SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

[X]   Annual Report under Section 13 or 15 (d) of the Securities Exchange Act of
      1934

                   For the fiscal year ended December 31, 1997

[ ]   Transition  Report under Section 13 or 15 (d) of the  Securities  Exchange
      Act of 1934

For the transition period from  _______________  to _________________

Commission file number  0-23054

                      HOSPITALITY WORLDWIDE SERVICES, INC.
             (Exact name of registrant as specified in its charter)

            New York                                         11-3096379
 State or other jurisdiction of                             (IRS Employer
 incorporation or organization                           Identification No.)

    450 PARK AVENUE, SUITE 2603, NEW YORK, NY                   10022
    (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code          212-223-0699

  Securities registered under Section 12(b)
  of the Exchange Act:                                    Common Stock, par
                                                        value $.0l per share

  Name of Exchange on which registered:                American Stock Exchange

  Securities registered under Section 12(g)
  of the Exchange Act:                                          NONE

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

                                [ X ] YES [   ] NO

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

      The aggregate  market value of the Common Stock,  $.0l par value per share
(the "Common Stock"),  held by  non-affiliates of the Registrant as of March 27,
1998 (based upon the last sale price for the Common Stock on the American  Stock
Exchange) was approximately $100,600,000.

      The number of shares of Common Stock  outstanding as of March 27, 1998 was
11,868,022.


DOCUMENTS  INCORPORATED  BY  REFERENCE  Certain  portions  of  the  Registrant's
definitive proxy statement to be filed not later than April 30, 1998 pursuant to
Regulation 14A are  incorporated by reference in Items 10 through 13 of Part III
of this Annual Report on Form 10-K.


                                       1
<PAGE>

                SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
                  THE SECURITIES LITIGATION REFORM ACT OF 1995


            Except for  historical  information  contained  herein,  this Annual
Report on Form 10-K contains  forward-looking  statements  within the meaning of
the Private Securities Litigation Reform Act of 1995 which involve certain risks
and  uncertainties.   The  Company's  actual  results  or  outcomes  may  differ
materially from those  anticipated.  Important factors that the Company believes
might  cause  such  differences  are  discussed  in  the  cautionary  statements
accompanying the forward-looking  statements in this Annual Report on Form 10-K.
In assessing  forward-looking  statements contained herein, readers are urged to
carefully  read those  statements.  When used in the Annual Report on Form 10-K,
the words "estimate," "anticipate," "expect," "believe," and similar expressions
are intended to identify forward-looking statements.



                                     PART I



Item 1.     Description of Business

General

      Hospitality  Worldwide Services,  Inc. (the "Company"),  formerly known as
Light Savers U.S.A., Inc., was formed under the laws of the State of New York in
October  1991.  In January  1994,  the  Company  consummated  an initial  public
offering of its common  stock.  At such time,  the Company's  principal  line of
business was to design and market decorative, energy efficient lighting fixtures
for the hotel and hospitality industry. The Company's primary marketing tool was
the  utilization  of  Con  Edison's   Applepower  Rebate  Program  (the  "Rebate
Program"),  under which Con Edison offered  rebates to those who utilized energy
saving devices,  such as the Company's  lighting  fixtures.  In 1994, Con Edison
substantially reduced the Con Edison Rebate Program, making it less advantageous
for the Company to use the Rebate Program as a marketing tool. As a result,  the
Company's revenues were substantially reduced.

      In August 1995, the Company acquired  substantially  all of the assets and
business and assumed certain liabilities of AGF Interior Services Co., a Florida
Corporation  ("AGF"),  a company  that,  through  its  wholly-owned  subsidiary,
Hospitality  Restoration  &  Builders,  Inc.,  a New  York  Corporation  ("HRB")
provided renovation services to the hospitality  industry. In December 1995, the
Company's  Board of  Directors,  in response to Con Edison's  decision to reduce
substantially  the Con  Edison  Rebate  Program,  determined  to  dispose of the
Company's  lighting business and concentrate the Company's efforts on renovation
services.  In February  1996,  the Company,  AGF, Tova  Schwartz,  the Company's
former President and Chief Executive Officer,  and certain other parties thereto
entered  into  a  Divestiture,  Settlement  and  Reorganization  Agreement  (the
"Divestiture  Agreement") pursuant to which, among other things, (i) the Company
sold its lighting business to Tova Schwartz; (ii) Ms. Schwartz resigned from her
positions  as a director  and  officer of both the  Company  and HRB;  (iii) the
Company  repurchased  500,000  shares  of  Common  Stock,  $.01 par value of the
Company (the "Common  Stock") from Ms.  Schwartz for $250,000 (which shares were
subsequently  sold by the  Company in a private  placement  offering);  (iv) Ms.
Schwartz  granted to the Company an option to purchase an  additional  1,000,000
shares  of Common  Stock  (all of which  were  subsequently  repurchased  by the
Company  and  placed  into  treasury);  and (v) the  Company  agreed  to pay Ms.
Schwartz consulting fees for a period of three years of $100,000 per year.

      In October 1996, the Company  changed its name from Light Savers,  U.S.A.,
Inc., to Hospitality  Worldwide Services,  Inc. The change of the corporate name
is more  indicative  of the  nature  of the  Company's  business  in view of the
significant  change in the  character  and strategic  focus  resulting  from the
acquisition  of AGF and  disposal  of the  Company's  lighting  business.  These
transactions were part of a strategic corporate program to refocus the Company's
business operations into areas with higher growth potential.

                                       2
<PAGE>

      Until  January 1997,  the Company's  only line of business was to provide,
through  HRB, a complete  package of  renovation  resources  to the  hospitality
industry  ranging  from  pre-planning  and scope  preparation  of a  project  to
performing  the renovation  requirements  and delivering  furnished  rooms.  HRB
offers  hospitality  maintenance  services to hotels and hotel chains throughout
the  continental  United  States.  For over 18 years  the  Company's  renovation
division has provided to the hospitality  industry  renovation and  improvements
such as vinyl, paint, wallpaper,  carpet,  installation of new furniture,  light
carpentry,  and masonry work. HRB generally provides its renovation  services in
an on time,  on budget  manner,  while  causing  little or no  disruption to the
ongoing  operation  of a hotel.  HRB has  successfully  responded  to the  hotel
industry's  efforts to increase  occupancy,  room rates and market share through
cosmetic upgrades, which are generally required every four to seven years.

      In January  1997,  the Company  completed the  acquisition  of The Leonard
Parker Company, ("LPC") and its subsidiary,  Parker Reorder Corporation ("Parker
Reorder").  LPC,  founded  in 1969,  is a  leading  purchasing  company  for the
hospitality  industry  which acts as an agent or  principal  for the purchase of
goods and services for its customers  which  include major hotel and  management
companies worldwide.  LPC purchases furniture,  fixtures and equipment,  kitchen
supplies,  linens and uniforms,  guestroom amenities, and other supplies to meet
its customers' requirements for new hotel openings and major renovations. In its
role as purchasing agent, LPC purchases  annually  approximately $250 million of
goods and  services  for its  customers.  Parker  Reorder has  developed  and is
marketing a new proprietary software product, Parker FIRST, which allows clients
to  reorder  operating  supplies  and  equipment  ("OS & E") and other  products
on-line and will provide such  clients  with access to  forecasting  and product
evaluation  capabilities.  Parker Reorder offers hotel properties the ability to
order,  on an as  needed  basis,  any  and  all OS & E  products  used  by  such
properties. The purchase price of LPC, after final adjustments, of approximately
$11,650,000  consisted of 1,250,000  newly issued  shares of Common Stock and $5
million  stated  value of newly  issued 6%  convertible  preferred  stock of the
Company,  convertible,  on a formula basis,  into not less than 1,000,000 and no
more than  4,000,000  shares of Common  Stock (at the present  stock price) from
January 1, 1998 to January 10, 2000. The acquisition has been accounted for as a
purchase  with  the  results  of  LPC  included  in the  consolidated  financial
statements of the Company from the acquisition date.

      In May 1997,  the Company  entered  into a joint  venture  ("Apollo  Joint
Venture")  with Apollo Real Estate  Advisors II, L.P.  ("Apollo")  and Watermark
Limited LLC  ("Watermark"),  an affiliate  of the Company to identify,  acquire,
renovate,  refurbish and sell hotel properties.  The Company will perform all of
the renovation and procurement  services for each of the properties purchased by
the Apollo Joint Venture.  In addition,  the Company will receive a five percent
equity  interest in each of the entities  formed to purchase such  properties in
exchange for its  contribution  of five percent of the total equity  required to
acquire, renovate and sell such properties.  The Apollo Joint Venture intends to
own and operate the properties only for the time necessary to upgrade and market
them for resale. As an inducement to enter into the Joint Venture Agreement, the
Company  issued to Apollo a  seven-year  warrant to purchase  750,000  shares of
Common Stock at $8.115 per share.  The warrant  expires in 2004.  The warrant is
currently  exercisable  as to 350,000  shares and becomes  exercisable as to the
remaining 400,000 shares in increments of 100,000 shares for every $7,500,000 of
incremental revenue earned and to be earned by the Company from the Apollo Joint
Venture.   The  Apollo  Joint   Venture  has  acquired  the  Warwick   Hotel  in
Philadelphia,  Pennsylvania  and has entered  into a letter of intent to acquire
the  Historic  Inn in Richmond,  Virginia.  The Company will fully  renovate and
refurbish these properties  pursuant to a contract with the Apollo Joint Venture
operating  entity,  which is expected to generate  approximately  $18 million of
revenue for the Company in 1998.

      In  November  1997,   the  Company  formed  a  wholly  owned   subsidiary,
Hospitality  Construction Corporation ("HCC"), to manage the renovation projects
under the Apollo  Joint  Venture and other  properties  in which the Company may
acquire an ownership interest. HCC is based in Atlanta, Georgia.

      On January 6, 1998, the Company reached an agreement in principle to enter
into a master  development  agreement with Prime Hospitality Corp.  ("Prime") to
develop 20 hotel  properties over a two-year period under the AmeriSuites  brand
name.  Under  the  proposed  agreement,   the  Company  will  provide


                                       3
<PAGE>

the site  identification,  development,  construction  and  purchasing  services
required for each project and Prime will provide  project  design and management
and franchise  services  once each  property is complete.  The Company and Prime
will each have a 50% interest in the new hotels.  In December  1997, the Company
formed a wholly-owned  subsidiary,  Hospitality Development Services Corporation
("HDS"), to manage the Prime project and any other hotel development projects in
the future. HDS is based in New York, New York.

      On  January 9, 1998,  the  Company  completed  the  acquisition  of Bekins
Distribution  Services,  Inc. ("Bekins"),  a leading provider of transportation,
warehousing  and  installation  services  to a variety of  customers  worldwide.
Founded in 1969, Bekins is a logistical services company that serves clients who
are opening,  renovating  or relocating  facilities by assuring that  materials,
fixtures,  furniture and merchandise are moved from multiple vendor locations to
their ultimate  destinations in a controlled  orderly sequence so that each item
can be  installed on schedule.  The  purchase  price of Bekins of  approximately
$11,000,000  consisted of 514,117  shares of Common Stock and the  assumption of
certain Bekins' debt. The  acquisition  will be accounted for as a purchase with
the results of Bekins included in the consolidated  financial  statements of the
Company from the acquisition date.

      On February 9, 1998, the Company, through its wholly-owned subsidiary, HWS
Real  Estate  Advisory  Group,   Inc.  ("HWS  REAG")  purchased  the  assets  of
Watermark's  real  estate  advisory  business.  Watermark  is  an  international
management  company that is the general partner and manages  Watertone  Holdings
LP, a  shareholder  of the  Company.  The purchase  price for such  business was
$1,500,000  and its  results  will be  included  in the  consolidated  financial
statements of the Company from the acquisition date.

      On March 6, 1998, the Company entered into a joint venture with ING Realty
Partners ("ING Joint Venture"), to acquire the Clarion Quality Hotel in Chicago,
Illinois.  HCC will fully  renovate and refurbish  this  property  pursuant to a
contract with the ING Joint Venture, which is expected to generate approximately
$17 million of revenue for the Company in 1998.

      Financial  information  about the Company's  business  segments appears in
Footnote 16 to the Consolidated  Financial Statements in Part II, Item 8 of this
report.

Sales and Marketing

      The  Company's  sales and  marketing  strategy  is to obtain and  maintain
strategic  alliances  with hotel chains and  franchises and to focus on customer
needs to upscale full service hotels with a global presence.

      The  Company's  sales and  marketing  efforts  are  coordinated  by senior
executives of the Company,  together with  salespersons who contact and maintain
relationships  with  appropriate  hotel  personnel.  Because  of  the  Company's
commitment to service and customer relationships,  the majority of the Company's
business comes from referrals and repeat customers.

Competition

      Servicing the hospitality industry is a highly competitive business,  with
competition  based  largely on price and quality of service.  In its  renovation
business,  the Company  primarily  competes  with small,  closely held or family
owned businesses. In its purchasing and reorder businesses, the Company competes
with other independent  procurement  companies,  hotel purchasing  companies and
food service distribution  companies.  With respect to Parker FIRST, the Company
expects  competition  from  a  number  of  hotel  management  companies,   hotel
companies,   franchise  operators  and  other  entities  who  are  pursuing  the
development  of software  systems  that attempt to provide  on-line  procurement
services.  There is no single  competitor or small number of competitors that is
or are dominant in the Company's business areas.  However, some of the Company's
competitors and potential  competitors possess  substantially greater financial,
personnel, marketing and other resources than the Company.

Regulation

      The Company's renovation business is subject to various federal, state and
local laws and  regulations,  pursuant to which it is required  to,  among other
things,  obtain licenses and general liability  insurance,  workers compensation
insurance  and surety  bonds.  The  Company  believes  that it is  currently  in
compliance

                                       4
<PAGE>

with these laws and regulations in those states in which it currently  operates.
There are a number of states in which the  Company  operates  where a license is
not required.  The Company's renovation business currently operates in 27 states
and has  applications  pending in an  additional  9 states and the  District  of
Columbia.

      The  Company's  procurement  business is subject to  regulation by various
state laws and regulations and international  customs,  duties, taxing and other
authorities  that regulate the import and  distribution of goods.  Domestically,
the freight carrier provides bills of lading and other documentation that record
the pick-up,  shipping and delivery of  merchandise  purchased by the Company on
behalf  of its  clients.  Internationally,  the  Company  must  comply  with the
individual county's requirements as they relate to commercial documentation. The
Company  believes  that  it  is  currently  in  compliance  with  the  laws  and
regulations in those states and countries in which it currently operates.

Dependence on Customers

      Most of the Company's  customers are in the hospitality  industry with few
of them accounting for a substantial  portion of the Company's  annual revenues.
During the year ended December 31, 1997,  one customer  accounted for 14% of the
Company's net revenues.  During the year ended  December 31, 1996, two customers
accounted for 49% and 31% of the Company's net revenues. In 1995, four customers
accounted for 23%, 19%, 18% and 14% of net revenues. As the Company continues to
grow and expand its  renovation  business and diversify  its  offerings  through
acquisitions,  the Company believes its dependence on significant customers will
decrease.  There are no  assurances  that either  continued  growth or decreased
dependence on significant customers will occur.

Employees

      As of December 31, 1997,  the Company  employed 257  employees.  A typical
renovation  project is staffed by a field supervisor,  who hires  subcontractors
and laborers specifically for the particular project. Each project is staffed by
trade  subcontractors  that may or may not be unionized.  The Company  purchases
workman's compensation insurance for each of its projects.  Every contractor and
subcontractor is required to sign the Company's standard contract before working
on a project.  None of the Company's  employees are  represented by labor unions
and the Company believes that its relationship with its employees is good.

Item 2.  Description of Properties

      The Company maintains its executive office at 450 Park Avenue, Suite 2603,
New York, New York 10022, where it occupies approximately 6,000 square feet in a
multi-story office complex. The Company has entered into a ten-year lease, which
expires  in January  2007,  with an  unaffiliated  lessor  pursuant  to which it
currently pays an annual fixed rental of $278,000.

      HRB maintains  offices at 1840 Century Park East, 10th Floor, Los Angeles,
California,  90067,  where it  occupies  approximately  7,400  square  feet in a
multi-story  office  complex.  HRB has  entered  into a five-year  lease,  which
expires  in  March  2003,  with an  unaffiliated  lessor  pursuant  to  which it
currently  pays an annual  fixed  rental  of  approximately  $208,000.  HRB also
maintains a satellite office in Coral Springs, Florida.

      LPC and Parker Reorder  maintain their  executive  offices at 550 Biltmore
Way, Coral Gables, Florida, 33134. LPC occupies approximately 18,400 square feet
under a lease which expires in August 2002 at an annual fixed rental of $412,000
(exclusive of rent  adjustments).  LPC also maintains  satellite  offices in Los
Angeles,  California,  Singapore  and  South  Africa.  Parker  Reorder  occupies
approximately 7,300 square feet under a lease which expires in September 2001 at
an annual fixed rental of $199,500.

      HCC maintains its executive  offices at 1780  Riverwood,  3350  Cumberland
Circle,  Atlanta,  Georgia where it occupies approximately 3000 square feet in a
multi-story  office  complex.  HCC has entered  into a  five-year  lease with an
unaffiliated  lessor that  expires in October  2002 at an annual fixed rental of
approximately $78,000.

                                       5
<PAGE>


      HDS  maintains its executive  offices at 711 Third Avenue,  New York,  New
York where it occupies  approximately  4,600 square feet under a five-year lease
which  expires  in  December  2002 at an annual  fixed  rental of  approximately
$145,000.

      Bekins maintains its executive offices at 7711 Bonhomme Avenue, St. Louis,
Missouri  63105 and  warehouse  locations  in Las  Vegas,  Nevada  and  Orlando,
Florida. HWS REAG maintains its executive offices at 225 West Washington Street,
Chicago, Illinois 60606 with satellite offices in Denver, Colorado and Stamford,
Connecticut.

Item 3.  Legal Proceedings

      The Company is a defendant in various  litigation  in the normal course of
business. Although the outcome of litigation cannot be predicted with certainty,
in the  opinion  of  management  based  on the  facts  known at this  time,  the
resolution of such  litigation  is not  anticipated  to have a material  adverse
effect on the financial position or results of operations of the Company.

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

      NONE



                                     PART II

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

      (a) Market Information.  The Common Stock has traded on the American Stock
      Exchange under the symbol "HWS" since September 18, 1997 and prior thereto
      traded  on the  NASDAQ  SmallCap  Market  under  the  symbol  "ROOM."  The
      following table sets forth, for the periods  indicated,  the range of high
      and low bid prices of the Common Stock for the fiscal periods specified.


                                                  High                  Low
                                                  ----                 ----
Fiscal 1996
---------
First Quarter..........................         $ 1-11/16         $     5/8
Second Quarter.........................             2-1/8            1-9/16
Third Quarter..........................            3-3/16             1-5/8
Fourth Quarter.........................             6-7/8             2-5/8

Fiscal 1997
---------
First Quarter..........................         $ 8-11/16         $ 5-15/16
Second Quarter.........................             9-3/8             5-3/8
Third Quarter..........................           14-3/16             7-3/8
Fourth Quarter.........................          13-15/16             8-1/2

      On March 27, 1998,  the last  reported  sales price of the Common Stock on
      the American Stock Exchange was $10.00 per share.

      (b) Holders.  As of March 27,  1998,  there were  approximately  95 record
      holders and approximately 1,877 beneficial holders of the Common Stock.

      (c) Dividends. The Company has not paid or declared any dividends upon its
      Common Stock since its  inception and does not intend to pay any dividends
      upon its  Common  Stock in the  foreseeable  future.


                                       6

<PAGE>

      The  payment by the  Company of  dividends,  if any,  in the future  rests
      within the  discretion  of its Board of Directors  and will depend,  among
      other things,  upon the Company's earnings,  its capital  requirements and
      its financial condition, as well as, other relevant factors.

Item 6.  Selected Financial Data (a)
<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                                     (in thousands)
                                                             1993          1994           1995           1996         1997
                                                             ----          ----           ----           ----         ----
<S>                                                        <C>             <C>          <C>           <C>          <C>
Net Revenues                                               $2,354          $524         $4,980        $24,367      $85,442
Income (loss) from continuing operations                      526       (1,285)          (380)          1,907        (844)
Basic earnings (loss) from continuing operations              .17         (.28)          (.07)            .27        (.13)
    per common share
Diluted earnings (loss) from continuing operations            .17           (b)            (b)            .27          (b)
    per common share
Total assets                                                2,565         4,492         10,031         12,750       84,268
Long-term debt                                                450            --             --             --           --
</TABLE>

(a)   No cash  dividends  were declared  during the five-year  period  presented
      above.  See Item 1.  Description  of  Business  for a  description  of all
      acquisitions  during  the  five-year  period.  All  amounts  presented  in
      thousands except for earnings (loss) per common share.
(b)   Antidilutive.

Item 7.  Management  Discussion and Analysis of Financial  Condition and Results
         of Operations Overview

      From its inception in 1991 to August 1995,  the  Company's  only source of
revenues  was  its  decorative   energy-efficient   lighting   fixture   design,
manufacturing  and  installation  business.  The Company acquired its renovation
business in August 1995 and disposed of its lighting  business in February 1996.
As part of its strategy to further its position as one of the leading  providers
of renovation and procurement  services for the hospitality industry on a global
basis,  the Company  acquired its procurement and reorder  businesses in January
1997. As a result of this  significant  change in the company's  business focus,
period to period historical comparisons are not considered meaningful.

      Additionally, historical comparisons are not considered meaningful because
revenue  recognition  methodologies  vary across the Company's  businesses.  The
Company  recognizes  all  revenues  associated  with a  renovation  project on a
percentage of completion basis, as if the Company were a general contractor.  As
part of this  process,  the  Company  develops  a  complete  scope of work to be
performed and invoices its clients on a monthly or  bi-monthly  basis as work is
performed.  The Company's cost of renovation services has been relatively stable
over the past two years. In contrast to the Company's  recognition of renovation
revenues,  the Company recognizes  procurement  revenues in three ways: (i) when
the  Company is a  principal,  during  which it  functions  as a  purchaser  and
reseller of products,  the Company  recognizes all revenues  associated with the
products it purchases at the time of shipment of the  respective  product,  (ii)
when the Company  acts as an agent only,  service  fee income is  recognized  as
revenue at the time the service is provided, and (iii) when the Company provides
these  services under  long-term  contracts,  earnings are recognized  under the
percentage of completion method,  based on efforts expended over the life of the
contract.  In each case, the Company charges its clients a procurement fee based
upon the amount of time and effort it expects to spend on a project. The Company
intends to continue to expand its role as a purchaser  and reseller  because the
Company believes that it can enter into more advantageous  arrangements with its
vendors  when  acting as  principal  rather  than  agent.  Under each  method of
procurement  revenue  recognition,  profits  primarily  include only procurement
service fees. The Company  realizes reorder revenue based on the fees it charges
its clients for services rendered.

                                       7
<PAGE>

Results of Operations: Fiscal 1997 Compared to Fiscal 1996.

      Revenues for the year ended December 31, 1997 were  $85,441,712,  compared
to  $24,367,112  for 1996. The increase in revenue  resulted  primarily from the
acquisition of LPC and Parker Reorder in January 1997.

      Gross  profit for the year ended  December  31, 1997 was  $13,960,717,  or
16.3% of revenues,  compared to $6,077,188,  or 24.9% of revenues, for 1996. The
decrease  in  gross  profit  as a  percent  of  revenues  in 1997 was due to the
addition of LPC and Parker Reorder,  whose  purchasing  operations  operate at a
lower  gross  profit  percentage  than  the  Company's  renovation  business.  A
significant  portion of its purchasing revenues and costs included the resale of
furniture and fixtures at little or no markup.  The Company's  purchasing income
is the result of fees  charged to its clients  based upon the amount of time and
effort it expects to spend on projects.

      Selling,  general and administrative  ("SG&A") expenses for the year ended
December  31,  1997  were  $13,776,081,   or  16.1%  of  revenues,  compared  to
$3,218,520,  or 13.2% of revenues,  for 1996.  Included in SG&A expenses for the
years ended December 31, 1997 and 1996 were $778,825 and $383,922, respectively,
of  amortization of goodwill on  acquisitions.  The increase in SG&A expenses in
1997  was  due  to the  addition  of LPC  and  Parker  Reorder  as  well  as the
development of an administrative infrastructure to control future growth.

      Income from  operations for the year ended December 31, 1997 was $184,636,
compared to $2,858,668,  for 1996. Operating profits decreased in 1997 due to an
increase in SG&A  expenses  and a decrease  in gross  profit  percentage.

      As an  inducement  to enter into the Apollo  Joint  Venture,  the  Company
issued to Apollo a warrant to purchase  750,000 shares of common stock, of which
250,000 shares were exercisable upon entering into the agreement in May 1997 and
the remaining  shares become  exercisable  based on  incremental  revenue to the
Company.  The fair value of the warrants for the 250,000 shares were  recognized
as warrant expense in 1997 in the amount of $1,287,500.

      The  provision  for income taxes for the year ended  December 31, 1997 was
$227,988,  compared to $926,325  for the same period last year.  The decrease in
the  provision  for income taxes was  primarily due to decrease in income (loss)
before income taxes.  For 1997,  although the Company had a loss from continuing
operations  before income taxes, an income tax provision was recorded  primarily
due to the  non-deductibility of goodwill amortization and state and local taxes
payable.

      The net loss for the year ended  December 31, 1997 was $843,649,  compared
to net income of $1,842,678, for 1996.

Results of Operations: Fiscal 1996 Compared to Fiscal 1995
(Period from August 1, 1995 to December 31, 1995).

      Revenues for the year ended December 31, 1996 were  $24,367,112,  compared
to $4,980,291, for 1995. Revenues for the Company increased significantly due to
the  growth  in the  Company's  renovation  business  from  increased  sales and
marketing efforts and the establishment of the Company's name in the hospitality
industry.  The 1995 revenues  were for the five months ended  December 31, 1995,
the period for which the Company owned the HRB business.

      Gross profit for the year ended December 31, 1996 was $6,077,188, or 24.9%
of revenues, compared to $1,156,512, or 23.2% of revenues, for 1995.

      SG&A  expenses for the year ended  December 31, 1996 were  $3,218,520,  or
13.2% of  revenues,  compared to  $1,619,189,  or 32.5% of  revenues,  for 1995.
Included in the SG&A expenses for the years ended December 31, 1996 and December
31, 1995 was $383,922 and $166,048,  respectively,  of  amortization of goodwill
for the acquisition of HRB. The Company  believes that these costs will continue
to increase as its business grows and as it develops a larger  infrastructure to
handle  future  growth.

                                       8
<PAGE>

However,  due to rapidly  increasing  revenues,  and a majority of the Company's
resources  dedicated to operations,  these costs should continue to decline as a
percentage of revenues.

      Income  (loss) from  operations  for the year ended  December 31, 1996 was
$2,858,668,  compared  to  ($462,677)  for the same  period  in 1995.  Operating
profits  increased in 1996 due to larger revenues and the ability of the Company
to maintain low SG&A expenses as a percentage of sales. The loss from operations
for 1995 is the result of increased overhead in an unsuccessful  attempt to grow
the lighting business that was subsequently discontinued.

      Income tax expense  for the year ended  December  31,  1996 was  $926,325,
compared to $25,000 for the same period in 1995.  The 1996  expense is below the
federal and state statutory tax rates due mainly to a reduction in the valuation
allowance.

      Net income for the year ended December 31, 1996 was  $1,842,678,  compared
to a net loss of $1,115,969 for the period ended December 31, 1995.

Liquidity and Capital Resources

      The Company's  short-term and long-term liquidity  requirements  generally
consist of operating  capital for its purchasing  and renovation  businesses and
SG&A  expenses.  The Company  continues to satisfy its  short-term and long-term
liquidity  requirements  with cash  generated  from  operations and funds from a
public  offering of its Common Stock in September 1997. Due to the nature of the
Company's  businesses,  with a majority of its resources  allocated to personnel
for performance of its services, capital requirements are insignificant.

      Net cash  provided by operating  activities  was  $3,279,325  for the year
ended  December 31, 1997,  compared to net cash used of $1,120,028  for the same
period  last year.  During the year  ended  December  31,  1997,  the  Company's
accounts  receivable  and costs in excess of billing  increased by  $13,543,701.
This  increase  was  partially  offset by an increase  of  accounts  payable and
accrued  liabilities  of  $10,896,395.   Due  to  the  Company's  rapid  growth,
acquisitions,  and the additional work performed on numerous projects,  accounts
receivable  increased  significantly  at  December  31,  1997 when  compared  to
December 31, 1996.  The Company  expects to collect these  receivables  fully in
1997.

      Net cash used by investing activities for the year ended December 31, 1997
was  $21,131,147,  compared to net cash provided of $649,318 for the same period
last year.  The change is  primarily  the result of the  purchase of  marketable
securities with the proceeds of the public  offering in September,  1997 and the
purchase of software for the Parker FIRST system.

      Net cash provided by financing activities increased to $29,539,760 in 1997
primarily as a result of the Company's public offering in September, 1997.

      In September 1997, the Company repaid all outstanding borrowings under its
secured line of credit with Marine Midland Bank of New York  ("Bank").  In March
1998, the Company obtained a $7,000,000 unsecured line of credit.

      In January  1997,  the Company  acquired 100% of the  outstanding  capital
stock  of  LPC.  The  purchase  price  for  LPC,  after  final  adjustments,  of
approximately  $11.65  million  consisted  of 1,250,000  newly issued  shares of
Common Stock and 200,000  shares of 6%  redeemable  convertible  preferred,  $25
stated  value  per  share,  which are  convertible,  on a  formula  basis,  into
1,000,000  shares of Common Stock (subject to upward  adjustment to a maximum of
4,000,000 shares in the event that the market price of the Common Stock is below
$5.00 at the time of  conversion)  during the period  from  January  10, 1998 to
January 10, 2000.

      In May 1997,  the Company  borrowed  $2.2 million from Findim  Investments
S.A.  at an interest  rate of

                                       9
<PAGE>

12% per annum in order to  exercise  its option to  purchase  500,000  shares of
Common  Stock from Tova  Schwartz,  the  Company's  former  President  and Chief
Executive Officer. This note was paid in full in September 1997.

      Since  January 1, 1996,  the Company has issued  940,750  shares of Common
Stock in private  placements  and through the exercise of options and  warrants,
raising an aggregate of 1,587,755.  During such time, the Company repurchased an
aggregate  of  1,500,000  shares  of Common  Stock  from  Tova  Schwartz  for an
aggregate purchase price of $3,362,500.

      As the Company grows and continues to explore  opportunities for strategic
alliances and acquisitions,  investment in additional support systems, including
infrastructure and personnel,  will be required. The Company expects to increase
its costs and expenses in 1998 as it continues to invest in the  development  of
its businesses. Although these increases may result in a short-term reduction in
operating margin as a percentage of revenues,  the Company  anticipates that its
investments  will have a  positive  impact on its net  revenues  on a  long-term
basis. The Company  anticipates making substantial  expenditures as it continues
to explore  expansion though strategic  alliances and  acquisitions.  The Apollo
Joint Venture has acquired the Warwick Hotel in Philadelphia,  Pennsylvania, and
has entered  into a letter of intent to purchase a hotel  property in  Richmond,
Virginia.  The ING Joint  Venture has  acquired  the  Clarion  Hotel in Chicago,
Illinois.

      To  support  the  Company's  growth,  as  well  as  to  support  potential
acquisitions  of  hospitality-related  businesses and the formation of strategic
alliances,  the  Company  completed  a  public  offering  in  September  1997 of
3,450,000  shares of Common  Stock.  The net  proceeds  of the  offering,  after
deducting applicable issuance costs and expenses were $32,126,630.  A portion of
the  proceeds  was  used to repay  short-term  indebtedness  with the  remainder
available  for general  corporate  purposes,  including the financing of working
capital needs and business development. In conjunction with the public offering,
the underwriter was granted a warrant to purchase 356,723 shares of Common Stock
at an exercise  price of $12.00 per share.  The warrant is  exercisable  in full
after one year  (September  17,  1998) and expires on September  17,  2002.  The
number of shares  issuable under this warrant are subject to change upon certain
events, among them, the declaration of dividends,  stock splits or reverse stock
splits.

      The Company  believes  its present  cash  position,  including  increasing
revenues  and cash on hand,  and its ability to obtain  additional  financing as
necessary,  will allow the Company to meet its short-term operating needs for at
least the next twelve months.

Inflation

      Inflation  and  changing  prices  during the  current  fiscal year did not
significantly  affect  the major  markets  in which  the  Company  conducts  its
business. In view of the moderate rate of inflation, its impact on the Company's
business has not been significant.

Accounting Pronouncements

      The  Financial  Accounting  Standards  Board has issued  Statement No. 130
"Reporting  Comprehensive  Income"  and  Statement  No. 131  "Disclosures  about
Segments of an Enterprise  and Related  Information",  both of which the Company
will adopt in 1998 and require restatement of prior periods presented.

      Statement  No. 130  establishes  standards  for  reporting  and display of
comprehensive  income  and its  components  in a separate  financial  statement.
Comprehensive  income  generally  includes net income as reported by the Company
adjusted for foreign currency  translation  adjustments and unrealized gains and
losses  on  marketable  securities  that are  "available  for  sale,"  which are
currently reported in the stockholders equity section of the balance sheet.

      Statement  No.  131  requires  that  the  company  report   financial  and
descriptive  information  about its reportable  operating  segments in financial
statements issued to shareholders for interim and annual periods.  The Statement
also establishes  standards for related disclosures about products and services,
geographic

                                       10
<PAGE>

areas  and  major  customers.  Under  this  Statement,  operating  segments  are
components  of an  enterprise  about which  separate  financial  information  is
available  that is regularly  evaluated by the  enterprise's  chief  operational
decision-maker   in  deciding  how  to  allocate   resources  and  in  assessing
performance.  While the Company  continues  to evaluate  the adoption of the new
standard,  it is  likely  that  its  currently  reported  business  segments  of
Renovation,  Purchasing and General  Corporate will be maintained with additions
for any acquisitions.

      Management  has  evaluated the impact of Year 2000 issues on the Company's
business and operations.  The Company believes,  based upon its internal reviews
and other  factors,  that  future  external  and  internal  costs to be incurred
relating to the modification of internal-use software for the year 2000 will not
have a  material  adverse  effect on the  Company's  results  of  operations  or
financial position.

Item 7a.  Quantitative and Qualitative Disclosures about Market Risk

      NONE

Item 8.  Financial Statements

      See Index to Financial Statements.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

      On March 14, 1996, the Company  dismissed Arthur Andersen LLP ("Andersen")
as its independent  accountants.  The Company's Board of Directors approved such
dismissal.  Andersen's  accountant's  report on the financial  statements of the
Company  for the two  prior  years  did not  contain  an  adverse  opinion  or a
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope,  or  accounting  principles.  There  were no other  reportable  events or
disagreements with Andersen to report in response to Item 304 of Regulation S-K.

      On March 15, 1996, BDO Seidman, LLP ("BDO") was engaged as new independent
accountants to the Company.  On November 19, 1997, the Company  dismissed BDO as
its  independent  accountants.  The Company's  Board of Directors  approved such
dismissal.  BDO's accountant's report on the financial statements of the Company
for the past two years did not  contain an adverse  opinion or a  disclaimer  of
opinion and was not  qualified or modified as to  uncertainty,  audit scope,  or
accounting  principles.  There were no other reportable  events or disagreements
with BDO to report in response to Item 304 of Regulation S-K.

      On November 20, 1997,  Andersen was engaged as independent  accountants to
the Company.

                                       11
<PAGE>


                                     PART IV

Item 14.  Exhibits and Reports on Form 8-K.

(a)    Financial Statements:
       0  Hospitality Worldwide Services, Inc. and Subsidiaries
       0  Report of Independent Public Accountants
       0  Consolidated Financial Statements

(b)    Exhibits

Exhibit
Number                                      Exhibits
-------                                     --------

    * 3.1              Certificate of Incorporation, as amended, of the Company.

      3.2              Amended and Restated By-laws of the Company (Incorporated
                       by reference to the Company's  Registration  Statement on
                       Form SB-2, No. 333-31765).

      4.1              Specimen  Common  Stock   Certificate   (Incorporated  by
                       reference  to Exhibit 4.1 to the  Company's  Registration
                       Statement on Form SB-2, No. 33-7094-NY).

      4.2              Rights  Agreement  dated as of November 24, 1997,  by and
                       between  the  Company and  Continental  Stock  Transfer &
                       Trust Company,  as rights agent (the "Rights  Agreement")
                       (Incorporated by reference to the Company's  Registration
                       Statement  on Form  8-A  filed  with  the  Commission  on
                       December 2, 1997).

    * 4.3              Amendment to Rights Agreement dated January 7, 1998.

      10.1             Asset  Purchase  Agreement  dated as of April 1, 1995, by
                       and   among  AGF   Interior   Services   Co.,   Watermark
                       Investments  Limited  (Bahamas),   Watermark  Investments
                       Limited  (Delaware),  HRB, the Company and Tova  Schwartz
                       (Incorporated  by  reference  to  the  Company's  Current
                       Report on Form 8-K dated August 22, 1995).

      10.2             Divestiture,   Settlement  and  Reorganization  Agreement
                       dated as of February 26, 1996,  by and among the Company,
                       HRB, Watermark  Investments Limited (Bahamas),  Watermark
                       Investments  Limited  (Delaware),  AGF Interior  Services
                       Co.,  Tova  Schwartz,  Alan G.  Friedberg  and  Guillermo
                       Montero (Incorporated by reference to Exhibit 10.2 of the
                       Company's  Form  10-KSB for the year ended  December  31,
                       1995).

      10.3             Memorandum Agreement dated April 12, 1996, by and between
                       the Company and Watermark  (Incorporated  by reference to
                       Exhibit  10.3 of the  Company's  Form 10-KSB for the year
                       ended December 31, 1995).

      10.4             Bill of Sale and Assumption  Agreement dated February 26,
                       1996,  by and  between  the  Company  and  Tova  Schwartz
                       (Incorporated   by  reference  to  Exhibit  10.4  of  the
                       Company's  Form  10-KSB for the year ended  December  31,
                       1995).

                                       12
<PAGE>

      10.5             Consulting  Agreement  dated  February 28,  1996,  by and
                       between  to  Company  and  Resource  Holdings  Associates
                       (Incorporated   by  reference  to  Exhibit  10.6  of  the
                       Company's  Form  10-KSB for the year ended  December  31,
                       1995).

      10.6             Employment  Agreement dated April 1, 1996, by and between
                       the  Company  and  Howard  G.  Anders   (Incorporated  by
                       reference  to Exhibit 10.7 of the  Company's  Form 10-KSB
                       for the year ended December 31, 1995).

      10.7             1996 Stock  Option Plan  (Incorporated  by  reference  to
                       Exhibit 4(a) to the Company's  Registration  Statement on
                       Form S-8 filed on February 12, 1997, File No. 333-21689).

      10.8             Form of Option Agreement for the 1996 Plan  (Incorporated
                       by   reference   to   Exhibit   4(b)  to  the   Company's
                       Registration  Statement on Form S-8 filed on February 12,
                       1997, File No. 333-21689).

      10.9             Form of Stock  Agreement for the Outside  Directors' Plan
                       (Incorporated   by  reference  to  Exhibit  4(c)  to  the
                       Company's  Registration  Statement  on Form S-8  filed on
                       February 12, 1997, File No. 333-21689).

      10.10            Form of  Option  Granted  to  Officers  (Incorporated  by
                       reference to Exhibit 4(d) to the  Company's  Registration
                       Statement on Form S-8 filed on February  12,  1997,  File
                       No. 333-21689).

      10.11            Agreement and plan of Merger dated as of January 9, 1997,
                       by and among  Leonard  Parker  Company,  LPC  Acquisition
                       Corp.,  and the Company  (incorporated  by  reference  to
                       Exhibit 2.1 of the Company's  Current  Report on Form 8-K
                       filed January 24, 1997).

      10.12            Employment Agreement, dated as of January 9, 1997, by and
                       among The Leonard Parker Company, the Company and Leonard
                       Parker   (Incorporated  by  reference  to  the  Company's
                       Registration Statement on Form SB-2, No. 333-31765).

      10.13            Employment Agreement, dated as of January 9, 1997, by and
                       among The Leonard Parker Company, the Company and Douglas
                       Parker  (Incorporated  by reference  to the  Registration
                       Statement on Form SB-2, No. 333-31765).

      10.14            Registration  Rights  Agreement,  date as of  January  9,
                       1997, by and among the Company,  Leonard Parker,  Douglas
                       Parker,  Bradley Parker,  Philip Parker, Gregg Parker and
                       Mitchell  Parker   (Incorporated   by  reference  to  the
                       Company's   Registration  Statement  on  Form  SB-2,  No.
                       333-31765).

      10.15            Agreement to Joint Venture,  dated as of May 12, 1997, by
                       and among  Apollo  Real Estate  Advisors  II,  L.P.,  the
                       Registrant  and  Watermark   Investments  Limited,   LLC.
                       (Incorporated by reference to the Company's  Registration
                       Statement on Form SB-2, No. 333-31765).


                                       13
<PAGE>

      10.16            Warrant  dated May 12,  1997 issued to Apollo Real Estate
                       Advisors  II,  L.P.  (Incorporated  by  reference  to the
                       Company's   Registration  Statement  on  Form  SB-2,  No.
                       333-31765).

      10.17            Agreement  and Plan of  Merger,  dated as of  January  1,
                       1998, by and among the Company,  HWS Acquisition Corp., a
                       Delaware  corporation,  Bekins Distribution Services Co.,
                       Inc.  and the  Sellers  named  therein  (Incorporated  by
                       reference  to the  Company's  Current  Report on Form 8-K
                       dated January 9, 1998).

      10.18            Registration  Rights  Agreement  dated as of  January  1,
                       1998, by and among the Company and the Shareholders named
                       therein.

      10.19            Financial Advisory Agreement dated April 10, 1997, by and
                       between  the  Company and  Resource  Holdings  Associates
                       (Incorporated by reference to the Company's  Registration
                       Statement on Form SB-2, No. 333-31765).

      11               Computation of earnings per share (Incorporated herein by
                       reference  to  Note  15  to  the  Company's  Consolidated
                       Financial Statements).

      16.1             Letter  from  Arthur  Andersen  LLP dated  March 19, 1996
                       (Incorporated  by  reference  to  the  Company's  Current
                       Report on Form 8-K/A filed March 25, 1996).

      16.2             Letter  from BDO  Seidman,  LLP dated  November  19, 1997
                       (Incorporated  by  reference  to  the  company's  Current
                       Report on Form 8-K dated November 12, 1997).

      * 21             Subsidiaries of the Company

      * 23.1           Consent of Arthur Andersen LLP dated March 31, 1998

      * 23.2           Consent of BDO Seidman, LLP dated March 31, 1998

      * 27             Financial Data Schedule
----------
      *Filed herewith.

(c)   Reports on Form 8-K

Form 8-K dated November 11, 1997, filed with the Commission on December 2, 1997,
     reporting Item 5, Other Events.

Form 8-K dated  November 12,  1997,  filed with the  Commission  on December 19,
     1997, reporting Item 4, Changes in Registrant's Certifying Accountant.

                                       14
<PAGE>


                                   SIGNATURES

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

                                HOSPITALITY WORLDWIDE SERVICES, INC.

Dated: March 31, 1998           By:          /S/ ROBERT A. BERMAN
                                            -------------------------
                                Robert A. Berman, Chairman of the Board, Chief
                                Executive Officer, (principal executive officer)
                                and Director

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

Signature Title Date

/S/ Robert A. Berman           Chairman of the Board,             March 31, 1998
---------------------------
Robert A. Berman               Chief Executive Officer
                               (principal executive officer)
                               and Director

                               Chairman Emeritus of the Board
---------------------------
Leonard F. Parker              and Director

/S/ Douglas Parker             President and Director             March 31, 1998
---------------------------
Douglas Parker

/S/ Howard G. Anders           Executive Vice President,          March 31, 1998
---------------------------
Howard G. Anders               Chief Financial Officer,
                               (principal financial officer,
                               principal accounting officer)
                               and Secretary

/S/ Scott A. Kaniewski         Director                           March 31, 1998
---------------------------
Scott A. Kaniewski

/S/ Louis K. Adler             Director                           March 31, 1998
---------------------------
Louis K. Adler

/S/ George Asch                Director                           March 31, 1998
---------------------------
George Asch

/S/ Richard A. Bartlett        Director                           March 31, 1998
---------------------------
Richard A. Bartlett

                                       15

<PAGE>


Item 8.  Financial Statements


                          Index to Financial Statements

                                                                        Page No.
                                                                        --------
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES

REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                    F-2, F-3

              CONSOLIDATED FINANCIAL STATEMENTS:
                        Balance sheets                                   F-4
                        Statements of operations                         F-5
                        Statement of stockholders' equity                F-6
                        Statements of cash flows                       F-7, F-8
                        Notes to consolidated financial statements     F-9-F-21




                                      F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders and Board of Directors of
Hospitality Worldwide Services, Inc.


We have  audited the  accompanying  consolidated  balance  sheet of  Hospitality
Worldwide  Services,  Inc.  (a New  York  Corporation)  and  subsidiaries  as of
December  31,  1997,  and the related  consolidated  statements  of  operations,
stockholders'  equity and cash flows for the year then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

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





Arthur Andersen LLP

/s/ Arthur Andersen LLP
New York, New York
March 30, 1998


                                      F-2

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Stockholders and Board of Directors
Hospitality Worldwide Services, Inc.
New York, New York

We have  audited the  accompanying  consolidated  balance  sheet of  Hospitality
Worldwide Services,  Inc. (formerly Light Savers U.S.A.,  Inc.) and subsidiaries
as of December 31, 1996, and the related consolidated  statements of operations,
stockholders'  equity  and cash  flows for each of the two  years in the  period
ended December 31, 1996. 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 provide 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  Hospitality
Worldwide Services, Inc. and subsidiary as of December 31, 1996, and the results
of its  operations  and its cash  flows for each of the two years in the  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.




/s BDO Seidman, LLP
BDO Seidman, LLP


New York, New York
March 21, 1997


                                      F-3

<PAGE>



              HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                              December 31,
                                                                                        1997                   1996
                                                                                        ----                   ----
<S>                                                                                  <C>                <C>
CURRENT ASSETS:
Cash and cash equivalents                                                            $11,964,129        $   276,191
Marketable securities                                                                 18,915,686                 --
Accounts receivable, net of allowance for
   doubtful accounts of  $267,595 and $50,000 (Notes 5 and 10)                        21,932,667          3,134,841
Current portion of note receivable (Note 3)                                              342,144             70,000
Costs and estimated earnings in excess of billings (Note 6)                            3,420,829          2,176,907
Advances to vendors                                                                    4,255,181                 --
Prepaid and other current assets                                                       1,037,480            421,303
                                                                                      ----------         ----------
                                        Total current assets                          61,868,116          6,079,242

Note receivable, less current portion (Note 3)                                                --            280,000
Property and equipment,
    less accumulated depreciation of $337,873 and $61,711 (Note 7)                     3,547,712            142,877
Goodwill and other intangibles,
    less accumulated amortization of $1,489,855 and $549,970 (Note 3)                 17,078,180          6,049,669
Deferred taxes (Note 9)                                                                  739,088             65,280
Other assets                                                                           1,034,595            133,022
                                                                                      ----------         ----------

                                                                                     $84,267,691        $12,750,090
                                                                                      ----------         ----------
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable  (Note 5)                                                           $16,374,426         $1,175,068
Accrued and other liabilities                                                          2,540,222          1,897,389
Billings in excess of costs and estimated earnings (Note 6)                              295,967            200,802
Customer deposits                                                                     13,323,571                 --
Loan payable  (Note 8)                                                                        --          1,400,000
Income taxes payable                                                                       7,669            297,860
                                                                                      ----------         ----------
                                        Total current liabilities                     32,541,855          4,971,119

Commitments and contingencies (Note 11)




STOCKHOLDERS' EQUITY  (Notes 13, 14 and 17)
Convertible preferred  stock,   $.01  par  value,
      $25  stated  value,   3,000,000   shares authorized,
      200,000 issued and outstanding in 1997, $5,000,000
      liquidation preference                                                           5,000,000                 --
Common stock, $.01 par value, 20,000,000 shares authorized,
      11,345,572 and 7,225,655 issued                                                    113,456             72,257
Additional paid-in capital                                                            47,519,725          8,185,410
Treasury stock, 500,000 common shares in 1996                                                 --           (715,000)
Retained earnings (deficit)                                                            (907,345)            236,304
                                                                                      ----------         ----------
                                        Total stockholders' equity                    51,725,836          7,778,971
                                                                                      ----------         ----------
                                                                                     $84,267,691        $12,750,090
                                                                                      ----------         ----------
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       F-4

<PAGE>


              HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                                 1997             1996            1995
                                                                             ------------    ------------    ------------
<S>                                                                            <C>           <C>             <C>
        Net revenues  (Note 12)                                                85,441,712    $ 24,367,112    $  4,980,291
        Cost of revenues  (Notes 10 and 12)                                    71,480,995      18,289,924       3,823,779
                                                                             ------------    ------------    ------------
                      Gross profit                                             13,960,717       6,077,188       1,156,512
        Selling, general and administrative expenses                           13,776,081       3,218,520       1,619,189
                                                                             ------------    ------------    ------------
                      Income (loss) from operations                               184,636       2,858,668        (462,677)
                                                                             ------------    ------------    ------------
        Other income (expense):
            Interest expense                                                     (287,633)        (26,101)        (13,007)
            Interest income                                                       774,836           1,141         120,257
           Warrant expense                                                     (1,287,500)           --              --
                                                                             ------------    ------------    ------------
                      Total other income (expense)                               (800,297)        (24,960)        107,250
                                                                             ------------    ------------    ------------
                      Income (loss) before income taxes                          (615,661)      2,833,708        (355,427)
        Provision for income taxes  (Note 9)                                      227,988         926,325          25,000
                                                                             ------------    ------------    ------------
                      Income (loss) from continuing operations                   (843,649)      1,907,383        (380,427)
                                                                             ------------    ------------    ------------
        Discontinued operations:  (Note 4)
                      Loss from discontinued operations                              --           (64,705)       (336,736)
                      Loss on disposal of discontinued operations,
                              including provision of $46,000 for operating
                              losses during the phase out period                     --              --          (398,806)
                                                                             ------------    ------------    ------------
                      Loss from discontinued operations                              --           (64,705)       (735,542)
                                                                             ------------    ------------    ------------
        Net income (loss)                                                    $   (843,649)   $  1,842,678    $ (1,115,969)
                                                                             ------------    ------------    ------------

        Basic earnings (loss) per common share:

                    Income (loss) from continuing operations                 $      (0.13)   $       0.27    $      (0.07)
                                                                             ------------    ------------    ------------
                    Discontinued operations:
                        Loss from operations                                         --             (0.01)          (0.06)
                        Loss on disposal                                             --              --             (0.07)
                                                                             ------------    ------------    ------------
                                                                                     --             (0.01)          (0.13)
                                                                             ------------    ------------    ------------
                    Net income (loss)                                        $      (0.13)   $       0.26    $      (0.20)
                                                                             ------------    ------------    ------------

        Diluted earnings (loss) per common share:

                    Income (loss) from continuing operations                          (a)    $       0.27             (a)
                                                                             ------------    ------------    ------------
                    Discontinued operations:
                        Loss from operations                                         --             (0.01)            (a)
                        Loss on disposal                                             --              --               (a)
                                                                             ------------    ------------    ------------
                                                                                     --             (0.01)            (a)
                                                                             ------------    ------------    ------------
                    Net income (loss)                                                 (a)    $       0.26             (a)
                                                                             ------------    ------------    ------------
        Weighted average common shares
             outstanding                                                        8,885,570       6,983,333       5,673,600
                                                                             ------------    ------------    ------------
        Weighted average common and
             common equivalent shares outstanding                               9,876,802       7,131,915       5,700,324
                                                                             ------------    ------------    ------------
</TABLE>



(a)    Antidilutive

The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                      F-5
<PAGE>
              HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
                                      Preferred Stock                 Common Stock
                                      ----------------             ----------------

                                   Number                        Number                                     Additional
                                     of           Stated           of             Par         Treasury        Paid in
                                   Shares         Value          Shares          Value          Stock         Capital
------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>             <C>             <C>         <C>
BALANCE,
  JANUARY 1, 1995                    --        $    --        4,625,655       $ 46,257        $    --     $ 4,590,285
Issuance of 2.5 million
    shares in connection
    with acquisition                 --             --        2,500,000         25,000             --       3,275,000
Sale of available-for-sale
    securities                       --             --               --             --             --              --
Net loss
------------------------------------------------------------------------------------------------------------------------
BALANCE,
  DECEMBER 31, 1995                  --             --        7,125,655         71,257             --       7,865,285
Purchase of
    treasury stock                   --             --       (1,000,000)            --     (1,152,500)             --
Sale of treasury stock               --             --          500,000             --        437,500          62,500
Stock issued in
    settlement of
    service agreements               --             --           75,000            750             --         149,250
Stock options issued
    for services                     --             --               --             --             --          44,000
Exercise of stock
    options and warrants             --             --           25,000            250             --          64,375
Net income                                                           --             --             --              --
------------------------------------------------------------------------------------------------------------------------
BALANCE,
  DECEMBER 31, 1996                  --             --        6,725,655         72,257      (715,000)       8,185,410
Purchase of
    treasury stock                   --             --         (500,000)            --    (2,210,000)              --
Exercise of stock
    options and warrants             --             --          419,917          4,199             --       1,018,931
Issuance of shares in
    connection with
    acquisition                 200,000      5,000,000        1,250,000         12,500             --       6,940,000
Stock issued in
    connection with
    offering, net of expenses        --             --        3,450,000         24,500     2,925,000       27,379,246
Income tax benefit from
    warrants exercised               --             --               --             --             --         360,349
Warrants issued
    for services                     --             --               --             --             --       3,635,789
Net income                           --             --               --             --             --              --
Preferred dividends                  --             --               --             --             --              --
------------------------------------------------------------------------------------------------------------------------
BALANCE,
    DECEMBER 31, 1997           200,000     $5,000,000       11,345,572       $113,456     $       --     $47,519,725
------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                 Unrealized
                                  Loss on        Retained         Total
                                 Marketable      Earnings     Stockholders'
                                 securities
 (Deficit)        Equity
------------------------------------------------------------------------------
BALANCE,
  JANUARY 1, 1995               $ (52,938)        $(490,405)    $ 4,093,199
Issuance of 2.5 million
    shares in connection
    with acquisition                    --              --        3,300,000
Sale of available-for-sale
    securities                      52,938              --           52,938
Net loss                                         (1,115,969)     (1,115,969)
------------------------------------------------------------------------------
BALANCE,
  DECEMBER 31, 1995                     --       (1,606,374)      6,330,168
Purchase of
    treasury stock                      --              --       (1,152,500)
Sale of treasury stock                  --              --          500,000
Stock issued in
    settlement of
    service agreements                  --              --          150,000
Stock options issued
    for services                        --              --           44,000
Exercise of stock
    options and warrants                --              --           64,625
Net income                                        1,842,678       1,842,678
------------------------------------------------------------------------------
BALANCE,
  DECEMBER 31, 1996                     --          236,304       7,778,971
Purchase of
    treasury stock                      --              --       (2,210,000)
Exercise of stock
    options and warrants                --              --        1,023,130
Issuance of shares in
    connection with
    acquisition                         --              --       11,952,500
Stock issued in
    connection with
    offering, net of expense            --              --       30,328,746
Income tax benefit from
    warrants exercised                  --              --          360,349
Warrants issued
    for services                        --              --        3,635,789
Net loss                                --         (843,649)       (843,649)
Preferred dividends                     --         (300,000)       (300,000)
------------------------------------------------------------------------------
BALANCE,
    DECEMBER 31, 1997          $        --       $ (907,345)    $51,725,836
------------------------------------------------------------------------------

 The  accompanying  notes to consolidated  financial  statements are an integral
part of these statements.

                                      F-6
<PAGE>


              HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                           Year Ended December 31,
                                                                                    1997             1996             1995
                                                                                  --------         --------          -------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                            <C>             <C>             <C>
           Net income (loss)                                                   $   (843,649)   $  1,842,678    $ (1,115,969)
           Adjustments to reconcile net income (loss) to net cash
                provided by (used in ) operating activities:
                Depreciation and amortization                                     1,114,001         404,114         178,801
                Provision for losses on accounts receivable                            --              --           125,366
                Loss on disposal of discontinued operations                            --              --           398,806
                Realized loss on sale of securities                                    --              --            52,938
                Stock based compensation charge                                   1,593,420          44,000            --
                Deferred income tax provision                                      (668,422)        (65,280)           --
           (Increase) decrease in current assets:
                Accounts receivable                                             (12,299,779)     (1,548,005)       (539,439)
                Current assets of discontinued operations                              --           145,317        (145,317)
                Costs in excess of billings                                      (1,243,922)     (2,047,173)       (129,734)
                Advances to vendors                                              (4,255,181)           --              --
                Prepaid and other current assets                                     36,528        (290,632)        182,029
                Increase in other assets                                           (901,573)        (81,014)         (9,632)
           Increase (decrease) in current liabilities:
                Accounts payable                                                 10,579,593         134,481         495,158
                Accrued and other liabilities                                       316,802         862,204         360,172
                Billings in excess of costs                                          95,165        (419,772)       (640,175)
                Customer deposits                                                10,046,533            --              --
                Accrued loss on disposal of discontinued operations                    --          (398,806)           --
                Income taxes payable                                               (290,191)        297,860            --
                                                                               ------------    ------------    ------------
                Net cash provided by (used in) operating activities               3,279,325      (1,120,028)       (786,996)
                                                                               ------------    ------------    ------------
        CASH FLOWS FROM INVESTING ACTIVITIES:
                Sale of marketable securities                                          --              --         3,047,243
                (Purchase) sale of short term marketable securities             (18,915,686)        715,000        (715,000)
                Cash acquired upon acquisition, net of acquisition costs            479,061            --           125,966
                Purchase of property and equipment                               (2,694,522)        (65,682)        (40,819)
                                                                               ------------    ------------    ------------
                Net cash provided by (used in) investing activities             (21,131,147)        649,318       2,417,390
                                                                               ------------    ------------    ------------
        CASH FLOWS FROM FINANCING ACTIVITIES:
                Proceeds from borrowings on loan payable                          3,180,000       1,400,000         455,926
                Repayment of loan payable                                        (4,580,000)       (455,926)           --
                Purchase of treasury stock                                       (2,210,000)     (1,152,500)           --
                Proceeds from sale of treasury stock                                   --           500,000            --
                Note receivable                                                        --              --        (2,574,521)
                Proceeds from stock offering                                     32,126,630            --              --
                  Proceeds from exercise of stock options and warrants            1,023,130          64,625            --
                                                                               ------------    ------------    ------------
                Net cash provided by (used in) financing activities              29,539,760         356,199      (2,118,595)
                                                                               ------------    ------------    ------------
        NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                    11,687,938        (114,511)       (488,201)
        CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              276,191         390,702         878,903
                                                                               ------------    ------------    ------------
        CASH AND CASH EQUIVALENTS, END OF PERIOD                               $ 11,964,129    $    276,191    $    390,702
                                                                               ------------    ------------    ------------
</TABLE>

                                      F-7

<PAGE>

              HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                          Year Ended December 31,
                                                                                 1997              1996              1995
                                                                               ---------         ---------         --------
<S>                                                                          <C>              <C>               <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
                  Interest                                                   $   178,113      $    26,101       $    12,486
                  Income taxes                                                   785,127          696,324              --
        NON-CASH INVESTING & FINANCING ACTIVITIES:
        Fair value (including goodwill) of net assets acquired                11,166,229             --           5,450,000
        Stock issued for assets acquired                                      11,952,500             --          (3,300,000)
        Note payable for assets acquired                                            --               --          (2,150,000)
        Issuance of stock for repayment of debt                                     --            150,000              --
        Repayment of debt from issuance of stock                                    --           (150,000)             --
        Preferred stock dividends not paid in lieu of
              purchase price reduction for LPC acquisition                       300,000             --                --
        Warrants granted and exercisable by Apollo                             1,837,527             --                --
        Warrants granted to underwriters for stock offering                    1,798,262             --                --
</TABLE>



The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                      F-8
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization

      Hospitality  Worldwide  Services,  Inc.,  formerly  known as Light  Savers
U.S.A.,  Inc.  (the  "Company"),  was  incorporated  in the State of New York on
October 10, 1991. Through its wholly owned operating  subsidiaries,  the Company
provides interior and exterior cosmetic  renovations and maintenance and acts as
a purchasing  agent and principal for leading  hotel and  hospitality  customers
nationwide.

2.  Summary of Significant Accounting Policies

      Principles of Consolidation

      The consolidated  financial statements include the accounts of the Company
and its wholly owned subsidiaries.  The Company also has an investment in a real
estate  joint  venture,  which is  accounted  for  under  the cost  method.  All
significant intercompany balances and transactions have been eliminated. Certain
prior  year  balances  have  been  reclassified  in the  consolidated  financial
statements in order to provide a presentation consistent with the current year.


      Use of Estimates

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements,  and the  reported  amounts  of  revenues  and  expenses  during the
reporting period.  Management  believes that the estimates utilized in preparing
the Company's financial statements are reasonable and prudent,  however,  actual
results could differ from those estimates.

      Revenue Recognition

Renovation

      The  Company  determines  renovation  earnings  under  the  percentage  of
completion  method.  Under this method,  the Company recognizes as earnings that
portion of the total earnings  anticipated from a contract which the cost of the
work  completed  bears to the  estimated  total cost of the work  covered by the
contract. To the extent that contracts extend over more than one year, revisions
in costs and earnings  estimates  during the course of the work are reflected in
the year in which the facts which  require the  revision  become  known.  Due to
uncertainties inherent in the estimation process, it is reasonably possible that
such estimates will be revised over the next year. When a loss is forecasted for
a contract,  the full amount of the anticipated loss is recognized in the period
in which it is  determined  that a loss  will  occur.  Claims  are  included  in
earnings from  renovation  contracts at an amount based on the related  contract
costs when realization is probable and the amount can be reliably estimated

      The  Company  continuously  reviews  estimated  earnings  from  renovation
contracts and makes necessary  adjustments  based on current  evaluations of the
indicated outcome.

      Cost of  renovation  contracts  include  all  direct  material,  labor and
subcontracting  costs, and those indirect costs related to contract  performance
that are identifiable with or allocable to the contracts.

Procurement

      Revenues are  recognized  three ways: (i) when the Company is a principal,
during which it functions as a purchaser  and reseller of products,  the Company
recognizes all revenues associated with the products it purchases at the time of
shipment of the  respective  product,  (ii) when the  Company  acts as an agent,
revenue is recognized as service fee income at the time the service is provided,
and (iii) when the Company  provides these services under  long-term  contracts,
earnings are  recognized  under the  percentage  of  completion  method based on
efforts  expended  over  the life of the  contract.  Revenues  from  procurement

                                      F-9
<PAGE>

contracts include both resale of product and service fee income.

      Customer  deposits consist of amounts remitted to the Company by customers
as deposits on specific  contracts.  Advances to vendors consist of amounts paid
by the Company to vendors on specific contracts.

      Depreciation and Amortization

      The Company  calculates  depreciation  on property  and  equipment  on the
straight-line method. Estimated useful lives are as follows: office equipment, 5
years;  software,  5 years;  and  furniture and  fixtures,  10 years.  Leasehold
improvements  to property  used in the Company's  operations  are amortized on a
straight-line  basis over the lease terms.  Maintenance and repairs are expensed
currently, while expenditures for betterments are capitalized.

      Goodwill

      Goodwill is amortized on a straight-line  basis over its estimated  useful
life of 17-30 years.  Goodwill  represents the costs of acquisition in excess of
the fair value of net assets acquired at the date of acquisition.

      Earnings Per Share of Common Stock

      In 1997,  the Company  adopted SFAS No. 128,  "Earnings  Per Share," which
replaced the  calculation  of primary and fully diluted  earnings per share with
basic and diluted earnings per share.  Unlike primary earnings per share,  basic
earnings  per share  excludes  any  dilutive  effects of options,  warrants  and
convertible  securities.  Diluted  earnings  per share are very  similar  to the
previously  reported  fully diluted  earnings per share.  All earnings per share
amounts for prior periods have been restated to conform to the new requirements.

      Basic  earnings  per common  share are based on net income less  preferred
stock  dividends  divided  by the  weighted  average  number  of  common  shares
outstanding.  Diluted  earnings  per common  share are  adjusted  to reflect the
assumed  conversion of convertible  preferred  stock and the  elimination of the
preferred  stock  dividends,  if such  conversion is dilutive,  and the weighted
average number of common share equivalents from stock options and warrants.

      Income Taxes

      Deferred  income  tax  assets or  liabilities  are  computed  based on the
difference  between the  financial  reporting and income tax bases of assets and
liabilities using the enacted marginal tax rate. Deferred income tax expenses or
benefits  are based on the  changes  in the asset or  liability  from  period to
period.

      Cash Equivalents

      The  Company  considers  all  highly  liquid  investments  purchased  with
maturities of 90 days or less to be cash equivalents.

      Marketable Securities

      Marketable securities which consist of commercial paper and treasury notes
maturing  in six  months  or less are  classified  as  available-for-sale  or as
held-to-maturity,    based   on   the   Company's   intended   holding   period.
Available-for-sale  investments are reported at fair value with unrealized gains
or losses,  if any,  reported as a separate  component of stockholder's  equity.
Held-to-maturity  investments  are reported at amortized cost. The cost basis of
securities is determined on a specific identification basis in calculating gains
and losses.

      Long-Lived Assets

      In 1996, the Company adopted Statement of Financial  Accounting  Standards
("SFAS") No. 121,  "Accounting  for the Impairment of Long-Lived  Assets and for
Long-Lived  Assets to be Disposed Of." This statement  requires that  long-lived
assets to be held and used be reviewed for impairment whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable. If

                                      F-10
<PAGE>

such review indicates that the asset is impaired, given that the
carrying  amount of an asset exceeds the sum of its expected  future cash flows,
on an undiscounted  basis, the asset's carrying amount should be written down to
fair value.  In addition,  SFAS No. 121 requires  that  long-lived  assets to be
disposed of be reported at the lower of carrying  amount or fair value less cost
to sell.  The effect of the  adoption of this  standard  was not material to the
consolidated financial statements.

      Stock -Based Compensation

      The Company accounts for its stock-based employee compensation plans using
the intrinsic value based method,  under which  compensation cost is measured as
the  excess of the  stock's  market  price at the grant  date over the amount an
employee  must pay to acquire the stock.  Expenses  related to stock options and
warrants issued to  non-employees  are accounted for using the fair value of the
security at the date of grant based on option-pricing models.

      Comprehensive Income

      In July 1997,  the Financial  Accounting  Standards  Board issued SFAS No.
130, "Reporting  Comprehensive Income." This statement establishes standards for
reporting and display of  comprehensive  income and its components in a separate
financial  statement.  Comprehensive  income  generally  includes  net income as
reported by the Company adjusted for cumulative foreign translation  adjustments
and   unrealized   gains  and   losses  on   marketable   securities   that  are
available-for-sale,  which are currently  reported in the  stockholders'  equity
section of the balance  sheet.  The  statement  is  effective  for fiscal  years
beginning  after  December 15, 1997.  The Company will adopt the standard at the
beginning of 1998, and will restate prior periods presented.

3.  Acquisition of Businesses

      On August 1, 1995, the Company  acquired  substantially  all of the assets
and  business  and assumed  certain  liabilities  of AGF  Interior  Services Co.
("AGF") through its wholly owned subsidiary,  Hospitality Restoration & Builders
("HRB"). HRB provides interior and exterior cosmetic renovations and maintenance
for  leading  hotel  and  hospitality   customers   nationwide.   The  aggregate
consideration  for the acquisition was $5,450,000.  The purchase price consisted
of a $2,150,000 promissory note payable to AGF over five years, bearing interest
at 8% per annum and 2,500,000 shares of the Company's common stock issued in the
name of AGF's sole stockholder, Watermark Investments Limited ("Watermark"). The
acquisition  resulted in goodwill of  approximately  $6,600,000,  which is being
amortized on a straight-line  basis over its estimated  useful life of 17 years.
The acquisition was accounted for as a purchase with the results of HRB included
in the consolidated  financial  statements from the acquisition date. On May 23,
1995, the Company loaned AGF $2,500,000,  secured by a promissory note,  payable
over five years and bearing  interest at 8% per annum.  On April 12,  1996,  the
Company  and  Watermark  agreed to offset the  $2,150,000  note  payable and the
$2,500,000  note  receivable,  with a net balance of $350,000  receivable  in 60
equal  monthly  installments  at 7% per annum with payments  commencing  January
1997. This note was paid in full in February 1998.

      In January 1997, the Company  completed the  acquisition of Leonard Parker
Company  ("LPC")  and Parker  Reorder  Corporation  ("Parker  Reorder").  LPC, a
leading  purchasing  company for the hospitality  industry,  acts as an agent or
principal for the purchase of goods and services for its customers which include
major hotel and management companies worldwide. Parker Reorder has developed and
is marketing a new  proprietary  software  product,  Parker FIRST,  which allows
clients to reorder operating  supplies and equipment ("OS&E") and other products
on-line and will provide such  clients  with access to  forecasting  and product
evaluation  capabilities.  The purchase price of LPC and Parker  Reorder,  after
final adjustments,  was approximately  $11,650,000 which consisted  primarily of
1,250,000  newly issued  shares of Common  Stock and $5 million  stated value of
newly issued 6% convertible  preferred stock of the Company,  convertible,  on a
formula basis,  into not less than  1,000,000  shares and no more than 4,000,000
shares of Common  Stock (at the present  stock  price)  from  January 1, 1998 to
January  10,  2000.  The  acquisition  resulted  in  goodwill  of  approximately
$11,400,000, which is being amortized on a straight-

                                      F-11
<PAGE>

line basis over its  estimated  useful  life of 30 years.  The  acquisition  was
accounted for as a purchase with the results of LPC and Parker Reorder  included
in the  consolidated  financial  statements of the Company from the  acquisition
date.

      The  following  pro  forma  consolidated  financial  information  has been
prepared to reflect the  acquisition  of the assets and business of AGF, LPC and
Parker Reorder.  The pro forma financial  information is based on the historical
financial  statements of the Company and AGF, LPC and Parker Reorder, and should
be read in conjunction  with the  accompanying  footnotes.  The accompanying pro
forma  operating  statements  are presented as if the  acquisitions  occurred on
January 1, 1995.  The pro forma  financial  information  is unaudited and is not
necessarily  indicative of what the actual  results of operations of the Company
would have been assuming the  transactions  had been  completed as of January 1,
1995, and neither is it necessarily  indicative of the results of operations for
future periods.

<TABLE>
<CAPTION>
Year Ended December 31                                                                1996                         1995
----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S>                                                                                 <C>                         <C>
Net sales                                                                           $83,067,724                 $ 52,302,744
Net income (loss) from continuing operations applicable to common shares              1,435,165                   (1,537,048)
Diluted loss per share from continuing operations                                          0.17                        (0.15)
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

      The above unaudited pro forma statements have been adjusted to reflect the
amortization  of goodwill as generated by the  acquisitions  over 17 and 30 year
periods, interest income on the $350,000 Watermark note receivable,  elimination
of the  interest  income  on the  $2,500,000  loan  to AGF,  dividends  of 6% on
$5,000,000 preferred shares in the LPC transaction,  LPC's officers compensation
based  on  employment  agreements  entered  into  at the  date  of  acquisition,
additional  income taxes on pro forma income and the 3,750,000 common shares and
$5,000,000 preferred shares issued as consideration in the transactions.

4.  Discontinued Operations

      In December  1995,  the Company  determined  to focus its resources on its
hospitality and restoration  business and discontinue its lighting business.  On
February 26, 1996,  the Company  entered into a divestiture  agreement  with its
former President. In accordance with the agreement,  the Company disposed of the
lighting business,  together with its accounts  receivable,  inventory and fixed
assets  to  the  former  President,   who  also  assumed  certain   liabilities.
Additionally,  in accordance with the agreement, the following occurred: (i) the
Company repurchased 500,000 shares of common stock from the former President for
$250,000 with a market value of $437,500;  (ii) the Company  retained the former
President  as a  consultant  for a three  year  period  at an  annual  salary of
$100,000,  (iii) the  former  President  granted  to the  Company  the option to
purchase an additional  1,000,000  shares of common stock over a two year period
at a 33% discount  from the average  trading price for the 20 trading days prior
to purchase,  but not below certain minimum set prices. The Company  repurchased
500,000 of the optioned  shares in October 1996 for $715,000 and repurchased the
remaining 500,000 shares in May 1997 for $2,210,000.

      In  1995,  the  Company  incurred  a  loss  on  disposal  of  discontinued
operations  of  $398,806,  which  primarily  includes  the present  value of the
consulting  fees payable to the former  President and a provision of $46,000 for
operating losses during the phase out period.  Revenues of the lighting business
segment for 1995 was $530,000.  In 1996, the Company incurred  additional losses
from discontinued operations of $64,705.

5.  Accounts Receivable/Accounts Payable

      Accounts  receivable  include  retainages of $636,577 at December 31, 1997
and $585,149 at December 31, 1996, on contracts which are  collectible  upon the
acceptance by the owner. All amounts at December 31, 1996 were collected in 1997
and  amounts at December  31,  1997 are  anticipated  to be  collected  in their
entirety in 1998.

                                      F-12
<PAGE>

      The  Company  withholds  a  portion  of  payments  due  subcontractors  as
retainages,  which  amounted to $212,278  at December  31, 1997 and  $181,528 at
December 31, 1996. The subcontractor balances are paid when the Company collects
its retainages receivable.


6.  Costs and Estimated Earnings on Uncompleted Contracts

      Costs  and  estimated  earnings  in  excess  of  billings  on  uncompleted
contracts represent unbilled  receivables.  Billings on uncompleted contracts in
excess of costs and estimated earnings  represent deferred revenue,  and consist
of:
<TABLE>
<CAPTION>
                                                                                                            December 31,
                                                                                                    1997                     1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>                   <C>
      Costs incurred on uncompleted contracts                                                    $15,629,620           $ 19,962,133
      Estimated earnings                                                                           7,333,524              7,027,729
      Billings to date                                                                           (19,838,282)           (25,013,757)
-----------------------------------------------------------------------------------------------------------------------------------=
      Costs and estimated earnings on uncompleted
        contracts in excess of billings                                                           $3,124,862           $  1,976,105
------------------------------------------------------------------------------------------------------------------------------------
      Included in the accompanying consolidated balance sheet under the
        following captions:
      Costs and estimated earnings in excess of billings                                          $3,420,829           $  2,176,907
      Billings in excess of costs and estimated earnings                                            (295,967)              (200,802)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  $3,124,862             $1,976,105
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


7.  Property and Equipment

      Property and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                                                             December 31
                                                                                                      1997                  1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>                    <C>
         Furniture and fixtures                                                                     $347,769               $ 52,048
         Office equipment                                                                          1,068,352                134,153
         Leasehold improvements                                                                      245,297                 18,387
         Software                                                                                  2,224,167                    --
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   3,885,585                204,588
            Less: Accumulated depreciation and amortization                                        (337,873)                (61,711)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  $3,547,712              $ 142,877
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

8.  Loan Payable

      In 1996,  the  Company  secured  a line of  credit  with a bank.  The line
provided for borrowings of up to $2.5 million,  with interest at prime plus 1/2%
(8.75% at December 31, 1996) and was  collateralized  by all Company  assets and
was  guaranteed  by HRB.  At December  31,  1996 the Company had an  outstanding
balance of $1.4 million on the line. In September  1997,  the Company repaid all
outstanding  borrowings  under the line. The weighted  average interest for 1997
was 8.92%.

      In May 1997, the Company  borrowed $2.2 million at an annual interest rate
of 12%. The proceeds of the  borrowing  were used to repurchase  500,000  shares
from the  Company's  former  President  (Note  4).  The note was paid in full in
September 1997.


                                      F-13

<PAGE>

9.  Income Taxes

      The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                           1997                 1996                  1995
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                   <C>                   <C>
                 Current:
                             Federal                                   $ 360,349             $ 620,929             $  25,000
                             State and Local                             536,061               370,676                  --
------------------------------------------------------------------------------------------------------------------------------------
                                                                         896,410               991,605                25,000
------------------------------------------------------------------------------------------------------------------------------------

                 Deferred:
                             Federal                                    (465,547)              (65,280)                 --
                             State and Local                            (202,875)                 --                    --
------------------------------------------------------------------------------------------------------------------------------------
                                                                        (668,422)              (65,280)                 --
------------------------------------------------------------------------------------------------------------------------------------
                 Total                                                 $ 227,988             $ 926,325             $  25,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


      The following is a  reconciliation  of the Company's income taxes based on
the statutory rate and the actual provision for income taxes:


<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                                                 1997                 1996                1995
---------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                  <C>                 <C>
Statutory federal income tax at 34%                            $ (209,325)          $  963,640          $(120,845)
Increase (decrease) resulting from:
   Reduction (increase) of valuation allowance                         --             (339,120)           101,345
   State and local taxes, net of federal tax benefit              219,903              239,027             16,500
   Nondeductible goodwill amortization and expenses               217,410               62,778             28,000
---------------------------------------------------------------------------------------------------------------------
Provision for income taxes                                     $  227,988           $  926,325         $   25,000
---------------------------------------------------------------------------------------------------------------------
</TABLE>



      Deferred  income  taxes  result  from  temporary  differences  between the
financial   reporting   carrying  amounts  and  the  tax  bases  of  assets  and
liabilities.  The source of these differences and tax effect of each at December
31, 1997 and 1996 are as follows:

Deferred Income Tax Liability (Asset)                1997        1996
------------------------------------------------------------------------
        Warrant expense                         $(735,016)    $    --
        Rent expense                              (52,800)         --
        Goodwill amortization                      50,017        22,000
        Allowance for doubtful accounts           (64,881)         --
        Other                                      63,592       (87,280)
                                                              ---------
                                                ---------     ---------
                                                $(739,088)    $ (65,280)
                                                =========     =========

      The Company has  recorded net deferred tax assets at December 31, 1997 and
1996 primarily representing expenses recognized for financial reporting purposes
that will be deductible in future years for tax  purposes.  Management  believes
that no valuation allowance is required for these assets due to future reversals
of existing taxable  temporary  differences and the expectation that the Company
will generate taxable income in future years.


10.  Related Party Transactions

      (a)   The Company hired Interstate  Interior Services  ("Interstate") as a
            subcontractor   on  certain  of  its  projects.   The  President  of
            Interstate  is the sister of one of the Company's  officers.  During
            1997,  1996 and from August 1, 1995 through  December 31, 1995,  the
            Company paid fees of $0,  $172,786 and  $712,137,  respectively,  to
            Interstate.


                                      F-14

<PAGE>

      (b)   During 1997 and 1996, the Company performed  renovation services for
            Watermark  LLC.  Watermark  LLC is the general  partner of Watertone
            Holdings LP, which is a  shareholder  of Company  common  stock.  In
            addition,  the Chief Executive Officer of the Company was a director
            of  Watermark  LLC.  During  1997,  the  Company and  Watermark  LLC
            renegotiated  the  renovation  contract  to  provide  for fees  more
            consistent  with a project of  similar  scope and  complexity.  As a
            result of the  renegotiations,  the  Company  recognized  additional
            revenues for the year ended December 31, 1997 of $780,183 without an
            accompanying increase in costs. As of December 31, 1997 and December
            31, 1996 the Company had a  receivable  balance of $0 and  $492,124,
            respectively, from Watermark.

            The following  revenues and gross profit have been  reflected in the
            consolidated financial statements:

                                          Year Ended             Year Ended
                                       December 31, 1997      December 31, 1996
            --------------------------------------------------------------------
            Net revenues                 $     780,183        $    526,743
            Cost of revenues                        --             492,283
            --------------------------------------------------------------------
            Gross profit                 $     780,183        $     34,460
            --------------------------------------------------------------------

      (c)   In connection  with the Apollo Joint Venture (see Note 13), on April
            10, 1997, the Company and Resource Holdings entered into a financial
            advisory  agreement  pursuant to which Resource  Holdings  agreed to
            assist the Company in connection with  negotiations  relating to the
            Apollo  Joint  Venture and to provide  general  financial  advisory,
            strategic  planning  and  acquisition  advice  to  the  Company.  In
            consideration for those services, the Company agreed to pay Resource
            Holdings  16 1/2% of certain  distributions  received by the Company
            from the Apollo Joint Venture  (after certain  distributions  to the
            joint  venture  parties  and  returns  on capital  invested  in each
            project in which the Apollo  Joint  Venture  participates)  and such
            additional fees to be mutually agreed upon between Resource Holdings
            and the Company.  No distributions were received by the Company from
            Apollo in 1997.

11.  Commitments and Contingencies

(A) Lease Commitments

      The  Company  leases  office  space in New York,  California,  Atlanta and
Florida which expire at various dates  through  2007.  In  conjunction  with the
acquisition  of Bekins in January,  1998 (see Note 17),  the  Company  assumed a
ground lease on a building in Orlando,  Florida  which  expires in 2085,  with a
minimum annual payment of $6,489.

      The aggregate future minimum lease payments due under operating leases are
as follows:

December 31
--------------------------------------------------------------------------------
1998                                                                  $1,729,608
1999                                                                   1,626,705
2000                                                                   1,354,771
2001                                                                   1,107,004
2002                                                                     797,168
Thereafter                                                             1,733,129
                                                                       ---------
                                                                      $8,348,385
                                                                       =========

      Rent expense for 1997, 1996 and 1995 was $1,093,686, $120,534 and $88,000,
respectively.

                                      F-15
<PAGE>


(B) Employment Agreements

      The Company  currently has  employment  agreements  with twelve members of
management  personnel  that  expire  from  April  1998  to  December  2000 at an
aggregate annual compensation of $2,025,000.

(C) Litigation

      The Company is a defendant in various  litigation  in the normal course of
business. Although the outcome of litigation cannot be predicted with certainty,
in the  opinion  of  management,  based on the  facts  known at this  time,  the
resolution of such  litigation  is not  anticipated  to have a material  adverse
effect on the financial position or results of operations of the Company.


12.  Major Customers and Subcontractor

      Most of the Company's customers are in the hospitality industry with a few
of them accounting for a substantial  portion of annual  revenues.  As a result,
the trade  accounts  receivable  and costs and  estimated  earnings in excess of
billings subject the Company to concentration of credit risk. As of December 31,
1996,  two  customers  accounted  for  approximately  80%  and  65% of  accounts
receivable and costs and estimated earnings in excess of billings, respectively.

      The largest  customer of the  Company  for 1997  accounted  for 14% of net
revenues.  The two largest  customers of the Company for 1996  accounted for 49%
and 31% of net revenues,  and the four largest  customers for 1995 accounted for
23%, 19%, 18%, and 14% of net revenues.

      During 1997,  no  subcontractors  accounted  for over 10% of the Company's
cost  revenues.  During 1996,  35% of the Company's  cost of revenues were costs
charged by one subcontractor.

13.  Stockholders' Equity

      In January  1997,  in connection  with the  acquisition  of LPC and Parker
Reorder,  the Company issued 200,000  shares of 6% Convertible  Preferred  Stock
("LPC  Preferred").  The holders of LPC  Preferred  are entitled to receive cash
dividends  at the rate of six  percent  (or  $1.50)  per  annum per share of LPC
Preferred  (the  "Preferred  Dividend"),  accruing from the date of issuance and
payable  commencing  March 31, 1998. If the Company is legally capable of paying
the Preferred Dividend and elects to accrue such amount,  such accrued dividends
shall bear interest at the rate of 13 1/2% per annum until paid.  The holders of
the LPC Preferred are also entitled to receive out of the cumulative net profits
of Parker Reorder (the  "Cumulative  Net Profits"),  an annual cash payment (the
"Participating  Dividend")  equal to 20% of (i) the  Cumulative  Net  Profits of
Parker  Reorder  measured  from  January  1, 1997,  less (ii) all  Participating
Dividends  previously  made to the holders of the LPC Preferred.  The holders of
the LPC Preferred are also entitled to a liquidation preference of $5,000,000.

      The LPC Preferred is  convertible,  at any one time during the period from
January 10, 1998 to January 10, 2000, into (i) 1,000,000 shares of Common Stock,
subject to upward  adjustment to a maximum of 4,000,000 shares in the event that
the market price of the Common  Stock is below $5.00 at the time of  conversion,
or (ii) 9.80% of the outstanding  capital stock of Parker  Reorder.  At any time
after  January 10,  2000,  the  Company  shall have the option to redeem the LPC
Preferred at a redemption price equal to the Stated Value for each such share of
LPC  Preferred,  plus an  amount  equal  to all  accrued  and  unpaid  Preferred
Dividends and interest thereon, if any.

      The holders of LPC Preferred are entitled to vote on all matters submitted
to the holders of the Common  Stock and each share of LPC  Preferred is entitled
to 4.17 votes.  The holders of record of the LPC  Preferred,  voting as a class,
are entitled to elect two directors to the  Company's  Board of Directors at any
time that any of the LPC Preferred is outstanding.

      In May 1997,  the  Company  entered  into an  Agreement  to Joint  Venture
("Apollo Joint  Venture") with Apollo Real Estate  Advisors II, L.P.  ("Apollo")
and Watermark  Limited LLC to identify,  acquire,

                                      F-16
<PAGE>

renovate,  refurbish and sell hotel properties.  The Company will perform all of
the renovation and procurement  services for each of the properties purchased by
the Apollo Joint Venture.  In addition,  the Company will receive a five percent
equity  interest in each of the joint venture  entities  formed to purchase such
properties in exchange for its  contribution of five percent of the total equity
required  to  acquire,  renovate  and sell such  properties.  The joint  venture
intends to own and operate the properties only for the time necessary to upgrade
and market  them for resale.  As an  inducement  to enter into the Apollo  Joint
Venture,  the Company issued to Apollo a seven-year  warrant to purchase 750,000
shares of Common  Stock at $8.115 per share.  The warrant  expires in 2004.  The
warrant is currently exercisable as to 350,000 shares and becomes exercisable as
to the  remaining  400,000  shares in  increments  of  100,000  shares for every
$7,500,000 of  incremental  revenue  earned and to be earned by the Company from
the joint  venture.  The fair value of the warrant for 250,000 shares was $5.15,
and for the 100,000 shares was $5.50. In 1997, the Company recognized an expense
of $1,448,560 on the 350,000 shares that became exercisable.

      The Company  completed a secondary  public  offering in September  1997 of
3,450,000  shares  of  Common  Stock  (inclusive  of  1,000,000  shares  held in
treasury) at $10.25 per share. The net proceeds of the offering, net of issuance
costs and  expenses,  were  $32,126,630.  A portion of the  proceeds was used to
repay short-term indebtedness with the remainder available for general corporate
purposes,  including  the  financing  of  working  capital  needs  and  business
development.  In conjunction  with the offering,  the  underwriter was granted a
warrant to purchase  356,723 shares of the Company's common stock at an exercise
price of $12.00 per share. The fair value of the warrants was $5.04. The warrant
is  exercisable  in full  after one year  (September  17,  1998) and  expires on
September 17, 2002. The number of shares  issuable under this warrant is subject
to change upon certain events,  among them, the declaration of dividends,  stock
splits or reverse stock splits.


14.  Stock Option Plan

      At  December  31,  1997,  the Company has three  stock  option  plans.  As
permitted by Statement of Financial  Accounting  Standards No. 123 ("SFAS 123"),
when the exercise  price of the  Company's  employee  stock  options  equals the
market price of the underlying stock on the date of grant, no compensation  cost
is recognized.

      During 1994,  the  Company's  Board of Directors  adopted a  non-statutory
stock  option plan for  purposes of issuance of shares of the  Company's  common
stock to certain key employees or consultants.  With respect thereto, options to
purchase a total of 160,000 shares were granted.  The stock option plan has been
retired, and there are no shares available for grant.

      On September 26, 1996, the Company's  Board of Directors  adopted the 1996
Stock  Option Plan (the  "Plan") for the purpose of  providing  incentive to the
officers and  employees  of the Company who are  primarily  responsible  for the
management and growth of the Company.  Each option granted  pursuant to the Plan
shall be designated  at the time of grant as either an "incentive  stock option"
or as a  "non-qualified  stock  option".  The term for each  option  granted  is
determined  by the Stock  Option  Committee,  which is  composed  of two or more
members of the Board of  Directors,  provided the maximum  length of the term of
each option  granted will be no more than ten years.  Options  granted vest over
two years.

      On September 26, 1996, the Company's Board of Directors  adopted,  and the
shareholders  approved,  the 1996  Outside  Directors  Stock  Option  Plan  (the
"Outside  Directors'  Plan") for the purpose of securing for the Company and its
shareholders the benefits arising from stock ownership by its outside directors.
Subject to shareholder  approval,  each outside  director who becomes an outside
director  after  March 1, 1996 shall  receive the grant of an option to purchase
15,000 shares of common stock.  To the extent that shares of common stock remain
available for the grant of options under the Outside  Directors  Plan on April 1
of each year, beginning on April 1, 1997, each outside director shall be granted
an option to purchase  10,000 shares of common stock.  Options granted under the
Outside  Directors  Plan vest over two years and shall be  exercisable  in three
equal installments beginning on the first anniversary of the grant date.

                                      F-17
<PAGE>

      SFAS 123 requires the Company to provide pro forma  information  regarding
net income and  earnings  per share as if  compensation  cost for the  Company's
stock option plans had been determined in accordance  with the fair  value-based
method  prescribed  in SFAS 123.  The Company  estimates  the fair value of each
stock option at the grant date by using the Black-Scholes  option-pricing  model
with the following  weighted-average  assumptions  used for grants in 1997, 1996
and 1995, respectively:  no dividends paid for all years; expected volatility of
49%, 40% and 40%;  risk-free  interest rate of 6%, 6.41% and 6.41%; and expected
lives of 5.3 years, 2 years and 2 years.

      Under the accounting  provisions of SFAS 123, the Company's net income and
earnings  per share would have been reduced to the pro forma  amounts  indicated
below.

                                          1997      1996        1995
------------------------------------------------------------------------
Net income (loss) (in thousands)
                 As reported          $   (844)   $  1,843   $  (1,116)
                 Pro forma            $ (2,031)   $  1,583   $  (1,182)
Basic earnings per share
                 As reported          $  (0.13)   $   0.26   $   (0.20)
                 Pro forma            $  (0.23)   $   0.23   $   (0.21)
Diluted earnings per share
                 As reported                (a)   $   0.26          (a)
                 Pro forma                  (a)   $   0.22          (a)


(a)    Antidilutive



      The following  table  contains  information on stock options for the three
year period ended December 31, 1997.
                                                                Weighted
                                               Option           average
                                               shares       exercise price
----------------------------------------------------------------------------
Outstanding, December 31, 1994                85,000           $    1.275
Granted                                       75,000                1.275
Exercised                                       --                   --
Canceled                                        --                   --
----------------------------------------------------------------------------
Outstanding, December 31, 1995               160,000                1.275
Granted                                      984,000                2.500
Exercised                                    (12,500)               1.570
Canceled                                        --
----------------------------------------------------------------------------
Outstanding, December 31, 1996             1,131,500                2.38
Granted                                      738,000                9.29
Exercised                                   (122,250)               2.15
Canceled                                     (19,250)               3.27
----------------------------------------------------------------------------
Outstanding, December 31, 1997             1,728,000           $    5.58
----------------------------------------------------------------------------


                                   Exercise price    Exercise price       Total
                                  less than market   equal to market     options
--------------------------------------------------------------------------------
Weighted-average fair value of:
      Options granted in 1995             --               $0.60         $0.60
      Options granted in 1996             --               $0.82         $0.82
      Options granted in 1997             --               $4.88         $4.88



                                      F-18
<PAGE>

The following table summarizes  information  about stock options  outstanding at
December 31, 1997.

<TABLE>
<CAPTION>
                                Options Outstanding                                         Options Exercisable
---------------------------------------------------------------------------------------------------------------------
         Amount       Weighted Average         Range of Exercise   Weighted Average     Amount         Weighted
       Outstanding  Remaining Contractual            Price         Exercise Price    Exercisable    Average Exercise
                       life (years)                                                                      Price
---------------------------------------------------------------------------------------------------------------------
<S>                        <C>                 <C>                   <C>               <C>             <C>
        992,500            1.80                $   1.275-2.75         $ 2.80            759,875         $2.73
        300,000            2.87                    6.125-6.75           6.67                 --            --
        435,500            5.87                   10.25-12.00          11.15                 --            --
---------------------------------------------------------------------------------------------------------------------
      1,728,000            3.01                 $ 1.275-12.00         $ 5.58            759,875         $2.73
</TABLE>




15. Earnings Per Share

      The  following  table  reconciles  the  components  of basic  and  diluted
earnings per share for income (loss) from  continuing  operations  for the years
ended December 31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                                                                 1997             1996               1995
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>               <C>              <C>
Numerator:
           Income (loss) from continuing operations                          $  (843,649)      $ 1,907,383      $  (380,427)
           Preferred stock dividends                                            (300,000)             --               --
---------------------------------------------------------------------------------------------------------------------------
           Basic earnings (loss) per common share -
                 Income (loss) available to common
                 stockholders from continuing operations                      (1,143,649)       1, 907,383         (380,427)
---------------------------------------------------------------------------------------------------------------------------

           Effect of dilutive securities (a)
             Preferred stock dividends                                              --                --               --
---------------------------------------------------------------------------------------------------------------------------
           Diluted earnings (loss) per common share -
                 Income (loss) available to common
                 stockholders from continuing operations                     $(1,143,649)      $ 1,907,383      $  (380,427)
---------------------------------------------------------------------------------------------------------------------------
        Denominator:
           Basic earnings per common share -
                 weighted average common shares outstanding                    8,885,570         6,983,333        5,673,600
---------------------------------------------------------------------------------------------------------------------------
           Effect of dilutive securities (a):
                 Stock-based compensation plans                                     --             148,582             --
                 Preferred stock                                                    --                --               --
---------------------------------------------------------------------------------------------------------------------------
           Diluted earnings (loss) per common share -
                 weighted average common and common
                 equivalent shares outstanding                                 8,885,570         7,131,915        5,673,600
---------------------------------------------------------------------------------------------------------------------------

        Basic earnings (loss) per common share
           from continuing operations                                        $     (0.13)      $      0.27      $     (0.07)

        Diluted earnings (loss) per common share
           from continuing operations                                                 (a)      $      0.27               (a)
</TABLE>

(a) The common stock equivalent shares for the years ended December 31, 1997 and
1995 were  991,232  and  26,724  for the  Stock-based  compensation  plans;  and
1,000,000  shares for the convertible  preferred stock in 1997. The common stock
equivalents  for these  shares were not included in the  calculation  of diluted
earnings (loss) per common share because the effect would be antidilutive.



                                      F-19


<PAGE>

16.  Business Segments

<TABLE>
<CAPTION>
                                                                      1997                 1996                    1995
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                   <C>                   <C>
      Sales to Unaffiliated Customers
                    Renovation                                     $ 19,394,593          $ 24,367,112          $  4,980,291
                    Purchasing                                       64,886,119                  --                    --
                    General Corporate                                 1,161,000                  --                    --
---------------------------------------------------------------------------------------------------------------------------
                                                                   $ 85,441,712          $ 24,367,112          $  4,980,291
---------------------------------------------------------------------------------------------------------------------------

              Inter-segment Sales
                    Renovation                                     $       --            $       --            $       --
                    Purchasing                                          165,000                  --                    --
                    General Corporate                                      --                 115,980                  --
---------------------------------------------------------------------------------------------------------------------------
                                                                   $    165,000          $    115,980          $       --
---------------------------------------------------------------------------------------------------------------------------

              Operating Profit (Loss)
                    Renovation                                     $    842,539          $  3,309,399          $   (160,688)
                    Purchasing                                          190,314                  --                    --
                    General Corporate                                  (848,217)             (450,731)             (301,989)
---------------------------------------------------------------------------------------------------------------------------
                                                                   $    184,636          $  2,858,668          $   (462,677)
---------------------------------------------------------------------------------------------------------------------------

              Identifiable Assets at Year End
                    Renovation                                     $ 10,287,288          $ 12,636,374          $  9,651,800
                    Purchasing                                       39,437,337                  --                    --
                    General Corporate                                34,543,066               113,716               379,446
---------------------------------------------------------------------------------------------------------------------------
                                                                   $ 84,267,691          $ 12,750,090          $ 10,031,246
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

      In June 1997,  the Financial  Accounting  Standards  Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement requires that the Company report financial and descriptive information
about its  reportable  operating  segments  in  financial  statements  issued to
shareholders  for interim and annual  reports.  The Statement  also  establishes
standards for related disclosures about products and services,  geographic areas
and major customers. Under this Statement,  operating segments are components of
an enterprise  about which separate  financial  information is available that is
regularly  evaluated by the enterprise's  chief  operational  decision-maker  in
deciding  how to allocate  resources  and in  assessing  performance.  While the
Company  continues to evaluate the  adoption of the new  standard,  it is likely
that its current  reported  business  segments  of  Renovation,  Purchasing  and
General  Corporate will be maintained with additions for any  acquisitions.  The
Statement is effective for fiscal years  beginning  after December 15, 1997. The
Company will adopt the standard at the beginning of 1998.

17.  Subsequent Events

      On January 6, 1998, the Company reached an agreement in principle to enter
into a master  development  agreement with Prime Hospitality Corp.  ("Prime") to
develop twenty hotel  properties  over a two-year  period under the  AmeriSuites
brand name.  Under the  proposed  agreement,  the Company  will provide the site
identification,  development,  construction and purchasing services required for
each project and Prime will provide  project design and management and franchise
services once each  property is complete.  The Company and Prime will be equally
responsible  for the  financing  requirements  (up to $30 million each) and will
each have a 50% interest in the new hotels.

      On  January 9, 1998,  the  Company  completed  the  acquisition  of Bekins
Distribution  Services,  Inc. ("Bekins"),  a leading provider of transportation,
warehousing  and  installation  services  to a variety of  customers  worldwide.
Founded in 1969, Bekins is a logistical services company that serves clients who
are opening,  renovating  or relocating  facilities by assuring that  materials,
fixtures,  furniture and merchandise are moved from multiple vendor locations to
their ultimate  destinations in a controlled  orderly sequence so

                                      F-20
<PAGE>


that each item can be  installed on  schedule.  The purchase  price of Bekins of
approximately  $11,000,000  consisted of 514,117  shares of Common Stock and the
assumption of certain Bekins' debt. The purchase agreement contains a make-whole
adjustment whereby, on a formula-basis, additional shares will be transferred if
the price of the  Company's  common  stock for the 20 days prior to the one year
anniversary date is less than 85% of the share price on the date of acquisition.
The  acquisition  will be accounted for as a purchase with the results of Bekins
included  in the  consolidated  financial  statements  of the  Company  from the
acquisition date.

      On February 9, 1998,  the Company  purchased the assets of the real estate
advisory  business from  Watermark  Limited,  LLC, an  international  management
company  that is the  general  partner  and  manages  Watertone  Holdings  LP, a
shareholder of the Company. The resulting wholly owned subsidiary of the Company
will be named HWS Real Estate  Advisory Group,  Inc. ("HWS REAG").  The purchase
price of HWS REAG was  $1,500,000  and their  results  will be  included  in the
consolidated financial statements of the Company from the acquisition date.

      In March 1998, the Company obtained a $7,000,000  unsecured line of credit
with a bank at an interest  rate of prime.  The Company drew down on the line of
credit for $3,500,000 in March 1998.

      On March 6, 1998,  in  conjunction  with a joint  venture  formed with ING
Realty Partners ("ING Joint Venture"),  the Company acquired the Clarion Quality
Hotel in Chicago,  Illinois. A wholly-owned subsidiary of the Company will fully
renovate and refurbish  this property  pursuant to a contract with the ING Joint
Venture,  which is expected to generate approximately $17 million of revenue for
the Company in 1998.

18.    Quarterly Financial Information (unaudited) (a)

<TABLE>
<CAPTION>
1997 Quarter Ended                                   March 31            June 30         September 30            December 31
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                <C>                    <C>                 <C>
Net revenues                                          $18,196            $19,513                $16,532             $31,201
Gross profit                                            3,459              4,555                  4,656               1,291
Income (loss) from operations                             815                938                  1,308              (2,876) (d)
Net income (loss)                                         397                430                    719              (2,390)
Basic earnings per common share (b)                       .04                .04                    .08                (.22)
Diluted earnings per common share (b)                     .04                .04                    .07                  (c)
</TABLE>

<TABLE>
<CAPTION>

1996 Quarter Ended                                  March 31             June 30         September 30            December 31
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                  <C>                    <C>                <C>
Net revenues                                         $1,993               $7,423                 $8,240             $6,711
Gross profit                                            316                2,110                  1,988              1,663
Income (loss) from operations                          (124)               1,131                  1,126                726
Net income (loss)                                      (121)                 827                    831                306
Basic earnings per share: (b)
  Income from continuing operations                    (.02)                 .12                    .12                .06
  Net income (loss)                                    (.02)                 .12                    .12                .05
Diluted earnings per share: (b)
  Income from continuing operations                      (c)                 .12                    .11                .05
  Net income (loss)                                      (c)                 .12                    .11                .04
</TABLE>



(a)    All amounts except per share data presented in thousands.
(b)    The  quarterly  per share  amounts are computed  independently  of annual
       amounts.
(c)    Antidilutive
(d)    The fourth  quarter  includes a non cash charge of $1,434  related to the
       recognition  of  warrants  issued in  connection  with the  Apollo  Joint
       Ventue.

                                      F-21