SAN JUAN FINANCIAL INC



                           Filing Type:  10KSB
                           Description:  Annual Report
                           Filing Date:  September 24, 2001
                            Period End:  December 31, 2000


                      Primary Exchange:  N/A
                                Ticker:  N/A















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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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                                  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 fiscal year ended December 31, 2000
                               ------------------


[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934
        For the transition period from __________________ to _________________
                 Commission file number __________________


                        Commission File Number 000


                            San Juan Financial, Inc.
                          ----------------------------
        (Exact name of small business issuer as specified in its charter)

                               4410 Newton Street
                                Denver, CO 80211
                                 (303) 455-2217


              Colorado                                    94-3363969
     (State of incorporation)                   (IRS Employer Identification #)


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

Securities registered under Section 12(g) of the Exchange Act:
                                                   Common Stock, no par value
                                                   Preferred Stock, no par value


[ ]  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.

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

     Issuer's revenues for its most recent fiscal year: _____________

     The number of shares  outstanding  of the  Registrant's  common stock as of
     December 31, 2000 was  5,063,000.  The number of shares  outstanding of the
     Registrant's preferred stock as of December 31, 2000 was zero (0).


    Transitional Small Business Disclosure Format:   [ ]  YES    [X]   NO


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                                Table of Contents

      Description of Business..................................................3
      Description of Property..................................................4
      Legal Proceedings........................................................4
      Submission of Matters to a Vote of Security Holders......................4
      Market for Common Equity and Related Stockholder Matters.................5
      Management's Discussion and Analysis or Plan of Operations...............5
      Financial Statements.....................................................6
      Changes/Disagreements with Accountants on Accounting/Financial
         Disclosure...........................................................18
      Directors, Executive Officers, Promoters and Control Persons............18
      Executive Compensation..................................................18
      Security Ownership of Certain Beneficial Owners and Management..........19
      Certain Relationships and Related Transactions..........................19
      Exhibits and Reports on Form 8-K........................................20
      Index to Exhibits and Reports...........................................20
      Signatures..............................................................21
















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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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DESCRIPTION OF BUSINESS

General
-------

San Juan  Financial,  Inc. was  incorporated in the State of Colorado on June 6,
1989;  is a  development  stage  company,  has  no  subsidiaries  or  affiliated
entities,  and has had no  significant  operations  or  revenues  to  date.  The
Articles of  Incorporation  of San Juan  Financial,  Inc.  authorize  750,000,00
shares of common stock, no par value and 10,000,000  shares of preferred  stock,
no par value.

San Juan Financial,  Inc. has 5,063,000 shares of common stock outstanding as of
December 31, 2000; and zero (0) shares of preferred stock outstanding.

San Juan Financial, Inc. has a fiscal year of December 31st.

Description of Business
-----------------------

Our  business  operations  will  consist  of the  generation  of  mortgage  loan
applications,  underwriting,  closing,  and the secondary marketing of qualified
mortgage loans.  Our products and services  include  origination of consumer and
home loans, appraisals, secondary loan purchases and sales, and the servicing of
funded  loans  for  financial  institutions  which  meet or  exceed  San  Juan's
underwriting criteria.

OUR PROPRIETARY ELECTRONIC NETWORK OF INSTITUTIONAL CLIENTS

     To further  complement our mortgage banking services,  we intend to develop
an electronic network with banks and credit unions. Our proprietary network will
allow us to aggregate  our client's  institutional  assets,  query an aggregated
database and immediately market prefunded loans. When development of our network
is  completed,  it will create a private  exchange  for our  institutional  loan
portfolios  and  thereby   facilitate  the  bulk  sale  of  portfolios  and  the
securitizing of mortgage assets.

     We believe that many institutional  clients are burdened by the traditional
mortgage lending process. Further,  consumers are dissatisfied because they find
the loan process slow and have difficulty  obtaining  information and monitoring
the status of their applications. Our Internet network will significantly reduce
these problems by offering a simpler,  faster and less expensive way to obtain a
mortgage loan. The potential marketability in the secondary markets of each loan
will have been already  established  before  funding,  as part of our  automated
underwriting process. See "Operations - Screening of Applicants."


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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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INDUSTRY OVERVIEW

     Many of the markets we serve are undergoing  rapid change and  experiencing
significant  growth.  We believe  that these  trends will  provide us with major
growth opportunities.

         MORTGAGE INDUSTRY

     According to the Mortgage Bankers Association,  U.S. consumer mortgage debt
exceeded $4.3 trillion in 1998 and the total volume of loan origination  reached
a record high of $1.5 trillion, compared to $834 billion of mortgage origination
in 1997.  Market  research  shows  that  approximately  30  percent  of the $1.5
trillion  market or $450 billion in mortgages will be originated by 2005.  While
the residential mortgage market is a substantial part of the U.S. economy, it is
fragmented with the largest mortgage lender,  Norwest  Mortgage,  accounting for
only 7.7 percent of funded loans in 1998.

     In  1998,  mortgage  brokers  arranged  approximately  70  percent  of  all
mortgages.  These small local  businesses  typically  act as  middlemen,  do not
approve or fund loans,  have inefficient  processing  systems and generally lack
the sophisticated  technology required to quickly determine borrower eligibility
or to search and analyze  available  mortgage  products to select the best match
for a customer.

     The traditional mortgage process is paper intensive,  generally requires at
least three weeks to complete, and involves the following steps:

     o    meeting with lender or broker to complete a lengthy paper application

     o    gathering extensive supporting documentation

     o    entering the application data into the broker's or lender's processing
          system

     o    ordering  appraisals,  title and credit reports and verifying  deposit
          and other facts

     o    submitting  the paper loan file to an  underwriter  to determine  loan
          eligibility

     o    receiving conditions to approval of loan by the underwriter

     o    collecting additional information and complying with the conditions

     o    resubmitting the revised paper file for approval

     o    preparing loan documents and closing instructions

     o    reviewing and approving the loan for funding

     o    closing the transaction

         This process tends to be burdensome and costly to lenders and complex,
time-consuming and intimidating to many borrowers.


OUR BUSINESS STRATEGY

     Our primary  objective is to become a leading mortgage broker for financial
institutions  and  their  customers.  We  intend to  achieve  this goal by:  (i)
offering financial institutions a more efficient and cost-saving  alternative to
an in-house mortgage banking department; (ii) developing a completely integrated
and seamless  Internet-based  mortgage process; (iii) developing our proprietary
Internet  network to  facilitate  the  securitization  and bulk sale of mortgage
assets; and (iv) geographic diversification of our mortgage portfolio.


LEGAL PROCEEDINGS

     San Juan Financial,  Inc. is not presently  involved in any litigation nor,
to the  knowledge  of  the  management  of  San  Juan  Financial,  Inc.,  is any
litigation threatened.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None during the year ended December 31, 2000.


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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Currently, there is no public market for San Juan Financial, Inc.'s stock.

Holders

San Juan  Financial,  Inc.  currently  has  5,063,000  shares  of  common  stock
outstanding  and no shares of preferred  stock  outstanding.  As of December 31,
2000 there are  forty-seven  (47)  shareholders  comprising  the  holding of the
5,063,000 shares of outstanding  common stock. All outstanding  shares of common
stock are  restricted  shares  under Rule 144. San Juan  Financial,  Inc. has no
existing  stock  options or other  plans nor or there any  outstanding  options,
warrants or securities convertible into common stock.

Dividend Policy

San Juan Financial,  Inc. has never paid a dividend on its common stock,  nor is
the payment of  dividends  of its common stock  anticipated  in the  foreseeable
future.  Management  anticipates that earnings, if any, will be retained to fund
the  company's  working  capital  needs.  The payment of any dividends is at the
discretion of the Board of Directors.


MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

San Juan  Financial,  Inc.'s  management  is seeking  funding  from a variety of
sources  including  private  placements  of its stock,  public  offerings of its
stock,  as well as debt  financing.  Additionally,  business  combinations  with
entities with  significant  cash will be  considered.  However,  there can be no
assurance management will be successful in these endeavors.

San Juan Financial,  Inc.'s management is conducting discussions with investment
bankers  pertaining to a stair step financing plan. This will encompass  initial
capital,  a first and second  level of  private  placements,  bridge  financing,
mezzanine financing and an eventual initial public offering.  However, there can
be no assurance management will be successful in these endeavors.












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                               SAN JUAN FINANCIAL
                          (A Development Stage Company)

                          Index to Financial Statements

                                                                            Page
                                                                            ----
Independent auditors' report.................................................F-2

Balance sheet, December 31, 2000.............................................F-3

Statement of operations, April 10, 2000 through
    December 31, 2000........................................................F-4

Statement of cash flows, April 10, 2000
    Through December 31, 2000................................................F-5

Summary of significant accounting policies...................................F-6

Notes to financial statements................................................F-9















                                       F-1
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                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders
San Juan Financial, Inc.

We have audited the balance  sheet of San Juan  Financial,  Inc. (a  development
stage  company)  as  of  December  31,  2000,  and  the  related  statements  of
operations,   shareholders'   equity,  and  cash  flows,  from  April  10,  2000
(inception)  through  December  31, 2000.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on my audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of San Juan Financial,  Inc. as of
December 31,  2000,  and the results of its  operations  and its cash flows from
April 10, 2000  (inception)  through  December  31,  2000,  in  conformity  with
generally accepted accounting principles.



                                  Craig W. Conners, C.P.A.
                                  San Diego, California
                                  March 7, 2001



                                       F-2
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<TABLE>
<CAPTION>
                            SAN JUAN FINANCIAL, INC.
                          (A Development Stage Company)

                                  Balance Sheet
                                     Audited
                                December 31, 2000


                                     ASSETS

                                                                                 Dec. 31, 2000      June 30, 2000
                                                                                   (Audited)          (Audited)


<S>                                                                                <C>                 <C>
CASH.............................................................................. $ 6,288             $41,585
EQUIPMENT, less accumulated depreciation of $.00..................................       0                   0
                                                                                   -------             -------
                                                                                   $ 6,288             $41,585
                                                                                   =======             =======

                              SHAREHOLDERS' EQUITY

PREFERRED STOCK,  no par value, 10,000,000 shares authorized;
- 0 shares issued and outstanding.................................................     -                   -

COMMON STOCK, no par value; 750,000,000 shares authorized;
- 5,063,000 shares issued and outstanding (Note C)................................ 103,000             100,200
ACCUMULATED RETAINED DEFICIT ($96,711accumulated during the development stage).... (96,711)            (58,615)

ADDITIONAL PAID CAPITAL .......................................................... $ 6,288            $ 41,585
                                                                                   ========           ========
</TABLE>


        See accompanying summary of significant accounting policies and
                         Notes to financial Statements



                                       F-3
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<TABLE>
<CAPTION>
                            SAN JUAN FINANCIAL, INC.
                          (A Development Stage Company)

                             Statement of Operations
                                     Audited

                    April 10, 2000 Through December 31, 2000


                                                                      Dec. 31, 2000      Dec. 31, 1999
                                                                      -------------      -------------
<S>                                                                    <C>                       <C>
OPERATING EXPENSES

         Filing Fees.............................................      $    173                  0
         Postage and Delivery....................................            76                  0
         Registration and Filing Fees............................         1,570                  0
            Professional Fees....................................        41,000                  0
            Supplies.............................................            99                  0
            Travel & Entertainment...............................         7,477                  0
            Web Site Development.................................         6,287                  0
         Other...................................................            29                  0
                                                                      ----------         ---------


                           TOTAL OPERATING EXPENSES                     $56,711              $   0
                                                                      ----------         ---------
                               LOSS FROM OPERATIONS                    ($56,711)          ($     0)
                                                                      ----------


INCOME TAX EXPENSE                                                            0                  0
                                                                      ----------         ---------

                                           NET LOSS                   ($ 56,711)           $     0
                                                                      ==========         =========


Basis loss per common share......................................      $   *               $   *
                                                                      ---------          ---------

Basic weighted average common shares outstanding.................     5,046,866          5,046,866
                                                                      =========          =========

*  Less than $.01 per share
</TABLE>


        See accompanying summary of significant accounting policies and
                         Notes to financial Statements


                                       F-4
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<TABLE>
<CAPTION>
                            SAN JUAN FINANCIAL, INC.
                          (A Development Stage Company)

                             Statement of Cash Flows
                                    Auditited

                    April 10, 2000 Through December 31, 2000


                                                            Dec 31, 2000    Sept. 30, 1999

<S>                                                          <C>                <C>
OPERATING ACTIVITIES
         Net loss.....................................       $ 56,711           $        0
                                                             ---------          ----------
                                    NET CASH (USED IN)
                                  OPERATING ACTIVITIES        (56,711)                   0
                                                             ---------          ----------

FINANCING ACTIVITIES
         Proceeds from the Sale of Common Stock.......        103,000                    0
         Adjustments to Retained Earnings.............        (40,000)                   0
                                                             ---------          ----------
                                  NET CASH PROVIDED BY
                                  FINANCING ACTIVITIES         63,000                    0
                                                             =========          ==========


Cash and cash equivalents, beginning of period                      0                    0
              CASH AND CASH EQUIVALENTS, END OF PERIOD          6,289                    0
                                                             ---------          ----------
                   CHANGE IN CASH AND CASH EQUIVALENTS          6,289                    0
                                                             =========          ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
         Interest.....................................              0                    0
         Income taxes.................................              0                    0
                                                             =========          ==========
</TABLE>


        See accompanying summary of significant accounting policies and
                         Notes to financial Statements


                                       F-5
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                            SAN JUAN FINANCIAL, INC.
                          (A Development Stage Company)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                            Development stage company

San Juan  Financial,  Inc.  (the  "Company")  entered the  development  stage in
accordance with Financial  Accounting  Standards  Board  Statements of Financial
Accounting Standards (SFAS) No. 7 "Accounting and Reporting by Development Stage
Enterprises"  in 1989 upon  incorporation.  The  Company  operates as a mortgage
banking and brokerage company over the internet.

                                Use of estimates

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

                                Cash equivalents

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

                           Equipment and depreciation

Equipment is stated at cost.  Equipment is depreciated over its estimated useful
life using the straight-line method.

Upon  retirement or  disposition  of the furniture and  equipment,  the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations.  Repairs and maintenance are charged to expense
as incurred and expenditures for additions and improvements are capitalized.

                              Web site development

The  Company  expenses  all  internal  and  external  costs  incurred to develop
internal-use computer software.  As a development stage company,  management has
determined  there is no  assurance  that the web site will  provide  substantive
service potential to the Company.

                                  Income taxes

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

                                      F-6
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Income taxes are  computed  under the  provisions  of the  Financial  Accounting
Standards  Board  (FASB)  Statement  109 No. (SFAS 109),  Accounting  for Income
Taxes. SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of the difference in events that have been recognized in the Company's financial
statements compared to the tax returns.

                            Earnings/(loss) per share

The  Company  reports  loss per  share  using a dual  presentation  of basic and
diluted loss per share. Basic loss per share excludes the impact of common stock
equivalents.  Diluted loss per share utilizes the average market price per share
when applying the treasury stock method in determining common stock equivalents.
However,  the Company has a simple  capital  structure for the period  presented
and,  therefore,  there is no variance  between  the basic and diluted  loss per
share.

                       Fair value of financial instruments

SFAS 107,  "Disclosure  About Fair  Value of  Financial  Instruments,"  requires
certain  disclosures  regarding  the fair value of  financial  instruments.  The
Company's only financial instrument at December 31, 2000 was cash.

                           Cash and Cash Equivalents.

For purposes of the statements of cash flows,  The Company  considers all highly
liquid debt  securities  purchased  with  maturity of three months or less to be
cash equivalents.

                         Investment in Equity Securities

Equity  securities  are considered  available-for-sale,  and are carried at fair
value,  with  unrealized  gains and losses  reported in a separate  component of
stockholders' equity under Accumulated Other Comprehensive Income.

                          Concentrations of Credit Risk

Financial instruments,  which potentially subject the Company to a concentration
of credit risk, are cash and cash equivalents and accounts receivable.

                             Property and Equipment

Property and  equipment,  consisting of  furnishings  and equipment  used in its
current   operations,   is  stated  at  cost,  less  accumulated   depreciation.
Depreciation  is begun when the assets are placed in service and computed  using
the  straight-line  method over the estimated useful lives of the assets,  which
range from five to seven years.

                                Long-Lived Assets

Long-lived  assets  to be held and used are  reviewed  for  impairment  whenever
events or changes in circumstances indicate that the related carrying amount may
not be recoverable.  When required,  impairment  losses on assets to be held and
used are recognized based on the fair value of the asset.  Long-lived  assets to
be disposed  of, if any,  are  reported at the lower of carrying  amount or fair
value less cost to sell.

                                  Sales Revenue

Revenues  from sales are  recorded  when the  collection  of sales  proceeds  is
reasonably  assured  and all  other  material  conditions  of the sales are met.
Income on contracts in excess of one month is deferred and  recognized  monthly,
pro-rata, over the term of the agreement.


                                      F-7
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                                   Advertising

Advertising costs are charged to operations in the year incurred.

                        Basic Net Income (Loss) per Share

Basic net income  (loss) per common share is computed by dividing the net income
or loss  available  to Common  stockholders  by the weighted  average  number of
Common  shares  outstanding  during  each  period.  There  were no common  stock
equivalents as of the periods ended December 31, 2000 and December 31, 1999. Net
income or loss per share for the periods presented above are based on a weighted
average number of shares outstanding of 5,063,000 and 5,000,000  (adjusted for a
one-for-eight  reverse  split)  during the three  months  ended,  2000 and 1999,
respectively.

                                Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires  management to make estimates and  assumptions.
These  estimates  and  assumptions  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.













                                       F-8
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                            SAN JUAN FINANCIAL, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS


NOTE A:  NATURE OF ORGANIZATION

                                   Background
The  company  was  incorporated  under  the laws of  Colorado  on June 6,  1989.
Following   incorporation  the  Company  remained  an  inactive  shell  company.
Effective  April  10,  2000,  the  Company  entered  the  development  stage  in
accordance with SFAS No. 7. The Company's  principal  activities since April 10,
2000 have  consisted of  organizational  maters and the sale of its no par value
common stock.

                              Amendment to Articles
On April 10, 2000, the Company filed amended articles of incorporation  with the
State of  Colorado,  at which time the  Company  revised  Article  XI,  Board of
Directors.  The Board  consists of one director who is also the President of the
Company.

NOTE B:  INCOME TAXES

A reconciliation of the U.S.  statutory federal income tax rate to the effective
rate is as follows:


                                                                Sept. 30, 2000
                                                                ---------------
             U.S. federal statutory graduated rate.............       15.00%
             State income tax rate, net of federal benefit.....        7.51%
             Offering costs....................................       13.13%
             Net operating loss for which no tax benefit
                is currently available.........................      -35.64%
                                                                ---------------
                                                                ---------------

                                                                       0.00%
                                                                ===============


At December 31, 2000, deferred taxes consisted of a net tax asset of $34,467 due
to operating loss  carryforwards of $96,711,  which was fully allowed for in the
valuation  allowance of $34,467.  The  valuation  allowance  from April 10, 2000
(inception)   through  December  31,  2000  was  $34,467.   Net  operating  loss
carryforwards will expire through 2020.

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


NOTE C:  SHAREHOLDERS' EQUITY

Common stock

In May 2000, the Company conducted a private placement offering whereby it sold
63,000 shares of its no par value common stock for $1.00 per share pursuant to
an exemption from registration claimed under Sections 4(2) and 4(6) of the
Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The
Company received net proceeds of $60,000 after deducting offering costs totaling
$3,000.

On August 9, 2000 the Company  sold an  additional  2,800 shares for $1.00 for a
net proceed of $2,800.

Following its original incorporation in June 1989, the Company issued 40,000,000
shares of its no par value  common  stock to an officer as payment for  services
related  to the  organization  and  start-up  of the  Company.  The value of the
transaction could not be objectively measured as the services were rendered by a
related party. The transaction was recorded at a nominal value of $40,000 ($.001
per share) as there was no market  price for the  Company's  common stock on the
date of issuance.

Reverse stock split

On April 7, 2000,  the Board of Directors  authorized an 8 to 1 reverse split of
the Company's no par value common stock,  effective on that date. As a result of
the split, the Company's  outstanding common shares were reduced from 40,000,000
to  5,000,000.  All per share and shares  outstanding  data in the  accompanying
financial statements have been restated to reflect the reverse split.

                                       F-9
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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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                          SAN JUAN FINANCIAL, INC.
                          (A Development Stage Company)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                            Development stage company

San Juan  Financial,  Inc., (the  "Company")  entered the  development  stage in
accordance with Financial  Accounting  Standards  Board  Statements of Financial
Accounting Standards (SFAS) No. 7 "Accounting and Reporting by Development Stage
Enterprises" on June 6, 1989 upon incorporation.  The Company operates as a real
estate investment firm.

                                Use of estimates

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

                                Cash equivalents

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

                           Equipment and depreciation

Equipment is stated at cost.  Equipment is depreciated over its estimated useful
life using the straight-line method.

Upon  retirement or  disposition  of the furniture and  equipment,  the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations.  Repairs and maintenance are charged to expense
as incurred and expenditures for additions and improvements are capitalized.

                              Web site development

The  Company  expenses  all  internal  and  external  costs  incurred to develop
internal-use computer software.  As a development stage company,  management has
determined  there is no  assurance  that the web site will  provide  substantive
service potential to the Company.


                                  Income taxes

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


Income taxes are  computed  under the  provisions  of the  Financial  Accounting
Standards  Board (FASB) Statement 109  No. (SFAS  109),  Accounting  for  Income


                                      F-10
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                                                                         Page 15
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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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Taxes. SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax  consequences
of the difference in events that have been recognized in the Company's financial
statements compared to the tax returns.

                            Earnings/(loss) per share

The  Company  reports  loss per  share  using a dual  presentation  of basic and
diluted loss per share. Basic loss per share excludes the impact of common stock
equivalents.  Diluted loss per share utilizes the average market price per share
when applying the treasury stock method in determining common stock equivalents.
However,  the Company has a simple  capital  structure for the period  presented
and,  therefore,  there is no variance  between  the basic and diluted  loss per
share.

                       Fair value of financial instruments

SFAS 107,  "Disclosure  About Fair  Value of  Financial  Instruments,"  requires
certain  disclosures  regarding  the fair value of  financial  instruments.  The
Company's only financial instrument at December 31, 2000 was cash.

                           Cash and Cash Equivalents.

For purposes of the statements of cash flows,  The Company  considers all highly
liquid debt  securities  purchased  with  maturity of three months or less to be
cash equivalents.

                         Investment in Equity Securities

Equity  securities  are considered  available-for-sale,  and are carried at fair
value,  with  unrealized  gains and losses  reported in a separate  component of
stockholders' equity under Accumulated Other Comprehensive Income.

                          Concentrations of Credit Risk

Financial instruments,  which potentially subject the Company to a concentration
of credit risk, are cash and cash equivalents and accounts receivable.

                             Property and Equipment

Property and  equipment,  consisting of  furnishings  and equipment  used in its
current   operations,   is  stated  at  cost,  less  accumulated   depreciation.
Depreciation  is begun when the assets are placed in service and computed  using
the  straight-line  method over the estimated useful lives of the assets,  which
range from five to seven years.

                                Long-Lived Assets

Long-lived  assets  to be held and used are  reviewed  for  impairment  whenever
events or changes in circumstances indicate that the related carrying amount may
not be recoverable.  When required,  impairment  losses on assets to be held and
used are recognized based on the fair value of the asset.  Long-lived  assets to
be disposed  of, if any,  are  reported at the lower of carrying  amount or fair
value less cost to sell.

                                  Sales Revenue

Revenues  from sales are  recorded  when the  collection  of sales  proceeds  is
reasonably  assured  and all  other  material  conditions  of the sales are met.
Income on contracts in excess of one month is deferred and  recognized  monthly,
pro-rata, over the term of the agreement.


                                      F-11
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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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                                   Advertising

Advertising costs are charged to operations in the year incurred.

                        Basic Net Income (Loss) per Share

Basic net income  (loss) per common share is computed by dividing the net income
or loss  available  to Common  stockholders  by the weighted  average  number of
Common  shares  outstanding  during  each  period.  There  were no common  stock
equivalents as of the periods ended December 31, 2000 and December 31, 1999. Net
income or loss per share for the periods presented above are based on a weighted
average number of shares outstanding of 5,063,000 and 5,000,000  (adjusted for a
one-for-eight  reverse  split)  during the three  months  ended,  2000 and 1999,
respectively.

                                Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires  management to make estimates and  assumptions.
These  estimates  and  assumptions  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.

                             Risks and Uncertainties

The company is a start up company subject to the substantial  business risks and
uncertainties  inherent  to such an  entity,  including  the  potential  risk of
business failure.

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern,  which  contemplates,  among other things, the
realization  of assets and  satisfaction  of liabilities in the normal course of
business. The Company's losses from operations through June 30, 2001 and lack of
operational  history,  among other matters,  raise  substantial doubt about it's
ability to continue as a going concern.  The Company  intends to fund operations
through  equity  financing   arrangements  which  management  believes  will  be
sufficient to fund its capital  expenditures,  working capital  requirements and
other cash  requirements.  There is no  assurance  the  Company  will be able to
obtain  sufficient  additional  funds  when  needed,  or  that  such  funds,  if
available, will be obtainable on terms satisfactory to the Company.

The  future  of the  Company's  operations  depends  in  part  on  it's  sale of
additional shares through a private placement memorandum.


                                      F-12
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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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CHANGES IN / DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING/FINANCIAL DISCLOSURE

There  have been no  disagreements  between  San Juan  Financial,  Inc.  and its
independent  accountants on any matter of accounting  principles or practices or
financial  statement  disclosures.  There  have  been  no  changes  in San  Juan
Financial, Inc.'s independent accountants.


DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The directors and officers of San Juan Financial, Inc. are as follows:

Director of
Name                      Age               Position with Registrant
Registrant Since
-----------------------------------------------------------------------------
Stephen G. Slater         37                Chairman, CEO and President
May, 2000

Troy Fullmer              35                Director, Secretary and Treasurer
May, 2000



EXECUTIVE COMPENSATION

None.


Employment Agreements
---------------------
None

Long-Term Incentive Plans
-------------------------
None


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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, all individuals  known to beneficially own 5% or
more of San Juan Financial, Inc. common stock, and all officers and directors of
the registrant,  with the amount and percentage of stock  beneficially  owner as
per the Shareholder List current to December 31, 2000.


   Name and Address                     Amount of Common Shares
 of Beneficial Holder                   of Beneficial Ownership       Percentage
 --------------------                   -----------------------       ---------

Oxnard Beaches, Ltd.                      416,666.75                   8.23%

Wentworth Cavanaugh, Ltd.                 416,666.75                   8.23%

Ron Stinner                               416,666.75                   8.23%

Mark Moniak                               416,666.75                   8.23%

Rowland F. Marshall                       416,666.5                    8.23%

Timothy Bessell                           416,666.5                    8.23%

Kevin Sutherland                          416,666.5                    8.23%

Cortez Roxbury                            416,666.5                    8.23%

Mark Bogani                               333,333.3                    6.60%

David Sorge                               333,333.3                    6.60%

Rob Chromosta                             333,333.3                    6.60%

Troy Fullmer                              333,333.3                    6.60%

Bruce Penrod                              333,333.3                    6.60%

Steven G. Slater, Chief Executive
Officer and President                           0                         0%

Directors and Officers as a group               0                         0%



CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None during the year ended December 31, 2000.



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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
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EXHIBITS AND REPORTS ON FORM 8-K


Exhibits
--------

San Juan Financial Inc.'s Articles of Incorporation and By-laws  incorporated by
reference. Reference: San Juan Financial, Inc. SB-2 filed on March 14,2001

Reports on Form 8-K
-------------------

None.


INDEX TO EXHIBITS AND REPORTS


         (3)      (i). Articles of Incorporation
                  (ii). By-laws


         (4)      Instruments defining the rights of holders, incl., indentures

                  Incorporated by reference;  see:   Exhibit  3(i)  Articles  of
                  Incorporation and Exhibit 3(ii) By-Laws










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SAN JUAN FINANCIAL, INC - 10KSB - Annual Report            Date Filed: 9/24/2001
--------------------------------------------------------------------------------



                                   SIGNATURES


In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.





                                                 San Juan Financial, Inc.
                                             -----------------------------------
                                                         (Registrant)



     Date:      September 24, 2001               \S\ Troy L. Fullmer
            ----------------------           -----------------------------------
                                                  (Troy Fullmer, President)












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