, 1998,
approximately  $500  million,   subject  to  Internal  Revenue  Service  audits,
subsequent  changes in the  ownership  of the  Company  and  effects  under Code
ss.382,  the application of Code ss.ss.269 and 384, and the consolidated  return
regulations under Code ss.1502, which are described below in this section.

     Code ss.382 and  Subsequent  Events and  Investors.  After the  issuance of
Common Stock in the acquisitions completed by the Company in 1997, management of
the Company believes that the Company's current cumulative ownership shift under
Code  ss.382 is only a few  percentage  points  short of a 50  percentage  point
ownership change. If a future ownership change under Code ss.382 were triggered,
the  Company  would be  allowed  to use its NOLs  only up to the  amount  of its
Section 382 Limitation on an annual basis. More specifically, this annual amount
would  equal the fair market  value of the Company at the time of the  ownership
change  multiplied by the federal  long-term  tax-exempt  rate.  Janus has taken
certain steps to monitor any further  transfers of Common Stock by its 5-percent
shareholders and further issuances or redemptions of Common Stock.  Because Code
ss.382 tests whether a 50 percentage  point ownership change has occurred over a
three-year  testing  period,  Janus' capacity to issue more Common Stock through
April 2000 will be severely curtailed.

     Certain Transferability  Restrictions. In accordance with authority granted
by the Company's Restated Certificate of Incorporation,  as amended, the Company
has  imposed  certain  transferability  restrictions  upon  Daewoo  Corporation,
Mitsubishi Corporation,  General Electric Capital Corporation and The Prudential
Insurance Company of America,  each of whom is presently a 5-percent shareholder
for purposes of Code  ss.382.  These  restrictions  provide that until April 24,
2001, the specified  shareholders shall be prohibited from transferring,  in any
manner,  any shares of Common Stock,  without the consent of the Company's Board
of  Directors.  The Company  shall have no  obligation  to consent to a transfer
unless it shall have  received  an opinion of legal  counsel  acceptable  to the
Company  to the effect  that the  transfer  does not give rise to an  "ownership
change" under Code ss.382 or otherwise affect the availability to the Company of
its  NOLs and any  other  applicable  tax  attributes  for  Federal  income  tax
purposes. In addition to such imposed transferability restrictions, Messrs. Beck
and Yeaggy have agreed to equivalent transferability restrictions.

     Impact of Consolidated  Return  Regulations.  Under the consolidated return
regulations  pursuant to the Code, the  consolidated  return change of ownership
("CRCO")  rule may limit the carryover of NOLs from a  consolidated  return year
ending before the year of a CRCO ownership change. The Company believes that the



                                       18

<PAGE>

changes to the U.S. Lines Group former  consolidated  group's capital  structure
caused a CRCO  ownership  change on or about  December 30, 1988 when U.S.  Lines
left its  former  consolidated  group.  The  CRCO  rule may  prevent  the  Janus
consolidated  group from utilizing its pre-CRCO NOLs against income generated by
a newly acquired business that is held in a subsidiary other than JI Subsidiary.
The CRCO rule should not prevent the Janus consolidated group from utilizing its
NOLs that  were  generated  in 1988 or in later  years  against  income of a new
subsidiary.

     Effect of Code  ss.384.  Congress  adopted Code ss.384 in 1987 to prevent a
loss  corporation  from using its  pre-acquisition  NOLs and net built-in losses
against any net built-in gains of a corporation the control of which  (utilizing
an 80% test of Code  ss.1504(a)(2)) is acquired by the loss corporation or whose
assets are acquired by the loss corporation in certain types of reorganizations.
The limitation of Code ss.384 applies to built-in  gains  recognized  within the
five-year  recognition  period  after the  acquisition  date.  Code  ss.384 will
prevent Janus from utilizing its NOLs against  built-in gains  recognized by any
acquired  companies  (assuming the control test is met) within five years of the
acquisition  date,  including  Janus' recent entry into the hotel business.  Any
future  acquisitions  by Janus will need to be analyzed for the impact that Code
ss.384  may have on the  utilization  of  Janus'  NOLs  against  any  recognized
built-in  gains.  The  interaction of the five-year rule of Code ss.384 with the
impending expiration of most of the NOLs of Janus under the general rule of Code
ss.172 reduces the possible tax benefit Janus can expect from its NOLs.

     Effect of Code ss.269. Code ss.269(a) provides that if:

          (1)  any person or persons acquire ... directly or indirectly, control
               of a corporation, or

          (2)  any corporation acquires ..., directly or indirectly, property of
               another  corporation,  ...  the basis of which  property,  in the
               hands of the acquiring corporation, is determined by reference to
               the basis in the hands of the transferor corporation,

and the principal  purpose of such  acquisition  was the evasion or avoidance of
Federal  income tax by securing  the benefit of a  deduction,  credit,  or other
allowance that such person or corporation  would not otherwise  enjoy,  then the
Internal  Revenue  Service  may  disallow  such  deduction,   credit,  or  other
allowance.  The Disclosure Statement states that Code ss.269 should not apply to
the  transactions  provided for under the Plan. The Disclosure  Statement points
out that the  creditors'  receipt of Common  Stock of the  Company  was a direct
consequence  of their  having  extended  credit to the debtor U.S.  Lines.  This
credit was not extended to achieve  control of the debtor in bankruptcy and thus
avoid or evade federal income tax.


Risk Factors

         The Common Stock of the Company is speculative in nature and involves a
     high degree of risk. The risk factors below are not listed in order of
importance.

     Possible Need for Additional Financing

     The Company has been  substantially  dependent  upon mortgage loans for the
financing of its real estate  activities  and internal cash flow for its working


                                       19
<PAGE>

capital  requirements.  The Company  anticipates  that in the absence of further
acquisitions  of hotels  and/or  management  agreements,  and based on currently
proposed  plans  and  assumptions  relating  to its  operations,  its  available
resources,  including its current cash  balances,  will be sufficient to satisfy
the Company's  contemplated cash requirements for its current  operations for at
least the next 24 months.  In the event that the  Company  acquires  one or more
hotels or a  significant  number of  additional  management  agreements,  or its
assumptions  change or prove to be inaccurate,  the Company could be required to
seek additional  financing or curtail its activities.  Any equity  financing may
involve substantial dilution to the interest of the Company's stockholders,  and
any debt financing could result in operational or financial  restrictions on the
Company.  There  can be no  assurance  that  any  additional  financing  will be
available  to the  Company  on  acceptable  terms  or at  all.  There  are  also
restrictions on the Company's ability to issue Common Stock and certain kinds of
preferred stock if the Company wishes to preserve its NOLs. See  "Description of
Business--The Net Operating Loss Carryforwards."

Conflicts of Interest

     While  under the terms of their  employment  agreements  with the  Company,
Messrs.  Beck and Yeaggy are prohibited from acquiring  additional  interests in
hotels  or hotel  management  companies  while  they  serve as  officers  of the
Company,  their present  independent  businesses give rise to the possibility of
conflicts of interest.

     The Company  relies  upon  Computel  and HELP,  which are  wholly-owned  by
Messrs.  Beck and  Yeaggy,  for  administrative  and  personnel  services at the
Hotels.

     Messrs.  Beck and Yeaggy  beneficially  held a mortgage  on the Owned Hotel
Days Inn Pompano Beach.

     Conflicts  may arise  between the  Company  and Messrs.  Beck and Yeaggy in
connection with the exercise of any rights or the conduct of any negotiations to
extend,  renew,  terminate or amend the agreements  between each of Computel and
HELP  and the  Company,  the  mortgage  on the  Days  Inn  Pompano  Beach or the
subleases for the offices  occupied by the Company in Boca Raton and  Cincinnati
which are sublet from an affiliate  of Messrs.  Beck and Yeaggy.  Conflicts  may
also arise between the Company and Messrs.  Beck and Yeaggy in  connection  with
certain  mortgage  indebtedness of the Company that is personally  guaranteed by
Messrs.  Beck and Yeaggy,  or in connection  with the exercise by the Company of
its rights  with  respect to a mortgage  note and  related  mortgage  on the KOA
Campground in Kissimmee, Florida, which is owned by Messrs. Beck and Yeaggy.

     In  addition,  certain  key  personnel  of the  Company  work  for  and are
compensated by both the Company and affiliates of Messrs.  Beck and Yeaggy.  The
allocation of compensation expenses of these individuals between the Company and
such affiliates could lead to conflicts of interest.

     Although  management's  recommendations  on matters  potentially  involving
conflicts  of interest  will be referred to the Audit  Committee of the Board of
Directors for review,  there can be no assurance that any such conflicts will be
resolved in favor of the Company.





                                       20

<PAGE>
     Operating Risks

     The  Company's  business  is  subject to all of the risks  inherent  in the
lodging industry.  These risks include,  among other things,  adverse effects of
general  and local  economic  conditions,  changes in local  market  conditions,
cyclical  overbuilding  of hotel  space,  a reduction  in local demand for hotel
rooms,  changes  in  travel  patterns,   the  recurring  need  for  renovations,
refurbishment  and improvements of hotel  properties,  changes in interest rates
and the other terms and availability of credit. Changes in demographics or other
changes in a hotel's local market could impact the  convenience or  desirability
of a hotel, which, in turn, could affect the economic returns from the operation
of a  hotel.  The  operational  expenses  of a  hotel  cannot  be  reduced  when
circumstances result in a reduction of revenue.

     Competition

     The  lodging  industry  is highly  competitive.  Several  of the  Company's
competitors  are larger than it and possess greater  financial,  operational and
managerial resources. There can be no assurance that in the markets in which the
Company's Hotels operate, competing hotels will not pose greater competition for
guests than presently exists, or that new hotels will not be constructed in such
locales.  New or existing  competitors could  significantly lower rates or offer
greater conveniences, services or amenities, or significantly expand, improve or
introduce  new  facilities  in  markets  in which the  Hotels  compete,  thereby
adversely affecting the Company's operations.  See "Description of Business--The
Hospitality Business--Competition."

     Geographic Concentration of Hotels

     Many of the  Company's  Hotels  are  located  in  Florida  and  Ohio.  Such
geographic  concentration  exposes the Company's  operating results to events or
conditions  that  specifically  affect those  areas,  such as local and regional
economic,  weather and other conditions.  Adverse developments that specifically
affect  those  areas  may have a  material  adverse  effect  on the  results  of
operations of the Company.

     Relationships with Franchisers

     The Company enters into non-exclusive  agreements with certain  franchisers
for the franchise or license of brand names, which allows the Company to benefit
from  franchise  name  recognition  and loyalty.  The Company  believes that its
relationships  with  nationally  recognized   franchisers  provides  significant
benefits  for its  existing  Owned  Hotels and  acquisitions  it may make in the
future.  While the Company believes that it currently enjoys good  relationships
with its  franchisers,  there can be no assurance  that a desirable  replacement
would be available if any of the  franchise  agreements  were to be  terminated.
Upon termination of any franchise  agreement,  the Company would incur the costs
of  signage  removal  and other  costs,  possible  lost  revenues  and the costs
incidental to establishing new associations.

     Compliance with Government Regulation

     The  lodging  industry  is subject  to  numerous  federal,  state and local
government regulations,  including those relating to the preparation and sale of
food and  beverages  (such as health and liquor  license  laws) and building and
zoning  requirements.  Also,  the  Company  is  subject  to laws  governing  its



                                       21
<PAGE>

relationships  with employees,  including minimum wage  requirements,  overtime,
working conditions and work permit requirements. The failure to obtain or retain
liquor licenses or an increase in the minimum wage rate,  employee benefit costs
or other costs  associated with employees,  could adversely  affect the Company.
Under the  Americans  with  Disabilities  Act of 1990  (the  "ADA")  all  public
accommodations  are required to meet  certain  federal  requirements  related to
access and use by disabled  persons.  While the Company believes that the Hotels
are substantially in compliance with these  requirements,  a determination  that
the Company is not in compliance  with the ADA could result in the imposition of
fines or an award of damages to private  litigants.  These and other initiatives
could adversely affect the Company.

     Under various federal,  state and local environmental laws,  ordinances and
regulations,  a current or previous  owner or operator of real  property  may be
liable for the costs of removal or remediation of hazardous or toxic  substances
on, under or in such property.  Such laws often impose liability  whether or not
the owner or operator  knew of, or was  responsible  for,  the  presence of such
hazardous or toxic substances.  In connection with the ownership or operation of
the Hotels, the Company may be potentially  liable for any such costs.  Although
the Company is not currently aware of any material  environmental claims pending
or   threatened   against  it,  no  assurance  can  be  given  that  a  material
environmental  claim will not be  asserted  against  the  Company or against the
Company and the Hotels.  The cost of defending against claims of liability or of
remediating a contaminated  property could have a material adverse effect on the
results of operations of the Company.

     Litigation

     The  Company's  Hotels are  visited by  thousands  of  invitees  each year.
Injuries incurred by any invitees on the hotel premises may result in litigation
against the Company.  While the Company maintains  general liability  insurance,
there can be no assurance that a claim will be covered by such insurance or that
claims  made  against  insurers  by the  Company  will not  result in  increased
premiums or cancellation of insurance coverage.

     Ownership of Hotel Real Estate

     The Company  currently owns seventeen hotels.  Accordingly,  the Company is
subject to the risks  associated with the ownership of real estate.  These risks
include,  among  others,  changes in  national,  regional  and local  economies,
changes in real  estate  market  conditions,  changes  in the  costs,  terms and
availability of credit, the potential for uninsured casualty or other losses and
changes in or enactment of new laws or regulations  affecting real estate.  Many
of these risks are beyond the control of the  Company.  Real estate is generally
illiquid which could result in limitations on the ability of the Company to sell
any one or more Owned Hotels if business conditions so required.









                                       22

<PAGE>

     Hotel Renovation Risks

     The renovation of hotels involves risks  associated with  construction  and
renovation  of  real  property,   including  the   possibility  of  construction
cost-overruns  and delays due to various  factors  (including  the  inability to
obtain regulatory approvals,  inclement weather, labor or material shortages and
the  unavailability  of construction or permanent  financing) and market or site
deterioration  after  acquisition or  renovation.  Any  unanticipated  delays or
expenses  in  connection  with the  renovation  of hotels  could have an adverse
effect on the results of operations and financial condition of the Company.

     No Limits on Indebtedness

     Neither the Company's  Restated  Certificate of Incorporation,  as amended,
nor its  by-laws  limit the amount of  indebtedness  that the Company may incur.
Subject to limitations it may agree to in debt instruments,  the Company expects
to incur additional debt in the future to finance  acquisitions and renovations.
The  Company's   continuing   substantial   indebtedness   could   increase  its
vulnerability  to general economic and lodging  industry  conditions  (including
increases in interest  rates) and could impair the  Company's  ability to obtain
additional financing in the future and to take advantage of significant business
opportunities  that may arise.  The Company's  indebtedness  is, and will likely
continue  to be,  secured  by  mortgages  on all of  the  Owned  Hotels.  Future
indebtedness may require the Company to secure indebtedness with other assets of
the Company, including its Management Agreements. There can be no assurance that
the Company will be able to meet its debt service obligations and, to the extent
that it  cannot,  the  Company  risks  the  loss  of some or all of its  assets,
including the Owned Hotels,  to foreclosure.  Adverse economic  conditions could
cause the terms on which borrowings become available to be unfavorable.  In such
circumstances,  if the  Company is in need of capital to repay  indebtedness  in
accordance with its terms or otherwise, it could be required to liquidate one or
more  investments  in hotels at times  that may not  permit  realization  of the
maximum return on such investments. See "Management's Discussion and Analysis or
Plan of Operation--Liquidity and Capital Resources."

     Control of the Company by Principal Officers

     Messrs.   Beck  and  Yeaggy  beneficially  own  approximately  43%  of  the
outstanding  shares of the  Common  Stock.  As a result,  such  persons,  acting
together,  have the ability to exercise  significant  influence over all matters
requiring stockholder  approval.  Messrs. Beck and Yeaggy are also directors and
executive officers of the Company. The concentration of ownership could delay or
prevent a change in control of the Company.

     Irregular Trading Market

     The  actual  "float"  of  shares  available  for  sale  in  the  market  is
approximately  23% of the 8,691,735 shares  outstanding as of December 31, 1998.
Approximately  5,658,060  shares,  comprised of 3,799,999 shares held by Messrs.
Beck and Yeaggy and their  affiliate and  1,858,061  shares held by five percent
shareholders  for  purposes  of the  NOL  preservation  rules,  are  subject  to
transferability   restrictions   until  April  24,  2001.  See  "Description  of
Business--The   Net  Operating   Loss   Carryforwards--Certain   Transferability
Restrictions." In addition,  as of December 31, 1998,  808,830 shares were still



                                       23
<PAGE>

held by the Reorganization  Trust for the benefit of former unsecured  creditors
of  U.S.  Lines.  See  "Description  of  Business--The   Reorganization  Trust."
Moreover,  among the  approximately  4,000 holders of record of the Common Stock
there are numerous holders of very small numbers of shares.

     When the  transferability  restrictions  expire, and as a result of certain
registration rights that have been granted to Messrs. Beck and Yeaggy,  sales of
substantial  amounts of Common Stock,  or the  perception  that such sales could
occur, would adversely affect prevailing market prices for the Common Stock.

     Dependence on Key Personnel

     The Company  believes that its success will depend to a significant  extent
on the efforts and abilities of certain of its senior  management,  particularly
those of its  Chairman of the Board,  Louis S. Beck,  its Vice  Chairman,  Harry
Yeaggy,  its President,  James E. Bishop and its President of Hotel  Operations,
Michael  M.  Nanosky.  Although  the  Company  has  entered  into an  employment
agreement with each of Messrs. Beck, Yeaggy, Bishop and Nanosky, the loss of any
one of them or  other  key  management  or  operations  employees  could  have a
material  adverse  effect  on the  Company's  operating  results  and  financial
condition.  There is strong competition for qualified management personnel,  and
the loss of key  personnel  or an inability  on the  Company's  part to attract,
retain and motivate key personnel could adversely affect the Company's business,
operating  results and financial  condition.  There can be no assurance that the
Company will be able to retain its existing key personnel or attract  additional
qualified personnel. The Company does not presently carry and does not intend to
carry "key man" insurance on the lives of any of its key personnel.

     Potential Effects of Preferred Stock Issuance

     The Board of  Directors  has the  authority,  without  further  stockholder
approval,  to issue up to 5,000,000  shares of preferred  stock,  in one or more
series,  and to fix the  number  of  shares  and  the  rights,  preferences  and
privileges of any such series.  The issuance of preferred  stock by the Board of
Directors  could  affect the rights of the  holders  of the  Common  Stock.  For
example, such an issuance could result in a class of securities outstanding that
would have  dividend,  liquidation,  or other  rights  superior  to those of the
Common  Stock  or  could  make a  takeover  of the  Company  or the  removal  of
management of the Company more difficult.

     Dividends Unlikely

     Since  reorganization,  the Company has never declared or paid dividends on
the  Common  Stock  and  currently  does  not  intend  to pay  dividends  in the
foreseeable  future.  The  payment of  dividends  in the  future  will be at the
discretion of the Board of Directors.  In addition,  the Company may not pay any
dividends  on the Common Stock unless  dividends  on the  outstanding  preferred
stock are current. The Company presently has 16,788.08 shares of preferred stock
outstanding  with an annual  dividend  expense of  $1,259,106.  The  Company was
current in the payment of  dividends on the  preferred  stock as of December 31,
1998.

     Seasonality; Quarterly Fluctuations

     The lodging industry is seasonal in nature.  Generally,  hotel revenues are
greater in the second and third quarters than in the first and fourth  quarters.
This seasonality can be expected to cause quarterly fluctuations in the revenues
of the Company.  Quarterly  earnings  may also be  adversely  affected by events


                                       24

<PAGE>

beyond the  Company's  control,  such as extreme  weather  conditions,  economic
factors  and other  considerations  affecting  travel.  However,  the Company is
working on gaining  ownership and  management  agreements in various  geographic
areas throughout the United States, where the "busy" seasons are during the less
"busy"  seasons of the Company's  currently  owned and managed  hotels,  thereby
lessening the seasonality affect of the Company's net income.

Item 2.           Description of Property.

     The Company conducts its corporate and business operations  activities from
offices in Cincinnati,  Ohio and Boca Raton, Florida. The Company occupies 4,300
square  feet of  office  space  in  Cincinnati,  Ohio  under a  sublease,  which
terminates  in April 2000 and  occupies  2,200  square feet of office space Boca
Raton, Florida under a sublease,  which terminates in April 1999. Both subleases
are from an affiliate of Messrs. Beck and Yeaggy.

     See "Description of Business--The  Hospitality  Business" for a description
of the properties that are owned and operated by the Company.

Item 3.           Legal Proceedings.

     The Company is not involved in any material legal proceedings.



                                     PART II

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

     Holders:

     As of March 10, 1999, there were  approximately  3,907 holders of record of
the Company's Common Stock.

     Dividends:

     Since  reorganization  the Company has never  declared or paid dividends on
its  Common  Stock  and  currently  does  not  intend  to pay  dividends  in the
foreseeable  future.  The  payment of  dividends  in the  future  will be at the
discretion of the Board of Directors.

     Market Information:

     Quotation of the Common Stock on the Nasdaq  Stock Market  SmallCap  Market
(symbol:  JAGI)  commenced  on January 22,  1998.  The Company is not aware that
there  were  any  publicly  available  quotations  of the  Common  Stock  in the
over-the-counter market prior to January 22, 1998.








                                       25
<PAGE>

     The following table sets forth, for the periods indicated, the range of the
high and low sales prices for the Common Stock as reported by Nasday SmallCap.
<TABLE>
<CAPTION>

                                                              High              Low
                        <S>                                    <C>               <C>
                  January 22, 1998-March 31, 1998             $7.00             $3.00
                  Quarter ended June 30, 1998                 $6.00             $3.50
                  Quarter ended September 30, 1998            $5.00             $2.4375
                  Quarter ended December 31, 1998             $5.00             $1.8125
</TABLE>

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

Overview

Year Ended December 31, 1998 Compared To Year Ended December 31, 1997

     Historical and Pro forma Results of Operations

     The  acquisition  of the assets from Messrs.  Beck and Yeaggy in April 1997
(the "Beck-Yeaggy Group") and the acquisition of the Cornerstone Group in August
1998,  were accounted for as purchases.  Accordingly,  the Company's  historical
results of  operations  for the years ended  December 31, 1998 and 1997 included
the results of operations of the  Beck-Yeaggy  Group and the  Cornerstone  Group
subsequent to their effective dates of acquisition for accounting purposes.  For
that reason,  the Company's  historical results of operations for the year ended
December 31, 1998 are not directly comparable to those for 1997.

     The Company had a net income of $1,887,241  for 1998 compared to a net loss
of  $562,744  in  1997.  Included  in the net  loss  for  1997  was a loss  from
discontinued  oil and gas services  operations of Pre-Tek of $986,709.  The 1998
net income  included  income from disposal of $136,186.  As discussed in Notes 1
and 9 of the Notes to Consolidated  Financial  Statements  elsewhere herein, the
Company  adopted a plan to  discontinue  and dispose of Pre-Tek's  operations in
December 1997. Accordingly, the results of operations of Pre-Tek in 1997 and the
estimated  loss to be  incurred  in  connection  with  the  disposal  have  been
classified as separate components of discontinued operations in the consolidated
statements of operations.  The loss from discontinued  operations of $986,709 in
1997  was  comprised  of the loss  from  Pre-Tek  operations  of  $349,353,  the
write-off of remaining goodwill related to Pre-Tek of $801,356,  a provision for
the estimated loss to be incurred from January 1, 1998 through March 31, 1998 of
$150,000 and the  estimated  loss on sale of the remaining net assets of Pre-Tek
of $15,000, net of the applicable credit for income taxes of $329,000.  The sale
of Pre-Tek  was  finalized  on March 31, 1998 and the  remaining  balance of the
accrual totaling $136,186 was reduced to $0.

     The  continuing  operations of the Company are  comprised  primarily of the
operations and management of the Hotels. To present more comparable  information
related  to  continued  continuing  operations,  the  discussion  of  results of
operations will relate to the Company's  unaudited pro forma combined results of
continuing  operations for the years ended December 31, 1998 and 1997. Pro forma
statements  of  continuing  operations  are  included  in Note 3 of the Notes to
Consolidated Financial Statements.



                                       26
<PAGE>

     The unaudited  pro forma  operating  information  included in Note 3 of the
consolidated  Financial  Statements is based on the  assumptions and adjustments
described in the Note and below which  management  believes are reasonable.  The
unaudited pro forma combined  information does not purport to represent what the
combined  results of operations  actually would have been if the acquisitions of
the Beck-Yeaggy Group and the Cornerstone Hotel Group had occurred as of January
1, 1997  instead  of the  actual  date of  consummation,  or what the  financial
position  and  results  of  operations  would  be for any  future  periods.  The
unaudited pro forma combined  information should be read in conjunction with the
audited historical financial  statements of Janus and its subsidiaries  included
elsewhere herein.

     In addition to combining the historical results of continuing operations of
the Company and the  historical  pre-acquisition  results of  operations  of the
Beck-Yeaggy  Group and the Cornerstone  Hotel Group for the periods from January
1, 1998 to April 30,  1998 and  January 1, 1997 to  December  31, 1997 as if the
acquisition had been  consummated on January 1, 1997.  Adjustments were made for
depreciation  of  property  and  equipment  based on the fair  values  of assets
acquired;   the  amortization  of  goodwill;  the  net  effects  of  changes  to
compensation  and related expenses based on revised lease agreements and expense
sharing  arrangements with a related party and revised employment  agreement and
the issuance of shares of preferred and common stock (net of shares returned) as
part of the consideration for the acquisition. The provision for income taxes is
based upon pro forma income from continuing operations and the statutory Federal
and state rates.

     The pro forma combined income from continuing operations of the Company was
$2,264,738  for the year ended  December 31, 1998,  as compared to net income of
$1,533,140  for the year ended  December  31,  1997.  The increase in income was
primarily the result of decreases in compensation  expense, an increase in hotel
revenues,  other income,  interest  income and tax refunds from prior years that
were received in 1998.

     Room and related  services  revenue  increased  $561,876 to  $28,856,963 in
1998. The increase was attributable  primarily to an increase in room rates from
Owned Hotels.  The average rate increased from $60.42 in 1997 to $62.19 for 1998
as occupancy remained stable in 1998 at 65%.

     Food and  beverage  revenues  are  principally  a function of the number of
guests who stay at each Owned Hotel,  local walk-in business and catering sales.
The $231,745  increase in food and beverage sales from  $10,453,513 for the year
ended  December 31, 1997 to  $10,685,258  for the  comparable  period in 1998 is
related to the increased  banquet  activity at the Company's  four  full-service
hotels and increases in menu pricing.

     Management fee income increased from $921,217 in 1997 to $1,754,610 in 1998
as a result of the addition of new management contracts and the termination of a
joint marketing venture.

     Other hotel related revenues increased for the year ended December 31, 1998
from  $715,768 in 1997 to  $762,202.  The  increase  resulted  from banquet room
rental and additional service charges from banquets.

     Direct hotel operating  expenses  decreased by $315,136 from $18,680,666 in
1997 to  $18,365,530  in 1998.  Direct  room and related  services  and food and
beverage  costs  decreased  as a  result  of  decreased  payroll  costs  and the
elimination of contracted cleaning services.


                                       27

<PAGE>

     Occupancy and other operating expenses remained stable in 1998.

     Selling,  general  and  administrative  expenses  increased  by $559,908 to
$7,656,220  in 1998 from  $7,096,312  in 1997 as a result of  professional  fees
incurred  for  tax  consultation,   commissions  for  management  contracts  and
shareholder services costs. In addition,  legal costs were incurred and expensed
for a potential acquisition transaction which was abandoned.

     Depreciation  increased by $210,873 in 1998 from  $3,183,773  in 1997.  The
increase was  attributable  to a full year of depreciation on 1997 furniture and
fixture additions and a half year on 1998 furniture and fixture additions.

     Interest income  increased  $279,083 to $1,137,506 in 1998 from $858,423 in
1997 as a result of funds  invested  over the same  period in the prior year and
interest received on a federal income tax refund.

     Interest  expense  decreased  from  $5,387,595 in 1997 to  $5,340,201.  The
decrease was attributable to principal  amortization  which offset interest rate
increases on variable debt.

     Minority interest  increased from $17,048 in 1997 to $84,992 in 1998 as net
income from the Kings Dominion  partnership in 1998 exceeded the net income from
the partnership in 1997.

Liquidity and Capital Resources

     The following  discussion  reflects the liquidity and capital  resources of
the Company after giving effect to the  transaction  with  affiliates of Messrs.
Beck and Yeaggy which closed effective January 1, 1999. The Company's  principal
sources of liquidity are cash on hand (including escrow deposits and replacement
reserve),  cash from  operations,  earnings on invested cash and, when required,
principally in connection with acquisitions, borrowings (consisting primarily of
loans  secured by  mortgages  on real  property  owned or to be  acquired by the
Company).  The Company's continuing operations are funded through cash generated
from its hotel  operations.  Acquisitions  of hotels are expected to be financed
through a combination of cash on hand,  internally  generated cash,  issuance of
equity  securities  and  borrowings,  some of which is likely to be  secured  by
assets of the Company.  The Company has no  committed  lines of credit and there
can be no assurance that credit will be available to the Company or if available
that such credit will be available on terms and in amounts  satisfactory  to the
Company.  The ability of the Company to issue its common or  preferred  stock is
materially  restricted by the  requirements of the Code if the Company wishes to
preserve  its  NOLs.  See  "Description  of  Business--The  Net  Operating  Loss
Carryforwards" and "Risk Factors--Net Operating Loss Carryforwards."

     Historical Changes in Liquidity and Capital Resources

     Total  assets   increased   from   $61,404,126  at  December  31,  1997  to
$108,683,792  at December 31, 1998.  The increase in total assets was the result
of the  acquisition of the  Cornerstone  Hotel Group  described in Note 3 of the
Consolidated Financial Statements.

     Accounts  receivable,   property  and  equipment,   other  current  assets,
goodwill,  notes receivable,  other assets, accounts payable,  accrued expenses,
long-term debt, paid-in-capital,  preferred stock and common stock all increased


                                       28
<PAGE>

as a result of the acquisitions.  The increase in cash and cash equivalents from
$11,191,481 in 1997 to $12,383,741 in 1998 is attributable to operations.

     At  December  31,  1998  the  Company  had  $12,383,741  in cash  and  cash
equivalents.

     During the year ended December 31, 1998,  the Company and its  predecessors
invested approximately $1,446,100 in capital improvements in connection with the
Owned  Hotels.  The  Company  plans to spend an  additional  $3,100,000  on such
capital  improvements  during  the  year  ending  December  31,  1999,  of which
$1,922,000 remains from the original product  improvement plan which the Company
agreed to in connection with the acquisition of the Cornerstone  Hotel Group and
is currently reserved.

     Capital  for  improvements  to Owned  Hotels has been and is expected to be
provided by a combination  of internally  generated  cash,  reserve  replacement
accounts and, if necessary and  available,  borrowings.  The Company  expects to
spend annually  approximately 4% to 5% of revenues from Owned Hotels for ongoing
capital  expenditures in each year. The additional  anticipated  improvements in
excess of the 4% to 5% are necessary to enhance the competitive  position of the
properties. The additional expenditures are mainly a result of the costs for new
facilities at Holiday Inn Independence, Holiday Inn North Canton and Holiday Inn
Hudson.

     The Company maintains a number of commercial banking relationships but does
not  currently  have any  committed  lines of credit.  The  Company is in active
negotiations  with lending  institutions  that might extend credit facilities to
the Company for capital  purposes  including  capital that might be required for
the acquisition of additional  hotels or management  contracts.  There can be no
assurance such negotiations will be successful.

     The Company anticipates that it will be able to secure the capital required
to pursue its acquisition program through a combination of borrowing, internally
generated  cash and  utilization  of its common  and/or  preferred  stock to the
extent such utilization does not jeopardize the Company's NOLs. See "Description
of  Business--The  Net  Operating  Loss  Carryforwards"  and "Risk  Factors--Net
Operating  Loss  Carryforwards".  There  can be no  assurance  however  that the
Company  will be able to  negotiate  sufficient  borrowings  to  accomplish  its
acquisition program on terms and conditions acceptable to the Company.  Further,
any such borrowings may contain covenants that impose limitations on the Company
that could constrain or prohibit the Company from making additional acquisitions
as well as its ability to pay  dividends or to make other  distributions,  incur
additional  indebtedness or obligations or to enter into other transactions that
the Company may deem beneficial.  Additionally, factors outside of the Company's
control could affect its ability to secure  additional funds on terms acceptable
to the Company. Those factors include,  without limitation,  any increase in the
rate  of  inflation  and/or  interest  rates,   localized  or  general  economic
dislocations,  an economic  down-turn and regulatory  changes  constricting  the
availability of credit.

     The  Company's  long-term  debt at December  31,  1998 totals  $63,266,387.
Mortgage debt totals  $63,143,341,  which consists of $54,320,332 in fixed rate,
fully self-amortizing mortgage loans and $8,823,009 in adjustable rate (3-5 year
adjustment  period)  mortgage  loans.  Such  adjustable rate loans have maturity
dates  ranging from August 1999 to April 2006.  Interest  rates on mortgage debt
range  from  8.09%  to  9.75%  with a  weighted  average  interest  rate of 8.4%
effective  at  December  31,  1998.  The  approximate  scheduled  repayments  of
principal on the long-term debt of the Company for the next five years are: 1999
-- $2,683,504;  2000 -- $1,249,451; 2001 -- $1,345,978; 2002 -- $1,422,554; 2003
-- $1,551,169.  Management of the Company currently  believes that the cash flow
from the  Company's  hotel  operations  will be  sufficient to make the required
amortization  payments.  Balloon payments required to be made at the maturity of
the  non-self-amortizing  loans are expected to be made from cash on hand at the
time or from the proceeds of  refinancing.  There can be no  assurance  that the
Company will be able to obtain financing,  or financing on terms satisfactory to
it.


                                       29
<PAGE>

     The Company has  benefited  and  continues  to benefit as the  recipient of
moneys  disbursed  by  the  Reorganization  Trust  as the  Reorganization  Trust
accumulates  moneys in excess of its reasonably  required reserves and projected
operating   expenses.   During  1997,   the  Company   received   $7,491,020  in
contributions from the Reorganization Trust. While there is no objective formula
to determine the extent to which  Reorganization  Trust assets exceed  projected
liabilities  and  administrative  requirements  thereby making  additional  cash
available for  contribution to the Company,  management of the Company  believes
that  there  will be no  further  contributions.  This  belief is based upon the
decrease  of  the  Reorganization   Trust's   administrative   expenses  through
reductions  in personnel and office  space,  which is related to the  decreasing
volume of unsettled claims of former unsecured  creditors of U.S. Lines and U.S.
Lines  (S.A.).  The amount of excess  cash  available  for  contribution  to the
Company will be dependent upon the remaining  duration of  Reorganization  Trust
activity necessary to resolve outstanding claims,  particularly the asbestos and
other late- manifesting  personal injury claims,  and the amount of professional
fees associated with this activity. Accordingly, no assurance can be given as to
the amount or timing of additional  contributions from the Reorganization Trust,
if in fact there are any additional contributions.

     Demand at many of the hotels is affected by seasonal  patterns.  Demand for
hotel rooms in the  industry  generally  tends to be lower  during the first and
fourth  quarters and higher in the second and third quarters.  Accordingly,  the
Company's revenues reflect this seasonality.

Inflation

     Although  inflation has been relatively  stable over the past two years and
has not had any discernible effect on the Company's  operations,  an increase in
the  inflation  rate could have a negative  effect on the  Company's  ability to
secure additional  capital under terms and conditions  acceptable to the Company
or refinance  indebtedness secured by the Owned Hotels.  Increase in the rate of
inflation could materially adversely affect the ability of the Company to expand
its operations through the acquisition of Owned Hotels.

Year 2000 Issues

     The Company has conducted a review of its computer  systems to identify the
systems  that could be affected by the "Year  2000" issue and has  initiated  an
implementation plan to resolve the issue. The Year 2000 problem is the result of
computer  programs being written using the two digits rather than four to define
the  applicable  year.  Any of the Company's  programs that have  time-sensitive
software  may  recognize a date using "00" as the year 1900 rather than the year
2000.  This  could  result in a major  system  failure or  miscalculations.  The
Company  presently  believes that, with  modifications to existing  software and
converting  to new  software,  the Year 2000 problem  will not pose  significant
operational  problems  for the  Company's  computer  systems as so modified  and
converted.  The Company anticipates  completing this work by September 30, 1999.
The Company is also in the process of working with each of its property  general
managers  to  complete  a plan in order to ensure  that all of the  computerized
operations of the Hotels for the year 2000 run properly.  All Hotels will have a
Year 2000 test prior to September 30, 1999 to ensure that the Year 2000 does not
cause any significant problems with the Hotels' ability to rent rooms.

Forward Looking Statements

     When used in this and in future  filings by the Company with the Securities
and Exchange Commission,  in the Company's press releases and in oral statements
made with the approval of an authorized  executive  officer of the Company,  the
words or phrases "will likely result,"  "expects," "plans," "will continue," "is
anticipated,"   "estimated,"  "project"  or  "outlook"  or  similar  expressions
(including  confirmations by an authorized  executive  officer of the Company of
any such  expressions  made by a third party with  respect to the  Company)  are
intended to identify forward-looking  statements.  The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made.  Such statements are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from  historical  earnings and those  presently  anticipated or projected.  Such


                                       30
<PAGE>

risks and other aspects of the Company's  business and  operations are described
in "Description of Business" and  "Management's  Discussion and Analysis or Plan
of Operation."  The Company has no obligation to publicly  release the result of
any  revisions  that may be made to any  forward-looking  statements  to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.

Item 7.           Financial Statements.

     The  Financial  Statements  required by this item appear  under the caption
"Index to Financial Statements" and are included elsewhere herein.

                                    PART III

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

     The material  contained in "Election of  Directors"  and in "Section  16(a)
Beneficial  Ownership  Reporting  Compliance" of the Company's  definitive proxy
statement  (to be filed  pursuant to the  Securities  Exchange  Act of 1934,  as
amended) for the annual  meeting of  stockholders  to be held on May 21, 1999 is
hereby incorporated by reference.

Item 10.         Executive Compensation.

     The  material   contained  in  "Compensation  of  Directors  and  Executive
Officers",  "Compensation  Committee  Report on Executive  Compensation"  of the
Company's  definitive  proxy  statement (to be filed  pursuant to the Securities
Exchange Act of 1934, as amended) for the annual meeting of  stockholders  to be
held on May 21, 1999 is hereby incorporated by reference.

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

     The material contained in "Voting Securities and Principal Holders Thereof"
of the  Company's  definitive  proxy  statement  (to be  filed  pursuant  to the
Securities  Exchange  Act of  1934,  as  amended)  for  the  annual  meeting  of
stockholders to be held on May 21, 1999 is hereby incorporated by reference.

Item 12.         Certain Relationships and Related Transactions.

     The material contained in "Certain  Relationships and Related Transactions"
of the  Company's  definitive  proxy  statement  (to be  filed  pursuant  to the
Securities  Exchange  Act of  1934,  as  amended)  for  the  annual  meeting  of
stockholders to be held on May 21, 1999 is hereby incorporated by reference.






                                       31

<PAGE>


                                     PART IV

Item 13.             Exhibits, Lists and Reports on Form 8-K.

         (a) Exhibits:  The exhibits listed in the accompanying  index are filed
as part of this report.
<TABLE>
<CAPTION>

Exhibit No.          Description
<S>                     <C>
3.1                  Restated Certificate of Incorporation,  as amended,
                     incorporated by reference to Exhibit 3.1 to Form 10-QSB of
                     the Company for the quarter ended September 30, 1997.

3.2                  By-Laws  incorporated  by reference  to Exhibit 3.2 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

3.3                  Certificate of Amendment to Certificate of Designation.

10.1                 Employment  Agreement  with James E. Bishop  dated April 4,
                     1997  incorporated  by  reference to Exhibit 10.1 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.3                 Employment  Agreement  with Louis S. Beck dated  April 24,
                     1997 incorporated by reference to Exhibit 10.3 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.4                 Employment Agreement  with Harry G. Yeaggy  dated April 24,
                     1997  incorporated  by reference to Exhibit 10.4 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.5                 Employment Agreement with Michael M. Nanosky dated April
                     24, 1997  incorporated by reference to Exhibit 10.5 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.6                 1996 Stock Option Plan incorporated by reference to Exhibit
                     10.6 to Form 10-SB of the Company filed with the Securities
                     and Exchange Commission on June 24, 1997.

10.7                 Stock Option Agreement incorporated by reference to Exhibit
                     10.7 to Form 10-SB of the Company filed with the Securities
                     and Exchange Commission on June 24, 1997.

10.9                 Investor Agreement  incorporated by reference to Exhibit 
                     10.9 to Form 10-SB of the Company filed with the Securities
                     and Exchange Commission on June 24, 1997.

10.11                Client Service  Agreement  between  Hospitality  Employee 
                     Leasing Program,  Inc. and the Company incorporated  by
                     reference  to  Exhibit  10.11 to Form  10-SB of the Company
                     filed with the Securities and Exchange Commission on June
                     24, 1997.
</TABLE>


                                       32
<PAGE>
<TABLE>
<CAPTION>

<S>                                         <C>
10.12                Product Lease and Service Agreement between Computel 
                     Systems,  Inc. and the Company incorporated by  reference
                     to Exhibit  10.12 to Form 10-SB of the Company filed  with
                     the  Securities  and Exchange Commission on June 24, 1997.

10.13                Sublease  Agreement  between Beck  Hospitality  Inc. III
                     and the Company  (Cincinnati  premises) incorporated  by 
                     reference to Exhibit 10.13 to Form  10-SB  of the  Company
                     filed  with the Securities and Exchange Commission on June
                     24, 1997.

10.14                Sublease  Agreement between Beck  Hospitality  Inc. III and
                     the Company  (Boca Raton  premises) incorporated  by 
                     reference  to  Exhibit  10.14 to Form  10-SB  of the  
                     Company  filed  with the Securities and Exchange Commission
                     on June 24, 1997.

10.16                Partnership   Agreement  of  Kings  Dominion  Lodge,   G.P.
                     incorporated by reference to Exhibit 10.16 to Form 10-SB of
                     the  Company  filed  with  the   Securities   and  Exchange
                     Commission on June 24, 1997.

10.20                Consulting  Agreement  by and  between  the Company and The
                     Cornerstone  Company  incorporated  by reference to Exhibit
                     10.20 to Form 10-QSB for the quarter ended June 30, 1998.

10.21                Purchase and Sale Agreement  between  Galburton  Inn,  Inc.
                     and the Company incorporated  by reference to Exhibit 10.21
                     to Form 10-QSB for the quarter ended June 30, 1998.

10.22                Purchase  and  Sale   Agreement   between   West   Montrose
                     Properties  and the Company  incorporated  by  reference to
                     Exhibit 10.22 to Form 10-QSB for the quarter ended June 30,
                     1998.

10.23                Purchase and Sale Agreement  between North Canton Operating
                     Corp., Canton North Properties and the Company incorporated
                     by  reference to Exhibit  10.23 to Form 10-QSB for the
                     quarter  ended June 30, 1998.

10.24                Purchase and Sale Agreement between Rockside Road Operating
                     Corp., Rockside Road Properties and the Compan incorporated
                     by  reference to Exhibit  10.24 to Form 10-QSB for the
                     quarter  ended June 30, 1998.

10.25                Loan  Agreement  dated as of August 14,  1998 by and among
                     JAGI  Cleveland - Hudson,  LLC;  JAGI Cleveland -  
                     Independence,  LLC; JAGI Montrose  West,  LLC, JAGI North
                     Canton,  LLC; and Amresco Capital,  L.P. incorporated by
                     reference to Exhibit 10.25 to Form 8-K for the event dated
                     August 14, 1998.
</TABLE>




                                       33

<PAGE>

<TABLE>
<CAPTION>

<S>                                                   <C>
10.26                Note (Fixed Rate) of JAGI Cleveland - Hudson,  LLC dated
                     August 14, 1998 in the principal sum of $13,300,000 and 
                     Schedule of Other Notes (Fixed Rate)  incorporated by
                     reference to Exhibit 10.26 to Form 8-K for the event dated
                     August 14, 1998.

10.27                Mortgage and  Security  Agreement  dated as of August 14,
                     1998 by and between  JAGI  Cleveland - Hudson,  LLC and
                     Amresco  Capital,  L.P. and Schedule of Other Mortgage and
                     Security  Agreements incorporated by reference to Exhibit
                     10.27 to Form 8-K for the event dated August 14, 1998.

10.28                Security  Agreement  dated as of August 14,  1998 by JAGI
                     Cleveland  - Hudson,  LLC and Amresco Capital L.P.  and 
                     Schedule of Other Security Agreements incorporated by 
                     reference to Exhibit 10.28 to Form 8-K for the event dated
                     August 14, 1998.

10.29                Second  Mortgage  and  Security  Agreement  dated as of
                     August 14, 1998 by and between JAGI Cleveland - Hudson, LLC
                     and Amresco  Capital,  L.P. and  Schedule of Other Second
                     Mortgage and Security Agreements  incorporated by reference
                     to Exhibit 10.29 to Form 8-K for the event dated August 14,
                     1998.

10.30                Second  Security  Agreement  dated as of August 14, 1998 by
                     and between JAGI Cleveland - Hudson, LLC and Amresco
                     Capital,  L.P. and Schedule of Other Second Security
                     Agreements incorporated by reference to Exhibit 10.30 to
                     Form 8-K for the event dated August 14, 1998.

10.31                Guaranty  dated as of August 14, 1998 by and between the 
                     Company and Amresco  Capital,  L.P. and Schedule of Other
                     Guaranties  incorporated  by reference  to Exhibit  10.31
                     to Form 8-K for the event dated August 14, 1998.

10.32                Asset Purchase and Agreement and Plan of Merger by and 
                     among the Company,  Beck Hospitality Inc. II,  Beck  
                     Hospitality  Inc.  III,  Louis S. Beck and Harry  Yeaggy
                     dated as of January 1, 1999 incorporated by reference to
                     Exhibit 10.32 to Form 8-K for the event dated February 2,
                     1999.

10.33                Stock Appreciation Right Certificate.

10.34                Amended and Restated Registration Rights Agreement dated as
                     of January 1, 1999 with Louis S. Beck.

10.35                Amended and Restated Registration Rights Agreement dated as
                     of January 1, 1999 with Harry G. Yeaggy.

10.36                Stock Appreciation Right Agreement with Paul Tipps dated as
                     of December 18, 1998

16                   Letter by J.H. Cohn LLP to the Securities and Exchange
                     Commission  incorporated by reference to Exhibit 16 to Form
                     8-K for the event dated April 16, 1998.
</TABLE>






                                       34
<PAGE>

<TABLE>
<CAPTION>

<S>                                  <C>
21                   Subsidiaries of the Company.

24                   Powers of Attorney.

27                   Financial Data Schedule.
</TABLE>

     (b) Reports on Form 8-K:

     A Current  Report on Form 8-K/A was filed with the  Securities and Exchange
Commission  (the  "Commission")  on October 26, 1998. The Form 8-K/A amended and
supplemented  the Form 8-K  initially  filed with the  Commission  on August 28,
1998,  which related to the acquisition by the Company of four hotels located in
Ohio from sellers commonly  controlled by Michael Gallucci,  Jr. of Akron, Ohio.
The Form 8-K/A contained the information referred to in Item 7 of the Form 8-K.































                                       35

<PAGE>
                                   SIGNATURES

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

                                    JANUS AMERICAN GROUP, INC.


Dated:  March 22, 1999              /s/          James E. Bishop
                                    ----------------------------------------- 
                                    James E. Bishop
                                    President


Dated:  March 22, 1999              /s/          Richard A. Tonges
                                    -----------------------------------------
                                    Richard A. Tonges
                                    Treasurer and Vice President of Finance
                                    (Principal Financial and Accounting Officer)


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


Dated:  March 22, 1999               *        
                                     ----------------------------------------
                                     Louis S. Beck
                                     Chairman


Dated:  March 22, 1999                                                       
                                     ----------------------------------------
                                     James E. Bishop
                                     President and Director


Dated:  March 22, 1999               *                                       
                                     ----------------------------------------
                                     Harry G. Yeaggy
                                     Vice Chairman


Dated:  March 22, 1999              *                                        
                                    -----------------------------------------
                                    Arthur Lubell
                                    Director


Dated:  March 22, 1999              *                                        
                                    -----------------------------------------
                                    Richard P. Lerner
                                    Director




                                       36
<PAGE>


Dated:  March 22, 1999              *                                        
                                    -----------------------------------------
                                    Vincent W. Hatala, Jr.
                                    Director


Dated:  March 22, 1999              *                                        
                                    -----------------------------------------
                                    Lucille Hart-Brown
                                    Director


Dated:  March 22, 1999              *                                        
                                    -----------------------------------------
                                    C. Scott Bartlett, Jr.
                                    Director


Dated:  March 22, 1999              *                                        
                                    -----------------------------------------
                                    Michael M. Nanosky
                                    President of Hotel Operations and Director


Dated:  March 22, 1999              *        
                                    -----------------------------------------
                                    Paul Tipps
                                    Director


* /s/     James E. Bishop
-------------------------
James E. Bishop
Attorney-in-Fact
























                                       37
<PAGE>


<TABLE>
<CAPTION>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES

                                    INDEX TO

                        CONSOLIDATED FINANCIAL STATEMENTS

                                                                      PAGE
<S>                                                                    <C>
1998 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                          F-2

1997 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                          F-3

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 AND 1997                 F-4


CONSOLIDATED STATEMENTS OF OPERATIONS
    YEARS ENDED DECEMBER 31, 1998 AND 1997                             F-5


CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
    TWELVE MONTHS ENDED DECEMBER 31, 1998 AND 1997                     F-6


CONSOLIDATED STATEMENTS OF CASH FLOWS
    YEARS ENDED DECEMBER 31, 1998 AND 1997                             F-7


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                             F-8

</TABLE>













                                      F-1

<PAGE>







               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Janus American Group, Inc.


We have audited the  accompanying  consolidated  balance sheet of Janus American
Group,  Inc. (a Delaware  corporation) and subsidiaries as of December 31, 1998,
and the related consolidated statements of operations, stockholders' equity, and
cash  flows  for  the  year  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion,  the 1998 financial statements referred to above present fairly,
in all material  respects,  the financial position of Janus American Group, Inc.
as of December 31, 1998,  and the results of its  operations  and its cash flows
for the year then  ended,  in  conformity  with  generally  accepted  accounting
principles.




Cincinnati, Ohio                                     /S/ GRANT THORNTON LLP
February 10, 1999













                                       F-2
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors
Janus American Group, Inc.


We have audited the  accompanying  consolidated  balance sheet of JANUS AMERICAN
GROUP, INC. (formerly,  Janus Industries,  Inc.) AND SUBSIDIARIES as of December
31, 1997, and the related consolidated  statements of operations,  stockholders'
equity and cash flows for the year then ended.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of Janus  American
Group,  Inc. and  Subsidiaries  as of December 31,  1997,  and their  results of
operations and cash flows for the year then ended,  in conformity with generally
accepted accounting principles.



                                                            /S/ J. H. COHN LLP

Roseland, New Jersey
February 20, 1998







                                      F-3


<PAGE>

<TABLE>

                           JANUS AMERICAN GROUP, INC.
<CAPTION>
                           CONSOLIDATED BALANCE SHEET
                           DECEMBER 31, 1998 AND 1997

                                     ASSETS
                                                                                   December 31,      December 31,
                                                                                           1998             1997
<S>                                                                                        <C>              <C>
Current assets:
  Cash and cash equivalents                                                        $ 12,383,741       $11,191,481
  Restricted cash for the redemption of preferred stock of subsidiary
    debt service and real estate taxes                                                  802,746           332,367
  Accounts receivable                                                                 1,422,327           408,474
  Current portion of notes receivable                                                   322,043           123,022
  Other current assets                                                                  239,206           581,249
                                                                                    -----------        ---------- 
          Total current assets                                                       15,170,062        12,636,593
Property and equipment, net of accumulated depreciation
  and amortization                                                                   74,550,300        34,803,291
Notes receivable                                                                        453,194           126,390
Mortgage notes receivable from related parties                                        5,425,046         5,558,755
Goodwill, net of accumulated amortization                                             6,536,996         6,707,506
Deferred tax asset                                                                      680,126                 -
Other assets                                                                          5,868,067         1,571,591
                                                                                    -----------        ----------

            Total                                                                  $108,683,792       $61,404,126
                                                                                    ===========        ==========

                       LIABILTIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt                                                $  2,683,504       $ 2,112,215
  Accounts payable                                                                    1,495,253           903,234
  Accrued expenses                                                                    1,951,618           827,405
  Dividends payable                                                                           -           197,583
                                                                                    -----------       -----------
            Total current liabilities                                                              
                                                                                      6,130,375         4,040,437

Long-term debt, net of current portion                                               60,582,883        17,866,318
Deferred tax liabilities                                                                      -         1,190,000
            Total liabilities                                                       -----------       -----------               
                                                                                     66,713,257        23,096,755

Minority interest                                                                                  
                                                                                      1,773,961         1,688,969

Commitments and contingencies

Stockholders' equity:
  Preferred stock:
    Series B; par value $.01 per share; 12,000 shares
      authorized; 10,451.88 shares issued and outstanding                                              
                                                                                            105               105
    Common stock, par value $.01 per share; 15,000,000 shares authorized;
      11,883,220 and 11,880,867 shares issued
      at December 31, 1998 and 1997 respectively                                             
                                                                                        118,833           118,809
    Additional paid- in capital                                                                
                                                                                     45,738,120        43,163,320
    Accumulated deficit                                                                        
                                                                                     (4,244,185)       (5,347,533)
    Treasury stock- 3,192,128 and 3,189,132 common shares in 1998 and 
      1997, at cost                                                                  (1,416,299)       (1,316,299)
                                                                                    -----------        ----------
            Total stockholders' equity                                               40,196,575        36,618,402
                                                                                    -----------        ----------

            Total                                                                  $108,683,792       $61,404,126
                                                                                    ===========        ==========

</TABLE>

The accompanying notes are an integral part of these statements.



                                      F-4

<PAGE>


<TABLE>
                           JANUS AMERICAN GROUP, INC.
<CAPTION>
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997

                                                                                             December 31,      December 31,
                                                                                                 1998             1997
<S>                                                                                               <C>                <C>
Revenues:
  Hotel revenues:
    Room and related services                                                                 $20,489,850       $ 8,213,514
    Food and beverage                                                                           6,298,770         1,222,680
    Management fees                                                                             1,754,610           566,824
    Other                                                                                         513,595           272,620
                                                                                               ----------        ----------
               Total revenues                                                                  29,056,825        10,275,638

Cost and expenses:
  Direct hotel operating expenses:
  Room and related services                                                                     4,918,908         1,841,215
  Food and beverage                                                                             5,122,426         1,115,954       
  Selling and general expenses                                                                  1,495,797           353,829
                                                                                               ----------        ----------
               Total direct hotel operating expense                                            11,537,130         3,310,998
  Occupancy and other operating expenes                                                         3,451,122         1,174,951
  Selling, general and administrative expenses                                                  6,484,960         3,480,117
  Depreciation of property and equipment                                                        2,392,300           873,581
  Amortization of intangible assets                                                               222,922           112,900
                                                                                               ----------        ----------
               Total costs and expenses                                                        24,088,434         8,952,547
                                                                                               ----------        ----------
Operating income (loss)                                                                         4,968,391         1,323,091

Other income (expense)
  Interest income                                                                               1,137,506           708,783
  Other income                                                                                          -            30,002
                                                                                                        
  Interest expense                                                                             (3,565,053)       (1,248,869)
                                                                                               ----------        ----------

Income(loss)from continuing operations before income taxes and minority interest                2,540,844           813,007

Federal income tax (benefits)                                                                    (219,449)                -
Provision for deferred income taxes                                                               695,874           330,000
Provision for state and local income taxes                                                        228,373             1,000
                                                                                               ----------        ----------
               Total provision for income taxes                                                   704,798           331,000
                                                                                               ----------        ----------

Income (loss) from continuing operations before minority interest                               1,836,046           482,007
Minority interest                                                                                  84,992            58,042
                                                                                               ----------        ----------
Net income from continuing operations                                                           1,751,055           423,965

     (Loss) from operations, net of credit for state income taxes of $136,000 in 1997                   -          (213,353)
     Gain (loss) on disposal, net of credit for state income taxes of $193,000 in 1997            136,186          (773,356)
                                                                                               ----------        ----------
                Total discontinued operations                                                     136,186          (986,709)
                                                                                               ----------        ----------

Net Income (loss)                                                                               1,887,241          (562,744)
Less preferred dividend requirements                                                              783,891           539,059
                                                                                               ----------        ----------
Net income (loss) applicable to common stock                                                   $1,103,350       $(1,101,803)
                                                                                                =========        ==========
                                                                                                 
Basic income (loss) per common share:
Net income (loss) per common share from continuing operations-Basic                                  0.11             (0.02)
Net income (loss) per common share from discontinued operations-Basic                                0.02             (0.13)
                                                                                                     ----              ----
Net income (loss) per common share-Basic                                                             0.13             (0.15)
                                                                                                     ====              ====
Income (loss) per common share-Assuming dilution:
Net income (loss) per common share from continuing operations-Assuming dilution                      0.11             (0.02)
Net income (loss) per common share from discontinued operations-Assuming dilution                    0.02             (0.13)
                                                                                                     ----              ----
Net income (loss) per common share-Assuming dilution                                                 0.13             (0.15)
                                                                                                     ====              ====
Basic weighted average common shares outstanding                                                8,693,545         7,534,248
                                                                                                =========        ==========
Weighted average common shares outstanding-assuming dilution                                    8,693,545         7,534,248
                                                                                                =========        ==========

</TABLE>
                                                            
The accompanying notes are an integral part of these statements.

                                      F-5
<PAGE>

<TABLE>

                           JANUS AMERICAN GROUP, INC.
<CAPTION>
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1998 AND 1997



                                                       Preferred Stock                Common Stock
                                                       Number                    Number                               
                                                         of                        of                            Comprehensive 
                                                       Shares     Amount         Shares          Amount              Income     
<S>                                                      <C>         <C>          <C>              <C>                <C>         
Balance December 31, 1996                                                      8,080,868       $ 80,809
Net Loss                                                                                                        
Contributions to capital from reorganization trust                                                              
Shares issued to acquire hospitality business         10,451.88    $105        3,799,999         38,000              
Repurchase of 276,400 warrants                                                                                  
Repurchase of common stock                                                                                      
Preferred stock dividends                                                                                       
                                                                                                                    
Balance December 31, 1997                             10,451.88     105       11,880,867        118,809            
                                                                    
Comprehensive Income:
  Net income                                                                                                      $1,887,241    
  Decrease in net operating loss valuation allowance                                                               2,566,000
                                                                                                                   ---------
Comprehensive Income                                                                                              $4,453,241
Conversion of  warrants and payout of puts                                         2,353             24            =========
Preferred Stock Dividends                                                                                       
                                                      ---------     ---       ----------        -------
Balance at December 31, 1998                          10,451.88    $105       11,883,220       $118,833          
                                                      =========     ===       ==========        =======          
</TABLE>

<TABLE>
<CAPTION>
                                                                              

                                                                                           Treasury Stock
                                                       Additional                         Number
                                                         Paid-in       Accumulated          of
                                                         Capital         Deficit          Shares        Amount             Total
<S>                                                       <C>              <C>               <C>         <C>                 <C>  
Balance December 31, 1996                             $13,061,256      $(4,245,730)     2,849,850     $(874,730)       $ 8,021,605
Net Loss                                                                  (562,744)                                       (562,744)
Contributions to capital from reorganization trust      7,440,930                                                        7,440,930
Shares issued to acquire hospitality business          22,763,772                                                       22,801,877
Repurchase of 276,400 warrants                           (102,638)                                                        (102,638)
Repurchase of common stock                                                                339,282      (441,569)          (441,569)
Preferred stock dividends                                                 (539,059)                                       (539,059)
                                                                        ----------                                      ----------  
Balance December 31, 1997                              43,163,320       (5,347,533)     3,189,132    (1,316,299)        36,618,402
                                                      
Comprehensive Income:
  Net income                                                             1,887,241                                       1,887,241
  Decrease in net operating loss valuation allowance    2,566,000                                                        2,566,000
Conversion of  warrants and payout of puts                  8,799                           2,996      (100,000)           (91,177)
Preferred Stock Dividends                                                 (783,891)                                       (783,891)
                                                       ----------       ----------      ---------    ----------         ----------
Balance at December 31, 1998                          $45,738,119      $(4,244,183)     3,192,128   $(1,416,299)       $40,196,575
                                                       ==========       ==========      =========    ==========         ========== 
</TABLE>
                      

The accompanying notes are an integral part of these statements.

                                      F-6

<PAGE>

<TABLE>

                           JANUS AMERICAN GROUP, INC.
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997


                                                                                      December 31,              December 31,
                                                                                              1998                      1997
<S>                                                                                          <C>                      <C>      
Operating activities:
Net income (loss)                                                                      $ 1,887,241               $  (562,744)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
  Depreciation and amortization                                                          2,392,300                   993,394
  Amortization of intangible assets                                                        222,922                   172,442
  Minority Interest                                                                         84,992                    58,042
  Deferred income taxes                                                                    695,874                         -
  Discontinued operations                                                                  (73,948)                  966,356   
  Changes in operating assets and liabilities:
    Accounts receivable                                                                 (1,013,853)                  (94,425)
    Other current assets                                                                   342,043                  (511,857)
    Other asset                                                                         (4,348,888)                 (622,191)
    Accounts payable and accrued expenses                                                1,716,232                   158,322
                                                                                        ----------                ----------
              Net cash provided by operating activities                                  1,904,915                   557,339

Investing activities:
  Acquisition of hospitality business, net of
    noncash consideration and cash acquired                                                      -                (1,646,541)
  Increase in Notes Receivable                                                              (4,276)                  175,000     
  Purchases of property and equipment                                                  (42,595,244)                 (846,953)
  Proceeds on sale of subsidiary's net assets                                               14,161                    45,000
  Collections of notes receivable                                                          127,884                    76,505
                                                                                        ----------                ----------
               Net cash ( used in) investing activities                                (42,457,475)               (2,196,989)

Financing activities:
  Dividends Paid                                                                          (981,474)                 (341,476)
  (Increase)decrease in restricted cash                                                   (470,382)                  631,962
  Repurchase of common stock                                                              (100,000)                 (441,569)
  Repurchase of warrants                                                                         -                  (102,638)
  Conversion of warrants to common stock                                                     8,823                         -     
  Reduction of payable for redemption of
    preferred stock of subsidiary                                                                -                  (631,962)
  Contributions to capital from United States
    Lines, Inc. and United States Lines (S.A.),
    Inc. Reorganization Trust, including $50,090
    attributable to minority interest in 1997                                                    -                 7,491,020
  Proceeds from long-term borrowings                                                    44,000,000                         -     
  Repayments of long-term borrowings                                                      (712,147)                 (355,042)
                                                                                        ----------                ----------
               Net cash provided by financing activities                                41,744,821                 6,250,295
                                                                                        ----------                ----------
Increase in cash and cash equivalents                                                    1,192,260                 4,610,645

Cash and cash equivalents, beginning of period                                          11,191,481                 6,580,836
                                                                                        ----------                ----------

Cash and cash equivalents, end of period                                               $12,383,741               $11,191,481
                                                                                        ==========                ==========

Supplemental disclosure of cash flow data:
  Interest paid                                                                        $(3,565,053)              $(1,248,869)
                                                                                        ==========                ==========

  Income taxes paid                                                                    $   130,750              $    187,200  
                                                                                        ==========                ==========
Noncash transactions:
  Acquisition of hospitality business                                                  $         -               $22,801,877
                                                                                        ==========                ========== 

</TABLE>

The accompanying notes are an integral part of these statements.

                                      F-7
<PAGE>


                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 1-Organization:

     As of December 31, 1998, the continuing operations of Janus American Group,
     Inc.  and  its'  Subsidiaries  ("Janus"  or  the  "Company"),  which  until
     September 29, 1997 had been named Janus  Industries,  Inc.,  were comprised
     primarily of the operations of eleven hotels (of which ten are wholly-owned
     and one is 85%-owned) and a hotel management company.

     The  Company's  owned and  managed  hotels  are  located  primarily  in the
     Midwestern and Southeastern  United States. As further described in Note 3,
     seven hotels and two mortgage notes receivable were acquired,  effectively,
     as of April 30, 1997 in a transaction that was accounted for as a purchase.
     Four  additional  hotels were  acquired on August 14, 1998 in a transaction
     that was accounted for as a purchase. Accordingly, the accompanying audited
     consolidated  financial  statements  reflect  the  accounts  for the  hotel
     operations  for  the  years  ended  December  31,  1998 and 1997  from  the
     applicable acquisition dates. The financial statements for periods prior to
     that date are not comparable.

     As further described in Note 9, management  decided during December 1997 to
     discontinue and dispose of all of the Company's  operations  related to the
     provision of engineering and wireline  logging services to companies in the
     oil and gas industry (the "oil and gas services operations").

     In November  1986,  the Company's  predecessor,  United States Lines,  Inc.
     ("USL"),  together with United States Lines (S.A.) Inc.  ("USL-SA") and two
     related  companies,  filed  petitions under Chapter 11 of the United States
     Bankruptcy  Code. In May 1989, the United States  Bankruptcy  Court for the
     Southern District of New York (the "Bankruptcy  Court") confirmed a plan of
     reorganization with respect to such companies,  which was later amended and
     modified  pursuant to an order of the Bankruptcy  Court entered in February
     1990 (the "Plan").

     Pursuant to the Plan and the order of the Bankruptcy  Court  confirming the
     Plan:

     (a)  USL and USL-SA  changed their names to Janus  Industries,  Inc. and JI
          Subsidiary, Inc. ("JIS"), respectively;

     (b)  The United  States  Lines,  Inc.  and United  States Lines (S.A.) Inc.
          Reorganization Trust (the "Reorganization  Trust") was established for
          the  purpose  of  administering  the Plan and  liquidating  and paying
          claims  of  former  creditors  of USL and  USL-SA;  it will  also make
          contributions of cash to Janus and JIS from time to time of amounts in
          excess of its projected liabilities and administrative requirements;


                                      F-8
<PAGE>
                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 1-Organization (continued):

     (c)  All claims of former creditors of USL and USL-SA were discharged; as a
          result,  such  former  creditors  may look only to the  Reorganization
          Trust  (and not to Janus or JIS) for  payment of amounts in respect of
          their discharged claims;

     (d)  The interests of all holders of shares of the capital stock of USL and
          USL-SA were  extinguished  and the former  creditors of USL and USL-SA
          became entitled to receive all of the shares of capital stock issuable
          by Janus and JIS, except for shares issuable to Janus and a subsidiary
          of  Dyson-Kissner-Moran  ("DKM"),  a new  Investor;  shares of capital
          stock issuable to such former  creditors were initially  issued to the
          Reorganization Trust as recordholder for reissuance to such creditors;
          and

     (e)  The Reorganization Trust contributed $3,000,000 of USL and USL-SA cash
          to  capitalize  Janus and JIS on February 23, 1990 and provided  Janus
          and JIS with certain books and records, and all tax attributes and tax
          benefits,  of USL and  USL-SA;  it also  made  cash  contributions  of
          approximately  $7,491,000  and  $7,622,000 to the capital of Janus and
          JIS in 1997 and 1996, respectively.


Note 2-Summary of significant accounting policies:

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

         Fresh-start accounting:
               The Company  adopted  fresh-start  accounting  at the time of its
               reorganization  in  February  1990  (see Note 1).  The  Company's
               opening balance sheet consisted of $6,000,000 in cash and capital
               stock.

         Principles of consolidation:
               The  audited   consolidated   financial  statements  include  the
               accounts  of  Janus  and  its  majority-owned  subsidiaries.  All
               significant  intercompany  balances  and  transactions  have been
               eliminated in consolidation.

         Cash equivalents:
               Cash equivalents  generally consist of highly liquid  investments
               with maturities of three months or less when acquired.


                                      F-9

<PAGE>

                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 2-Summary of significant accounting policies (continued)

         Property and equipment:
               Property  and  equipment  is  stated  at  cost.  Depreciation  is
               computed using the straight-line method over the estimated useful
               lives of the assets.

         Goodwill:
               Goodwill,  which  represents  the excess of the costs of acquired
               businesses  over the fair value of the net assets acquired at the
               respective   dates  of   acquisition,   is  amortized  using  the
               straight-line  method  over  the  estimated  useful  lives of the
               assets (40 years).

         Impairment of long-lived assets:
               The Company has adopted the  provisions of Statement of Financial
               Accounting  Standards No. 121,  Accounting  for the Impairment of
               Long-Lived  Assets and for  Long-Lived  Assets to be  Disposed of
               ("SFAS  121").  Under SFAS 121,  impairment  losses on long-lived
               assets,  such  as  property  and  equipment  and  goodwill,   are
               recognized when events or changes in circumstances  indicate that
               the  undiscounted  cash flows  estimated  to be generated by such
               assets are less than their carrying value and,  accordingly,  all
               or a  portion  of such  carrying  value  may not be  recoverable.
               Impairment  losses are then  measured by comparing the fair value
               of assets to their  carrying  amounts.  As of  December  31, 1998
               there was no such impairment.

         Deferred loan costs:
               Costs  incurred to obtain  long-term  financing  are deferred and
               amortized using the straight-line  method (which approximates the
               interest method) over the terms of the loans.

         Revenue recognition:
               The  Company  recognizes  all  revenues  on an  accrual  basis as
               earned.

         Advertising costs:
               The costs of advertising  and promotion are expensed as incurred.
               Advertising  costs  charged  to  operations,  all of  which  were
               attributable  to the  Company's  hotel  operations,  amounted  to
               $415,400 in 1998 and $191,000 in 1997.









                                      F-10

<PAGE>

                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 2-Summary of significant accounting policies (continued):

         Income taxes:
               The Company  accounts for income taxes  pursuant to the asset and
               liability   method  which   requires   deferred  tax  assets  and
               liabilities  to be computed  annually for  temporary  differences
               between  the  financial  statement  and tax bases of  assets  and
               liabilities that will result in taxable or deductible  amounts in
               the future based on enacted tax laws and rates  applicable to the
               periods in which the temporary differences are expected to affect
               taxable  income.  Valuation  allowances  are  established,   when
               necessary,  to reduce  deferred tax assets to the amount expected
               to be  realized.  The income tax  provision  or credit is the tax
               payable or  refundable  for the  period  plus or minus the change
               during the period in deferred tax assets and liabilities.  Income
               tax credits  attributable  to benefits  from net  operating  loss
               carryforwards or other temporary  differences that existed at the
               time the Company adopted fresh-start  accounting are reflected as
               a contribution to stockholders' equity in the period in which the
               tax benefits are realized.

               As  explained  in Note 1, the assets and  liabilities  of USL and
               USL-SA were initially  transferred to the Reorganization Trust in
               February  1990.  The  Reorganization  Trust is considered to be a
               grantor trust for income tax purposes.  Accordingly,  any taxable
               income or loss  associated with the disposition of assets and the
               settlement  of  liabilities  by  the  Reorganization   Trust  are
               recorded  in the  Federal  and state  income  tax  returns of the
               Company;  however,  such assets and liabilities are not presented
               in these consolidated financial statements.

               In  connection  with the  contract  entered  into  subsequent  to
               year-end  (see  Note  15)  deferred   income  will  be  triggered
               accelerating  taxable  income.  This  changed  the  deferred  tax
               valuation reserve which was restricted by the timing of income.

               Stock  options:  In accordance  with the provisions of Accounting
               Principles  Board Opinion No. 25,  Accounting for Stock Issued to
               Employees,  the Company will  recognize  compensation  costs as a
               result of the issuance of stock options  based on the excess,  if
               any,  of the fair  value of the  underlying  stock at the date of
               grant or award (or at an appropriate subsequent measurement date)
               over the  amount  the  employee  must pay to  acquire  the stock.
               Therefore,   the  Company  will  not  be  required  to  recognize
               compensation  expense as a result of any grants of stock  options
               at an exercise  price that is  equivalent to or greater than fair
               value.  The  Company  will also make pro  forma  disclosures,  as
               required by Statement of Financial  Accounting Standards No. 123,
               Accounting  for  Stock-Based  Compensation  ("SFAS 123"),  of net
               income or loss as if a fair value based method of accounting  for
               stock options had been applied, if such amounts differ materially
               from the historical amounts.


                                      F-11

<PAGE>

                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 2--Summary of significant accounting policies (concluded):
                  
         Reclassification:
               Prior year amounts have been reclassified to conform with current
               year presentation.

         Income (loss) per common share:
               Effective  December 31, 1997, the Company  adopted the provisions
               of Statement of Financial  Accounting Standards No. 128, Earnings
               per Share  ("SFAS  128"),  which  replaces  the  presentation  of
               "primary"  and  "fully-diluted"  income  (loss) per common  share
               required under previously  promulgated  accounting standards with
               the presentation of "basic" and "assuming dilution" income (loss)
               per common share.

               Basic  net  income  (loss)  per  common  share is  calculated  by
               dividing net income or loss,  as adjusted for required  preferred
               stock dividends,  by the weighted average number of common shares
               outstanding  during the period.  The  calculation  of diluted net
               income(loss)  per  common  share is  similar to that of basic net
               income (loss) per common share,  except that the  denominator  is
               increased to include the number of additional  common shares that
               would have been  outstanding if all  potentially  dilutive common
               shares,  principally  those  issuable  upon the exercise of stock
               options and warrants, were issued during the period.

               The  Company's  reported  net  income  represents  its net income
               available to common  shareholders  for purposes of computing both
               measures.  The following  reconciles  shares  outstanding  at the
               beginning  of the  year to  average  shares  outstanding  used to
               compute both income per share measures.
<TABLE>
<CAPTION>

                                                              December 31,              December 31,
                                                                      1998                      1997
                          <S>                                       <C>                      <C>

                  Averages shares outstanding-basic              8,693,545                 7,534,248

                  Effect of dilutive securities-
                  dilutive shares contingently
                  issuable upon the exercise of
                  stock options and warrants                             -                         -  
                                                                 ---------                 ---------

                  Averages shares outstanding-
                  Assuming dilution                              8,693,545                 7,534,248
                                                                 =========                 =========
</TABLE>


                                      F-12

<PAGE>

                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 3-Acquisitions:

     On April  24,  1997,  the  Company  entered  the  hospitality  business  by
     acquiring  the  following  from  affiliates  of Louis S.  Beck and Harry G.
     Yeaggy  ("Messrs.  Beck and  Yeaggy"):  (i) seven  hotels (of which six are
     wholly-owned  and one is owned by an 85%-owned  partnership),  (ii) a hotel
     management  company and  substantially all of the assets thereof other than
     seven management  contracts and (iii) financial  participations in the form
     of mortgages on one additional  hotel and a campground  (the  "Mortgages").
     The  seven  hotels,  the  management  company  and the  Mortgages  are also
     referred to herein as the "BY Hotel  Group."  Messrs.  Beck and Yeaggy also
     own controlling interests in other hotels,  certain of which are managed by
     the Company.

     Each of Messrs.  Beck and Yeaggy became an executive officer of the Company
     as of the date of acquisition.

     The  consideration  exchanged by the Company for the assets and liabilities
     of the BY Hotel Group and the other direct acquisition costs were comprised
     as follows:
<TABLE>
<CAPTION>

Issuance of
<S>                                                                   <C>
10,451.88  shares of Series B preferred stock with
a liquidation  preference and estimated fair value
of $1,000 per share                                                $10,451,880
3,799,999 shares of Janus common stock with an
estimated fair value of $3.25 per share                             12,349,997
                                                                    ----------

         Total value of shares issued                              $22,801,877

Cash paid to Messrs. Beck and Yeaggy to repay
short-term loans                                                       793,803
Legal, accounting and other costs related to the
purchase                                                             1,007,424

         Total purchase price to be allocated                      $24,603,104
                                                                    ==========
</TABLE>

     The  acquisition  was  accounted for as a purchase  and,  accordingly,  the
     results  of the BY Hotel  Group  have  been  included  in the  accompanying
     consolidated  statements  of  operations  subsequent to April 30, 1997 (the
     effective date of the  acquisition for accounting  purposes).  In addition,
     



                                      F-13

<PAGE>
                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 3-Acquisitions (continued):

     total   acquisition  costs  were  allocated  to  the  assets  acquired  and
     liabilities  assumed  based on their  estimated  fair values on the date of
     acquisition,  with the excess of cost over such fair  values  allocated  to
     goodwill, as shown below:

<TABLE>
<CAPTION>

<S>                                                                      <C>
Cash                                                                $    79,994

Accounts receivable                                                     230,011

Other current assets                                                    217,024

Property and equipment                                               34,400,000

Mortgage notes receivable                                             5,758,282

Goodwill                                                              6,820,406

Other assets                                                          1,256,672

Accounts payable                                                       (579,115)

Other current liabilities                                              (519,595)

Long-term debt                                                      (20,333,575)

Deferred tax liabilities                                             (1,190,000)


Minority interest in the 85%-owned hotel Partnership                 (1,537,000)
                                                                     ----------

Total purchase price allocated                                      $24,603,104
                                                                     ==========
</TABLE>

     Although the Company has a  substantial  amount of estimated  available net
     operating loss carryforwards for Federal income tax and alternative minimum
     tax  purposes,  the deferred  tax assets  potentially  available  from such
     carryforwards   have  been  reduced  by  a  valuation   allowance   due  to
     uncertainties related to their future realization. Accordingly, the amounts
     allocated  to  goodwill  and  deferred  tax  liabilities   shown  above  in
     connection  with the  acquisition  of the BY Hotel  Group  have  each  been
     reduced by approximately  $8,134,000,  which is equivalent to the reduction
     in the valuation allowance attributable to the portion of the net operating
     loss  carryforwards  that management  estimates will be offset by temporary
     differences attributable to the acquired net assets of the BY Hotel Group.

     Some of the income  earning  assets  acquired in the 1997  purchase are not
     subject  to  offset  by the net  operating  loss  for five  years  from the
     acquisition date. Therefore,  certain income from these items will be taxed
     to the company without regard to the net operating loss.






                                      F-14
<PAGE>

                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 3-Acquisitions (continued):

     The goodwill attributable to the acquisition of the BY Hotel Group is being
     amortized based on an estimated useful life of 40 years.

     On August 14,  1998,  the  Company  acquired  four  additional  hotels from
     commonly  controlled  sellers (the  "Cornerstone  Hotel Group").  The total
     purchase price was $44,110,500 in cash,  financed by four mortgage loans in
     substantially  the  amount  of the total  purchase  price,  secured  by the
     acquired properties. The loans are cross-defaulted and cross-collateralized
     among the four hotels but otherwise of limited recourse to the Company. The
     financing  was for an  initial  term of ten  years,  based  upon a  25-year
     amortization schedule, at a fixed interest rate of 8.09% per annum.

     The  acquisition  was  accounted  for as a purchase  and was  allocated  as
     follows:
<TABLE>
<CAPTION>

<S>                                                                       <C>

          Land                                                      $ 4,132,509

          Buildings                                                  28,927,552

          Equipment                                                      52,500

          Furniture and fixtures                                      8,090,259

          Prepaids and escrow for                                     2,907,680
            product improvement program                               ---------
                
               Total purchase price allocated                       $44,110,500
                                                                     ==========
</TABLE>

The following  unaudited  information  shows the pro forma results of continuing
operations of the Company for the twelve months ended  December 31, 1998 and pro
forma  results of operations  for the twelve  months ended  December 31, 1997 as
though  each of the BY Hotel  Group  and the  Cornerstone  Hotel  Group had been
acquired as of January 1, 1997.  In each case,  the results of the  discontinued
oil and gas services operations are excluded.

<TABLE>
<CAPTION>
                                               Unaudited               Unaudited
                                               Pro Forma               Pro Forma
                                        December 31, 1998      December 31, 1997
<S>                                            <C>                      <C>
Revenues:
  Hotel revenues:
    Room and related services                 $28,856,963            $28,295,087

    Food and beverage                          10,685,258             10,453,513

    Management fees                             1,754,610                921,217

    Other                                         762,202                715,768
                                                          
          Total Revenues                      $42,059,033            $40,385,585

</TABLE>




                                      F-15
<PAGE>
                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


Note3--Acquisitions (continued):
<TABLE>
<CAPTION>

<S>                                                                       <C>            <C>
Cost and expenses:
  Direct hotel operating expenses
    Room and related services                                          7,250,670      7,434,533
    Food and beverage                                                  8,674,878      8,929,889
    Selling and general expenses                                       2,439,982      2,316,244
                                                                      ----------     ----------
            Total direct hotel operating expenses                    $18,365,530    $18,680,666
    Occupancy & other operating expenses                               5,120,882      5,106,479
    Selling, general and admin. expenses                               7,656,220      7,096,312
    Depreciation of property and equipment                             3,394,646      3,183,773
    Amortization of intangible assets                                    264,532        268,997
                                                                      ----------     ----------
            Total costs and expenses                                 $34,801,810    $34,336,227

Operating income (loss)                                               $7,257,223    $ 6,049,358

Other income (expense)
  Interest income                                                      1,137,506        858,423
  Other income                                                                 -         30,002
  Interest expense                                                    (5,340,201)    (5,387,595)
                                                                      ----------     ----------
Income (loss) from continuing operations before                                      
income taxes and minority interest                                    $3,054,528     $1,550,188

Provision (credit) for income taxes                                    1,161,000        589,000
                                                                      ----------     ----------
Income (loss) from continuing operations before
  minority interest                                                    1,893,528        961,188
Minority interest                                                         84,992         17,048
                                                                      ----------     ----------
Net income (loss) from continuing operations                         $ 1,838,536    $   944,140
Less preferred dividend requirements                                     783,891        783,891
                                                                      ----------     ----------
Net income (loss) from continuing operations                         
  applicable to common stock                                         $ 1,054,645    $   160,249
                                                                      ==========     ==========

Net income (loss) from continuing operations per                            0.12           0.02
 common share-Basic
</TABLE>


                                      F-16
<PAGE>

                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 3-Acquisitions (continued):
<TABLE>
<CAPTION>

<S>                                                                         <C>            <C>
Net income (loss) from continuing operations per                            0.12           0.02
common share-assuming dilution

Basic weighted average shares outstanding                              8,693,545      8,783,563
                                                                      ==========     ==========

Basic weighted average shares-assuming dilution                        8,693,545      8,783,563
                                                                      ==========     ==========
</TABLE>


     In  addition to  combining  the  historical  results of  operations  of the
     Company and the historical  pre-acquisition results of operations of the BY
     Hotel  Group and the  Cornerstone  Hotel  Group,  the pro forma  results of
     operations include adjustments that, among other things, reflect:

     --   The elimination of the net revenues derived from management  contracts
          of the BY Hotel  Group and  non-recurring  income  of the  Cornerstone
          Hotel Group that were not acquired by the Company;

     --   Depreciation  of property  and  equipment  based on the fair values of
          assets acquired;

     --   Amortization  of the  additional  goodwill  arising  from the BY Hotel
          Group  acquisition  and licensing  fees,  loan costs and closing costs
          incurred in the acquisition of Cornerstone Hotel Group;

     --   The net effects of changes to compensation  and related expenses based
          on revised  lease  agreements,  expense  sharing  arrangements  with a
          related  party,   revised  employment   agreements  and  non-recurring
          expenses;

     --   The net effects of changes to interest  expense  based on  acquisition
          financing of the Cornerstone Hotel Group.








                                      F-17
<PAGE>
                 JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 3-Acquisitions (concluded):

     --   The  provision  for income  taxes is based upon pro forma  income from
          continuing  operations and the statutory  Federal and state income tax
          rates. Any actual income tax credits attributable to benefits from net
          operating  loss  carryforwards  that  existed at the time the  Company
          adopted fresh-start  accounting will be reflected as a contribution to
          stockholders'  equity  in the  period in which  the tax  benefits  are
          realized; and

     --   The effects of the issuance of shares of preferred and common stock as
          part of the  consideration  for the  acquisition  of BY Hotel Group on
          preferred stock dividends and weighted average common shares

     The unaudited pro forma results of operations shown above do not purport to
     represent what the combined results of operations  actually would have been
     if the  acquisition of the BY Hotel Group and the  Cornerstone  Hotel Group
     had  occurred  as of  January  1,  l997  instead  of  the  actual  date  of
     consummation  or what the  results  of  operations  will be for any  future
     periods.


  Note 4-Mortgage notes receivable:

     The  Mortgages,  which  were  acquired  on  April  24,  1997 as part of the
     acquisition  of the BY Hotel  Group,  are secured by a hotel in Juno Beach,
     Florida and a campground in Kissimmee,  Florida, both of which are owned by
     entities  controlled by Messrs.  Beck and Yeaggy.  Messrs.  Beck and Yeaggy
     have also personally  guaranteed the Mortgages.  The balances receivable at
     December 31, 1998 consisted of the following:
<TABLE>
<CAPTION>

                                                                      1998              1997
<S>                                                                 <C>              <C>
     Note secured by hotel property,                            $2,141,749        $2,185,744
       with interest at .5% above specified prime rate 
       (an effective rate of 9.0% at December 31, 1998)

     Note secured by campground, with interest at 8%             3,417,006         3,496,033
                                                                 ---------         ---------

     Total long-term receivable                                  5,558,755         5,681,777

     Less current portion                                          133,709           123,022
                                                                 ---------         ---------

     Long-term portion, net of current portion                  $5,425,046        $5,558,755
                                                                 =========         =========
</TABLE>




                                      F-18
<PAGE>
                 JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 4--Mortgage notes receivable (concluded):

     The Mortgages are payable in monthly installments of principal and interest
     through April 2003 and final  installments  of all remaining  principal and
     interest in May 2003.  Principal  payments on the  Mortgages in each of the
     five years subsequent to December 31, 1998 are:
<TABLE>
<CAPTION>

<S>                                                     <C>
            Year Ending December 31                   Amount
                      1999                        $  133,709
                      2000                           145,326
                      2001                           157,958
                      2002                           171,690
                      2003                         4,950,072

</TABLE>

     The Company  derived  interest  income of $471,759  and  $320,516  from the
     Mortgages during the years ended December 31, 1998 and 1997 respectively.


Note 5--Property and equipment:

     Property and equipment at December 31, 1998 and December 31, 1997 consisted
     of the following:

<TABLE>
<CAPTION>

                                     Years of         December 31,     December31,
                                   Useful Life            1998               1997
                                   -----------            ----               ----
<S>                                     <C>                <C>               <C>
Land                                                  $10,167,507       $ 6,035,000

Hotels                                  30             56,004,760        26,942,000

Hotel furniture and fixtures:            5              3,125,877         2,232,941               

Hotel furniture and fixtures:            9              8,415,676                 -   

Equipment and vehicles                   5                 83,212           648,147

Other                                    5                 19,886            11,724
                                                       ----------        ----------
                                                       77,816,918        35,869,812

Less accumulated  depreciation                                                       
and amortization                                        3,266,618         1,066,521
                                                       ----------        ----------

Totals                                                $74,550,300       $34,803,291
                                                      ===========       ===========
</TABLE>


                                      F-19

<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS



Note 6- Long-term debt:
<TABLE>
<CAPTION>
                                                                                 1998             1997
<S>                                                                              <C>              <C>
Long-term debt at December 31 consisted of the following:

Fixed rate mortgage  notes payable in monthly  installments,  including
interest at rates ranging from 8.09% to 10%; the mortgage notes mature
from August 2000 through January 2016                                       $54,320,332       $10,717,718

Variable rate mortgage notes payable in monthly installments, including
interest at rates varying with the prime commercial lending rate, rates
on U.S.  Treasury  securities and other defined  indexes (the effective
rates at December  31, 1997  ranged from 8.73% to 9.5%);  the  mortgage
notes mature from August 1999 through
April 2006                                                                    8,823,009         9,094,499

Equipment notes with various maturities
through December 2001 and interest at rates
ranging from 8.98% to 15%                                                       123,046           166,316
                                                                             ----------        ----------

Total long-term debt                                                         63,266,387        19,978,533

Less current portion                                                          2,683,504         2,112,215
                                                                             ----------        ----------

Long-term debt, net of current portion                                      $60,582,883       $17,866,318
                                                                             ==========        ==========
</TABLE>

     Long-term debt is secured by the Company's  notes,  property and equipment.
     Principal payments in years subsequent to December 31, 1998 are as follows:

             Year Ending December 31                        Amount

                      1999                                $2,683,504
                      2000                                 1,249,451
                      2001                                 1,345,978
                      2002                                 1,422,554
                      2003                                 1,551,169



                                      F-20

<PAGE>
                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 7--Commitments and contingencies:

         Employment agreements:
               During  1997,  the Company  entered  into  employment  agreements
               whereby it will be obligated  to pay minimum  salaries to four of
               its  executive  officers,  including  each of  Messrs.  Beck  and
               Yeaggy, aggregating $750,000 during 1998 and 1999 and $250,000 in
               2000.

         Concentration of credit risk:
               Financial  instruments  that  potentially  subject the Company to
               concentrations  of credit  risk  consist  principally  of cash in
               banks, accounts receivable and the Mortgages.

               The Company  maintains its cash balances in bank deposit accounts
               which,  at  times,  may  exceed  the  Federal  Deposit  Insurance
               Corporation  coverage  limits  thereby  exposing  the  Company to
               credit risk.  The Company  reduces its exposure to credit risk by
               maintaining  such  deposits  with  financial  institutions  which
               management believes are high quality.

               Exposure  to credit  risk with  respect to trade  receivables  is
               limited  by the  short  payment  terms  and,  generally,  the low
               balances applicable to such instruments and the Company's routine
               assessment of the financial strength of its customers.

               Exposure to credit risk with respect to the  Mortgages is limited
               because they are secured by real estate with an estimated  market
               value in excess of the mortgage balance.

         Litigation:
               The  Company  is a party to  various  legal  proceedings.  In the
               opinion of  management,  these  actions are routine in nature and
               will  not  have a  material  adverse  effects  on  the  Company's
               consolidated financial statements in subsequent years.

Note 8-Income taxes:

     For financial statement purposes,  there was a provision for Federal income
     taxes at  December  31,  1998 but none in 1997  because all of the tax loss
     attributes  referred  to in Note 3 have been  reserved  through a valuation
     allowance  against the  deferred tax assets due to the lack of a historical
     taxable income stream. Further benefits to be realized from the utilization
     of the net operating loss  carryforwards  generated  prior to the Company's
     reorganization  in  February  1990  will  be  reported  as an  increase  in
     additional paid-in capital and not as a credit to results of operations. In
     1998 the Company  increased  paid-in-capital  by  $2,566,000 as a result of
     such benefits.

     Section  382 of  the  Internal  Revenue  Code  limits  the  amounts  of net
     operating loss carryforwards usable by a corporation  following a change of
     more  than 50% in the  ownership  of the  corporation  during a  three-year
     period.  As of December 31, 1998 management  believes that such a change in
     ownership has not occurred.


                                      F-21

<PAGE>

                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 8--Income taxes (concluded):      

     Currently,  the net operating loss utilized of $463,100 in the period ended
     December 31, 1998 is included in the disclosure of comprehensive  income in
     accordance  with the  accounting  for  losses  prior to the  February  1990
     reorganization.

     During the period ended December 31, 1998, the Company received $261,215 in
     refunds from the Internal  Revenue Service (the "Service")  attributable to
     amended  returns filed for previous years,  plus interest of $154,280.  The
     Company  recorded  such  refunds as income  upon  receipt  as such  amended
     returns  were  subject to review by the Service and accepted in the current
     year.

     A  reconciliation  of the statutory  Federal  income tax rate of 34% to the
     effective  tax rate for the  provision  for income  taxes  attributable  to
     income from continuing operations follows:

<TABLE>
<CAPTION>
                                                              1998               1997
<S>                                                             <C>               <C>
     Statutory rate                                           34.0%              34.0%
     Writeoff of goodwill related to Pretek                   (2.5)                 -
     Refund of Federal income tax (a)                         (8.6)                 -
     Nondeductable amortization of goodwill                    1.6                4.7
     State and local tax                                       5.9                  -
     Other                                                    (2.7)               2.0
                                                              ----               ----

               Total                                          27.7%              40.7%
                                                              ====               ==== 
</TABLE>

(a)  Refund of taxes for prior years subject to IRS review.

Deferred taxes at year end were comprised of the following:

<TABLE>
<CAPTION>

                                                                 1998               1997
<S>                                                             <C>               <C>
     Deferred tax liabilities
        Depreciation and gain recognition                $  1,885,874        $  1,190,000

     Deferred tax assets
        Net operating loss carryforwards                  165,355,000         167,735,000
        Valuation allowance                               162,789,000         167,735,000

     Net deferred tax assets                                2,566,000                   -  
                                                          -----------         -----------

     Net deferred tax asset (liability)                  $    680,126        $ (1,190,000)
                                                          ===========         =========== 
</TABLE>

     Net  operating  loss  carryforwards  consist  of federal  carryforwards  of
     $486,400,000 principally expiring in years 2000 through 2011.

     The Company's actual tax rate differs from statutory rates due to goodwill,
     income (loss) from the bankruptcy trust and federal tax refunds.


Note 9-Discontinued operations:

     In December 1997, the Company  adopted a plan to discontinue and dispose of
     the oil and gas services  operations.  Accordingly,  the results of the oil
     and gas services  operations  through  December 31, 1997 and the  estimated
     loss to be incurred in connection with the disposal have been classified as
     separate components of discontinued operations.

     At  December  31,  1998 the  Company  recognized  liquidating  income  from
     discontinued operations of $136,186.


                                      F-22

<PAGE>
                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 9-Discontinued operations (concluded):

The assets and  liabilities of the  discontinued  operations  have been included
with those of the Company's  continuing  operations in the accompanying  balance
sheet at December 31, 1997, and was comprised as follows:
<TABLE>
<CAPTION>

                                                                   1997  
<S>                                                                <C>
           Equipment, net of accumulated
             depreciation of $192,209                           $455,938

           Other current and non-current assets                  212,827

           Accounts payable and accrued expenses:
             Estimated loss on disposal                         (165,000)
             Other                                              (119,950)
                                                                 -------

           Net assets of discontinued operations                $383,815
                                                                 =======
</TABLE>

     The oil and gas services  operations  generated net sales of $1,297,715 for
     the year ended December 31, 1997.

     The loss on disposal of discontinued operations for the year ended December
     31, 1997 was comprised as follows:
<TABLE>
<CAPTION>

<S>                                                                  <C>
           Write-off of remaining goodwill                      $801,356

           Estimated loss to be incurred from January
             1, 1998 through estimated date of disposal          150,000

           Estimated loss on sale of the remaining net
              assets                                              15,000

           Credit for income taxes                              (193,000)
                                                                 -------

           Loss on disposal                                     $773,356
                                                                 =======
</TABLE>

     The loss on disposal was based on management's best estimate of the results
     of the discontinued  operations  through the estimated date of disposal and
     the amounts to be realized from the sale of the remaining net assets.


                                      F-23

<PAGE>
                 JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 10-Fair value of financial instruments:

     The Company's financial instruments at December 31, 1998 and 1997 consisted
     of cash, accounts receivable,  mortgage notes receivable,  accounts payable
     and fixed and variable rate mortgage and equipment  notes  payable.  In the
     opinion of management,  (i) cash,  accounts receivable and accounts payable
     were carried at values that approximated their fair values because of their
     short-term  maturities and (ii) mortgage notes  receivable and mortgage and
     equipment notes payable were carried at values that approximated their fair
     values  because  they had  interest  rates  equivalent  to those  currently
     prevailing for financial instruments with similar characteristics.

Note 11-Minority interest:

     The Company owns an interest of approximately 90% in JIS and an interest of
     85% in a hotel  partnership  that it acquired as part of the acquisition of
     the BY Hotel Group  during  1997 (see Note 3). The balance of the  minority
     interest  in these  consolidated  subsidiaries  at  December  31,  1998 and
     December  31, 1997 and the changes in the  minority  interest are set forth
     below:
<TABLE>
<CAPTION>

                                                                               HOTEL
                                                           JIS              PARTNERSHIP                TOTAL
<S>                                                      <C>                     <C>                      <C>
         Balance at January 1, 1997                    $43,837                     -0-               $   43,837

         Initial allocation at the
         date of Acquisition
         of the BY Hotel Group                                                1,537,000               1,537,000

         Effect of contributions of
         Capital from the
         Reorganization Trust (a)                       50,090                                           50,090

         Net Income (loss)                              (2,814)                  60,856                  58,042
                                                        ------                ---------               ---------

         Balance at December 31, 1997                   91,113                1,597,856               1,688,969

         Net Income                                       -0-                    84,992                  84,992
                                                        ------                ---------               ---------

         Balance at December 31, 1998                  $91,113               $1,682,848              $1,773,961
                                                        ======                =========               =========
</TABLE>

(a)  As a result of prior cumulative losses,  distributions and redemptions, the
     minority  interest in JIS had been  eliminated as of December 31, 1995 and,
     since the minority stockholders do not incur any obligations as a result of
     losses  and  distributions  in excess of their  equity in JIS, a portion of
     such excess was charged  against  the  majority  interest in the JIS common
     stock held by Janus.  Accordingly,  a portion of the  capital  contribution
     made by the  Reorganization  trust  to JIS in 1997 was  reallocated  to the
     capital of the majority interest.


                                      F-24

<PAGE>
                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 12 - Stockholders equity:

          Capital stock:
          Information regarding the capital stock of Janus follows:
               -Preferred  stock,  par value  $.01 per share;  5,000,000  shares
               authorized at December 31, 1998 and 1997  respectively,  of which
               4,000 shares were  designated  as "Series A" (the "Janus Series A
               preferred  stock");  the 2,200 shares of Series A preferred stock
               that were  issued  and  outstanding  at  December  31,  1995 were
               redeemed during 1996; and

               -Preferred  stock,  par  value  $.01  per  share;  12,000  shares
               authorized  at December 31, 1998 and 1997, of which 12,000 shares
               were  designated  as "Series B" (the  "Janus  Series B  preferred
               stock"); 10,451.88 shares of Series B preferred stock were issued
               during 1997 and outstanding at December 31, 1998 and 1997.

               -Common  stock,  par  value  $.01 per  share;  15,000,000  shares
               authorized; and 11,880,867 shares issued at December 31, 1998 and
               1997  respectively;  and 3,189,132 shares held as treasury shares
               at December 31, 1998 and 1997 respectively.  At December 31, 1998
               and 1997 the  Reorganization  Trust held  shares of Janus  common
               stock for possible future  distribution  under the Plan which the
               Reorganization   Trust  was   originally   required  to  vote  in
               proportion to the votes cast by the Company's other stockholders.

               On April 14, 1997, the Bankruptcy Court issued an order modifying
               the terms under which the  Reorganization  Trust votes the shares
               of Janus common stock it holds. As a result,  the  Reorganization
               Trust is now  required to vote such shares in  proportion  to the
               votes cast by other stockholders,  but disregarding shares issued
               after March 16, 1997.

          Information regarding the capital stock of JIS follows:
               -Preferred  stock,  par value  $.01 per share;  5,000,000  shares
               authorized  at December 31, 1998 and 1997,  of which 7,650 shares
               were  designated  as  "Series  A" (the  "JIS  Series A  preferred
               stock"); and

               -Common  stock,  par  value  $.01 per  share;  15,000,000  shares
               authorized; 5,000,000 shares issued at December 31, 1998 and 1997
               respectively;  409,000 shares held as treasury shares at December
               31, 1998 and 1997 respectively.

          The  capitalization of Janus and JIS upon confirmation of the Plan was
          determined  pursuant  to the Stock  Purchase  Agreement  dated May 16,
          1989, as amended  pursuant to the  Supplemental  Agreement dated as of
          February  23,  1990  (the  "Stock  Purchase  Agreement"),   among  the
          subsidiary of DKM, USL and USL-SA. The Stock Purchase Agreement was an
          integral part of the Plan.



                                      F-25

<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS


Note 12--Stockholders equity (continued):

          Capital stock (continued):

               The shares of Janus and JIS common  stock and Series A  preferred
               stock acquired by the Reorganization  Trust were acquired for the
               benefit of former holders of claims against USL and USL-SA.  Such
               shares will be distributed by the Reorganization  Trust from time
               to time to such former  creditors as their claims are liquidated.
               However,  shares of Janus or JIS  common  stock will be issued by
               the  Reorganization  Trust only to creditors in a manner designed
               to preserve the Company's net operating losses in accordance with
               the requirements of the Internal Revenue Code.

               The restated  Certificate of  Incorporation  of each of Janus and
               JIS contain restrictions on the "transfer" (as defined) of shares
               of the Janus and JIS capital stock which are intended to preserve
               and maintain the Federal  income tax attributes of Janus and JIS.
               The restated  Certificates of  Incorporation of each of Janus and
               JIS prohibit the  acquisition  of any shares of the capital stock
               or   securities  of  Janus  or  JIS  if,  at  the  date  of  such
               acquisition,  such  purchaser  would be a holder of 5% or more of
               the  issued  and  outstanding  capital  stock  of  Janus  or JIS,
               determined based on the fair market value of the capital stock of
               Janus or stock of Janus or JIS  entitled to vote for the election
               of directors.  However,  such transfers and issuances can be made
               if approved by the Board of Directors.

               The Janus Series A preferred stock and the JIS Series A preferred
               stock were substantially  identical in their terms. The Janus and
               JIS Series A preferred stock entitled the holders thereof to cash
               dividends,  payable on the last day of each June and December, at
               an annual rate equal to 12% of the liquidation  preference  value
               of the Janus or JIS Series A preferred stock. Shares of the Janus
               and JIS Series A preferred  stock were  redeemable  at a price of
               $100 per share.  Holders of the Janus and JIS Series A  preferred
               stock were not entitled to vote except as required by law.

               The  Series B  preferred  stock has a par value of $.01 per share
               and a  liquidating  and  redemption  price of $1,000  per  share.
               Holders  of  the  Series  B  preferred   stock  are  entitled  to
               cumulative  dividends at the annual rate of $75 per share. Unless
               dividends remain unpaid for a specified period,  holders will not
               derive any voting rights from the Series B preferred stock.

               In  December  1996,  the  Company  notified  the  holders  of the
               remaining  4, 207  shares of JIS  Series A  preferred  stock then
               outstanding that such shares were


                                      F-26

<PAGE>
                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 12--Stockholders equity (continued):

          Capital stock (concluded):

               being redeemed.  Those shares were  effectively  redeemed through
               the transfer of the  aggregate  redemption  price of $420,750 and
               the aggregate balance of accrued and unpaid dividends of $252,450
               to a  restricted  cash  account  which  can only be used for such
               redemption  payments.   The  restricted  cash  and  corresponding
               liability  of  $673,200   were   reflected   separately   in  the
               consolidated balance sheet as of December 31, 1996. The remaining
               balances at December 31, 1998 were immaterial.

               In April  1997,  the  Company  issued  10,451.88  shares of Janus
               Series B preferred  stock and  3,799,999  shares of Janus  common
               stock  (approximately  43% of the Janus common stock  outstanding
               after such issuance) as consideration  for the acquisition of the
               BY Hotel Group (see Note 3).

               Based  on  the  provisions  of  Janus'  corporate  charter  and a
               separate  agreement  between  Janus and Messrs.  Beck and Yeaggy,
               Messrs. Beck and Yeaggy are prohibited from purchasing additional
               shares of Janus  common stock  without the prior  approval of the
               Board of Directors.

               During 1998, the Company was obligated to repurchase 2,996 shares
               of Janus common stock for $100,000 under a put agreement.

               During  1997,  the Company  repurchased  339,282  shares of Janus
               common stock for $441,569.

               During 1997, the Reorganization  Trust transferred cash in excess
               of its  projected  liabilities  and  administrative  requirements
               totaling  $7,491,020  to the  Company,  of which  $7,031,054  was
               deemed a capital  contribution to Janus and $459,966 was deemed a
               capital  contribution to JIS (including  $50,090  attributable to
               the minority interest in the JIS common stock - see Note 11).

          Warrants:
               In July 1996,  the  Company  also  issued  warrants  to  purchase
               500,000 shares of Janus common stock, which were deemed to have a
               nominal  fair  value,  as  part  of  the  consideration  for  the
               acquisition  of Pre-Tek.  All of the warrants will expire on July
               15, 2001.  During 1997,  warrants to purchase 276,400 shares were
               repurchased  for  $102,638.  At December  31,  1998,  warrants to
               purchase  110,626  shares  were  exercisable  at $3.00 per share;
               warrants to purchase 55,312 shares were  exercisable at $4.00 per
               share; and warrants to purchase 55,309 shares were exercisable at



                                      F-27

<PAGE>
                  JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 12--Stockholders equity (continued):

          Warrants (concluded):

               $5.00 per share.  At  December  31,  1997,  warrants  to purchase
               111,803 shares were  exercisable at $3.00 per share:  warrants to
               purchase 55,900 shares were  exercisable at $4.00 per share;  and
               warrants to purchase 55,897 were  exercisable at $5.00 per share.
               However, the warrants,  may only be sold pursuant to an effective
               registration  statement  under the  Securities  Act of 1933 or an
               appropriate  exemption from such registration.  

               Commencing in May 1999, the warrants become subject to redemption
               by the  Company  at $.25 per  warrant on 30 days'  prior  written
               notice if the market  price of the Janus  common  stock equals or
               exceeds $10.00 per share for 10 consecutive trading days.

Note 13--Stock options and stock appreciation rights:

          During 1996, the  stockholders of the Company approved the adoption of
          the Janus  Industries,  Inc.  1996 Stock Option Plan (the " Plan") and
          the termination of the Janus Industries,  Inc. Directors' Stock Option
          Plans (the "Directors' Plan").

          The Plan provides for grants of incentive  stock options  ("ISOs") and
          nonstatutory  stock  options  ("NSOs").  ISOs may be issued to any key
          employee  or  officer  of the  Company;  NSOs may be issued to any key
          employee or officer of the Company or any of the Company's independent
          contractors, agents or consultants other than nonemployee directors. A
          committee of at least two directors (the  "Committee")  will determine
          the dates on which options become exercisable and terminate  (provided
          that  options  may not  expire  more than ten years  after the date of
          grant). All outstand-ing  options will become immediately  exercisable
          in the event of a "change in control" (as defined) of the Company. The
          exercise  price of any ISO must be at  least  100% of the fair  market
          value on the date of grant (110% for an optionee  that holds more than
          ten percent of the  combined  voting  power of all classes of stock of
          the Company).  NSOs may be granted at any exercise price determined by
          the Committee. The Company has reserved 300,000 shares of common stock
          for issuance under the Plan.

          The Plan  permits the  Committee  to grant stock  appreciation  rights
          ("SARs") in connection  with any option  granted under the Plan.  SARs
          enable an optionee to  surrender an option and to receive a payment in
          cash or common stock,  as determined  by the  Committee,  with a value
          equal to the  difference  between the fair market  value of the common
          stock on the date of  surrender  of the related  option and the option
          price.

          The  Company  granted  options for the  purchase  of 20,000  shares of
          common stock at an exercise  price of $2.75 per share during 1996, all
          of which remained outstanding and exercisable at December 31, 1998 and
          1997.

          There was no public  market for the Janus common stock during 1996 and
          1997.  Management  estimates  that the exercise  price for the options
          granted in 1996  approximated the fair value on the date of grant. All
          of the options  remained  outstanding  and exercisable at December 31,
          1997 and 1996.
          

                                      F-28

<PAGE>

                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 13-Stock options and stock appreciation rights: (concluded):

          The Directors'  Plan provided for annual grants of a specified  number
          stock  options to each  nonemployee  director  beginning in 1997 at an
          exercise  price equal to the fair market  value of the common stock on
          the date of grant.  No options were granted under the  Directors  Plan
          prior to its termination.

          During 1997,  the Company  granted SARs with respect to 100,000 shares
          of Janus common stock to an executive  officer at an exercise price of
          $3.25  per share  which  vest at the rate of  20,000  shares  per year
          commencing  on April 23, 1997.  It also granted SARs with respect to a
          total of  40,000  shares  of Janus  common  stock to  directors  at an
          exercise  price of $3.25 per share  which will be  exercisable  at any
          time during the period from October 25, 1997  through  April 23, 2003;
          however, the appreciated value paid with respect to the SARs issued to
          the directors  will be limited to $7.00 per share.  Appreciation  upon
          any  exercise  of the  SARs  issued  in 1997  must  be  paid in  cash.
          Management  estimates  that the exercise price for the SARs granted in
          1997  approximated the fair value on the respective dates of grant and
          throughout the remainder of the year. Accordingly, the Company made no
          charges to  compensation  expense related to the SARs during 1997. The
          SARs issued in 1997 were not issued in  conjunction  with the Plan. In
          1998, the Company granted SARs with respect to 25,000 shares of common
          stock to a director  at an  exercised  price of $2.48 per share  which
          will be exercisable at any time through  December 17, 2003. These SARs
          were not issued in conjunction with the Plan.


Note 14-Other related party transactions:

          The Company  engages in various  transactions  with other  entities in
          which  Mr.  Beck and Mr.  Yeaggy  have an  interest.  In  addition  to
          interest   derived  from  the  Mortgages  (see  Note  4),  results  of
          operations in 1998 and 1997 include revenues and expenses derived from
          related party transactions as follows:
<TABLE>
<CAPTION>
          
                                                          1998            1997
                                                          ----            ----
<S>                                                        <C>            <C>
         Management fee income (a)                     $434,316         $265,940
         Personnel leasing fees (b)                      57,279           33,709
         Management systems fees (c)                     50,022           32,417
         Rent for office facilities and equipment        44,582           38,292
         Reimbursement for Management expenses         $993,124         $577,626
</TABLE>

(a)  The Company  managed 6 hotels for entities  controlled by Messrs.  Beck and
     Yeaggy.

(b)  The  Company  pays  administrative  fees to  Hospitality  Employee  Leasing
     Program,  Inc.  ("HELP"),  a corporation  wholly-owned by Messrs.  Beck and
     Yeaggy,  which  provides the Company with  personnel for the hotels it owns
     and  manages.  In  addition,  the  Company  reimburses  HELP for the actual
     payments it makes to or on behalf of such employees.

(c)  The Company pays  management  systems fees for the use of a hotel  property
     management  system and related  computer  hardware  and  software  under an
     agreement with Computel Computer Systems, Inc., a corporation  wholly-owned
     by Messrs. Beck and Yeaggy.

                                      F-29

<PAGE>
                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 14--Other related party transactions (concluded):

          At December  31,  1998 and 1997  accounts  receivable  includes $0 and
          $131,645 arising from management services provided to these affiliated
          entities.
    
          At December 31, 1997 other current assets includes $40,232 for accrued
          interest  receivable  on the  Mortgages  and $146,408  receivable as a
          result of certain  adjustments related to the acquisition of the Hotel
          Group.

          Pursuant to a marketing agreement, the Company also receives a portion
          of the management fees from hotels managed by a marketing  partner and
          shares a portion of the  management  fees it earns from certain of the
          hotels it manages with the marketing partner.

          The  Company  also  derived  management  fee  income of  $247,314  and
          $268,947 in 1998 and 1997 pursuant to the agreement with its marketing
          partner.


Note 15--Subsequent event

          Effective   January  1,  1999  Janus  acquired  the  following   hotel
          properties from affiliates of Messrs Beck and Yeaggy.

          (a)  Days  Inn  East:  a 93  room  limited-service  hotel  located  in
               Cincinnati, Ohio
          (b)  Holiday Inn Express: a 110 room limited-service  hotel located in
               Juno Beach, Florida
          (c)  Red Roof Kings Island: a 124 room  limited-service  hotel located
               in Mason, Ohio
          (d)  Days Inn Kings Island: a 124 room  limited-service  hotel located
               in Mason, Ohio
          (e)  Days Inn Cambridge:  a 103 room limited-service  hotel located in
               Cambridge, Ohio
          (f)  Best Western Cambridge:  a 95 room limited-service  hotel located
               in Cambridge, Ohio
          (g)  Days Inn Pompano:  a 183 room  limited-service  hotel  located in
               Pompano Beach,  Florida.  A minority  shareholder  retained a 25%
               ownership interest.

          The Company also acquired two  management  agreements  with respect to
          the  properties  known as  Knights  Inn West  Palm  Beach in West Palm
          Beach, Florida, and Days Inn Inner Harbor in Baltimore, Maryland.

          The  aggregate  purchase  price  was  $25,067,246,  consisting  of the
          assumption  of  existing   liabilities  in  the  aggregate  amount  of
          $16,822,782,  a cash  payment  in the  amount  of  $1,908,267  and the
          issuance of 6,336.2 shares of the Company's Preferred Stock, Series B,
          $.01 par value per share. The source of the cash payment was from



                                      F-30
<PAGE>
                   JANUS AMERICAN GROUP, INC. AND SUBSIDIARIES
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

Note 15--Subsequent event (concluded):

          available working capital.  After giving effect to the issuance of the
          new shares of stock,

          Messrs.  Beck and Yeaggy and affiliate now own 16,788.08 shares of the
          Preferred Stock, Series B.

          The  following is a condensed  income  statement for the twelve months
          ended December 31, 1998 for the aforementioned properties acquired:
<TABLE>
<CAPTION>

<S>                                                     <C>

               Revenue                              $9,479,935

               Total costs and expenses              7,582,904

               Interest expense                      1,361,528

               Minority interest                        26,790

               Deferred federal income
                 tax benefit                          (120,000)
                                                     ---------

                     NET INCOME                     $  628,713
                                                     =========
</TABLE>
























                                      F-31
<PAGE>





                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>

<S>                                     <C>
Exhibit No.          Description
3.1                  Restated Certificate of Incorporation,  as amended,  
                     incorporated by reference to Exhibit 3.1 to Form 10-QSB of
                     the Company for the quarter ended September 30, 1997.

3.2                  By-Laws  incorporated  by reference  to Exhibit 3.2 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

3.3                  Certificate of Amendment to Certificate of Designation.

10.1                 Employment  Agreement  with James E. Bishop  dated April 4,
                     1997  incorporated  by  reference to Exhibit 10.1 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.3                 Employment  Agreement  with Louis S. Beck dated  April 24,
                     1997  incorporated  by  reference  to Exhibit 10.3 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.4                 Employment Agreement  with Harry G. Yeaggy  dated April 24,
                     1997  incorporated  by reference to Exhibit 10.4 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.5                 Employment Agreement with Michael M. Nanosky dated April
                     24, 1997  incorporated by reference to Exhibit 10.5 to Form
                     10-SB of the Company filed with the Securities and Exchange
                     Commission on June 24, 1997.

10.6                 1996 Stock  Option Plan  incorporated  by reference to
                     Exhibit 10.6 to Form 10-SB of the Company filed with the
                     Securities and Exchange Commission on June 24, 1997.

10.7                 Stock Option  Agreement  incorporated  by reference to
                     Exhibit 10.7 to Form 10-SB of the Company filed with the
                     Securities and Exchange Commission on June 24, 1997.

10.9                 Investor Agreement  incorporated by reference to Exhibit
                     10.9 to Form 10-SB of the Company filed with the Securities
                     and Exchange Commission on June 24, 1997.

10.11                Client Service  Agreement  between  Hospitality  Employee
                     Leasing Program,  Inc. and the Company incorporated  by
                     reference  to Exhibit 10.11 to Form  10-SB  of the Company
                     filed with the Securities and Exchange Commission on June
                     24, 1997.

10.12                Product Lease and Service Agreement between Computel
                     Systems,  Inc. and the Company incorporated by reference to
                     Exhibit  10.12 to Form 10-SB of the  Company filed with the
                     Securities and Exchange Commission on June 24, 1997.
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

<S>                                               <C>

10.13                Sublease  Agreement  between Beck  Hospitality  Inc. III
                     and the Company  (Cincinnati  premises) incorporated  by
                     reference to Exhibit  10.13 to Form  10-SB  of the Company
                     filed  with the Securities and Exchange Commission on
                     June 24, 1997.

10.14                Sublease  Agreement between Beck Hospitality  Inc. III and
                     the Company  (Boca Raton  premises) incorporated  by  
                     reference  to  Exhibit  10.14 to Form  10-SB of the Company
                     filed with the Securities and Exchange Commission on June
                     24, 1997.

10.16                Partnership   Agreement  of  Kings  Dominion  Lodge,   G.P.
                     incorporated by reference to Exhibit 10.16 to Form 10-SB of
                     the  Company  filed  with  the   Securities   and  Exchange
                     Commission on June 24, 1997.

10.20                Consulting  Agreement  by and  between  the Company and The
                     Cornerstone  Company  incorporated  by reference to Exhibit
                     10.20 to Form 10-QSB for the quarter ended June 30, 1998.
 
10.21                Purchase  and Sale Agreement  between  Galburton  Inn, Inc.
                     and the Company incorporated by reference to Exhibit 10.21
                     to Form 10-QSB for the quarter ended June 30, 1998.

10.22                Purchase  and  Sale   Agreement   between   West   Montrose
                     Properties  and the Company  incorporated  by  reference to
                     Exhibit 10.22 to Form 10-QSB for the quarter ended June 30,
                     1998.

10.23                Purchase and Sale Agreement  between North Canton Operating
                     Corp., Canton North Properties and the Company incorporated
                     by  reference to Exhibit  10.23 to Form 10-QSB for the 
                     quarter  ended June 30, 1998.

10.24                Purchase and Sale Agreement between Rockside Road Operating
                     Corp., Rockside Road Properties and the Company 
                     incorporated  by  reference to Exhibit  10.24 to Form
                     10-QSB for the quarter ended June 30, 1998.

10.25                Loan  Agreement  dated as of August 14,  1998 by and among
                     JAGI  Cleveland - Hudson,  LLC;  JAGI Cleveland -  
                     Independence,  LLC; JAGI Montrose  West,  LLC, JAGI North
                     Canton,  LLC; and Amresco Capital,  L.P. incorporated by 
                     reference to Exhibit 10.25 to Form 8-K for the event dated
                     August 14, 1998.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

<S>                                            <C>
10.26                Note (Fixed Rate) of JAGI Cleveland - Hudson,  LLC dated
                     August 14, 1998 in the principal sum of $13,300,000 and
                     Schedule of Other Notes (Fixed Rate)  incorporated by
                     reference to Exhibit 10.26 to Form 8-K for the event dated
                     August 14, 1998.

10.27                Mortgage and  Security  Agreement  dated as of August 14,
                     1998 by and between  JAGI  Cleveland - Hudson,  LLC and
                     Amresco  Capital,  L.P. and Schedule of Other Mortgage and
                     Security  Agreements incorporated by reference to Exhibit
                     10.27 to Form 8-K for the event dated August 14, 1998.

10.28                Security  Agreement  dated as of August 14,  1998 by JAGI
                     Cleveland  - Hudson,  LLC and Amresco Capital L.P.  and
                     Schedule of Other  Security  Agreements  incorporated  by
                     reference to Exhibit 10.28 to Form 8-K for the event dated
                     August 14, 1998.

10.29                Second  Mortgage  and  Security  Agreement  dated as of  
                     August 14, 1998 by and  between  JAGI Cleveland - Hudson,
                     LLC and Amresco Capital, L.P. and  Schedule of Other Second
                     Mortgage and Security  Agreements incorporated by reference
                     to Exhibit 10.29 to Form 8-K for the event dated
                     August 14, 1998.

10.30                Second  Security  Agreement  dated as of August 14, 1998 by
                     and between JAGI Cleveland - Hudson, LLC and Amresco 
                     Capital,  L.P. and Schedule of Other Second Security 
                     Agreements  incorporated by reference to Exhibit 10.30 to
                     Form 8-K for the event dated August 14, 1998.

10.31                Guaranty  dated as of August 14, 1998 by and between the
                     Company and Amresco  Capital,  L.P. and Schedule of Other
                     Guaranties  incorporated  by reference  to Exhibit  10.31
                     to Form 8-K for the event dated August 14, 1998.

10.32                Asset Purchase and Agreement and Plan of Merger by and
                     among the Company,  Beck Hospitality Inc. II,  Beck  
                     Hospitality  Inc.  III,  Louis S. Beck and Harry  Yeaggy
                     dated as of January 1, 1999 incorporated by reference to
                     Exhibit 10.32 to Form 8-K for the event dated February 2,
                     1999.

10.33                Stock Appreciation Right Certificate.

10.34                Amended and Restated  Registration  Rights  Agreement dated
                     as of January 1, 1999 with Louis S.  Beck.

10.35                Amended and Restated Registration  Rights  Agreement dated
                     as of January 1, 1999 with Harry G. Yeaggy.

10.36                Stock Appreciation Right Agreement with Paul Tipps dated as
                     of December 18, 1998

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<CAPTION>

<S>                                           <C>

16                   Letter by J.H. Cohn LLP to the Securities and Exchange 
                     Commission  incorporated by reference to
                     Exhibit 16 to Form 8-K for the event dated April 16, 1998.
21                   Subsidiaries of the Company.
24                   Powers of Attorney.
27                   Financial Data Schedule.


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