U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 _______________

                                   FORM 10-KSB

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1997

                          Commission File Number 0-9455

                            ATLANTIC INDUSTRIES, INC.
                 (Name of small business issuer in its charter)

         Colorado                                 13-3045713
-------------------------------    ------------------------------------
(State or other jurisdiction of    (I.R.S. Employer Identification No.)
incorporation or organization)

     38 South Audley Street
    Mayfair, London, England                           W1Y 5DH
----------------------------------------              ----------
(Address of principal executive offices)              (Zip Code)

Issuer's telephone number, including area code:  (44171) 629-7617

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

Securities registered under Section 12(g) of the Exchange Act:

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

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No ___

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  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. [X]

         Issuer's revenues for the year ended December 31, 1997: $-0-.

         The aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 10, 1998 was $922.52.

         The  number of  shares of the  Company's  $.01 par value  common  stock
outstanding as of March 10, 1998 was 193,127.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

Transitional Small Business Disclosure Format   Yes ______    No   [X]
<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

         Little Prince  Productions,  Ltd.  ("Little  Prince"),  the predecessor
company to the  registrant,  was  incorporated  on April 3, 1980 pursuant to the
laws of the State of New York.  Little  Prince was  originally  formed to pursue
certain  ancillary  and  subsidiary  rights to the literary  work  entitled "The
Little  Prince."  Subsequent  to its  organization  Little  Prince  changed  its
business focus. See "-Background of Company's Operations" below. As used in this
report the term "Company"  refers to Little Prince prior to December 6, 1996 and
to Atlantic (as defined below) as of and subsequent to December 6, 1996.

         On  February  29,  1996,   the  Company  held  a  Special   Meeting  of
Shareholders (the "Meeting").  At the Meeting the Company's shareholders,  by an
affirmative vote of approximately 76% of the total shares  outstanding,  adopted
the following  proposals:  (i) a change in the Company's state of  incorporation
from New York to Colorado by means of a merger (the  "Merger") of Little  Prince
into Atlantic Industries, Inc., ("Atlantic") a Colorado corporation organized on
January 31,  1996,  which was wholly  owned by Little  Prince at the time of the
Merger;  (ii) approval of the terms of the merger  agreement which provided for,
among other things, a 10 for 1 reverse stock split and an increase in the number
of authorized  shares of the Company after the Merger to  50,000,000;  and (iii)
consented and authorized  the Board of Directors  (the "Board"),  at the Board's
discretion, to (a) sell the Company's interest in the common stock of its wholly
owned  subsidiary,  LPPL Corp.,  to an  independent  third-party  or (b) vote to
dissolve  LPPL Corp.  On  December 6, 1996,  the Merger  became  effective  (the
"Effective  Date").  By  operation  of law on the  Effective  Date,  all assets,
property,  rights, liabilities and obligations of Little Prince were transferred
to and assumed by the  Company.  The  principal  effect of the Merger was to (i)
change the law applicable to the Company's  corporate  affairs from the New York
Business  Corporation Law to the Colorado Business  Corporation Act, (ii) reduce
the number of shares of the Company's  $.01 par value common stock (the "Shares"
or the "Common Stock") issued and outstanding,  and (iii) increase the number of
Shares authorized for issuance.

         Specifically,  on the  Effective  Date,  the Company was  authorized to
issue 50,000,000 shares of capital stock (the "Capital  Stock").  Of the Capital
Stock  reserved  for  issuance  40,000,000  shares are  reserved for issuance as
Common Stock,  of which  2,499,923  shares were  outstanding  at that time,  and
10,000,000  shares were  reserved for issuance as  preferred  stock  ("Preferred
Stock"), of which no shares were outstanding.

SALE OF LPPL CORP.

     Pursuant to the authority granted to it by the shareholders at the Meeting,
on July 22, 1996 the Board authorized the sale of its ownership  interest in all
of the issued and outstanding
<PAGE>
capital stock of LPPL Corp.  (the "LPPL Shares") to Frances Katz Levine pursuant
to that certain Stock Purchase  Agreement (the "Agreement") dated July 22, 1996.
As consideration for the LPPL Shares,  the Company received $10 and Ms. Levine's
agreement to use her best efforts to effect and complete by July 21, 1997, at no
cost to the Company,  the  reincorporation  of LPPL Corp.  under the laws of the
State of Delaware.  Simultaneously  therewith, Ms. Levine agreed to increase the
number of shares of authorized  capital stock of LPPL Corp.  and  distribute the
shares of common stock of LPPL Corp.  to the  shareholders  of the Company as of
July 22,  1996 at a ratio of one LPPL Share for every one share of Common  Stock
of the Company (or such other ratio as required by the attendant  circumstances)
in  accordance  with  the  requirements  of all  applicable  federal  and  state
securities laws and regulations.  In the event Ms. Levine failed to complete the
above actions by July 21, 1997, the Agreement required Ms. Levine to immediately
take all steps necessary to dissolve LPPL Corp. and deliver any assets remaining
after dissolution,  if any, to the Company.  Ms. Levine did fail to complete the
above actions by July 21, 1997.  Accordingly,  the Company  recognized a gain on
the disposition of LPPL Corp. of $155,825 on such date.

DEVELOPMENTS SUBSEQUENT TO DECEMBER 31, 1996

         On February 12, 1997 the Company held a Special Meeting of Shareholders
(the "1997 Meeting"). At the 1997 Meeting the Company's shareholders adopted, by
an affirmative  vote of  approximately  74% of the total Shares  outstanding,  a
proposal  to  effect  a  reverse  stock  split  of up to  twenty-for-one  of the
presently  issued and  outstanding  shares of Common Stock. At the 1997 Meeting,
shareholders  owning (i)  2,853,588  (74%)  shares of Common Stock voted for the
proposal,  (ii) 210 shares of Common Stock voted against the proposal, and (iii)
140 shares of Common Stock abstained.  The proposal as adopted allowed the Board
to  abandon  the  reverse  stock  split or to  reduce  the ratio of the split to
something less than  twenty-for-one at any time after the 1997 Meeting and prior
to February 12, 1998 if the Board determined,  in its sole discretion,  that the
reverse stock split would not be in the best  interests of the Company or that a
different  ratio  (but not  greater  than  twenty-for-one)  would be in the best
interest of the Company.

         On February 13, 1997, the Company filed an amendment to its Articles of
Incorporation making effective a twenty-for-one  reverse stock split. The filing
of the amendment  resulted in a decrease in the number of outstanding  Shares to
approximately  193,127 and,  since the number of Shares  available  for issuance
remained at  40,000,000,  increased the number of Shares  available for issuance
from approximately 36,140,077 to 39,806,873.

THE COMPANY'S BUSINESS PLAN

         The Company's  current focus is on acquiring  service or  manufacturing
businesses, as well as developing,  selling, leasing and managing real estate in
the United  Kingdom,  the United  States and other  countries.  The  Company has
expanded its business plan to encompass the potential  acquisition of service or
manufacturing  businesses,  as well as  commercial  real estate  properties  for
equity in the Company.

                                        2
<PAGE>
     The Company's  current  acquisition  strategy  involves the  possibility of
acquiring,   in  exchange  for  the  Capital  Stock,  existing  businesses  that
management  believes will offer the  opportunity of sound  sustainable  earnings
with the potential  for growth.  Such  acquisitions  may result in the merger of
another  corporation  into the  Company in return for the  Capital  Stock of the
Company.  As of the date hereof, no such acquisitions have been made nor are any
contemplated in the near future. See "Description of Property" for a description
of the Company's investment strategies.

COMPETITION

         Management  believes that the Company may face competition for the most
attractive  real  estate  investment   opportunities  or  business   acquisition
opportunities from other investors.  Other investors,  substantially all of whom
have  greater  resources  than the  Company,  are in the market for real  estate
investments and business  acquisitions  and present  intense  competition due to
their being considerably better established and larger than the Company in total
assets and  resources.  There cannot be any assurance  that the Company will, in
fact,  be able to raise  equity  capital  on terms  favorable  to it or at times
necessary to enable it to take advantage of attractive investment  opportunities
against potential competitors.

PERSONNEL

         During the fiscal  year ended  December  31,  1997,  the Company had no
employees other than its two executive officers.

ITEM 2. DESCRIPTION OF PROPERTY

         The Company does not own or lease any property.  The executive  offices
of the  Company  have been  maintained  at the  office of Mr.  Kirby at 38 South
Audley Street,  Mayfair,  London,  England W1Y 5DH. The Company has no ownership
interest in such property,  has no formal lease or agreement with respect to its
office facilities and pays no rent or other remuneration for the use thereof.

NATURE OF INVESTMENTS/INVESTMENT STRATEGY

         Currently,  the Company has no  investments of any type.  Further,  the
Company  does not  intend to seek  investments  that  involve  a high  degree of
dependence on specialized  skills or market  conditions or which will be at risk
from rapid  changes  in market  conditions  or from  technological  change.  All
potential  acquisitions  will be analyzed in depth by the executive  officers of
the Company and approved by the Board. Advice from independent  advisors will be
sought as deemed appropriate by the executive officers.

     In evaluating potential investments, the Company will consider, among other
factors:  (a) the  current  anticipated  cash  flows and their  ability  to meet
operational  needs  and  provide  a  competitive  market  return  on the  equity
invested; (b) the potential for capital appreciation;

                                        3
<PAGE>
(c) the  geographical  area and  location of the  business  or  property  (which
business or property may be located in the United Kingdom,  the United States or
elsewhere);  (d) the ability to increase cash flow through a capable management;
(e) the capability of existing management; (f) the market positions and relative
strengths of the business related to its  competitors;  (g) the general economic
growth  and tax and  regulatory  environment  of the  communities  in which  the
business operates; and (h) the prospects for liquidity,  through sale, financing
or refinancing.

         The  Company  further  intends  to  keep  debt to  conservative  levels
relative to equity with regard to both mature  investments and new acquisitions.
The  Company  also may raise  funds by selling  its  Capital  Stock in public or
private  transactions.  The Company's  shareholders do not and will not have any
preemptive  rights with respect to any such issues of Capital  Stock.  Moreover,
there  can be no  assurance  that the  Company  will be able to raise  any funds
through the sale of Capital Stock.

         In  accordance  with  their  fiduciary  duties to the  Company  and its
shareholders,  the Board may determine that a change from the Company's  current
investment  strategies  and policies is in the best  interest of the Company and
its shareholders and shareholder  approval will not be necessary for a change in
the  Company's  investment  policies.  Although the Company  currently  does not
anticipate  such a change,  should the Board deem it advisable,  changes will be
made.  Alternative methods of financing,  which could be adopted by the Board in
the future, could include the issuance, in public or private transactions, of up
to 10,000,000  shares of Preferred  Stock in addition to short,  intermediate or
long-term borrowings,  on a secured or unsecured basis. Such borrowings could be
in the form of bank  borrowings,  including  unsecured  borrowings or borrowings
secured on the Company's then existing  assets and/or assets being acquired with
borrowed  funds.  Borrowings  could  also be made by the  Company  by way of the
issuance  of senior or  subordinated  notes or  debentures,  including  notes or
debentures convertible into shares of Common Stock. The Company may also combine
any of the above financing methods.

ITEM 3. LEGAL PROCEEDINGS

         No material  legal  proceedings to which the Company (or any officer or
director of the Company, or any affiliate as owners of record or beneficially of
more than 5% of the Common Stock) to  management's  knowledge,  is a party or to
which the  property of the Company is subject,  is pending and no such  material
proceedings are known by management of the Company to be contemplated.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         During the fourth  quarter of the fiscal year ended  December 31, 1997,
no matters were submitted to a vote of security holders.

                                        4
<PAGE>
                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

         The Common Stock is  currently  traded on the  over-the-counter  market
under the symbol  "ACDX".  Between May 22, 1993 and March 27, 1997, the Company,
or its  predecessor,  traded on the OTC Bulletin  Board under the symbol "LTLP."
Prior to May 22,  1992,  the  Company,  or its  predecessor,  was  quoted on the
National   Association  of  Securities   Dealers'  Automated   Quotation  System
("NASDAQ").  Because the Company did not meet the revised financial criteria for
continued  inclusion in NASDAQ,  it was delisted  therefrom,  effective  May 22,
1992. Currently,  the Common Stock is neither listed on NASDAQ nor quoted on the
OTC  Bulletin  Board.  The Company has been advised by NASDAQ that no dealer has
submitted bid prices for the Common Stock since August, 1995.

         On December 31, 1996, the Company  authorized the issuance of 1,360,000
shares of Common Stock to the Patchouli Foundation  ("Patchouli") in payment for
loans made by the Patchouli Foundation to the Company.  Pursuant to Section 4(2)
of the  Securities  Act of 1933,  as amended  (the  "Act"),  the issuance of the
1,360,000 shares was exempt from the  registration  requirements of the Act. See
"Certain Relationships and Related Transactions."

         As of March 10,  1998,  there  were 324  record  holders  of the Common
Stock.  The Company has not declared or paid any form of dividends on the Common
Stock  during the last two fiscal  years and does not  contemplate  declaring or
paying any dividends on the Common Stock in the near future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         The  following  discussion  should  be read  in  conjunction  with  the
Company's  financial  statements  and notes thereto  included  elsewhere in this
report.

         The statements contained herein, if not historical, are forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995,  and involve risks and  uncertainties  that could cause actual  results to
differ   materially  from  the  results,   financial  or  otherwise,   or  other
expectations  described  in such  forward-looking  statements.  These  risks and
uncertainties  that may  affect the  operations,  performance,  development  and
results of the Company's business include those,  among others,  discussed below
and under "Description of Business-THE  COMPANY'S BUSINESS PLAN," "-COMPETITION"
and "Description of  Property-NATURE  OF  INVESTMENTS/INVESTMENT  STRATEGY." Any
forward looking  statement or statements speak only as of the date on which such
statement  was made,  and the Company  undertakes  no  obligation  to update any
forward looking statement or statements to reflect events or circumstances after
the date on  which  such  statement  is made or to  reflect  the  occurrence  of
unanticipated events. Therefore, forward-looking statements should not be relied
upon as a prediction of actual future results.

                                        5
<PAGE>
RESULTS OF OPERATIONS

         Balance sheet amounts originally denominated in United Kingdom sterling
have been  translated  into U.S.  dollars  using the year-end  rate of exchange.
Operational results originally  denominated in United Kingdom sterling have been
translated  into  U.S.  dollars  using  the  average  annual  rate of  exchange.
Fluctuations  in foreign  exchange rates could have either  negative or positive
impacts on the Company's balance sheet and results of operations.

         During the fiscal year ended December 31, 1997, the Company was largely
inactive except for administrative activities in connection with the preparation
and filing of periodic  reports  required under the  Securities  Exchange Act of
1934, as amended.  All filings are now up to date. The majority of the operating
costs of approximately  $24,398 incurred during the 1997 fiscal year, related to
the  audit,  accounting,   secretarial  and  legal  costs  associated  with  the
preparation of the aforementioned documentation.

LIQUIDITY AND CAPITAL RESOURCES

         As a result of the sale of LPPL  Corp.,  the Company  currently  has no
income producing assets. The Company is dependent in the short term on continued
loans from  Patchouli.  As stated above,  the Company intends to acquire through
the  issuance  of  additional  shares of Capital  Stock a suitable  business  or
businesses and/or to obtain additional funds through the sale of Common Stock or
Preferred  Stock in public or private  transactions.  The  Company's  investment
strategy   is   set   forth   under    "Description   of    Property-NATURE   OF
INVESTMENTS/INVESTMENT STRATEGY."

         After the merger of Little Prince into the Company,  the Board believed
that its  ability to acquire  suitable  income  producing  properties  was still
limited by the number of Shares  outstanding at the end of the Company's  fiscal
year. For example, an arbitrarily assigned value of $5.00 per share for purposes
of  conducting  a reverse  acquisition  would  indicate  that the  Company had a
capitalization  of  $20  million,   with  the  current  number  of  shares  then
outstanding.  Because  the Shares are  currently  of minimal  value,  the person
selling the business in return for shares would recognize a substantial dilution
in the value of the shares such person received.  Under the same scenario, after
giving  effect  to a reverse  stock  split of  twenty-for-  one,  the  Company's
hypothetical  capitalization  would decrease to approximately $1 million and the
person selling the business would recognize a less  substantial  dilution in the
value of its shares.  Although, the above example is hypothetical and meant only
for  illustrative  purposes to reflect  the  difficulties  the Company  faced in
attempting  to  locate a viable  business  or  assets to  acquire,  the  Company
believed that the  twenty-for-one  reverse stock split that became  effective on
February 13, 1997,  would enhance the Company's  ability to enter into potential
acquisitions in the future.

           The Company cannot provide any assurances that the reverse stock spit
will  enable it to  acquire a  suitable  business,  businesses  or assets in the
future.  In addition,  the Company  cannot provide any assurance as to the value
per share a person  interested in selling its business or assets in exchange for
shares would demand or accept.

                                        6
<PAGE>
         The Company had no material commitments for capital expenditure for the
period ended December 31, 1997.

         Because  the  Company  currently  has  no  operations,   it  cannot  be
determined  what,  if any,  effect  the  "Year  2000"  issues  will  have on the
operations of the Company and no such determination has been made.

ITEM 7. FINANCIAL STATEMENTS

         The financial  statements of the company required by Regulation S-B are
attached  to this  Report.  Reference  is made to Item 13 below for an "Index to
Financial Statements."

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

                                        7
<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 DURING THE YEAR ENDED DECEMBER 31, 1997.

The table  below sets forth the  persons who were the  directors  and  executive
officers of the Company  during the year ended  December 31, 1997  together with
their respective ages, their respective dates of service, the year in which each
was first  elected or appointed an officer or director,  and any other office in
the Company held by each such person.  All persons who served as officers of the
Company during this period also served as executive officers.

                                                        Officer and Director
                                                    ----------------------------
 Name of Director    Other Offices Held       Age      From                To
 ----------------    ------------------       ---      ----                --
Adrian P. Kirby     Chief Executive Office,    39   October 1, 1994      Present
                    Chairman, President
Peter N. Chapman    Treasurer, Secretary       42   November 16, 1992    Present
                                                                              
         Messrs.   Kirby  and  Chapman,   the  Company's  current  officers  and
directors, devote such of their time to the Company's business and affairs as is
required for their executive duties and meetings of the Board of Directors.

FAMILY RELATIONSHIPS

         No family relationship exists between any director or executive officer
of the Company or person contemplated to become such.

BUSINESS EXPERIENCE

         The following summarizes the present occupation and business experience
during  the past five  years for each  person who is  currently  a  director  or
executive officer of the Company. No other persons have been nominated or chosen
to become a director of the Company.

         ADRIAN P. KIRBY has been the  President,  Chief  Executive  Officer and
Chairman of the Board of Directors of the Company  since October 1, 1994. He was
a founder and is a major  shareholder  of  Atlantic  Properties,  Ltd.,  and has
served as a Director and as Treasurer of such corporation since its inception on
February 15, 1995. In 1993, Mr. Kirby founded The Riparian Group,  consisting of
Riparian Securities,  Ltd., Riparian Investments,  Ltd. and Riparian Properties,
Ltd. Mr. Kirby served as the Chairman of all of the constituent  corporations of
the Riparian  Group until his  resignation  therefrom in March of 1995. In 1984,
Mr.  Kirby  incorporated   Guardacre   Investments  Limited,  and  subsequently,
Guardacre  Securities and

                                        8
<PAGE>
Guardacre  Properties  Limited.  Collectively, these  corporations were known as
the "Guardacre  Group." From 1984 through November 1993, Mr. Kirby was the Chief
Executive Officer of the Guardacre Group.

         PETER N. CHAPMAN has served as Treasurer,  Secretary, and a Director of
the Company from  November 16, 1992  through the present.  Mr.  Chapman has been
employed as a chartered  accountant  since 1979. He has been self employed since
1990, first  independently and subsequently as a partner in Chapman & Chapman, a
firm of chartered  accountants.  From 1988 through  January  1990,  Mr.  Chapman
worked for William A. Swales  Limited  where,  commencing  in January  1989,  he
served as Finance  Director.  Effective  November  16,  1992,  Mr.  Chapman  was
appointed as an officer and director of LPPL Corp., a wholly owned subsidiary of
the Company  until July 22,  1996.  Mr.  Chapman was admitted as a Fellow of the
Institute of Chartered Accountants in England and Wales in 1979.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section  16(a) of the  Securities  Exchange  Act of 1934 and the  rules
thereunder  require 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 and with the NASDAQ and to furnish the Company with copies.

         Based on its review of the copies of the Section  16(a) forms  received
by it, or written  representations  from certain reporting persons,  the Company
believes   that,   during  the  last  fiscal  year,  all  Section  16(a)  filing
requirements applicable to its officers,  directors and greater than ten-percent
beneficial owners were complied with.

ITEM 10.          EXECUTIVE COMPENSATION

CURRENT REMUNERATION

         The Company has no stock option or stock appreciation rights, long term
or other incentive  compensation plans, deferred compensation plans, stock bonus
plans,  pension plans, or any other type of  compensation  plan in place for its
executive  officers,  directors,  or other  employees  and none of its executive
officers or directors have ever received compensation of any such types from the
Company pursuant to plans or otherwise.

         The  following  table  sets  forth  information  concerning  the annual
compensation  received or accrued for services provided in all capacities to the
Company for the years ended  December 31, 1997,  1996 and 1995 by the  Company's
chief executive  officer.  None of the Company's  executive officers received or
accrued annual  compensation in excess of $100,000 in any of such years.  All of
the Company's current  executive  officers have agreed to render services to the
Company solely for the purpose of enhancing the value of their  shareholdings in

                                        9
<PAGE>
the  Company,  until  such  time  as the  Company  has the  financial  resources
available to compensate such persons for their services.

<TABLE>
                                         SUMMARY COMPENSATION TABLE

<CAPTION>
                                                                                                                         All
                                                              Other           Restricted     Securities                  Other
                                                              Annual          Stock          Underlying     LTIP         Compensa-
              Principal                Salary      Bonus      Compensa-       Award(s)       Options/       Payouts      tion
Name          Position       Year      ($)         ($)        tion ($)        ($)            SARs(#)        ($)           ($)
------------------------------------------------------------------------------------------------------------------------------------
<S>           <C>            <C>       <C>         <C>        <C>             <C>            <C>            <C>          <C>

Adrian P.     President      1995      $-0-        $-0-       $-0-            $-0-           $-0-           $-0-         $-0-
Kirby(1)      and Chief      1996       -0-         -0-        -0-(2)          -0-            -0-            -0-          -0-
              Executive      1997       -0-         -0-        -0-             -0-            -0-            -0-          -0-
              Officer

---------------
<FN>
(1) Mr. Kirby became  president  and chief  executive  officer of the Company on
October 1, 1994.  Mr.  Kirby has agreed to render his  services  to the  Company
solely  for the  purpose  of  enhancing  the value of the  shareholdings  of the
Patchouli  Foundation  in the  Company  until such time as the  Company  has the
financial  resources  available  to  compensate  him  for his  services.
(2) On  December 31, 1996,  the  Patchouli  Foundation  ("Patchouli")   received
1,360,000 shares of Common Stock in exchange for the cancellation of the debt of
$170,000 owed to  Patchouli  by the  Company.  Mr. Kirby may  be  deemed to be a
beneficial owner of such shares  through the investment  and voting powers which
Mr. Kirby has over such shares through his position as attorney-in-fact  for the
administrator of the Patchouli  Foundation.  The purpose of this transaction was
not to pay Mr. Kirby  compensation  for his services as an executive  officer of
the Company. See "Certain Relationships and Related Transactions."
</FN>
</TABLE>

DIRECTORS REMUNERATION

         The directors of the Company are not  compensated for their services as
such.

EMPLOYMENT AGREEMENTS

         The  Company  has not entered  into an  employment  contract or similar
arrangements with any executive officer.

                                       10
<PAGE>
ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership of  outstanding  Common Stock as of March 10, 1998, by (i)
each person known by the Company to own beneficially five percent or more of the
outstanding  shares  of  Common  Stock,  (ii)  the  Company's  directors,  Chief
Executive  Officer and  executive  officers  whose total  compensation  exceeded
$100,000  for the last  fiscal  year,  and (iii)  all  directors  and  executive
officers of the Company as a group.

       Name and Address            Amount and Nature of
      of Beneficial Owner          Beneficial Ownership      Percent of Class**
      -------------------          --------------------      ------------------

Patchouli Foundation                          99,250(1)              51.4%
c/o Hans Zum Elefant
Kirchgasse 3/5
 Postfach 8024
Zurich

Adrian P. Kirby, Chairman of the              99,250(1)              51.4
Board, CEO and President
38 South Audley Street
Mayfair, London
England W1Y 5DH

Terence G. Galgey                             11,250                  5.8
c/o Daniel Stewart & Co.
27 John Adam Street
London, England WC2N 6HX

Peter N. Chapman, Director, CFO                1,625                    *
and Secretary
38 South Audley Street
Mayfair, London
England W1Y 5DH
                                             100,875                 52.2
All executive officers and directors
as a group (2 persons).

------------------
(1) Includes 99,202 Shares beneficially owned by the Patchouli  Foundation.  Mr.
Kirby  may be  deemed  to be a  beneficial  owner  of such  shares  through  the
investment  and voting  powers which Mr. Kirby has over such shares  through his
position as attorney-in-fact for the administrator of the Patchouli  Foundation.
* Indicates less than 1% beneficial ownership
**Calculated on the basis of 193,127 Shares outstanding on March 10, 1998

                                       11
<PAGE>
CHANGES IN CONTROL

         The Company is not aware of any existing  arrangements  that may result
in a change in control of the  Company at this time.  A change in control of the
Company could occur in the future if the Company locates a suitable  business or
assets to acquire.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS AND BUSINESS RELATIONSHIPS WITH MANAGEMENT

         Since 1994, the Patchouli  Foundation  ("Patchouli")  has made loans to
the Company to cover costs and  expenses  incurred in  connection  with  various
corporate activities, including without limitation, legal, accounting and filing
fees incurred in connection with the preparation of the Company's Annual Reports
on Forms 10-KSB,  Quarterly  Reports on Form 10-Q,  proxy  statements  and state
income tax returns.  Patchouli is a non-discretionary  family trust, governed by
Liechtenstein  law, set up for the benefit of the family of Adrian P. Kirby, the
Chairman of the Board, Chief Executive Officer and President of the Company. Mr.
Kirby  may be  deemed  to be a  beneficial  owner  of such  shares  through  the
investment  and voting  powers which Mr. Kirby has over such shares  through his
position as attorney-in-fact for the administrator of Patchouli.

         As of December 31, 1996, Patchouli had advanced to the Company $170,000
(the  "Patchouli  Advance").   On  December  31,  1996,  the  Board  unanimously
authorized  the  issuance of  1,360,000  shares of Common  Stock to Patchouli in
payment  for the  Patchouli  Advance.  As a result of this  exchange,  Patchouli
became the  beneficial  owner of 51.4% of Common Stock  issued and  outstanding.
Although the Common Stock  currently  has no value,  the Board valued the Common
Stock at a price of $.125 per share for  purposes of  determining  the number of
Shares Patchouli would receive as payment for the Patchouli  Advance.  The Board
believed  that the offered  price of $.125 per share was fair and  reasonable to
the Company and its shareholders.

RELATIONSHIP BETWEEN THE COMPANY AND ATLANTIC PROPERTIES, LTD.

     On February 15, 1995, the Company's current officers and directors, founded
Atlantic Properties,  Ltd., a Delaware corporation,  for the purpose of engaging
in business of acquiring,  developing,  re-developing,  owning, selling, leasing
and managing  residential leisure and other types of real estate properties.  In
consideration  of the services  rendered and unreimbursed  expenses  incurred in
connection  with its  organization,  Atlantic  Properties,  Ltd.  issued 105,000
shares,  constituting  approximately  2.5% of its total  issued and  outstanding
common stock to the Company. On March 30, 1995, Atlantic Properties,  Ltd. filed
a  registration  statement  on  Form  S-11  with  the  Securities  and  Exchange
Commission (SEC File No. 33-90790), which was declared effective on November 11,
1995.  The 105,000  shares  owned by the  Company  were  included  therein to be
registered under the Securities Act of 1933, as amended, for distribution,  on a
pro rata basis, to the holders of Company's common stock of record, on a date to
be

                                       12
<PAGE>
determined,  at the rate of one  share of common  stock  for  every two  hundred
thirty-eight   (238)  shares  of  the  Company's   Common  Stock,   without  any
Consideration  being paid by such shareholders.  Notwithstanding  the foregoing,
any person who holds  Shares of the Company as of the initial  record date in an
amount of less than two  hundred  thirty-eight  (238) will  receive one share of
Atlantic  Properties,  Ltd.  common  stock.  As  of  March  26,  1998,  no  such
distribution  of  shares  of  Atlantic  Properties,  Ltd.  has been  made to the
shareholders of the Company.

                                       13
<PAGE>
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

    (a) The following documents are filed as part of this Report.

    FINANCIAL STATEMENTS.  See Index to Financial Statements on page F-1 of this
    Report.

    EXHIBITS.  Exhibits filed  as  part of this  report are as follows (for
    electronic  filing  purposes  only,  this report  contains  Exhibit 27,
    Financial Data Schedule):

Exhibit No.                Description
-----------                -----------

2.1(1)      Agreement and Plan of Merger dated  February 9, 1996, between Little
            Prince Productions, Ltd. and Atlantic Industries, Inc.

2.2(2)      Certificate of Merger of Little Prince Productions, Ltd., a New York
            corporation into Atlantic Industries, Inc., a Colorado  corporation,
            dated  March 29, 1996,  under Section 907 of the  New York  Business
            Corporation Law.

2.3(2)      Articles  of Merger  of  Little Prince Productions, Ltd., a New York
            corporation into Atlantic Industries,  Inc., under Section 7-111-107
            of the Colorado Business Corporation Act.

2.4(3)      Stock  Purchase  Agreement  dated  as  of  July 22, 1996 between the
            Company and Frances Katz Levine.

3.1(2)      Articles of Incorporation of Atlantic Industries, Inc., as amended

3.2(2)      Amended and Restated Bylaws of Atlantic Industries, Inc.

27*         Financial Data Schedule
---------------
*Filed herewith.
(1) Filed  with the  Securities  and  Exchange  Commission  as an exhibit to the
Company's  Form 10-K,  dated  December 31, 1995,  which exhibit is  incorporated
herein by reference.
(2) Filed  with  the  Securities  and  Exchange  Commission as an exhibit to the
Company's Form 10-KSB,  dated December 31, 1996,  which  exhibit is incorporated
herein by reference.
(3) Filed  with  the  Securities  and  Exchange  Commission as an exhibit to the
Company's Form 10-QSB, dated June 30, 1996, which exhibit is incorporated herein
by reference.

                                       14
<PAGE>
    (B)  REPORTS ON FORM 8-K

     The Company  did not file any  Current  Reports on Form 8-K during the last
quarter of the period covered hereby.

                                       15
<PAGE>
                                   SIGNATURES

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

                                     ATLANTIC INDUSTRIES, INC.


March 26, 1998                       By /s/ Adrian P. Kirby
                                        ----------------------------------------
                                        ADRIAN P. KIRBY, Chairman of the
                                        Board, Chief Executive Officer and
                                        President

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



March 26, 1998                       By /s/ Adrian P. Kirby
                                        ----------------------------------------
                                        ADRIAN P. KIRBY, Chairman of the
                                        Board, Chief Executive Officer and
                                        President



March 26, 1998                        By /s/ Peter N. Chapman
                                         ---------------------------------------
                                         PETER N. CHAPMAN, Director, Treasurer
                                         and Secretary, Principal Financial and
                                         Accounting Officer

                                       16
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page
                                                                            ----

Independent Auditor's Report.................................................F-2

Financial Statements:

    Balance Sheet as of December 31, 1997....................................F-3

    Statements of  Operations  and  Accumulated  Deficit for the year ended
             December 31, 1997 and  for  the period  from  January 31, 1996
             (inception) to December 31, 1996................................F-4

    Statement of Stockholders' Deficit for the period from January 31, 1996
             (inception) to December 31, 1997................................F-5

    Statements of Cash Flows for the year ended  December  31, 1997 and for
             the period from  January 31, 1996  (inception) to December 31,
             1996............................................................F-6

Notes to Financial Statements................................................F-7

                                       F-1
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT


The Directors and Shareholders
Atlantic Industries, Inc.

We have audited the balance  sheet of Atlantic  Industries,  Inc. as of December
31, 1997, and the related  statements of operations,  stockholders'  deficit and
cash flows for the year ended  December 31, 1997 and for the period from January
31, 1996  (inception) to December 31, 1996.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Atlantic Industries, Inc. as of
December 31, 1997 and the results of its  operations  and its cash flows for the
year  ended  December  31,  1997  and for  the  period  from  January  31,  1996
(inception)  to  December  31,  1996  in  conformity  with  generally   accepted
accounting principles.


New York, New York                           /s/ Moore Stephens, P.C.
February 19, 1998

                                       F-2
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 1997

                                     ASSETS

TOTAL ASSETS                                                     $      -0-
                                                                  --------- 
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable and accrued expenses                               4,000
  Due to shareholder                                                 41,450
                                                                  ---------
         Total Current Liabilities                                   45,450
                                                                  ---------
STOCKHOLDERS' DEFICIT
  Preferred stock, $.01 par value; authorized -
    10,000,000  shares;  issued and
    outstanding - 0 shares
  Common stock, $.01 par value; authorized -
    40,000,000 shares; 193,127 shares issued
    and outstanding                                                   1,931
  Additional paid-in capital                                       (138,228)
  Retained earnings                                                  90,847
                                                                  ---------
         Total Stockholders' Deficit                                (45,450)
                                                                  --------- 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                      $      -0-
                                                                  =========

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

                                       F-3
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                            STATEMENTS OF OPERATIONS

                                                         For the period from
                             For the year ended     January 31, 1996 (inception)
                              December 31, 1997          to December 31, 1996
                              -----------------          --------------------



REVENUE                          $     -0-                      $     -0-

GENERAL AND ADMINISTRATIVE
  EXPENSES                         (24,398)                       (26,545)
                                   -------                        -------

LOSS FROM OPERATIONS               (24,398)                       (26,545)
                                   -------                        -------


OTHER INCOME (LOSS)
  Loss of transferred business         -0-                        (14,035)
                                   -------                        -------

LOSS FROM CONTINUING OPERATIONS
  BEFORE INCOME TAX PROVISION      (24,398)                       (40,580)

INCOME TAX PROVISION                   -0-                            -0-
                                   -------                        -------

LOSS FROM CONTINUING OPERATIONS    (24,398)                       (40,580)

DISCONTINUED OPERATIONS

  Income from disposition of
    LPPL Corp., net of income
    taxes of $-0- and $-0-,
    respectively                   155,825                            -0-
                                   -------                        -------
NET INCOME (LOSS)                 $131,427                       $(40,580)
                                   =======                        =======

EARNINGS (LOSS) PER SHARE

  From continuing operations      $   (.13)                     $    (.32)

  From discontinued operations         .81                            -0-
                                     -----                       --------
  Total earnings (loss) per share   $  .68                      $    (.32)
                                     =====                       ========

WEIGHTED AVERAGE NUMBER OF
  SHARES OUTSTANDING               193,127                        125,199
                                   =======                        =======

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

                                       F-4
<PAGE>
<TABLE>
                            ATLANTIC INDUSTRIES, INC.

                       STATEMENT OF STOCKHOLDERS' DEFICIT

      FOR THE PERIOD FROM JANUARY 31, 1996 (INCEPTION) TO DECEMBER 31, 1997

<CAPTION>
                                  Preferred Stock              Common Stock
                                  ---------------              ------------                            Retained
                                                                                     Additional        Earnings         Total
                                Number of               Number of                     Paid-in        Accumulated    Stockholders'
                                  Shares     Amount      Shares          Amount       Capital          Deficit         Deficit
                                  ------     ------      ------          ------       -------          -------         -------
<S>                                <C>    <C>        <C>               <C>           <C>            <C>            <C>

January 31, 1996 Issuance
  of Common Stock                         $                 100        $       1     $              $              $         1
Acquired Equity of Little
  Prince Productions Ltd.                             2,499,923           24,999     (331,297)                        (306,298)
Common Stock Issued in
   Payment of Amount Due
   to Shareholder                                     1,360,000           13,600      156,400                          170,000
Recapitalization Adjustment                                (100)              (1)           1                                0
Loss for the period from
  January 31, 1996 to
  December 31, 1996                                                                                    (40,580)        (40,580)
February 12, 1997 Reverse
  Stock Split: 20 for 1 (see
  (Note 7)                                           (3,666,796)         (36,668)      36,668                                0
                            ------------------------------------------------------------------------------------------------------

Balance December 31, 1996           0            0      193,127            1,931     (138,228)         (40,580)       (176,877)
                            ------------------------------------------------------------------------------------------------------
Net income for the year
  ended December 31, 1997          --           --          --                --           --          131,427         131,427
                            ------------------------------------------------------------------------------------------------------
                                    0     $      0     193,127         $   1,931    $(138,228)       $  90,847      $  (45,450)
                            ======================================================================================================

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

                                                                F-5
</TABLE>
<PAGE>

                            ATLANTIC INDUSTRIES, INC.

                            STATEMENTS OF CASH FLOWS

                                                        For the period from
                               For the year ended   January 31, 1996 (inception)
                                December 31, 1997       to December 31, 1996
                                -----------------       --------------------

OPERATING ACTIVITIES:
  Net income (loss)                     $ 131,427           $  (40,580)
  Adjustments to reconcile net income
    to net cash provided (used) by
    operating activities:
  (Gain) loss on disposition of LPPL
    Corp.                                (155,825)              14,035
  Issuance of common shares for
   related party services (see
   Note 3)                                    -0-               10,000
  Changes in operating assets and
    liabilities:
    Increase (decrease) in accounts
      payable and accrued expenses        (16,561)              16,544
    Increase in due to shareholder         40,959                  -0-
                                        ---------            ---------
      Net Cash Provided (Used)
      by Operations                           -0-                   (1)
                                        ---------            ---------
FINANCING ACTIVITIES:
  Issuance of common shares                   -0-                    1
                                        ---------            ---------
    Net Cash Provided by
      Financing Activities                    -0-                    1
                                        ---------            ---------

INCREASE IN CASH                              -0-                  -0-
CASH, beginning of period                     -0-                  -0-
                                        ---------            ---------
CASH, end of period                    $      -0-           $      -0-
                                        =========            =========

SUPPLEMENTAL DISCLOSURES:

1.       During the period  ended  December  31,  1996,  the  Company  satisfied
         $160,000 of a payable to a major  shareholder  through the  issuance of
         1,280,000  common  shares.  The total  payable  satisfied was $170,000,
         which included  $10,000 for services  rendered and which is a component
         of operating activities (see Note 3).

2.       A summary of the assets and  liabilities of Little Prince  Productions,
         Ltd.  ("Little  Prince")  that were merged into the Company  during the
         period ended December 31, 1996 is as follows:

                  Miscellaneous receivable     $8,829
                  Investments                       1
                  Accounts payable              4,017
                  Due to shareholder          160,491

          The  $8,829  receivable  is  from LPPL Corp. ("LPPL"), Little Prince's
          former subsidiary.

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

                                       F-6
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

I.       ORGANIZATION AND STOCK ACQUISITION

         Atlantic  Industries,  Inc. (the "Company") was incorporated  under the
         laws of Colorado  on January 31, 1996 for the purpose of having  merged
         into it a New York corporation, Little Prince Productions, Ltd ("Little
         Prince"), and to continue the real estate activities of Little Prince.

         Little  Prince  also  continued,  although  at  a  minimal  level,  its
         theatrical production operations  through its  subsidiary,  LPPL. In an
         effort to  restore the  profitability  of Little  Prince,  its board of
         directors adopted a plan  of reorganization  which, among other things,
         called for the merger of Little Prince into  the Company. This plan was
         ratified  by  a  special  meeting  of  Little  Prince's shareholders on
         February 29, 1996.

         On December 6, 1996, the Company issued 2,499,943 common shares for all
         the 24,999,236  outstanding  common shares of Little Prince. The shares
         of  Little  Prince  were then  cancelled  and  the  separate  corporate
         existence of this company ceased,  with the Company surviving to all of
         Little Prince's assets and liabilities.  For accounting  purposes,  the
         acquisition was treated as a recapitalization of the Company,  with the
         Company as the  acquiror.  The  2,499,943  shares issued are treated as
         issued for cash and are shown  outstanding for all periods presented in
         the same manner as for a stock split.

         The  financial  statements  of  the  Company  reflect  its  results  of
         operations for the period from January 31, 1996 (inception) to December
         31, 1996 and for the year ended  December 31, 1997.  Because it was the
         acquiree for accounting purposes,  the results of operations for Little
         Prince are not included for the period from January 1, 1996 to December
         6, 1996, the date of merger.  Pro forma  financial  information for the
         merger transaction is not presented as, at the date of the transaction,
         Little  Prince  was  considered  a public  shell and  accordingly,  the
         transaction was not considered a business combination.

         On February  12,  1997,  at a special  meeting of the  shareholders,  a
         resolution was passed to effect a twenty-for-one reverse stock split as
         of February  13, 1997.  The effect of this  reverse  stock split was to
         reduce the issued and outstanding shares to 193,127.

         The Company intends to look for investments  throughout the world.  The
         Company discontinued its theatrical  productions operations through the
         disposition of LPPL (see Note 5).

                                       F-7
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (CONTINUED)

         The Company is  dependent  on  a  major  shareholder   to  finance  its
         administrative  expenses.  The  shareholder  has pledged to continue to
         fund the  Company's  cash  needs  to allow it  to meet its  liabilities
         through at least December 31, 1998 if the Company  remains  inactive or
         cannot generate revenue sufficient to meet its obligations.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         a.       Use of Estimates

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

         b.       Cash Equivalents

                  The  Company  considers  all highly  liquid  investments  with
                  maturities  of three months or less when  purchased to be cash
                  equivalents.

         c.       Foreign Currency Translation

                  Balance sheet amounts  denominated  in foreign  currencies are
                  translated  into  U.S.  dollars  using  the  year  end rate of
                  exchange. Revenues, income, expenses and losses denominated in
                  foreign currencies are translated at the average exchange rate
                  for the year.

         d.       Earnings per Share

                  The Company  adopted  SFAS 128  "Earnings  Per Share" in these
                  financial  statements.  The  adoption  was not material to the
                  Company.

                  Income  per  common  share  is  computed  on the  basis of the
                  weighted  average  shares  of  common  stock  outstanding.  At
                  December 31, 1997 this  average was 193,127  (1996 - 125,199).
                  Potential common shares are included if dilutive.

         e.       Recognition of Gain from Disposition of Subsidiary

                                       F-8
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (CONTINUED)

                  The Company  reported  the  disposition  of LPPL in accordance
                  with  the  SEC's SAB Topic 5E, which requires that the Company
                  not  recognize  the   gain   on  disposition  until  it can be
                  reasonably determined that the  risks  of LPPL's business have
                  been  transferred to the purchaser.  As  discussed  in Note 5,
                  the risks and all  incidents  of  ownership  were  transferred
                  during the year ended December 31, 1997  and  accordingly, the
                  gain was recognized in that period. Operating  losses  but not
                  operating  income of the divested  business  were  included in
                  the  Company's  results of  operations  for  the  period ended
                  December 31, 1996.

3.       RELATED PARTY TRANSACTIONS

         A major shareholder of the Company, Patchouli Foundation ("Patchouli"),
         advanced  funds to the Company and Little Prince in order to allow them
         to meet their obligations to creditors as follows:

                                                       For the period from
                            For the year ended    January 31, 1996 (inception)
                             December 31, 1997        to December 31, 1996
                             -----------------        --------------------

Funds advanced to the
  Company (and Little
  Prince in 1996 only)            $30,959                     $160,491
Charges for administrative
  services provided by
  Patchouli                        10,000                       10,000
                                   ------                      -------
    Total advanced to             $40,959                     $170,491
       the Company                 ======                      =======

Balance due to Patchouli
  at the end of the period        $41,450                    $     491
                                   ======                     ========

         As of December 31, 1996,  the Company  issued  1,360,000  common shares
         (68,000  after  the  effect  of a 20  for 1  reverse  stock  split)  to
         Patchouli in  satisfaction  of $170,000 of the balance then due,  which
         included $10,000 of  administrative  services  provided to the Company.
         The issuance of 80,000 of the common  shares (4,000 after the effect of
         a 20 for 1 reverse  stock  split)  was  based on the fair  value of the
         services received.

         The  attorney-in-fact  of  Patchouli  is a director  and officer of the
         Company.

                                       F-9
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (CONTINUED)

         The  balance  due to  Patchouli  at  December  31, 1997 does not accrue
         interest and is payable on demand.  It is not  practicable  to estimate
         the  fair  value  of this  payable  since  it is not the  result  of an
         arm's-length transaction and does not resemble any marketable financial
         instruments.

4.       INCOME TAXES

         Income  taxes have not been  provided  due to the  Company's  loss from
         operations for the period ended  December 31, 1996 and its  utilization
         of net operating losses for the year ended December 31, 1997.

         Actual tax  expense  was less than the amount of  $44,700  computed  by
         applying the U.S.  federal income tax rate of 34% to income before tax.
         The reasons for this difference are as follows:

                                                                    % of Pretax
                                                           Amount       Income
                                                           ------       ------

      Computed "expected" rate                             $ 44,700      34.00%
      Reduction due to benefit from lower tax brackets      (10,200)     (7.75)
      Reduction in taxes resulting from net operating
        loss carryover                                      (34,500)    (26.25)
                                                           --------    -------
      Actual tax expense                                  $     -0-       0.00%
                                                           ========    =======

         As  of  December  31,  1997,  the  Company  had a  net  operating  loss
         carryforward  of  approximately  $1,818,000  that may be offset against
         future   taxable   income   resulting   in  a  deferred  tax  asset  of
         approximately  $618,000.  A valuation allowance for the full amount was
         recorded  due to the  uncertainty  that the  Company  will  utilize the
         losses  in  the  future.   The   valuation   allowance   decreased   by
         approximately  $44,000  during the year ended  December 31, 1997 due to
         the utilization of the losses against income.

         Net operating losses expire as follows:

                Year Ending December 31                         Loss
                -----------------------                         ----

                         2008                              $1,611,000
                         2009                                  73,000
                         2010                                  74,000
                         2011                                  60,000
                                                           ----------
                                                           $1,818,000

                                      F-10
<PAGE>
                            ATLANTIC INDUSTRIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (CONTINUED)

         The  Company's net operating  loss  includes the loss  carryforward  of
         Little Prince to which the Company succeeded pursuant to Section 381 of
         the Internal Revenue Code and related regulations.  Little Prince's net
         operating  losses  were   approximately   $1,889,000  at  the  time  of
         acquisition.

5.       DISCONTINUED OPERATIONS

         On July 22,  1996,  Little  Prince  sold all of the  shares in its 100%
         owned subsidiary,  LPPL. Under the terms of the sales agreement,  there
         were circumstances under which the shares could revert to Little Prince
         within  one  year of the date of sale.  Due to this  provision,  Little
         Prince was deemed not to have  transferred the risks of LPPL's business
         as of December  31,  1996.  Pursuant to the SEC's SAB Topic 5E,  Little
         Prince  continued  to carry the assets and  liabilities  of LPPL on its
         balance sheet on December 6, 1996 when it was merged into the Company.

         As of July 22,  1997,  one year after the sale of LPPL,  the  reversion
         provision  expired,  and  the  Company  then  recognized  a gain on the
         disposition of LPPL of $155,825.

6.       AUTHORITATIVE PRONOUNCEMENTS

         In June  1997,  the FASB  issued  SFAS  130,  "Reporting  Comprehensive
         Income" and SFAS 131,  "Disclosures About Segments of an Enterprise and
         Related  Information."  In  February  1998,  the FASB  issued SFAS 132,
         "Employer's   Disclosure   About  Pensions  and  Other   Postretirement
         Benefits." All three are effective for financial  statements for fiscal
         years  beginning  after December 15, 1997. The Company will adopt these
         statements  on January  1, 1998.  Adoption  is not  expected  to have a
         material impact on financial position and results of operations.

                                      F-11
<PAGE>
                                  EXHIBIT INDEX

         Certain of the following exhibits, designated with an asterisk (*), are
filed herewith.  The exhibits not so designated  have been filed  previously and
are  incorporated  herein by  reference to the  documents  indicated in brackets
following the  descriptions  of such exhibits.  For electronic  filing  purposes
only, this report contains Exhibit 27, Financial Data Schedule.

Exhibit No.      Description
-----------      -----------

2.1(1)       Agreement and Plan of Merger dated February 9, 1996, between Little
             Prince Productions, Ltd. and Atlantic Industries, Inc.

2.2(2)       Certificate  of  Merger  of  Little Prince Productions, Ltd., a New
             York  corporation  into   Atlantic  Industries,  Inc., a   Colorado
             corporation, dated March 29, 1996, under Section 907 of the New
             York Business Corporation Law.

2.3(2)       Articles  of  Merger of Little Prince Productions, Ltd., a New York
             corporation into Atlantic Industries, Inc., under Section 7-111-107
             of the Colorado Business Corporation Act.

2.4(3)       Stock  Purchase  Agreement  dated  as  of July 22, 1996 between the
             Company and Frances Katz Levine.

3.1(2)       Articles of Incorporation of Atlantic Industries, Inc., as amended.

3.2(2)       Amended and Restated Bylaws of Atlantic Industries, Inc.

27*          Financial Data Schedule

---------------
*Filed herewith.
(1) Filed  with the  Securities  and  Exchange  Commission  as an exhibit to the
Company's  Form 10-K,  dated  December 31, 1995,  which exhibit is  incorporated
herein by reference.
(2) Filed with the  Securities  and  Exchange  Commission  as  an exhibit to the
Company's Form 10-KSB dated  December 31, 1996,  which  exhibit is  incorporated
herein by reference.
(3) Filed with the  Securities  and Exchange Commission  as  an  exhibit  to the
Company's  Form  10-QSB,  dated  June 30, 1996,  which  exhibit  is incorporated
herein by reference.