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

                                   Form 10-KSB

[ X ] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 2000

[   ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from ___________ to ____________

Commission File Number: 333-50982

                      HIGHLAND HOLDINGS INTERNATIONAL, INC.
                      -------------------------------------
                 (Name of small business issuer in its charter)

           Delaware                                      98-0179679
           --------                                      ----------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


         5075 Warner Avenue, Suite B, Huntington Beach, California 92649
         ---------------------------------------------------------------
                    (Address of principal executive offices)

Issuer's telephone number: (714) 377-2118

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

    Title of each class           Name of each exchange on which registered
    -------------------           -----------------------------------------
           N/A                                      N/A

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.001 par value

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

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

The issuer's revenues for its most recent fiscal year: $-0-

The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 15,2001: Common stock, $.001 par value: $557,760.

The number of shares of the registrant's common stock, $.001 par value,
outstanding as of March 24, 2001: 1,272,326 shares

Documents incorporated by reference: Certain exhibits to the Forms 10-KSB for
the fiscal years ended September 30, 1996, September 30, 1997, September 30,
1998 and September 30, 1999, and the Registration Statement on Form SB-2 (File
No. 333-21719) and amendments thereto of the registrant are incorporated herein
by reference.
                 Transitional Small Business Disclosure Format:
                                  Yes ___ No X
<PAGE>


                                     PART I

Item 1. Description of Business.
--------------------------------

Highland Holdings International, Inc. is presently in the exploration stage and
there is no assurance that any of its prospects or properties contain a
commercially viable mineral deposit (a reserve) until further exploration work
is done and a final evaluation of such work concludes legal and economic
feasibility. The company has not earned any revenues to date and has an
accumulated deficit of $2,254,034.

The Company was initially incorporated under the laws of the State of Delaware
on March 23, 1992 under the name Northern Medical, Inc. with the aim of
developing and manufacturing chemical products in the plastic and coating
business. Through a filing in the office of the Secretary of State of Delaware
on October 30, 1992 the Company amended its Articles of Incorporation to change
its name to Normed Industries, Inc. The certificate of incorporation was again
amended on January 17, 1995 increasing the number of shares of common stock to
20,000,000 and 5,000,000 shares of preferred stock. On March 28, 1995 the
Company amended its certificate of incorporation with a change of name to
Highland Resources, Inc. and on November 3, 1997 the Company amended its
certificate of incorporation to change its name to Highland Holdings
International, Inc. On March 16, 2001 filed with the Secretary of State of
Delaware an Amended and Restated Certificate of Designation of Rights,
Priviliges, Preferences and Restrictions of Series B Convertible Preferred
Stock. As of March 29, 2001, no shares or Series B Convertible Preferred Stock
nor any other series of Preferred Stock is issued and outstanding.

A complete discussion of the current business of the Company is set forth in
Item 6, Management's Discussion and Analysis or Plan of Operation.

Employees.
----------

At the present time the Company does not employee anyone at the Honduran
properties. Work is done by a contract mining company. There are no employees in
the United States.


Item 2. Description of Property.
--------------------------------

Executive Offices. The Company presently maintains its executive offices at 5075
Warner Avenue, Suite B, Huntington Beach, California 92649. The Company sublets
this space from a third party. Management believes that these premises will be
suitable for its present needs until active business operations recommence.

Mineral Rights Owned. On October 2, 1997, the Company purchased 75% of the
mineral rights of three mineral properties held by Derena-Desarrollo de Recursos
Naturales S. de R.L. a Honduran based company. These properties were transferred
during 1999 to Highland Resources Honduras, S.A. a subsidiary of the Company. On
December 18, 1998, the Company acquired an additional 20% of the mineral rights
of the three properties, bringing its total holdings up to 95%.

<PAGE>


The three mineral properties are (a) the Zapote (Rey del Oro Mine) with 4 mining
concessions; (b) the Jimingula-based metal exploration claim; and (c) the Derena
gold exploration claim. All three mineral properties were originally staked by
Derena-Desarrollo de Recursos Naturales S. de R.L. ("Derena-Desarrollo"), a
Honduran mining company founded by Mr. Lennart Mattsson and John Svanholm in
1982. Both Mr. Mattsson and Mr. Svanhom were long-term United Nations employees
in Honduras. Upon retirement they founded Derena-Desarrollo. Derena-Desarrollo
spent 15 years staking and exploring the areas of interest by Mr. Svanholm, who
died while working on the company's prospects. Mr. Mattsson has continued his
role as Derena-Desarrollo's administrator and primary financier.

In July 1997, the Company exercised an option to acquire the mineral properties
and on October 7, 1997, the Company completed the acquisition. At this time,
five vein structures have been found within the four Zapote mining concessions;
preliminary sampling at the Derena exploration claim showed some gold
mineralization at outcrops and old workings; surface showings of copper, silver,
zinc, and mercury had been found along a seven-kilometer fault-controlled trend
at Jimingula.

During the past three years the Company has done exploration work at the Zapote
1 with the construction of a shop and warehouse at Zapote 1. Existing adits have
been extended and treachings has been carried out to explore surface exposure of
vein outcrops. In addition, extensive sampling (1,100 plus samples) of known
gold bearing veins. The clarity of low cyanide is acceptable for the extraction
of gold. It is also considered operationally efficient to extract gold. The
company purchased an air compressor, jack hammers, generators and located for
purchase a backhoe, portable crusher and other required equipment.

The Company previously leased properties in Brazil and Arizona, USA, but it has
not continued any exploration on these properties during the last two years and
does not foresee any resumption at the present time.

The 400 hectare Zapote mining concession block is centered on the Rey del Oro
mine which operated by a German group until 1943 when Honduras declared war on
Germany and the owners were forced to leave the country. The property was
acquired by Derena-Desarrollo in 1982 which located two high-grade (plus 30g/t)
ore shoots in the old workings that the Germans apparently overlooked. Samplings
by Derena-Desarrollo and independently by the Honduras Ministry of Natural
Resources and Environment, both of which have been confirmed by the Company's
check sampling, show medium to high-grade gold mineralization on surface and
underground vein structures. A preliminary assessment of the Rey del Oro mine
and surrounding acreage by the Company's mining consultants, Loeb Aron &
Company, indicates at least four multiple vein structures and other areas on the
concession block may also contain similar deposits as suggested by surface
indications not yet sampled at depth.

                                       2
<PAGE>


The 3,600 hectare Derena-Desarrollo exploration claim with limited prospecting
has found gold mineralization on surface outcrops and from underground workings.
The property was reportedly worked in the 1930's using "arractre" a simple
grinding device powered by mules for gold recovery. An extensive program of
exploration is needed to evaluate the potential of the property.


Item 3. Legal Proceedings.
--------------------------

The Company is not engaged in any legal proceedings.


Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------

No matter was submitted to a vote of security holders of the Company during its
fiscal quarter ended December 31, 2000.


                                     PART II

Item 5. Market for Common Equity and Related Stockholders Matters.
------------------------------------------------------------------

The Company's Common Stock is currently quoted on the over-the-counter market on
the electronic bulletin board maintained by the National Association of
Securities Dealers, Inc. under the symbol "HHIN". The symbol for the stock was
changed on January 10, 2001by reason of a reverse split of shares on the basis
of one new share for fifteen old shares. The prior symbol had been HHII.

When the trading price of the Company's Common Stock is below $5.00 per share,
the Common Stock is considered to be "penny stock" that are subject to rules
promulgated by the Securities and Exchange Commission (Rule 15g-1 through 15g-9)
under the Securities Exchange Act of 1934. These rules impose significant
requirements on brokers under these circumstances, including: (a) delivering to
customers the Commission's standardized risk disclosure document; (b) providing
to customers current bid and offers; (c) disclosing to customers the
brokers-dealer and sales representatives compensation; and (d) providing to
customers monthly account statements.

The following table set forth the range of high and low closing bid prices of
the Common Stock for the periods indicated and represent inter-dealer quotations
without retail markups, markdowns or commissions and do not necessarily
represent actual transactions.

                                                   Bid Prices
         1999                                High              Low
         ----                                ----              ---
         First Quarter                       $ .15            $ .01
         Second Quarter                        .05              .02
         Third Quarter                         .05              .02
         Fourth Quarter                        .21              .02

         2000
         ----
         First Quarter                       $ .021           $ .0147
         Second Quarter                        .02              .02
         Third Quarter                         .03              .02
         Fourth Quarter                        .06              .011

                                       3
<PAGE>


          (1)  The Company is unaware of the factors which resulted in the
               significant fluctuations in the bid prices per share during the
               periods being presented, although it is aware that there is a
               thin market for the Common Stock, that there are frequently few
               shares being traded and that any sales significantly impact the
               market.

The Company has never paid cash dividends on it Common Stock. The Company
currently intends to retain earning, if any for dividends use in the operation
and expansion of its business and therefore does not anticipate paying any cash
dividends on the Common Stock in the foreseeable future.

As of March 20, 2001, the Company had approximately 115 shareholders of record;
it estimates it has approximately 450 beneficial holders.

The Company has not paid any dividends on its Common Stock and does not expect
to do so in the foreseeable future. The Company intends to apply its earnings,
if any, in expanding its operations and related activities. The payment of cash
dividends in the future will be at the discretion of the Board of Directors and
will depend upon such factors as earnings levels, capital requirements, the
Company's financial condition and other factors deemed relevant by the Board of
Directors, and is subject to the dividend rights of the Preferred Stock of the
Company to the extent any of such shares are outstanding. In addition, the
Company's ability to pay dividends may be limited under any future loan
agreements of the Company which restrict or prohibit the payment of dividends.

Item 6. Management's Discussion and Analysis or Plan of Operation.
------------------------------------------------------------------

Except for historical information, the materials contained in this Management's
Discussion and Analysis are forward-looking )within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934) and involve a number of risks and uncertainties. These include the
Company's historical losses, the need to manage its growth, general economic
downturns, intense competition in the mining and natural resource industries,
seasonality of quarterly results, and other risks detailed from time to time in
the Company's filings with the Securities and Exchange Commission. Although
forward-looking statements in this Annual Report reflect the good faith judgment
of management, such statements can only be based on facts and factors currently
known by the Company. Consequently, forward-looking statements are inherently
subject to risks and uncertainties, actual results and outcomes may differ
materially from the results and outcomes discussed in the forward-looking
statements. Readers are urged to carefully review and consider the various
disclosures made by the Company in this Annual Report, as an attempt to advise
interested parties of the risks and factors that may affect the Company's
business, financial condition, and results of operations and prospects.

                                       4
<PAGE>


Exploration Stage Activities.
-----------------------------

The Company has been a exploration stage enterprise from its inception March 23,
1992, to December 31, 2000. The Company is an exploration stage company involved
in the exploration of a gold mining concession in Honduras, which began in
October, 1997.

The Company was formed on March 23, 1992 and remained inactive until March 13,
1995 when the Company entered into an agreement to purchase the alluvial mineral
rights in its Lagoa da Pedra Project from the Lagoa da Pedra Partnership for
34,202 of the Company's common shares. As of December 31, 1996, the Company had
concluded that the Lagoa da Pedra Project was not able to yield production
sufficient to offset the required investment in exploration and commercial
production costs and had charged the mineral costs $446,967 accumulated for this
project were charged to operations for the year ending December 31, 1996.

On June 27, 1996, the Company, under the same management, entered into an
agreement with Minas Novas Pesquisa E Lavra S.A. ("Minas Novas"), a Brazilian
corporation for the acquisition of 95% of the issued and outstanding stock of
Minas Novas which included various mineral properties in Brazil. As of December
31, 1998, the Company, under the direction of a new President, John P. Demoleas,
had concluded that the Minas Novas Project was not able to yield production
sufficient to offset the required investment in exploration and commercial
production costs and has charged the accumulated mineral costs of $225,191 to
operations as of December 31, 1998.

On May 5, 1997, the Company issued, pursuant to regulation D, an aggregate of
285,714 shares of common stock to various parties in consideration for the
purchase of 1 unpatented mining claim situated in Pima County, Arizona, valued
at $100,000. As of December 31, 1998, the Company had concluded that the Arizona
Project was not able to yield production sufficient to offset the required
investment in exploration and commercial production costs and has charged the
mineral costs of $29,658 accumulated for this to operations for the year ending
December 31, 1998.

In October, 1997, the Company, through its subsidiary Highland Resources
Honduras S.A., of which the Company owns 95% of the outstanding capital stock,
entered into an agreement for the purchase of 100% ownership of the mineral
rights from Desarrollo De Recursos Naturales, S. de R.L. de C.V.,
("Derena-Desarrollo") consisting of mineral concessions aggregating 18,000
hectares. As of December 31, 2000, the property in Honduras is the only active
mining project that the Company feels will be capable of yielding production
level quantities of gold. As of December 31, 2000, the Company has charged an
aggregate of $770,375 to exploration costs. The Company is in the process of
pursuing and finding a management team to complete the feasibility studies and
conducting geologic exploration and analyze test borings of the Honduras
project.

                                       5
<PAGE>


To finance these activities, the Company sold through the period from 1995
through December 31, 2000 (taking into consideration the reverse split of one
new share for fifteen old shares) an aggregate of 270,526 shares of common stock
with an aggregate consideration of $902,144. The Company has sold an aggregate
of 506,667 shares of common stock to related parties for an aggregate
consideration of $114,000. Also during this period, the Company has been
financed through loans that were subsequently converted to 121,888 shares of
common stock aggregating $272,376.

There can be no assurance that production will develop. Further investments into
exploration activities as defined in the Company's operating plan will
significantly reduce the cost of preparation, processing and production by
enabling the Company to operate without reliance upon outside vendors and
suppliers.

Results of Operations for the year ended December 31, 2000 as compared to the
year ended December 31, 1999.
-----------------------------------------------------------------------------

During the fiscal year ended December 31, 2000, the Company was financed by its
President, whose loans increased by an amount of $82,712. These loans are shown
under Officer Loan Payable in the Long-Term Liabilities section of the Balance
Sheet. The Company continues to carry a contingent liability of $103,000 on its
balance sheet in respect to a possible requirement for its dealings in Brazil.
The Company intends to write this off during the year 2001 since there is little
likelihood of a claim. Losses for the year 2000 were reduced by the amount of
$53,008 from those of 1999 and are attributable to a new plan of exploration
implemented early in the year. The Company had a net loss of $166,007 during the
year 2000.

For the year ended December 31, 1999 and December 31, 2000, the Company has not
generated any revenue from the production and sale of minerals.

The following table sets forth a schedule of expenses for the fiscal years ended
December 31, 1999 and December 31, 2000:
                                                   December 31,    December 31,
                                                       1999            2000
                                                       ----            ----

General & Administrative                             $ 27,827       $ 36,624
Exploration Costs                                     130,197         64,506
Non Cash Consulting Fees                               30,000         50,000
Realized and unrealized
  Loss on trading securities net                       17,132         13,286
Depreciation                                            1,956          1,591
Interest Expense                                       11,903
                                                     --------       --------
                                                     $219,015       $166,007


Management's decision to reduce administrative expenses by way of eliminating
the corporate office in Toronto, Canada and cut back administrative salaries for
clerical and secretary help and reduce the moneys expensed on travel back and
forth to Honduras was instrumental in preserving cash and decreasing the
company's expenditures from $219,015 in the fiscal year ended December 31, 1999
to $166,007 in fiscal year ended December 31, 2000, a decrease of $53,008.

                                       6
<PAGE>


The Board of Directors decided at a meeting in November of 2000 to seek other
avenues for which the Company would operate during the coming years in addition
to maintaining the mining operation through to a cash flowing business. The
decision was reached to engage several firms to assist the Company in looking
for viable merger and acquisition candidates and, in order to attract these
companies to work with the Company, it was determined that the best way would be
through a stock plan as incentive. The Company filed an S-8 registration
statement in late November and issued a total of 1,400,000 shares to two
companies prior to the reverse split effective on January 10, 2001. The shares
issued under this Registration Statement became 46,667 shares following the
split and the work done by both of these companies has produced, in early 2001,
letters of intent to acquire three operating and cash flowing businesses.
Negotiations to complete the proposed transaction are continuing and the Company
anticipates that one or more the the proposed transaction will close during the
months of April and May, 2001.

Liquidity and Capital Resources.
--------------------------------

The accompanying financial statements have been prepared on a going concern
basis which assumes that the Company will continue in operation for at least one
year and will be able to realize its assets and discharge its liabilities in the
normal course of business. The Company incurred net losses from inception to
December 31, 2000 of $2,254,034. Although expenses in 2000 include non-cash
charges aggregating $64,877 (amortization and depreciation charges of $1,591;
non-cash compensation consulting fees of $50,000; and loss on trading securities
of $13,286, the Company has not generated positive cash flow from operations in
2000. These factors indicate that the Company's continuation as a going concern
is dependent upon, among other things, its ability to obtain adequate financing
or to acquire cash flowing companies which will allow the company to operate.

The Company's cash balance at December 31, 2000 was $1,934. Working capital at
December 31, 2000 was negative by $252,439. The payment of administrative
expenses and purchase of assets in Canada are paid in Canadian currency. The
reporting currency for the Company is in U. S. Dollars. However the Company does
transfer US Dollars into the accounts of its subsidiaries in Canada and Honduras
and in the past Brazil. Assets and liabilities were translated using the
exchange rate at the balance sheet date; revenues, expenses, gains and losses
were translated by using the weighted average exchange rate for the period from
January 1, 2000 to December 31, 2000.

Income tax: As of December 31, 2000 the Company had a tax loss carry-forward of
$2,254,000 The Company's ability to utilize its tax credit carry-forwards in
future years will be subject to an annual limitation pursuant to the "Change in
Ownership Rules" under Section 382 of the Internal Revenue Code of 1986, as
amended. However, any annual limitation is not expected to have a material
adverse effect on the Company's ability to utilize its tax credit
carry-forwards.

                                       7
<PAGE>


The Company expects its capital requirements to increase over the next several
years as it continues to develop its business, increases sales and
administration infrastructure and embarks on developing in-house business
capabilities and facilities. The Company's future liquidity and capital funding
requirements will depend on numerous factors, including the extent to which the
Company's present management can fund or raise funds to continued capital
requirements, the costs and timing of expansion of exploration, property
development, facilities expansion needs, and competition in the business entered
into.

The Company believes that its available cash and cash from management
contributions is not sufficient to satisfy its funding needs to complete the
Company's exploration needs and bring the company to an exploration stage.
Management believes that it will be required raise funds in addition to funds
provided by personal resources. Management believes that approximately $300,000
will be needed from either personal resources or needed to be raised through
private placements or a public offering or the acquisition of a cash flowing
business with sufficient capital to loan funds to Highland to complete
preliminary exploration, purchase equipment and begin production. The Company
will continue to seek working capital from private placements. There can be no
assurance that such financing, if required, will be available on satisfactory
terms, if at all. If the Company is unsuccessful in raising capital in a timely
manner to continue the Company's exploration process, this will significantly
delay the Company from achieving profitable operations. If management is unable
to provide funds from private sources or raise funds through private or public
offers, this could materially jeopardize the Company's ability to continue as a
going concern and may even cause the Company the continued ownership of the
present mineral holdings.

Marketing Plans.
----------------

The market for the sale of gold is well defined and the Company intends to
review each of the potential ways in which gold is commercially sold at such
time as the feasibility reports show the quality and the content of the reserve
on each property.

Honduran Mining Law. Mineral rights in Honduras belong to the federal
government, and the exploration and mining of mineral is governed by the Mining
Code of 1968. Exploration and mining rights are granted by the Ministry of Mines
and Hydrocarbons on a priority-of-request basis as permits and concessions.
Honduran citizens, foreign citizens, Honduran companies and foreign companies
with legal representation in Honduras can all request exploration permits and
mining concessions. All metallic minerals are open to exploration on a permit
basis, however gas and oil are regulated by a separate code of law. Mining and
exploration activities are considered a public utility and thus take priority
over the private exploration of land. The development of mineral properties is
divided into three phases under the Honduras Mining Code.

     1. Reconnaissance. All lands, both state and private are open for
prospecting except areas covered by valid permits and concessions or withdrawn
reserves. Permission to conduct renaissance prospecting on private land can be
obtained through the Ministry of Mines. Highland Holdings International, Inc.
has obtained the valid permits and concessions.

                                       8
<PAGE>


     2. Exploration Permits. Exploration permits are granted for periods of 2 to
4 years and can be renewed once for a period of 2 to 4 years so that the total
period of validity does not exceed 6 years. All land is open to staking except
areas specifically withdrawn as ecological, mineral or archaeological reserves.
Permits are granted for a minimum area of 400 hectares to a maximum of 50,000
hectares. No company or individual can hold more than 200,000 hectares of permit
area. The exploration permit is granted in the form of a contract with the
Ministry of Mines based on an exploration plan and budget submitted by the
requesting company. Non-fulfilment of the exploration plan can result in
cancellation of the balance remaining on the time of the permit. The Company
presently holds exploration permits for a total of 18,200 hectares.

     3. Mining Concessions. Mining concessions are granted for a period of 40
years with the right to a 20 year extension. Concessions are granted for a
minimum area of 100 hectares and a maximum area of 400 hectares. No company can
hold more than 20,000 hectares of mining concession area in Honduras. However,
mining concessions and installations are considered real property and cn be
mortgaged as such. Highland Holdings International, Inc. wholly owned
subsidiary, Highland Resources, Honduras S.A. (HRH) presently holds 4 mining
concessions. No mortgage or other encumbrance is presently in effect.

Importation of Mining Equipment. Mining equipment not manufactured in Honduras
or Central America can be imported by holders of a valid mining concession
without payment of import duties. The importation of equipment has been
discussed with both Highland's Honduran attorney and the Chief Geologist at the
Ministry of Mines. The paper work required to approve the importation of
equipment can take up to two months.

Environmental Regulations. A General Law of the Environment was decreed in 1993.
This law requires the drafting of an environmental impact report for any mining
project and the licensing of any potentially-polluting industrial activity. The
issuance of a mining concession is not dependent on obtaining the environmental
license. Fulfilment of environmental requirements must be done within 18 months
following the issuance of a concession. The Company will not have any difficulty
in meeting the requirements which are not considered rigorous.

Taxes. Mining concessions are subject to a small fee on the areas of
concessions. This tax is now being revised due to the devaluation of the
Honduran currency, the Lempira. The Federal Government also collects a one
percent to two percent royalty of production. As an incentive for mining, both
the royalty and the area fee are forgiven during the firs five years of
operation. According to Highland's Honduran attorney the maximum income tax rate
is forty percent. The Company has not paid any taxes to date and does not expect
to pay any for the next year.

                                       9
<PAGE>


Regulations.
------------

The Company is subject to many laws and regulations both in the United States
and, internationally. The Company is current in all required Honduran filings.
The risks of conducting business in Honduras include currency fluctuations and
uncertain political and social risks. The Company does not anticipate any
difficulty in the future in complying with all applicable Laws and Regulations
in the performance of its operations. The Company cannot predict the impact of
possible changes in response to future legislation, rules or governmental
requirements including regulations which may affect the ability of the company,
as well as others in the industry, to develop and market products. However, we
do not presently believe that existing applicable legislative and administrative
rules and regulations will have a significant impact on operations.

Competition.
------------

The Company is in an industry the selling price of which is controlled by buyers
in London and New York. The Company is under-capitalized to compete against the
major gold producing companies which are located around the world. The Company
will be dependent upon external forces in the sale of its products. The present
selling price of gold, slightly under US$300 per oz., is a price at which the
Company is capable of competing. There can be no assurance that the Company can
develop superior or more cost-effective products than its competitors, or that
it can successfully market its product.

Economic Risk.
--------------

Local, National and international economic conditions may have a substantial
adverse effect on the efforts of the Company. A downturn in the United States
economy could reduce the amount of disposable cash that individuals are willing
to pay for products made with gold or the amount they are willing to purchase.

Patents and Trademarks.
-----------------------

The Company does not own any Patents or Trademarks and does not have any
intention at the present time to file any Patent or Trademark Applications.


Item 7. Financial Statements.
-----------------------------

Information with respect to this Item is set forth in "Index to Financial
Statements".


Item 8. Changes In and Disagreements with Accountants on Accounting and
        Financial Disclosure.
-----------------------------------------------------------------------

On March 12, 2001 the Company accepted the resignation of its independent
accountant, Thomas P. Monahan. The reports of Thomas P. Monahan for the fiscal
years ended December 31, 1998 and December 31, 1999 contained no adverse
opinion, disclaimers of opinion, or opinion that was qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was approved by the Company's Board of Directors. At no time during
the engagement of Thomas P. Monahan as independent accountant for the Company
were there any disagreements, whether or not resolved, on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope of procedure. Disclosure of this dismissal was first contained in the
Current Report on Form 8-K which was filed with the Securities and Exchange
Commission on March 19, 2001. On March 19, 2001, the Company, as required by
Item 304(a) (3) of Regulation S-B, advised Thomas P. Monahan of this disclosure
and requested by response thereto by Thomas P. Monahan. It is the intent of the
Company and Thomas P. Monahan to file his response to this disclosure by means
of an amendment to the Form 8-K on file herein.

On March 12, 2001, the Company engaged the firm of Kabani & Company, Inc., of
Fountain Valley, California, as independent accountants for the Company. Prior
to March 12, 2001, neither the Company, nor anyone on its behalf, had consulted
with Kabani & Company, Inc., concerning the accounting principles of any
specific completed or contemplated transaction, any type of audit opinion on the
Company's financial statements nor any other material factor which might be
considered by the Company in reaching a decision as to any accounting, auditing
or financial reporting issue.

                                       10
<PAGE>

                                    PART III

Certain information required by Part III is omitted from this report on Form
10-KSB in that the Company will file a definitive proxy statement pursuant to
Regulation 14A (Proxy Statement) not later than 120 days after the end of the
fiscal year covered by this report on Form 10-KSB, and certain information
included therein is incorporated herein by reference. Only those sections of the
Proxy Statement which specifically address the items set forth herein are
incorporated by reference.


Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act
--------------------------------------------------------------------------------

The directors and executive officers of the Company are as follows:

Name(1) (2)                         Age        Position
-----------                         ---        --------
John P. Demoleas                    41         Chairman, President & Chief
                                               Executive Officer
George Nadas                        47         Director, Secretary and Principal
                                               Financial and Accounting Officer

(1)  The Company presently has no executive committee, nominating committee or
     audit committee of the Board of Directors.

(2)  All directors hold office until the next annual shareholder's meeting or
     until their death, resignation, retirement or until their successors have
     been elected and qualified. Vacancies in the existing Board of Directors
     are filled by a majority vote of the remaining directors.

The background and principal occupations of each director and executive officer
of the Company are as follows:

Mr. Demoleas has served as Chairman, President and Chief Executive Officer from
May 1998 to present. Since 1988 Mr. Demoleas has served as Executive Director of
St. Peter's Foundation, which implements corporate development programs and
manages investment and endowment funds. In 1996 he established The Foundation
for Healthy Children, a non-profit corporation, and serves as its President and
CEO. Mr. Demoleas holds joint MPH-MBA degrees from Columbia University.

Mr. Nadas has served as Director, Secretary and Principal Financial and
Accounting Officer from March 1997 to present. Since 1989, Mr. Nadas has been a
founder and partner in Reiter & Nadas Chartered Accountants has a financial
background which includes Controller of VasCATH,, Inc. a medical products
manufacturer, and V.P. Finance of Safety House of Canada, Ltd. He earned his
Bachelors degree in mathematics with Honors from the University of Waterloo,
Ontario, Canada.

                                       11
<PAGE>


Item 10. Executive Compensation.
--------------------------------

For the year ended December 31, 2000 their was no compensation paid to to any
executive officer or director of the Company which would be required to be
reported pursuant to Item 402 of Regulation S-B.


Item 11. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

The following table sets forth certain information with respect to the current
beneficial ownership of the Company's common stock as of March __, 2001, of each
person known to the Company to be the beneficial owner of more than five percent
(5%) of said securities, each director of the Company, and all directors and
executive officers of the Company as a group.

                                        Shares             Percent of
     Name and Address of             Beneficially         Outstanding
     Management Shareholders            Owned                Shares
     -----------------------            -----                ------

     John P. Demoleas                   611,619              48.00%
     5075 Warner Avenue "B"
     Huntington Beach, CA 92649

     Directors and officers as a group
     (2 persons, including the above)   634,886              50.00%

     (1) Except as otherwise noted, it is believed by the Company that all
     persons have full voting and investment power with respect to the shares,
     except as otherwise specifically indicated. Under the rules of the
     Securities and Exchange Commission, a person (or group of persons) is
     deemed to be a "beneficial owner" of a security if he or she, directly or
     indirectly, has or shares the power to vote or to direct the voting of such
     security, or the power to dispose of or to direct the disposition of such
     security. Accordingly, more than one person may be deemed to be a
     beneficial owner of the same security. A person is also deemed to be a
     beneficial owner of any security which that person has the right to acquire
     within 60 days, such as warrants or options to purchase the Common Stock of
     the Company.


Item 12. Certain Relationships and Related Transactions.
--------------------------------------------------------

The information required by this Item is incorporated herein by reference to the
Company's Proxy Statement

                                       12
<PAGE>


Item 13. Exhibits and Reports on Form 8-K.
------------------------------------------

(a)  Exhibits:
     ---------

          *    denotes filed herewith

3.1       Certificate of Incorporation of Northern Medical, Inc., as filed with
          the Secretary of State of Delaware on March 23, 1992, is incorporated
          by reference to Exhibit 1 to the Registrant's registration statement
          on Form 10-SB, filed with the Commission on December 10, 1999 (the
          "Form 10-SB").

3.2       Certificate of Amendment to Certificate of Incorporation of Northern
          Medical, Inc. (changing name to Normed Industries, Inc.), as filed
          with the Secretary of State of Delaware on November 2, 1992, is
          incorporated by reference to Exhibit 2 to Form 10-SB.

3.3       Certificate of Amendment to Certificate of Incorporation of Normed
          Industries, Inc., as filed with the Secretary of State of Delaware on
          January 8, 1995, is incorporated by reference to Exhibit 3 to Form
          10-SB.

3.4       Certificate of Amendment to Certificate of Incorporation of Normed
          Industries, Inc. (changing name to Highland Resources, Inc.), as filed
          with the Secretary of State of Delaware on March 28, 1995, is
          incorporated by reference to Exhibit 4 to Form 10-SB.

3.5*      Certificate of Amendment to Certificate of Incorporation of Highland
          Resources, Inc., as filed with the Secretary of State of Delaware on
          May 2, 1997.

3.6       Certificate of Amendment to Certificate of Incorporation of Highland
          Resources, Inc. (changing name to Highland Holdings International,
          Inc.), as filed with the Secretary of State of Delaware on December 3,
          1997, is incorporated by reference to Exhibit 5 to Form 10-SB.

3.7       The Bylaws of the Registrant are incorporated by reference to Exhibit
          6 to Form 10-SB.

4.1*      Amended and Restated Certificate of Designation of Rights, Privileges,
          Preferences, and Restrictions of Series B Convertible Preferred Stock
          of the Registrant, as filed with the Secretary State of Delaware on
          March 16, 2001.

21.1*     Subsidiaries of the Registrant. Highland Resources Honduras, S.A.
          (Honduran Company.)

23.1*     Consent of Kabani & Company, Inc.

(b)  Reports on Form 8-K.
     --------------------

     1.   The Company filed a Current Report on Form 8-K on March 19, 2001,
          reflecting the change in independent accountants.

                                       13
<PAGE>


                                   SIGNATURES

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


Registrant:             Highland Holdings International, Inc.



                        By: /s/ John P. Demoleas
                        ------------------------
                        John P. Demoleas, President


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


Date:  April 4, 2001                /s/ John P. Demoleas
                                    --------------------
                                    John P. Demoleas
                                    Chairman, President and
                                    Chief Executive Officer


Date:  April 4, 2001                /s/ George Nadas
                                    ----------------
                                    George Nadas
                                    Director, Secretary and Principal
                                    Financial and Accounting Officer


                                       14
<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


To the Stockholders and Board of Directors
Highland Holdings International, Inc. (an exploration stage company):

     We have audited the accompanying consolidated balance sheet of Highland
Holdings International, Inc. (an exploration stage company) as of December 31,
2000 and the related consolidated statements of operations, cash flows and
shareholders' deficit for the year ended December 31, 2000 and 1999 and for the
period from inception, March 23, 1992 to December 31, 2000. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. The financial statements as of December 31, 1999
and for the year then ended, were audited by other auditor whose report dated
April 28, 2000 expressed an unqualified opinion on those statements.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Highland Holdings International, Inc. (an exploration stage company) and
subsidiaries as of December 31, 2000 and the consolidated results of their
operations and their consolidated cash flows for the year then ended and for the
period from inception, March 23, 1992 to December 31, 2000 in conformity with
generally accepted accounting principles.


The accompanying consolidated financial statements have been prepared assuming
that Highland Holdings International, Inc. (an exploration stage company) will
continue as a going concern. As more fully described in Note 2, the Company has
incurred operating losses since inception and requires additional capital to
continue operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to these
matters are described in Note 2. The consolidated financial statements do not
include any adjustments to reflect the possible effects on the recoverability
and classification of assets or the amounts and classifications of liabilities
that may result from the possible inability of Highland Holdings International,
Inc. (an exploration stage company) to continue as a going concern.


/s/ KABANI & COMPANY, INC.
--------------------------
KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS

Fountain Valley, California
March 28, 2001

                                      F-1
<PAGE>

                      HIGHLAND HOLDINGS INTERNATIONAL, INC.
                         (an exploration stage company)
                           CONSOLIDATED BALANCE SHEET

                                                                    December 31,
                                                                        2000
                                                                        ----
                                     Assets
Current assets
  Cash                                                              $     1,934
  Prepaid expenses                                                        1,278
                                                                    -----------
  Total current assets                                                    3,212

Property & equipment-net                                                  1,835


                                                                    -----------
Total assets                                                        $     5,047
                                                                    ===========

                      Liabilities and Stockholders' Deficit

Current liabilities
  Accounts payable and accrued expenses                             $    19,939
  Officer loan payable                                                  132,712
  Contract payable                                                      103,000
                                                                    -----------
  Total liabilities                                                     255,651

Stockholders deficit
  Preferred stock- $.001 par value, authorized
    5,000,000 shares. The number of shares outstanding
    at December 31, 2000; -0-
  Capital stock- $.001 par value, authorized
    20,000,000 shares. The number of shares
    outstanding at December 31, 2000; 1,072,326                           1,072
  Additional paid in capital                                          2,047,967
  Accumulated other comprehensive income: Currency translation            5,982
  Accumulated deficit during exploration stage                       (2,305,625)
                                                                    -----------
Total stockholders deficit                                             (250,604)
                                                                    -----------
Total liabilities and stockholders deficit                          $     5,047
                                                                    ===========


                 See accompanying notes to financial statements.

                                       F-2
<PAGE>
<TABLE>
<CAPTION>


                          HIGHLAND HOLDINGS INTERNATIONAL, INC.
                             (an exploration stage company)
                          CONSOLIDATED STATEMENT OF OPERATIONS

                                                                             For the period
                                                                             from inception,
                                                  For the       For the      March 23, 1992
                                                 year ended    year ended         to
                                                December 31,  December 31,   December 31,
                                                    2000          1999           2000
                                                    ----          ----           ----
<S>                                             <C>            <C>            <C>
Income                                          $         0    $         0    $         0


Cost of goods sold                                        0              0              0
                                                -----------    -----------    -----------

Gross profit                                              0              0              0

Operations:
  General and administration                         36,624         27,827        866,578
  Exploration costs                                  64,506        130,197        770,375
  Non cash compensation-consulting fees              50,000         30,000        175,500
  Non cash payment for mining interests                                           391,753
  Realized and unrealized loss on
    trading securities-net                           13,286         17,132         30,418
  Depreciation and amortization                       1,591          1,956          6,124
                                                -----------    -----------    -----------
Total expense                                       166,007        207,112      2,240,748

Loss from continuing operations                    (166,007)      (207,112)    (2,240748)

Other income and loss

  Interest expense                                        0        (11,903)       (64,877)
                                                -----------    -----------    -----------
Total other income and expenses                          (0)       (11,903)       (64,877)

Net Profit (Loss) from operations               $  (166,007)   $  (219,015)   $(2,305,625)
                                                ===========    ===========    ===========

Net loss per share-basic & diluted              $     (0.16)   $     (0.33)
                                                ===========    ===========
Weighted average number of shares outstanding
Basic & Diluted                                     986,153        664,178
                                                ===========    ===========


                     See accompanying notes to financial statements.

                                           F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                       HIGHLAND HOLDINGS INTERNATIONAL, INC.
                                          (an exploration stage company)
                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY


                                                                                  Deficit
                                                                                accumulated
                                                                   Additional     during        Currency
                                      Common         Common         paid in     exploration    translation
            Date                       Stock          Stock         capital        stage       adjustment        Total
           ------                   -----------    -----------    -----------   -----------    -----------    -----------
<S>                                 <C>            <C>            <C>           <C>            <C>            <C>
03-13-1992                                  556    $         1    $     1,999   $              $              $     2,000
                                    -----------    -----------    -----------   -----------    -----------    -----------
Net loss                                                                             (1,800)                       (1,800)

12-31-1994                                  556              1          1,999        (1,800)                          200
Issuance of stock for acquisition          2280              2        293,195                                     293,197
additional capital contribution                                        27,000                                      27,000
Currency translation adjustment
Net loss                                                                            (30,050)                      (30,050)
                                    -----------    -----------    -----------   -----------    -----------    -----------
12-31-1995                                2,836              3        322,194       (31,850)                      290,347
Issuance of shares for
forgiveness of loans                        670              1        147,375                                     147,376
Issuance of shares for
acquisition                                 198              1         43,055                                      43,056
Currency translation adjustment
Net loss                                                                           (845,629)                     (845,629)
                                    -----------    -----------    -----------   -----------    -----------    -----------
12-31-1996                                3,704              5        512,624      (877,479)                     (364,850)
Issuance of shares for
acquisition                              19,048             19         99,981                                     100,000
Issuance of shares for
consulting services                      12,476             12         65,488                                      65,500
Sale of shares                            2,857              2         14,998                                      15,000
Sale of shares                           17,143             17         89,983                                      90,000
Issuance of shares for
acquisition                               2,381              2         62,498                                      62,500
Issuance of shares to Advisory
Board                                       286              1          1,499                                       1,500
Sale of shares                            5,000              5        524,995                                     525,000
Currency translation adjustment                                                                      8,621          8,621
Net loss                                                                           (593,679)                     (593,679)
                                    -----------    -----------    -----------   -----------    -----------    -----------
12-31-1997                               62,895             63      1,372,066    (1,471,158)         8,621        (90,408)
Issuance in consideration for
consulting fees                           2,666              3         28,497                                      28,500
Issuance of shares for
conversion of debt                       67,906             68        100,932                                     101,000
Sale of shares through private
placement                                40,317             40        155,960                                     156,000
Sale of shares                           22,667             23         33,977                                      34,000
Sale of shares through private
placement                               182,542            182         81,962                                      82,144
Beneficial conversion feature on
loans                                                                  41,248                                      41,248
Foreign currency translation                                                                         (940)           (940)
Net loss                                                                           (449,445)                     (449,445)
                                    -----------    -----------    -----------   -----------    -----------    -----------
12-31-1998                              378,993            379      1,814,642    (1,920,603)         7,681        (97,901)
Capital contribution                                                    8,024                                       8,024
Sale of shares through private
placement                               506,667            507        113,493                                     114,000
Issuance of shares for
conversion of debt                       53,333             53         23,947                                      24,000
Issuance of shares for
consulting fees                          40,000             40         29,960                                      30,000
Beneficial conversion feature on
loans                                                                   7,994                                       7,994
Currency translation adjustment                                                                     (1,699)        (1,699)
Net loss                                                                           (219,015)                     (219,015)
                                    -----------    -----------    -----------   -----------    -----------    -----------
12-31-1999                              978,993            979      1,998,060    (2,139,618)         5,982       (134,597)
Issuance of shares for
consulting fees                          93,333             93         49,907                                      50,000
Net loss                                                                           (166,007)                     (166,007)
                                    -----------    -----------    -----------   -----------    -----------    -----------
12-31-2000                            1,072,326    $     1,072    $ 2,047,967   $(2,305,625)   $     5,982    $  (250,604)


All shares issuance reflect a 17,500 forward split on January 24, 1995; a 30 to
1 reverse split on April 4, 1997 and a 7 to 1 reverse split on July 1, 1998 and
a 15 to 1 reverse split on January 10, 2001.


                 See accompanying notes to financial statements.

                                       F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                     HIGHLAND HOLDINGS INTERNATIONAL, INC.
                                        (an exploration stage company)
                                     CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                                  For the period from
                                                                       For the year     For the    inception, March
                                                                          ended        year ended    23, 1992, to
                                                                       December 31,   December 31,   December 31,
                                                                           2000           2000           2000
                                                                           ----           ----           ----
<S>                                                                    <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net profit (loss)                                                    $  (166,007)   $  (219,015)   $(2,305,625)
  Add items not affecting cash

  Depreciation and amortization                                              1,591          1,956          6,124
  Issuance of common stock for consulting fees                              50,000         30,000        175,500
  Issuance of common stock for the Lagoa da Pedra Project                                                293,197
  Issuance of common stock for the acquisition of Arizona properties                                     100,000
  Issuance of common stock for the acquisition of Minas Novas                                            105,556
  Interest expense                                                                         11,903         64,877

  Write off of security deposit
  Write off of office equipment abandoned with shut down of office
  Changes in non-cash operating accounts
  Trading  securities                                                      (31,375)        31,375
  Prepaid expenses                                                            (174)         6,570         (1,278)
  Accounts payable                                                          (2,473)        15,116         19,939
                                                                       -----------    -----------    -----------
TOTAL CASH FLOWS FROM OPERATIONS                                           (85,688)      (184,845)    (1,541,710)

CASH FLOWS FROM FINANCING ACTIVITIES
  Officer loan payable                                                      82,712         50,000        132,712
  Contract payable                                                                                       103,000
  Proceeds from issuance of  shares of common stock for debt                                             147,376
  Proceeds of  convertible note                                                                          109,365
  Currency translation adjustment                                                          (1,699)         5,982
  Sale of stock-net of offering costs                                         --          122,024      1,053,168
                                                                       -----------    -----------    -----------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES                                  82,712        170,325      1,551,603

CASH FLOWS FROM INVESTING ACTIVITIES
  Office equipment                                                            (768)          --           (7,959)
                                                                       -----------    -----------    -----------

TOTAL CASH FLOWS FROM INVESTING ACTIVITIES                                  (7,959)          --             (768)

NET INCREASE (DECREASE) IN CASH                                              3,744        (14,520)         1,934
CASH BALANCE BEGINNING OF PERIOD                                             5,678         20,198              0
                                                                       -----------    -----------    -----------
CASH BALANCE END OF PERIOD                                             $     1,934    $     5,678    $     1,934
                                                                       ===========    ===========    ===========


                                See accompanying notes to financial statements.

                                                      F-5
</TABLE>
<PAGE>

                      HIGHLAND HOLDINGS INTERNATIONAL, INC.
                         (an exploration stage company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            December 31, 2000 & 1999


Note 1. Organization of Company and Issuance of Common Stock

     a. Creation of the Company

     Highland Holdings International, Inc. (the "Company") was formed on March
23, 1992 under the laws of the State of Delaware as Northern Medical, Inc. with
10,000,000 shares of common stock authorized, $.001 par value each and 1,000,000
shares of preferred stock, $.001 par value each. On October 30, 1992, the
certificate of incorporation was amended to change the name of the Company to
Normed Industries, Inc. The certificate of incorporation was again amended on
January 17, 1995 increasing the number of shares of common stock to 20,000,000,
$.001 par value each and 5,000,000 shares of preferred stock, $.001 par value
each. On March 28, 1995, the Company amended its certificate of incorporation to
change its name to Highland Resources, Inc. On November 3, 1997, the Company
amended its certificate of incorporation to change its name to Highland Holdings
International, Inc.

     b. Description of the Company

     The Company is an exploration stage company involved in the acquiring and
development of a gold mining concession in Honduras. At the report date mineral
claims, with unknown reserves, had been acquired. At present, the Company is in
the exploration stage and there is no assurance that any of its prospects or
properties contains a commercially viable ore body (reserves) until further
geologic exploration work is done, and a final feasibility study based upon such
work is concluded.

     c. Issuance of Capital Stock

     All shares issued reflect a 17,500 forward split on January 24, 1995; a 30
to 1 reverse split on April 4, 1997 and a 7 to 1 reverse split on July 1, 1998
and 15 to 1 reverse split on January 10, 2001and such the per share amounts have
been adjusted to reflected the adjusted number of shares.

     On March 31, 1992, the Company issued 556 shares of common stock to Mr.
Roger Fidler in consideration for the contribution of $1,500 in cash and $500 in
organization costs.

     On March 13, 1995, The Company entered into an agreement to obtain the
alluvial gold and diamond mineral rights in its Lagoa da Pedra Project of the
Lagoa da Pedra Partnership for 2280 shares of common stock with an aggregate
consideration of $293,197.

     On September 11, 1996, the Company issued 670 shares of common stock in
consideration for the forgiveness of $147,376 in loans to the Company.

     On September 11, 1996, the Company issued 198 shares of common stock as
part consideration in the acquisition of Minas Novas valued at an aggregate
consideration of $43,056.

     On May 5, 1997, the Company issued, pursuant to regulation D, an aggregate
of 19,048 shares of common stock to various parties in consideration for the
purchase of 18 unpatented mining claims situated in Pima County, Arizona, valued
at $100,000.

                                      F-6
<PAGE>


     On May 5, 1997, the Company issued, pursuant to Regulation D, and aggregate
of 12,476 shares of common stock to various related parties to the Company in
consideration of consulting services valued at $65,500 in services.

     On May 30, 1997, the Company sold 2,857 shares of common stock pursuant to
Rule 504 for an aggregate consideration of $15,000.

     As of June 30, 1997, the Company sold 17,143 shares of common stock,
pursuant to a private placement under "Rule 504" of the Securities Act of 1933,
as amended, for an aggregate consideration of $90,000.

     On December 16, 1997, the Company issued 2,381 shares of common stock for
an aggregate consideration of $62,500 pursuant to the agreement with Minas Novas
Pesquisa E. Lavra S.A. to three individuals named in the agreement as follows:
1,310 shares to Friedrich Ewald Ronger, 833 shares to Victor Eugenio Suckau and
238 shares to Lothar Wirth for an aggregate consideration of $62,500.

     On December 16, 1997, the Company issued 286 shares of common stock to 6
advisory board members in exchange for services over a period of 1 year valued
at $1,500.

     On December 16, 1997, the Company sold 5,000 shares pursuant to Regulation
D for an aggregate consideration of $525,000.

     During the year 1998, the Company sold an aggregate of 22,667 shares of
common stock for an aggregate consideration of $34,000 in consulting fees.

     During 1998, the Company issued 67,906 shares of common stock through the
initial sale of $101,000 in convertible debt that was converted into shares of
common stock during the year.

     The Company sold an aggregate of 40,317 shares of common stock in
consideration for $156,000 through the completion of a private placement.

     The Company sold an aggregate of 182,542 shares for an aggregate
consideration of $82,144 through the completion of a private placement.

     As of September 30, 1999, the Company sold 20,000 shares of common stock
for $10,000 or to Mr. George Nadas, Secretary.

     As of September 30, 1999, the Company sold an aggregate of 486,667 shares
of common stock for an aggregate of $104,000 to Mr. John Demoleas, President.

     As of December 31, 1999, the Company converted the balance of $24,000 due
Cadence Capital into 53,333 shares of common stock in consideration for the
conversion of debt.

     As of September 30, 1999, the Company issued an aggregate of 40,000 shares
of common stock in consideration of consulting fees valued at an aggregate of
$30,000.

     In December 1999, the Company converted the balance due Cadence Capital
into 53,333 shares of common stock for $24,000 of debt or $0.03 per share.

     On December 4, 2000, the Company issued 93,333 shares of common stock in
consideration of consulting fees valued at an aggregate of $50,000.

                                      F-7
<PAGE>


Note 2. Summary of Significant Accounting Policies

     a. Basis of Financial Statement Presentation

     The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$2,305,625 for the period from inception, March 23, 1992, to December 31, 2000.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company is
anticipating the need to do further private placements to bring the mine in
Honduras into production and with the completion of its additional private
placement and with the increase in working capital, the Company will be able to
continue to develop the Company's mining concession and begin production. The
Company will require substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing long-term need to
obtain additional financing. The recoverability of the amounts shown for the
mining projects and the ability of the Company to continue as a going concern
are dependent upon its ability to raise capital, achieve profitable operations
from its mining activities, and on a satisfactory regulatory environment
governing the development and operation of mining properties in Honduras.

     The financial statements presented consist of the consolidated balance
sheet of the Company as at December 31, 2000 and the related consolidated
statements of operations, stockholders equity and cash flows for the years
ending December 31, 2000, 1999, and for the period from inception, March 23,
1992, to December 31, 2000.

     b. Cash and cash equivalents

     The Company treats temporary investments with a maturity of less than three
months as cash.

     c. Investments

     The Company's investments are classified as trading securities and are
carried at fair value with the realized and unrealized losses are carried in
operations.

     d. Exploration Costs

     Cost of acquisition, exploration, carrying, and retained unproven
properties are expensed as incurred. Cost incurred in proving and developing a
property ready for production are capitalized and amortized over the life of the
mineral deposit or over a shorter period if the property is shown to have an
impairment in value.

     e. Environmental Requirements

     At the report date environmental requirements related to the mineral claims
acquired are unknown and therefore an estimate of any future cost cannot be
made.

     f. Property and Equipment

     Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight-line
methods over a period of five years. Maintenance and repairs are charged against
operations and betterment's are capitalized.

                                      F-8
<PAGE>


     g. Revenue Recognition

     Revenue is recognized when extracted minerals are shipped.

     h. Foreign Currency Translation

     The U.S. dollar amounts presented have been translated from the Brazilian,
Honduras and Canada currency amounts in accordance with he criteria set forth in
Statement of Financial Accounting Standards 52 (SFAS 52) as applicable to the
accounts and transactions of a company operating in the currency of a country
with a non-highly inflationary economy. As of July 01, 1997, the three years
cumulative rate of inflation in Brazil, Honduras and Canada was less than 100%
and the entity's functional currency became the Brazilian real, Honduars lempira
and the Canadian dollar, the currency of the primary economic environment in
which the Company operates. As the reporting currency is the U.S. dollar, the
following criteria for the translation of Brazilian reais, Honduras lempira and
Canadian dollars to U.S. dollars was applied to the local currency basis
financial statements according to SFAS 52. Assets and liabilities were
translated by using the exchange rate at the balance sheet date; Revenues,
expenses, gains, losses were translated by using the weighted average exchange
rate for the period from January 1, 2000 to December 31, 2000.

     The translation loss for the period from January 1, 2000 to December 31,
2000 was reported separately as a component of shareholder's Equity (as a CTA
-cumulative translation adjustment); The capital account in Shareholder's equity
was translated by using the historical exchange rate.

     i. Selling and Marketing Costs

     Selling and Marketing - Certain selling and marketing costs are expensed in
the period in which the cost pertains. Other selling and marketing costs are
expensed as incurred.

     j. Use of Estimates

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

     k. Asset Impairment

     The Company adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS No. 121) effective January 1, 1996. SFAS No. 121 requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the estimated undiscounted cash flows to be generated
by those assets are less than the assets' carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of.

                                      F-9
<PAGE>


     l. Basic and diluted net loss per share

     Net loss per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), "Earnings per share".
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net
loss per share for all periods presented has been restated to reflect the
adoption of SFAS No. 128. Basic net loss per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is based
on the assumption that all dilutive convertible shares and stock options were
converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.

     m. Stock-based compensation

     In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and
related interpretations with proforma disclosure of what net income and earnings
per share would have been had the Company adopted the new fair value method. The
implementation of this standard did not have any impact on the Company's
financial statements.

     n. Fair value of financial instruments

     Statement of financial accounting standard No. 107, Disclosures about fair
value of financial instruments, requires that the Company disclose estimated
fair values of financial instruments. The carrying amounts reported in the
statements of financial position for current assets and current liabilities
qualifying as financial instruments are a reasonable estimate of fair value.

     o. Segment Reporting

     The Company allocates resources and assesses the performance of its
activities as one segment. During the years ended December 31, 2000 and 1999,
the Company only operated in one segment therefore segment disclosure has not
been presented.

     p. Recent Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133, as amended by SFAS No. 137 and SFAS No. 138, is effective for fiscal
quarters of fiscal years beginning after June 15, 2000. This statement is not
applicable to the Company.

                                      F-10
<PAGE>


     In June 1999, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards (SFAS) No. 136, "Transfer of Assets to a
Not-for-Profit Organization or Charitable Trust that raises or Holds
Contributions for Others." This statement is not applicable to the Company.

     In June 1999, the FASB issued Financial Accounting Standards (SFAS) No.
137, "Accounting for Derivative Instruments and Hedging Activities." The Company
does not expect adoption of SFAS No. 137 to have a material impact, if any, on
its financial position or results of operations.

     In June 2000, the FASB issued Financial Accounting Standards (SFAS) No.
138, "Accounting for Certain Instruments and Certain Hedging Activities." This
statement is not applicable to the Company.

     In June 2000, the FASB issued Financial Accounting Standards (SFAS) No.
139, "Rescission of FASB Statement No. 53 and Amendments to Statements No. 63,
89, and 121." This statement is not applicable to the Company.

     In September 2000, the FASB issued Financial Accounting Standards SFAS No.
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and a replacement of FASB Statement No. 125."
This statement is not applicable to the Company.

     In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes the SEC's views on the application of GAAP
to revenue recognition. In June 2000, the SEC released SAB No. 101B that delays
the implementation date of SAB 101 until no later than the fourth fiscal quarter
of fiscal year beginning after December 15, 1999. The Company has reviewed SAB
No. 101 and believes that it is in compliance with the SEC's interpretation of
Revenue recognition.

     In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation." This Interpretation
clarifies (a) the definition of employee for purposes of applying APB Opinion
No. 25, (b) the criteria for determining whether a plan qualifies as a no
compensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. The
adoption of this Interpretation has not had a material impact on the Company's
financial position or operating results.

     q. Reclassifications

     Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 presentation.

Note 3. Acquisition of Assets

     The following claims have not been proven to have a commercial minable ore
reserve and therefore all costs for exploration and retaining the properties
have been expensed

     a. Lagoa da Pedra Project

     On March 13, 1995 when the Company entered into an agreement to purchase
the alluvial mineral rights in its Lagoa da Pedra Project located on the
Jequitinhonha river, near Diamantina, Minas Gerais, Brazil from the Lagoa da
Pedra Partnership (the "Partnership") for 2,280 shares of common stock. The
partnership consisted of Charles Stetler, a geologist (owning 12.5% of the
Partnership), Jose Lourenco Viana Neto (owning 12.5% of the Partnership),

                                      F-11
<PAGE>


Enterprise Gold Limited, a partnership located in Monaco (owning 50% of the
Partnership) and Perth Limited of the British Virgin Islands (owning 25% of the
Partnership). Charles Stetler and Jose Lourenco Viana Neto are experienced in
the mining industry in Brazil and will manage the operations in Brazil and
Enterprise Gold Limited and Perth are investors with international business
affiliations that assisted in the corporate development of the operation. The
transaction has been accounted for as a reverse acquisition and using the
purchase method of accounting with historic costs being the basis of valuation.
The financial statements of the Company have been retroactively restated to
include the combined statements of operations and cash flows for the period from
inception, March 22, 1992, to March 13, 1995 and the statements of operations
and cash flows of Lagoa da Pedra Partnership for the period March 13, 1995. The
aggregate moneys spent on the project to date represent $293,197.

     The contract for purchase required a payment of $30,000 with a down payment
of $5,000, which was paid on May 10, 1993 by the Lagoa da Pedra Partnership and
the balance of $25,000 to be paid by December 31, 1996 by the Lagoa da Pedra
Partnership. The terms of the agreement were modified on various occasions to
extend the time required to pay the balance of $25,000.

     As of December 31, 1996, the Company had concluded that the Logoa da Pedra
Project is not able to yield production sufficient to offset the required
investment in exploration and commercial production costs and had charged the
mineral costs $446,967 accumulated for this project were charged to operations
for the year ending December 31, 1996.

     b. Option on Acquisition of Minas Novas

     On June 27, 1996, the Company entered into an agreement with Minas Novas
Pesquisa E Lavra S.A. ("Minas Novas"), a Brazilian corporation for the
acquisition of 95% of the issued and outstanding stock of Minas Novas for a
purchase price of $380,000.

     On September 1, 1997, the agreement was modified as to the terms and
conditions as follows:

     The Company was given recognition of the $15,000 paid pursuant to the
original agreement on June 27, 1996.

     On September 11, 1996, the Company issued an aggregate of 198 shares of
restricted common stock as part consideration in the acquisition of Minas Novas
and to extend the deadline for the payment of the purchase price of the mineral
property. These shares were subsequently restated to 198 upon the reverse split
of the Company's stock. The shares were issued as restricted stock.

     On December 16, 1997, the Company issued an additional 2,381 shares of
common stock pursuant to the agreement with Minas Novas to three individuals
named in the agreement as follows: 1,310 shares to Friedrich Ewald Renger, 833
shares to Victor Eugenio Suckau and 238 shares to Lothar Wirth. These shares
were issued as a further inducement to extend the deadline for the payment of
the purchase price of the mineral property and as additional consideration and
collateral for the consummation of this purchase agreement. The shares of common
stock, were issued as restricted stock and were valued at an aggregate of
$62,500 and charged to operations as a cost of acquiring the mineral property.

     The shareholders' of Minas Novas had an option until September 30, 1998, to
require the Company to repurchase the shares for an aggregate consideration of
$500,000 by notifying the company of Minas Nova's intention in writing by
September 1, 1998 and effect payment within 120 days. Thirty days after written
notice, interest will accrue at the rate of 2% per month. In the event of

                                      F-12
<PAGE>


default by the Company to repurchase these shares, then the present contract
looses all legal validity and all outstanding shares of Minas Novas must be
returned to the seller without onus to the seller. Effective September 2, 1998,
if the principals of Minas Novas wish to sell on the open market any part of the
shares of restricted stock, these shares can only be sold in blocks with a
combined maximum value of $100,000 in any given month.

     The Company also agreed to begin to advance money as follows:

     $5,000 per month for the next 12 months for payment of administration costs
commencing September 1, 1997.

     $20,000 toward the costs of the elaboration of the Economic Development
Plan as required by the Brazilian government.

     $80,000 for working capital commencing December 1, 1997.

     The default of any of the obligations of either the Company or Minas Novas
that is not corrected in a maximum period of 30 days, counting the date of the
specific notification will cause the dissolution of the contract and subject the
Company to a penalty of $210,000 and the return to each party the shares issued
pursuant to this contract.

     As of December 31, 1997, the Company reflected a total Contract Payable of
$603,000 consisting of a $103,000 balance for monies due towards the 4 monthly
payments of $5,000 due for 1997, the $80,000 and the $20,000 less $17,000 paid
as of December 31, 1997 and the liability for the repurchase of the shares of
common stock for an aggregate consideration of $500,000.

     The Company has charged operations for an aggregate of $240,000
representing the $120,000 in operating monies due Minas Novas and $120,000
representing the difference in the purchase price of $120,000 due to the
penalties for prolonging payment of the original terms of purchase ($500,000 for
the option less the original purchase price of $380,000).

     As of December 31, 1998, the Company has concluded that the Minas Novas
Project is not able to yield production sufficient to offset the required
investment in exploration and commercial production costs and has charged the
cost to purchase the Minas Novas project of $380,000 to operations for the year
ending December 31, 1998. Management is also of the opinion that Minas Novas
Pesquisa E Lavra S.A. has not lived up to the terms and conditions of the
contract for purchase, exploration and development entered into on September 11,
1997 and has discontinued any further relationship with the shareholders of
Minas Novas. The Company has also placed a stop transfer order on the shares of
common stock that were issued as a further inducement and as additional
consideration and collateral for the consummation of this purchase agreement and
has requested the return of these shares. As of December 31, 2000, the Company
has recognized the value of the outstanding put option of the shares of common
stock collateralizing aggregating $500,000 and the balance of the contract
payable aggregating $103,000. Pursuant to the terms and conditions of the
agreement, the Company may also be liable for liquidated damages of up to
$210,000 if litigation should occur.

     As of December 31, 2000, a lawsuit has not been entered into by either
party and in the opinion of management a lawsuit by Minas Novas is not expected
considering that they have regained all rights to the property and their shares
of stock and the benefits of the Company's investment in property improvements
and equipment purchased.

                                      F-13
<PAGE>


     c. Arizona Property

     On May 5, 1997, the Company issued, pursuant to regulation D, an aggregate
of 19,048 shares of common stock to various parties in consideration for the
purchase of 18 unpatented mining claims situated in Pima County, Arizona, valued
at $100,000.

     This agreement was memorialized on January 23, 1998 with the actual
transfer and registration of title to the 18 mining claims. As of December 31,
1998, the Company has concluded that the Arizona Project is not able to yield
production sufficient to offset the required investment in exploration and
commercial production costs and has charged the mineral costs of $29,658
accumulated for this project and has charged operations for the year ending
December 31, 1998.

     d. Honduras Properties

     In October 1997, the Company, through its subsidiary, Highland Resources
Honduras S.A., of which the Company owns 95%, entered into an agreement for the
purchase of 100% ownership of the and the mineral rights from Desarrollo De
Recursos Naturales, S. de R.L. de C.V., ("Derena") consisting of mineral
concessions aggregating 18,000 hectares. The agreement was memorialized in
Honduras on March 18, 1998 with the recording and registration of the Company
rights and titles to the concessions in Tegucigalpa, Honduras through the
Company's subsidiary Highland Resources Honduras, S.A.

     As of March 31, 1998, title had transferred by agreement but had not been
officially registered with the local government.

     In June 1997, the Company paid a fee of $25,000 to Derena for the right to
do due diligence on the properties owned by Derena in Honduras. Upon
acceptability of the investigation, the Company would obtain 75% ownership of
Derena for a cash payment of US$ 250,000. In December 1998, the percentage of
ownership was renegotiated to become 95% ownership. Derena's minority holding of
5% would be a "free carried interest", (i.e. not contributing to exploration,
administration and development costs), except as follows:

     Production from all properties would be subject to a 2% "Net Smelter
Royalty", payable to Decenna, Mr. Mattsson and/or his assignees and/or
successors.

     For a period of 5 years from June 10, 1997, the Company has the option to
purchase Mr. Mattsson's minority interest interests, whether carried or
participatory for the sum of US$ 1,000,000.

     Mr. Mattsson has been appointed to the Executive Advisory Board of the
Company.

     As of December 31, 1998, the Company has paid $391,313 pursuant to the
terms of this agreement and the percentage of ownership was renegotiated to
become 95%.

Note 4. Related Party transactions

     a. Issuance of Common Stock

     On March 31, 1992, the Company issued 556 shares of common stock to Mr.
Roger Fidler in consideration for the contribution of $1,500 in cash and $500 in
organization costs.

                                      F-14
<PAGE>


     On December 16, 1997, the Company issued pursuant to regulation D, 286
shares of common stock to 6 advisory board members in exchange for services over
a period of 1 year valued at $1,500.

     On May 5, 1997, the Company issued an aggregate of 103 shares of common
stock to Wolfdietrich Bruehl, former Chairman of the Board, in consideration for
services valued at $22,450.

     On May 5, 1997, the Company issued an aggregate of 1,905 shares of common
stock to Charles Stetler, former President, in consideration for services valued
at $28,571.

     On May 5, 1997, the Company issued an aggregate of 952 shares of common
stock to Melanie Ellerton, former President of the Company for an aggregate
consideration for services valued at $5,000.

     On May 5, 1997, the Company issued an aggregate of 990 shares of common
stock to George Nadas in consideration for services valued at $5,000.

     On July 10, 1998, the Company sold an aggregate of 71,338 shares of common
stock to John Demoleas, President, in consideration for $40,000.

     On September 9, 1998 the Company sold an aggregate of 48,444 shares of
common stock to John Demoleas for $14,533.

     As of December 31, 1998, the Company issued an aggregate of 476 shares of
common stock to John Demoleas, President of the Company for an aggregate
consideration of $5,000.

     As of September 30, 1999, the Company sold an aggregate of 486,666 shares
of common stock for an aggregate of $104,000 to Mr. John Demoleas, President.

     As of September 30, 1999, the Company sold 20,000 shares of common stock
for $10,000 to Mr. George Nadas, Secretary.

     b. Officer Compensation

     For the year ended December 31, 2000, the Company has not paid any salary
to any of the officers.

     c.Officer Loan

     In April 1999, John Demoleas, President of the Company advanced the Company
an aggregate of $50,000. During 2000, the Company borrowed additional $82,712.
Total loan from officer at December 31, 2000 amounted to $132,712. The loan is
payable on demand, unsecured and interest free.

Note 5. Preferred Stock

     The certificate of Incorporation was amended on January 17, 1995 increasing
the number of shares authorized from 200 common shares with a par value of $.001
to an aggregate number of shares of stock which the corporation shall have
authority to issue is 20,000,000, which are divided into 5,000,000 shares of
Preferred stock with a par value of $.001. The Preferred Shares have the
following provisions:

                                      F-15
<PAGE>


     a. Dividends are cumulative.

     Preferred shareholders are entitled to receive dividends at the rate of
$.12 per share per annum and no more, payable in cash quarterly commencing March
31, 1995 and thereafter on the last day of September, December, March and June
of each year on any Preferred series A shares ("Preferred Stock") outstanding.
Dividends that are in arrears must be paid before any distribution shall be paid
on common stock.

     b. Redemption

     At any time during the six year period commencing on the date of issuance,
the Company may redeem all or part of the outstanding shares of the Preferred
Stock at the redemption cash price equal to $2.50 per share, together with all
declared and unpaid dividends provided the Company gives thirty days prior to
the date specified for redemption.

     c. Voting Rights

     Except as otherwise required by law or by the articles of incorporation of
the Company, the shares of Preferred Stock shall have no voting rights
whatsoever.

     d. Conversion Rights

     Each share of Preferred Stock shall be convertible at the option of the
holder, at any time during the time period commencing 5 years from the date of
issuance and ending 6 years from the date of issuance, and on or prior to the
5th day prior to a redemption date into fully paid and nonassessable shares of
common stock of the Company. The number of shares of common stock into which
each share of the Preferred Stock may be converted shall be determined by
dividing the initially issuable conversion price of $2.50 subject to adjustment
by the conversion price in effect at the time of the conversion. The conversion
price from time to time in effect shall be subject to adjustment as follows: In
case the Company shall at any time subdivide the outstanding shares of common
stock, or shall issue a stock dividend on its outstanding common stock, the
conversion price in effect immediately prior to such subdivision or the issuance
of such dividend shall be proportionately decreased, and in case the Company
shall at any time combine the outstanding shares of common stock, the conversion
price in effect immediately prior to such combination shall be proportionately
increased, effective at the close of business on the date of such subdivision,
dividend or combination, as the case may be.

     e. Contingent Liability

     The Company shall at all times reserve and keep available out its
authorized but unissued common stock, solely for the purpose of effecting the
conversion of the Preferred Shares, the full number of shares of common stock
deliverable upon the conversion of all Preferred Stock from time to time
outstanding.

     On December 31, 2000, the number of shares of preferred stock outstanding
was -0-.

                                      F-16
<PAGE>


Note 6. Furniture and Fixtures

     Furniture and fixtures consisted of the following:

                                            December 31, 2000
                                            -----------------
                       Office equipment           $7,959
                       Accumulated depreciation    6,124
                                                  ------
                       Balance                    $1,835
                                                  ======

Note 7. Income Taxes

     The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 2000, the Company had
no material current tax liability, deferred tax assets or liabilities to impact
on the Company's financial position because the deferred tax asset related to
the Company's net operating loss carry forward and was fully offset by a
valuation allowance.

     As of December 31, 2000, the Company has net operating loss carry forwards
for income tax purposes of $2,254,000. This carry forward is available to offset
future taxable income, if any, and expires in the year 2015. The Company's
utilization of this carry forward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.

     The components of the net deferred tax asset as of December 31, 2000 are as
follows:

                 Deferred tax asset:

                 Net operating loss carry forward   $ 770,000
                 Valuation allowance                 (770,000)
                                                    ---------
                 Net deferred tax asset             $       0
                                                    =========

     The Company recognized no income tax benefit for the loss generated in the
period from inception, March 23, 1992, to December 31, 2000.

     SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.

                                      F-17
<PAGE>


Note 8. Cash Flow Information

     The following is supplemental cash flow information for the period from
inception, March 23, 1992, to December 31, 1997

          Issuance of 2,280 common shares for
           acquisition of  mineral properties
           on March 13, 1995                               $(293,197)

          Issuance of 670 common shares for
           forgiveness of debt                              (147,376)

          Issuance of 198 common shares as part
           consideration of Minas Novas                      (43,056)

          Issuance of 19,048 common shares as
           consideration for acquisition of Arizona
           properties                                       (100,000)

          Issuance of 12,476 common shares in
           consideration for consulting fees                 (65,500)

          Issuance of 2,381 common shares as part
           consideration for the Minas Novas acquisition     (62,500)

          Issuance of 286 common shares to 6 advisory
           board members in exchange for services             (1,500)

          Capital Stock                                      713,129
                                                           ---------
          Total                                            $       0
                                                           =========


     The following is supplemental cash flow information for the year ended
December 31, 1998:

         Issuance of 2,666 common shares in consideration
          of consulting fees                                 $ (28,500)

         Issuance of 39,997 common shares in consideration
          of the conversion of debt                           (101,000)

         Capital Stock                                         129,500
                                                             ---------
         Total                                               $       0
                                                             =========

     The following is supplemental cash flow information for the year ended
December 31, 1999:

       Issuance of 53,312 common shares in consideration
        of the conversion of debt                              $(24,000)

       Issuance of 40,000 shares in consideration consulting
        fees                                                    (30,000)

       Capital Stock                                             54,000
                                                               --------
       Total                                                   $      0
                                                               ========

                                      F-18
<PAGE>


     The following is supplemental cash flow information for the year ended
December 31, 2000:

      Issuance of 93,333 shares in consideration of consulting
       fees                                                       (50,000)

      Capital Stock                                                50,000
                                                                 --------
      Total                                                      $      0
                                                                 ========


Note 9. Commitments and Contingencies

     a. Stock Option Plan and Stock Grant Program

     In June 1995, the Company adopted a non-qualified stock option plan and a
stock grant program with the following provisions.

     1. Stock Option Plan: The Company has reserved 20,000 shares of its
authorized common stock for issuance to key employees, officers and consultants.
Under this plan, no employee may receive more than 3,333 options. Options are
nontransferable and expire if not exercised within two years. The options may
not be exercised by the employee until after the completion of two years of
employment with the Company. The options are issuable to officers, key employees
and consultants in such amounts and prices as determined by the Board of
Directors. As of December 31, 1997, no options have been granted pursuant to
this plan.

     2. Stock Grant Program: The Company has reserved 20,000 shares of its
authorized common stock for issuance to key employees, officers, directors, and
consultants. Under this plan, no employee may receive more than 6,666 options.
The program requires the employee to remain as the employee of the company for
at least one year following the grant and to agree not to engage in any activity
which would be considered in competition with the Company's business. If the
employee violates any one of these conditions the ownership of the stock issued
under the program shall revert back to the Company. The stock issued under the
program is nontransferable for two years. As of December 31, 1998, December 31,
1999 and December 31, 2000, no options have been granted pursuant to this plan.

     b. Leased Office Space

     The Company occupies office space at the office of George Nadas, Chartered
Accountant and Secretary to the Company at 800 Petrrolia Road, Unit 7, Toronto,
Canada M3J 3K4. The Company pays rent on a month-to-month basis at the rate of
$250.

     c. Leased Office Space in Honduras

     On October 26, 1997, the Company, through its subsidiary HRH, leased
approximately 630 square feet of office space for two years in the city of
Tequcigalps for $625 per month.

     d. Consulting Agreements

     1. On November 17, 1997, the Company entered into a consulting agreement
with Loeb Aron & Company LTD. ("Loeb Aron"), a company incorporated in England
for services relating to geology and related mining, smelting, engineering, and
production of minerals. The agreement is for two years beginning October 1, 1997
and is extended automatically for a period of 6 months or until notice is given
by either party.

                                      F-19
<PAGE>


     For the year ended December 31, 1998, the Company has paid Loeb Aron as
follows: On February 4, 1998, 714 post split shares of common stock valued at
$1,000 and on September 10, 1998, 15,333 shares of common stock valued at
$25,000.

     2. Agreement with A-Z Professional Consultants, Inc. a Utah corporation,
("A-Z"), for the purposes of consulting on matters relating to mergers and
acquisitions, advising corporate management and in performing general
administrative duties for public-held companies and development stage investment
ventures. The term is for 1 year and is renewable.

     Payment for these services is 40,000 shares of common stock. As of
September 30, 1999, the Company has delivered 40,000 shares of common stock
valued at $0.75 per share for an aggregate consideration of $30,000.

     3. On November 22, 2000, the Company entered into a consulting agreement
with two individuals, whereby, these individuals will provide the Company
financial consulting services. On December 4, 2000, the Company issued 93,333 of
its ordinary share capital valued at $50,000.

Note 10. Convertible Promissory Note

     The Company borrowed an aggregate of $125,000 as evidenced by a Convertible
Promissory Note with Cadence Capital Corp., (the "Note") dated March 26, 1998
and due September 22, 1998. The Company received net proceeds of $109,635 after
paying interest in advance of $15,635. The Note is payable pursuant to the
following terms and conditions:

     Interest is payable at the rate of 12% in advance upon the closing of the
issuance of this Note. The holder of this Note has the right to convert this
note, in whole or in part at any time into shares of common stock, at the lesser
of 75% of the lowest closing bid price for the shares quoted on the Bulletin
Board for the 5 day trading period ending on the day prior to the conversion
date, or the lowest closing bid price for the shares quoted on the Bulletin
Board for the five day trading period ending on the day prior to the date.

     Notwithstanding any provisions of this Note, in no event will the Holder be
entitled to convert this Note into shares to the extent that after such
conversion, the number of shares of common stock beneficially owned by the
Holder and its affiliates and the number of shares issuable upon the conversion
of this Note would result in beneficial ownership and its affiliates of more
than 4.9% of the issued and outstanding shares of common stock as of the date of
the conversion.

     The number of shares is also subject to various conversion price
adjustments and adjustment for reverse stock splits.

     The Company has agreed to use the proceeds of this Note for working capital
and not to pay any indebtedness of the Company.

     As of December 31, 1998, the Company had converted $101,000 in debt into an
aggregate of 67,906 shares of common stock for an average conversion price of
$1.50 per share.

     As of December 31, 1999, the Company converted the balance of $24,000 into
53,312 shares of common stock in consideration for the conversion of $24,000 in
debt $.45 per share.

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     On the dates of conversion of the promissory notes, the conversion prices
were less than the fair values of the common stock; hence a beneficial
conversion feature is attached to these convertible notes. For the year ended
December 31, 1998 and 1999, the amount of this beneficial conversion feature is
$41,248 and $7,994 respectively and has been recorded as interest expense and
additional paid-in-capital for the years ended December 31, 1998 and 1999.

Note 11. Subsequent Events

     Stock Option

     Subsequent to year ended December 31, 2000, the company has adopted a stock
option plan, under which options may be granted, as determined by the option
committee of the board of directors at the time of grant of an option. The plan
enables the option committee of the board of directors to grant up to 13,333
stock options to employees and consultants from time to time. The option
committee has granted no options. The date of grant of an Option shall, for all
purposes, be the date on which the Option Committee makes the determination
granting such Option, or such other date as determined by the Option Committee.

     Stock Split

     Subsequent to year ended December 31, 2000, the stockholders of the Company
authorized a reverse stock split of the Company's common stock in the ratio up
to one share for fifteen shares. The net loss per common share has been restated
to retroactively effect a reverse stock split in the ratio of one share for ten
shares.




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