SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                     For the Fiscal Year Ended June 30, 1997

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the Transition Period from _________________

                        Commission File Number 2-6806-NY

                           Concord Energy Incorporated
                 (Name of small business issuer in its charter)

           Delaware                                          22-2670198
 (State or other jurisdiction of                          (I.R.S. Employer
 in corporation or organization)                         Identification No.)

1515 Simmons Street,  Jourdanton, TX                           78026
(Address of principal                                        (Zip Code)
executive offices)

                Issuer's telephone number (830) 769-3955

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

                                      None

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

                         Common Stock, $.0001 par value

<PAGE>

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the 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.

                                 YES _X_ NO ___

Check if there is no disclosure of delinquent  filers  contained in this form in
response to Item 405 of Regulation S-B, 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]

Issuer's revenues for its fiscal year ended June 30, 1997:        $10,483,477
                                                                  -----------

Aggregate market value of the voting stock held
by non-affiliates as of October 8, 1997:                          $ 7,190,252*
                                                                  -----------

Number of shares of common stock outstanding
as of October 8, 1997:                                              6,045,745
                                                                  -----------

                      Documents incorporated by reference:

Portions of the following document are incorporated by reference into the
designated part of this form 10-KSB:

               Proxy statement dated October 20, 1997 (Part III)

----------
* This  valuation was arrived at by applying the $1.3594 per share bid quotation
on  October 8, 1997 on the  NASDAQ  Small Cap  Market to the total of  5,289,381
shares held by non-affiliates


                                       2
<PAGE>

                                     PART I

ITEM 1  DESCRIPTION OF BUSINESS

A.   BUSINESS DEVELOPMENT

     Concord Energy  Incorporated  (the "Company") was incorporated in the State
of Delaware in 1985 under the name  Monoclonal  International  Technology,  Inc.
("Monoclonal").  In 1991 Monoclonal changed its name to Asons Distributing, Inc.
In May 1993  Monoclonal  entered  into an agreement  and plan of  reorganization
("Agreement")  with Concord  Energy,  Inc. a privately  held Nevada  corporation
("Concord"),  which in June 1991 was formed to  effectuate  a  consolidation  of
approximately 166 oil and gas partnerships.

     Pursuant to the  Agreement,  Monoclonal  changed its name to Concord Energy
Incorporated and all of Monoclonal's prior officers and directors resigned.  The
existing  officers and directors of Concord were then  appointed as  replacement
officers and directors of the Company.

     In May of 1995  Knight  Equipment  and  Manufacturing  Corporation  and its
wholly-owned  subsidiary K & S Engineering,  Inc. ("KEMCO") were acquired by the
Company.  In March  1996,  the Company  acquired  Integrated  Petroleum  Systems
Corporation ("IPS").

     The Company's headquarters are located at 1515 Simmons Street,  Jourdanton,
Texas 78026. Concord Energy Incorporated including its wholly-owned subsidiaries
KEMCO,  Concord Energy,  Inc.,  Concord  Operating,  Inc.  ("COI"),  and IPS are
collectively referred to herein as the "Company".

B.   BUSINESS OF ISSUER

     The Company is primarily a petroleum industry service company with emphasis
on 


                                       3
<PAGE>

locating,  designing,  refurbishing  and installing  gas  processing  plants and
equipment  for the natural  gas  industry.  In  addition,  the Company  provides
rentals of processing equipment and services including engineering, procurement,
dismantling, reapplication and relocation of complete gas processing facilities.
The company also develops, installs and maintains its proprietary software, used
to  collect,   process  and  transmit   data.   The  Company  has  interests  in
approximately  75 wells  which  are  located  primarily  in East  Texas  and the
Louisiana  Gulf  Coast.  The wells range in depth from 3,500 feet to 15,000 feet
and produce oil and gas from  formations  which  historically  are known to have
quality reserves.

     In June 1996 the Company's headquarters  relocated from Bernardsville,  New
Jersey to  Jourdanton,  Texas where the  Company's  subsidiary,  KEMCO,  has its
offices and manufacturing  facilities.  The Company's  exploration and operating
office relocated from Houston,  to Jourdanton,  Texas in June 1996. Prior to the
acquisition of KEMCO,  the Company's  revenues were  primarily  derived from the
sale  of oil and  gas.  KEMCO  accounted  for  approximately  85% and 87% of the
Company's revenues for the years ended June 30, 1997 and 1996, respectively.

     Approximately  7% and 5% of the Company's  revenues  during the years ended
June 30, 1997 and 1996, respectively, were from the sale of crude oil.

     Natural  gas sales  represented  approximately  5% and 6% of the  Company's
revenues during the 1997 and 1996 fiscal years, respectively.

C.   BUSINESS STRATEGY

     The Company is committed to a strategy which  emphasizes  growth in the oil
and gas service  industry.  Pursuant to this strategy the Company acquired KEMCO
in May of 1995 and IPS in March 1996. The Company  intends to continue to expand
KEMCO's  


                                       4
<PAGE>

manufacturing  operations by commencing  the  manufacturing  of new equipment as
well as expanding KEMCO's rental,  leasing and operating of processing equipment
and  complete  gas  processing  plants and by  developing  processing  operation
services.  The Company intends to continue to develop and market its proprietary
software through the Company's wholly-owned  subsidiary IPS. COI, a wholly-owned
subsidiary of the Company,  manages the Company's  field oil and gas  production
operations.  By  utilizing  COI's  operating  capabilities,  the Company has the
ability to efficiently manage the production of its wells.

D.   EQUIPMENT AND MANUFACTURING OPERATIONS

     The  equipment  and  manufacturing  activities  of the  Company  consist of
locating,  designing,  refurbishing  and  installing  predominately  natural gas
processing  equipment.  The  Company  also  provides  rentals of gas  processing
equipment  and services  including  engineering,  procurement,  dismantling  and
moving and erecting of gas processing  equipment at new  locations.  The Company
maintains  most of its  equipment  inventory at its  facilities  in  Jourdanton,
Texas.  These facilities  include  construction  and storage areas,  mechanical,
machine, and metal workshops as well as engineering and administrative  offices.
Within the Jourdanton  facilities is a  sandblasting  area approved by the Texas
Natural Resource Conservation Commission ("TNRCC"),  and registered for abrasive
cleaning.  KEMCO is  authorized  by the  National  Board of Boiler and  Pressure
Vessel  Inspectors  for repair and  registration  of "U" stamped  vessels and is
certified  by the  American  Society of  Mechanical  Engineers  ("ASME") for the
construction  of new "U" stamped  pressure  vessels.  The Company  maintains  an
inventory of gas processing  equipment and complete gas plants and miscellaneous
parts, such as vessels,  valves, pipe, fittings and electrical  components which
are needed to complete refurbishing  projects. 


                                       5
<PAGE>

The Company's equipment inventory is available for sale on an "As-Is,  Where-Is"
basis, or can be redesigned and refurbished to meet a customer's specific needs.

E.   PRODUCTION AND DEVELOPMENT OPERATIONS

     The production  and  development  activities of the Company  consist of the
development  and operation of properties  for the production and sale of oil and
gas. The Company conducts its production and development operations primarily in
East Texas and the Louisiana Gulf Coast.

     The majority of the Company's  natural gas is marketed  through third party
operators.  The majority of the  Company's  crude oil  production  is sold under
short term contracts at current posted prices for each geographic region.

     The following summarizes certain of the Company's major prospects:

The Kilgore Waterflood Project

     A waterflood is an enhanced oil recovery  method in which water is injected
into an oil rich reservoir  through injection wells. The injected water "pushes"
or "sweeps" the oil toward a select pattern of collector or producer wells.  The
Kilgore Field is in excess of 400 acres in size and has one water injection well
and nine producing  wells.  Water injection  commenced in September 1993 and oil
production  commenced in November 1993. The Kilgore Field is currently producing
approximately 40 barrels per day and test results from core samples, engineering
data,  geological mapping and independent engineer reports,  indicate that there
are approximately  1,750,000 gross barrels,  in which the Company's  interest is
approximately  1,275,000 barrels The Company's share of the estimated additional
development   costs  required  to  achieve  the  total  potential   reserves  is
approximately $1,695,000.


                                       6
<PAGE>

The Hester Field Project

     The Hester  Field  Project  (the  "Hester  Field") is located in St.  James
Parish,  Louisiana.  The producing  formation present in the Hester Field is the
D-3 sand reservoir. To date the field has produced approximately 330,000 barrels
of oil. The Hester Field oil  reservoir is  approximately  140 acres in size and
has very distinct geological boundaries. The Hester Field is currently producing
approximately  50 BOPD and  bottom  hole  pressure  tests  indicate  recoverable
reserves from the existing  wells to be  approximately  175,000 gross barrels of
oil. By drilling an additional well, approximately another 115,000 gross barrels
of oil could  potentially be recovered.  The Company's share of the Hester Field
is approximately 38%.

F.   SOFTWARE DEVELOPMENT, SALES, AND INSTALLATION OPERATIONS

     The Company's wholly owned subsidiary IPS has developed  computer  software
to gather and process  production data of oil and gas wells more  efficiently in
the field and transmit the data to the home office of an oil or gas  development
company.  The  software  operates  on  conventional  PC  platforms  and  special
hand-held  computers.  The  information  collected  at the well can be  imported
directly into the accounting  systems typically used by the petroleum  industry.
The Company's  proprietary software system is called APEX(TM) (for "Analysis and
Production  Express") and allows  companies  to: (1) reduce field  personnel and
clerical  support;  (2) increase  productivity  and operating  efficiency in the
field;  (3) gain  access to well test and  production  data every 24 hours;  (4)
improve  the  quality  and  accuracy  of  the  client's  central  data  base  by
eliminating  errors resulting from manually  performed  calculations and copying
from  form to form;  and (5)  easily  generate  reports  involving  all types of
production data.


                                       7
<PAGE>

G.   EMPLOYEES

     The Company and its subsidiaries have approximately  ninety-eight full-time
employees.  KEMCO has an average  full-time work force of  approximately  ninety
employees in addition to approximately  ten independent  contractors who perform
various technical services.  The employees include engineers,  yard supervisors,
field  supervisors,  laborers,  technical  personnel and field  installation and
start-up  specialists.  KEMCO has eight  administrative  employees including its
management.  IPS employs  five  people;  one  supervising  all sales and general
management, one administrative, and three programmers.

H.   COMPETITION

     Competition in the oil and gas industry is intense.  The Company encounters
some  competition  from numerous gas  processing  equipment  service  companies;
however, few of its competitors offer the complete range of services provided by
the Company.

     There are  numerous  oil and gas  companies  engaged in drilling and income
programs,  partnerships and other joint ventures which offer competition for oil
and gas  development.  Many  of  these  companies  are  large,  well-established
entities  with  substantially   larger  operating  staffs  and  greater  capital
resources than the Company. In addition,  many of such companies have engaged in
the  manufacturing  and energy  businesses  for a much  longer  period  than the
Company. Competition in the oil and gas computer software industry is strong and
continues to expand.

I.   REGULATIONS

     The oil and gas exploration, production and service industry is extensively
regulated by federal,  state and local  authorities.  Legislation and regulation
affecting  the industry are under  constant  review for  amendment or expansion,
raising the  possibilities  of changes that may adversely  affect the Company in
areas such as pricing  and  marketing  of  services,  


                                       8
<PAGE>

equipment and oil and gas production.  Substantial penalties may be assessed for
noncompliance with various  applicable  statutes and regulations and the overall
regulatory burden on the industry increases the cost of doing business,  thereby
reducing profits.  Federal  legislation and regulatory  control generally affect
the oil and gas  produced by the  Company and the manner in which such  products
are marketed, sold and transported.

     The  Company is  required  to meet all the  Occupational  Safety and Health
Administration  ("OSHA") regulations as well as those related to Texas workman's
compensation  laws; labor laws, sales tax, ASME Codes,  Electrical  codes,  fire
regulations,  etc. In accordance with these  regulations,  the Company  requires
each of its employees to signify  receipt,  understanding  and acceptance of the
Company's "CODE OF ETHICS - EMPLOYEE HANDBOOK - SAFETY MANUAL".  All contractors
who perform  services for the Company must also signify  their  compliance  with
these regulations.  In an attempt to prevent such hazards, the Company maintains
extensive safety and training  programs.  The Company is required to comply with
numerous state and local regulations  affecting different aspects of the oil and
gas drilling and  production  activities  including  the drilling of wells,  the
spacing  of  wells,  the  utilization  or  pooling  of oil and  gas  properties,
environmental  matters,  safety  standards,  the sharing of markets,  production
limitations, plugging and abandonment, and restoration.

     Moreover,  various federal,  state and local laws and regulations cover the
discharge  of  materials  into  the  environment  or  otherwise  relate  to  the
protection of the environment.  These  regulations may affect the Company's cost
of operations.  It is not  anticipated  that the Company will be required in the
near  future to expend  substantial  amounts of money in  relation  to its total
capital  expenditure  program by reason of  environmental  laws or  regulations.
However,  since such laws and  regulations are frequently  changed,  the Company
cannot predict the ultimate cost of compliance therewith.


                                       9
<PAGE>

J.   INDUSTRY RISKS

     The Company's equipment and manufacturing operations are subject to all the
hazards and risks  normally  incident to  manufacturing  and working  with heavy
equipment. Employer's liability, performance liability and comprehensive general
liability   insurance  coverage  in  the  aggregate  amount  of  $10,000,000  is
maintained.

     The  Company's oil and gas  operations  are subject to all of the operating
hazards and risks  normally  incident to drilling and production of oil and gas,
such as explosions,  encountering  formations with abnormal pressure,  blowouts,
cratering and oil spills,  any of which can result in the loss of  hydrocarbons,
environmental  pollution,  personal injury claims and loss of life. Such hazards
can  also  severely  damage  or  destroy   equipment,   subsurface   structures,
surrounding  areas or  property  of  others.  The  Company  maintains  insurance
coverage in the aggregate  amount of $2,000,000,  including  physical  damage on
certain risks, employer's liability and comprehensive general liability.

     The Company believes that it's insurance coverage is adequate and customary
for Companies of a similar size engaged in operations comparable to those of the
Company.  The Company also requires that all third party contract services carry
insurance which meets the Company's requirements.

     However,  there  can be no  assurance  that  losses  will  not  occur  from
uninsurable risks or in amounts in excess of existing coverage. The Company does
not carry  business  interruption  insurance due to the  prohibitive  cost.  The
occurrence  of any event that is not fully  covered by  insurance  could have an
adverse impact upon the Company's financial condition and results of operations.


                                       10
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTIES

A.   KEMCO Properties

     KEMCO's   facilities   in   Jourdanton,   Texas  include  a  main  yard  of
approximately  5 acres.  Within  the main yard  are:  an  administrative  office
building of approximately  4,000 square feet, a warehouse and purchasing  office
building of approximately  6,000 square feet, a mechanical  workshop building of
approximately  10,000 square feet,  and  instrument and valve storage and repair
building of approximately 12,000 square feet. Across from KEMCO's main yard, the
Company  owns a  6,000  square  foot  building  which  is  utilized  by  KEMCO's
engineering department.

     KEMCO's  three other yards in  Jourdanton,  Texas are a 7 acre  laydown and
dismantling yard, a 2 1/2 acre leased yard with a 3,200 square foot workshop and
office trailer,  and a 20 acre  sandblasting,  painting and storage yard. All of
these yards are in close proximity to the main yard.

B.   IPS Properties

     IPS leases 1,924 square feet of office space at 5990 Greenwood Plaza Blvd.,
Suite 205, Englewood, Colorado 80111.

C.   Oil and Gas Properties

     The Company has an ownership  interest in  approximately 75 producing wells
primarily  located  in East  Texas and the  Louisiana  Gulf  Coast,  of which it
manages approximately 15 producing oil and gas wells.


                                       11
<PAGE>

     Proved Oil and Gas Reserves

     The  following  table sets forth  estimates of proved  developed and proved
undeveloped  oil and gas reserves and the present value of estimated  future net
revenues  attributable to such reserves,  based on the assumptions  that oil and
gas  prices,  and  operating  costs will remain  fixed at year end  levels.  The
present  value of the  estimated  future  net  revenues  for  proved oil and gas
reserves on the dates  indicated below was computed by discounting the aggregate
future net revenues by 10% per year.  The present  value does not  represent the
fair market value of such reserves. For the years ending June 30, 1997 and 1996,
this   information  is  based  upon  the  reserve  reports  prepared  by  Harris
Engineering  Services of  Houston,  Texas.  Proved  reserves  are the  estimated
quantities of oil, gas and natural gas liquids which  geological and engineering
data  demonstrate  with  reasonable  certainty to be recoverable in future years
from known  reserves under existing  economic and operating  conditions.  Proved
developed  reserves  are proved  reserves  that can be expected to be  recovered
through  existing  wells with  existing  equipment and  operating  methods.  The
estimation of reserves  requires  substantial  judgment on the part of petroleum
engineers  sometimes  resulting in imprecise  determinations,  particularly with
respect to new discoveries.  The accuracy of any reserve estimate depends on the
quality  of  available  data,  engineering  and  geological  interpretation  and
judgment.  Results of drilling, testing and production subsequent to the date of
the  estimate  may  result  in  revisions  of any  such  estimate.  Accordingly,
estimates of reserves are often materially  different from the quantities of oil
and gas that are  ultimately  recovered and such estimates will change as future
production  and  development  information  becomes  available.  The reserve data
represents estimates only and should not be construed as being exact.


                                       12
<PAGE>

     Estimates  of proved  reserves  at June 30,  1997 have not been  previously
filed by the Company  with or included  in reports to any federal  authority  or
agency.

                                                              June 30,
                                                    --------------------------
                                                        1997           1996
                                                     ---------       --------
Estimated proved developed
  and proved undeveloped oil
  and gas reserves:
       Oil (Bbls)                                     1,662,445      1,840,834
       Gas (Mcf)                                        790,323      1,616,990
       EQB*                                           1,794,165      2,110,332
Present value of future net reserves                $14,768,810    $21,529,556
Present value of future net reserves
  discounted at 10%                                 $ 8,211,438    $12,390,060

Estimated proved developed oil and gas reserves:
       Oil (Bbls)                                       557,442        375,061
       Gas (Mcf)                                        790,323        924,019
       EQB                                              689,163        529,064
Present value of future net reserves                $ 4,472,861    $ 4,326,975
Present value of future net reserves
  discounted at 10%                                 $ 2,648,466    $ 2,979,752

The present  value of future net reserves as stated above is determined by using
the Securities and Exchange Commission Regulations which include constant prices
of oil and gas as of the end of the fiscal year.

----------
*    Equivalent  barrels  (Mcf of gas is  converted  to  equivalent  barrels  by
     dividing by 6)


                                       13
<PAGE>

Productive  Wells,  Developed  And  Undeveloped  Acreage and  Drilling  Activity
Acreage

The following  tables set forth the Company's  developed  acreage and productive
wells as of June 30,  1997 and 1996.  "Gross"  refers to total acres or wells in
which the  Company  has a working  interest  and "Net"  refers to gross acres or
wells multiplied by the percentage of working interest owned by the Company.

                                        Developed Acreage
                                        -----------------
                                          Gross    Net
                                          -----    ---
                            1997          8,080   1,542

                            1996          8,160   1,377

                                Productive Wells
<TABLE>
<CAPTION>

                      Oil                                           Gas
     ---------------------------------------       -------------------------------------
       Gross     Net      Gross       Net            Gross     Net     Gross       Net    
      Number    Number  Developed  Developed        Number   Number  Developed  Developed
     of Wells  of Wells  Acreage    Acreage        of Wells of Wells  Acreage    Acreage
     --------  --------  -------    -------        -------- --------  -------    -------
<S>     <C>       <C>     <C>        <C>              <C>      <C>     <C>         <C>
1997    59        20      4,080      1,083            17       3       4,000       458 
                                                  
1996    59        16      4,080        915            18       3       4,080       462 
</TABLE>

     At June 30,  1997,  the  Company  owned the  rights to 400 gross  (351 net)
undeveloped  acres, all of which are located in the United States. The following
table sets forth the states in which such  acreage is located  and the number of
gross and net acres:


                                       14

<PAGE>

State                         Gross Acres                    Net Acres
-----                         -----------                    ---------

Texas                             320                           320
Louisiana                          80                            31
                                  ---                           ---

Total                             400                           351
                                  ===                           ===

     During the last two years,  the Company did not drill or participate in the
drilling of any exploratory and development well(1):

Production, Unit Prices and Costs

     The following  sets forth the  production and average unit prices and costs
for the years ended June 30, 1997 and 1996:

                                                  Year Ended June 30,
                                                  -------------------
                                                  1997          1996
                                                  ----          ----
Production:
Oil and condensate (Bbls)                         37,067        32,815
Gas (Mcf)                                        215,165       302,583
Average sales price:
Oil and condensate (per Bbl)                      $21.01        $17.71
Gas (per Mcf)                                     $ 2.42        $ 2.06
Average production costs
per EQB*                                          $ 9.63        $ 7.68

----------
(1)  A majority of the Company's  activities  since  inception have consisted of
     upgrading  service  equipment  and  production  facilities  and  conducting
     workovers and recompletions.

*    Production  costs include lease operating  expenses,  production  taxes and
     expensed workovers.


                                       15
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

     From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of October 8,
1997,  the Company was not engaged in any legal  proceedings  that are expected,
individually  or in the  aggregate,  to have a  material  adverse  effect on the
Company.

     The Company,  together with Integrated  Energy Inc.  ("Integrated"),  Jerry
Swon and Bruce Deichl,  was named as a defendant in a lawsuit commenced by three
investors in two oil and gas partnerships sponsored by Integrated,  in the Court
of Common Pleas in Philadelphia,  Pennsylvania. The plaintiffs allege in essence
that  they  were  induced  to   participate   in  the   partnerships   by  false
representations  concerning  the  safety  and  earnings  potential  of the  well
properties.  They are seeking  recovery of their  investment  which  exceeded $3
million. The Company had no dealings whatever with the plaintiffs,  and its sole
link to the operative  facts is that the Company  received 10% of invested funds
under  its  management   agreement  with   Integrated   (see  Item  12,  Certain
Relationships and Related Party Transactions).

     While prior management  reported that they did not believe that the lawsuit
had merit,  current  management has determined  that the costs of defending this
suit  combined  with the  potential  cost if the  Plaintiff's  were  successful,
dictated that a settlement be negotiated.  Negotiations  were initiated  between
the  Company's  CEO and a  principal  in the  lawsuit  in April  1997.  A verbal
agreement has been reached to settle this cause of action for 350,000  shares of
the  Company's  common  stock and a warrant to  purchase an  additional  350,000
shares of the  Company's  common stock at $1.00 per share.  At June 30, 1997 the
Company has a reserve  recorded  in the amount of $175,000  for the cost of this
settlement.

     Subsequent  to the end of fiscal 1997,  the Company filed suit against Mark
T. 


                                       16
<PAGE>

Shipley,  Richard D. Barden, June Barden,  Jerry Swon, and Fallon & Fallon which
suit is in the United States  District Court for the Western  District of Texas,
San Antonio  Division.  The litigation  relates to the Company's  acquisition of
IPS. The  petition  alleges that  members of the  Company's  former  management,
former IPS management and other  interested  persons  committed  fraudulent acts
and/or omissions in connection with the acquisition. The specific damages sought
are monetary  damages in an unspecified  amount,  as well as relief from certain
related  debt,  wages and  agreements.  Some of the  defendants  have filed suit
against the Company seeking the payments of debts related to IPS.

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

     Since the last annual meeting of the  shareholders  held on August 9, 1996,
no matter was  submitted  to a vote of the  Company's  shareholders  through the
solicitation of proxies or otherwise.

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Trading in the Company's  common stock is currently  reported on the NASDAQ
Small Cap Market under the symbol CODE. The following  table sets forth the high
and low bid prices for the Company's common stock for the periods indicated. The
Company's  common  stock was not  listed on the NASDAQ  Small Cap  Market  until
January,  1996.  Thus,  prices  prior to that date are based on  trading  on the
Electronic  Bulletin  Board  operated by the National  Association of Securities
Dealers, Inc. ("Bulletin Board") under the symbol CCNG.


                                       17
<PAGE>

         All of the following price information has been adjusted to reflect the
Company's December 1995 one for five reverse split.

                                             High Bid           Low Bid
                  June 30, 1994                9 3/8             5
                  Sept. 30, 1994              10 5/16            5 5/8
                  Dec. 31, 1994                9 1/16            3 1/8
                  Mar. 31, 1995                6 1/4             1 7/8
                  June 30, 1995               11 1/4             3 3/4
                  Sept. 30, 1995               6 1/4             3 1/8
                  Dec. 31, 1995                5 5/16            3 1/4
                  Mar. 31, 1996                6                 3 3/4
                  June 30, 1996                4 3/8             3 1/4
                  Sept. 30, 1996               3 1/8             3 1/8
                  Dec. 31, 1996                2 9/16            1 3/8
                  Mar 31, 1997                 2 3/8             2 1/8
                  June 30, 1997                1 5/8             1 1/2
                  Oct. 8, 1997                 1 3/8             1 11/32

     The above  quotations  represent  prices between dealers and do not include
retail  markups,  markdowns or  commissions.  Such quotations do not necessarily
represent actual transactions.

     Approximate number of equity security holders

     As of October 8, 1997, the approximate  number of shareholders of record of
the  Company's  common  stock  was 490.  That  number  was  determined  from the
Company's  transfer agent's list of shareholders and does not include beneficial
owners of the  Company's  common  stock  whose  shares  are held in the names of
various dealers and clearing agents.


                                       18
<PAGE>

     Dividends

     The Company has never paid any dividends,  whether cash or property, on its
securities. For the foreseeable future it is anticipated that any earnings which
may be  generated  from  operations  of the Company  will be used to finance the
growth of the Company and that dividends will not be paid to stockholders.

     Recent issuance's of unregistered securities

     During the  fiscal  year ended June 30,  1997 the  Company  issued  145,982
unregistered  shares of its common  stock in  transactions  exempt  pursuant  to
Section 4(2) of the Securities Act of 1933. The following details the issuance's
of these shares.

   Name of                 Purpose of           Number of            Date of
   Holder                   Issuance           Shares Issued        Issuance

David A.  Kocian    Financial Consulting
                    Services                        8,000        July, 19, 1996
                   
Richard Horn        Interest on Debt                  617         July 23, 1996
                   
Cannterbury         Financial Consulting
  Associates        Services                       12,500         July 23, 1996
                   
Orta Foundation     Conversion of $45,000
                    of debt and related interest   22,783         July 25, 1996
                   
Mark T. Shipley     Conversion of $10,000
                    of debt and related interest    1,861       August 26, 1996
                   
Robert A. Barden    Conversion of $30,000
                    of debt                         5,000       August 26, 1996
                   
Ann Hamilton        Conversion of $49,891
                    of debt                         8,315       August 26, 1996
                   
Thomas Bruderman    Financial Consulting
                    Services                        6,250     November 13, 1996
                   
Global Portfolios   Conversion of $125,000
  PTY LTD           of debt and related interest   80,656        March 13, 1997


                                       19
<PAGE>

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

     The following should be read in conjunction with the summary financial data
and the Company's  consolidated  financial  statements and related notes thereto
appearing elsewhere in this report. The financial data and information contained
in this  report  for  fiscal  1997  and  1996  respectively,  reflect  financial
information for IPS for the period of March 1, through June 30, 1997.

     Results of Operations

     Comparison of 1997 to 1996:

     The Company's  revenue was  generated  primarily  from contract  revenue of
KEMCO.  Approximately  85% of the  Company's  revenue for the fiscal year ending
June 30, 1997 was generated by KEMCO.  During the year ending June 30, 1997, the
Company  reported  total  revenue of  $10,483,477  representing  a  decrease  of
$344,732 or  approximately  3% from the prior fiscal year. The Company  reported
contract  revenue  during fiscal 1997 of $8,709,511  representing  a decrease of
$576,428 or  approximately 6% from the prior fiscal year, which accounts for the
majority of the net decrease in total revenue from fiscal 1996 to 1997.

     Oil sales,  which accounted for  approximately 7% of the Company's  revenue
during fiscal 1997,  increased by $197,498 or  approximately  34% from the prior
fiscal year.  This  increase  was  primarily  attributable  to a net increase in
production  volume of 4,252  barrels which  resulted  from improved  recovery on
certain wells offset by normal production  decline of wells and the cessation of
operations of certain  unprofitable  wells,  and by an increase of approximately
$3.30 in the average price per barrel received by the Company.  Gas sales, which
accounted  for  approximately  5% of the Company's  revenue  during fiscal 1997,
decreased by $102,247,  or  approximately  16% from the prior fiscal year.  This
decrease was  primarily  related to normal  production  decline of wells and the
cessation of operations of certain  unprofitable  wells,  partially offset by an
increase of  approximately  $.36 in the average price per Mcf of gas received by
the Company.

     Due to the  termination of the management  agreement with  Integrated  (see
Item 12, Certain  Relationships  and Related Party  Transactions)  there were no
syndication  sales  


                                       20
<PAGE>

and revenue  interest income during fiscal 1997,  which represents a decrease of
$140,000, or 100% from the prior fiscal year.

     During  fiscal  1997,  well  operating   income  decreased  by  $12,514  or
approximately  24% from the prior fiscal year. This decrease is primarily due to
shutting down certain uneconomical wells for which COI had been the operator.

     Total costs and expenses during fiscal 1997 were $15,780,090 as compared to
$16,491,510 in fiscal 1996. The net decrease of $711,420 or  approximately 4% is
primarily  the result of a  combination  of the  termination  of the  management
agreement with Integrated,  a write-down of the unamortized  balance of goodwill
associated  with IPS of  $2,417,368  at June 30, 1997, a decrease in the cost of
KEMCO's contract revenue of $884,776 or approximately  11% from fiscal 1996, and
the  restatement of inventory  which resulted in the recording of a reduction of
$3,043,055 in fiscal 1996.

     The management  agreement with Integrated was terminated  effective July 1,
1996 (see Item 12, Certain  Relationships and Related Party  Transactions).  The
cost of this agreement for fiscal 1996 was $1,392,000.

     Included  in the  costs and  operating  expenses  for  fiscal  1997,  was a
write-down of the unamortized goodwill associated with IPS of $2,417,368.  Based
on the results of operations for IPS since its acquisition,  current  management
has determined that the unamortized goodwill had no future benefit.

     The cost of KEMCO's  contract revenue  decreased  $884,776 or approximately
11% from fiscal 1996. This decrease was primarily the result of the inclusion in
fiscal 1996 of a Project  Audit  settlement.  This audit  resulted in a $521,500
balance due to a Customer and represents additional costs previously incurred by
the customer.  In March 1996,  KEMCO agreed to reimburse  the  customer,  and no
reserve for such expense had been established.

     During  fiscal 1996 the Company  recorded a reduction  in  inventory in the
amount of  $3,043,055.  This was the result of a retail fair market  value being
booked at the time of the KEMCO  acquisition  rather than a wholesale value with
the balance being charged to goodwill.  Current  management  determined that the
allocated  costs were in error and chose to take a one time  adjustment  to more
accurately reflect the operations of the Company.

     Lease  operating  expenses  during  fiscal  1997  increased  by  $63,004 or
approximately  


                                       21
<PAGE>

10% from the prior  fiscal year.  Lease  operating  expenses as a percentage  of
total oil and gas sales were 54% in fiscal 1997, compared to 53% in fiscal 1996.

     Total general and  administrative  expenses during fiscal 1997 decreased by
$1,124,123 or approximately 29% to $2,816,713. The decrease was primarily due to
the  termination  of the  Company's  management  agreement  with  Integrated  as
previously  discussed  partially offset by the establishment of a reserve in the
amount of $175,000,  which  represents  the estimated cost of settling a lawsuit
(see Item 3, Legal  Proceedings),  recorded  in fiscal  1997.  The  general  and
administrative  costs  associated with the KEMCO  operations  during fiscal 1997
decreased by $94,307 or approximately 7% to $1,189,872.  In fiscal 1996, general
and administrative expenses for KEMCO were $1,284,179. The Company's general and
administrative  expense  related to IPS during fiscal 1997 increased by $335,896
or 161% to $ 543,935,  compared to $208,039  for Fiscal  1996.  The  increase is
primilary the result of the inclusion of IPS in Fiscal 1996, for only the period
of March 1, 1996, the effective date of its' acquisition, through June 30, 1996.

     Depreciation,   depletion  and  amortization  expense  during  fiscal  1997
increased by $90,630 or  approximately  15%,  compared to the prior fiscal year.
This  increase is primarily  the result of the  inclusion  for an entire year of
amortization  of the IPS's goodwill  which  increased by $117,920 from the prior
fiscal year.

     Interest expense during fiscal 1997 decreased by $221,127 to $978,822.  The
decrease is primarily  due to the Company's  retirement  of  $1,303,249  debt by
principal payments and conversions to the Company's common stock.

     Liquidity and Capital Resources

     As of June 30, 1997 and 1996, the Company had working capital  (deficit) of
$(760,076) and $1,193,748,  respectively, resulting in a decrease of $1,953,824.
This  decrease  in 1997  is the  result  of a  decrease  in  current  assets  of
$1,633,495 and an increase in current  liabilities of $320,329.  The decrease in
current assets  primarily  resulted from a combination of a decrease in cash and
accounts receivable of $1,296,588 and a decrease in inventories of $356,131. The
increase in current liabilities  primarily resulted from an increase in accounts
payable and accrued  expenses of $ 1,594,359  partially  offset by a decrease in
the current portion of notes payable of $1,180,115.


                                       22
<PAGE>

     During  fiscal  1997,  cash  used  in  operating  activities  was  $548,850
representing  a decrease of  $2,663,554  or  approximately  83% from fiscal year
1996.  This decrease  primarily  resulted from the  combination of the increased
accounts  payable and accrued  expenses,  decrease in  inventories,  decrease in
receivables,  decrease  in total  revenues  and the  decrease in total costs and
operating expenses.

     Management  notes that the accompanying  Report of Independent  Accountants
for the Company's  financial  statements includes an assumption that the Company
will  continue as a going  concern.  As  discussed  in Note 15 of the  financial
statements,  the Company has suffered  recurring  losses and negative cash flows
from  operations,  has a negative  working  capital at June 30, 1997, as well as
significant debt maturing in the near future.

     The Company is presently  negotiating  the extension and refinancing of its
note  payable  that  matures on  November  1, 1997 of  $2,920,000.  The  Company
believes that it will be successful in obtaining refinancing utilizing the KEMCO
inventory as collateral,  however there are no current  commitments to refinance
this indebtedness.

     At June 30,  1997 KEMCO had work in  progress  with  $605,199  in  revenues
remaining to be earned.  Through October 8, 1997 KEMCO obtained  commitments for
additional  contracts with future revenues of $13,696,055 for a total backlog at
October 8, 1997 of $14,301,254.

     Capital Expenditures And Commitments

     During fiscal 1996,  the Company  completed the  acquisition of IPS for the
issuance of 600,000 shares (post split) of the Company's  common stock valued at
$3.00 per share, a commitment to fund working capital of $550,000, assumption of
$350,196  additional  notes and  $300,000  repayment  of debt to  Integrated,  a
related party.

     During  fiscal 1997 and 1996,  the Company  invested  $8,625 and  $149,581,
respectively,  in oil and gas  activities  including  acquisition  of  producing
properties, surface equipment and production facility upgrades, capitalized well
workovers and  recompletions.  The majority of these capital  expenditures  were
funded  through the private  issuance of 42,500 shares of the  Company's  common
stock in fiscal 1996.

     During  fiscal  1997 and 1996,  the  Company  incurred  additional  capital
expenditures of $109,380 and $317,761. These capital expenditures were primarily
of equipment and the purchase and renovation of a building  acquired in November
1995.  The building is 


                                       23
<PAGE>

located across from KEMCO's main yard and was required to consolidate and expand
KEMCO's  engineering  staff.  The total cost of the building and its renovations
were $85,844.

     To fulfill the requirements of the contracts  included within the Company's
backlog at October 8, 1997,  the Company  will be required to make  substaintial
expenditures,  which in part, will be funded through  progress  billings paid by
the Company's customers.

     Based upon the current level of operations,  the Company believes that cash
flow  from  future   operations   will  be  adequate  to  meet  its  anticipated
requirements for working capital,  capital  expenditures and scheduled  interest
payments  through June 30, 1998.  However,  various factors  including,  but not
limited to, those items  previously  discussed in the Industry  Risks Section of
this report would have a material  adverse effect on the Company's cash flow and
could force the Company to revise its planned  capital  expenditures or to raise
money through stock issuance or to borrow additional funds.

                             SUMMARY FINANCIAL DATA

                                                       Year Ended June 30,
                                                  ----------------------------
Operating Data                                         1997           1996
                                                  ------------    ------------
Total oil and gas sales                           $  1,298,811    $  1,203,559
Contract revenue                                     8,709,511       9,285,939
Total revenue                                       10,483,477      10,828,209
Loss from operations                                (5,296,613)     (5,663,301)
Net loss                                            (6,243,940)     (6,807,293)
Net loss per share                                       (1.07)          (1.97)

                                                            June, 30
                                                  ----------------------------
Balance Sheet Data                                    1997            1996
                                                  ------------    ------------
Total current assets                              $  6,980,120    $  8,613,615
Total assets                                        15,278,359      20,114,991
Working capital (deficit)                             (760,078)      1,193,748
Notes payable, long term debt
   and capital lease obligations                     6,163,316       7,428,361
Total liabilities                                   10,298,838      10,045,905
Total stockholders' equity                           4,979,521      10,069,086


                                       24
<PAGE>

     All statements  other than statements of historical  facts included in this
report  regarding  the  Company's  financial  position,  business  strategy  and
objectives of management for future  operations are  forward-looking  statements
that  involve  risks  and  uncertainties.  Although  the  Company  believes  the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations  will prove to have been correct.  Such
forward-looking  statements are made in reliance on the "safe harbor" protection
provided under the Private  Securities  Litigation  Reform Act of 1995.  Factors
that  could  cause  actual  results  to  differ  materially  from the  Company's
expectations  include,  among others, the following:  (i) market dynamics,  (ii)
regulatory changes, (iii) competition and other economic conditions.

ITEM 7.  FINANCIAL STATEMENTS

     The following financial statements are filed with this report, beginning on
page F-1:

                                                                          Pages

Report of  Independent Accountants ....................................    F-1
Consolidated Balance Sheets, June 30,  1997 and 1996 ..................    F-2
Consolidated Statements of Operations, Years Ended
   June 30, 1997, and 1996 ............................................    F-3
Consolidated Statements of Changes in Stockholders'
   Equity,  Years Ended June 30, 1997, and 1996 .......................    F-4
Consolidated Statements of Cash Flows, Years Ended
   June 30, 1997, and 1996 ............................................    F-5
Notes to Consolidated Financial Statements ............................    F-6

                                    PART III

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

                                      None


                                       25
<PAGE>

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS

     There is  incorporated  in this item 9 by  reference  that  portion  of the
Company's  definitive Proxy Statement dated October 20, 1997 appearing under the
caption "DIRECTORS AND OFFICERS".

ITEM 10. EXECUTIVE COMPENSATION

     There is  incorporated  in this item 10 by  reference  that  portion of the
Company's  definitive Proxy Statement dated October 20, 1997 appearing under the
caption "EXECUTIVE COMPENSATION".

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     There is  incorporated  in this item 11 by  reference  that  portion of the
Company's  definitive Proxy Statement dated October 20, 1997 appearing under the
caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT".

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     Jerry  Swon,  former  President  and  former  Chairman  of the Board of the
Company  owns all of the  outstanding  stock  of  Integrated,  which  was also a
shareholder  of the Company.  Integrated  had provided  certain  services to the
Company pursuant to a management agreement (see below).

     Certain  officers and  directors of the Company own a total of 6.35% of the
Company's  outstanding  common  stock as of  October  8,  1997.  This total also
includes the 5.95% of the 


                                       26
<PAGE>

Company's common stock owned by Deral Knight,  Company Chairman of the Board and
CEO and former President of the Company's wholly-owned subsidiary KEMCO.

     The Company and  Integrated,  entered into an agreement in June,  1991 that
required Integrated to provide certain management, administrative and accounting
services to the Company and its subsidiaries,  Concord and COI, for $116,000 per
month through June 30, 1996. While the agreement was in effect,  the Company was
also entitled to a percentage of all the  syndicated  retail  partnership  gross
sales  made by  Integrated.  As  additional  consideration  for  the  agreement,
Integrated  assigned to the Company,  effective  June 1, 1991 through  March 31,
1994, its revenue sharing interest in all program syndication's. In fiscal 1996,
the Company recorded  $140,000 in syndication  income.  The services provided by
Integrated  Energy,  Inc. included the receipt of cash for oil and gas sales and
the payment of operating and capital  expenditures on behalf of the Company.  As
of July 1, 1996, the management agreement was terminated.

     In  conjunction  with the  above  referenced  agreement,  the  Company  and
Integrated  entered into an agreement by which the  associated  receivables  and
payables may be netted.  At June 30, 1997,  the Company has a net payable due to
Integrated of $6,943.  At June 30, 1996,  the Company had a net  receivable  due
from Integrated of $236,415.

     As part of its ongoing  operations,  the  Company  conducts  business  with
Atascosa Electric  Services  ("AES"),  an entity which is owned by a relative of
Deral Knight, who is also a stockholder of the Company.

     At June 30,  1997 and 1996,  respectively,  there was  $35,684  and  $9,073
payable due to Deral Knight.  These amounts  represent  unreimbursed  travel and
other business  expenses  incurred in the normal course of business and included
$13,193  and  $9,073  accrued   interest  payable  for  fiscal  1997  and  1996,
respectively.

     On  December  5, 1996,  KEMCO  entered  into a lease  agreement  with Deral
Knight,  


                                       27
<PAGE>

CEO, Chairman of the board of directors,  and a stockholder of the Company.  The
lease is for 2.42 acres of land  located  adjacent to property  which KEMCO owns
and includes a 3,200 square ft. shop building and office  trailer.  The lease is
for five years at a cost of $975 per month.

     Under the  provisions of the agreement  whereby the Company  acquired Deral
Knight's  stock in KEMCO,  Deral  Knight  has  agreed to return to the  Company,
Concord  common  stock valued at $6.25 per share to the extent that Deral Knight
owed money to the Company at June 30, 1996.  Accordingly,  in liquidation of the
receivable  balance,  17,130  shares of Company  common  stock are  reflected as
having been returned to the Company.

     In  August,   1995,  the  Company's  board  of  directors   considered  the
acquisition of a 63% interest in IPS. At that time, the  acquisition  involved a
cash  investment  of $1.4  million.  The  Company's  board  declined to make the
acquisition  at that time because the Company  needed to conserve its  available
cash  following the recent  acquisition  of KEMCO.  The board was also concerned
because IPS had just completed its development  stage, had no written orders and
was just  starting  to market its  products.  After the board  passed on the IPS
transaction,  former Company president Jerry Swon disclosed to the board that he
wished to pursue the IPS venture through a company controlled by him.

     Thereafter,  on August 22, 1995,  IPS entered into an agreement with Tucker
Financial,  Inc.  ("Tucker"),  a company  controlled by former Company President
Jerry Swon, whereby Tucker provided funding to IPS in the amount of $300,000, as
part of an  agreement  that gave Tucker the right to acquire up to 63% of IPS by
furnishing a total of $1.4 million in working capital to IPS.

     On October 18, 1995 Tucker  arranged  with an entity known as the SMR Group
to provide  net equity  capital to IPS in the amount of $1.4  million  for a 25%
interest  in IPS.  That  arrangement  contemplated  combining  IPS with a public
company in which Tucker 


                                       28
<PAGE>

would have held a 28%  interest.  The sum of $300,000 was to be repaid by IPS to
Tucker.  No such repayment  actually took place because the deal between IPS and
SMR Group was never finalized.

     On December 12, 1995,  Mr. Swon,  recommended  that the Company's  board of
directors  reconsider the  acquisition of IPS based on the progress made by that
company  during the second half of 1995,  and the immediate  outlook for IPS and
its principal  products.  Mr. Swon advised the board that he felt confident that
the  acquisition  could be made for stock at this time and that IPS's  agreement
with the SMR Group could be  terminated.  The board  authorized him to negotiate
with IPS and report back at a subsequent meeting.

     On December 26, 1995,  Mr. Swon  advised the  Company's  board of directors
that 100% of IPS could be purchased for 600,000  shares of the Company's  common
stock.  He also  indicated  that an additional  100,000  shares could  eliminate
$400,000 of  indebtedness  including  $300,000 in debt that IPS had  incurred in
connection  with the  financing  arranged by Tucker.  Mr. Swon advised the board
that IPS would require up to an estimated $700,000 in working capital during the
next 12 months,  and the Company would assist IPS in raising or obtaining  these
funds. The board unanimously resolved to purchase IPS on the proposed terms.

     As part of the acquisition,  Tucker  relinquished its right to purchase IPS
shares as described above. The individuals acquiring Company shares included ten
persons who received 45% of the Concord stock issued as  consideration  for IPS.
The Company is currently  investigating  whether these individuals were entitled
to receive the shares issued to them (see item 3 Legal Proceedings).

     At the time of the IPS acquisition  there existed a royalty  agreement with
its president 


                                       29
<PAGE>

for any related oil and gas industry  applications  developed  from the original
idea of developing a set of proprietary software programs.  Royalties under this
agreement  are  calculated  as  follows:  1% of the  first  $1,500,000  of gross
revenue, and 5% of gross revenue thereafter.  The agreement expires December 31,
2015.

     In March 1996,  the Company  finalized a sale of gas processing and related
equipment to Integrated for $550,000.  The Company's profit on the sale of these
items was approximately  $200,000. On November 22, 1996, the Company repurchased
from  Integrated  the gas  processing  and related  equipment for $361,415.  The
purchase price was netted against the net receivable due from Integrated at June
30, 1996 of $236,415 which resulted in a net payment to Integrated of $125,000.

     In June 1996,  Mr. Swon returned  124,500  shares of the  Company's  common
stock  from  Integrated,  at a value of $3.00 per share as  partial  payment  of
Integrated intercompany debt.

     In June of 1996,  the Company  accepted  $150,000  of  expenses  charged by
Integrated.  These expenses  represented costs incurred by Integrated outside of
the scope of the management contract.

     On November 22, 1996,  Jerry Swon  resigned as chairman and board member of
the Company's board of directors. In conjunction with his resignation, the board
of  directors  approved a  severance  payment of six months of his then  current
salary totaling $75,000.


                                       30
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     a) Exhibits

     Exhibits  marked  with an  asterisk  have been  previously  filed  with the
Securities  and Exchange  Commission  by the Company,  and are  incorporated  by
reference,  as indicated.  Other exhibits, if not so designated,  are filed with
this Form 10-KSB.

     (3)* - Certificate of  Incorporation  as amended and by-laws,  incorporated
     herein as an exhibit by reference to the Current Report. Exhibit 3 therein,
     under the Securities  Exchange Act of 1934, filed by Registrant on Form 8-K
     with the Securities  and Exchange  Commission on May 18, 1993, SEC File No.
     2-6806.

     (10.8)* - Agreement and Plan of  Reorganization  between the Registrant and
     Concord  incorporated  herein as an exhibit  by  reference  to the  Current
     Report,  Exhibit 10.8 therein,  under the Securities  Exchange Act of 1934,
     filed by Registrant on Form 8-K with the Securities and Exchange Commission
     on May 18, 1993, SEC File No. 2-6806.

     (10.9)* - KEMCO acquisition agreement  incorporated herein as an exhibit by
     reference to the Current Report,  Exhibit 10.9 herein, under the Securities
     Exchange Act of 1934,  filed by Registrant on Form 8-K with the  Securities
     and Exchange Commission on May 26, 1995, SEC File No. 2-6806.

     (10.10)*T - KEMCO - Deral Knight employment  agreement  incorporated herein
     as an exhibit by reference to the Current  Report,  Exhibit  10.10  herein,
     under the Securities  Exchange Act of 1934, filed by Registrant on Form 8-K
     with the Securities  and Exchange  Commission on May 26, 1995, SEC File No.
     2-6806.

     (21) - List of subsidiaries of the Registrant as of October 8, 1997.

     No current  reports on form 8K have been filed during the forth  quarter of
this fiscal year.

----------
*    Previously filed
T    Management Contract


                                       31
<PAGE>

                                   SIGNATURES

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

                                       CONCORD ENERGY INCORPORATED

                                       By:   /s/ Deral Knight
                                          ----------------------------------
                                             DERAL KNIGHT
                                             Chairman of the Board

                                             Dated: October 13, 1997

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

/s/ Scott S Kalish
----------------------------------------
SCOTT S KALISH                                         October 13, 1997
Treasurer (Principal Accounting Officer)

A Majority of the Board of Directors
----------------------------------------

/s/ Deral Knight
----------------------------------------
DERAL KNIGHT                                           October 13, 1997
Director

/s/ Barry Laidlaw
----------------------------------------
BARRY LAIDLAW                                          October 13, 1997
Director

Neal Glass 
----------------------------------------
NEAL GLASS                                             October __, 1997
Director


                                       32
<PAGE>

                                  "EXHIBIT 21"

                              List of Subsidiaries

Subsidiaries of Concord Energy Incorporated

        Name                          Business              % of Ownership
        ----                          --------              --------------

Knight Equipment and           Oil Field Services and
Manufacturing Corp             Equipment Sales                    100%

Concord Energy, Inc.           Oil and Gas Production             100%

Concord Operating, Inc.        Oil and Gas Operations             100%

Integrated Petroleum           Software Sales and
  Systems Corporation          Development                        100%

Subsidiaries of Knight Equipment and Manufacturing Corporation

        Name                          Business              % of Ownership
        ----                          --------              --------------

K & S Engineering, Inc.        Engineering Services               100%


                                       33
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Concord Energy Incorporated

We have audited the accompanying  consolidated  balance sheets of Concord Energy
Incorporated  and  subsidiaries  as of June 30,  1997 and 1996,  and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of Concord  Energy
Incorporated  and  subsidiaries as of June 30, 1997 and 1996, and the results of
their  operations  and their cash  flows for the years then ended in  conformity
with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 15 to
the consolidated financial statements, the Company has suffered recurring losses
and negative cash flows from operations,  has a negative working capital at June
30, 1997 and significant debt maturing in the near future that raise substantial
doubt about its ability to continue as a going  concern.  Management's  plans in
regard  to  these  matters  are also  described  in Note  15.  The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

                                       /s/ Hill, Kotara & Ford, P.C.

San Antonio, Texas
September 26, 1997
Except for Notes 9, 15 and 16
as to which the date is October 8, 1997


                                      F-1
<PAGE>

Concord Energy Incorporated and Subsidiaries

Consolidated Balance Sheets
--------------------------------------------------------------------------------

                                                       June 30,       June 30,
                                                         1997           1996
Assets

Current assets
   Cash and cash equivalents                         $     41,939  $    898,083
   Costs and estimated earnings in excess
     of billings on uncompleted contracts                 460,995       117,095
   Accounts receivable, net of allowance for
     doubtful accounts of $178,643 and $132,930           711,856     1,259,785
   Receivable due from Integrated, net                       --         236,415
   Inventories                                          5,725,842     6,081,973
   Prepaid expenses and other assets                       39,488        20,264
                                                     ------------  ------------

     Total current assets                               6,980,120     8,613,615

Property, plant and equipment, net                      8,038,612     8,522,550
Goodwill, net                                                --       2,594,248
Bond issuance costs, net                                  219,627       334,578
Other assets                                               40,000        50,000
                                                     ------------  ------------

     Total assets                                    $ 15,278,359  $ 20,114,991
                                                     ============  ============

Liabilities and Stockholders' Equity

Current liabilities
   Current portion of notes payble to 
     stockholders                                    $       --    $    298,000
   Current portion of long-term debt                    3,599,108     4,481,223
   Current portion of capital lease obligations             5,566        23,100
   Accounts payable                                     2,139,124     1,332,392
   Accrued expenses                                     1,902,150     1,114,523
   Billings in excess of costs and estimated 
     earnings on uncompleted contracts                     54,758        72,711
   Payable due to Integrated, net                           6,943
   Federal  income taxes payable                           32,547        97,918
                                                     ------------  ------------

     Total current liabilities                          7,740,196     7,419,867

Long term liabilities
  Notes payable                                         2,558,642     2,578,045
  Capital lease obligations                                  --          47,993
                                                     ------------  ------------

     Total long term liabilities                        2,558,642     2,626,038
                                                     ------------  ------------

Commitments and Contingencies

Stockholders' equity
   Preferred Stock, $.01 par value, 1,000  shares
     authorized, 0 shares issued and outstanding             --            --
   Common stock, $.0001 par value, 20,000,000
     shares authorized, 6,045,717 and 5,899,735
    (post-split) shares issued and outstanding                605           590
   Paid-In capital                                     22,812,110    22,514,415
   Accumulated deficit                                (17,352,628)  (11,108,688)
                                                     ------------  ------------
                                                        5,460,087    11,406,317
Common stock subscribed                                      --        (856,665)
Cost of Treasury Stock                                   (480,566)     (480,566)
                                                     ------------  ------------

     Total stockholders' equity                         4,979,521    10,069,086
                                                     ------------  ------------

     Total liabilities and stockholders' equity      $ 15,278,359  $ 20,114,991
                                                     ============  ============

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

                                      F-2
<PAGE>

Concord Energy Incorporated and Subsidiaries

Consolidated Statements of Operations
--------------------------------------------------------------------------------

                                                      Year Ended    Year Ended
                                                       June 30,      June 30,
                                                         1997          1996

Revenue:
  Oil sales                                          $    778,636  $    581,138 
  Gas sales                                               520,175       622,421
                                                     ------------  ------------
                                                     
     Total oil and gas sales                            1,298,811     1,203,559
                                                     
  Contract revenue                                      8,709,511     9,285,939
  Syndication sales                                          --         140,000
  Well operating income                                    38,902        51,416
  Rental income                                           243,271       125,468
  Software Sales                                          192,982        21,827
                                                     ------------  ------------
                                                     
     Total revenue                                     10,483,477    10,828,209
                                                     ------------  ------------
                                                     
Costs and Operating Expenses:                        
  Lease operating                                         702,275       639,271
  Cost of contract revenue                              9,129,166     8,244,390
   Inventory adjustment  to lower                    
     cost or market                                          --       3,043,055
  General and administrative:                        
      Management agreement                                   --       1,392,000
      Other expenses                                    2,816,713     2,548,856
  Write-off of goodwill, net                            2,417,368          --
  Depreciation, depletion and amortization                714,568       623,938
                                                     ------------  ------------
                                                     
      Total costs and operating expenses               15,780,090    16,491,510
                                                     ------------  ------------
                                                     
     Income (Loss) from Operations                     (5,296,613)   (5,663,301)
                                                     ------------  ------------
                                                     
Other income (expense):                               
  Other income                                             31,495        49,584
  Interest expense                                       (978,822)   (1,199,949)
                                                     ------------  ------------
                                                     
     Total other income (expense)                        (947,327)   (1,150,365)
                                                     ------------  ------------
                                                     
     Loss before income taxes                          (6,243,940)   (6,813,666)
                                                     ------------  ------------

          Income tax benefit                                 --           6,373
                                                     ------------  ------------

     Net Loss                                        $ (6,243,940) $ (6,807,293)
                                                     ============  ============ 
                                                     
     Net Loss per share                              $      (1.07) $      (1.97)
                                                     ============  ============ 
                                                 
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-3
<PAGE>

Concord Energy Incorporated and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                              Common Stock                                       
                                      ---------------------------    Paid-in      Accumulated    
                                         Shares         Amount       capital        deficit      
<S>                                   <C>            <C>          <C>            <C>             
Balance at June 30, 1995               15,521,122    $   1,552    $ 14,935,326   $ (4,301,395)   

1 for 5 stock reversion               (12,416,898)      (1,242)          1,242           --      
                                      -----------    ---------    ------------   ------------    
Balance at June 30, 1995
     as restated                        3,104,224          310      14,936,568     (4,301,395)   

Issuance of common stock                2,413,907          242       6,552,885           --      

Issuance upon conversion
     of debt                              381,604           38       1,024,962           --      

Acquisition of treasury stock
     by  increasing payable to
     Integrated                              --           --              --             --      

Receipt of shares in lieu of
     repayment of receivable
     from stockholder                        --           --              --             --      

Net  loss                                    --           --              --       (6,807,293)   
                                      -----------    ---------    ------------   ------------    

Balance at June 30, 1996                5,899,735          590      22,514,415    (11,108,688)   

Collections on subscriptions
     receivable                              --           --              --             --      

Issuance upon conversion
     of debt and other liabilities        145,982           15         297,695           --      

Net  loss                                    --           --              --       (6,243,940)   
                                      -----------    ---------    ------------   ------------    
Balance at June 30, 1997                6,045,717    $     605    $ 22,812,110   $(17,352,628)   
                                      ===========    =========    ============   ============    
<CAPTION>
                                                           Treasury Stock                     
                                     Subsriptions    ---------------------------             
                                      Receivable        Share        Value           Total
<S>                                   <C>            <C>          <C>            <C>             
Balance at June 30, 1995             $       --            --     $       --     $ 10,635,483  
                                                                                               
1 for 5 stock reversion                      --            --             --             --    
                                      -----------    ---------    ------------   ------------    
Balance at June 30, 1995                                                                       
     as restated                             --            --             --       10,635,483  
                                                                                               
Issuance of common stock                 (856,665)         --             --        5,696,462  
                                                                                               
Issuance upon conversion                                                                       
     of debt                                 --            --             --        1,025,000  
                                                                                               
Acquisition of treasury stock                                                                  
     by  increasing payable to                                                                 
     Integrated                              --         124,500       (373,500)      (373,500) 
                                                                                               
Receipt of shares in lieu of                                                                   
     repayment of receivable                                                                   
     from stockholder                        --          17,130       (107,066)      (107,066) 
                                                                                               
Net  loss                                    --            --             --       (6,807,293) 
                                      -----------    ---------    ------------   ------------    
Balance at June 30, 1996                 (856,665)      141,630       (480,566)    10,069,086  
                                                                                               
Collections on subscriptions                                                                   
     receivable                           856,665          --             --          856,665  
                                                                                               
Issuance upon conversion                                                                       
     of debt and other liabilities           --            --             --          297,710  
                                                                                               
Net  loss                                    --            --             --       (6,243,940) 
                                      -----------    ---------    ------------   ------------    
Balance at June 30, 1997             $       --         141,630   $   (480,566)  $  4,979,521  
                                      ===========    =========    ============   ============    
</TABLE>

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

                                      F-4
<PAGE>

Concord Energy Incorporated and Subsidiaries

Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------

                                                     Year Ended     Year Ended
                                                       June 30,      June 30,
                                                         1997          1996

Cash flows from operating activities
   Net Income (loss)                                 $(6,243,940)  $(6,807,293)
   Adjustments to reconcile 
     net income/loss to net cash
     (used in) provided by operating
     activities:
     Depreciation, depletion and 
        amortization                                     829,331       788,176
     Other noncash transactions                        2,583,896     4,068,808
     Decrease (Increase)  in assets:
        Accounts receivable                              547,929      (538,085)
        Costs and estimated earning 
          in excess of billings 
          on uncompleted contracts                      (343,900)      441,766
        Receivable due from Stockholder                     --          (3,447)
        Receivable due from affiliated 
          company                                        236,415        15,937
        Inventories                                      356,131      (558,270)
        Other assets and liabilities                     (19,224)       54,903
     (Decrease)  Increase  in 
        liabilities
        Accounts payable                                 806,732       450,653
        Accrued expenses                                 774,161       328,517
        Federal income tax payable                       (65,371)      (22,180)
        Receivable due from/payable 
          due to Integrated, net                           6,943    (1,504,600)
        Billings in excess of costs 
          and estimated earnings on
          uncompleted contracts                          (17,953)       72,711
                                                     -----------   -----------

         Net cash provided by (used in) 
           operating activities                         (548,850)   (3,212,404)
                                                     -----------   -----------

Cash flows from investing activities
    Purchases of equipment, well workovers 
      and recompletions                                 (118,406)     (314,342)
      Sale of oil and gas interests                         --         468,750
                                                     -----------   -----------

         Net cash (used in) provided by 
           investing activities                         (118,406)      154,408
                                                     -----------   -----------

Cash flows from financing activities
      Net proceeds from note payable                        --       1,696,065
      Net proceeds from issuance of 
        common stock                                     856,665     3,208,602
      Principal payments on notes payable  
        and capital lease obligations                 (1,045,553)   (1,206,376)
                                                     -----------   -----------

        Net cash flows provided by (used in)
           financing activities                         (188,888)    3,698,291
                                                     -----------   -----------

Net increase (decrease) in cash and 
  cash equivalents                                      (856,144)      640,295
                                                     -----------   -----------

Cash and cash equivalents at 
  beginning of period                                    898,083       257,788
                                                     -----------   -----------

Cash and cash equivalents at 
  end of period                                      $    41,939   $   898,083
                                                     ===========   ===========

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


                                      F-5
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.   Organization, Recapitalization, and Operations

Concord Energy  Incorporated  (the  "Company") is an oil and gas exploration and
production  company which also locates,  designs,  refurbishes  and installs gas
plants and gas  processing  equipment for customers in the natural gas industry.
In addition,  the Company also provides rentals of gas plants and gas processing
equipment and provides services such as engineering,  procurement,  dismantling,
reapplication and relocation of complete gas processing facilities. In addition,
the Company has developed unique, proprietary software which is used to collect,
process,  and transmit  data  relative to petroleum  production  and  processing
operations. The Company is headquartered in Jourdanton, Texas with substantially
all of its oil and gas  operations in East Texas and the  Louisiana  Gulf Coast.
The  Company's   wholly-owned   subsidiaries,   Concord  Energy,  Inc.,  Concord
Operating,  Inc.  ("COI"),  and Knight Equipment and  Manufacturing  Corporation
("KEMCO") are located in Jourdanton,  Texas,  and Integrated  Petroleum  Systems
Corporation ("IPS") is located in Denver, Colorado.

Concord  Energy,  Inc.,  (the  Company's  name  prior  to  the  recapitalization
described  below) was formed in June 1991 for the purpose of  combining  the net
assets and operations of 166  previously  independent  oil and gas  partnerships
(the  "Partnerships")  and the net  assets  and  operations  of COI  through  an
exchange of Partnership  and COI net assets for common stock in Concord  Energy,
Inc. The exchange was accounted for at historical cost. Certain limited partners
in the Partnerships which did not participate in the exchange were allocated net
working  interests  in  the  properties  previously  held  by  their  respective
Partnerships.

Prior to the exchange,  the Partnerships were managed by Integrated Energy, Inc.
("Integrated") and Tucker Financial,  Inc. ("Tucker") which were in the business
of establishing and managing oil and gas limited partnerships. Subsequent to the
exchange  and through  June 30, 1996,  Integrated  continued to provide  certain
management and  administrative  services to the Company pursuant to a management
agreement between the Company and Integrated, which terminated on June 30, 1996.
COI manages the production of Company-owned oil and gas properties.

On May 19, 1993, Monoclonal International Technology, Inc. ("MITI") acquired all
of the  outstanding  common  stock  of  Concord  Energy,  Inc..  For  accounting
purposes,  the acquisition was treated as a  recapitalization  of Concord Energy
Inc.,  with MITI as the acquirer  (i.e., a reverse  acquisition).  In connection
with  the   acquisition,   MITI  later  changed  its  name  to  Concord   Energy
Incorporated,  approved a 1 for 230 reverse split of its  127,784,100  shares of
common  stock and issued  10,556,077  shares of its common stock in exchange for
all the  outstanding  common  stock  of  Concord  Energy,  Inc.  


                                      F-6
<PAGE>

Concord  Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

In  December  1995,  the  company  effectuated  a 1 for 5  reverse  split of its
outstanding  stock.  Historical  stockholders'  equity  and net loss  per  share
information  has been  retroactively  restated for all periods  presented in the
accompanying consolidated financial statements to reflect this reverse split.

2.   Summary of Significant Accounting Policies

Principles of consolidation

The  consolidated  financial  statements  are  comprised  of the Company and its
wholly-owned subsidiaries, Concord Energy, Inc., Concord Operating, Inc., Knight
Equipment & Manufacturing  Corporation and its  wholly-owned  subsidiary,  K & S
Engineering, Inc. and Integrated Petroleum Systems. All significant intercompany
accounts and transactions are eliminated in consolidation.

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.

Cash equivalents

Cash and cash  equivalents  include all cash and highly liquid  investments with
original maturities of three months or less.

Inventories

Inventories  are  stated  at the  lower of cost or  market  using  the  first-in
first-out method.  Inventory  consists  principally of gas plants,  compressors,
separators,  supplies  and repair parts  utilized by the Company in  conjunction
with its design and refurbishing of gas plants and gas processing equipment.

Property, plant and equipment

Property,  plant and equipment is stated at cost less accumulated  depreciation,
depletion and amortization.


                                      F-7
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

The Company  accounts for its oil and gas properties  under the full cost method
of  accounting.  Under the full cost method,  all costs  incurred in  acquiring,
exploring and developing  oil and gas reserves are  capitalized to the full cost
pool.  When oil and gas properties are sold,  retired or otherwise  disposed of,
any applicable proceeds are credited to the full cost pool, with no gain or loss
recognized,  unless the sale would have a significant impact on the relationship
between  capitalized  costs and  proved  reserves.  Since all of its oil and gas
operations are within the United States,  the Company  utilizes one cost pool to
account for its oil and gas properties. Depreciation, depletion and amortization
of oil and gas properties is computed based on the unit-of-production method for
the cost  pool,  based on  estimates  of proved  reserves  as  determined  by an
independent reserve engineer.

Other  property,  plant and  equipment  is  recorded  at cost  less  accumulated
depreciation. Repairs and maintenance costs which do not extend the useful lives
of the assets are  expenses as  incurred.  Depreciation  is provided  for on the
straight-line  method over the estimated  useful lives of the assets which range
from three to seven  years,  except for  buildings  and  improvements  which are
depreciated over estimated useful lives ranging from 20 to 30 years.

Goodwill

Goodwill  recorded as a result of the  acquisition  of IPS was being  amortized,
straight-line  over  it's  originally  estimated  useful  life  of 15  years  in
accordance  with  Generally  Accepted  Accounting  Principles.  At June 30, 1997
management  determined  that the  remaining  unamortized  goodwill had no future
benefit  and the  balance  was  written-off  as a  charge  against  income  from
operations.

Other Assets

Other  assests of the  Company,  which  include the  drawings and blue prints of
amine units  manufactured  and serviced by Perry Gas Processors,  Inc., is being
amortized,  straight-line  over  it's  estimated  useful  life  of  5  years  in
accordance with Generally Accepted Accounting Principles.

Leases

Leases  which meet  certain  criteria  evidencing  substantive  ownership by the
Company are capitalized  and the related capital lease  obligations are included
in  liabilities.  Amortization  and interest  are charges to expense,  with rent
payments  being treated as payments of the capital lease  obligation.  All other
leases are accounted for as operating  leases,  with rent payments being charged
to expense as incurred.


                                      F-8
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

Deferred financing and bond issuance costs

Costs  Incurred  in  conjunction  with  obtaining  financing   (including  costs
associated  with the issuance of bonds) are  amortized  using the  straight-line
method over the term of the related  financing  agreement or bond. Bond issuance
costs at June 30, 1997 and 1996 are stated net of  accumulated  amortization  of
$351,134 and $186,183, respectively.

Revenue recognition

Oil and gas sales

Revenues from oil and gas sales are accrued as earned based on production volume
statements and joint interest billings obtained from the well operator.

Contract revenue

Revenues from  construction  contracts are recognized based on the percentage of
completion method,  measured on the basis of costs incurred to date to estimated
total costs for each contract.  Contract  costs include all direct  material and
labor costs, including those indirect labor and repair costs related to contract
performance. Selling, general and administrative costs are charged to expense as
incurred.  Provisions for estimated losses on uncompleted  contracts are made in
the period in which such losses are determined.  Changes in job performance, job
conditions, estimated profitability and final contract settlements are monitored
on a periodic  basis in order to  determine  if revisions to the income and cost
estimates are necessary as a result of such changes. Revisions to the income and
cost estimates, if any, are recognized in the period in which such revisions are
determined  to be  necessary.  Costs  and  earnings  in excess  of  billings  on
uncompleted  contracts represent an asset based on revenues recognized in excess
of amounts  billed to  customers.  Billings  in excess of costs and  earnings on
uncompleted  contracts is recorded as a liability  and  represent  contracts for
which  billings  to date  exceed  cumulative  revenues  recognized  based on the
percentage of completion method.

Syndication sales

Under an agreement  between the Company and  Integrated  (see Note 13) which was
terminated on June 30, 1996, the Company was entitled to receive a percentage of
the proceeds of all sales made by Integrated of syndicated retail  partnerships.
This revenue was recognized when earned.

Well operating income

The  Company,  through its wholly  owned  subsidiary  COI,  manages and operates
wells. The revenue generated from these services is recognized when earned.


                                      F-9
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

Rental revenue

The Company leases  certain gas plants and  separators to customers  under short
term leases which are  accounted for as operating  leases.  At June 30, 1997 and
1996, there are no significant future minimum rentals to be received under these
noncancelable operating leases.

Software sales

The  Company,  through its wholly  owned  subsidiary  IPS,  sells,  installs and
maintains its proprietary software. The revenue generated from these services is
recognized when earned.

Income taxes

The Company  accounts  for income  taxes under the asset and  liability  method.
Under the asset and liability  method,  deferred tax assets and  liabilities are
recognized  based upon  differences  arising from the carrying of amounts of the
Company's assets and liabilities for tax and financial  reporting purposes using
enacted tax rates in effect for the year in which the  differences  are expected
to reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is  recognized  in income in the  period  when the  change in tax rates is
enacted.

Net loss per share

Net loss per share of common stock is based upon the weighted  average number of
shares of common stock  outstanding  (5,840,015  in fiscal 1997 and 3,454,627 in
fiscal  1996).  The  Company's  common  stock  equivalents,   which  consist  of
outstanding  warrants to purchase the Company's common stock, are not considered
in the net loss per share calculation since their effect is anti-dilutive.

3.   Business Combinations

KEMCO - On May 7, 1995, the Company  acquired all of the issued and  outstanding
shares of the common  stock of KEMCO for  $7,000,000  in a business  combination
accounted  for under the purchase  method of  accounting.  The  acquisition  was
financed by the  issuance of 400,000  shares of the  Company's  common stock and
payment of  $4,500,000  in cash.  Financing for the cash portion of the purchase
price was  obtained  primarily  through  the net  proceeds  from debt  financing
totaling approximately  $3,700,000 and the net proceeds from the sale of 260,000
shares of the Company's common stock totaling approximately $800,000.


                                      F-10
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

IPS - On March 1, 1996 the Company  acquired  all of the issued and  outstanding
shares of the common  stock of IPS for 600,000  shares of the  Company's  common
stock, valued at $1,800,000,  in a business combination  accounted for under the
purchase  method of  accounting.  The results of operations of IPS subsequent to
March 1, 1996, are included in these consolidated financial statements.

At the time of purchase,  IPS'  liabilities  exceeded the value of its assets by
$853,208,  which when added to the  $1,800,000  value  assigned to the shares of
common  stock  issued  resulted  in  goodwill  of  $2,653,208   being  recorded.
Amortization of goodwill of $235,840 and $58,960 is recorded as of June 30, 1997
and 1996, respectively.

Based on the results of operations for IPS since its acquisition, management has
determined that the  unamortized  goodwill at June 30, 1997 of $2,417,368 has no
future  benefit.  Accordingly,  the  balance  of the  unamortized  goodwill  was
written-off as a charge against income from operations.

4.   Accounts Receivable and Concentration of Credit Risk

Accounts receivable represents amounts due from customers who are in the oil and
gas  business  throughout  North  and  South  America.  Fluctuations  in  market
conditions impact the credit worthiness of these customers.  The Company reviews
the financial  condition of purchasers and joint interest  participants prior to
signing sales or joint  interest  agreements.  Payment terms are on a short-term
basis and in accordance with industry standards.

The  Company  maintains  account  balances  at several  financial  institutions.
Accounts  are  insured  by  the  Federal  Deposit  Insurance  Corporation  up to
$100,000.  In the normal  course of business,  the Company may maintain  account
balances,  which are generally  transient in nature,  in excess of the federally
insured limits.


                                      F-11
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

5.   Costs and Estimated Earnings on Uncompleted Contracts

Information on contracts in progress at June 30 is as follows:

                                                     1997              1996

Costs incurred on uncompleted contracts           $5,342,048        $1,637,171
Estimated earnings (loss) thereon                   (924,403)          338,164
                                                  ----------        ----------
                                                   4,417,645         1,975,335

Less:   Billings on uncompleted contracts          4,011,408         1,930,951
                                                  ----------        ----------
                                                  $  406,237        $   44,384
                                                  ==========        ==========

Included in the accompanying balance sheets 
  under the following captions:

    Costs and estimated earning in excess of
        billings on uncompleted contracts         $  460,995        $  117,095

    Billings in excess of costs and estimated
        earnings on uncompleted contracts            (54,758)          (72,711)
                                                  ----------        ----------

                                                  $  406,237        $   44,384
                                                  ==========        ==========

6.   Inventory - Lower of Cost or Market Adjustment

Based on a comparison  of the estimated  potential  sales prices to the recorded
carrying  costs of the  inventory of plants  acquired in the KEMCO  acquisition,
management has determined that the recorded cost of the inventory of such plants
was in excess of the market  value of the plants  which would allow a reasonable
profit  margin on the sale of the plants.  The recorded cost of the inventory of
such plants had been determined  based on an appraisal  obtained and relied upon
to establish the value of the plants at the time KEMCO was acquired.  Management
subsequently  determined  that  the  values  assigned  to the  plants  were  the
appraiser's  estimated  retail sales price of the plants rather than a wholesale
market value that would allow in a reasonable  profit margin on the sales of the
plants.

To adjust the carrying cost of the plants to their  estimated  wholesale  market
value,  an adjustment  of  $3,043,055  was charged to expense for the year ended
June 30, 1996.


                                      F-12
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

7.   Property, Plant and Equipment, Net

Significant  components  comprising  property,  plant and  equipment  at June 30
include the following:

                                                    1997            1996
                                             
Oil & gas properties:                        
      Leasehold costs                           $ 7,495,916     $  7,495,916
      Lease well & equipment                      1,845,508        1,836,882
      Intangibles                                 1,904,925        1,904,925
      Property, plant & equipment                   484,181          484,181
      Other                                          80,632           80,632
                                                -----------     ------------
                                                 11,811,162       11,802,536
                                                -----------     ------------
                                             
Other property, plant & equipment            
      Land                                          185,413          185,413
      Buildings & improvements                      361,525          359,535
      Machinery & equipment                         329,271          244,776
      Vehicles                                      132,769          237,896
      Furniture, fixtures & software                191,592          187,646
                                                -----------     ------------
                                                  1,200,570        1,215,266
                                                -----------     ------------
                                             
Accumulated depreciation,                    
depletion and amortization                       (4,973,120)      (4,495,252)
                                                -----------     ------------
                                             
Property, plant and equipment, net              $ 8,038,612     $  8,522,550
                                                ===========     ============

Depreciation,  depletion  and  amortization  of  oil  and  gas  properties,  and
depreciation of other  property,  plant and equipment for the periods ended June
30 is as follows:

                                                     1997             1996

Oil and gas properties                             $375,068          $431,914
Other property, plant and equipment                 152,620           133,064
                                                   --------          --------
                                                   $527,688          $564,978
                                                   ========          ========
                                        

                                      F-13
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

At June 30, 1996 vehicles recorded under capital leases totaled $105,127 and the
related  accumulated  amortization  through  June  30,  1997 and 1996 was $0 and
$26,282.  Amortization  expense  related to these  vehicles  totaled  $8,050 and
$21,026 in 1997 and 1996, respectively.  These leases were terminated during the
year ended June 30, 1997.

8.   Debt and Capital Lease Obligations

Debt

Notes payable and long-term debt includes the following at June 30:

                                                        1997          1996

Bond payable, dated May 1995, with
interest at 10% per annum, requiring
semi-annual interest payments through
maturity on November 1, 1997. The bond
is secured by the assets of KEMCO. As
incentive to the note holders for
extending the original maturity date of
the note from May 1, 1997, interest was
increased by 4% per annum from May 1,
1997 through maturity.                              $2,920,000     $2,920,000

Secured notes payable, dated December
1994, with a face value of $2,500,000
issued at $750,000 discount. The notes
bear interest at 9% per annum with an
effective interest rate of 15% per
annum. Semi-annual interest payments of
$112,500 are required through maturity
in January 2010. The notes are secured
by certain gas plants and equipment and
a guarantee of the Company.                          1,794,101      1,774,601

Secured notes payable, dated September
1994, with a face value of $1,400,000
issued at a $699,500 discount. The notes
bear interest at 6% per annum payable
semi-annually with an effective interest
rate of 14.02% per annum. Annual
principal payments of $140,000 are
required beginning in August 2005
through maturity in August 2009. The
notes are secured by certain oil and gas
property owned by the Company.                         742,116        723,412


                                      F-14
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                        1997          1996

Acquisition bridge financing evidenced
by notes payable which bear interest at
12% per annum. The interest and related
principal are due at various maturity
dates through November 25, 1996. The
notes were secured by a personal
guarantee from Jerry Swon, former
Chairman of the Company's board of
directors, who was also a shareholder of
the Company.                                              --          180,000

12% convertible notes, dated October
1994, convertible at maturity into
shares of the Company's common stock at
$5.00 per share. During 1995, $125,000
of these notes matured and were
converted into 25,000 shares of the
Company's common stock. Upon the
conversion, an additional 3,000 shares
of the Company's common stock was issued
as consideration for accrued interest
expense through the date of conversion
totaling $15,000. The remainder of the
notes and accrued interest totaling
$20,542 were converted into 80,656
shares of common stock in March 1997.
The notes were secured by certain oil
and gas property owned by the Company.                    --          125,000

Secured note payable dated January 1996,
with interest at 9% per annum. Interest
and principal of $1,271 are due monthly
through January 2000. The note is
secured with certain equipment owned by
the Company.                                            35,033         46,559

Unsecured non-interest bearing note
payable dated March 1996 payable in
monthly installments of $43,599 through
maturity on December 15, 1996.
Subsequent to its maturity the note
bears interest at 10% per annum.                       174,000        304,500

Secured note payable dated February
1996, with interest at 12% per annum
from inception through February 1, 1997.
From February 2, 1997 through August 31,
1997, interest charged increased to 18%
per annum. Interest from September 1,
1997 to maturity is at 12% per annum
Principal and interest are due at
maturity on February 1, 1998. The note
is secured by a certain gas plant owned
by the Company.                                        350,000        600,000


                                      F-15
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                        1997          1996

6% convertible note, dated April 1996,
convertible at maturity into shares of
the Company's common stock. The note and
related accrued interest were converted
into 22,783 shares of the common stock
in July 1996.                                             --           45,000

Various unsecured notes payable, bearing
interest of 4.5% to 12% per annum. The
interest and principal are due at
various maturity dates through May 1997.               142,500        340,196
                                                    ----------     ----------

Total debt outstanding                               6,157,750      7,059,268

Less: current portion                                3,599,108      4,481,223
                                                    ----------     ----------

Long-term debt                                      $2,558,642     $2,578,045
                                                    ==========     ==========

As of June 30, 1997,  maturities and scheduled  payments for the next five years
and thereafter are: $3,599,108 in 1998, $13,791 in 1999, $8,634 in 2000, and the
remainder after year 2001.

Capital Lease Obligations

In conjunction  with its  acquisition  of KEMCO,  the Company  acquired  certain
leased  equipment  which  is  accounted  for as  capital  leases.  Prior  to the
acquisition,  the leases were prepaid at inception.  Capital  lease  obligations
recorded in the accompanying  consolidated  financial  statements  represent the
present value of the lease purchase  options which are exercisable at the end of
the lease term in December  1997,  discounted at an interest rate of 16% and the
future payments due on a lease of a yard facility  discounted at 12%. The leases
for two vehicles were  terminated  during 1997 without  exercising the option to
purchase the vehicles.

Capital lease obligations as of June 30 consist of the following:

                                                    1997           1996

Total future minimum lease payments              $   6,000       $ 85,106
Less:  amounts representing interest                   434         14,013
                                                 ---------       --------

Present value of minimum lease payments          $   5,566       $ 71,093
                                                 =========       ========

The obligations under capital lease mature as follows: $5,566 in fiscal 1998.


                                      F-16
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

9.   Commitments and Contingencies

Minimum Rental Commitments

The Company has several noncancelable  operating leases,  primarily for yard and
office equipment,  that expire over the next five years.  These leases generally
are for periods  ranging from three to five years and require the Company to pay
all executory  costs such as  maintenance  and  insurance.  Rent expense for the
years ended June 30, 1997 and 1996 was $123,660 and $62,567, respectively.

Future minimum lease payments under  noncancelable  operating  leases as of June
30, 1997 are as follows:

                  Fiscal Year
                    1998                        $ 112,542
                    1999                           66,287
                    2000                           27,571
                    2001                            8,475
                    2002                            3,600
                                                ---------

         Total minimum lease payments           $ 218,475
                                                =========

Legal Matters

As of June 30,  1997,  the Company was  involved in various  litigation  matters
which it  considers to be in the normal  course of  business.  In the opinion of
management,  based upon consultation with legal counsel,  the claims either lack
merit,  or the potential  liability,  if any, upon the ultimate  disposition  of
these  lawsuits  will not have a  material  effect  on the  Company's  financial
position or results of operations.

The Company, together with Integrated, Jerry Swon and Bruce Deichl, was named as
a  defendant  in a  lawsuit  commenced  by  three  investors  in two oil and gas
partnerships  sponsored by Integrated.  Management has determined that the costs
of defending this suit combined with the potential cost if the plaintiff's  were
successful,  dictated  that a settlement  be  negotiated.  An agreement has been
reached  to settle  this  cause of action for  350,000  shares of the  Company's
common  stock and a warrant to  purchase  an  additional  350,000  shares of the
Company's  common  stock at $1.00 per share.  At June 30, 1997 the Company has a
reserve recorded in the amount of $175,000 for the cost of this settlement.


                                      F-17
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

Subsequent to fiscal year 1997,  the Company filed suit against Mark T. Shipley,
Richard D. Barden, June Barden, Jerry Swon and Fallon and Fallon. The litigation
relates to the Company's  acquisition of IPS. The petition  alleges that members
of the Company's former  management,  former IPS management and other interested
persons  committed  fraudulent  acts and/or  omissions  in  connection  with the
acquisition.  The specific damages sought are monetary damages in an unspecified
amount, as well as relief from certian related debt, wages and agreements.  Some
of the defendants  have filed suit against the Company  seeking payment of debts
related to IPS.

During  the year  ended  June 30,  1996 the  Company  agreed to a project  audit
settlement  related to a claim on a  contract  performed  by KEMCO  prior to its
acquisition by the Company. The $521,500 cost of the project audit settlement is
recorded as a component of the cost of revenue for the year ended June 30, 1996,

10.  Outstanding Warrants

Warrants  outstanding  as of June 30,  1997  entitling  the  holders to purchase
shares of the Company's common stock are summarized as follows:

Date of Issuance   Number of Shares   Exercise Price/Share    Expiration Date

November 1994            1,500               $7.50             November 1997
June 1995               50,000                2.90             February 1998
June 1995              100,000                7.50               July 1997
November 1995           20,000                5.00             November 1998
February 1996           25,000                4.00              January 1999
May 1996                20,000                3.75               June 1998
May 1996               100,000                3.75               June 1999
May 1996                15,000                4.00              January 1998
May 1996               100,000                4.50               March 2001
May 1996               200,000               2.625               July 1999

The Company has sufficient shares authorized but not issued for use in the event
these warrants are exercised.


                                      F-18
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements

11.  Supplementary Cash Flow Information

Supplementary  cash  flow  information  for  fiscal  years  ended  June 30 is as
follows:

                                                            1997       1996

Interest paid                                            $635,972   $  697,031
Taxes paid                                                 55,050       39,482
Noncash investing and financing activities:
  Issuance of common stock:
      to acquire business and goodwill                       --      2,653,208
      to convert notes payable                            257,696    1,025,000
      in exchange for services and payment
         of liabilities                                    40,014      560,360
      for subscription receivable                            --        856,665
      to acquire property, plant and equipment               --        127,500
  Land acquired by capital lease                             --         25,500
  Treasury stock acquired:
    by incurring payable to Integrated                       --        373,500
    in lieu of collection of stockholder receivable          --        107,666

Other non cash  transactions  for the fiscal  years ended June 30, 1997 and 1996
are as follows:

                                                           1997        1996

Lower of cost or market adjustment to inventory        $     --     $3,043,055
Write-off  of goodwill                                  2,417,368         --
Expenses paid by issuance of common stock                  53,480      560,360
Expenses paid by issuance of debt                            --        421,500
Amortization on bond and lease discounts                   38,204       42,008
Loss on sale and retirement of equipment                   74,844        1,885
                                                       ----------   ----------

         Total                                         $2,583,896   $4,068,808
                                                       ==========   ==========

12.  Income Taxes

For the year ended June 30, 1997,  there is no net income tax benefit or expense
recorded  by the  Company.  For the year  ended  June 30,  1996,  the income tax
benefit of $6,373 results from the adjustment of federal income taxes payable to
the amount that was due.


                                      F-19
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

The provision (benefit) for income taxes differs from the statutory federal rate
for the fiscal years ended June 30 as follows:

                                                               1997     1996

Federal statutory rate                                        (34.0%)  (34.0%)
Valuation allowance of deferred income tax asset               34.0     34.0
Other                                                           0.0      0.0
                                                              -----    -----  
Effective tax rate                                              0.0%     0.0%

The  components  of the  net  deferred  income  tax  asset  as of June 30 are as
follows:

                                                         1997          1996
Temporary differences:
   Depreciation, depletion,  amortization and
     abandonments of oil and gas properties         $(1,858,203)   $  (976,118)
  Book vs. tax treatment of acquisition of 
     subsidiaries                                     1,807,774      1,015,928
  Other                                                 202,240         57,815
                                                    -----------    ----------- 

         Total                                          151,811         97,625

  Tax credit carryfoward                                 55,017         55,017
  Operating loss carryfoward                          6,334,915      5,097,314
                                                    -----------    ----------- 

  Deferred income tax asset                           6,541,743      5,249,956

  Valuation allowance                                (6,541,743)    (5,249,956)
                                                    -----------    ----------- 

 Deferred income tax asset, net                     $      --      $      --
                                                    ===========    =========== 

The significant  items included in the company's  noncurrent  deferred tax asset
result  from  differences  between  the rates  used in  computing  depreciation,
depletion  and  amortization  of  intangible  drilling  costs  for  book and tax
purposes,  the different  accounting treatment of abandoned oil & gas properties
for  book  and tax  purposes,  and the  different  accounting  treatment  of the
acquisitions of KEMCO and IPS for book and tax purposes. The Company's valuation
allowance increased $1,291,787 in fiscal 1997 and $2,736,344 in fiscal 1996.


                                      F-20
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

As of June 30,  1997,  the  Company had a net  operating  loss  carryforward  of
approximately   $18,632,000   for  regular  tax   purposes.   Of  these  losses,
approximately  $4,772,000  were incurred by Concord Energy,  Inc.,  prior to its
acquisition  of MITI,  and  $1,114,000  (and the tax  credit  carryfoward)  were
incurred by IPS prior to its acquisition by the Company,  and will be subject to
the separate return  limitation year rules of the Internal  Revenue Code.  These
losses  will  expire,  if not  utilized,  in fiscal  years  ending June 30, 2008
through 2013.

13.  Transactions with Related Parties

Related Party Ownership Interests

The former chairman of the Company's board of directors,  personally and through
Integrated and Tucker,  which are companies that he owns, owns or controls 2.30%
of the  Company's  common  stock  as of June  30,  1997.  Additionally,  certain
officers and directors of the Company, together with its present chairman of the
board own or control 6.07% of the Company's common stock as of June 30, 1997.

Receivables from Related Parties/Affiliated Company

Integrated  and the Company  previously had an agreement by which the associated
receivables  and payables  were  permitted to be netted.  At June 30, 1997,  the
Company has a net payable due to  Integrated  of $6,943.  At June 30, 1996,  the
Company had a net receivable due from Integrated of $236,415.

As part  of its  ongoing  operations,  KEMCO  conducts  business  with  Atascosa
Electric Services ("AES"), an entity which is owned and controlled by the family
of Deral  Knight,  CEO,  who is also  chairman of the board of  directors  and a
stockholder  of the  Company.  For the year ended June 30, 1997 and 1996,  KEMCO
subcontracted $277,266 and $283,400, respectively, in electrical work to AES and
at June 30, 1997 and 1996 owed AES $39,587 and $37,040,  respectively,  which is
included in accounts payable.

At June 30, 1997 and 1996,  respectively,  there was $35,684 and $9,073  payable
due to Deral  Knight.  These  amounts  represent  unreimbursed  travel and other
business  expenses incurred in the normal course of business and include $13,193
and $9,073 of accrued interest payable at June 30, 1997 and 1996, respectively.

Under the  provisions  of the  agreement  whereby  the  Company  acquired  Deral
Knight's  stock in KEMCO,  Deral  Knight  has  agreed to return to the  Company,
Concord  Energy  Incorporated  common  stock  valued at $6.25 per  shares to the
extent  that  Deral  Knight  owed  money  to  the  Company  at  June  30,  1995.
Accordingly, in liquidation of the 


                                      F-21
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

receivable balance, 17,130 shares of Company common stock issued to Deral Knight
as part of the  purchase  price of his KEMCO stock are  reflected as having been
returned to the Company and are recorded as treasury  stock at June 30, 1997 and
1996.

Other Payables to Related Parties

At June 30, 1997 and 1996, $267,750 and $270,227,  respectively, is reflected as
owed to Richard D. Barden, the former president of IPS, and his wife June Barden
(see Note 9). The balance generally consists of accrued compensation and expense
reimbursements  due  to  them  and  is  included  in  accrued  expenses  in  the
accompanying balance sheet.

Notes Payable to Stockholders

Notes Payable to  stockholders  bear  interest  rates ranging from 6% to 12% per
annum which are  generally  payable at maturity.  Interest  expense  incurred on
these notes,  of which $250,000 was payable to Deral Knight,  during fiscal 1997
and 1996 totals $4,120 and $26,000,  respectively.  The notes matured at various
dates through August 1996.

Additionally,  the $142,500  recorded as various unsecured notes at Note 8 as of
June 30, 1997 and $230,000 of the $340,196  recorded as various  unsecured notes
at June 30,  1996  represent  notes  payable to former  stockholders  of IPS who
became  stockholders  of the Company  when the Company  acquired  IPS.  Interest
expense on these stockholder notes for fiscal 1997 totals $25,685 and was $6,775
for the period from March 1, 1996 through  June 30,  1996.  At June 30, 1997 and
1996, $13,007 and $14,028, respectively, of interest is accrued on these notes.

 In August 1996 various  notes which  totaled  $87,696 were  converted to 14,616
shares of the Company's common stock. Upon conversion,  an additional 560 shares
of the Company's common stock was issued as  consideration  for accrued interest
expense  through  the date of the  conversion  totaling  $3,362.  This stock was
converted  under  agreements  that  require  the  Company to pay the  difference
between  the  price  the of the  Company's  stock on July 1,  1997 and $6.00 per
share.  The value of the  Company's  common stock at the time of  conversion  of
$3.00 per share or $45,528 was recorded as paid in capital,  and $3.00 per share
or  $45,528  as an accrued  liability  in the  accompanying  balance  sheet.  An
additional  accrued  liability  of $22,764  is  recorded  as an expense  for the
difference in the price of the Company's  common stock at the time of conversion
of $3.00 per share  and the  price at July 1,  1997 of $1.50 per  share,  in the
accompanying  statement of operations  for fiscal 1997. The total amount of this
accrued   liability  of  $68,292,   is  included  in  accrued  expenses  in  the
accompanying balance sheet. 


                                      F-22
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

Joint Venture Agreement with Integrated

In December 1994,  KEMCO (prior to its acquisition by the Company)  entered into
an agreement with Integrated (the "Joint Venture Agreement") in which Integrated
agreed to  finance  the  purchase  of  certain  gas  plants  and gas  processing
equipment which was sold to KEMCO, in exchange for 50% of the profit realized by
KEMCO on the sale of the inventory.  During the year ended June 30, 1996,  KEMCO
acquired the remaining  inventory from the joint venture.  The resulting $50,000
profit paid to  Integrated  is  recorded  as a cost of  contract  revenue in the
statement of operations for fiscal 1996.

Acquisition of IPS

In March 1996,  the  Company  acquired  IPS.  Included  amongst the  individuals
acquiring  Company  shares,  in connection  with the acquisition of IPS, are ten
individuals  who received 45% of the Concord stock issued as  consideration  for
IPS.  Of these  individuals,  eight have made  investments  in the past in other
ventures in which Mr. Swon, Tucker, Integrated and/or KEMCO had an interest, and
eight of which had owned stock in the Company.  Included with the acquisition of
IPS was a $300,000 liability from IPS to Tucker,  for funds previously  advanced
to IPS from  Tucker.  This  $300,000  was applied to, and is included in the net
receivable balance due from Integrated to the Company at June 30, 1996 (see note
9).

Management Agreement

The Company  and  Integrated  had entered  into an  agreement  (the  "Management
Agreement")   that   required   Integrated   to  provide   certain   management,
administrative and accounting  services to the Company and certain  subsidiaries
for  $116,000  per month,  which  agreement  terminated  on June 30,  1996.  The
Management  Agreement had been provided for under the terms of the consolidation
of  Partnerships,  the assets of which were exchanged for Concord  Energy,  Inc.
stock (see Note 1 above).  The  services  provided by  Integrated  included  the
receipt of cash for oil and gas sales and the payment of  operating  and capital
expenditures on behalf of the Company.

In accordance with the provisions of the Management  Agreement,  the Company was
also entitled to a percentage of all syndicated  retail  partnership gross sales
made by Integrated.  In the fiscal year ended June 30, 1996 the Company recorded
$140,000 of syndication income from Integrated.

Employment Agreements

On November 1, 1991 IPS entered  into an  employment  agreement  with its former
president,  Richard D.  Barden.  The  agreement  as  modified on October 4, 1994
provides  for him to receive an annual  base  salary of  $96,200  per year.  The
agreement  also  provides  for certain  fringe  benefits and bonuses and expires
December 31, 2000. The agreement  terminated  upon the resignation of Mr. Barden
in July 1997. 


                                      F-23
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

On November 9, 1994 KEMCO entered into an employment  agreement  with its former
president, Deral Knight. The agreement provides for him to receive a base salary
of $125,000 per annum plus a bonus  consisting of ten percent of KEMCO's pre-tax
net profits from  $1,500,000  to $2,000,000  and fifteen  percent of pre-tax net
profits which exceed $2,000,000.  The agreement also provides for certain fringe
benefits and expires May 7, 2000.

Royalty Agreement

In March,  1992 IPS entered into a royalty  agreement with its former president,
Richard D. Barden, for any related oil and gas industry  applications  developed
from the original idea of  developing a set of  proprietary  software  programs.
Royalties  under this  agreement  are  calculated  as  follows:  1% of the first
$1,500,000 of gross revenue, and 5% of gross revenue thereafter. Royalty expense
under the terms of this  agreement  were  $2,063 and $1,137 for the years  ended
June 30, 1997 and 1996, respectively. The agreement expires December 31, 2015.

Other Related Party Transactions

In  March  1996 the  Company  finalized  a sale of gas  processing  and  related
equipment to Integrated for $550,000.  The Company's profit on the sale of these
items was  approximately  $250,000.  The plant  was  leased to a third  party by
KEMCO,  which billed and collected the rentals and remitted them to  Integrated.
On November  22, 1996 the Company  repurchased  from  Integrated  the plants and
related  equipment for $361,415.  The purchase  price was netted against the net
receivable due from  Integrated at June 30, 1996 of $236,415 which resulted in a
net payment to Integrated of $125,000.

In June 1996 the Company  accepted  124,500 shares of the Company's common stock
from  Integrated,  at a value  of $3.00  per  share  as a  reduction  of the net
receivable  balance  due from  Integrated  as of June 30,  1996.  This  stock is
included in the accompanying  consolidated financial statement as Treasury stock
in stockholders' equity.

In June 1996, in conjunction  with the  termination of the management  agreement
between the Company and Integrated,  the Company recognized $150,000 of expenses
from Integrated.  These expenses  represent costs incurred by Integrated between
March 1994 and June 30, 1996,  outside of the scope of the  management  contract
which had not been previously charged to the Company.  These costs were included
in the accompanying consolidated financial statement within other expense in the
statement of operations  for fiscal 1996.  Through  October 31, 1996 the Company
paid Integrated $32,000 for financial services.


                                      F-24
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

On November 22, 1996 Jerry Swon resigned as chairman and member of the Company's
board of directors. In conjunction with his resignation,  the board of directors
approved a severance  payment of six months of his then current salary  totaling
$75,000.

On December 5, 1996 KEMCO entered into a lease agreement with Deral Knight, CEO,
and Chairman of the board of directors  and a  stockholder  of the Company.  The
lease is for 2.42 acres of land located  adjacent to property  which KEMCO owns,
and includes a 3,200 square ft. shop building and office  trailer.  The lease is
for a term of five years at a cost of $975 per month.

14.  Supplemental Oil and Gas Information

The  following  tables set forth  information  about the  Company's  oil and gas
producing  activities.  All of the  Company's  activities  are within the United
States.

a) Oil and Gas Reserves  (Unaudited) - The following  table of estimated  proved
developed  and  undeveloped  reserves  of oil and gas has been  prepared  by the
Company utilizing  estimates of the year-end reserve  quantities  provided by an
independent  petroleum  consultant.  Reserve estimates for producing oil and gas
properties and for new discoveries are inherently  imprecise and are expected to
change as additional performance data becomes available.

Proved developed and proved undeveloped reserves:

                                        Oil             Gas            Total
                                       (bbls)          (Mcf)         (EQB) (1)

Balance at June 30, 1995             1,748,260       2,369,230       2,143,131 
Revisions of previous estimates        175,439        (258,528)        132,351
Extensions and discoveries                --              --              --
Production                             (32,815)       (302,583)        (83,246)
Sale of minerals in place              (50,050)       (191,129)        (81,904)
                                     ---------         -------       ---------
                                                                   
Balance at June 30, 1996             1,840,834       1,616,990       2,110,332
Revisions of previous estimates       (141,322)       (611,502)       (243,239)
Extensions and discoveries                --              --              --
Production                             (37,067)       (215,165)        (72,928)
Sale of minerals in place                 --              --       
                                     ---------         -------       ---------
                                                                   
Balance at June 30, 1997             1,662,445         790,323       1,794,165
                                     =========         =======       =========

(1)  Equivalent  barrels  (Mcf of gas is  converted  to  equivalent  barrels  by
     dividing by six).


                                      F-25
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                         Oil           Gas           Total
                                       (bbls)         (Mcf)         (EQB) (1)

Proved developed reserves:
         June 30, 1996                 375,061       924,019         529,064
         June 30, 1997                 557,442       790,323         689,163

b)  Capitalized  Costs  Relating to Oil and Gas  Producing  Activities  - are as
follows:

                                                               June 30
                                                          1997         1996

Proved and unproved oil and
         gas properties                              $11,811,162   $11,802,536
Accumulated depletion and
         valuation allowances                         (4,662,857)   (4,287,790)
                                                     -----------   -----------

Net capitalized costs                                $ 7,148,305   $ 7,514,746
                                                     ===========   ===========

Depletion, depreciation and amortization
         Per equivalent barrel of production         $      5.14   $      5.19
                                                     ===========   ===========

c)  Cost  incurred  in  Oil  and  Gas  Property  Acquisition,   Exploration  and
Development Activities are as follows:

                                                 Year Ended June 30,
                                                 1997          1996

Property acquisition costs                      $ --         $ 22,081
Development costs                                8,625        127,500
                                                ------       --------

         Total                                  $8,625       $149,581
                                                ======       ========

The Company has no unevaluated capitalized costs which are not currently subject
to depletion.

d)  Results  of  Operations  for  Oil and Gas  Producing  Activities  (excluding
corporate overhead and interest costs) are as follows:


                                      F-26
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                     Year Ended June 30,
                                                    1997            1996

Oil and gas sales                                $1,298,810      $1,203,559
Production Costs                                   (702,275)       (639,271)
Depreciation, depletion and amortization           (375,068)       (431,914)
                                                 -----------     -----------
                                                    221,467          132,374
Income tax expense                                     --               --
                                                 -----------     -----------

Results of operations for oil and gas
         producing activities (excluding
         corporate overhead and interest
         costs)                                  $   221,467     $   132,374
                                                 =============   ===========

e) Standardized  Measure of Discounted Future Net Cash Flows and Changes Therein
Relating  to Proved  Oil and Gas  Reserves  (Unaudited)  - the  following  table
presents a  standardized  measure of future net cash inflows  relating to proved
oil and gas  reserves.  Future cash inflows were  computed by applying  year-end
prices of oil and gas relating to the Company's proved reserves to the estimated
year-end  quantities of those reserves.  Future production and development costs
were computed by estimating  expenditures  expected to be incurred in developing
and producing  the proved oil and gas reserves at the end of the year,  based on
year-end costs and assuming continuation of existing economic conditions. Future
income tax expenses were computed by applying year-end  statutory tax rates with
consideration of future tax rates already legislated,  to the future pre-tax net
cash flows relating to the Company's  proved oil and gas reserves,  less the tax
basis of the properties involved.  The future income tax expense gives effect to
tax  credits  and  allowances  relating  to the  Company's  proved  oil  and gas
reserves.  Because  of  the  imprecise  nature  of  reserve  estimates  and  the
unpredictable nature of the other variables used, actual future cash inflows may
vary  considerably and the standardized  measure does not necessarily  represent
the fair market value of the Company's oil and gas reserves.


                                      F-27
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                     Year Ended June 30,
                                                    1997             1996

Future cash inflows                              $30,479,333      $38,952,790
Future production and development costs          (15,710,519)     (17,423,234)
Future income tax (expense) benefit                1,744,869          707,514
                                                 -----------      -----------

Future net cash flows                             16,513,683       22,237,070

10% annual discount for estimated timing
         of cash flows                            (6,557,376)      (9,139,496)
                                                 -----------      -----------

Standardized measure of discounted
         future net cash flows at the
         end of the year                           9,956,307      13,097,574

Standardized measure of discounted
         future net cash flows at the
         beginning of the year                    13,097,574       9,866,818
                                                 -----------      -----------

         Total change in standardized
           measure during the year               $(3,141,267)     $ 3,230,756
                                                 ===========      ===========

The  following  table sets forth an analysis of the changes in the  standardized
measure of discounted future net cash flows from proved oil and gas reserves:

                                                         Year Ended June 30,
                                                       1997             1996

Sales of oil and gas produced, net
         of production costs                      $   (596,535)    $  (564,290)
Net changes in price and production costs           (1,930,876)      2,198,328
Development costs incurred during the year              (8,625)       (127,500)
Revisions of previous quantity estimates            (3,622,487)      2,989,749
Accretion of discount                                2,152,956       1,758,162
Net changes in income taxes                          1,037,355       1,180,856
Sales of reserves in place                                --          (468,513)
Other                                                 (173,055)     (3,736,036)
                                                  -----------       ----------

         Total change in standardized
           measure during the year                $(3,141,267)      $3,230,756
                                                  ===========       ==========


                                      F-28
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

Average sales price and production costs per unit of production were as follows:

                                                       Year Ended June 30,
                                                      1997           1996

Average sales price:
  Crude oil, per barrel                            $  21.01        $ 17.71
 Nature gas, per thousand cubic feet                   2.42           2.06

Average crude oil and gas sales,
         per equivalent barrel                        17.81          14.46

Average production costs,
         per equivalent barrel                         9.63           7.68

15.  Going Concern

As shown in the accompanying  financial  statements,  the Company incurred a net
loss of $6,243,940 and negative cash flow from operating  activities of $548,850
for the year ended June 30, 1997, and a net loss of $6,813,666 and negative cash
flow from operations of $3,212,404 for the year ended June 30, 1996. At June 30,
1997 the Company's current liabilities exceeded current assets by $760,076,  and
subsequent  to June 30, 1997 the Company has become  involved in a dispute  over
the  completion  of a  significant  contract  which has delayed  collection of a
significant account receivable. As a result of these conditions, the Company has
had difficulties meeting its current obligations as they come due. Additionally,
the Company has notes  payable of $2,920,000  maturing on November 1, 1997,  for
which it must either  negotiate an extension or secure other  long-term  debt or
equity  financing.  These  factors  create an  uncertainty  about the  Company's
ability to continue as a going concern.  The financial statements do not include
any adjustments  that might be necessary if the Company is unable to continue as
a going concern.

Management is currently  attempting to secure long-term  financing  secured by a
portion of the Company's inventory of plants to replace the notes that mature on
November  1, 1997.  Additionally,  subsequent  to June 30,  1997 the Company has
obtained  contracts for  $13,696,055  which  management  estimates will generate
sufficient  profit to relieve  its current  liquidity  problems.  The  Company's
ability to continue as a going concern is dependent on its  obtaining  financing
to replace its maturing  debt,  meeting its profit  estimates  on contracts  and
achieving   profitable   operations  and  sufficient  positive  cash  flow  from
operations to meet its obligations.


                                      F-29
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

16.  Events Subsequent to Date of Balance Sheet

     a. In  September  1997 the Company  filed suit against  certain  former IPS
shareholders,  Jerry Swon and Fallon  and  Fallon.  The  petition  alleges  that
fraudulent   acts  and/or   omissions   occurred  in  connection  with  the  IPS
acquisition.  Some of the  defendants  have since filed suit against the Company
seeking the payment of debts related to IPS (see Note 9).

     b. In October 1997 the Company  filed suit against one of its customers for
the collection of outstanding  recievables due to the Company.  As of October 8,
1997 the uncollected balance was $870,079.  The customer has filed a countersuit
on this matter.

     c.  Through  October 8, 1997,  warrants to purchase  100,000  shares of the
Company's common stock expired unexercised.


17.  Business Segments

The Company's  operations are classified into two principal  industry  segments:
oil and gas exploration  and production  (oil and gas) and locating,  designing,
refurbishing  and  installation  of gas  plants  and gas  processing  equipment,
including rentals (contracting). Prior to 1996 the Company operated primarily in
the oil and gas industry.  The  following is a summary of segmented  information
for 1997 and 1996.

                                                          1997         1996

Net sales to unaffiliated customers:
         Oil and gas                                  $ 1,298,811   $ 1,203,559
         Contracting                                    8,952,782     9,411,407
         All other segments as reported in the
           accompanying statement of operations           231,884       213,243
                                                      -----------   -----------
                                                      $10,483,477   $10,828,209
                                                      ===========   ===========


                                      F-30
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                       1997           1996

Income (loss) from operations:
      Oil and gas                                 $    221,467    $    132,374
      Contracting                                     (146,346)     (1,932,348)
      All other segments                            (2,374,214)        200,577
                                                  ------------    ------------
                                                    (2,299,093)     (1,599,397)
                                                  ------------    ------------
Other income                                            31,495          49,584
Other expenses                                      (2,997,520)     (2,671,904)
Management agreement                                      --        (1,392,000)
Interest expense                                      (978,822)     (1,199,949)
                                                  ------------    ------------
      Loss before income tax as reported in the
        accompanying statement of operations      $ (6,243,940)   $ (6,813,666)
                                                  ============    ============

Identifiable assets:
      Oil and gas                                 $  7,274,993    $  7,812,111
      Contracting                                    7,338,115       7,652,392
      All other segments                                  --              --
                                                  ------------    ------------
                                                    14,613,108      15,464,503
General corporate assets                               665,251       4,650,488
                                                  ------------    ------------
      Total assets as reported in the     
           accompanying balance sheet             $ 15,278,359    $ 20,114,991
                                                  ============    ============

Capital expenditures:
      Oil and gas                                 $      8,625    $    130,365
      Contracting                                       43,793         149,581
      All other segments
                                                          --              --
      Corporate                                         65,988         188,071
                                                  ------------    ------------
                                                  $    118,406    $    468,017
                                                  ============    ============


                                      F-31
<PAGE>

Concord Energy Incorporated and Subsidiaries

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                         1997          1996

Depreciation, Depletion and Amortization:
      Oil and gas                                      $375,068      $431,914
      Contracting                                        72,656        68,576
      All other segments                                   --            --
      Corporate                                         266,844       123,448
                                                       --------      --------
               Total depreciation, depletion and
                        amortization                   $714,568      $623,938
                                                       ========      ========

In 1997 net sales to two customers of the Company's contracting segment amounted
to $4,406,832  and  $2,203,882  accounting  for 63% of the total revenues of the
Company.

In 1996 net sales to two customers of the Company's contracting segment amounted
to $3,418,778  and  $3,103,783  accounting  for 60% of the total revenues of the
Company.

The loss from  operations of the other segments for 1997 includes a write-off of
goodwill of $2,417,368 which is more fully discussed in note 3.

The loss from operations of the contracting segment for 1996 includes a lower of
cost or market  write-down of inventory of  $3,043,055  and a charge of $521,500
for  settlement  of claim on a contract  completed in a prior year as more fully
discussed in notes 6 and 9, respectively.

                                      F-32