UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

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

For the calendar year ended  December 31, 1996

[ ]  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.
                 (Name of Small Business Issuer in its Charter)

New York                                                 11-3096379
--------                                             --------------------
State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization                        Identification No.)
450 PARK AVENUE, SUITE 2603, NEW YORK, NY                 10022
-----------------------------------------                 -----
(Address of principal executive offices)               (Zip Code)

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

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

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

            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

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

            The  Registrant's  revenues  for the fiscal year ended  December 31,
1996 were $24,367,112.

            The aggregate market value for the 5,141,531 shares of Common Stock,
$.0l par value per share (the "Common  Stock"),  held by  non-affiliates  of the
Registrant as of March 28, 1997 was approximately $33,111,640.
<PAGE>
ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS:

            Check  whether the  Registrant  has filed all  documents and reports
required  to be filed by Section 12, 13 or 15(d) of the  Exchange  Act after the
distribution of securities under a plan confirmed by a court.

                                  [ ] YES [ ]NO

APPLICABLE ONLY TO CORPORATE REGISTRANTS

The  number  of  shares of Common  Stock  outstanding  as of March 28,  1997 was
8,304,489.

DOCUMENTS INCORPORATED BY REFERENCE

None
<PAGE>
                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                   Form 10-KSB
                      Calendar Year Ended December 31, 1996

                                TABLE OF CONTENTS

                                                                      Page No.
                                                                      --------


                                     PART I

Item 1.   Description of Business                                           2
Item 2.   Description of Properties                                         4
Item 3.   Legal Proceedings                                                 4
Item 4.   Submission of Matters to a Vote of Security Holders               5


                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters          5
Item 6.   Management Discussion and Analysis of Financial Condition and
          Results of Operations                                             5
Item 7.   Financial Statements                                              9
Item 8.   Changes In and Disagreements with Accountants on                  9
          Accounting and Financial Disclosure



                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act                 10
Item 10.  Executive Compensation                                            12
Item 11.  Security Ownership of Certain Beneficial Owners and Management    15
Item 12.  Certain Relationships and Related Transactions                    18
Item 13.  Exhibits and Reports on  Form 8-K                                 19


<PAGE>
                                     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, par value $.01 per share (the "Common Stock"). 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 "Con Edison Rebate  Program"),  under
which Con Edison offered rebates to those who utilized energy saving devices for
a substantial  amount,  if not all, of the cost of the fixtures,  which left the
customer  responsible  for payment of a small  portion,  if any, of the cost. In
1994, Con Edison substantially reduced the Con Edison Rebate Program,  making it
less  advantageous  for the  Company to use the Con Edison  Rebate  Program as a
marketing tool. As a result, the Company's revenues were substantially reduced.

         In August 1995,  the  Company's  wholly-owned  subsidiary,  Hospitality
Restoration  and  Builders,  Inc.,  a  New  York  corporation  ("HRB")  acquired
substantially all of the assets and business and assumed certain  liabilities of
AGF  Interior  Services  Co.,  a  Florida  corporation  ("AGF")  which  provides
renovation services to the hospitality industry, in a stock and cash transaction
from Watermark  Investments  Limited, a Delaware corporation  ("Watermark").  In
December  1995,  the  Company's  Board of  Directors,  in an effort to focus the
Company in a more  strategic  direction,  determined  to begin to dispose of the
Company's lighting division and concentrate the Company's efforts in HRB.

         On February 26, 1996, the Company,  HRB, Watermark Investments Limited,
a Bahamian  international business company  ("Watermark-Bahamas"),  Watermark, a
wholly-owned  subsidiary  of  Watermark-Bahamas,  AGF,  Tova  Schwartz,  Alan G.
Friedberg and Guillermo A. Montero  entered into a  Divestiture,  Settlement and
Reorganization Agreement (the "Divestiture Agreement") pursuant to which (i) the
Company  sold its  lighting  business to Tova  Schwartz,  the  Company's  former
President  and Chief  Executive  Officer,  (ii) Ms.  Schwartz  resigned from her
positions  as a director  and officer of the Company and HRB;  (ill) the Company
repurchased 500,000 shares of Common Stock from Ms. Schwartz for $250,000,  with
a market value of $437,500;  (iv) Ms. Schwartz granted to the Company options to
purchase  an  additional  1,000,000  shares of Common  Stock (two  options  with
respect to 500,000  shares  each);  (v) the Company  retained Ms.  Schwartz as a
consultant  for a period of three years at a salary of $100,000  per year;  (vi)
Ms.  Schwartz,  the sole  remaining  director  of the Company  (since  Howard G.
Anders,  Moshe  Greenfield and Moise Hendeles  resigned from their  positions as
directors of the Company effective  February 25, 1996),  appointed Mr. Friedberg
and  Robert A.  Berman  to the  Company's  Board of  Directors  and the  parties
appointed Mr. Friedberg as the Company's  President and Chief Executive Officer;
(vii) the Company  entered into  three-year  employment  agreements with each of
Messrs.  Friedberg and Montero; and (viii) the Company engaged Resource Holdings
Associates, L.P. ("Resource Holdings") as its financial advisor.

         Subsequently, on March 25, 1996, Mr. Berman resigned from the Company's
Board of Directors  and the Board  elected  Scott A.  Kaniewski  as  Watermark's
representative to the Board of Directors.

         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.  The name
change was approved at the annual shareholders meeting held in September, 1996.


                                        2
<PAGE>
         Until January, 1997, the Company's only line of business was to provide
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 seventeen years, HRB, through its predecessor,  AGF, 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.

         On January 10, 1997, the Company  completed the  acquisition of Leonard
Parker  Company,  ("LPC"),  a leading  purchasing  company  for the  hospitality
industry  that acts as an agent 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.  Founded in 1969, the privately-held  Leonard Parker
Company had revenue in excess of $56  million  for the year ended  December  31,
1996.  The  purchase  price of LPC of  approximately  $12,000,000  consisted  of
1,250,000  newly issued  shares of Common  Stock and $5 million  stated value of
newly  issued  6%  redeemable   convertible  preferred  stock  of  the  Company,
convertible,  on a formula basis,  into not less than 1,000,000 and no more than
5,000,000  shares of Common Stock (at the present  stock price) not earlier than
January 1, 1998. The  Acquisition  will be accounted for as a purchase method of
accounting  with the  results  of LPC  included  in the  consolidated  financial
statements of the Company from the acquisition date.

         The  Company  currently  maintains  its  executive  offices at 450 Park
Avenue,  Suite  2603,  New York,  NY 10022,  and its  telephone  number is (212)
223-0699.  HRB maintains its principal  office at 1800 Century Park East,  Suite
370, Los Angeles,  California 90067, and its telephone number is (310) 286-6400.
HRB also maintains a satellite office in Coral Springs,  Florida.  LPC maintains
its executive office at 550 Biltmore Way, Coral Gables,  Florida, 33134, and its
telephone  number  is  (305)  774-3000.  LPC also has  offices  in Los  Angeles,
California, Singapore, and South Africa.

MARKETING

         Marketing  efforts  are  directed  by  the  Company's  newly  appointed
divisional  presidents  and  in-house  sales staff.  Sales  efforts are directed
primarily to the owners of major hotel chains throughout the United States.  The
Company believes that it provides  necessary  services to major hotel chains and
feels  confident  it will be able to  benefit  from its  strategic  focus in the
hospitality industry.

COMPETITION

         The hospitality  maintenance  industry is highly fragmented and is made
up largely of small, local companies.  Competition in the hospitality renovation
industry is  significant  and is based largely on the price and service.  In the
future,  the  Company's  competitors  may be larger and have  greater  financial
resources  than  HRB.  The  Company  recognizes  the  need to grow to be able to
compete  effectively.  For this  reason,  the Company is focusing its efforts on
expansion   through   acquisitions  (see  pages  6  and  7  for  1995  and  1996
acquisitions)  to enhance  the  Company's  ability to  compete  effectively  and
increase the  Company's  national  operations  and to expand into  international
markets.

PERMITS AND LICENSES

         The Company is required  to obtain  state-wide  licenses in many of the
states in which it provides  services.  The Company currently has licenses in 20
states.  The Company's  management  believes that it has sufficient  licenses to
conduct  its  business,  and that it would  easily be able to obtain  additional
licenses if it were required to do so. In  connection  with such  licenses,  the
Company is  required  to, and  believes it does,  comply with all  environmental
laws.


                                        3
<PAGE>
DEPENDENCE ON CUSTOMERS

         Most of the Company's customers are in the hospitality  industry with a
few of  them  accounting  for a  substantial  portion  of the  Company's  annual
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
(see Recent  Developments),  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, 1996, the Company employed 201 employees,  including
32 full time  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.

RECENT DEVELOPMENTS

         On March 18, 1997, the Company's Board of Directors voted to reorganize
the Company's  internal  management and to nominate a new Chairman of the Board.
The Company's Board of Directors effected these changes in an effort to properly
align each of the Company's  Divisions'  strengths and resources,  and to manage
anticipated  future growth.  As a result,  Leonard Parker,  Chairman of LPC, was
appointed  Chairman  of the  Board  of the  Company;  Robert  Berman,  the  sole
principal of the general  partner of Watertone  Holdings,  L.P.,  the  Company;s
major  shareholder,  was named  President  and Chief  Executive  Officer  of the
Company;  Alan G. Friedberg,  former Chairman of the Board,  President and Chief
Executive Officer,  was named President - Renovation  Division;  Douglas Parker,
President of Leonard Parker Company,  was named President - Purchasing Division;
and Guillermo Montero,  Vice-President - Operations, and Chief Operating Officer
of HRB, was named President of HRB.

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  4,803 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 $206,000  (exclusive  of rent
adjustments).

         HRB  maintains  offices  at 1800  Century  Park East,  3rd  Floor,  Los
Angeles, California, 90067, where it occupies approximately 3,336 square feet in
a  multi-story  office  complex.  HRB has entered into a five year lease,  which
expires in May 1999, with an unaffiliated  lessor pursuant to which it currently
pays  an  annual  fixed  rental  of  approximately  $66,800  (exclusive  of rent
adjustments). HRB also maintains a satellite office in Coral Springs, Florida.

         LPC maintains its executive  office at 550 Biltmore Way,  Coral Gables,
Florida, 33134. LPC also maintains offices in Los Angeles, California, Singapore
and South Africa.

ITEM 3.  LEGAL PROCEEDINGS

         NONE





                                        4
<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         NONE

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     (a) MARKET  INFORMATION.  The Common Stock is 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.

                                                            Common Stock


                                                            High       Low
                                                            ----       ---
            Fiscal 1995
            -----------

            First Quarter .................................2-1/4       1-1/4
            Second Quarter.................................2-1/2         3/4
            Third Quarter..................................2-3/8      1-7/16
            Fourth Quarter.................................2-5/16     1-1/16

            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

                  On March 28, 1997, the last reported sales price of the Common
                  Stock on the Nasdaq SmallCap Market was $6.44 per share.

     (b)  HOLDERS.  As of March 28,  1997,  there were  approximately  73 record
     holders and approximately 747 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. 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.  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         THIS  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS COULD DIFFER  MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS.

OVERVIEW

         In February 1995, the Company's  management  determined that the change
in the Con Edison Rebate  Program had seriously  impacted its ability to promote
and build its decorative  energy efficient  lighting  business and began to seek
either a joint venture  partner or an acquisition  opportunity.  In August 1995,
the


                                        5
<PAGE>
Company's wholly-owned subsidiary, HRB, acquired substantially all of the assets
and business and assumed  certain liabilities  of AGF, a company which  provides
renovation services to the hospitality industry ("the Acquisition"). In December
1995,  the  Company  determined  to  focus  its  resources  on  its  hospitality
renovation business and to discontinue its lighting business.

         In  February  1996,  the  Company  sold its  lighting  business  to the
Company's former President.

ASSET PURCHASE

         Pursuant to an Asset Purchase  Agreement (the "Agreement")  dated as of
August 1, 1995 (the "Acquisition Date"), the Company acquired  substantially all
of the assets (the  "Acquisition") of AGF,  including  contract rights,  through
HRB. HRB provides interior and exterior cosmetic renovations and maintenance for
leading hotel and hospitality customers nationwide.

         The  aggregate  consideration  for  the  Acquisition  pursuant  to  the
Agreement was subject to final determination subsequent to the Acquisition Date.
As finally  determined  on April 12,  1996,  the purchase  price  consisted of a
$2,150,000  promissory note (the "Note Payable") payable to AGF over five years,
bearing interest at 8% per annum, and 2,500,000 shares of Common Stock delivered
to AGF and  issued  in the  name  of  AGF's  sole  stockholder,  Watermark.  The
Acquisition  resulted in goodwill of  approximately  $6,600,000,  which is being
amortized on a  straight-line  basis over its  estimated  life of 17 years.  The
Acquisition  was  accounted  for as a  purchase  method of  accounting  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 (the "Note  Receivable"),  payable  over five years and bearing
interest at 8%.

         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  payable to the  Company  over five years at a rate of 7% per annum,
with payments commencing January 1997.

         As noted above, the Company's Board of Directors determined that it was
in the best  interest of the Company and its  shareholders  to  discontinue  the
decorative  lighting  business.  Tova Schwartz,  the Company's former President,
acquired the lighting business from the Company on the following terms:

         1.       The Company  repurchased  from Ms. Schwartz  500,000 shares of
                  Common Stock with a market  value of  $437,500,  at a price of
                  $.50 per share or $250,000.

         2.       The  Company  and  Ms.  Schwartz  entered  into a  three  year
                  commission agreement that provides for payments to the Company
                  of  commissions  for sales  referred  to Ms.  Schwartz  by the
                  Company.  The Company engaged Ms. Schwartz as a consultant for
                  a three year term at a rate of $100,000 per year.

         The  closing  sale  price of the  Common  Stock on  Nasdaq  immediately
following the purchase was $.875 a share.

         Ms.  Schwartz,  further granted the Company an option (the "Option") to
purchase an additional  1,000,000  shares of Common Stock at a 33% discount from
the average trading price on Nasdaq for the prior 20 trading days. The Option is
exercisable  as to  500,000  shares of Common  Stock for a period of 18  months,
commencing on August 26, 1996, at a minimum  exercise  price of $1.00 per share.
The Option is exercisable as to an additional 500,000 shares of Common Stock for
a period of 12 months, commencing on February 26, 1997, at a



                                        6
<PAGE>
minimum  exercise price of $1.50 per share.  During the exercise  period for the
Option,  Ms.  Schwartz  will have the ability to request the Company to purchase
the relevant  optioned  shares at a 50% discount to market.  If the Company does
not purchase  the relevant  optioned  shares,  the Option will be canceled  with
respect to such shares.

         On October 10, 1996,  the Company  exercised  its option to  repurchase
500,000 shares of Common Stock from Ms. Schwartz for $715,000.

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.

         Selling,  general  and  administrative  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  selling,   general  and
administrative  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.  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 last year.  Operating
profits  increased in 1996 due to larger revenues and the ability of the Company
to maintain low  selling,  general and  administrative  expenses as a percent 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 last year. 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 ending December 31, 1995.

         THE  HISTORICAL  RESULTS FOR THE YEAR ENDED  DECEMBER  31, 1995 ARE NOT
INDICATIVE OF THE COMPANY'S FUTURE OPERATING  RESULTS SINCE THE COMPANY ACQUIRED
THE ASSETS AND  BUSINESS OF AGF IN AUGUST  1995 AND  DISCONTINUED  ITS  LIGHTING
BUSINESS IN DECEMBER 1995. THEREFORE,  THE FOLLOWING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REFLECTS THE COMPANY'S
OPERATING  RESULTS  ON A PRO  FORMA  CONSOLIDATED  BASIS  GIVING  EFFECT  TO THE
ACQUISITION  AND  THE  DISCONTINUANCE  OF  THE  LIGHTING  BUSINESS  AS  IF  SUCH
TRANSACTIONS TOOK PLACE ON JANUARY 1, 1995. THE PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION IS BASED ON THE HISTORICAL  FINANCIAL  STATEMENTS OF THE COMPANY AND
AGF AND SHOULD BE READ IN  CONJUNCTION  WITH SUCH  FINANCIAL  STATEMENTS AND THE
NOTES  THERETO.  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 ACQUISITION AND THE  DISCONTINUANCE OF THE LIGHTING
BUSINESS HAD BEEN COMPLETED AS OF JANUARY 1, 1995, AND NEITHER IS IT NECESSARILY
INDICATIVE OF THE RESULTS OF OPERATIONS FOR FUTURE PERIODS.



                                        7
<PAGE>

         Revenues  for the  year  ended  December  31,  1996  were  $24,367,112,
compared  to   $7,159,035   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.

         Gross profit for the year ended December 31, 1996 was 24.9% of revenues
compared to 20.0% of revenues for 1995.  The Company has been able to maintain a
consistently  higher gross margin  percentage as it develops an internal  direct
labor force that is capable of  completing  renovation  projects in a timely and
efficient manner.

         Selling,  general  and  administrative  expenses  for  the  year  ended
December 31, 1996 were $3,218,520, or 13.2% of revenues,  compared to $2,680,766
or  37.4%  of  revenues  for  1995.   Included  in  the  selling,   general  and
administrative  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. 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 sales.

         Income (loss) from  continuing  operations  for the year ended December
31, 1996 was $2,858,668, compared to ($1,225,475) for the same period last year.
Operating  profits  increased in 1996 due to larger  revenues and the ability of
the Company to maintain low selling,  general and  administrative  expenses as a
percent 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 last year. The 1996 expense is below the
federal and state statutory tax rates due mainly to a reduction in the valuation
allowance.

         Net income (loss) for the year ended December 31, 1996 was  $1,842,678,
compared to a net loss of ($1,961,017) for the period ending December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

         In August 1996,  the Company  negotiated a new bank line of credit with
Marine  Midland Bank of New York,  which  provides the Company up to  $2,000,000
based on the value of all Company assets.  The line bears interest at the bank's
prime  lending rate plus .5%.  Proceeds  from the borrowing are utilized to fund
short term cash  requirements.  At December 31, 1996,  there were  borrowings of
$1,400,000 on the line.

         The Company's short-term and long-term liquidity requirements generally
consist of operating  capital for renovation and  maintenance  related costs and
selling,  general and administrative  expenses. The Company continues to satisfy
its short-term  and long-term  liquidity  requirements  with cash generated from
operations, and utilization of its line of credit.

         Net cash used by operating  activities  was  ($1,120,028)  for the year
ended  December 31, 1996,  compared to ($786,996) for the same period last year.
During the twelve  months  ending  December 31,  1996,  the  Company's  accounts
receivable and costs in excess of billing increased by $3,595,178. This increase
was partially  offset by an increase of accounts  payable and accrued expense of
$996,685.  Due to the Company's  rapid  growth,  and the  significant  amount of
additional work performed on numerous  projects,  a backlog of billings occurred
at year end resulting in the large  accounts  receivable  increase.  The Company
expects to collect these receivables fully in 1997.

         Net cash provided by investing  activities  for the year ended December
31, 1996 was $649,318, compared to $2,417,390 for the same period last year. The
decrease  is  primarily  the  result  of the  sale of the  Company's  short-term
marketable  securities in 1995, an infusion resulting from the company's IPO the
previous  year.  Due to the  nature of the  Company's  business,  including  the
outsourcing  of most  renovation and  maintenance  related work, the Company has
insignificant capital requirements, and therefore can use its operating cash for
operating needs.


                                       8
<PAGE>

         On April 8, 1996, the Company  completed a private placement of 500,000
shares of Common  Stock to  accredited  investors at a price of $1.00 per share,
for aggregate  gross proceeds of $500,000.  The Company used the proceeds of the
private placement for working capital.

         On October 10, 1996, the Company  repurchased  500,000 shares of Common
Stock from its former  President,  Tova  Schwartz for  $715,000.

         On January  15,  1997,  Resource  Holdings,  the holder of an option to
purchase 500,000 shares of Common Stock, exercised a portion of said option with
respect to 200,000  shares of Common Stock  resulting in  additional  capital of
$400,000 for the Company. On January 22, 1997, Resource Holdings disposed of the
200,000 shares of Common Stock.  As of March 30, 1997,  Resource  Holdings has a
remaining  option to purchase  300,000  shares of Common  Stock,  or  beneficial
ownership of 3.49% of the outstanding Common Stock of the Company.

         During the first quarter of 1997, additional exercises of stock options
and  warrants  resulted in an increase in the  Company's  additional  capital of
$345,283.

         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  twelve  months.

ITEM 7.  FINANCIAL  STATEMENTS

         See  Index to  Financial Statements.

ITEM 8.  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 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 Andersen to report in response to Item
304(a) of Regulation S-B, ss. 228.304(a).

         On March 15,  1996,  BDO  Seidman,  LLP was engaged as new  independent
accountants to the Company.



                                        9
<PAGE>
                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company and their positions with the
Company are set forth below.

          NAME                    AGE        POSITION

          Leonard F. Parker        66        Chairman of the Board and
                                             Director

          Robert A. Berman         37        President, Chief Executive
                                             Officer and Director

          Alan G. Friedberg        38        President-Renovation Division
                                             and Director

          Howard G. Anders         53        Chief Financial Officer,
                                             Executive Vice President
                                             and Secretary

          Douglas Parker           39        President - Purchasing Division,
                                             LPC and Director

          Scott A. Kaniewski       33        Director

          Louis K. Adler           60        Director

          George Asch              59        Director

          Richard A. Bartlett      39        Director


LEONARD F.  PARKER has been  Chairman  of the Board of the  Company  since March
1997.  Leonard Parker founded LPC in 1969, sold it in 1973 and re-acquired it in
1976. Mr. Parker is a graduate of Tulane University,  and served in the U.S. Air
Force during the Korean War as an Air Force liaison to the  Mitsubishi  Aircraft
Company in Japan  before  moving to Miami in 1954.  Prior to founding  LPC,  Mr.
Parker  was  employed  from 1950 by  Maxwell  Company,  an  interior  design and
furnishing  Company.  Mr. Parker is on the Board of Directors of Pompeii  Casual
Furniture  and the Douglas  Gardens Home for the Aged.  He is involved  with the
Special Olympics and also serves on various committees for the Special Olympics.

ROBERT A.  BERMAN  has been the  President  and Chief  Executive  Officer of the
Company since March 1997. Mr. Berman, a long time entrepreneur, has an extensive
background  in a variety of  commercial  ventures.  His  experiences  range from
financial  development of various projects in the area of Commercial Real Estate
and Construction. The commonality of these ventures lies in Mr. Berman's ability
to  successfully  structure  business  ventures  for  rapid  growth  and  market
penetration.

ALAN G. FRIEDBERG has been the President - Renovation Division and a director of
the Company since March 1997.  Previously,  he was the Chief  Executive  Officer
and,  President of the Company.  He became the Chief Executive Officer of HRB in
August 1995.  Prior thereto,  Mr.  Friedberg was the founder and Chief Executive
Officer of AGF. Mr. Friedberg is third generation in the construction  industry.
In 1979, he formed AGF, a contract installation


                                       10
<PAGE>
company  and   expanded  it  to  a  full   service   "turn-key"   operation   in
construction/installation  specializing in hotels.  He has applied his extensive
experience  and  hands on  management  approach  to  successfully  complete  the
renovation of over 100,000 guestrooms. Completed projects include work performed
for Marriott,  Loews, Nikko, Holiday Inn Worldwide, Ritz Carlton, New York Grand
Hyatt and many more.

HOWARD G. ANDERS has been the Executive Vice President,  Chief Financial Officer
and  Secretary of the Company since  February  1996 and was the  Executive  Vice
President,  Chief  Operating  Officer and a director of the Company from October
1994 to November  1995.  From December 1995 to February  1996, Mr. Anders was an
independent consultant.  Prior to joining the Company, Mr. Anders served as Vice
President and Chief Financial Officer of Alpine Lace Brands,  Inc. in Maplewood,
New Jersey from April 1992 to October 1994.  From April 1983 to April 1992,  Mr.
Anders was President and Chief Operating Officer of North Hills Electronic, Inc.
in Glen Cove, New York. Mr. Anders is a 1965 graduate of Rutgers  University and
attended the Harvard Business School PMD Program in 1979.

DOUGLAS A. PARKER has been  President-Purchasing  Division of the Company  since
March 1997. Mr. Parker is also President of Leonard Parker Company.  Mr. Parker,
a graduate of Tulane University in International Business, has been with Leonard
Parker Company for 17 years. As the company has expanded into the  international
market,  he has been directly  responsible  for the  development of the overseas
offices in Johannesburg,  Singapore and Dubai,  coordinating  the  international
operations,  sales, vendor and client relationships.  Some of the firms' current
projects include the Grand Hyatt New York, The New York Palace,  the Mohegan Sun
Resort and Casino,  Ritz-Carlton San Juan, Durban Hilton,  Johannesburg  Hilton,
and the Chicago Beach Hotels in Dubai.

GUILLERMO A. MONTERO has been the President of HRB since March 1997. Previously,
Mr. Montero was the Vice  President-Operations  and Chief  Operating  Officer of
HRB. In August 1995, he became the Senior Vice  President of HRB. Prior thereto,
he was the President of AGF. Originally from Maracaibo,  Venezuela,  Mr. Montero
has  strong  ties in the  design/construction  industry.  Mr.  Montero  attended
Oglethorpe  University  and Georgia  Tech,  receiving a B.A.  degree in 1982. He
became  associated with AGF in 1979.  Completed  projects include work performed
for the Ritz Carlton Chain, The Omni Hotels Chain,  Holiday Inn, Embassy Suites,
Hilton and Travelodge.

SCOTT A.  KANIEWSKI  has been a director of the Company since March 1996 and has
been a director of Watermark since February 1995.  Prior to his involvement with
Watermark, Mr. Kaniewski held several positions with VMS Realty Partners ("VMS")
including Vice President of Hotel  Investments  where he was responsible for the
development  of fee for  service  programs  targeting  institutions  and private
investors.  He also directed the asset management of VMS' hotel portfolio. He is
Certified Public Accountant and a member of the Illinois CPA Society.

LOUIS K. ADLER has been a director  of the Company  since  September  1996.  Mr.
Adler has been a private investor for over five years in Houston,  Texas. He has
been the Chairman of the Board and President of Bancshares,  Inc. (Houston,  TX)
since 1973,  Vice Chairman of the Board since 1992 and a director  since 1988 of
Luther's Bar-B-Q,  Inc., a group of twenty  restaurants in Texas,  Louisiana and
Colorado, a Director,  Secretary and Treasurer of Warwick  Communications,  Inc.
(owner of KFXX, the Fox Television Affiliate in Longview,  TX) since 1993, and a
director and officer of several  other  private  companies.  Mr. Adler is also a
trustee  and the  President  of the Adler  Foundation  and  member of the Dean's
Advisory Counsel of Goizueta Business School of Emory University.

GEORGE ASCH has been a director of the Company since  September  1996.  Mr. Asch
has been a Vice President of Gray,  Seifert and Co., Inc. since  September 1994.
Gray,  Seifert and Co., Inc. is an investment  management company which became a
wholly-owned  independent  subsidiary of Legg Mason,  Inc. in April 1994. For 25
years prior to joining  Gray  Seifert and Co.,  Inc.  in August  1990,  Mr. Asch
served as  President of a  manufacturing  company.  He  currently  serves on the
boards of various philanthropic organizations,  including the Montefiore Medical
Center and the Price Foundation. He is a graduate of Columbia College and served
as an officer in the United States Navy.

RICHARD A. BARTLETT has been a director of the Company since September 1996. Mr.
Bartlett is a Managing Director of Resource Holdings Limited, a private merchant
banking firm in New York City  ("Resource  Limited").  He  specializes  in legal
aspects of mergers,  acquisitions  and other corporate  restructurings.  In that
capacity, he sits



                                       11

<PAGE>

and has sat on the board of various  companies in which Resource Limited and its
principals have made investments.  Prior to joining Resource Limited in 1984, he
served as a law clerk to the Honorable Harry A. Blackmun,  Associate Justice for
the United States Supreme Court,  during the Supreme  Court's 1983-84 term. From
1982 to 1983, he served as law clerk to the Honorable  David L. Bazelon,  United
States  Court of Appeals  for the  District of Columbia  Circuit.  Mr.  Bartlett
received a law degree  from Yale Law School in 1982,  where he was the editor of
the Yale Law Journal.  He received his B.A. from  Princeton  University in 1979,
where he studied  economics and politics at the Woodrow  Wilson school of Public
and International  Affairs. From 1987 to 1993, he was a member of the Council of
Foreign Relations and he is a member of the New York State Bar.

MEETINGS AND COMMITTEES

         The Company's Board of Directors met four times in 1996. A Compensation
Committee and an Audit  Committee were formed at the September 26, 1996 Board of
Directors meeting. The Compensation Committee consists of two outside directors,
Richard A. Bartlett and Scott A. Kaniewski.  The Audit Committee consists of two
outside directors, George Asch and Louis K. Adler.

ITEM 10. EXECUTIVE COMPENSATION

         The following  table sets forth,  for the fiscal years  indicated,  all
compensation  awarded to, earned by or paid to Tova Schwartz,  who served as the
Chief  Executive  Officer of the Company from its inception  until February 1996
and Alan G. Friedberg,  Howard G. Anders and Guillermo A. Montero, the Company's
three most highly compensated executives (the "Named Executive Officers"). There
is no other  executive  officer of the Company  whose salary and bonus  exceeded
$100,000  with  respect to the fiscal years ended  December  31, 1996,  1995 and
1994.







                                       12

<PAGE>

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                                     Long-Term
                                                                                                    Compensation
                             Annual Compensation                                                       Awards
     ---------------------------------------------------------------------------------------           ------
                                                                                Other Annual          Securities
     Name and                                                                   Compensation          Underlying
     Principal Position              Year         Salary (S)      Bonus($)          ($)(1)            Options(#)
     ------------------              ----         ----------      --------          ------            ----------

<S>                  <C>             <C>           <C>            <C>                  <C>               <C>
    Alan G. Friedberg (2)            1996          $225,000       $75,000              -                 400,000
                                     1995          $110,520             -              -                       -
                                     1994                -              -              -                       -

    Guillermo A. Montero (3)         1996          $190,000       $76,665              -                 300,000
                                     1995          $  83,337            -              -                       -
                                     1994                -              -              -                       -

    Howard G. Anders (4)             1996          $150,000       $25,000              -                 100,000
                                     1995          $128,333             -              -                  50,000
                                     1994          $  39,999            -              -                  50,000

    Tova Schwartz (5)                1996                -              -              -                       -
                                     1995          $103,992             -              -                       -
                                     1994          $100,000       $83,333(6)           -                       -
</TABLE>


 ............

(1)      Perquisites and other personal benefits, securities or property to each
         executive  officer  did not exceed the lesser of $50,000 or 10% of such
         executive's salary and bonus.
(2)      Mr.  Friedberg joined the Company in August 1995 as the Chief Executive
         Officer of HRB. In February 1996, he became the Chief Executive Officer
         and a  director  of  the  Company.  Currently,  Mr.  Friedberg  is  the
         President-Purchasing Division of the Company.
(3)      Mr.   Montero   joined   the   Company   in   August   1995   as   Vice
         President-Operations and Chief Operating Officer of HRB. Currently, Mr.
         Montero is President of HRB.
(4)      Mr.  Anders  joined  the  Company  in October  1994 as  Executive  Vice
         President, Chief Operating Officer and a director. In February 1996, he
         resigned as a director  of the  Company and became the Chief  Financial
         Officer, Executive Vice President and Secretary of the Company.
(5)      Ms.  Schwartz  served as the  Company's  Chief  Executive  Officer  and
         President from its inception  until she resigned in February 1996. Alan
         G. Friedberg  became the Company's Chief Executive  Officer in February
         1996.
(6)      Reflects dollar amount earned in 1993 and paid in 1994.

         The following  table sets forth  certain  information  regarding  stock
option grants made to the Named Executive  Officers during the fiscal year ended
December 31, 1996.












                                       13

<PAGE>
                        OPTION GRANTS IN LAST FISCAL YEAR

                                INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
                             Number of            % of Total
                             Securities            Options
                             Underlying           Granted to
                               Options           Employees in       Exercise or Base      Expiration
      Name                   Granted (#)         Fiscal Year          Price ($/SH)           Date
      ----                   -----------         -----------          ------------           ----

<S>                           <C>                    <C>                 <C>                <C>
Alan G. Friedberg             400,000                43%                 $2.75              9/26/06

Guillermo Montero             300,000                32%                 $2.75              9/26/06

Howard G. Anders              100,000                11%                 $2.75              9/26/06

Tova Schwartz                       0                 0%                 $   0                    0

</TABLE>

         The   following   table  sets  forth  certain   information   regarding
unexercised  stock options held by the Named  Executive  Officers as of December
31, 1996.


                    AGGREGATED FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>

                                                                         Value of
                                Number of Securities                   Unexercised
                               Underlying Unexercised                  In-the-Money
                                     Options at                         Options at
                                  December 31, 1996              December 31, 1996 $ (1)
         Name                 Exercisable/Unexercisable         Exercisable/Uunexercisable
         ----                 -------------------------         --------------------------

<S>                                <C>                              <C>
Alan G. Friedberg                  200,000/200,000                  $800,000/$800,000

Guillermo A. Montero               150,000/150,000                  $600,000/$600,000

Howard G. Anders                   150,000/50,000                   $747,500/$200,000

Tova Schwartz                            0/0                               0/0
</TABLE>

(1)      On December 31, 1996, the last reported sales price of the Common Stock
         on the Nasdaq SmallCap Market was $6.75 per share.

BOARD OF DIRECTORS COMPENSATION

         The  Company  does  not  currently  compensate  directors  who are also
executive  officers  of the  Company  for  service  on the  Board of  Directors.
Directors are reimbursed for their  expenses  incurred in attending  meetings of
the Board of Directors.

         On September 26, 1996, the Company's  Board of Directors  adopted,  and
the Company's  shareholders  approved,  the 1996 Outside  Directors Stock Option
Plan (the  "Outside  Directors'  Plan") for purposes of securing for the Company
and its  shareholders  the benefits  arising from stock ownership by its outside
directors.

         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,  commencing
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
shall be exercisable in three equal installments, commencing on the first

                                       14

<PAGE>

         anniversary  of the grant date.  The  Company  has  granted  options to
purchase  60,000  shares  under the Outside  Directors  Plan at a grant price of
$2.75 per share, of which none are currently exercisable.

LONG-TERM INCENTIVE AND PENSION PLANS

         The Company does not have any  long-term  incentive or defined  benefit
pension plans.

         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 Company has granted  889,000 shares
under the Plan at a grant price of $2.75 per share,  of which 2,500  shares have
been exercised, and 442,000 are currently exercisable.  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 as more than ten years.  At December  31, 1996,
776,000 shares were available for grant. OTHER

         No director or  executive  officer is  involved in any  material  legal
proceeding  in which he is a party  adverse  to the  Company  or has a  material
interest adverse to the Company.

EMPLOYMENT AGREEMENTS

         Pursuant to the  Divestiture  Agreement,  the Company and Tova Schwartz
agreed that Ms. Schwartz would provide  consulting  services to the Company on a
part-time  basis (no more than four hours per month) for a term of three  years,
to be  compensated  at a rate of $100,000 per year. As additional  consideration
for the purchase of the lighting business,  the Company agreed to refer lighting
business to Ms. Schwartz or an entity  controlled by her and Ms. Schwartz agreed
to pay  commissions  to the Company for a period of three years at a rate of 10%
(or as  negotiated),  of the net  invoice  price of all  sales  referred  to Ms.
Schwartz by the Company.

         In addition,  pursuant to the Divestiture Agreement, Mr. Friedberg, Mr.
Montero and the Company agreed on the terms of their respective  employment with
the Company,  for an initial term of three years,  subject to automatic  renewal
for successive  twelve-month periods unless either party provides the other with
a notification of non-renewal. The salary of Mr. Friedberg is $225,000 annually,
and Mr.  Montero is $190,000  annually and Mr.  Friedberg  and Mr.  Montero have
agreed not to compete  with the  Company  during the two year  period  after the
termination of their employment with the Company.

         On  April 1,  1996,  the  Company  entered  into a two year  employment
agreement with Mr. Anders,  at a salary of $150,000 per annum.  Pursuant to such
agreement, Mr. Anders has agreed not to compete with the Company during the term
of the agreement and for a period of two years thereafter.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Company's officers and directors, and persons who own more than ten
percent  of a  registered  class of the  Company's  equity  securities,  to file
reports of ownership and changes in ownership  with the  Securities and Exchange
Commission (the "Commission").  Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. During the year ended December
31, 1996,  all of such forms were filed in a timely manner with the exception of
Forms 3 for Leonard  Parker,  Douglas  Parker and  Watertone  Holdings,  LP (and
related parties) and Forms 4 for Watertone Holdings, LP (and related parties).

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The voting  securities  of the Company  outstanding  on March  30,1997,
consisted of 8,304,489  shares of Common Stock.  The following  table sets forth
information concerning ownership of the Common Stock,

                                       15
<PAGE>

as at March 28, 1997, by (i) each director,  (ii) each executive officer,  (iii)
all directors and  executive  officers as a group,  and (iv) each person who, to
the  knowledge  of  management,  owned  beneficially  more than 5% of the Common
Stock.  Unless otherwise  indicated,  the address of each person listed below is
450 Park Avenue, New York, New York 10022.

<TABLE>
<CAPTION>

                                                            Shares                  Percent of
                                                         Benficiailly                Outstanding
             Beneficial Owner(1)                             Owned                   Common Stock(2)
             -------------------                             -----                   ---------------

<S>                                                         <C>                             <C>
             Watertone Holdings,  LP                        1,800,000                       21.68%
             730 Fifth Avenue, 9th Floor
             New York, New York 10019

             Robert A. Berman                               1,800,000(3)                  21.68%

             Watertone, LLC                                   500,000(4)                   6.02%
             c/o Relco Inc.
             3 Stamford Landing
             46  Southfield Ave.
             Stamford, Connecticut 06902

             Joel A. Asen                                     500,000(4)                   6.02%
             445 Old Academy Road
             Fairfield, Connecticut  06430

             John A. Garraty, Jr.                             500,000(4)                   6.02%
             c/o Kelley Drye & Warren
             101 Park Avenue
             New York, New York  10178

             E.W. Plaut                                       500,000(4)                   6.02%
             c/o Relco Inc.
             3 Stamford Landing
             46 Southfield Avenue
             Stamford, Connecticutt  06802

             Tova Schwartz                                  1,243,150                       14.97%
             11 Wedgewood Lane
             Lawrence, New York 11559

             Resource Holdings Associates, L.P.               300,000(5)                   3.49%
             520 Madison Avenue
             New York, New York  10022

             Resource Holdings Limited                        300,000(6)                   3.49%
             520 Madison Avenue
             New York, New York  10022

             Richard A. Bartlett                              416,666(7)                   4.84%
             50 Central Park West, #11C
             New York, New York  10023

             Jerry M. Seslowe                                 416,668(8)                   4.84%
             2 Chanticlare Drive
             Manhasset, New York  11030

             John C. Shaw                                     416,666(9)                   4.84%
             16 Ledge Road
             Old Greenwich, Connecticutt  06870
</TABLE>


                                       16

<PAGE>

<TABLE>
<CAPTION>
                                                                         Shares                  Percent of
                                                                      Benficiailly                Outstanding
             Beneficial Owner(1)                                        Owned                   Common Stock(2)
             -------------------                                        -----                   ---------------
<S>                                                                    <C>                             <C>

             Leonard Parker                                              300,000                        3.61%
             550 Biltmore Way
             Coral Gables, Florida 33134

             Douglas Parker                                              190,000                        2.29%
             550 Biltmore Way
             Coral Gables, Florida 33134

             Bradley Parker                                              190,000                        2.29%
             550 Biltmore Way
             Coral Gables, Florida 33134

             Howard G. Anders                                            154,500  (10)                  1.83%

             Alan Friedberg                                              210,000  (11)                  2.47%

             Guillermo A. Montero                                        169,792  (12)                  2.01%

             Scott A. Kaniewski                                            2,000                            *

             Louis K. Adler                                               75,000                            *

             George Asch                                                  75,000                            *

             All Officers and Directors as a group (9 persons)         3,223,166  (13)                 37.24%
</TABLE>

            ----------------
            *       Less than 1%

(1)   Except  as  outlined  herein,  the  persons  named  in the  table,  to the
      Company's  knowledge,  have sole voting and dispositive power with respect
      to all shares shown as  beneficially  owned by them,  subject to community
      property  laws  where  applicable  and the  information  contained  in the
      footnotes hereunder.

(2)   Calculations  assume that all options and warrants which are  excercisable
      within 60 days after December 31, 1996 have been exercised.

(3)   Consists of 1,800,000  shares of Common Stock held by Watertone  Holdings,
      LLP, as to which each of Watertone  Limited,  LLC, and Robert A. Berman is
      attributed  beneficial  ownership persuant to rule 13d-3 of the Securities
      Exchange Act of 1934. Mr. Berman has sole power to vote and dispose of the
      1,800,000 shares of Common Stock.

(4)   Consists of 500,000  shares of Common Stock held by  Watertone,  LLC as to
      which each of Watertone LLC, Joel A. Asen,  John A. Garraty,  Jr. And E.W.
      Plaut are attributed  beneficial  ownership  pursuant to Rule 13d-3 of the
      Securities Exchange Act of 1934, as amended ("Rule 13d-3").  Messrs. Asen,
      Garraty and Plaut,  as Managers of  Watertone  L.LC,  have shared power to
      vote and dispose of the 500,000 shares of Common Stock.

(5)   Consists of 300,000 shares of Common Stock underlying an option granted to
      Resource  Holdings by the  Company as partial  compensation  for  services
      rendered as a consultant  (the "Option") at an exercise price of $2.00 per
      share.

(6)   Consists of 300,000  shares of Common  Stock  underlying  the Option as to
      which  Resource  Holdings  Limited  is  attributed   beneficial  ownership
      pursuant to Rule 13d-3.

(7)   Consists of (i) 116,666 shares of Common Stock owned  individually  by Mr.
      Bartlett: and (ii) 300,000 shares of Common Stock underlying the Option as
      to which Mr. Bartlett is attributed  beneficial ownership pursuant to Rule
      13d-3.  Mr.  Bartlett  has sole power to vote and  dispose of the  116,666
      shares of Common Stock he owns individually.  Mr. Bartlett,  as a Managing
      Director  of  Resource  Holdings  Limited,  has  shared  power to vote and
      dispose of the 300,000 shares of Common Stock underlying the Option.

(8)   Consists of (i) 116,668 shares of Common Stock owned  individually  by Mr.
      Seslowe;  (ii) 300,000 shares of Common Stock  underlying the Option as to
      which Mr.  Seslowe is  attributed  beneficial  ownership  pursuant to Rule
      13d-3.  Mr.  Seslowe  has sole power to vote and  dispose  of the  116,666
      shares of Common Stock he owns  individually.  Mr. Seslowe,  as a Managing
      Director  of  Resource  Holdings  Limited,  has  shared  power to vote and
      dispose of the 300,000 shares of Common Stock underlying the Option.

                                       17
<PAGE>

(9)   Consists of (i) 116,666 shares of Common Stock owned  individually  by Mr.
      Shaw; and (ii) 300,000 shares of Common Stock  underlying the Option as to
      which Mr. Shaw is attributed  beneficial ownership pursuant to Rule 13d-3.
      Mr.  Shaw has sole  power to vote and  dispose  of the  116,666  shares of
      Common Stock he owns  individually.  Mr. Shaw,  as a Managing  Director of
      Resource  Holdings  Limited,  has shared  power to vote and dispose of the
      300,000 shares of Common Stock underlying the Option.

(10)  Consist  of (i) 4,500  shares of Common  Stock  held  individually  by Mr.
      Anders;  and (ii) 150,000 shares of Common Stock issuable upon exercise of
      presently exercisable options currently held by Mr. Anders.

(11)  Consist of (i) 10,000  shares of Common  Stock  held  individually  by Mr.
      Freidberg:  and (ii) 200,000 shares of Common Stock issuable upon exercise
      of presently exercisable options currently held by Mr. Friedberg.

(12)  Consists of (i) 19,792 shares of Common Stock held by Mr.  Montero's  wife
      Maria  Elizabeth  Leon  as  to  which  Mr.  Montero  disclaims  beneficial
      ownership;  and (ii) 150,000 shares of Common Stock issuable upon exercise
      of presently exercisable options currently held by Mr. Montero.

(13)  Includes  options to purchase  710,000  shares of Common Stock at exercise
      prices ranging from $1.275 - $2.75 per share.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

         On February 26, 1996, the Company, HRB,  Watermark-Bahamas,  Watermark,
AGF, Tova Schwartz,  Alan G. Friedberg and Guillermo A. Montero entered into the
Divestiture  Agreement  pursuant  to which  (i) the  Company  sold its  lighting
business to Tova Schwartz,  the Company's  former  President and Chief Executive
Officer; (ii) Ms. Schwartz resigned from her positions as a director and officer
of the Company and HRB; (iii) the Company  repurchased  500,000 shares of Common
Stock from Ms. Schwartz for $250,000,  with a market value of $437,500;(iv)  Ms.
Schwartz  granted to the Company the option to purchase an additional  1,000,000
shares of Common Stock;  (v) the Company  retained Ms.  Schwartz as a consultant
for a period of three years at a salary of $100,000 per year; (vi) Ms. Schwartz,
the sole  remaining  director  of the Company  (since  Howard G.  Anders,  Moshe
Greenfield and Moise Hendeles  resigned from their positions as directors of the
Company  effective  February 25, 1996),  appointed  Mr.  Friedberg and Robert A.
Berman  to the  Company's  Board of  Directors  and the  parties  appointed  Mr.
Friedberg as the Company's President;  (vii) the Company entered into three-year
employment agreements with each of Messrs. Friedberg and Montero; and (viii) the
Company engaged Resource Holdings  Associates as its financial advisor. On March
25, 1996,  Mr. Berman  resigned  from the  Company's  Board of Directors and the
Board elected Scott A. Kaniewski as Watermark's  representative  to the Board of
Directors.    See   "Employment   Agreements"   for   a   description   of   the
consulting/commission arrangement between the Company and Ms. Schwartz.

         On  April  12,  1996,  based  upon  provisions  of the  Asset  Purchase
Agreement and a memorandum  agreement between the parties to the Agreement,  the
Company and Watermark agreed to reduce the purchase price by $1,350,000  through
a reduction in the Note Payable.  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  payable to the  Company  over five years at a rate of 7% per annum,
with payments commencing January 1997.

         On February  28,  1996,  the  Company  engaged  Resource  Holdings as a
financial  advisor until December 31, 1997. As compensation for such engagement,
the Company granted  Resource  Holdings a five-year  option to purchase  500,000
shares of Common Stock at an exercise price of $2.00 per share and agreed to pay
a retainer of $10,000 per month for at least one year.

         During  1996,  the  Company  has  performed   renovation  services  for
Watermark.  As of December  31, 1996,  the company had a receivable  of $492,824
from Watermark, which was collected in full during the first quarter of 1997.



                                       18
<PAGE>

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K.

     EXHIBITS

        Exhibit
        NUMBER                                        EXHIBITS

           3.1          Certificate  of  Incorporation,  as  amended,  of  Light
                        Savers  U.S.A.,  Inc.   (Incorporated  by  reference  to
                        Exhibits 3.1-3.3 to the Company's Current Report on Form
                        8-K dated January 24, 1997.
           3.2          By-laws of the Company  (Incorporated  by  reference  to
                        Exhibit 3.4 to the Company's  Registration  Statement on
                        Form SB-2, No. 33-7094-NY).
           3.3          Restated  Certificate of Incorporation,  as amended,  of
                        Light Savers U.S.A.,  Inc.,  changing the Company's name
                        to Hospitality Worldwide Services, Inc. (Incorporated by
                        reference to exhibit to the Company's
           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).
          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).
          10.5          Registration  Rights  Agreement dated as of February 26,
                        1996,  by and  among  the  Company,  Watermark  and Tova
                        Schwartz  (Incorporated  by reference to Exhibit 10.5 of
                        the  Company's  Form 10-KSB for the year ended  December
                        31, 1995).
          10.6          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).
          10.7          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).


                                       19
<PAGE>

          10.8          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).
          10.9          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).
          10.10         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).
          10.11         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).
          10.13         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).
          16            Letter  from  Arthur  Andersen  LLP dated March 19, 1996
                        (Incorporated by reference to Exhibit 1 to the Company's
                        Current Report on Form 8-K/A filed March 25, 1996).
        * 21            Subsidiaries of the Company.
        * 27            Financial Data Schedule

--------------------------
            *Filed herewith.

(b)    Reports on Form 8-K

         On October 8, 1996 the Registrant filed with the New York Department of
State  Amendment to its  Certificate  of  Incorporation  to, among other things,
effect a change  in its name from  Light  Savers  U.S.A.,  Inc.  to  Hospitality
Worldwide  Services,  Inc.  The  Registrant's   shareholders  approved  such  an
amendment to the  Registrant's  Certificate of Incorporation at the Registrant's
annual meeting of shareholders on September 26, 1996.




                                       20

<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, 1997                    By: /S/ ROBERT A. BERMAN
                                             ---------------------------------
                                         Robert A. Berman, President, 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:
<TABLE>
<CAPTION>

            SIGNATURE                                           TITLE                                  DATE
            ---------                                           -----                                  ----
<S>                                            <C>                                         <C>

 /S/  LEONARD F. PARKER                        Chairman of the Board and                   March 31, 1997
 ---------------------------------             Director
      Leonard F. Parker


 /S/  ROBERT A. BERMAN                         President, Chief Executive Officer          March 31, 1997
 ---------------------------------             (principal executive officer) and
      Robert A. Berman                         Director

 /S/  HOWARD G. ANDERS                         Executive Vice President, Chief             March 31, 1997
 ---------------------------------             Financial Officer, (principal
      Howard G. Anders                         financial officer, principal
                                               accounting officer) and secretary

 /S/  SCOTT A. KANIEWSKI                       Director                                    March 31, 1997
 ---------------------------------
      Scott A. Kaniewski

 /S/  LOUIS K. ADLER                           Director                                    March 31, 1997
 ---------------------------------
      Louis K. Adler

 /S/  GEORGE ASCH                              Director                                    March 31, 1997
 ---------------------------------
      George Asch

 /S/  RICHARD A. BARTLETT                      Director                                    March 31, 1997
 ---------------------------------
      Richard A. Bartlett

 /S/  DOUGLAS PARKER                           President-Purchasing Division,              March 31, 1997
 ---------------------------------
      Douglas Parker                           Leonard Parker Company and
                                               Director

 /S/ ALAN G. FRIEDBERG                         President-Renovation Division               March 31, 1997
 ---------------------------------             and Director
     Alan G. Friedberg
</TABLE>


                                       21
<PAGE>
ITEM 7. FINANCIAL STATEMENTS


                          Index to Financial Statements


                                                                        Page No.
                                                                        --------

HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY


REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

     CONSOLIDATED FINANCIAL STATEMENTS:
          Balance sheet                                                   F-3
          Statements of operations                                        F-4
          Statements of stockholders' equity                              F-5
          Statements of cash flows                                     F-6, F-7
          Notes to consolidated financial statements                   F-8-F-19




                                       F-1
<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 subsidiary 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 audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  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, 1996


                                       F-2
<PAGE>
               HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET

                          YEAR ENDED DECEMBER 31, 1996

                                     ASSETS
<TABLE>
<CAPTION>

CURRENT ASSETS:

<S>                                                                            <C>
Cash                                                                           $   276,191
Accounts receivable, net of allowance for
    doubtful acccounts of $50,000 (Notes 5, 8 and 10)                            3,134,841
Current portion of note receivable (Note 3)                                         70,000
Costs in excess of billings  (Note 6)                                            2,176,907
Prepaid and other current assets                                                   421,303
                                                                               ------------
                    Total current assets                                         6,079,242
                                                                               ------------

Property and equipment, less accumulated depreciation of $61,711 (Note 7)         142,877
Goodwill, less accumulated amortization of $549,970  (Note 3)                    6,049,669
Note receivable, less current portion  (Note 3)                                    280,000
Deferred taxes (Note 9)                                                             65,280
Other assets                                                                       133,022
                                                                               ------------
                     Total other assets                                          6,670,848
                                                                               ------------
                                                                                12,750,090
                                                                               ------------

                      LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:

Loan payable - bank  (Note 8)                                                  $ 1,400,000
Accounts payable  (Note 5)                                                       1,175,068
Accrued and other liabilities                                                    1,897,389
Billings in excess of costs  (Note 6)                                              200,802
Income taxes payable                                                               297,860
                                                                               ------------
                    Total current liabilities                                    4,971,119
                                                                               ------------

STOCKHOLDERS'  EQUITY  (Notes 13, 14 and 15)
Preferred  stock,  $.01 par value
3,000,000 shares
      authorized, none issued and outstanding
Common stock, $.01 par value, 20,000,000 shares authorized,
       6,725,655 outstanding, 500,000 shares held in treasury                       72,257
Additional paid-in capital                                                       8,185,410
Treasury stock                                                                    (715,000)
Retained Earnings                                                                  236,304
                                                                               ------------
                    Total stockholders' equity                                   7,778,971
                                                                               ------------

                                                                               $12,750,090
                                                                               ------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>
               HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                           YEAR ENDED DECEMBER 31,

                                                                       1996                       1995
                                                                   ---------------------------------------

<S>                                                                 <C>                         <C>
Net revenues  (Note 12)                                             $24,367,112                 4,980,291

Cost of revenues  (Notes 10 and 12)                                  18,289,924                 3,823,779

                                                                   ---------------------------------------
       Gross profit                                                   6,077,188                 1,156,512

Selling, general and administrative expenses                          3,218,520                 1,619,189

                                                                   ---------------------------------------
       Income (loss) from operations                                  2,858,668                  (462,677)

Other income (expense):

  Interest expense                                                      (26,101)                  (13,007)
  Interest income                                                         1,141                   120,257
                                                                   ---------------------------------------
    Total other income (expense)                                        (24,960)                  107,250
                                                                   ---------------------------------------

       Income (loss) before provision for income taxes                2,833,708                  (355,427)

Provision for income taxes  (Note 9)                                    926,325                    25,000

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

       Income (loss) from continuing operations                       1,907,383                  (380,427)
                                                                   ---------------------------------------

Discontinued operations:  (Note 4)

       Loss from discontinued operations                                (64,705)                 (336,736)

       Loss on disposal of discontinued operation,
           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)                                                   $ 1,842,678               $(1,115,969)
                                                                   ---------------------------------------

      Primary and fully diluted
      income (loss) per share
      from continuing operations                                    $         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) per share                                   $         0.26            $    (0.20)
                                                                   ---------------------------------------

WEIGHTED AVERAGE NUMBER OF COMMON
  AND COMMON EQUIVALENT SHARES OUTSTANDING                            7,192,361                 5,653,052
                                                                   ---------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>
               HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                             TREASURY
                                                   COMMON STOCK                 STOCK
                                              ------------------------------------------------
                                              NUMBER
                                                OF              PAR
                                              SHARES           VALUE            VALUE
                                              ------------------------------------------------
<S>                                             <C>               <C>           <C>
BALANCE, JANUARY 1, 1995                        4,625,655 $       46,257 $                -

Issuance of 2.5 million shares in
     connection with acquisition (note 3)       2,500,000         25,000                  -

Sale of available-for-sale securities                   -              -                  -

Net loss
                                              -------------------------------------------------
BALANCE, DECEMBER 31, 1995                      7,125,655         71,257                  -

Purchase of treasury stock                     (1,000,000)              -        (1,152,500)

Sale of treasury stock                            500,000               -           437,500

Stock issued in settlement of
     service agreements                            75,000            750                  -

Stock options issued for services

Exercise of stock options and warrants             25,000            250

Net income                                                -             -                 -
                                              ------------------------------------------------
BALANCE, DECEMBER 31, 1996                      6,725,655 $       72,257 $         (715,000)
                                              ------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                 UNREALIZED
                                              -----------------------------------------------------------------------
                                               ADDITIONAL         LOSS ON          RETAINED              TOTAL
                                                PAID IN          MARKETABLE        EARNINGS          STOCKHOLDERS'
                                                CAPITAL         SECURITIES         (DEFICIT)            EQUITY
                                              -----------------------------------------------------------------------
<S>                                                <C>           <C>              <C>                <C>
BALANCE, JANUARY 1, 1995                           4,590,285     $   (52,938)     $     (490,405)    $     4,093,199

Issuance of 2.5 million shares in
     connection with acquisition (note 3)          3,275,000                                   -           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                         7,865,285               -          (1,606,374)          6,330,168

Purchase of treasury stock                                 -                                   -          (1,152,500)

Sale of treasury stock                                62,500                                   -             500,000

Stock issued in settlement of
     service agreements                              149,250                                   -             150,000

Stock options issued for services                     44,000                                                  44,000

Exercise of stock options and warrants                64,375                                                  64,625

Net income                                                 -                          1,842,678            1,842,678
                                              -----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996                         8,185,410     $         -      $      236,304 $         7,778,971
                                              -----------------------------------------------------------------------
</TABLE>

See accompanying  notes to consolidated financial statements.

                                       F-5
<PAGE>
               HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                 YEAR ENDED DECEMBER 31,

                                                                                   1996                    1995
                                                                              -------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                            <C>                  <C>
  Net income (loss)                                                            $ 1,842,678          $   (1,115,969)
  Adjustments to reconcile net income (loss) to net cash
    used for operating activities:
    Depreciation and amortization                                                  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 options issued for services                                               44,000                       -
    Deferred income taxes                                                          (65,280)                      -
    (Increase) decrease in current assets:
      Accounts receivable                                                       (1,548,005)               (539,439)
      Current assets of discontinued operations                                    145,317                (145,317)
      Costs in excess of billings                                               (2,047,173)               (129,734)
      Prepaid and other current assets                                            (290,632)                182,029
    Increase (decrease) in current liabilities:
      Accounts payable                                                             134,481                 495,158
      Accrued and other liabilities                                                862,204                 360,172
      Billings in excess of costs                                                 (419,772)               (640,175)
      Accrued loss on disposal of discontinued operations                         (398,806)                      -
      Income taxes payable                                                         297,860                       -
      Increase in other assets                                                     (81,014)                 (9,632)
                                                                              -------------------------------------

NET CASH USED FOR OPERATING ACTIVITIES                                         $(1,120,028)               (786,996)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of marketable securities                                                   -               3,047,243
     (Purchase) sale of short term marketable securities                           715,000                (715,000)
     Cash acquired in connection with aquisition                                         -                 125,966
     Purchase of property and equipment                                            (65,682)                (40,819)
                                                                              -------------------------------------

NET CASH PROVIDED BY INVESTING ACTIVITIES                                          649,318               2,417,390

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from borrowings on loan payable - bank                            $ 1,400,000                 455,926
    Repayment of loan payable - bank                                              (455,926)                      -
    Purchase of  treasury stock                                                 (1,152,500)                      -
    Proceeds from sale of treasury stock                                           500,000                       -
    Note receivable                                                                      -             $(2,574,521)
    Proceeds from issuance of common stock                                          64,625                          -
                                                                              -------------------------------------
NET CASH PROVIDED BY (USED) FOR FINANCING ACTIVITIES                               356,199              (2,118,595)
                                                                              -------------------------------------

NET DECREASE  IN CASH                                                             (114,511)               (488,201)
CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD                                                               390,702                 878,903
                                                                              -------------------------------------

CASH AND CASH EQUIVALENTS,
 END OF PERIOD                                                                 $   276,191             $   390,702
                                                                              -------------------------------------
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-6
<PAGE>
               HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31,
                                                          1996                    1995
                                                          -----------------------------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:

Cash paid during the period for:
<S>                                                      <C>          <C>
     Interest                                            $  26,101    $    12,486
     Income taxes                                          696,324              -

NON-CASH TRANSATIONS:

Fair value (including goodwill) of net assets acquired   $       -      5,450,000
Stock issued for assets aquired                                  -    $(3,300,000)
Note payable for assets aquired                                  -     (2,150,000)

Issuance of Stock for repayment of debt                  $ 150,000    $         -
Repayment of debt from issuance of stock                  (150,000)             -

</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-7
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND
      BASIS OF PRESENTATION

         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. On August 1, 1995 the Company  acquired  substantially  all of
the assets and  business,  and  assumed  certain  liabilities,  of AGF  Interior
Services, Inc. (d/b/a Hospitality Restorations and Builders),  through its newly
formed  subsidiary  corporation,  Hospitality  Restorations  and Builders,  Inc.
("HRB")  (see Note 3 -  Acquisition  of  Business).  HRB  provides  interior and
exterior cosmetic  renovations and maintenance for leading hotel and hospitality
customers  nationwide.  The acquisition was accounted for as a purchase with the
results of HRB included from the acquisition date.

         The Company  previously  manufactured and designed  decorative,  energy
efficient lighting fixtures and related products. Sales were mainly to hotels in
the New York  metropolitan  area. In December  1995,  the Company  determined to
focus its resources on its hospitality and restoration  business and discontinue
its lighting business.

         The  consolidated  financial  statements  include  the  accounts of the
Company and its  wholly-owned  subsidiary,  HRB.  All  significant  intercompany
balances and transactions have been eliminated.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ESTIMATES

         The  preparation of financial  statements in conformity  with Generally
Accepted  Accounting  Principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION
 CONSTRUCTION CONTRACTS

         The Company  recognizes  revenues and  earnings on contracts  using the
percentage of completion  method,  based primarily on contract costs incurred to
date compared to total estimated contract costs.

         To the extent  contracts  extend over one year,  revisions  in cost and
profit  estimates  during the course of the work are reflected in the accounting
period in which the facts which require the revision  become  known.  Assets and
liabilities  related to  contracts  are  included in current  assets and current
liabilities in the  accompanying  consolidated  balance  sheet,  as they will be
liquidated  in the  normal  course of  contract  completion,  although  this may
require more than one year.

         Revenues on short-term  contracts are recognized based on the completed
contract  method,  results  of  which  are not  materially  different  than  the
percentage of completion method for such contracts.

         At the time a loss on a  contract  becomes  known,  the  amount  of the
estimated ultimate loss on both short and long-term contracts is accrued.

         Claims (cost recoveries from  construction  projects) are recorded when
realization is probable and the amount can be reliably estimated.


                                       F-8

<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY AND EQUIPMENT

         Property   and   equipment  is  recorded  at  cost  and  shown  net  of
depreciation.  The Company  provides for  depreciation  using the  straight-line
method over estimated useful lives (generally 3-7 years) for financial reporting
purposes, and the accelerated method for income tax reporting purposes.

GOODWILL

         Goodwill  is  amortized  on a  straight-line  basis over its  estimated
useful life of 17 years. The Company periodically  evaluates goodwill based upon
the expected undiscounted cash flow from the acquired business.

EARNINGS (LOSS) PER SHARE OF COMMON STOCK

         Primary and fully diluted earnings (loss) per share of common stock was
computed by dividing  the  earnings  (loss) by the  weighted  average  number of
common shares and common stock equivalents outstanding during the period.

INCOME TAXES

         The Company accounts for income taxes in accordance with the provisions
of Statement of Financial  Accounting  Standards No. 109, "Accounting for Income
Taxes" ("Statement 109"). Under the asset and liability method of Statement 109,
deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases and operating loss and tax credit carry forwards.  Deferred tax assets and
liabilities,  if any, are measured  using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  Under Statement 109, the effect on deferred tax assets
and  liabilities  of a change in tax rates is recognized in income in the period
that includes the enactment date.

CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.

LONG-LIVED ASSETS

         In  March  1995,  the  Financial   Accounting  Standards  Board  issued
Statement of Accounting  Standards No. 121,  "Accounting  for the  Impairment of
Long-Lived  Assets and for Long-Lived Assets to be Disposed of'", which requires
that certain  long-lived  assets be reviewed for impairment  whenever  events or
changes  in  circumstances   indicate  that  the  carrying  amount  may  not  be
recoverable.  This  standard  is  effective  for fiscal  years that begin  after
December 15, 1995. The Company's  adoption of this  pronouncement  on January 1,
1996 did not have a  material  impact on the  Company's  consolidated  financial
statements.




                                       F-9
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying  values of financial  instruments  including cash and cash
equivalents,  accounts  receivable,  loan  payable - bank and  accounts  payable
approximate  fair  value  due  to  the  relatively  short  maturities  of  these
instruments.  Due to the nature of the transaction  and the  relationship of the
parties  involved,  it is not  practical to determine the fair value of the note
receivable.

STOCK OPTIONS

         In October  1995,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial Accounting  Standards No. 123 (SFAS No.123),  "Accounting
for  Stock-Based  Compensation",  allows a choice of either the intrinsic  value
method or the fair value method of accounting for employee  stock  options.  The
Company has chosen to continue the use of the intrinsic  value method.  Expenses
related to stock options issued to nonemployees are accounted for using the fair
value at the date of grant as required by SFAS No. 123.

PRESENTATION OF PRIOR YEAR DATA

         Certain  reclassifications  have been made to  conform  prior year data
with the current presentation.

3.    ACQUISITION OF
      BUSINESS

         On August 1, 1995, the Company acquired substantially all of the assets
and business and assumed certain liabilities of AGF Interior Services Co. (d/b/a
Hospitality   Restoration  and  Builders)   ("AGF")  through  its  newly  formed
subsidiary  corporation,  HRB.  HRB  provides  interior  and  exterior  cosmetic
renovations  and  maintenance  for  leading  hotel  and  hospitality   customers
nationwide.

         The aggregate  consideration for the acquisition  pursuant to the Asset
Purchase   Agreement   which  was  dated  August  1,  1995,   subject  to  final
determination  subsequent to that date, was $5,450,000.  As finally  determined,
the purchase price consists 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,  delivered to AGF and issued in the name of AGF's sole
stockholder,  Watermark Investments Ltd. ("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  ("Note  Receivable"),  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.

         The following pro forma  consolidated  financial  information  has been
prepared to reflect the  acquisition  of the assets and business of AGF. The pro
forma financial  information is based on the historical  financial statements of
the Company and AGF,  and should be read in  conjunction  with the  accompanying
footnotes.  The accompanying pro forma operating  statements are presented as if
the transaction  occurred 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  transaction  had been
completed as of January 1, 1995, and neither is it necessarily indicative of the
results of operations for future periods.


                                      F-10
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



        YEAR ENDED DECEMBER 31                           1995
        ----------------------                           ----
                                                       (unaudited)

        Net sales                                      $7,159,035

        Loss from continuing operations                (1,225,475)

        Net loss                                       (1,961,017)

        Loss per share from continuing
        operations                                           (.18)

        NET LOSS PER SHARE                                   (.28)


         The above unaudited pro forma  statements have been adjusted to reflect
the amortization of goodwill,  as generated by the  acquisition,  over a 17-year
period,  interest  income on the $350,000 note  receivable,  elimination  of the
interest income on the $2,500,000  funds used in connection with the acquisition
and the 2,500,000 shares issued as consideration in the transaction.  The impact
of outstanding stock options was not included in the calculation of net loss per
share since the effect would be antidilutive.

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 prior 20 trading days,
but not below certain  minimum set prices.  The agreement also provides that the
former President has the ability to request the Company to purchase the relevant
optioned  shares at a 50%  discount to market.  If the Company does not purchase
the relevant  optioned shares,  the option will be canceled with respect to such
shares. In 1995 the Company incurred a loss on disposal of discounted 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   amounting  to  $585,149  on
contracts  which are  collectible  upon the  acceptance  by the  owner,  and are
anticipated to be collected in their entirety in 1997.

         The  Company  withholds  a portion of payments  due  subcontractors  as
retainages ($181,528 at December 31, 1996). The subcontractor  balances are paid
when the Company collects its retainages receivable.


                                      F-11


<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6.   COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

         Billings  on  uncompleted  contracts  in excess of costs and  estimated
earnings represent deferred revenue and consist of:

        DECEMBER 31, 1996
--------------------------------------------------------------------------------

        Costs incurred on uncompleted contracts                  $  19,962,133

        Estimated earnings                                           7,027,729

        Billings to date                                         $ (25,013,757)
--------------------------------------------------------------------------------

        Costs on uncompleted contracts in excess of billings
        and estimated earnings                                   $   1,976,105
--------------------------------------------------------------------------------

        Included in the accompanying consolidated balance sheet under the
        following captions:

        Costs and estimated earnings in excess of
        billings on uncompleted contracts                        $  2,176,907

        Billings in excess of costs and estimated
        earnings on uncompleted contracts                        $   (200,802)
--------------------------------------------------------------------------------

                                                                 $  1,976,105
================================================================================

7.      PROPERTY AND EQUIPMENT

      Major classes of property and equipment consist of the following:

      DECEMBER 31, 1996
--------------------------------------------------------------------------------

      Furniture and fixtures                                     $   52,048
      Office equipment                                              134,153
      Leasehold improvements                                         18,387
--------------------------------------------------------------------------------
                                                                   204,588
      Less: Accumulated depreciation                               (61,711)
--------------------------------------------------------------------------------
                                                                 $ 142,877
--------------------------------------------------------------------------------

8.    LOAN PAYABLE - BANK

         In 1996,  the  Company  secured a line of credit  ("line")  with Marine
Midland Bank of New York.  The line  provides for  borrowings  up to $2 million,
with interest at prime +1/2% (8.75% at December 31, 1996) and is  collateralized
by all  Company  assets.  At December  31,  1996 the Company had an  outstanding
balance of $1.4 million on the line.

                                      F-12
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

================================================================================


9.      PROVISION FOR INCOME TAXES

      Provision for income taxes consists of the following:
                                                    Year ended December 31,
                                                    -----------------------
                                                    1996             1995
--------------------------------------------------------------------------------
      Current:
            Federal                             $  490,369      $  25,000
            State                                  370,676             -

      Deferred:
--------------------------------------------------------------------------------
            Federal                                 65,280             -
            State                                        -             -
                                                $  926,325     $  25,000
================================================================================

         The following is a  reconciliation  of the Company's income taxes based
on the statutory rate and the actual provision for income taxes: 1996 1995

Statutory Federal income tax @ 34%              $  963,460     $(120,845)

Increase (decrease) resulting from:

Reduction of valuation allowance                  (339,120)            -

State and local taxes, net of Federal tax benefit  239,027        16,500

Non deductible goodwill amortization and expenses   56,861        28,000

Increase in valuation allowance                          -       101,345

Other                                                6,097             -
================================================================================
Provision for income taxes                      $  926,325     $  25,000
================================================================================

         The  deferred  tax asset  represents  expenses  accrued  for  financial
reporting purposes not deductible for tax purposes in 1995. Due to the Company's
profitability  in 1996,  and an  assessment  that  operations  will  continue to
generate  taxable  income,  the deferred tax asset is  recognized in the current
year.


                                      F-13
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The  primary  tax effects of the  temporary  differences  which give rise to the
Company's net deferred tax asset at December 31, 1995 and 1996 are as follows:

    DECEMBER 31,                                    1996               1995
    ----------------------------------------------------------------------------

    Accrued liabilities                        $  87,280           $ 169,000

    Goodwill amortization                       (22,000)              (6,000)

    Net operating loss carryforwards                  -              176,120

    Valuation allowance                               -             (339,120)
                                               ---------------------------------
                                                 65,280                    0
                                               ---------------------------------

10.      RELATED PARTY TRANSACTIONS

         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 1996 and from August 1, 1995,
the date of the  Acquisition,  to December  31,  1995,  the Company paid fees of
$172,786 and $712,137, respectively, to Interstate.

         During 1996, the Company performed  renovation  services for Watermark,
the  Company's  major  shareholder.  As of December 31, 1996,  the Company had a
receivable  of $492,824 from  Watertone,  which was collected in full during the
first quarter of 1997.

11.      COMMITMENTS

         (A)    LEASE COMMITMENTS

         The Company  leases  office space in New York,  California  and Florida
which expire at various dates through 2007.

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

        DECEMBER 31
--------------------------------------------------------------------------------
        1997                           $       158,404
        1998                                  285,174
        1999                                  242,020
        2000                                  212,318
        2001                                  212,318
        Thereafter                          1,121,931
--------------------------------------------------------------------------------
                                       $    2,232,165
================================================================================

      Rent expense for 1996 and 1995 was $120,534 and $88,000, respectively.



                                      F-14
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      (B)   EMPLOYMENT AGREEMENTS

         The Company has two three-year  employment  agreements and one two year
employment  agreement with management  personnel which call for aggregate annual
compensation  of  $565,000,  one  expiring  on April  1998 and two  expiring  on
February 1999.

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 in excess of billings subjects
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 in excess of billings, respectively.

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

         During 1996, 35% of the Company's cost of revenues were cost charged by
one subcontractor.

13.     STOCKHOLDERS' EQUITY

         On January 26, 1994, the Company  completed its initial public offering
("IPO") of  1,437,500  shares of common stock at a price of $3.00 per share less
and  underwriter's  discount of 10%. This included an additional  187,500 shares
purchased  by the  underwriter  on an  over-allotment  option  grant,  which was
exercised  simultaneously  with the completion of the offering.  Proceeds of the
IPO, net of commissions  of $431,250 and other related  expenses of $486,958 (of
which $265,016 was recorded in 1993 as deferred costs), were $3,394,292.

         The   underwriter   received   warrants  to  purchase   125,000  shares
exercisable  at $3.60 per share for a period of four years  commencing  one year
from the effective  date of the IPO.  Additionally,  the Company  reimbursed the
underwriter  on a  non-accountable  basis for its expense in the amount of 3% of
the gross proceeds of the IPO. Upon the closing of the IPO, the Company  entered
into a three-year  financial  consulting agreement with the underwriter pursuant
to which the underwriter shall receive a consulting fee of $27,333 per year from
the  effective  date.  The total  three-year  fee of $82,000  was prepaid on the
closing date of the IPO. During 1996, 12,500 warrants were exercised.

         In March, 1996 in accordance with the divestiture agreement between the
Company and its former  President,  the Company  repurchased  500,000  shares of
Common Stock for $250,000 with a market value of $437,500.

         In April  1996,  the Company  consummated  a private  placement  of the
500,000 shares of Common Stock for aggregate gross proceeds of $500,000.

         In  September  1996,  the Company  issued  75,000  shares to two former
consultants to the discontinued lighting business in settlement of the unexpired
portion of their service agreements.

         In October 1996, in accordance with the divestiture  agreement  between
the Company and its former  President,  the Company  repurchased  an  additional
500,000 shares of Common Stock for $715,000.


                                      F-15
<PAGE>
                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         On February 28, 1996,  the Company  engaged a financial  advisor  until
December 31, 1997. As compensation for such engagement,  the Company granted the
financial  advisor a five-year option to purchase 500,000 shares of common stock
at an exercise  price of $2.00 per share and agreed to pay a retainer of $10,000
per month for at least one year.

         On January 15, 1997, the financial  advisor  exercised  200,000 options
resulting in $400,000 of additional capital to the Company.

14.  STOCK OPTION PLAN

         At December 31, 1996,  the Company has three stock option plans,  which
are described below. As permitted by Statement of Financial Accounting Standards
No. 123,  the Company  applies APB Option 25,  "Accounting  for Stock  Issued to
Employees",  and related  interpretations in accounting for the plans. Under APB
Option 25, 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  85,000  shares at $1.275 per share have been granted and are currently
exercisable.  Of the options,  75,000  expire in four years and 10,000 expire in
two years. The stock option plan was retired,  and there are no shares available
for grant.  Additionally,  during 1995 the  Company  granted  75,000  options at
$1.275 per share which are currently exercisable and expire in four years.

         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 Company has granted  924,000 shares
under the Plan at a grant price of $2.75 per share,  of which 2,500  shares have
been exercised, and 462,000 are currently exercisable.  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 as more than ten years.  At December  31, 1996,
776,000 shares were available for grant.

         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  purpose of  securing  for the  Company and its
shareholder 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  shall  be  exercisable  in  three  equal  installments
beginning on the first  anniversary  of the grant date.  The Company has granted
options to purchase  60,000 shares under the Outside  Directors  Plan at a grant
price of $2.75  per  share,  of which  none are  currently  exercisable.  Of the
options, 20,000 are exercisable in even increments each of the next three years.

         FASB Statement 123, "Accounting for Stock-Based  Compensation" 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


                                      F-16
<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FASB Statement 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 1995  and  1996,
respectively:  no  dividends  paid for all years;  expected  volatility  of 40%;
risk-free interest rates of 6.41%; and expected lives of 2 years.

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

                                              1996               1995
                                             ------             ------
 Net income (in thousands)
    As reported                             $ 1,843            $ (1,116)
    Pro forma                               $ 1,583            $ (1,182)

Primary earnings per share
    As reported                             $  0.26            $ (0.20)
    Pro forma                               $  0.22            $ (0.21)

         The following table contains information on stock options for the three
year period  ended  December  31,  1996.

                                               Exercise           Weighted
                                    Option     price range           average
                                    shares     per share    exercised price
--------------------------------------------------------------------------------
Outstanding, January 1, 1994             -           -               -
Granted                             85,000      $1.275          $1.275
Exercised                                -           -               -
Canceled                                 -           -               -
--------------------------------------------------------------------------------
Outstanding, December 31, 1994      85,000      $1.275          $1.275
Granted                             75,000      $1.275          $1.275
Exercised                                -           -               -
Canceled                                 -           -               -
--------------------------------------------------------------------------------
Outstanding, December 31, 1995     160,000      $1.275          $1.275
Granted                          1,484,000    $2.00 to $2.75     $2.50
Exercised                           (2,50)       $2.75           $2.75
Canceled                                -            -               -
--------------------------------------------------------------------------------
Outstanding, December 31, 1996  1,641,500     $1.275 to $2.75    $2.38
Exercisable at year-end
      1994                         85,000             $1.275   $1.275
      1995                        120,000             $1.275   $1.275
      1996                      1,120,000     $2.00 to $2.75    $2.21

                                                 1996 Stock       1996 Outside
                                  1994 Plan      Option Plan      Directors Plan
                                  ---------      -----------      --------------
Available for future grants
      1994                              -                  -         -
      1996                              -            776,000         *


                                      F-17

<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                 Exercised price     Exercised 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


The following table summarizes  information  about stock options  outstanding at
December 31, 1996.

    Range of exercise prices:                      $1.275-$2.75
    Outstanding Options
          Number outstanding
               at December 31, 1996                 1,641,500
          Weighted-average remaining
               contractual life (years)                  4.30
          Weighted-average exercise price               $2.38

    Exercisable options
          Number outstanding
               at December 31, 1996                 1,120,000
          Weighted-average exercise price               $2.21

*The plan does not state a maximum number of shares available for grant.

15.   SUBSEQUENT EVENT

A.  ACQUISITION

         On January 10, 1997,  the Company  acquired the Leonard  Parker Company
and  affiliates,  ("LPC"),  a leading  purchasing  company  for the  hospitality
industry  that acts as an agent for the  purchase of goods and  services for its
customers  which include major hotel and  management  companies  worldwide.  The
purchase price of approximately  $12,000,000 consisted of 1,250,000 newly issued
Common  Stock of the  Company  and $5  million  par  value of  newly  issued  6%
convertible preferred stock of the Company, convertible into 1,000,000 shares of
common stock not earlier that January 1, 1998.

         This  acquisition  will be accounted  for using the purchase  method of
accounting.  Based on a preliminary  valuation,  the acquisition  will result in
goodwill of approximately  $12,000,000.  The pro forma financial  information is
based on the historical  financial statements of the Company and LPC, and should
be read in conjunction  with the  accompanying  footnotes.  The following  table
presents,  on a pro forma  basis,  a  condensed  consolidated  balance  sheet at
December 31, 1996,  giving  effect to the  acquisition  as if it had occurred on
that date.


                                      F-18

<PAGE>

                      HOSPITALITY WORLDWIDE SERVICES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                                        Pro Forma
                                                      December 31,
   (Unaudited)                                               1996
   -----------------------------------------------------------------------------
   Current assets                                     $13,763,000
   Net property, plant and equipment                    1,129,000
   Goodwill - net                                      18,050,000
   Other assets                                           573,000
                                                      ------------
                                                      $33,515,000
                                                      ------------

   Current liabilities                                $13,667,000
   Long-term debt                                         109,000

   Stockholder's equity                                19,739,000
                                                      ------------
                                                      $33,515,000
   -----------------------------------------------------------------------------

         The Company's consolidated statement of operations will not include the
results  of  operations  of LPC until the year  1997.  The  following  pro forma
results,  are  unaudited and are not  necessarily  indicative of what the actual
results of operations  of the Company  would have been assuming the  transaction
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,
 (Unaudited)                                              1996             1995
 -----------------------------------------------------------------------------------

<S>                                                      <C>             <C>
 Net Sales                                               $83,013,000     $50,124,000
 Net income (loss) from continuing operations
 applicable to common shares                             $ 1,884,000     $  (692,000)
 Net income (loss) per share from continuing operations         0.23           (0.14)
 ------------------------------------------------------------------------------------
</TABLE>

         The above unaudited pro forma results have been adjusted to reflect the
amortization of goodwill as generated by the acquisition, over a 30 year period,
LPC's officers  compensation based on employment  agreements entered into at the
date of acquisition,  dividends of 6% on preferred  stock and additional  income
taxes on LPC's pro forma income.





                                      F-19