SECURITIES AND EXCHANGE COMMISSION
                                              WASHINGTON, D.C. 20549


                                                    FORM 10-KSB

[x]     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
 Act of 1934 [Fee Required]

For the fiscal year ended December 31, 1997

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities
 Exchange Act of 1934 [No Fee Required]

For the transition period from                          to

Commission file number 0-22934

                                               IMATEL HOLDINGS, INC.
                        (Exact name of small business issuer in its charter)


                         Washington                               93-1192971
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
                                                             Identification No.)

                 14 Quai du Seujet
                 Geveva, Switzerland                            CH-1201
           (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:          011 41 229 081 598
                                                           --------------------

Securities registered pursuant to Section 12(b) of the Act:              None
                                                             ----------------

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, no
 par value

           Indicate  by check  mark  whether  the  registrant  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.
                                                      YES   X        NO

           Check if there is no disclosure of delinquent filers in response to 
Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy
or information statements incorporated by reference in part III of this Form 
10-K or any amendment to this Form
10-KSB. [X]

           State issuer's revenues for its most recent fiscal year: $0.

           The aggregate market value of the voting stock held by non-affiliates
of the  registrant was  $14,532,748  based upon the average of the bid and asked
price of the Common Stock of $4.375 as of December 31, 1997.

           The number of shares  outstanding  of the issuer's  classes of Common
Stock as of December 31, 1997:

Common Stock, No Par Value - 3,394,668 shares

                                    DOCUMENTS INCORPORATED BY REFERENCE:  NONE


<PAGE>



Item 1.  Description of Business

Business Development

         Development  Bancorp,  Ltd. (the  "Company")  Development  Bancorp is a
holding  company  that owns  various  interests  in  subsidiaries  and  investee
companies in the financial  services  industry in North America and Europe.  The
Company was incorporated on August 16, 1984 in the state of Washington under the
name Gold Valley,  Inc. for the primary purpose of exploring and developing gold
properties.  No commercial  ore deposits were  developed.  In 1986,  the Company
acquired an 18.75%  interest in an oil  partnership  consisting of five wells in
Pondera County,  Montana. In 1991, the Company sold this partnership interest to
the then officers and directors of the Company on an  installment  contract.  In
1991, the Company  canceled this contract from these  affiliates in exchange for
investment  banking and financial  consulting  services when it became  apparent
that  the  affiliates  were  not  willing  or  able to  pay.  After  sale of its
partnership interest, the Company began to seek other business opportunities. On
August 13, 1993, the Company changed its name to Development  Bancorp,  Ltd. and
effected a 165-for-1  reverse stock split in preparation for a private placement
fund raising. Under the Washington Business Corporation Act, the name change and
the reverse stock split only required  approval of the Board of Directors of the
Company and not approval of its  shareholders  In  conjunction  with the special
meeting in lieu of the annual  meeting,  held on October 4, 1993,  the Company's
shareholders  authorized the issuance of preferred stock, adopted a Stock Option
Plan and ratified the reverse stock split.  Following this  reorganization,  the
Company has directed its efforts towards financial  services as well as merchant
banking  activities  focused on investing in financial service  subsidiaries and
partnering with other companies around the world engaged in financial services.

         On  October  20,  1997,  the  Company  entered  into a  Stock  Purchase
Agreement with International Marketing and Advertising, Inc. (IMATEL), a Florida
corporation engaged in telecommunications,  pursuant to which the Company was to
acquire 51% of IMATEL for $500,000 cash. The acquisition  was reported  pursuant
to Item 2 of Form 8-K dated October 20, 1997 and the Company changed its name to
IMATEL Holdings, Inc. Subsequent to the acquisition, the Company became aware of
a purported  shareholders'  agreement  among the  shareholders  of IMATEL  which
prohibited  the  sale  of  shares  to the  Company  without  consent  of  IMATEL
shareholders.  The Company has accounted  for the $500,000  investment as a loan
and has reserved  $250,000  against this  receivable for costs of collection and
potential impairment.

Financial Services

         In June 1993 the Company commenced its business of providing  financial
services with the organization of an operating subsidiary, Societe Financiere de
Distribution Geneve S.A. (oSFDo).  SFD operates in Geneva,  Switzerland and is a
Swiss  financial  company.  In fiscal  1995 the  Company  organized  Development
Bancorp Services Limited, an Irish corporation ("Ireland").  SFD's and Ireland's
activities consist primarily of financial services, including financial advisory
and transactional  support  services.  Neither Ireland nor SFD publicly solicits
customer deposits and both companies employ other banks as custodian of customer
cash  and  securities   assets,  and  are  therefore  exempt  from  the  banking
regulations.  Both subsidiaries deal exclusively with  institutional  clients in
Europe.  The  Company's  European  operations  are managed by Riccardo  Mortara,
president and chairman of the Company.  Mr. Mortara has over 20 years experience
in the  Swiss  banking  industry  and he is the owner and  operator  of  Societe
Financiere du Seujet, a Swiss trust & portfolio management company.

         SFD is owned 99.3% by the Company and 0.7% by Mr. Riccardo  Mortara,  a
managing  director  of SFD.  SFD was  capitalized  in  July,  1993 by a  capital
contribution of 427,000 Swiss Francs ("SFr") by the Company and SFr 3,000 by Mr.
Mortara.  If not for Mr. Mortara's  ownership of SFD, it would be a wholly owned
subsidiary  of the Company and under Swiss law the Company would be deemed to be
liable for all of SFD's  liabilities.  Societe  Financiere de Seujet,  S.A. is a
shareholder of the Company,  and its shares may be deemed  beneficially owned by
Mr. Mortara. Following the reorganization of the Company into financial services
and the establishment of the Company's  European  subsidiaries,  the Company has
been active in seeking merchant banking opportunities to invest and partner with
other financial services companies around the world.

                                                         2

<PAGE>




Merchant Banking Activities

         In  September  of  1993,  the  Company  invested   US$921,000  with  an
organization  known as PEMP.  PEMP is a licensed  Canadian  financial  advisory,
insurance,  and fund management  group based in Montreal.  The Company  received
120,000 Class G Shares,  or 9%, of the holding company for the PEMP  operations,
known as  Gestion  PEMP,  Inc.,  as well as a royalty  to  receive a portion  of
certain fees from the  development  of the PEMP network.  The Class G shares are
not transferable  except in the event of a sale of the entire business.  In 1996
and 1995 the Company received $0 and $35,017,  respectively, in commissions from
royalty in the PEMP  Network.  No  proceeds  have been  received in 1996 or 1997
because  PEMP  is  currently  reorganizing  its  ownership  structure  and it is
anticipated  that the Company's  royalty right will be converted into redeemable
preferred  shares in late 1997. The PEMP group currently has 5 offices and 6,000
customers throughout Canada.

         In 1996, the Company helped fund PEMP's  expansion with the purchase of
4.65 million redeemable preferred shares of the senior holding Company,  Gestion
Guychar Inc. for $3.5  million  (Canadian  dollars).  The  preferred  shares are
non-voting, non-transferable, and non-participating and are redeemed as follows:
$1,250,000 on October 1, 2001, with an annual cumulative dividend of 4%, payable
on  October 1 of each  year;  $1,300,000  on  October  1,  2002,  with an annual
cumulative  dividend of 3.8%,  payable on October 1 of each year; and $2,100,000
on  October 1,  2003,  with an annual  cumulative  dividend  of 3.5%  payable on
October 1 of each year.  All  amounts  respecting  the  preferred  shares are in
Canadian  dollars.  The purchase price of the preferred shares in US dollars was
$3,132,012.

         In the second  half of 1997,  the  Company  purchased  7,345  shares of
Societe  Financiere Privee ("SFP"),  a Swiss bank for  US$4,148,293.  SFP offers
complete banking and portfolio management services and is publicly traded on the
Swiss Stock  Exchange.  The  Company's  ownership of SFP is equal to about 3% of
SFP's  outstanding  shares.  The Company is currently in discussion  with SFP to
co-develop and offer certain services in the United States.

Competition

         Competition in the Company's areas of focus come from international and
local banks,  brokerage firms, and other financial  institutions.  Most of these
competitors  have greater  experience and greater  financial  resources than the
Company.

Employees

         The Company has 5 employees, including its officers.  The officers of
 the Company do not work exclusively
for the Company.

Regulations

         SFD is  subject  to  numerous  regulations  under the  Swiss  financial
companies statutes.  SFD is subject to annual audit requirements;  must maintain
an  adequate  relationship  between  its equity and its total  liabilities,  and
between its current assets and  liabilities;  and is prohibited from engaging in
money  laundering.  SFD is not  permitted to place  securities  with the general
public, but only with institutional  clients,  and does not hold custody of cash
for customers.  Commissions for securities  transactions are not regulated.  SFD
opens  accounts  for each  customer in an  authorized  bank,  outside of its own
balance sheet.

         Since SFD does not publicly  solicit  customer  deposits,  it is exempt
from many reporting and  regulatory  provisions  ordinarily  applicable to Swiss
financial companies.

         A financial  company like SFD which does not publicly  recommend itself
for the  acceptance  of deposits  can obtain the status of a  bank-like  finance
company by means of a decision of the Banking Commission. Based on the

                                                         3

<PAGE>



activities  of a  finance  company,  the  Banking  Commission  is  empowered  to
interpret the applicability or  non-applicability  of certain  provisions of the
Swiss Banking Law.

         In  addition  to  the  general  regulations  applicable  to  all  Swiss
companies, bank-like companies, not publicly soliciting deposits, have to comply
with the following provisions:

         (1)Pursuant  to Article 7 of the Swiss Banking Law they are required to
submit to the National  Bank their annual  balance  sheet.  If the National Bank
requires it may also require detailed semi-annual balance sheets, as well as any
other  information  and  reports  which  it  may  consider  necessary,  such  in
connection with the credit and monetary policy.

         (2)To enable the Banking  Commission  to determine  whether a bank-like
finance company does not in fact publicly  solicit  deposits,  it is required to
submit to the Banking  Commission an annual balance sheet prepared in accordance
with the  Implementing  Ordinance to the Swiss  Banking Law, an annual report of
the board of directors,  and an auditor's  report prepared by an independent and
qualified auditing company.

         (3)Under  Article 8 of the Swiss Banking Law the prior  approval of the
Swiss  National  Bank is  required  for foreign  bond or share  issues of SFr 10
million  or  more  floated  in   Switzerland   and  for  credits  and  loans  to
non-residents in amounts exceeding this sum and with terms of longer than twelve
months.  The rule applies to the  placement  of medium term foreign  obligations
with a maturity of twelve  months or more,  if the amount  placed is expected to
total Sfr 3 million  within a year.  The Swiss  National  Bank is  empowered  to
refuse  permission or to impose  conditions if deemed  necessary in the light of
the Swiss franc  exchange  rate,  the interest rate trend on the Swiss money and
capital markets or the overall national interest.

         In comparison  with banks,  the advantages of a finance company that is
subject to Articles 7 and 8 of the Swiss Banking Law only consist,  for example,
in the  fact  that  in the  exercise  of its  activity  it is not  bound  by the
provisions  of  the  Swiss  Banking  Law  concerning   ratios  between   equity,
liabilities and liquid funds. Moreover, such a finance company would be under no
restriction if, for example,  it proposed to grant substantial credit facilities
to a single  customer,  while real banks are  required  to  maintain an adequate
ratio to their own funds with regard to any single borrower.

         There are no other licensing or other requirements known to the Company
which would be required to enable it to compete effectively in the United States
and foreign markets.

Item 2.  Description of Property

         The  Company's  headquarters  in Geneva is furnished  by the  Company's
president at no cost.  The Company also has two office  leases in Palm  Springs,
California that expire in August of 1998, and February of 1999.

Item 3.  Legal Proceedings

         Not Applicable.

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

         Not applicable.



                                                         4

<PAGE>



                                                      PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         (a) Market Information

         Until  October  4, 1993 the  Company's  common  stock was  traded  only
intermittently  over-the-counter  in what is  commonly  referred to as the "pink
sheets." The Common Stock was listed  without  price  quotations  in 1992 and in
1993  through  October 4, 1993.  Thereafter,  the Common Stock was quoted in the
NASD's Electronic  Bulletin Board,  which reports the following high and low bid
prices.  These prices have been  adjusted for a  one-for-six  stock  dividend to
holders of record as of November 1, 1996, payable November 15, 1996:


                                             High              Low

         Quarter Ended
         December 31, 1993
         (commencing October 5, 1993)$       6.25              $2.92

         March 31, 1994                      5.83               3.75
         June 30, 1994 5.42                  3.75
         September 30, 1994                  5.42               3.33
         December 31, 1994                   5.83               4.58
         March 31, 1995                      5.83               2.50
         June 30, 1995 4.79                  3.33
         September 30, 1995                  2.50               1.67
         December 30, 1995                   4.37               2.50
         March 31, 1996                     4.695               1.25
         June 30, 1996 2.71                   .52
         September 30, 1996                  4.45               1.95
         December 31, 1996                   6.30               4.00
         March 31, 1997                      5.75               3.25
         June 30, 1997 6.00                  4.00
         September 30, 1997                  5.25               3.25
         December 31, 1997                   5.00               2.50

         These prices  reflect  inter-dealer  prices,  without  retail  mark-up,
markdown or commission and may not represent  actual  transactions.  The Company
does not believe  that  trading of its common  stock  currently  is  necessarily
reflective of an established trading market.

         (b) Holders

         As of December 31, 1997, there were approximately 161 record holders of
Company common stock. There are three holders of its Series A Preferred Stock.

         (c) Dividends

         The Company has not paid any cash  dividends on its common  stock.  The
Company  currently  intends to retain any  earnings  for use in its business and
therefore does not anticipate  paying cash dividends in the foreseeable  future.
The Series A Preferred  Stock has no dividend  rights and does not  restrict the
payment of dividends to holders of Common Stock.


                                                         5

<PAGE>



Item 6.  Management's Discussions and Analysis or Plan of Operations

         The following  discussion  regarding  the  financial  statements of the
Company  should be read in conjunction  with the financial  statements and notes
thereto included in this Report.

The  following  Summary  Financial  Information  is derived  from the  financial
statements of the Company.
<TABLE>
<CAPTION>

Income Statement Data

                             Year Ended December 31,
                                                  1997          1996            1995           1994          1993           1992
<S>                                           <C>          <C>        <C>           <C>          <C>           <C> 
Revenues                                      $      -0-   $103,243   $656,482      $42,106      $9,843        $-0-
Net Income (Loss) - Continuing
  Operations                                   (3,986,592)      (3,451)     (349,773)    (127,339)      (19,338)     (9,728)
Net Income (Loss) - Discontinued
 Operations                                      (177,850)    (520,257)       326,087
Net Income (Loss) Per Share                        (1.19)(.30)         (.35)         (.13)        (.08)         (.53)
Weighted Average
 Shares Outstanding
                                              $3,364,183     $1,747,762    $1,282,403    $ 984,090    $  233,550   $  18,424


Balance Sheet Data

                               As of December 31,
                                              1997           1996               1995           1994          1993           1992
Working capital                           $  (351,664)       $    725,475  $ 2,181,582    $ 2,097,051  $ 1,309,393  $  3,221
Long Term Debt                                     -0-                -0-       41,770            -0-          -0-       -0-

Total Assets                               5,952,981  9,476,510          4,857,460    4,308,941      3,808,696    3,221

Shareholders'
 Equity                                   $4,660,538$ 9,179,427         $3,446,447   $3,881,892     $3,032,264   $3,221
</TABLE>

Results of Operations

         The  Company's  had no  revenues in 1997.  Gaensel  and  administrative
expenses were $732,090, compared to $1,087,041 in fiscal 1996. The reduction was
due to cost  cutting  measures.  The  majority  of the loss in  fiscal  1997 was
attributable  to the write down of investments  made in prior fiscal years,  but
also includes $250,000 written off in connection with an investment in Imatel, a
Florida telecommunications company.

Investments

         In 1996 the Company  entered into a strategic  investment in the common
shares of  Societe  Financial  Privee,  Geneva,  a Swiss  financial  institution
involved in portfolio management and financial services.  The Company intends to
market SFP Geneva's  services in the United  States.  A total of 7,345 shares of
SFP (constituting 3% of SFP's outstanding shares) were purchased for $4,148,293.

         In 1996 the Company purchased 4.65 million redeemable  preferred shares
of Gestion  Guychar,  Inc.,  which is a related company to Gestion Pemp Network.
The  redeemable  preferred  stock was  purchased  for  investment.  See Merchant
Banking Activities.

         The Company  purchased  120,000  Class G shares of Gestion  PEMP,  Inc.
("PEMP") and Gestion PEMP Network,  a multi-level  marketing  system of PEMP for
$921,000  in  September  1993.  The  shares  are  held by a  custodian  bank not
affiliated  with the Company.  The Class G shares are not  transferable,  except
that in the event  Gestion  Guychar  (PEMP)  Inc.  sells its Class G shares  the
Company shall have the right to sell its shares at the same

                                                         6

<PAGE>



price.  The Class G shareholders are also obligated to vote in favor of any 
proposed public offering of PEMP.  In
1996 and 1995 the Company received $0 and $35,017, respectively in commissions 
from the ownership of  Gestion
PEMP Network.  See Merchant Banking Activities.

Liquidity and Capital Resources

         The  Company  has  generated  cash for its  operations  and  investment
through  operations  and  private  placements,  and  believes  that such  funds,
together with current financial resources,  are sufficient to support operations
over the next 12  months.  The  Company  has not,  however,  adopted  any formal
budget. No material capital expenditures are contemplated at this time.

Item 7.  Financial Statements and Supplementary Data

         Financial Statements

         The following financial statements are included herein:

                  Independent Auditors' Report
                  Consolidated Balance Sheet at December 31, 1997
                  Consolidated  Statement  of  Operations  for the  years  ended
                  December   31,  1997  and  1996   Consolidated   Statement  of
                  Shareholders' Equity Consolidated  Statement of Cash Flows for
                  the  years  ended   December   31,  1997  and  1996  Notes  to
                  Consolidated Financial Statements

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

         The  Company's  former   independent   accountant   Silverman,   Olson,
Thorvilson & Kaufmann Ltd. ("Silverman") resigned from that capacity on December
6, 1997.  The report by Silverman  on the  financial  statements  of the Company
dated June 6, 1997,  including  balance  sheets as of December 31, 1996 and 1995
and the  statements of  operations,  cash flows and  statement of  stockholders'
equity for the years ended December 31, 1996 and 1995 did not contain an adverse
opinion  or a  disclaimer  of  opinion,  or  was  qualified  or  modified  as to
uncertainty,  audit scope or accounting principles. During the period covered by
the  financial  statements  through  the  date  of  resignation  of  the  former
accountant, there were no disagreements with the former accountant on any matter
of accounting  principles  or  practices,  financial  statement  disclosure,  or
auditing scope or procedure. On January 27, 1998 the Company engaged Cordovano &
Howey, PC., as its new independent accountant.

         The  Registrant's  former  independent  accountant  Terrence  J. Dunne,
C.P.A.  ("Dunne") resigned from that capacity on December 6, 1995. The report by
Dunne on the  financial  statements  of the  Registrant  dated  June  27,  1995,
including  balance sheets as of December 31, 1994 and 1993 and the statements of
operations, cash flows and statement of stockholders' equity for the years ended
December  31,  1994,  1993 and 1992 did not  contain  an  adverse  opinion  or a
disclaimer  of opinion,  or was qualified or modified as to  uncertainty,  audit
scope or  accounting  principles.  During  the period  covered by the  financial
statements through the date of resignation of the former accountant,  there were
no  disagreements  with  the  former  accountant  on any  matter  of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure.  A letter from the former  independent  accountant for the Registrant
was  attached  as an Exhibit to a Form 8-K dated  December  6, 1995 in which the
resignation  of Mr.  Dunne was  reported.  On February  28, 1996 the  Registrant
engaged  Silverman,  Olson,  Thorvilson & Kaufmann  Ltd. as its new  independent
accountant.


                                                     PART III

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


                                                         7

<PAGE>



         The members of the Board of  Directors  of the Company  serve until the
next  annual  meeting  of  stockholders,  or until  their  successors  have been
elected.  Information as to the directors and executive  officers of the Company
is as follows. No annual meeting has been set.

         Riccardo Mortara           President and Director
         Dempsey K. Mork        Chief Financial Officer, Secretary and Director

Riccardo Mortara

         Riccardo  Mortara,  age 50, has been  President  and a Director  of the
Company  since  June  1993.  Mr.  Mortara is the  managing  director  of Societe
Financiere du Seujet,  Geneva,  Switzerland,  a company which provides portfolio
management  and financial  services to banks,  corporations,  and high net-worth
individuals primarily in Europe. Between the years of 1984 and 1991, Mr. Mortara
was a director  of a Geneva  private  portfolio  management  company in which he
still  is a  co-owner.  Mr.  Mortara  currently  serves  on the  boards  of five
financial services companies.

Dempsey K. Mork

         Dempsey K. Mork, age 55, has been the Secretary/Treasurer and a 
Director of the Company since December
1992 and was President from December 1992 to June 1993.    Mr. Mork is also 
president and a director of A.G.
Holdings, Inc., Gaensel Gold Mines, Inc. and Magellan Capital Corporation.  
  Mr. Mork's background includes
consulting experience in international transactional work.


Item 10. Executive Compensation

         The following  table sets forth the cash  compensation of the Company's
executive officers and directors during each of the last three fiscal years. The
remuneration  described in the table does not include the cost to the Company of
benefits  furnished  to the named  executive  officers,  including  automobiles,
premiums for health  insurance and other benefits  provided to such  individuals
that are extended in connection with the conduct of the Company's business.  The
value  of such  benefits  cannot  be  precisely  determined,  but the  executive
officers named below did not receive other  compensation in excess of the lesser
of $50,000 or 10% of such officer's cash compensation.


                                                         8

<PAGE>


<TABLE>
<CAPTION>

                                            Summary Compensation Table
===================================================================================================================================
                             ANNUAL COMPENSATION                                                         LONG TERM COMPENSATION
-----------------------------------------------------------------------------------------------------------------------------------
          Name and                                                        Other Annual                                         All
     Principal Position           Year         Salary          Bonus      Compensation                 Awards     Payouts     Other
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Restricted   Options/  LTIP
                                                                                               Stock ($)    SARs(#)  Payouts ($)
------------------------------------------------------------------------------------------------------------------------------------
Riccardo Mortara
<S>                            <C>                         <C>            <C>                  <C>          <C>         <C>     <C>
President and Director         1997(1)                     0              60,000               0            0           0       0
                               1996(1)                     0              60,000               0            0           0
                               1995(1)                     0              60,000               0            0           0       0
------------------------------------------------------------------------------------------------------------------------------------
Dempsey K. Mork                1997(1)                     0              60,000               0            0           0       0
Chief Financial Officer        1996(1)                     0              60,000               0            0           0       0
Secretary and Director         1995(1)                     0              60,000               0            0           0       0
===================================================================================================================================
</TABLE>

(1)  The above table does not include fringe  benefits since such amount is less
     than  $25,000  for each  person,  and does not  include  20,000  shares  of
     restricted  stock  awarded to each of the named  persons  for  services  in
     fiscal  1994.  All amounts for 1996 and 1997 have been  accrued but unpaid.
     The Board of  Directors  awarded  $120,000 to Messrs.  Mork and Mortara for
     services  in  fiscal  1995 but the  Company  has not  paid to Mr.  Mork the
     $60,000. The Company issued 29,165 shares to Mr. Mortara for such amount.

Options Granted in Fiscal 1996

     There were no options granted in fiscal 1997.

Option Exercises and Year-end Value Table

    The following  table contains  information  concerning the exercise of stock
options and employment  related  options and  information  in unexercised  stock
options held as of December 31, 1997 by the named executive officers:
<TABLE>
<CAPTION>

                                                                                             Value of Unexercised
                                                                                             In-the-Money Options
                                                            Number of Unexercised                     at
                             Shares                           Options & Warrants                December 31, 1997
                           Acquired on       Value
                            Exercise       Realized(1)   Exercisable     NonExercisable          Exercisable(2)
<S>                              <C>       <C>    <C>        <C>                   <C>            <C>          
Riccardo Mortara                -0-        $     -0-         97,417                0              $     223,572
Dempsey K. Mork                 -0-        $     -0-         97,417                0              $     223,572
</TABLE>

(1)      Market Value at time of exercise less exercise price.
(2)      The average of the closing bid and ask prices of the Common Stock at 
December 30, 1996 was $4.375.
         Value equals the difference between market value and exercise price.

         In fiscal 1994,  the Company  issued  23,333  shares to each of Messrs.
Mork and  Mortara  for  services  rendered.  The shares were valued at $1.83 per
share,  and the number of shares was not based upon the hours of services to the
Company.  In April 1994 the Company issued options to purchase 233,334 Shares at
$2.50 per share, exercisable until April, 2004, including 97,417 options to each
of Messrs. Mork and Mortara. The options were not issued under the 1993 Plan.

         Except as noted above,  the Company has no agreement or  understanding,
express or implied,  with any officer or director, or any other person regarding
employment  with the  Company or  compensation  for  services.  Compensation  of
officers and directors is determined by the Company's  board of directors and is
not subject to shareholder approval.

                                                         9

<PAGE>




Stock Option Plan

         The  Company has  adopted  the 1993 Stock  Option Plan (the  "Plan") to
offer  an  incentive  based  compensation  system  to  employees,  officers  and
directors and to outside  consultants  or advisors,  and, as is  frequently  the
practice,  including to the  professional  corporations  of such  consultants or
advisors.

         A total of 800,000  shares are  authorized for issuance under the Plan.
As of December 31, 1994, no options had been granted under the Plan. The Company
may increase the number of shares  authorized for issuance under the Plan or may
make other  material  modifications  to the Plan without  shareholder  approval.
However, no amendment may change the existing rights of any option holder.

         Any shares  which are subject to an award but are not used  because the
terms and  conditions  of the award are not met, or any shares which are used by
participants to pay all or part of the purchase price of any option may again be
used for awards  under the Plan.  However,  shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.

         In the discretion of a committee  comprised of  non-employee  directors
outside consultants or advisors,  including to the professional  corporations of
such consultants or advisors (the  "Committee"),  directors,  officers,  and key
employees of the Company and its  subsidiaries  or  employees of companies  with
which the Company does business  become  participants in the Plan upon receiving
grants in the form of stock options or restricted  stock.  Pending  formation of
the Committee, the Board of Directors is acting as the Committee.

         Stock  options  may  be  granted  as  non-qualified  stock  options  or
incentive  stock  options,  but incentive  stock options may not be granted at a
price  less  than 100% of the fair  market  value of the stock as of the date of
grant (110% as to any 10% shareholder at the time of grant); non-qualified stock
options may not be granted at a price less than 85% of fair market  value of the
stock as of the date of grant.  Restricted  stock may not be  granted  under the
Plan in connection with incentive stock options.

         Stock  options  may be  exercised  during a period of time fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability,  whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock  acquired  through the  exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery or recourse promissory notes
or a combination  of notes,  cash and shares of the Company's  common stock or a
combination  thereof.  Incentive  stock options may only be issued to directors,
officers and employees of the Company.

         Stock  options  may be granted  under the Plan may include the right to
acquire an Accelerated Ownership  Non-Qualified Stock Option ("AO"). All options
granted to date have included the "AO" feature.  If an option grant contains the
AO feature and if a  participant  pays all or part of the purchase  price of the
option with shares of the  Company's  common  stock,  then upon  exercise of the
option the participant is granted an AO to purchase, at the fair market value as
of the date of the AO grant,  the number of shares of common  stock the  Company
equal  to the sum of the  number  of whole  shares  used by the  participant  in
payment of the purchase price and the number of whole shares,  if any,  withheld
by the Company as payment for withholding  taxes. An AO may be exercised between
the date of grant and the date of expiration, which will be the same as the date
of expiration of the option to which the AO is related.

         Stock  appreciation  rights and/or  restricted  stock may be granted in
conjunction  with, or may be unrelated to stock  options.  A stock  appreciation
right entitles a participant to receive a payment,  in cash or common stock or a
combination  thereof,  in an amount equal to the excess of the fair market value
of the stock at the time of exercise  over the fair market  value as of the date
of grant.  Stock  appreciation  rights may be exercised  during a period of time
fixed by the  Committee not to exceed ten years after the date of grant or three
years after death or disability,  whichever is later.  Restricted stock requires
the  recipient  to  continue  in service as an  officer,  director,  employee or
consultant  for a fixed period of time for  ownership of the shares to vest.  If
restricted  shares or stock  appreciation  rights  are  issued  in  tandem  with
options,  the  restricted  stock or stock  appreciation  right is canceled  upon
exercise of the option and the option will  likewise  terminate  upon vesting of
the restricted shares.


                                                        10

<PAGE>



         Directors  currently  receive  no  compensation  for  their  duties  as
directors.

         Compliance with Section 16

         Not Applicable.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         Principal  Shareholders.  The  following  table sets forth  information
relating  to  the  beneficial  ownership  of  Company  securities  by  executive
officers,  directors and those persons  beneficially holding more than 5% of the
Company  capital  stock,   based  on   3,394,668  common  shares
outstanding and 1,500 Class A Preferred Shares outstanding at December 31, 1997.
<TABLE>
<CAPTION>

                                            Name and Address                      Amount and Nature
                                              of Beneficial                         of Beneficial                Percent
  Title of Class                                Ownership                             Ownership                 of Class

<S>                                      <C>                                          <C>                           <C> 
Common Stock                             Dempsey K. Mork(2)                           137,585                       4.1%
                                         74900 Highway 111
                                         Suite 121
                                         Indian Wells, CA 92210

                                         Riccardo Mortara(3)                          130,145                       3.8%
                                         14 Quai du Seujet
                                         CH-1201 Geneva
                                         Switzerland


Series A
  Preferred
  Stock(1)                               Dempsey K. Mork                                  500                      33.3%
                                         74900 Highway 111
                                         Suite 121
                                         Indian Wells, CA 92210


                                         Riccardo Mortara                                 500                      33.3%
                                         14 Quai du Seujet
                                         CH-1201 Geneva
                                         Switzerland

                                         Parley International, Inc.(4)                    500                      33.3%

All directors and officers and
as a Group (3 persons)

Common Stock                                                                          267,730                       7.9%
Series A Preferred Stock                                                                1,500                       100%

</TABLE>

(1)      The holders of the  beneficial  ownership  of Series A Preferred  Stock
         have the right, voting unanimously, to collectively elect two-thirds of
         the Board of Directors.
(2)      Includes options to purchase 97,417 shares, as well as shares held in
 the name of a corporation controlled
         by Mr. Mork.
(3)      Includes 10,000 Shares held by the spouse of Mr. Mortara of which Mr.
 Mortara disclaims beneficial
         ownership, and options to purchase 97,417 Shares.
(4)    The controlling shareholder of Parley International is Terrence Ramsden.


                                                        11

<PAGE>




Item 12. Certain Relationships and Related Transactions

         Certain  conflicts  of  interest  now exist and will  continue to exist
between the Company and its officers and directors due to the fact that each has
other business interests to which he devotes his primary attention. Each officer
and director may continue to do so notwithstanding the fact that management time
should be  devoted to the  business  of the  Company.  No  procedures  have been
adopted to resolve such conflicts of interest.

         The Company issued 23,333, 23,333 and 17,500 shares to Dempsey K. Mork,
Riccardo Mortara, and Jehu Hand in December 1994 for services rendered valued at
$1.83 per share as officers of the Company.

         The Company issued 40,833 shares to Societe Financiere du Seujet, SA on
August 15, 1995 in  reimbursement  of out of pocket expenses for travel costs of
$189,000 incurred on behalf of the Company.  The shares were valued at the price
of a recent placement of shares at $5.00 less the commission of $.50 which would
have been paid if the Company had sold the shares to a third party.  Mr. Mortara
is a principal of Societe Financiere du Seujet.

         On  February  27,  1997 the Company  issued  22,728  shares to Riccardo
Mortara in reimbursement of costs and expenses  incurred by him on behalf of the
Company in the amount of $90,912. The shares were valued at $4.00 per share, the
current trading price of the Common Stock.

                                                      PART IV

Item 13. (a) Exhibits



    Exhibit No.            Document Description



      2.   Plan of acquisition, reorganization, arrangement, liquidation or
 succession.

           2.1.  Share Purchase Agreement between KSM Financial Holdings and
 the Company.(3)

           2.2   Recision Agreement with respect to the transaction described in
Exhibit 2.1(4)

      3.   Articles of Incorporation and Bylaws

           3.1             Articles of Incorporation, (1)
           3.2             Bylaws (1)
           3.3             Amendment to Articles of Incorporation changing name
 to
                           Development Bancorp, Ltd.(1)
           3.4             Amendment to Articles of Incorporation authorizing 
Series A
                           Preferred Stock as revised. (5)
           3.5             Certificate of Designation for Series B Convertible
 Preferred Stock(2)
           3.6             Amendment to Articles of Incorporation changing name
to IMATEL Holdings, Inc.(6)

23.   Consents of Auditors.

      23.1 Consent of Cordovano & Company P.C.(6)


                                                        12

<PAGE>



21.   Subsidiaries.  The Company's subsidiary, Societe Financiere de
 Distribution, Geneva, SA is incorporated in
Switzerland.  The subsidiary Development Corp. Services Limited is incorporated
 in Ireland; KSM Holding
Corporation is incorporated in Minnesota; and Global Financial Group, a 
subsidiary of KSM Holding Corporation,
is a Colorado corporation.

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

(1)   Incorporated by reference to the Company's registration statement on Form 
10-SB, file no. 0-22934.
(2)   Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31,
      1995.
(3)   Incorporated by reference to the Company's Current Report on Form 8-K 
dated December 6, 1995.
(4)   Incorporated by reference to the Company's Current Report on Form 8-K 
dated November 1, 1996.
(5)   Incorporated by reference to the Company's Annual Report on Form 10-KSB 
for the year ended December 31,
      1996.
(6)   Filed herewith.

           (b) Reports on Form 8-K

      On October 20, 1997, the Company  entered into a Stock Purchase  Agreement
with  International   Marketing  and  Advertising,   Inc.  (IMATEL),  a  Florida
corporation engaged in telecommunications,  pursuant to which the Company was to
acquire 51% of IMATEL for $500,000 cash. The acquisition  was reported  pursuant
to Item 2 of Form 8-K dated October 20, 1997 and the Company changed its name to
IMATEL Holdings, Inc. Subsequent to the acquisition, the Company became aware of
a purported  shareholders'  agreement  among the  shareholders  of IMATEL  which
prohibited  the  sale  of  shares  to the  Company  without  consent  of  IMATEL
shareholders.  The Company has accounted  for the $500,000  investment as a loan
and has reserved  $250,000  against this  receivable for costs of collection and
potential impairment.

                                                


                                                    SIGNATURES


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


Dated:    April 13, 1998                                 IMATEL HOLDINGS, INC.



                                                    By:/s/ Dempsey K. Mork
                                                       Dempsey K. Mork
                                                        Secretary/Treasurer

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated on April 13, 1998.



By:/s/ Riccardo Mortara
   Riccardo Mortara
   President (principal executive officer) and Director



By:/s/ Dempsey K. Mork
   Dempsey K. Mork
   Secretary/Treasurer (principal accounting and financial officer)
   and Director


                                                        14

<PAGE>

<TABLE>
<CAPTION>


                                                       IMATEL HOLDINGS, INC.
                                                (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                             Index to Consolidated Financial Statements

                                           As of and for the year ended December 31, 1997

                                                                                                                             Page


<S>                                                                                                                             <C>
Independent auditors' report  ..                                                                                              F-2

Consolidated balance sheet ..                                                                                                 F-3

Consolidated statement of operations .                                                                                        F-4

Consolidated statement of shareholders' equity ...                                                                            F-5

Consolidated statement of cash flows                                                                                          F-6

Summary of significant accounting policies ...                                                                                F-7

Notes to consolidated financial statements .                                                                                  F-9




</TABLE>


























                                                                 15

<PAGE>




                                                                F-1








To the Board of Directors
Imatel Holdings, Inc.

                                                    INDEPENDENT AUDITORS' REPORT

We have  audited  the  consolidated  balance  sheet  of  Imatel  Holdings,  Inc.
(formerly  Development  Bancorp,  Ltd.) and subsidiaries as of December 31, 1997
and the related consolidated statements of operations,  shareholders' equity and
cash flows for the year ended December 31, 1997.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  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  consolidated  financial  statements  are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our 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 Imatel Holdings,
Inc.  and  subsidiaries,  as of  December  31,  1997  and the  results  of their
operations  and their  cash  flows for the year  ended  December  31,  1997,  in
conformity with generally accepted accounting principles.





Cordovano and Harvey, P.C.
Denver, Colorado
March 5, 1998












                                                                 16

<PAGE>






                                                                F-2



                                                                

<PAGE>







                                                                

<PAGE>


<TABLE>
<CAPTION>


                                                       IMATEL HOLDINGS, INC.
                                                (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                                     Consolidated Balance Sheet

                                                         December 31, 1997

                                                               ASSETS

CURRENT ASSETS
<S>                                                                                                             <C>            
   Cash                                                                                                         $         8,596
 .
   Interest receivable                                                                                                   13,275
 ....
   Other receivable (Note H) ..                                                                                         250,000
   Loan receivable, related party (Note B)                                                                              295,862
 .
   Marketable securities (Note A)                                                                                       371,046

                                                                                     TOTAL CURRENT ASSETS               938,779

INVESTMENTS, NET (Note C)                                                                                             4,971,962
 ..
PROPERTY AND EQUIPMENT, less $19,360 of
   accumulated depreciation (Note D)                                                                                     29,414

ORGANIZATION COSTS, less $11,602 of
   accumulated amortization                                                                                               5,859

OTHER ASSETS                                                                                                              6,967
 ..
                                                                                             TOTAL ASSETS          $  5,952,981


                                            LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
   Checks drawn in excess of available funds (Note H)..                                                     $     935,572

   Accounts payable                                                                                                38,412
 ......
   Accrued payroll taxes                                                                                            459
 ...
   Other accrued liabilities (Note H)                                                                             316,000

                                                                                TOTAL CURRENT LIABILITIES        1,290,443


                                            MINORITY INTEREST                                                       2,000
                                                    .

SHAREHOLDERS' EQUITY (Note E)
   Preferred stock, no par value, 1,000,000 shares authorized,
      1,500 shares issued and outstanding ..                                                                       1,500

   Common stock, no par value, 50,000,000 shares
      Authorized, 3,394,668 shares issued and outstanding .                                                     12,252,597
   Cumulative translation adjustment ...                                                                         (193,082)

   Retained deficit                                                                                             (7,400,477)

                                                                               TOTAL SHAREHOLDERS' EQUITY        4,660,538
                                                                                                                $ 5,952,981
</TABLE>

               See accompanying summary of significant accounting policies and
                     notes to the consolidated financial statements
                                                                F-3
<TABLE>
<CAPTION>
  
                                                     IMATEL HOLDINGS, INC.
                                                (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                                Consolidated Statement of Operations

                                                For the year ended December 31, 1997

EXPENSES
<S>                                                                                                         <C>          
General and administrative expense                                                                          $     732,090
 .
 LOSS FROM OPERATIONS                                                                                            (732,090)
OTHER INCOME (EXPENSE)
   Interest income                                                                                                 40,976
 ..
   Interest expense                                                                                               (52,300)

   Foreign currency transaction loss (Note F)                                                                     (31,007)
 ..
   Loss on sale of marketable securities                                                                          (10,522)
 ...
   Loss on write-down of other receivable (Note                                                                  (250,000)
H)..
   Loss on write-down of investments (Note C)                                                                   (2,865,401)

                                                                             TOTAL OTHER INCOME (EXPENSE)       (3,168,254)
                                                                          LOSS FROM CONTINUING OPERATIONS       (3,900,344)
INCOME TAXES (Note G)
   Current benefit                                                                                               (738,232)

   Deferred                                                                                                       824,480
expense...
                                                                      NET LOSS FROM CONTINUING OPERATIONS       (3,986,592)

DISCONTINUED OPERATIONS (Note J)
   Loss on disposal of discontinued operations,
   net of $86,248  income tax                                                                                    (177,850)
benefit..
                                                                  TOTAL LOSS FROM DISCONTINUED OPERATIONS        (177,850)
                                                                                                 NET LOSS   $(4,164,442)

Basic loss per common share, continuing operations                                                               $ (1.19)

Basic loss per common share, discontinued operations                                                             $ (0.05)

Basic weighted average common shares outstanding                                                                 3,364,183
 ...

Diluted loss per common share, continuing operations                                                             $ (1.11)
 ..
Diluted loss per common share, discontinued operations                                                           $ (0.05)

Diluted weighted average common shares outstanding                                                               3,597,517
 .

</TABLE>










       See accompanying summary of significant accounting policies and
                         notes to the consolidated financial statements
                                                                F-4




                                                                

<PAGE>
<TABLE>
<CAPTION>



                                                       IMATEL HOLDINGS, INC.
                                                (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                           CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                                                   For the year December 31, 1997

                                     Preferred Stock    Common Stock               Retained       Translation
                                     Shares    Amount   Shares Amount              Deficit         Adjustment            Total
<S>                                  <C>     <C>      <C>      <C>                 <C>                <C>                <C>      
BALANCE, DECEMBER 31, 1996           1,000   1,000   3,341,940 12,131,685          (3,110,258)        155,000            9,177,427

Prior period adjustment (Note E)         -       -            -         -            (125,777)              -             (125,777)
 ...
BALANCE, DECEMBER 31, 1996
 (as restated)                        1,000   1,000  3,341,940 12,131,685          (3,236,035)        155,000            9,051,650

Shares issued for services                -       -     30,000     30,000                   -               -               30,000
 .

Shares issued to officer in
 exchange for expenses
 paid on behalf of the Company (Note B)    -      -     22,728      90,912                    -                    -        90,912
 .
Shares issued to related party for 
services 
                                         500     500                                                                           500

                                                                                                         
   currency translation ..                 -       -         -           -      -              -           (348,082)      (348,082)
 ..

Net loss for the year ended 
  December 31,                             -       -         -           -       -    (4,164,442)                  -    (4,164,442)
1997
    BALANCE, DECEMBER 31, 1997         1,500  $1,500  3,394,668$12,252,597          $ (7,400,477)     $    (193,082)  $  4,660,538





</TABLE>













                                                                

<PAGE>





See accompanying summary of significant accounting policies and
                         notes to the consolidated financial statements.
                                                                F-5




                                                                

<PAGE>

<TABLE>
<CAPTION>


                                                       IMATEL HOLDINGS, INC.
                                                (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                                Consolidated Statement of Cash Flows

                                                For the year ended December 31, 1997

OPERATING ACTIVITIES
<S>                                                                                                        <C>         
   Net loss                                                                                                 $(4,164,442)
 ..

   Transactions not requiring cash:
      Depreciation and amortization                                                                               4,927

      Stock issued for non-cash consideration (Note                                                             121,412
B)...
      Realized loss on sale of marketable securities                                                              10,522

      Foreign currency transaction loss                                                                           29,941
 ..
      Prior period adjustment (Note E)                                                                          (125,777)

      Loss on write-down of other receivable (Note                                                               250,000
H).
      Loss on write-down of investments (Note C)                                                                2,865,401

      Loss from discontinued operations (Note J)                                                                 264,098
 .

  Changes in current assets and current liabilities:
      Receivables, marketable securities, and other current assets                                                73,599
 ..
     Accounts payable, accrued liabilities and other current liabilities                                         992,858
 ..
                              NET CASH PROVIDED BY
                          OPERATING ACTIVITIES 322,539

                                                                       NET CASH FROM INVESTING ACTIVITES            -

                                                                      NET CASH FROM FINANCING ACTIVITIES            -

TRANSLATION ADJUSTMENT CHANGES TO CASH                                                                          (348,082)
 ....
DECREASE IN CASH                                                                                                 (25,543)
 .
Cash, beginning of year                                                                                           34,139
 .
CASH, END OF YEAR                                                                                          $         8,596



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest                                                                                     $        52,300
 ..
Cash paid for income taxes                                                                                 $             800


</TABLE>

Non-cash investing and financing transactions:
The  Company  recorded  $2,153 of non-cash  foreign  currency  exchange  gain on
marketable securities.

The Company  issued  30,000  shares of its common stock as payment for services.
The fair value of the services performed totaled $30,000. See Note B.

The Company issued 22,728 shares of its common stock at market, to an officer of
the Company in exchange  for $90,912 in expenses  the officer  paid on behalf of
the Company. See Note B.

The Company issued 500 shares of its preferred stock as payment for services to
 an affiliate.  The services
were valued at $500.  See Note B.
               See accompanying summary of significant accounting policies and
                        notes to the consolidated financial statements
                                                                F-6
                                        IMATEL HOLDINGS, INC.
                                    (FORMERLY DEVELOPMENT BANCORP, LTD.)

                           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                                                         December 31, 1997

Nature of organization
Imatel  Holdings,  Inc. (the  "Company") is a holding  company  organized in the
state of  Washington  for the  purpose  of  providing  international  investment
banking  services  through its  majority-owned  subsidiaries:  Development  Corp
Services  Limited  (Ireland  -  99.93%  owned)  and SFD  Societe  Financiere  De
Distribution Geneve SA (Switzerland - 99.3% owned).  During 1997 the Company had
no operations and is currently seeking to acquire an operating company.

On November 24, 1997, the Company changed its name from Development Bancorp,
 Ltd. to Imatel Holdings, Inc.

Basis of consolidation
The consolidated  financial  statements include the accounts of Imatel Holdings,
Inc. and its majority- owned subsidiaries, Development Corp Services Limited and
SFD Societe Financiere De Distribution Geneve SA.

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

Cash equivalents
For the  purposes of the  statement  of cash flows,  the Company  considers  all
highly  liquid debt  instruments  purchased  with an original  maturity of three
months or less to be cash equivalents.





                                                                

<PAGE>



Marketable securities
Marketable  securities  consist of various  equity and debt  securities  and are
stated at current market value. All equity  securities are considered  "trading"
securities and all debt securities are considered "available for sale" under the
provisions of Statement of Financial  Accounting  Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities".  Accordingly, unrealized
gains  and  losses  on  equity  securities  are  reflected  in  operations,  and
unrealized  gains and  losses on debt  securities  are  charged  to  "cumulative
translation adjustment" on the accompanying consolidated balance sheet.

Market value is determined by quoted market prices as of the balance sheet date.
Net realized gains or losses are determined on the specific  identification cost
method.

Investments
Investments  consist of various  equity  ownership  interests in  privately-held
corporations  or  partnerships.  Investments are stated at cost, as adjusted for
foreign currency translation gains or losses, if any.

Property and equipment
Property and  equipment is stated at cost.  Depreciation  is computed  using the
straight-line  method over the estimated  five to seven year useful lives of the
assets.  Expenditures  for additions and  improvements  are  capitalized,  while
repairs and maintenance costs are expensed as incurred.




                                                                F-7
                                          IMATEL HOLDINGS, INC.
                                 (FORMERLY DEVELOPMENT BANCORP, LTD.)

                        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                                                         December 31, 1997

Intangible assets
Intangible  assets consist of  organization  costs,  which are amortized over 60
months.

Income taxes
Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to differences  between the recorded book basis and tax basis
of assets and liabilities  for financial and income tax reporting.  The deferred
tax assets and liabilities represent the future tax return consequences of those
differences,  which will  either be taxable  or  deductible  when the assets and
liabilities  are recovered or settled.  Deferred  taxes are also  recognized for
operating  losses that are  available to offset  future  taxable  income and tax
credits that are available to offset future federal income taxes.

Concentrations of Credit risk
The Company  maintains cash in bank deposit accounts which, at times, may exceed
federally insured limits or are in foreign banks.

Stock-based compensation
The Company accounts for its stock-based compensation plans under the principles
prescribed by the Accounting  Principles Board's Opinion No. 25, "Accounting for
Stock  Issued to  Employees"  (APB 25).  Accordingly,  stock  option  awards are
considered  to be  "noncompensatory"  and do not  result in the  recognition  of
compensation expense. See Note H.





                                                                

<PAGE>



New accounting pronouncement
In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting Standards No. 128, Earnings Per Share (SFAS 128). SFAS 128
specifies the computation, presentation, and disclosure requirements of earnings
per share and supersedes  Accounting  principles  Board Opinion No. 15, Earnings
Per Share.  SFAS 128 requires a dual  presentation of basic and diluted earnings
per share.  Basic earnings per share,  which excludes the impact of common stock
equivalents,  replaces primary  earnings per share.  Diluted earnings per share,
which  utilizes the average market price per share as opposed the greater of the
average  market price per share or ending  market price per share when  applying
the treasury  stock method in  determining  common stock  equivalents,  replaces
fully-diluted earnings per share. SFAS 128 is effective for the Company in 1997.















                                                                F-8
                                                       IMATEL HOLDINGS, INC.
                                    (FORMERLY DEVELOPMENT BANCORP, LTD.)

                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                         December 31, 1997

Note A:  Marketable securities
<TABLE>
<CAPTION>

Marketable securities consisted of the following at December 31, 1997:
                                                                                                          Estimated
                                                                                Cost                     Market Value
<S>                                                                        <C>                          <C>
Equity securities .                                                        $             976            $
                                                                                                                      976

Debt securities                                                                      403,994                      370,070
                                                                              $      404,970            $         371,046

</TABLE>
Unrealized  (loss)  included in  marketable  securities at December 31, 1997 was
$33,924.

At December 31, 1997 the  maturities  of debt  securities,  at estimated  market
value, which are classified as available-for-sale are as follows:

Within one year                                     $                -
 ...
One through five years ..                                       370,070
                                                         $      370,070


Note B:  Related party transactions

During the year ended  December 31, 1997,  the Company  issued  30,000 shares of
common  stock to  officers in exchange  for  services  rendered on behalf of the
Company.  The services were valued at cost.  Further,  the Company issued 22,728
common shares, at market value on date of issuance, to an officer of the Company
as payment for expenses  the officer paid on behalf of the Company.  The Company
also issued 500 shares of preferred stock to an affiliate for services  rendered
on behalf of the Company.

Note C:  Investments

Investments consisted of the following at December 31, 1997:

7,345 shares of Societe Financiere Privee                        $   4,082,359
 ....

4,650,000 redeemable preferred shares of
  Gestion Guychar, Inc, net of $2,000,0000 allowance                    889,603

Investment in Gestion Pemp Network (Canada)
   net of $573,458 allowance ..                                               -

120,000 shares of Gestion Pemp, Inc. (Canada)
   net of $242,877 allowance ...                                              -
                                             TOTAL INVESTMENTS      $ 4,971,962


Societe Financiere Privee
The Company owns 1,140 preferred shares and 6,205 common shares  representing an
approximate  three  percent  ownership   interest  in  the  Swiss   corporation.
Unrealized  loss on  foreign  currency  translation  from  Swiss  francs to U.S.
dollars at December 31, 1997 was $65,934 and has been recorded as a component of
shareholders' equity as cumulative translation adjustment.


                                                                F-9
                                                       IMATEL HOLDINGS, INC.
                                          (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                         December 31, 1997
Note C:  Investments, concluded

Gestion Guychar, Inc.
The Company owns  4,650,000  redeemable  preferred  shares that are  non-voting,
non-participating,  and non-transferable.  They are to be redeemed at a price of
one  Canadian  dollar  per share plus  annual  cumulative  dividends  payable on
October  1 of each  year at  variable  interest  rates  ranging  from 3.5 to 4.0
percent. The shares are redeemable as follows:
<TABLE>
<CAPTION>

<S>                                                                        <C>      
October 1, 2001                                                            1,250,000
 .....
October 1, 2002 .                                                          1,300,000
October 1, 2003 .                                                          2,100,000
                                                                           4,650,000

</TABLE>

During 1997 Gestion Guychar, Inc. experienced a significant liquidity crisis and
 consequently, the Company
did not receive its annual dividend payment. In management's opinion, the 
decline in the value of the
                investment in Gestion Guychar, Inc. is permanent. Therefore the
 Company has recorded an allowance of
             $2,000,000 to write down the investment to a new cost basis. The
 amount of the write down is accounted for
             as a realized loss and accordingly, included in the statement of 
operations. Prior to the write-down, the
               investment  experienced  a decline  in value of  $242,409  due to
foreign currency exchange rate declines.

Gestion Pemp Network and Gestion Pemp, Inc.
The Company owns an  investment,  in the form of a loan to Gestion Pemp Network.
The Pemp  companies,  including  Gestion  Pemp  Network and Gestion  Pemp,  Inc.
recently  integrated with Polygone  Financial Services Inc. The decline in value
of $48,108 in 1997 was due to foreign  currency  exchange rate declines.  Due to
significant  changes in the operations,  which management  believes has caused a
significant  decline in value,  the Company has written off its investment.  The
impairment of $573,458 is included in the statement of operations.

In addition,  the Company owns 120,000  common shares of Gestion Pemp,  Inc. The
common stock  represents  an  approximate  eight percent  ownership  interest in
Gestion Pemp, Inc. which was recently  integrated with Polygone.  The decline in
value of $20,375 in 1997 was due to foreign currency exchange rate declines. Due
to significant changes in the operations, which management believes has caused a
significant  decline in value,  the Company has written off its investment.  The
impairment of $242,877 is included in the statement of operations.

Note D:  Property and equipment

Property and equipment consisted of the following at December 31, 1997:
<TABLE>
<CAPTION>

<S>                                                                   <C>            
Furniture .                                                           $        34,913
Equipment ..                                                                  8,625
Leasehold improvements ....                                                   5,236
                                                                             48,774
Less accumulated depreciation ..                                            (19,360)
                                        PROPERTY AND EQUIPMENT, NET   $        29,414
</TABLE>


Depreciation expense totaled $9,415 for the year ended December 31, 1997.
                                                                F-10
                                                       IMATEL HOLDINGS, INC.
                                           (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                         December 31, 1997

Note E:  Shareholders' equity

Preferred stock
The Company has authorized an aggregate of 1,000,000  shares of no par preferred
stock as follows:

               Class A Preferred Stock
               The Company has  designated  1,500 shares of no par value Class A
               preferred stock. Class A shareholders are not entitled to receive
               dividends.  During  1997,  500 shares were issued to an affiliate
               for  services,  valued at $500.  At December  31, 1997 there were
               1,500 shares issued and outstanding.





                                                                 

<PAGE>



               Class B Convertible Preferred Stock
               The  Company  has  designated  110,000  shares  of no  par  value
               convertible  Class B preferred  stock.  Class B shareholders  are
               entitled  to  receive  dividends  in a manner  similar  to common
               shareholders when declared by the board of directors.  Each Class
               B share is  convertible  into one share of common  stock,  at the
               option of the shareholder, provided that the market price for the
               Company's  common  stock  is at or  above  $4.50  per  share.  At
               December 31, 1997 there were no shares issued and outstanding.

Prior period adjustment
During the year ended  December  31,  1997,  the  Company  expensed  $125,777 in
officers' salaries,  which were related to salaries earned in 1996. As a result,
the retained deficit balance at December 31, 1996 was increased by $125,777.

Note F:  Foreign currency transaction gain (loss)

Foreign currency  transaction  gains and losses result from a change in exchange
rates between the functional currency of the Company and the currency in which a
foreign  transaction  is  denominated.  These gains or losses are  comprised  of
actual  currency gains or losses  realized upon  settlement of foreign  currency
transactions  and expected  (unrealized)  currency  gains or losses on unsettled
foreign currency transactions.

The foreign  currency  transaction loss for the year ended December 31, 1997 was
$31,007.

Note G:  Income taxes

A reconciliation of the U.S.  statutory federal income tax rate to the effective
tax rate follows for the year ended December 31, 1997:

U.S. statutory federal rate                                       34.0%
 ...

State income tax rate ..                                          9.3%
Temporary differences -writedown of investments                 (23.5%)
Net operating loss for which no tax benefit
   Is currently available                                       (19.8%)
 .
                                                                    -%



                                                                F-11
                                                       IMATEL HOLDINGS, INC.
                                           (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                         December 31, 1997

Note G:  Income taxes concluded

At December 31, 1997 deferred taxes consisted of the following:


Deferred tax assets,

   Net operating loss carryforward ..                          $     824,480
Less valuation allowance                                            (824,480)
 .
   Net deferred taxes .                                    $               -


The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery.  The change in the valuation allowance for the year ended
December 31, 1997 totaled $748,480.  The net operating loss carryforward expires
through the year 2012.

The valuation  allowance will be evaluated at the end of each year,  considering
positive  and  negative  evidence  about  whether the deferred tax asset will be
realized.  At that time,  the  allowance  will either be  increased  or reduced;
reduction could result in the complete  elimination of the allowance if positive
evidence  indicates  that the  value of the  deferred  tax  assets  is no longer
impaired and the allowance is no longer required.

Note H:  Commitments and contingencies

Bank line of credit
At December 31, 1997,  the Company had two Swiss Franc  ("SFr")  lines of credit
available at Societe  Financiere  Privee SA, in the amounts of SFr 1,120,000 and
SFr  350,000,  approximately  US$767,123  and  US$239,726  respectively.  As  of
December  31,  1997,  there were no amounts  outstanding  under  either  line of
credit.  The SFr  1,120,000  line expires  November 27, 1999 and the SFr 350,000
line expires December 31, 1998.

Checks drawn in excess of available funds
The Company's subsidiaries maintains investments with a Swiss trustee, which has
deposited  the  investments  in accounts  held at Societe  Financiere  Privee SA
('SFP"). The trustee is an affiliated entity owned by the president and director
of the Company.  From time to time,  funds are transferred from the subsidiaries
to the parent, creating an excess of available funds. Available funds consist of
fiduciary deposits as required by SFP. Further, SFP reserves the right to offset
any uncollected  amounts by any positive  balances of all accounts.  Further SFP
has a lien over all  securities  under its custody and a right of offset against
such securities for any unpaid claims.

Stock option plan
At  December  31,  1997,  an  aggregate  of 800,000  shares of common  stock was
reserved for issuance  under the Company's  1993 stock option plan.  Pursuant to
the plan,  the board of  directors  may grant  options to  employees,  officers,
directors,  or others at their  discretion.  As of December 31, 1997, no options
had been granted under the plan.

Other stock options
As of December  31, 1997,  an  aggregate of 233,334  shares of common stock were
reserved for issuance upon exercise of non-qualified  stock options  outstanding
to purchase an  aggregate of 233,334  shares of common  stock (of which  194,834
were to Company  officers) at $2.50 per share. The options expire in April 2004.
These option were not issued under the Company's 1993 stock option plan.
                                                                F-12
                                                       IMATEL HOLDINGS, INC.
                                         (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                         December 31, 1997

Note H:  Commitments and contingencies concluded





                                                                 25

<PAGE>



Accrued officers' salaries
The  board  approved  payment  to two  officers  for  salaries  in 1996 and 1997
totalling  $300,000,  payable in common stock of the Company based on the market
value at time of  issuance.  At December  31, 1997 no amounts have been paid nor
has any common stock been issued in satisfaction of this commitment.

Operating lease
The Company leases its corporate  offices under a noncancellable  lease.  Future
minimum lease payments are as follows for the years ended December 31:

1998 ..                                                   $            43,965
1999 ..                                                                 3,994
                                                          $            47,959


 Rent Expense
for the year ended December 31, 1997 totaled $47,066.

                                                                
 Other receivable
On October 20, 1997, the Company  entered into an agreement  with  International
Marketing and Advertising,  Inc., ("IMA") a Florida  corporation  engaged in the
telecommunications  business,  in which the Company  would  purchase  51% of the
outstanding  common  stock  of  IMA  for  $500,000  cash,  contingent  upon  IMA
shareholder  approval.  The Company was  notified  that the  shareholders  voted
against the merger therefore
the Company is pursuing return of the $500,000 paid as an advance on the
 acquisition of IMA.  At December 31, 1997, the Company recorded an allowance
 against the $500,000 receivable for $250,000,  leaving a net
realizable value of $250,000.  The advance is unsecured, however management 
expects a favorable
outcome in its collection of the receivable

Note I:  Industry and geographical segment reporting

As of and for the year ended  December  31,  1997 the Company  operated  and had
assets in the United States and Europe as follows:

LOSS FROM OPERATIONS

   United States ..                                      $        (688,339)
   Europe .                                                        (43,752)
                            TOTAL LOSS FROM OPERATIONS   $        (732,091)


IDENTIFIABLE ASSETS

   United States                                       $         590,839

   Europe ..                                                   5,362,142
TOTAL IDENTIFIABLE ASSETS                               $      5,952,981







                                                                F-13
                                                       IMATEL HOLDINGS, INC.
                                          (FORMERLY DEVELOPMENT BANCORP, LTD.)

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                                                                

<PAGE>


                                                         December 31, 1997

Note J:  Discontinued operations

During the year ended December 31, 1997, the Company incurred  expenses totaling
$14,098  regarding the disposal of  discontinued  operations.  The  discontinued
operations  related to the  acquisition of KSM Holding  Corporation in 1995 that
was subsequently  rescinded in 1996. Further, under the terms of the rescission,
the Company recorded a $250,000  contract  receivable due from KSM. During 1997,
management  deemed  the  receivable  as  uncollectible  and wrote it off.  These
transactions  resulted  in a $264,098  loss from the  disposal  of  discontinued
operations for the year ended December 31, 1997.







































                                                                F-14




                                             DEVELOPMENT BANCORP, LTD.

                                  INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995








<TABLE>
<CAPTION>

<S>                                                                                                          <C>
Independent Auditors' Report                                                                                 1


Consolidated Balance Sheet                                                                                   2


Consolidated Statement of Operations                                                                         3


Consolidated Statement of Shareholders' Equity                                                               4


Consolidated Statement of Cash Flows                                                                     5-6


Notes to Consolidated Financial Statements                                                              7-20




                                                        17

<PAGE>








</TABLE>







                                         INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders
Development Bancorp, Ltd.
Indian Wells, California


We have  audited the  accompanying  consolidated  balance  sheet of  Development
Bancorp,  Ltd. as of December  31, 1996 and 1995,  and the related  consolidated
statements of operations, shareholders' equity and cash flows for the years 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 audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audits 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 Development Bancorp,
Ltd. as of December 31, 1996 and 1995,  and the results of their  operations and
their cash flows for the years then ended in conformity with generally  accepted
accounting principles.




SILVERMAN OLSON THORVILSON & KAUFMANN LTD
CERTIFIED PUBLIC ACCOUNTANTS
Minneapolis, Minnesota

June 6, 1997


                                                     
<PAGE>
<TABLE>
<CAPTION>



                                                 DEVELOPMENT BANCORP, LTD.
                                                CONSOLIDATED BALANCE SHEET
                                                December 31, 1996 and 1995


           ASSETS                                                                       1996               1995
Current assets:
<S>                                                                              <C>                  <C>       
    Cash and equivalents                                                         $        34,139      $1,518,327
    Commissions receivable                                                                     -           244,874
    Other receivables                                                                      11,088            92,728
    Marketable securities (Note 2)                                                       661,066        1,572,608
    Loan receivable - related party (Note 3)                                             303,098                 -
    Other current assets                                                                   13,167          122,288

               Total current assets                                                   1,022,558         3,550,825

Investments (Note 4)                                                                  8,165,123            888,381
Contract receivable - related party (Note 5)                                             250,000                 -
Property and equipment, net (Note 6)                                                       38,829          139,319
Intangible assets, net (Note 7)                                                                -            278,935

               Total assets                                                      $   9,476,510        $4,857,460

           LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Checks drawn in excess of available funds                                    $      196,826       $         -
    Note payable - bank (Note 8)                                                               -             50,000
    Notes payable - related parties (Note 9)                                                   -            304,875
    Accounts payable                                                                       46,034          482,467
    Accrued payroll and commissions                                                        54,223          253,587
    Other accrued liabilities                                                                  -            251,433
    Current portion of long-term debt (Note 10)                                                -              26,881

               Total current liabilities                                                  297,083       1,369,243

Long-term debt (Note 10)                                                                        -                6,770
Long-term debt - related party (Note 11)                                                        -              35,000

               Total liabilities                                                          297,083       1,411,013

Commitments and contingencies (Note 12)                                                        -                  -

Shareholders' equity:
    Class A preferred stock, no par value (Note 13)                                           1,000            1,000
    Class B convertible preferred stock, no par value (Note 13)                                 -            165,000
    Common stock, no par value; 50,000,000 shares
        authorized, 3,317,440 and 1,211,606 shares
        issued and outstanding, respectively (Note 14)                               12,133,685         3,672,496
    Accumulated deficit                                                           (   3,110,258)       (   795,771)
    Translation adjustment                                                                155,000          403,722

               Total shareholders' equity                                              9,179,427        3,446,447

               Total liabilities and shareholders' equity                        $    9,476,510       $4,857,460
</TABLE>

                                          Theaccompanying  notes are an integral
                                             part of the financial statements.


                                                            
<PAGE>


<TABLE>
<CAPTION>

                                                 DEVELOPMENT BANCORP, LTD.

                                           CONSOLIDATED STATEMENT OF OPERATIONS

                                      For the Years Ended December 31, 1996 and 1995



                                                                                         1996                1995
Revenues:
<S>                                                                              <C>                  <C>          
    Commissions and consulting fees                                              $        38,734      $      39,952
    Consulting fees - related party (Note 15)                                              64,509                 -

               Total revenues                                                            103,243              39,952

General and administrative expenses                                                   1,087,041             513,880

               Loss from operations                                              (      983,798)      (     473,928)

Other income (expense):
    Gain on sale of marketable securities                                                771,721            570,795
    Unrealized gain (loss) on marketable
        securities portfolio                                                     (             946)           61,112
    Interest income                                                                        49,492             41,480
    Interest expense                                                                           -      (           17)
    Foreign currency transaction gain (loss) (Note 16)                                   159,990      (     323,597)

           Total other income (expense)                                                  980,257      (     349,773)

               Loss from continuing operations                                   (           3,541)   (     124,155)

Loss from discontinued operations (Note 20)                                      (       520,257)     (     326,087)

               Net loss                                                          $(     523,798)      $(   450,242)


Per share information (Note 14):

    Loss from continuing operations                                              $            -        $(           .10)
    Loss from discontinued operations                                            (               .30) (             .25)

               Net loss per share                                                $(             .30)  $(           .35)

    Weighted average number
        of common shares outstanding                                                  1,747,762          1,282,403




</TABLE>







                                          Theaccompanying  notes are an integral
                                             part of the financial statements.

                                                            

<PAGE>
<TABLE>
<CAPTION>




                                                     DEVELOPMENT BANCORP, LTD.

                                                 STATEMENT OF SHAREHOLDERS' EQUITY

                                           For the Years Ended December 31, 1996 and 1995


                                      Class A and B                                       Accu-       Trans-                 Total
                                       Preferred Stock              Common Stock         mulated    lation        Shareholders'
                                        Shares          Amount     Shares      Amount    Deficit      Adjustment     Equity
<S>                                        <C>          <C>        <C>         <C>          <C>       <C>             <C>        
Balances at December 31, 1994 (Note 14)    1,000        $1,000     1,275,773   $4,081,496   $(345,529)$ 144,925       $3,881,892
Issuance of common stock for cash        -        -                   58,333      270,000          -          -          270,000
Issuance of common stock for services             -              -    52,500      121,000          -             -       121,000
Issuance of preferred stock in acquisition
    of KSM Holding Corporation (Note 19)  110,000      165,000  -          -          -                     -            165,000
Redemption of common stock in sale
    of investments (Note 4)                      -        -         (175,000)    (800,000)          -          -        (800,000)
Equity adjustment from foreign currency translation                       -  -       -          -       258,797          258,797
Net loss                                 -        -          -            -                  (450,242)         -        (450,242)
Balances at December 31, 1995 (Note 14)   111,000      166,000     1,211,606    3,672,496    (795,771)  403,722        3,446,447

Issuance of common stock for cash        -        -                2,006,667    6,466,500          -          -        6,466,500
Issuance of common stock for services             -              -    99,167      204,000          -             -       204,000
Issuance of common stock dividend (Note 14)                               -     1,790,689  (1,790,689)                            
Redemption of preferred sock in rescission of KSM
    Holding Corporation acquisition (Note 20)
                                         (110,000)    (165,000)      -            -          -          -               (165,000)
Equity adjustment from foreign currency translation
                                         -    -   -          -            -                            (248,722)        (248,722)
Net loss                                 -    -   -          -                   (523,798)         -                    (523,798)

Balance at December 31, 1996
                                            1,000       $1,000     3,317,440  $12,133,685 $ 3,110,258) $155,000      $ 9,179,427


</TABLE>







                                               The  accompanying  notes  are  an
                                                 integral  part of the financial
                                                 statements.




                                                                

<PAGE>


<TABLE>
<CAPTION>


                                                 DEVELOPMENT BANCORP, LTD.

                                           CONSOLIDATED STATEMENT OF CASH FLOWS

                                      For the Years Ended December 31, 1996 and 1995


                                                                                       1996                 1995
Cash flows from operating activities:
<S>                                                                              <C>                  <C>     
    Net loss                                                                     $(    523,798)       $(  450,242)
    Adjustments to reconcile net loss to net
        cash provided by (used in) operating activities:
           Depreciation and amortization                                                  20,990             22,064
           Common stock issued for services                                             204,000            121,000
           Non-cash gain on sale of investment                                                -        (       9,572)
           Unrealized (gain) loss on marketable securities                                     946     (     62,868)
           Foreign currency transaction (gain) loss                                     204,325            106,032
           Loss from discontinued operations                                            582,457                  -
        (Increase) decrease in assets:
           Commissions receivable                                                       170,632        (   200,067)
           Other receivables                                                      (       90,852)      (     32,195)
           Marketable securities                                                        395,065        (   632,107)
           Other current assets                                                           80,189       (     59,305)
        Increase (decrease) in liabilities:
           Checks drawn in excess of available funds                                    196,826                  -
           Accounts payable                                                       (     368,216)           327,972
           Accrued liabilities                                                    (       13,953)          350,011

               Net cash provided by (used in) operating activities                       858,611       (   519,277)

Cash flows from investing activities:
     Increase in loan and contract receivable - related party                     (   1,061,568)                 -
    Purchase of investments                                                       (   7,348,293)                 -
    Increase in intangible assets                                                              -       (     52,482)
    Purchase of property and equipment                                            (        46,619)     (     41,962)

               Net cash used in investing activities                              (   8,456,480)       (     94,444)

Cash flows from financing activities:
    Repayment of notes payable - related parties                                  (        76,544)     (   112,094)
    Repayment of long-term debt                                                   (        27,553)     (       5,101)
    Repayment of long-term debt - related party                                                -       (       5,000)
    Proceeds from issuance of common stock                                            6,466,500            270,000

               Net cash provided by financing activities                              6,362,403            147,805

Effect of exchange rate changes on cash                                           (      248,722)          258,797

Decrease in cash and equivalents                                                  (   1,484,188)       (   207,119)

Cash and equivalents - beginning of year                                               1,518,327        1,725,446

Cash and equivalents - end of year                                               $        34,139      $1,518,327



</TABLE>


                                                            

<PAGE>



                                          Theaccompanying  notes are an integral
                                             part of the financial statements.
<TABLE>
<CAPTION>

                                                 DEVELOPMENT BANCORP, LTD.

                                           CONSOLIDATED STATEMENT OF CASH FLOWS

                                      For the Years Ended December 31, 1996 and 1995



                                                                                      1996                 1995

<S>                                                                              <C>                      <C>  
Supplemental disclosure of cash flow information:

    Cash paid during the year for interest                                       $      6,619         $     11,057
</TABLE>

Supplemental schedule of non-cash investing and financing activities:

    During 1996:
        The Company  issued $14,413 of long-term debt in exchange for $14,413 of
property and equipment.

        The Company recorded $132,774 of non-cash foreign currency exchange gain
on marketable securities.

        The Company  issued  477,517 shares of its common stock as a dividend to
shareholders valued at $1,790,689.

        The Company  rescinded its  acquisition  of KSM. In connection  with the
        rescission,  the  Company  received  a  contract  receivable  valued  at
        $250,000 and redeemed  110,000  shares of its preferred  stock valued at
        $165,000 in exchange for returning  $95,661 of KSM net assets,  the 1996
        write-off of $622,861 of KSM advances and $278,935 of intangible assets,
        resulting in a $582,457 loss on disposal of the business (Note 20).

    During 1995:

        The  Company  redeemed  175,000  shares of its  common  stock  valued at
        $800,000 in the sale of oil and gas investments valued at $790,428 (Note
        4).

        In connection  with the  acquisition  of KSM, the Company issued 110,000
        shares of  preferred  stock  valued at $165,000 in exchange for assuming
        various liabilities and various non-cash assets (Note 19).

















                                          Theaccompanying  notes are an integral
                                             part of the financial statements.


                                                            F-6

<PAGE>




                              DEVELOPMENT BANCORP, LTD.

                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies

                  Nature of Organization:

                      Development Bancorp, Ltd. ("Development" or "the Company")
 is a holding company
                      organized in the state of Washington for the purpose of 
providing international investment
                      banking services through its majority-owned subsidiaries: 
 Development Corp Services Limited
                      (Ireland - 99.93% owned), SFD Societe Financiere De 
 Distribution Geneve SA (Switzerland -
                       99.3% owned), and KSM Holding Corporation ("KSM") (United
                      States - 99.93%  owned) for the period from  November  14,
                      1995 to November 1, 1996 (Notes 19 and 20).  KSM owns 100%
                      of Global Financial Group ("Global") (United States).

                  Basis of Presentation:

                      For the year ended  December  31, 1996,  the  consolidated
                      financial  statements  include the accounts of Development
                      Bancorp,   Ltd.   and   its   wholly-owned   subsidiaries,
                      Development   Corp   Services   Limited  and  SFD  Societe
                      Financiere  De  Distribution  Geneve SA,  and KSM  Holding
                      Corporation  for  the  period  from  January  1,  1996  to
                      November  1, 1996 (Note 20).  For the year ended  December
                      31, 1995, the consolidated  financial  statements  include
                      the  accounts  of  Development   Bancorp,   Ltd.  and  its
                      wholly-owned   subsidiaries,   Development  Corp  Services
                      Limited, SFD Societe Financiere De Distribution Geneve SA,
                      and  KSM   Holding   Corporation   for  the  period   from
                      acquisition (November 14, 1995) to December 31, 1995 (Note
                      19).

                      All  references  to  "the  Company"  in  these   financial
                      statements   relate  to  the  consolidated   entity.   All
                      significant  intercompany  accounts and  transactions  are
                      eliminated in consolidation.

                  Cash and Equivalents:

                      Cash  equivalents  include all highly  liquid  investments
                      purchased with a maturity of three months or less.

                  Marketable Securities:

                      Marketable  securities  consist of various equity and debt
                      securities  and are stated at current  market  value.  All
                      equity securities are considered  "trading" securities and
                      all debt  securities are  considered  "available for sale"
                      under the provisions of Statement of Financial  Accounting
                      Standards No. 115,  Accounting and Certain  Investments in
                      Debt  and  Equity  Securities  (SFAS  115).   Accordingly,
                      unrealized  gains  and  losses on  equity  securities  are
                      reflected in operations,  and unrealized  gains and losses
                      on debt securities are credited or charged to "translation
                      adjustment" on the accompanying balance sheet.

                      Market value is  determined  by the quoted market price as
                      of the balance  sheet date.  Net realized  gains or losses
                      are determined on the specific identification cost method.



                                                 DEVELOPMENT BANCORP, LTD.

                                        NOTES TO CONSOLIDATED FINANCIAL 
STATEMENTS


                                                            F-7

<PAGE>



                                 For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies (Continued)

                  Investments:

                      Investments  consist of various equity ownership interests
                      in    privately-held    corporations   or    partnerships.
                      Investments  are stated at cost,  as adjusted  for foreign
                      currency translation gains or losses, if any.

                  Property and Equipment:

                      Property and equipment is stated at cost.  Depreciation is
                      computed using  straight-line and accelerated methods over
                      the  estimated  five to  seven  year  useful  lives of the
                      assets.

                      Expenditures    for   additions   and   improvements   are
                      capitalized, while repairs and maintenance are expensed as
                      incurred.

                  Intangible Assets:

                      Intangible  assets  consist of the costs of  broker/dealer
                      network development and related customer lists acquired in
                      the acquisition of KSM Holding  Corporation.  These assets
                      are being  amortized  on a  straight-line  basis over five
                      years.

                  Income Taxes:

                      Income   taxes  are   provided  for  the  tax  effects  of
                      transactions  reported  in the  financial  statements  and
                      consist of taxes  currently  due plus deferred  taxes,  if
                      any.  Deferred  taxes  represent  the net tax  effects  of
                      temporary  differences  between  the  carrying  amounts of
                      assets and  liabilities for financial  reporting  purposes
                      and the amounts used for income tax purposes.

                  Net Loss Per Share:

                      Loss per share is calculated based on the weighted average
                      number  of  common  shares  outstanding  as the  effect of
                      including common stock equivalents would be anti-dilutive.

                  Financial Instruments:

                      The  carrying  amounts of  financial  instruments  such as
                      cash,   commissions  and  other  receivables,   marketable
                      securities,  and short-term liabilities approximated their
                      fair value based upon the  short-term  maturities of these
                      instruments.












                                                        8

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies (Continued)

                  Concentrations of Credit Risk:

                      Financial instruments that potentially subject the Company
                      to  concentration  of credit risk consist  principally  of
                      cash,  commissions  receivable,   and  the  Company's  and
                      customers' margin transactions.

                      Cash

                         The Company  maintains  cash in bank  deposit  accounts
                         which, at times, may exceed federally insured limits or
                         are in foreign banks.  The Company  believes it has its
                         cash  deposits at high quality  financial  institutions
                         and that no significant credit risk exists with respect
                         to these deposits.

                      Commissions Receivable

                         Commissions  receivable  arise from the introduction of
                         customers'   security   trades  to  the  Company's  two
                         carrying  brokers  who collect and remit to the Company
                         their allocable share of the  commissions  earned.  The
                         Company  believes its carrying  brokers are financially
                         stable  entities and no significant  credit risk exists
                         with respect to these receivables.

                      Company's Margin Transactions

                         In  the  normal   course  of  business,   Global  sells
                         securities not yet purchased  (short sales) for its own
                         account.  The  establishment of short positions exposes
                         Global to  off-balance  sheet  market risk in the event
                         prices increase,  as Global may be obligated to acquire
                         the securities at prevailing market prices.

                      Customers' Margin Transactions

                         The  activities of Company  customers are transacted on
                         either a cash or margin basis through the facilities of
                         its  clearing  broker.  In  margin  transactions,   the
                         clearing   broker  extends  credit  to  the  customers,
                         subject to various regulatory and margin  requirements,
                         collateralized by cash and securities in the customer's
                         account.  In  connection  with  these  activities,  the
                         clearing    broker   executes   and   clears   customer
                         transactions  involving the sale of securities  not yet
                         purchased ("short sales").

                         These   transactions   may   expose   the   Company  to
                         significant  of off- balance sheet risk in the event
                         margin
                         requirements  are not  sufficient to fully cover losses
                         which  the  customers  may  incur.  In  the  event  the
                         customers  fail to  satisfy  their  obligations  to the
                         clearing  broker,   the  Company  may  be  required  to
                         compensate the clearing  broker for losses  incurred on
                         behalf of its customers.







                                                        F-9

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 1:           Organization and Significant Accounting Policies (Continued)

                  Concentrations of Credit Risk (continued):

                      Customers' Margin Transactions (continued)

                         The  Company,  through its clearing  brokers,  seeks to
                         control  the  risk   associated   with  its  customers'
                         activities  by requiring  customers to maintain  margin
                         collateral in compliance  with various  regulatory  and
                         internal  guidelines.   The  clearing  brokers  monitor
                         required  margin  levels  daily and,  pursuant  to such
                         guidelines, requires the customer to deposit additional
                         collateral, or reduce positions, when necessary.

                  Newly-Issued Accounting Standards:

                      In 1996, the company adopted 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 No. 121") which was issued in March 
                         1995

                      This statement requires that long-lived assets and certain
                      intangibles be reviewed for impairment  whenever events or
                      changes in circumstances  indicate that the carrying value
                      of an  asset  may not be  recoverable.  In  adopting  this
                      standard,  the Company is required to estimate  the future
                      cash flows  expected  to result  from the use of the asset
                      and its eventual  disposition.  If the sum of the expected
                      future  cash  flows  (undiscounted  and  without  interest
                      charges) is less than the carrying amount of the asset, an
                      impairment loss would be recognized.

                      The adoption of SFAS No. 121 did not result in an 
                         impairment loss in 1996.

                  Use of Estimates:

                      The preparation of financial statements in conformity with
                      generally   accepted   accounting    principles   requires
                      management to make certain estimates and assumptions about
                      the  future  outcome  of  current  transactions  which may
                      affect the reporting and disclosure of these transactions.
                      Accordingly,   actual  results  could  differ  from  those
                      estimates  used  in the  preparation  of  these  financial
                      statements.

                  Reclassifications:

                      Certain  reclassifications  have  been  made  in the  1995
                      financial   statements  in  order  to  conform  with  1996
                      financial statement presentation.  These reclassifications
                      have no  effect on  accumulated  deficit  or net loss,  as
                      originally reported.







                                                       F-10

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 2:           Marketable Securities

                  Marketable  securities  consisted of the following at December
31:
<TABLE>
<CAPTION>

                                                                                                    Estimated
                  1996                                                                                Market
                                                                                      Cost             Value

<S>                                                                              <C>               <C>        
                     Equity securities                                           $   257,796       $   259,949
                     Debt securities                                                  403,994           401,117

                                                                                 $   661,790       $   661,066

                                                                                                    Estimated
                  1995                                                                                Market
                                                                                      Cost             Value

                     Equity securities                                           $1,155,803        $1,170,108
                     Debt securities                                                  400,000           402,500

                                                                                 $1,555,803        $1,572,608
</TABLE>

                  Unrealized  gain (loss)  included in marketable  securities at
                  December   31,   1996  and  1995  was  $(724)   and   $16,805,
                  respectively.

                  At December 31, 1996,  the maturities of debt  securities,  at
                  estimated market value,  which are classified as available for
                  sale are as follows:
<TABLE>
<CAPTION>

<S>                                                                              <C>        
                           Within one year                                       $         -
                           One - five years                                           401,117

                                                                                 $   401,117
</TABLE>

Note 3:           Loan Receivable - Related Party

                  Loan  receivable  -  related  party  consisted  of a  $303,098
                  advance  to a  corporation  related  to the  Company by common
                  management  and  control.  The loan is  non-interest  bearing,
                  unsecured and due upon demand.






                                                       F-11

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 For the Years Ended December 31, 1996 and 1995

Note 4:           Investments
                  Investments consisted of the following at December 31:
<TABLE>
<CAPTION>

                                                                                      1996              1995
<S>                                                                               <C>              <C>
                  7,345 common shares of Societe Financiere Privee               
                      (Switzerland)                                              $ 4,148,293       $         -
                  4,650,000 redeemable preferred shares of
                      Gestion Guychar, Inc.                                         3,132,012                 -
                  Investment in Gestion Pemp Network (Canada)                          621,566          624,069
                  120,000 shares of Gestion Pemp, Inc. (Canada)                        263,252          264,312

                  Total investments                                              $ 8,165,123       $   888,381

                  Societe Financiere Privee:
</TABLE>

                      The company owns 7,345 common shares of Societe Financiere
                      Privee, representing an approximate 3% ownership interest.

                  Gestion Guychar, Inc.:

                      The company owns 4,650,000  redeemable preferred shares of
                      Gestion   Guychar,   Inc.  These  shares  are  non-voting,
                      non-participating  and  non-transferable.  They  are to be
                      redeemed at a price of one Canadian  dollar per share plus
                      annual  commutative  dividends  payable on October  1st of
                      each  year  at  various  rates  ranging  from  3.5%  to 4%
                      according to the following schedule:
                                                                       Shares To
                                                                     Be Redeemed

                                    October 1, 2001                    1,250,000
                                    October 1, 2002                    1,300,000
                                    October 1, 2003                    2,100,000

                                                                       4,650,000
                  Gestion Pemp Network:

                      The company  owns an interest in Gestion Pemp  Network,  a
                      multi-level  marketing  system  of Pemp,  Inc.,  a related
                      Canadian  corporation.  The $2,503 and $74,506  decline in
                      value experienced in 1996 and 1995, respectively,  was due
                      to  foreign   currency   exchange  rate   declines   which
                      management  considers to be  temporary.  During 1995,  the
                      company   received   $35,017  in  commissions   from  this
                      investment.

                  Gestion Pemp, Inc.:
                      The company owns 120,000  common  shares of Gestion  Pemp,
                      Inc., representing an approximate 8% ownership interest.

                                                       F-12

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  For the Years Ended December 31, 1996 and 1995
Note 4:           Investments (Continued)
                  Investment in oil and gas leaseholds:

                      In 1995,  the Company sold its interest in the oil and gas
                      leaseholds  for a redemption of 150,000  shares of Company
                      common stock valued at $800,000.

Note 5:           Contract Receivable - Related Party
         Contract receivable - related party  consisted of a contract  valued at
                  $250,000 which was received in the KSM  rescission  (Note 20).
                  The contract  bears  interest at 8%, is  unsecured  and due in
                  November 2001.

Note 6:           Property and Equipment

                  Property and equipment  consisted of the following at December
31:
<TABLE>
<CAPTION>
                                                                                     1996             1995
<S>                                                                              <C>             <C>       
                  Furniture and equipment                                        $   38,978      $  178,710
                  Leasehold improvements                                                9,796          13,176
                                                                                      48,774         191,886

                  Less accumulated depreciation                                   (     9,945)    (    52,567)

                  Property and equipment, net                                    $    38,829     $  139,319
</TABLE>

                  Depreciation expense aggregated $20,990 in 1996 and $17,334 in
1995.

                  On November  1, 1996,  the  company  disposed of property  and
                  equipment  with an aggregate book value of $140,532 as part of
                  the KSM rescission (Note 20).

Note 7:           Intangible Assets

                  Intangible   assets  arose  in  the  acquisition  of  KSM  and
                  consisted of the following at December 31, 1995 (Note 19):
<TABLE>
<CAPTION>

<S>                                                                                              <C>       
                  Broker/dealer network development                                              $  233,665
                  Customer lists                                                                       50,000
                                                                                                       283,665
                  Less accumulated amortization                                                   (      4,730)

                  Intangible assets, net                                                         $  278,935

</TABLE>
                  Amortization expense was $4,730 in 1995.

                  On November 1, 1996, the Company  rescinded its acquisition of
                  KSM and  accordingly  the  remaining  $278,935  of  intangible
                  assets  were  written-off  as part of the  rescission  in 1996
                  (Note 20).


                                                       F-13

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 8:           Note Payable - Bank

                  The Company had a $100,000 bank line of credit  available,  of
                  which  $50,000 was  outstanding  as of  December  31, 1995 and
                  continuing  through  November 1, 1996.  Interest  accrues at a
                  variable  rate (10.0% as of  November 1, 1996).  This debt was
                  assumed by KSM as part of the  rescission  on November 1, 1996
                  (Note 20).

Note 9:           Notes Payable - Related Parties

                  At December 31, 1995, the Company had notes payable to related
parties as follows:
<TABLE>
<CAPTION>

<S>                                                                                             <C>    
                  Note payable - officer/shareholder bearing
                  interest at 15%.  The note is unsecured and
                  matures August 1996.                                                           $  108,000

                  Note  payable -  affiliated  company  related  through  common
                  control,  bearing  interest at 10%.  The note was created when
                  the  affiliate  transferred  ownership  of certain  marketable
                  securities  to the  Company  and is  repaid  by  returning  an
                  equivalent  number of the same  marketable  securities  to the
                  affiliated  company upon demand. As a result, the note payable
                  principal  fluctuates with the market price of the securities.
                  The note is personally guaranteed
                  by an officer/shareholder of the Company.                                          196,875

                  Notes payable - related parties                                                $  304,875
</TABLE>

                  These notes, aggregating $228,331 as of November 1, 1996, were
                  assumed by KSM as part of the KSM rescission (Note 20).

Note 10:          Long-Term Debt

                  Long-term  debt  consisted  of the  following  at December 31,
1995:
<TABLE>
<CAPTION>

<S>                                                                                             <C>
                  Note payable - investment broker bearing
                  interest at 9%.  The note matures in January
                  1997 and is secured by furniture and equipment.                                $    12,091

                  Note payable - equipment bearing interest at
                  13.5%.  The note matures in March 1997 and
                  is secured by equipment.                                                            21,560
                                                                                                      33,651
                  Less current portion                                                              (    26,881)

                  Long-term debt                                                                 $      6,770
</TABLE>

                  Long-term debt aggregating $20,510 as of November 1, 1996, was
                  assumed by KSM as part of the KSM rescission (Note 20).

                                                       F-14

<PAGE>








                                                 DEVELOPMENT BANCORP, LTD.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995



Note 11:          Long-Term Debt - Related Party

                  As of December  31, 1995 and  continuing  through  November 1,
                  1996,  the Company had a $35,000 note payable to an officer of
                  the  Company.  The  unsecured  note bears  interest  at 10.5%,
                  payable monthly,  with principal due upon maturity in November
                  1999.

                  This note was assumed by KSM as part of the KSM  rescission on
November 1, 1996 (Note 20).

Note 12:          Commitments and Contingencies

                  Bank line of credit:

                      At December  31, 1996,  the company had a 1,950,000  Swiss
                      Franc   line  of  credit   available   at  a  Swiss   bank
                      (approximately  $1,450,000 as of December 31, 1996). As of
                      December 31, 1996, there were no amounts outstanding under
                      the line of credit.

                  Development Stock Option Plan:

                      At December 31 1996,  and 1995,  an  aggregate  of 800,000
                      shares of common stock were  reserved  for issuance  under
                      the  Company's  1993 stock  option  plan.  Pursuant to the
                      plan,   the  board  of  directors  may  grant  options  to
                      employees,   officers,   directors   or  others  at  their
                      discretion.  As of December 31, 1996 and 1995,  no options
                      had been granted under the plan.

                  Other Development Stock Options:

                      As of December 31, 1996 and 1995,  an aggregate of 233,334
                      shares of common stock were  reserved  for  issuance  upon
                      exercise of  non-qualified  stock options  outstanding  to
                      purchase an  aggregate  of 233,334  shares of common stock
                      (of which  194,834 were to Company  officers) at $2.50 per
                      share.  The options  expire in April 2004.  These  options
                      were not issued  under the  Company's  1993  stock  option
                      plan.

                  Operating Leases:

                      The  Company  leases its  corporate  offices  and  certain
                      equipment under noncancellable operating leases.

                      Future minimum lease payments are as follows for the years
ended December 31:
<TABLE>
<CAPTION>

<S>                                                                               <C>         
                           1997                                                  $     63,037
                           1998                                                         53,197
                           1999                                                           4,478

                                                                                 $   120,712
</TABLE>

                      Rent  expense  in 1996 and  1995  aggregated  $89,495  and
$58,837, respectively.

                                                       F-15

<PAGE>





                                                       F-16

<PAGE>



                                                 DEVELOPMENT BANCORP, LTD.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 13:          Preferred Stock

                  The Company has authorized an aggregate of 1,000,000 shares of
no par preferred stock as follows:

                  Class A Preferred Stock:

                      The Company has  designated  1,000  shares of no par value
                      Class A  preferred  stock.  Class A  shareholders  are not
                      entitled to receive  dividends.  At December  31, 1996 and
                      1995,  there were 1,000 shares of Class A preferred  stock
                      issued and outstanding.

                  Class B Convertible Preferred Stock:

                      The Company has designated  110,000 shares of no par value
                      convertible Class B preferred stock.  Class B shareholders
                      are entitled to receive  dividends in a manner  similar to
                      common   shareholders   when  declared  by  the  board  of
                      directors.  Each  Class B share  is  convertible  into one
                      share of common stock,  at the option of the  shareholder,
                      provided  that the market price for the  Company's  common
                      stock is at or above $4.50 per share.

                      In 1995,  the  Company  issued  110,000  shares of Class B
                      preferred stock in the acquisition of KSM (Note 19). These
                      shares were redeemed in 1996 as part of the KSM rescission
                      (Note 20).

Note 14:          Common Stock Dividend

                  On November 1, 1996, The Company declared a one-for-six  share
                  common  stock  dividend  to the  shareholders  of record.  All
                  references  in the  accompanying  financial  statements to the
                  number  of  common  shares  and  per-share  amounts  have been
                  retroactively  restated to reflect the issuance of the 477,517
                  share common stock dividend for both years presented.

Note 15:          Related Party Transactions

                  During 1996, the Company provided  consulting  services to two
                  corporations  affiliated  through common  control.  Total fees
                  received  aggregated  $64,509 and are  included in  consulting
                  fees related party.

Note 16:          Foreign Currency Transaction Gain (Loss)

                  Foreign  currency  transaction  gains or losses  result from a
                  change in exchange  rates between the  functional  currency of
                  the Company or its  subsidiaries  and the  currency in which a
                  foreign transaction is denominated.  These gains or losses are
                  comprised of actual  currency  gains or losses  realized  upon
                  settlement  of  foreign  currency  transactions  and  expected
                  (unrealized)  currency  gains or losses on  unsettled  foreign
                  currency transactions.

                  For 1996 and  1995,  the  foreign  currency  transaction  gain
                  (loss) was $159,990 and $(323,597), respectively.



                                                       F-17

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 For the Years Ended December 31, 1996 and 1995



Note 17:          Income Taxes

                  The  effective  tax  rate  varies  from  the  maximum  federal
                  statutory rate as a result of the following items:
<TABLE>
<CAPTION>

                                                                                    1996             1995
<S>                                                                              <C>             <C> 
                 Tax benefit computed at the
                      maximum federal statutory rate                             (     34.0)%     (     34.0)%

                  Foreign income exclusion                                               2.9            30.5
                  Net (increase) decrease  due to various
                      temporary and permanent differences                        (      2.0)      (     13.6)

                  Net operating loss carryforward                                      33.1              17.1

                  Income tax provision                                                   -    %           -    %

                  Deferred taxes consisted of the following at December 31:

                                                                                    1996             1995
                  Asset:
                      Net operating loss carryforward                           $  76,500        $  47,000
                      Other                                                      (       500)     (    7,000)
                  Net deferred tax asset before
                      valuation allowance                                           76,000           40,000
                  Less valuation allowance                                       (  76,000)       (  40,000)

                  Net deferred tax asset                                        $       -        $        -
</TABLE>

                  For  financial  statement  purposes,  no tax  benefit has been
                  reported in 1996 or 1995 as the  Company  has had  significant
                  losses in recent years and  realization of the tax benefits is
                  uncertain.   Accordingly,   a  valuation  allowance  has  been
                  established for the full amount of the deferred tax asset.

                  At December  31,  1996,  the Company  had net  operating  loss
                  carryforwards  aggregating  approximately  $510,500 for income
                  tax purposes that expire in 2011.

                  The  utilization  of the net operating loss  carryforwards  is
                  dependent   upon  the  ability  of  the  Company  to  generate
                  sufficient  taxable income during the carryforward  period. In
                  addition, utilization of these carryforwards is limited due to
                  ownership changes as defined in the Internal Revenue Code.



                                                       F-18

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  For the Years Ended December 31, 1996 and 1995



Note 18:          Industry and Geographical Segment Reporting

                  The Company  operated and had assets in the United  States and
Europe as follows:
<TABLE>
<CAPTION>

                                                                                    1996              1995
                  Revenues:
<S>                                                                              <C>               <C>         
                      United States                                              $  103,243        $     35,017
                      Europe                                                               -                4,935

                             Total revenues                                      $  103,243        $    39,952

                  Loss From Operations:
                      United States                                              $( 946,991)       $(  482,152)
                      Europe                                                       (   36,807)              8,224

                             Total loss from operations                          $( 983,798)       $   473,928

                  Identifiable Assets:
                      United States                                              $4,369,417        $2,121,811
                      Europe                                                       5,107,093         2,735,649

                             Total identifiable assets                           $9,476,510        $4,857,460
</TABLE>

Note 19:          KSM Holding Company Acquisition

                  On November 14,  1995,  the Company  exchanged  110,000 of its
                  convertible  preferred  stock for all 3,617,143  shares of KSM
                  common  stock  issued and  outstanding  (not  including  2,400
                  shares of preferred stock outstanding).  The exchange resulted
                  in KSM becoming a 99.93% owned subsidiary of the Company.

                  The  total KSM  purchase  price was  $217,482,  consisting  of
                  110,000 shares of Company  convertible  preferred stock valued
                  at $165,000 and acquisition costs totaling $52,482.  The $1.50
                  price  per  share  used  to  value  the  preferred  stock  was
                  determined based upon the market value of an equivalent number
                  of shares of common stock due to the conversion  rights less a
                  discount to factor in the  reduction  in value  stemming  from
                  restrictions  in  conversion  and the size of the newly issued
                  block.

                  The Company  accounted for the acquisition  under the purchase
                  method whereby the assets and  liabilities of KSM are recorded
                  at their net book value,  which approximated fair market value
                  as of the date of acquisition as estimated by management.

                                                       F-19

<PAGE>




                                                 DEVELOPMENT BANCORP, LTD.

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                For the Years Ended December 31, 1996 and 1995


Note 19:          KSM Holding Company Acquisition (Continued)

                  The following items represent the net tangible assets acquired
                  and liabilities assumed:
<TABLE>
<CAPTION>

<S>                                                                              <C>         
                           Commissions receivable                                $     44,807
                           Other receivables                                            53,236
                           Marketable securities                                      392,633
                           Other current assets                                         51,983
                           Net property and equipment                                 114,691
                           Note payable - bank                                    (     50,000)
                           Notes payable - related parties                        (   416,969)
                           Accounts payable                                       (   143,803)
                           Accrued liabilities                                    (     34,009)
                           Long-term debt                                         (     38,752)
                           Long-term debt - related parties                       (     40,000)

                                    Net assets (liabilities)                     $(    66,183)
</TABLE>

                  The $283,665 excess purchase price of the fair market value of
                  tangible assets and  liabilities  acquired has been identified
                  as  broker/dealer   network  development  and  customer  lists
                  acquired and is being amortized over a five-year period.

                  Summarized  below is the  unaudited  condensed  and  pro-forma
                  consolidated statement of operations as if the KSM acquisition
                  had taken place at the  beginning  of the year ended  December
                  31, 1995.
<TABLE>
<CAPTION>

                                                                1995 Pro-forma Consolidated


                                                                   Statement of Operations (Unaudited)
                                                                                                            Pro-forma
                                                  Development        KSM Holding            Pro-forma     Development
                                                  Bancorp, Ltd.        Corporation      Consolidating     Bancorp, Ltd.
                                                  Consolidated     Consolidated (1)        Entries (2)    Consolidated
<S>                                               <C>                 <C>                  <C>            <C>         
                  Revenues                        $      656,482      $  1,571,490         $      -       $  2,227,972
                  General & administrative         (   1,186,400)      (  1,831,532)        (  52,003)     (  3,069,935)
                          Loss from operations     (      529,918)     (     260,042)       (   52,003)    (     841,963)
                  Other income (expense)                    79,676     (       37,342)              -             42,334
                          Net loss                $(     450,242)     $(    297,384)       $(  52,003)    $(    799,629)
                  Net loss per share              $(             .41)                                     $(        .73)
                  Weighted average number
                     of shares outstanding             1,095,606                                              1,095,606
</TABLE>

                  (1)      Represents  KSM  Holding   Corporation   consolidated
                           unaudited  activity  for the period  from  January 1,
                           1995 to November 14, 1995 (date of acquisition).

                                                          F-20

<PAGE>



                  (2)      Represents  adjustment to  amortization of intangible
                           assets  acquired  in  the  KSM  Holding   Corporation
                           acquisition  for the period  from  January 1, 1995 to
                           November 14, 1995 (date of acquisition).
                                                    DEVELOPMENT BANCORP, LTD.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  For the Years Ended December 31, 1996 and 1995



Note 20:          Loss from Discontinued operations

                  Loss from discontinued  operations  consisted of the following
at December 31:
<TABLE>
<CAPTION>

                                                                                     1996             1995

<S>                                                                             <C>              <C>       
                  Loss from disposal of business                                $(582,457)       $        -
                  Income (loss) from discontinued operations                       62,200      (   326,087)

                  Total loss from discontinued operations                       $(520,259)       $( 326,087)
</TABLE>

                  Loss from Disposal of Business:

                      In November 1996, the Company rescinded its acquisition of
                      KSM (Note 19).  The terms of the  rescission  specify that
                      all  110,000  shares of Company  Class B  preferred  stock
                      valued  at  $165,000  be  returned  to  the  Company,  and
                      $1,032,861  of Company  advances to KSM  ($160,000  of the
                      advances were expensed by the Company in 1995 and $250,000
                      is included in the $278,935  intangible  asset  valuation)
                      were to be recorded as a contract  receivable from KSM, in
                      exchange  for  return of $95,661 of KSM net assets and the
                      write-off of $278,935 of  intangible  assets.  At December
                      31, 1996,  the Company  valued the contract  receivable at
                      $250,000 (Note 5). Accordingly,  this valuation adjustment
                      resulted in an  additional  loss of $622,861 in 1996.  The
                      rescission  resulted  in an  aggregate  $582,457  loss  on
                      disposal of business.

                  Income (loss) from discontinued operations:

                      Summarized  results  of  discontinued  operations  were as
follows for years ended December 31:

<TABLE>
<CAPTION>

                                                                                     1996            1995

<S>                                                                             <C>              <C>       
                           Revenues                                             $2,577,079       $  616,530
                           General and administrative Expenses                  ( 2,597,967)     (   883,019)
                           Other income (expense)                            83,088     (     59,598)

                           Income (loss) from discontinued operations  $    62,200      $( 326,087)

</TABLE>