U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB
           (Mark One)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
                   For the fiscal year ended December 31, 1997

                                       or

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
                     For the transition period from       to

                         Commission file number 33-6505D

                                  MORLEX, INC.
                    (formerly known as America Online, Inc.)
           -----------------------------------------------------------
           (Name of Small Business Issuer as specified in its charter)

Colorado                                                      84-1028977
--------------------------------------            -----------------------------
(State or other jurisdiction of                           (I.R.S. employer
 incorporation or organization)                         identification number)

P.O. Box 3755, Englewood, CO                                    80155
--------------------------------------            -----------------------------
(Address of principal executive offices)                     (Zip Code)

         Issuer's telephone number, including area code: (303) 699-8784
                                                         --------------


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

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                          Common Stock $.0001 par value
                          -----------------------------
                                (Title of Class)

Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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     No X.

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 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

State the aggregate market value of the voting stock held by non-affiliates of
the Registrant: Unknown

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of April 23, 1998, there were 125,680,000 shares of the Issuer's common stock
issued and outstanding.

The Issuer had no revenues for the year ending December 31, 1997.

DOCUMENTS INCORPORATED BY REFERENCE: NONE
Transitional Small Business Disclosure Format (check one): Yes       ; No   X


                                        1

<PAGE>




                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

     America Online, Inc. (the "Company" or the "Registrant") was incorporated
in the State of Colorado on April 23, 1986, under its former name, Morlex, Inc.
("Morlex"). The Company changed its name from Morlex to America Online, Inc. on
July 17, 1987 (the "Name Change").

     In January 1987, Morlex, in a stock-for-stock exchange (the "Stock
Exchange"), acquired America OnLine, Inc. ("AOL#1"), a then wholly owned
subsidiary of InfoSource Information Service, Inc. ("InfoSource"). All
activities of the Company occurring prior to July 17, 1987 were under its former
name, Morlex, Inc., and shall, for purposes of this annual report, be referred
to as the "Company" and any reference to America Online, Inc. as it existed as a
wholly owned subsidiary of InfoSource prior to the Stock Exchange and the Name
Change, shall be herein referred to as AOL#1.

     Prior to incorporation, the Company had no prior operating history and was
formed as what is commonly known as a blind pool. Since the termination of the
business of the former AOL#1, the Company has been seeking the acquisition of,
or merger with an existing company. The Company's business history since its
incorporation is as follows:

     On September 10, 1986, the Company filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-18 under the
Securities Act of 1933, as amended (the "Securities Act"), relating to an
offering of up to 5,000,000 Units. In December 1986, the Company consummated the
offering, having received net offering proceeds aggregating $248,400.

     In January 1987 the Company acquired AOL#1 in the Stock Exchange, as a
result of which AOL#1 became a wholly owned subsidiary of the Company in
exchange for 85,000,000 shares of Company stock which were issued to InfoSource
for all the shares of AOL#1.

     On July 17, 1987 a special meeting of Stockholders of the Company was held
to change the name of Morlex to America Online, Inc. The proposal to change the
name was approved and the Company's name was thereupon changed.

     On March 1, 1988 the Board of Directors approved the cancellation of a
$30,000 debt to InfoSource by issuing 30,000,000 shares of the Company to
InfoSource. All 115,000,000 shares previously issued to InfoSource (including 
such 30,000,000 shares and the 85,000,000 shares above-referenced) were 
returned to the Company's treasury as issued but no longer outstanding shares.

     On December 28, 1992, the Company terminated the business of AOL#1 and a
Certificate of Dissolution of AOL#1 was filed with the Secretary of State of the
State of

                                        2

<PAGE>



Colorado.  Since that time, the Company has had no active business.

     On April 24, 1998 the Board of Directors, by unanimous written consent in 
lieu of a special meeting, resolved to amend the Company's Articles of 
Incorporation to change the name of the Company back to Morlex, Inc. in order 
to remove any confusion between the Company and the Internet company of the 
same name.

     On May 15, 1998, the shareholders of the Company, by majority vote, 
approved the amendment and name change at a meeting called for that purpose. 
The amendment was filed with the Secretary of State of Colorado on June 2, 
1998, upon which the name of the Company became Morlex, Inc.

     SELECTION OF OPPORTUNITIES

     The analysis of new business opportunities has and will be undertaken by or
under the supervision of the officers and directors of the Registrant. The
Registrant has unrestricted flexibility in seeking, analyzing and participating
in potential business opportunities. In its efforts to analyze potential
acquisition targets, the Registrant will consider the following kinds of
factors:

          (a)  Potential for growth, indicated by new technology, anticipated
               market expansion or new products;

          (b)  Competitive position as compared to other firms of similar size
               and experience within the industry segment as well as within the
               industry as a whole;

          (c)  Strength and diversity of management, either in place or
               scheduled for recruitment;

          (d)  Capital requirements and anticipated availability of required
               funds, to be provided by the Registrant or from operations,
               through the sale of additional securities, through joint ventures
               or similar arrangements or from other sources;

          (e)  The cost of participation by the Registrant as compared to the
               perceived tangible and intangible values and potentials;

          (f)  The extent to which the business opportunity can be advanced;

          (g)  The accessibility of required management expertise, personnel,
               raw materials, services, professional assistance and other
               required items; and

          (h)  Other relevant factors.

     In applying the foregoing criteria, no one of which will be controlling,
management will attempt to analyze all factors in the circumstances and make a
determination based upon reasonable investigative measures and available data.
Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Due to the Registrant's extremely limited
capital available for investigation and management's limited experience in
business analysis, the Registrant may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.


                                        3

<PAGE>



FORM OF ACQUISITION

     The manner in which the Registrant participates in an opportunity will
depend upon the nature of the opportunity, the respective needs and desires of
the Registrant and the promoters of the opportunity, and the relative
negotiating strength of the Registrant and such promoters.

     It is likely that the Registrant will acquire its participation in a
business opportunity through the issuance of common stock or other securities of
the Registrant. Although the terms of any such transaction cannot be predicted,
it should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"),
depends upon the issuance to the shareholders of the acquired company of at
least 80 percent common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of these
provisions rather than other "tax free" provisions provided under the Code, all
prior shareholders would in such circumstances retain 20% or less of the total
issued and outstanding shares. This could result in substantial additional
dilution to the equity of those who were shareholders of the Registrant prior to
such reorganization.

     The present shareholders of the Registrant will likely not have control of
a majority of the voting shares of the Registrant following a reorganization
transaction. As part of such a transaction, all or a majority of the
Registrant's directors may resign and new directors may be appointed without any
vote by shareholders.

     In the case of an acquisition, the transaction may be accomplished upon the
sole determination of management without any vote or approval by shareholders.
In the case of a statutory merger or consolidation involving the Company, it
will likely be necessary to call a shareholders' meeting and obtain the approval
of the holders of a majority of the outstanding shares. The necessity to obtain
such shareholder approval may result in delay and additional expense in the
consummation of any proposed transaction and will also give rise to certain
appraisal rights to dissenting shareholders. Most likely, management will seek
to structure any such transaction so as not to require shareholder approval.

     It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial cost for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached for the participation
in a specific business opportunity, the failure to consummate that transaction
may result in the loss to the Registrant of the related costs incurred.



                                        4

<PAGE>



EMPLOYEES

     The Registrant currently has no employees.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company neither rents nor owns any properties.

ITEM 3.  LEGAL PROCEEDINGS

     There are not presently any pending legal proceedings to which the
Registrant is a party or as to which any of its property is subject and no such
proceedings are known to the Registrant to be threatened or contemplated against
it.

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

         None.


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

     A. Market for Common Stock. The Company is not aware of any market activity
in its stock during the fiscal year ended December 31, 1997.

     B. Holders. As of April 23, 1998, there were approximately 275 holders of
125,680,000 shares of the Company's common stock.

     C. Dividends. The Registrant has not paid any cash dividends during the
fiscal year ended December 31, 1997 to date and does not anticipate or
contemplate paying dividends in the foreseeable future. It is the present
intention of management to utilize all available funds for the development of
the Registrant's business.

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

     The Registrant was formed on April 23, 1986 for the purpose of investing in
any and all types of assets, properties and businesses. On September 10, 1986,
the Commission granted effectiveness to a Registration Statement on Form S-18,
filed by the Registrant in the Colorado Regional Office. The Plan of Operation
of the Registrant is further described in Item 1 of this Form 10-KSB.

                                        5

<PAGE>




     As of December 31, 1997, the Registrant had cash of $0 and no other assets.
As of December 31, 1997, the Registrant had total liabilities of $0 and total
stockholders equity of $0. As of December 31, 1996, the Registrant had cash of
$0 and no other assets. As of December 31, 1996, the Registrant had total
liabilities of $0 and total stockholders equity of $0. Prior to the consummation
of a potential business acquisition as described in Item 1 of this Form 10-KSB,
management does not expect that the Registrant will have any significant capital
requirements or that there will be significant changes in the number of
Registrant's employees.

     The Registrant has not commenced any active operations as of the date
hereof except for the registration and sale of its securities. The Registrant's
assets consist of a limited amount of cash. No revenue has been generated by the
Registrant since the termination of the business of AOL#1. The Registrant will
not have significant operations until, if ever, such time as it effects an
acquisition.

     On December 31, 1997, the Company sold 35,970,000 shares of Common Stock to
Charles T. Gould, its Chairman and President, in exchange for the cancellation
of $49,191 of indebtedness of the Company to Mr. Gould.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 1997, the Company has no assets. The significant amount
of capital necessary to acquire and develop a successful business in today's
economy will limit the Company's ability to locate one suitable for acquisition
or merger. Given the limited amount of working capital, the potential venture is
likely to involve the acquisition of, or merger with a company which is not
seeking immediate substantial amounts of cash but one which desires to establish
a public trading market for its shares. There can be no assurance that the
Company will ever consummate such a transaction. It is possible that the Company
will require additional financing to expand and fund any business which it
acquires or establishes. If additional funds are required, there can be no
assurance given that additional financing will be available on commercially
reasonable terms or otherwise

                                        6

<PAGE>



ITEM 7.  FINANCIAL STATEMENTS

                          Index to Financial Statements
                          -----------------------------

Independent Accountants' Report
         Year ended December 31, 1997

Balance Sheets
         Years ended December 31, 1997 and 1996

Statement of Changes in Shareholders' Equity
         Years ended December 31, 1997 and 1996

Statement of Operations
         Years ended December 31, 1997 and 1996

Statement of Cash Flows
         Year ended December 31, 1997 and 1996

Notes to Financial Statements
         Years ended December 31, 1997







                                        7

<PAGE>




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

     There are not and have not been any disagreements between the Registrant
and its accountants on any matter of accounting principles, practices or
financial statement disclosure.


                                    PART III


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

     A. Identification of Directors and Executive Officers. The current officers
and directors will serve for one year or until their respective successors are
elected and qualified. They are:


<TABLE>
<CAPTION>
NAME                                AGE              DATE OF                    POSITION
                                                     ELECTION
-----------------                  -----             ---------                  --------------------------
<S>                               <C>               <C>                         <C>                                            
Charles T. Gould                    46               4/5/91                     Chairman of the Board of
4562 S. Ouray Way                                                               Directors, President and
Aurora, CO 80015                                                                Treasurer

Lannelle Lancaster                  46               5/15/89                    Vice-President, Secretary 
4562 S. Ouray Way                                                               and Director
Aurora, CO 80015

Kaylene Veron                       48               5/15/89                    Director
4915 Cornwall Drive
Boulder, CO 80301
</TABLE>


     Charles T. Gould. Mr. Gould has been a director, President and Treasurer of
the Company since April 1991. He is presently a Stock Broker and Trader with
Charles Schwab in Denver, Colorado. Prior to Mr. Gould's employment with Charles
Schwab & Co., he served as an Environmental Production Worker with Interel
Environmental in Englewood, Colorado.

     Lanne Lancaster. Ms. Lancaster has served as Vice President and Secretary
of the Company since March 1989. Presently, Ms. Lancaster is an Educator at the
Community College of Aurora, Colorado, where she has been employed the last 10 
years.

                                        8

<PAGE>




     Kaylene Veron. Ms. Veron has served as a Director of the Company since
March 1989. Ms. Veron is a homemaker and a Realtor. She currently resides in
Boulder, Colorado.

     B. Significant Employees. None.

     C. Family Relationships. Charles T. Gould is the husband of Lanne Lancaster
and the brother of Kaylene Veron.

     D. Involvement in Certain Legal Proceedings. There have been no events
under any bankruptcy act, no criminal proceedings and no judgments or
injunctions material to the evaluation of the ability and integrity of any
director, executive officer, promoter or control person of Registrant during the
past five years.

     E. Compliance With Section 16(a). The Registrant is not subject to Section
16 of the Exchange Act.

ITEM 10.  EXECUTIVE COMPENSATION

     No compensation has been paid or accrued to any officer or director of the
Registrant since 1994. The current officers and directors are not being
compensated by the Registrant. The Registrant has no current intent to issue
shares of its common stock to management in connection with an acquisition.
However, the Registrant may subsequently deem the issuance of shares to
management for services rendered in connection with an acquisition to be fair
and reasonable to the Registrant and its public shareholders in light of the
services rendered. In the event any shares are issued for services rendered by
management they shall be issued in such an amount as the Board of Directors
deems fair and reasonable to the Registrant and its public shareholders and in
compliance with management's fiduciary duties under state law. Officers and
directors will be reimbursed for actual out-of-pocket expenses incurred on
behalf of the Registrant as approved by the Board of Directors.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

     A. Security Ownership of Certain Beneficial Owners. The following persons
are known to the Registrant to be officers, directors and beneficial owners of
more than five percent of the Registrant's common stock as of April 20, 1998:


<TABLE>
<CAPTION>
                                    Amount and
Name and Address                    Nature of
of Beneficial Owner                 Beneficial Ownership (1)                            Percent of Class
-------------------                 ------------------------                            ----------------

<S>                                 <C>                                                 <C>   
Charles T. Gould(2)                 93,470,000                                          74.37%
4562 S. Ouray Way
Aurora, CO 80015
</TABLE>

                                        9

<PAGE>




<TABLE>
<CAPTION>
                                    Amount and
Name and Address                    Nature of
of Beneficial Owner                 Beneficial Ownership (1)                            Percent of Class
-------------------                 ------------------------                            ----------------
<S>                                 <C>                                                 <C> 
Lanelle Lancaster(2)                790,000                                             *
4562 S. Ouray Way
Aurora, CO 80015

Kaylene Veron                       0                                                       0%
4915 Cornwall Drive
Boulder, CO 80301

---------------------
ALL OFFICERS AND
DIRECTORS AS A
GROUP (3 Individuals)               94,260,000                                           75.00%
---------------------
</TABLE>
  * Less than one percent.
(1) Unless otherwise indicated herein and subject to applicable community 
    property laws, each stockholder has sole voting and investment power with 
    respect to all shares of Common Stock beneficially owned by such 
    stockholder and directly owns all such shares in such stockholder's sole 
    name.
(2) Shares owned of record by each such individual. Excludes shares owned of 
    record by each such individual's spouse, which are reported herein.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company had accrued certain amounts due to Charles T. Gould, its
Chairman and President, for payment of consulting fees, rent and other
administrative expenses. In December, 1997, these amounts ($49,191) were
converted to 35,970,000 shares of common stock.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     A. Exhibits:

                  3.1  Certificate of  Incorporation - incorporated by reference
                  to Exhibit 3.1 to Registration Statement on Form S-18.

                  3.2 Bylaws -  incorporated  by  reference  to  Exhibit  3.2 to
                  Registration Statement on Form S-18.

                  10.1 Stock Purchase Agreement by and between the Registrant 
                  and Charles T. Gould.

                  27.1 Financial Data Schedule.

     B. Reports on Form 8-K. No Reports on Form 8-K were filed by the Registrant
during the fourth quarter of or at any time during its fiscal year.






                                       10

<PAGE>



                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




                                                         AMERICA ONLINE, INC.

                                                      By: /s/ Charles T. Gould
                                                         -----------------------
                                                        President and Treasurer

Date: June 10, 1998.

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



                                               TITLE                   DATE
             By: /s/Charles T. Gould         President,           June 10, 1998
                ---------------------         Director

             By:  /s/ Lanne Lancaster        Secretary,           June 10, 1998
                ---------------------         Director

             By:  /s/ Kaylene Veron           Director            June 10, 1998
                ----------------------




                  Supplemental Information to be Furnished With
           Reports Filed Pursuant to Section 15(d) of the Exchange Act
                            by Non-reporting Issuers

No annual report to security holders or proxy material has been sent to security
holders of the Registrant.

                                       11

<PAGE>



                                  Exhibit Index


3.1  Registrant's Certificate of Incorporation filed as Exhibit 3.1 to
     Registrant's Registration Statement on Form S-18.

3.2  Registrant's By-Laws filed as Exhibit 3.2 to Registrant's Registration
     Statement on Form S-18.

10.1 Stock Purchase Agreement by and between the Registrant and Charles T.
     Gould.

27.1 Financial Data Schedule.






                                       12

<PAGE>




                                   SIGNATURES


     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




                                                       AMERICA ONLINE, INC.

                                                     By:
                                                        -----------------------
                                                           Charles T. Gould
                                                        President and Treasurer

                                                         Date: June 10, 1998

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



                                                TITLE                 DATE

            By:                                 President,        June 10, 1998
               -----------------------------    Treasurer
                   Charles T. Gould             and Director

            By:                                 Director          June 10, 1998
               -----------------------------
                    Kaylene Veron


            By:                                 Secretary/        Juen 10, 1998
               -----------------------------     Director
                   Lanne Lancaster               


                  Supplemental Information to be Furnished With
           Reports Filed Pursuant to Section 15(d) of the Exchange Act
                            by Non-reporting Issuers

No annual report to security holders or proxy material has been sent to security
holders of the Registrant.

                                       13

<PAGE>



                              AMERICA ONLINE, INC.

                                    CONTENTS
                    ----------------------------------------

                                                                         Page
                                                                         ----
Independent Auditors' Report                                              3

Balance Sheets, Years Ended December 31, 1997 and 1996                    4

Statements of Operations for the Years
 Ended December 31, 1997 and 1996                                         5

Statements of Changes in Shareholders' Equity for the
 Years Ended December 31, 1997 and 1996                                   6

Statements of Cash Flows for the Years
 Ended December 31, 1997 and 1996                                         7

Notes to Financial Statements                                             8



<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
America OnLine, Inc.


We have audited the  accompanying  balance sheets of America OnLine,  Inc. as of
December  31,  1997  and 1996  and the  statements  of  operations,  changes  in
shareholders'  equity and cash flows for the years then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements referred above present fairly, in all
material respects,  the financial position of America OnLine,  Inc., at December
31,  1997 and  1996,  and the  related  statements  of  operations,  changes  in
shareholders'  equity and cash flows for the years then ended in conformity with
generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net capital  deficiency that raise substantial doubt about its ability
to continue as a going concern.  Management's plans in regard to this matter are
also  described  in  Note  1.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.


                                                          Spicer, Jeffries & Co.


Denver, Colorado
March 3, 1998

<PAGE>
                              AMERICA ONLINE, INC.

                                 BALANCE SHEETS
                     YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>

                                                                                               1997               1996
                                                                                       ---------------      ---------------
                                        ASSETS


<S>                                                                                    <C>                  <C>         
         TOTAL ASSETS                                                                  $          -         $          -
                                                                                       ===============      ===============




         LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accrued payroll taxes                                                               $          -         $         2 556
   Accrued expenses - shareholder (Note 2)                                                        -                  41 283
                                                                                       ---------------      ---------------

         TOTAL CURRENT LIABILITIES                                                                -                  43 839
                                                                                       ---------------      ---------------

SHAREHOLDERS' EQUITY:
   Common stock, $.0001 par value - shares authorized,
     1,000,000,000; shares issued and outstanding,
     125,680,000 and 89,710,000, respectively                                                   12 568                8 971
   Additional paid-in capital                                                                  291 728              246 134
   Deficit                                                                                    (304 296)            (298 944)
                                                                                       ---------------      ---------------

         TOTAL SHAREHOLDERS' EQUITY                                                               -                 (43 839)
                                                                                       ---------------      ---------------

                                                                                       $          -         $           -
                                                                                       ===============      ===============


</TABLE>





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

                                                            -4-

<PAGE>



                              AMERICA ONLINE, INC.

                            STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>


                                                                                             1997                1996
                                                                                       ---------------    -----------------

<S>                                                                                    <C>                  <C>         
REVENUES                                                                               $          -         $         -
                                                                                       ---------------      ---------------


EXPENSES:
  Consulting                                                                                     3 300                3 600
  General and administrative                                                                     2 052                2 161
                                                                                       ---------------      ---------------
                                                                                                 5 352                5 761
                                                                                       ---------------      ---------------

NET LOSS                                                                               $        (5 352)     $        (5 761)
                                                                                       ===============      =============== 

NET LOSS PER COMMON SHARE                                                              $           NIL      $           NIL
                                                                                       ===============      ===============

WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                                                        92 476 923           89 710 000
                                                                                       ===============      ===============



</TABLE>







The accompanying notes are an integral part of the financial statements.
                                                                     -5-

<PAGE>



                              AMERICA ONLINE, INC.

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>


                                                                                          Additional
                                                             Common Stock                  Paid in
                                                       Share              Amount            Capital            (Deficit)
                                                 ----------------   ----------------    ---------------      --------------
<S>                                             <C>                <C>                 <C>                  <C>
BALANCES, December 31, 1995                            89 710 000   $          8 971    $        246 134     $     (293 183)

  Net loss                                                   -                  -                   -                (5 761)
                                                 ----------------   ----------------    ----------------     --------------

BALANCES, December 31, 1996                            89 710 000              8 971             246 134           (298 944)

  Issuance of common stock                             35 970 000              3 597              45 594               -

  Net loss                                                   -                  -                   -                (5 352)
                                                 ----------------   ----------------    ----------------     --------------

BALANCES, December 31, 1997                           125 680 000   $         12 568    $        291 728     $     (304 296)
                                                 ================   ================    ================     ==============

</TABLE>



The accompanying notes are an integral part of the financial statements.
                                                                          -6-

<PAGE>



                              AMERICA ONLINE, INC.

                             STATEMENT OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>


                                                                                               1997             1996
                                                                                       ----------------    ----------------

<S>                                                                                    <C>                 <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
  Net loss                                                                             $        (5 352)     $        (5 761)
                                                                                       ---------------      ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Shareholder advances                                                                           5 352                5 761
                                                                                       ---------------      ---------------

NET INCREASE (DECREASE) IN CASH                                                        $          -         $          -

CASH, beginning of year                                                                           -                    -
                                                                                       ---------------      ---------------

CASH, end of year                                                                      $          -         $          -
                                                                                       ===============      ===============


SUPPLEMENTAL DISCLOSURE OF NON-CASH
 FINANCING ACTIVITIES:
  Issuance of common stock for debt                                                    $        49 191      $        49 191
                                                                                       ===============      ===============

</TABLE>



The accompanying notes are an integral part of the financial statements.
                                                                         -7-

<PAGE>


                              AMERICA ONLINE, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 1  - SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

The Company,  formerly Morlex Inc., was incorporated under the laws of the State
of Colorado on April 23, 1986.  The primary  activity of the Company was to seek
merger or acquisition candidates.

As shown in the financial  statements,  the Company  incurred net losses for the
last several years and has no working  capital and has  accumulated a deficit of
$304,296;  it is management's  assertion that these circumstances may hinder the
Company's ability to continue as a going concern. As of the date of this report,
management  has not  developed  a formal  plan to raise  funds for  neither  the
Company's short or long term needs.

The Company  successfully  completed a public stock  offering in December  1986.
Proceeds to the  Company,  net of direct  registration  and  underwriting  fees,
amounted to $248,400. It has had minimal operations over the last several years.

Net Loss Per Share

Net loss per share of common  stock is based on the weighted  average  number of
shares of common stock outstanding.

Estimates

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

Income taxes

The Company has a remaining net operating  loss  carryforward  of  approximately
$300,000 expiring  principally in 2002 and 2003. However,  the Company's ability
to utilize  such losses to offset  future  taxable  income is subject to various
limitations  imposed  by the  rules  and  regulations  of the  Internal  Revenue
Service.  A portion of the Company's net operating  losses are limited each year
to offset future taxable  income,  if any, due to the change of ownership in the
Company's outstanding shares of common stock.

NOTE 2  - RELATED PARTY TRANSACTIONS

The Company had accrued certain amounts due to one of its major shareholders for
payment of consulting fees, rent and other administrative expenses. In December,
1997,  these amounts  ($49,191)  were  converted to 35,970,000  shares of common
stock.

                                                                       -8-