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, 1999

                                       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.
                 (Name of Small Business Issuer 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.

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 X No.

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of 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 issuer's revenues for its most recent fiscal year.   None

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: Unknown

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of March 10, 2000, there were
389,200,000 shares of the issuer's common stock issued and outstanding.

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


<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Business Development

         Morlex, Inc. (the "Company", "Morlex" or the "Registrant") was
incorporated in the State of Colorado on April 23, 1986. 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"). The Company changed its name from Morlex to
America Online, Inc. on July 17, 1987 (the "Name Change"). AOL #1 was never
affiliated with the well-known Internet Service Provider of the same name.

         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 $248,400.00.

         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
$30,000.00 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 granted to InfoSource pursuant
to the Stock Exchange) were returned to the Company's treasury as issued but no
longer outstanding shares.

                                       2

<PAGE>
         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 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.

         On June 14, 1999, the Company filed a Registration Statement under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") on Form 10-SB,
pursuant to which the Company sought to register its Common Stock under the
Exchange Act. The Registration Statement became effective on August 14, 1999,
and now the Company intends to seek a listing of its common stock on the NASD
OTC Bulletin Board. The Company believes that it can enhance its opportunities
to acquire or merge with an operating company if its securities are listed on
the Bulletin Board. There can be no assurance that the Company's securities will
be listed on the Bulletin Board.

         On August 16, 1999, Steven J. Goodman, Lawrence Kaplan and Charles T.
Gould each directors and major shareholders of the Company, each purchased
25,000,000 shares of Common Stock in exchange for $2,500 each in cash previously
advanced to the Company.

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;

                                       3

<PAGE>
         (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 and 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.

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.

                                       4

<PAGE>
         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 of the 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 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.

Employees

         The Registrant currently has no employees.

ITEM 2. DESCRIPTION OF PROPERTY

         The Company neither rents nor owns any properties. The Company
currently has no policy with respect to investments or interests in real estate,
real estate mortgages or securities of, or interests in, persons primarily
engaged in real estate activities.

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.

                                       5

<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         A. Market for Common Stock. The Company is not aware of any market
activity in its stock during the fiscal year ended December 31, 1999.

         B. Holders. As of March 10, 2000, there were approximately 279 holders
of 389,200,000 shares of the Company's common stock.

         C. Dividends. The Registrant has not paid any cash dividends during
either the fiscal year ended December 31, 1998 or December 31, 1999 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 OPERATION

         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 briefly described below and further
described in Item 1 of this Form 10-KSB.

         As of December 31, 1999, the Registrant had cash of $3,101 and no other
assets. As of December 31, 1999, the Registrant had total liabilities of $1,480
and total stockholders equity of $1,621. As of December 31, 1998, the Registrant
had cash of $3,664 and no other assets. As of December 31, 1998, the Registrant
had total liabilities of $476 and total stockholders equity of $3,188. 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 will purchase any significant equipment 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.

                                       6

<PAGE>
         The Company filed, on June 14, 1999, a Registration Statement under the
Exchange Act, on Form 10-SB, pursuant to which the Company is seeking to
register its Common Stock under the Exchange Act. The Registration Statement
became effective on August 14, 1999, and now the Company intends to seek a
listing of its common stock on the NASD Bulletin Board. The Company believes
that it can enhance its opportunities to acquire or merge with an operating
company if its securities are listed on the Bulletin Board. There can be no
assurance that the Company's securities will be listed on the Bulletin Board.

Plan of Operation

         The Company has not realized any revenues from operations, and its plan
of operation for the next twelve months shall be to continue its efforts to
locate suitable acquisition or merger candidates. Although it is currently
anticipated that the Company can satisfy its cash requirements, and that no
additional funds need be raised, for at least the next twelve months, the
Company can provide no assurance that it can continue to satisfy its cash
requirements for such period.

Results of Operations

         The Company has not conducted any active operations in the past fiscal
year, except for its efforts to locate suitable acquisition or merger
transactions. No revenue has been generated by the Company during such period,
and it is unlikely the Company will have any revenues unless it is able to
effect an acquisition of, or merger with, an operating company, of which there
can be no assurance.

ITEM 7.  FINANCIAL STATEMENTS

                          Index to Financial Statements

Independent Accountants' Report
         Year ended December 31, 1999                                      F-1

Balance Sheets
         Years ended December 31, 1999 and 1998                            F-2

                                       7

<PAGE>
Statement of Changes in Shareholders' Equity
         Years ended December 31, 1999 and 1998                            F-3

Statements of Operations for the Years
         Ended December 31, 1999 and 1998                                  F-4

Statement of Cash Flows
         Years ended December 31, 1999 and 1998                            F-5

Notes to Financial Statements
         Year ended December 31, 1999                                      F-6

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:

NAME                       AGE      DATE OF                POSITION
                                    ELECTION

Charles T. Gould           48        4/5/91            Chairman of the Board of
4562 S. Ouray Way                                      Directors
Aurora, CO 80015

Lawrence E. Kaplan         56        7/29/98           President, Treasurer and
150 Vanderbilt Motor                                   Director
Parkway, Suite 311
Hauppauge, New York 11788

Steven J. Goodman          60        7/29/98           Secretary and Director
5000 Carden Beach
St. Croix, USVI  00820

                                       8

<PAGE>
         Charles T. Gould. Mr. Gould has been a director 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.

         Lawrence E. Kaplan. Mr. Kaplan has served as President, Treasurer and a
director of the Company since July, 1998. Mr. Kaplan has served as a director of
IDF International, Inc. since August 1996. Mr. Kaplan is a registered
representative, officer, director and sole stockholder of G-V Capital Corp., an
NASD-registered broker/dealer. He is also an officer and a director of
Osteoimplant Technology, a manufacturer of orthopedic devices and total joint
implants.

         Steven J. Goodman. Mr. Goodman has served as Secretary and a director
of the Company since July, 1998. Mr. Goodman was a consultant for Tessa
Financial Group, Inc. from August 1995 until July, 1998. From 1991 through
March, 1995, Mr. Goodman was West Coast Managing Director of Creative Business
Strategies, a financial corporate consulting firm. Mr. Goodman served as a
director of Javelin Systems, Inc., a public company listed on NASDAQ from
January, 1996 until December, 1999.

         B. Significant Employees. None.

         C. Family Relationships. Charles T. Gould is the husband of Lanne
Lancaster and the brother of Kaylene Veron. Ms. Lancaster served as the Vice
President and Secretary of the Company from March, 1989 until July, 1998.
Presently, she is the record owner of 790,000 shares of Common Stock of the
Company. Ms. Veron served as a director of the Company from March, 1989 until
July, 1998. Presently, Ms. Veron owns no shares of the Company.

         D. Involvement in Certain Legal Proceedings. There have been no events
under any bankruptcy act, no criminal proceedings and no judgments, injunctions,
orders or decrees 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 Company believes that all
required Forms 3 and 4 were furnished to the Registrant during the fiscal year
ended December 31, 1999.

                                       9

<PAGE>
ITEM 10.  EXECUTIVE COMPENSATION

         No compensation has been paid or accrued to any officer or director of
the Registrant since 1994. Except as otherwise indicated in Item 12, 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.

                                       10

<PAGE>
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 March
24, 2000:

Name and Address           Amount and Nature of
of Beneficial Owner        Beneficial Ownership (1)       Percent of Class
-------------------        ------------------------       ----------------

Charles T. Gould (2)              119,260,000                   30.6%
4562 S. Ouray Way
Aurora, CO 80015

Lawrence E. Kaplan                119,260,000                   30.6%
150 Vanderbilt Motor
Parkway
Suite 311
Hauppauge, New York
11788

Steven J. Goodman                 119,260,000                   30.6%
5000 Carden Beach
St. Croix, USVI  00820

ALL OFFICERS AND
DIRECTORS AS A
GROUP (3 Individuals)             357,780,000                   91.9%

(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. Within
    sixty (60) days of the date of this filing, none of the above persons has
    the right to acquire any further shares of the Registrant's common stock
    from options, warrants, rights, conversion privileges or other similar
    arrangement.

(2) Includes 790,000 shares of Common Stock owned by stockholder's spouse.

                                       11

<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company completed two private placements of its Common Stock, par
value $.0001 per share, in December 1997 and July 1998. In December 1997,
Charles T. Gould, a director, purchased 35,970,000 shares of Common Stock in
exchange for the cancellation of $49,191.00 of indebtedness of the Company to
Mr. Gould. In July 1998, Steven J. Goodman, a director and Secretary of the
Company, and Lawrence E. Kaplan, a director and President of the Company, each
purchased 94,260,000 shares of Common Stock in exchange for $3,000.00 each in
cash and $6,246.00 each in previous services rendered, or an aggregate of
188,520,000 shares of Common Stock with an aggregate purchase price of $6,000.00
in cash and $12,852.00 in previous services rendered. The Company currently has
virtually no cash or other assets.

         On August 16, 1999, Steven J. Goodman, Lawrence Kaplan and Charles T.
Gould each purchased 25,000,000 shares of common stock in exchange for $2,500
each in cash previously advanced to the Company.

         Charles T. Gould is the husband of Lanne Lancaster and the brother of
Kaylene Veron. Ms. Lancaster served as the Vice President and Secretary of the
Company from March, 1989 until July, 1998. Presently, she is the record owner of
790,000 shares of Common Stock of the Company. Ms. Veron served as a director of
the Company from March, 1989 until July, 1998. Presently, Ms. Veron owns no
shares of the Company.

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 - incorporated by reference to Exhibit 10.1 to
         Annual Report on Form 10-KSB filed May 14, 1999.

                  10.2 Common Stock Purchase Agreement by and between the
         Registrant and Steven J. Goodman - incorporated by reference to Exhibit
         10.2 to Annual Report on Form 10-KSB filed May 14, 1999.

                  10.3 Common Stock Purchase Agreement by and between the
         Registrant and Lawrence E. Kaplan - incorporated by reference to
         Exhibit 10.3 to Annual Report on Form 10-KSB filed May 14, 1999.

                  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.

                                       12

<PAGE>
                                SCOTT & GUILFOYLE
                          CERTIFIED PUBLIC ACCOUNTANTS
                            5 DAKOTA DRIVE, SUITE 206
                             LAKE SUCCESS, NY 11042
                                 (516) 775-9600

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Morlex, Inc. (formerly America OnLine, Inc.)

We have audited the accompanying balance sheet of Morlex, Inc. (formerly America
OnLine, Inc.) as of December 31, 1999 and the statement of operations, changes
in shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Morlex, Inc. as of December 31, 1998 were
audited by other auditors whose report dated March 30, 1999, on those statements
included an explanatory paragraph describing conditions that raised substantial
doubt about the Company's ability to continue as a going concern.

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 ccounting 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 Morlex, Inc. (formerly America
OnLine, Inc.), at December 31, 1999, and the related statements of operations,
changes in shareholders' equity and cash flows for the year 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.

Lake Success, NY
February 23, 2000

                                      F-1

<PAGE>
                                  MORLEX, INC.
                         (FORMERLY AMERICA ONLINE, INC.)
                                  BALANCE SHEET
                                   DECEMBER 31

                                                          1999          1998

                                     ASSETS

CURRENT ASSETS
     Cash                                               $   3,101     $   3,664
                                                        =========     =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accrued expenses                                    $   1,480     $     476
                                                        ---------     ---------

         TOTAL LIABILITIES                                  1,480           476
                                                        ---------     ---------

STOCKHOLDERS' EQUITY
         Common stock, $.0001 par value
           1,000,000,000 shares authorized;
           389,200,000 and 314,200,000 shares
           issued and outstanding                          38,920        31,420
         Additional paid-in capital                       303,728       298,728
         Deficit                                         (341,027)     (326,960)
                                                        ---------     ---------

         TOTAL STOCKHOLDERS' EQUITY                         1,621         3,188
                                                        ---------     ---------
         TOTAL LIABILITIES AND
           STOCKHOLDERS' EQUITY                         $   3,101     $   3,664
                                                        =========     =========


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

                                      F-2

<PAGE>
                                  MORLEX, INC.
                         (FORMERLY AMERICA ONLINE, INC.)
                        STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                Additional                        Total
                                                      Common Stock                Paid in                      Stockholders'
                                                   Shares       Amount            Capital         Deficit         Equity

<S>                                              <C>             <C>             <C>             <C>            <C>
Balance, December 31, 1997                       125,680,000     $12,568         $291,728       $(304,296)      $      0

Issuance of common stock                         188,520,000      18,852                0               0         18,852

Capital contributed                                        0           0            7,000               0          7,000

Net loss for the year
  ended December 31, 1998                                  0           0                0         (22,664)       (22,664)
                                                 -----------     -------         --------       ---------       --------
Balance, December 31, 1998                       314,200,000      31,420          298,728        (326,960)         3,188

Capital contributed                                        0           0            5,000               0          5,000

Issuance of common stock                          75,000,000       7,500                0               0          7,500

Net loss for the year ended
   December 31, 1999                                       0           0                0         (14,067)       (14,067)
                                                 -----------     -------         --------       ---------       --------

Balance, December 31, 1999                       389,200,000     $38,920         $303,228       $(341,027)      $  1,621
                                                 ===========     =======         ========       =========       ========

</TABLE>

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

                                      F-3

<PAGE>
                                  MORLEX, INC.
                         (FORMERLY AMERICA ONLINE, INC.)
                             STATEMENT OF OPERATIONS
                         FOR THE YEAR ENDED DECEMBER 31

                                                     1999             1998

REVENUE                                              NONE             NONE

EXPENSES
       Professional                              $      7,594      $      9,113
       Consulting                                           0            12,852
       General and administrative                         470               699
       Filing and transfer fees                         6,003                 0
                                                 ------------      ------------

       TOTAL                                           14,067            22,664
                                                 ------------      ------------

NET LOSS                                         $    (14,067)     $    (22,664)
                                                 ============      ============
LOSS PER SHARE:
       Net loss per share                             NIL              NIL

Weighted average number of
common shares outstanding                         342,556,164       219,940,000
                                                 ============      ============

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

                                      F-4
<PAGE>
                                  MORLEX, INC.
                         (FORMERLY AMERICA ONLINE, INC.)
                             STATEMENT OF CASH FLOWS
                         FOR THE YEAR ENDED DECEMBER 31

                                                          1999          1998

CASH FLOWS FROM OPERATING ACTIVITIES
       Net loss                                        $(14,067)      $(22,664)
         Increase in accrued expenses                     1,004            476
                                                       --------       --------

NET CASH USED BY OPERATING ACTIVITIES                   (13,063)       (22,188)
                                                       --------       --------
CASH FLOWS FROM FINANCIAL ACTIVITIES
       Capital contributed                                5,000          7,000
       Net proceeds from issuance of stock                7,500         18,852
                                                       --------       --------

NET CASH PROVIDED BY FINANCING ACTIVITIES                12,500         25,852
                                                       --------       --------

NET INCREASE (DECREASE) IN CASH                            (563)         3,664

BEGINNING CASH BALANCE                                    3,664              0
                                                       --------       --------

ENDING CASH BALANCE                                    $  3,101       $  3,664
                                                       ========       ========

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

                                      F-5

<PAGE>
                                  MORLEX, INC.
                         (FORMERLY AMERICA ONLINE, INC.)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

The Company 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
$341,027. 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 either 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.

The Company filed, on June 14, 1999, a Registration Statement under the Exchange
Act, on Form 10-SB, pursuant to which the Company is seeking to register its
Common Stock under the Exchange Act. The Registration Statement became effective
on August 14, 1999, and now the Company intends to seek a listing of its common
stock on the NASD Bulletin Board. The Company believes that it can enhance its
opportunities to acquire or merge with an operating company if its securities
are listed on the Bulletin Board. There can be no assurance that the Company's
securities will be listed on the Bulletin Board.

On August 16, 1999, Steven J. Goodman, Lawrence Kaplan and Charles T. Gould,
officers and directors of the Company each purchased 25,000,000 shares of common
stock in exchange for $2,500 each in cash previously advanced to the Company.

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 from those estimates.

                                      F-6

<PAGE>
                                  MORLEX, INC.
                         (FORMERLY AMERICA ONLINE, INC.)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

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.

                                      F-7

<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.

                                                    MORLEX, INC.,

                                                    By: /s/ Lawrence E. Kaplan
                                                        ----------------------
                                                        President and Treasurer
Date: March 24, 2000.

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         Director      March 24, 2000

                   By:  /s/ Lawrence E. Kaplan     President,    March 24, 2000
                                                   Treasurer,
                                                   Director

                   By:  /s/ Steven J. Goodman      Secretary,    March 24, 2000
                                                   Director

                  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.

<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 - incorporated by reference to Exhibit 10.1 to Annual Report on
         Form 10-KSB filed May 14, 1999.

10.2     Common Stock Purchase Agreement by and between the Registrant and
         Steven J. Goodman - incorporated by reference to Exhibit 10.2 to Annual
         Report on Form 10-KSB filed May 14, 1999.

10.3     Common Stock Purchase Agreement by and between the Registrant and
         Lawrence E. Kaplan - incorporated by reference to Exhibit 10.3 to
         Annual Report on Form 10-KSB filed May 14, 1999.

27.1     Financial Data Schedule.