FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

 [ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                    For the fiscal year ended: March 31, 1998

                                       OR

 [   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

           For the transition period from              to            
                                          ------------    -----------

                        Commission file number: 2-87052-D
                                                ---------

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

           Colorado                                             84-0914754
-------------------------------                              -------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

                             Mellon Financial Center
                         Suite 1001, 1775 Sherman Street
                                Denver, Colorado                   80203
                    ----------------------------------------     ----------
                    (Address of principal executive offices)     (Zip Code)

                    Issuer's telephone number: (303) 894-0234
                                               --------------

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

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

     Indicate by check mark whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the  Exchange  Act  during the  preceding  12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing requirements for at least 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 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 ]

     Issuer's revenues for its most recent fiscal year: $4,230.
<PAGE>

     Aggregate  market value of voting stock held by  non-affiliates  as of June
30,  1998:  $-0-.  There is  currently  no trading  market for the  Registrant's
securities.

     Number of shares of Common Stock,  $.01 par value,  outstanding  as of June
30, 1998: 1,788,756.

     Documents  incorporated by reference:  See Part IV, Item 13 - "Exhibits and
Reports on Form 8-K" for a listing of documents  incorporated  by reference into
this annual report on Form 10-KSB.

                                       -2-

<PAGE>

                           COGENCO INTERNATIONAL, INC.

                                   FORM 10-KSB

                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS
          -----------------------

(a)  BUSINESS DEVELOPMENT.

     Cogenco International, Inc. ("Cogenco" or the "Company") was organized
under the laws of the State of  Colorado  on June 27,  1983,  for the purpose of
engaging in the cogeneration business,  which is the simultaneous  production of
power,  either  mechanical or  electrical,  and useful thermal  energy,  such as
steam,  so that the waste heat which is a by-product of one process  becomes the
energy source for the other.  Cogenco commenced active business operations after
it completed  its initial  public  offering of  securities  in February of 1985,
pursuant  to which the Company  realized  total net  proceeds  of  approximately
$1,000,000.

     Cogenco  was not  successful  in the  cogeneration  business,  although  it
completed  one  cogeneration  facility  in Arvada,  Colorado,  and  investigated
numerous other cogeneration project  opportunities.  Cogenco eventually depleted
its  financial  resources  and was not  able to  secure  additional  capital  to
continue active business  operations.  Cogenco ceased active business operations
in early 1988. The Company has been attempting to locate a business  opportunity
to combine with the Company since that time.

     During the time  subsequent  to  cessation of active  business  activities,
Cogenco has been  maintained as a validly  existing  Colorado  corporation.  Its
activities  have consisted  primarily of the settlement of debts incurred by the
Company through the date it ceased active operations and  subsequently,  and the
maintenance  of books  and  records  to allow  the  Company  to  obtain  audited
financial statements for all years since inception. In addition, certain members
of  its  management  have  continuously  sought  to  locate  potential  business
opportunities for the Company.

     Meetings  of  shareholders  of the Company  were held in February  1992 and
August 1993 at which  restructurings of the Company's authorized and outstanding
capital  were  approved.  Share  numbers in this  Report  have been  restated to
reflect the recapitalizations approved by the Company's shareholders in February
1992 (50 for 1 reverse split) and August 1993 (10 for 1 reverse split).

(b)  BUSINESS OF ISSUER.

     Since the time it ceased active business operations in 1988,  management of
Cogenco has been actively  seeking  business  opportunities.  Several  potential

                                      -3-
<PAGE>

candidates  were  located  between  1988  and  the  present  time;  however,  no
combination with any of these companies was ever completed.

     The Company has engaged in limited  activities  in the oil and gas business
but has been  hampered in its  efforts due to its lack of capital.  It is likely
that the Company will need a  substantial  amount of  additional  capitalization
before  it  will be able to  participate  in any  activities  in the oil and gas
industry.  There is no  assurance  that the Company  will obtain any  additional
capitalization.

         In addition, Cogenco may serve as the sponsor and/or general partner of
programs  and/or  entities  which  will  actually  operate  in the  oil  and gas
business. This may take the form of limited and/or general partnerships, working
interest programs, joint ventures or other methods of acquiring interests in oil
and gas properties and financing the operation thereof.

Competition
-----------

     Upon entering the oil and gas business through  acquisition of interests in
oil and gas properties as described  above (of which,  however,  there can be no
assurance), the Company will be in competition with numerous companies and firms
which  are  larger,  better  established,   have  greater  financial  and  other
resources,  more employees, and more extensive facilities than will the Company.
The Company  will  therefore  be at a  competitive  disadvantage  to these other
entities.  The Company cannot expect to be a significant  participant in the oil
and gas  business  within  the  foreseeable  future  and will  face  significant
competition  from a substantial  number of businesses  and  individuals  who are
engaged in the oil and gas business.

Government Regulation
---------------------

     The oil and gas business is heavily  regulated by statute and regulation by
various government entities,  both state and federal. In addition, tax treatment
of investments in oil and gas properties is constantly  undergoing change at the
federal level.  Although management  believes that despite such regulation,  the
oil and gas business can be  profitable,  and that oil and gas  companies of the
size  anticipated  for  the  Company  can  and do  operate  successfully  in the
industry,  no assurance can be given that such  governmental  regulation may not
adversely affect the Company in the future.

Employees and Consultants
-------------------------

     The  Company's  President,  Mr.  David  Brenman,  is the only person who is
actively  involved  in  day  to  day  operations  of  the  Company.   Management
anticipates that additional employees and/or consultants will be retained as may
be necessary to operate the Company.  The Company believes that this arrangement
is  adequate  to meet the needs of the  Company  during its  process of pursuing
business opportunities.


                                       -4-

<PAGE>

Item 2.   DESCRIPTION OF PROPERTY
          -----------------------

     The Company  currently  maintains  its offices at no charge in the business
office of the law firm which  represents it in general  corporate and securities
law matters. See Item 12 - "Certain Relationships and Related Transactions." The
office facilities are provided to the Company pursuant to an oral agreement, and
the  value of such  facilities  is de  minimis.  Management  believes  that this
arrangement will be suitable for its needs for the immediate future.

     The Company owns no real property and no material personal property.

Item 3.   LEGAL PROCEEDINGS
          -----------------

     The Company is not a party to any legal proceedings and no such proceedings
are known to be contemplated.

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

     None.

                                       -5-

<PAGE>

                                     PART II


Item 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
          --------------------------------------------------------

(a)  MARKET INFORMATION.

     The  Company's  Common  Stock is not  eligible  for  listing  on the NASDAQ
system, and trading,  if any, has been strictly limited to the  over-the-counter
market.  The Common Stock has been quoted from time to time in the "Pink Sheets"
maintained  by the  National  Quotation  Bureau,  Inc.  Since  1988,  management
believes that no established trading market has existed for the Company's Common
Stock.

(b)  HOLDERS.

     (b)(1) The  approximate  number of record  holders of the Company's  Common
Stock, $.01 par value, as of June 15, 1998 was 841. This figure does not reflect
an indeterminable number of shareholders whose shares are held in "street name."

(c)  DIVIDENDS.

     The Company has not paid a dividend  with  respect to its Common  Stock and
cannot be  expected  to pay a dividend  on its Common  Stock in the  foreseeable
future.

     The  Company's  ability to pay dividends is restricted by provisions of the
Colorado Business Corporation Act which provides that a Colorado corporation may
only pay  dividends if, after giving  effect to the  dividend,  the  corporation
would  be able to pay its  debts  as they  become  due in the  usual  course  of
business,  or the  corporation's  total  assets  would be less  than  its  total
liabilities plus the amount that would be needed,  if the corporation were to be
dissolved at the time of the dividend,  to satisfy the preferential  rights upon
dissolution  of  shareholders  whose  preferential  rights are superior to those
receiving the dividend.

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

RESULTS OF OPERATIONS

Years Ended March 31,1997 and 1998.
----------------------------------

     As stated above, the Company has been essentially inactive since early 1988
until the 1993 fiscal  year.  During this time the  Company  was,  and since has
been,  investigating investment alternatives in the oil and gas industry but has
been  unsuccessful.  As a result,  during the last two fiscal  years the Company
achieved no operating  revenues,  but recognized a net loss of $(12,021) for the
fiscal year ended  March 31, 1997 as compared to a net loss of $(9,234)  for the
fiscal year

                                       -6-

<PAGE>

ended March 31, 1998. The larger net loss during the 1997 fiscal year was due to
travel expenses of $4,228 paid to the Company's President in 1997 as compared to
$-0- paid in 1998,  legal fees of $5,863 in 1997 and $7,197 in 1998, and general
and  administrative  of  $6,074  in 1997 and  $5,115  in 1998.  The  Company  is
attempting to finance new business operations at the present time.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company has been  without  adequate  funds since 1987.  At the time it
ceased active business operations,  it was essentially out of money and has been
unable to raise any  substantial  amounts of money since that time.  The Company
settled a substantial  portion of its outstanding  debt for shares of its stock,
and for cash  raised in selling its stock in private  placements.  In July 1993,
the Company raised $500,000 from one unaffiliated investor.

PLAN OF OPERATION

     In July 1993, the Company raised $500,000 from the sale of 50,000 shares of
its Common Stock.  Certain  persons who became control  shareholders  invested a
total of $185,000 in shares of the  Company's  Common Stock in early 1993.  Such
individuals  subsequently  have  sold  their  shares  of  Common  Stock  to  two
unaffiliated entities, one of whom has transferred 543,334 to Brenman Bromberg &
Tenenbaum, P. C. for legal services performed for one of the individuals.  Prior
to the  disposition of the shares held by these control  shareholders,  they had
expressed their desire to have the Company consider the acquisition of interests
in oil and gas  properties  and the entry  into the oil and gas  industry.  As a
result,  the  Company  entered  into  letters of intent  with an  operating  oil
company.  Since the Company was unable to meet the financial requirements of the
letters of intent, the agreements  terminated without additional  obligations to
the Company.

     The  Company  will  continue  reviewing  opportunities  in the  oil and gas
industry,  however,  and may propose other investments.  Because the Company may
need a  substantial  amount  of  capital  from  third  parties,  there can be no
assurance that the Company will be able to complete any investment obligation.

     As of this date,  the  Company  has not  identified  any  properties  to be
acquired at the present  time.  Until  properties  are  acquired,  the Company's
available  cash is expected to satisfy its cash  requirements  during the fiscal
year ending March 31, 1999. For more  information,  see Item 1  "Description  of
Business."


                                       -7-

<PAGE>

Item 7.   FINANCIAL STATEMENTS
          --------------------

     The following financial  statements are filed as a part of this Form 10-KSB
immediately following the signature page:

                                                                        Page No.
                                                                        --------
     Report of Independent Certified Public
     Accountants........................................................  F-1

     Balance Sheet - March 31, 1997 and 1998............................  F-2

     Statement of  Operations  - For the Years Ended March 31, 1997
       and  1998  and  Cumulative  Amounts  from  Inception  of the
       Development Stage (July 26, 1990)
       through March 31, 1998...........................................  F-3

     Statement of Stockholders' Equity (Deficit) -
       For the Period from Inception of the Development
       Stage (July 26, 1990) through March 31, 1998.....................  F-4

     Statement of Cash Flows - For the Years
       Ended March 31, 1997 and 1998 and
       Cumulative Amounts from Inception of
       the Development Stage (July 26, 1990) through
       March 31, 1998...................................................  F-6

     Notes to Financial Statements - For the
       Years Ended March 31, 1997 and 1998 .............................  F-7


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

     Since inception, the Company has not filed a Form 8-K reporting a change of
accountants,  nor has there been any material  disagreement with its accountants
on any matter regarding accounting or financial disclosure.


                                       -8-

<PAGE>
                                    PART III


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

(a)  IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.

     The  directors  of the Company  are  elected to hold office  until the next
annual meeting of shareholders and until their  respective  successors have been
elected  and  qualified.  Officers  of the  Company  are elected by the Board of
Directors and hold office until their successors are elected and qualified.

     The current sole officer and director of the Company is:

Name                       Age         Position
----                       ---         --------

David W. Brenman           42          Director, President, Secretary and
                                       Treasurer

The sole director intends to appoint additional directors when appropriate.

     DAVID W. BRENMAN, age 42, is currently engaged as an independent  financial
consultant,  which he has been since 1988.  From 1987 to 1988 Mr.  Brenman was a
vice  president  of  Lloyds  International  Corporation,  the  merchant  banking
subsidiary of Lloyds Bank Plc. From 1984 to 1986 Mr. Brenman served as President
of the Company  and from 1984 until the  present has served as a director.  From
1979 until  1984,  Mr.  Brenman  was an  associate  with the law firm of Brenman
Raskin & Friedlob, P.C. of Denver,  Colorado, where he specialized in the fields
of taxation and  securities  law. Mr.  Brenman  received a B.A.  degree from the
University of Washington in  accounting,  a J.D.  degree from the  University of
Denver,  College of Law and an L.L.M. in taxation from New York University.  Mr.
Brenman  serves on the board of directors of U. S. Energy Corp., a publicly held
corporation  engaged in the mining business.  Mr. Brenman currently serves,  and
since  December  1990 has served,  as President and Treasurer of the Company and
has served as the Company's Secretary since December 1994.


(b)  SIGNIFICANT EMPLOYEES.

     The Company has no significant employees at the present time.


                                       -9-

<PAGE>



(c)  FAMILY RELATIONSHIPS.

     Currently  there are no  family  relationships  among any of the  Company's
officers and/or directors.

(d)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.

     During the past five years,  no director,  executive  officer,  promoter or
control person of the Company has:

     (1) Had any  bankruptcy  petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that date;

     (2) Been  convicted in a criminal  proceeding  or been subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);

     (3) Been  subject to any order,  judgement,  or  decree,  not  subsequently
reversed,  suspended  or  vacated,  of  any  court  of  competent  jurisdiction,
permanently or temporarily enjoining,  barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or

     (4) Been found by a court of competent  jurisdiction  (in a civil  action),
the Commission or the Commodity  Futures  Trading  Commission to have violated a
federal or state securities or commodities law, where the judgement has not been
reversed, suspended, or vacated.

(e)  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

     Not applicable.



                                      -10-

<PAGE>



ITEM 10.  EXECUTIVE COMPENSATION
          ----------------------

CASH COMPENSATION.

     During the past three (3) fiscal years, no officer of the Company  received
any compensation.  David W. Brenman, the Company's president and chief executive
officer,  received  total cash  reimbursements  of $10,000,  $4,228 and $-0- for
travel  expenses  incurred by him during the 1996,  1997 and 1998 fiscal  years,
respectively.

     Mr. Brenman has received no stock options, employee benefits, or other form
of direct or indirect  remuneration  from the Company during the 1996,  1997 and
1998 fiscal years.  Mr. Brenman is currently  devoting such time as is necessary
to the affairs of the Company to seek out a merger candidate.

COMPENSATION UNDER PLANS.

     STOCK  OPTION AND BONUS  PLANS.  The Company had a stock  option plan and a
stock bonus plan pursuant to which the Board of Directors had the right to issue
stock options and stock bonuses as compensation to qualified employees,  both of
which were  terminated by the Board of Directors in June,  1997.  One option was
granted  under the stock option plan to a director of the  Company,  but expired
unexercised  in 1990.  No stock  bonuses were ever granted under the stock bonus
plan.

OTHER COMPENSATION.

     Other  than  as  described  above,  no  other   compensation  was  paid  or
distributed  to any officer or director of the Company for services  rendered to
the Company during the last three fiscal years.

COMPENSATION OF DIRECTORS.

     The Company does not pay its directors for their services in that capacity;
however, officers and directors receive reimbursement for out-of-pocket expenses
incurred by them in connection with the business of the Company.  Currently, the
Company does not pay any directors fees for attendance at board meetings.

     The Company has no other arrangements pursuant to which any director of the
Company was compensated during the fiscal year ended March 31, 1998 for services
as a director.

TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL.

     The Company has no  compensation  plan or  arrangement  with respect to any
executive  officer  which plan or  arrangement  results or will  result from the
resignation, retirement or any other termination of such individual's employment
with the  Company.  The Company has no plan or  arrangement  with respect to any

                                      -11-
<PAGE>

such  persons  which will  result  from a change in control of the  Company or a
change in the individual's responsibilities following a change in control.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

(a)(b)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following  table sets forth  information as of June 15, 1998, as to the
beneficial  ownership  of  shares of the  Company's  only  outstanding  class of
securities,  its Common  Stock,  by each  person who,  to the  knowledge  of the
Company at that date,  was a beneficial  owner of 5% or more of the  outstanding
shares of Common Stock,  by each person who is an officer and/or director of the
Company and by all officers and  directors of the Company as a group.  The table
does not include information  regarding shares of Common Stock held in the names
of certain  depositories/clearing  agencies as nominee  for various  brokers and
individuals. No such broker or individual is believed to hold greater than 5% of
the Company's Common Stock.
<TABLE>
<CAPTION>
                                                              Amount and
                       Name and Address                       Nature of
 Title of                of Beneficial                        Beneficial         Percent of
  Class                      Owner                               Owner             Class
---------              ----------------                       ----------         ----------
<S>                <C>                                        <C>                   <C>
Common             David W. Brenman                           497,042(1)            27.8%
Stock              599 Lexington Avenue
                   23rd Floor
                   New York, NY  10019

Common             Saga Investments, Inc.                     543,334(1)            30.4%
Stock              c/o Peter Desjardins
                   Suite 1301, Arbift Tower
                   P. O. Box 5724
                   Dubai, United Arab Emirates

Common             Brenman Bromberg & Tenenbaum, P.C.         593,476(1)(2)         33.2%
Stock              1775 Sherman Street
                   Suite 1001
                   Denver, CO  80203

Common             Officers and                               497,042(1)            27.8%
Stock              directors as a
                   group (one
                   person)
----------------
</TABLE>


                                      -12-

<PAGE>

(1)       Ownership is direct.

(2)       Includes 543,334 shares owned by Brenman  Bromberg & Tenenbaum,  P.C.,
          4,850 shares owned by Albert Brenman who is president,  a director and
          shareholder  of Brenman  Bromberg & Tenenbaum,  P.C. and 45,292 shares
          owned  by  A.  Thomas  Tenenbaum  who  is  Vice  President,  Assistant
          Secretary,  Assistant Treasurer, a director and shareholder of Brenman
          Bromberg & Tenenbaum,  P.C. See "Item 12.  Certain  Relationships  and
          Related Transactions."

(c)  CHANGES IN CONTROL.

     Management is not aware of any arrangements which may result in a change of
control of the Company.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

(a)(b)(c) TRANSACTIONS WITH MANAGEMENT AND OTHERS.

     LEGAL REPRESENTATION.  The law firm of Brenman Bromberg & Tenenbaum,  P. C.
("BBT") provides legal representation to the Company. A principal of BBT, Albert
Brenman, is the father of David W. Brenman, the sole officer and director of the
Company.  BBT owns 543,334 shares of the Company's Common Stock and employees of
the law firm of BBT own 50,142 shares of the Company's Common Stock. BBT is paid
its standard hourly fees for legal  representation of the Company. BBT currently
provides  office  facilities  to the  Company  at no charge as the value of such
facilities is de minimis.

(d)  TRANSACTIONS WITH PROMOTERS.

     Not applicable.

                                      -13-

<PAGE>
                                     PART IV


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.
          ---------------------------------

     (a)  Exhibits  required  to be filed are  listed  below and,  except  where
incorporated by reference, immediately follow the Financial Statements.

Number    Description
------    -----------

 3.1      Articles of Incorporation,  as amended, incorporated by reference from
          the Annual Report on Form 10-KSB for the five fiscal years ended March
          31, 1992

 3.2      Bylaws,  incorporated  by reference from the Annual Report on Form 10-
          KSB for the five fiscal years ended March 31, 1992

 3.3      Articles of Amendment to the Articles of  Incorporation,  incorporated
          by reference  from the Form 8-K dated August 16, 1993 filed August 26,
          1993.

 27       Financial Data Schedule


     (b) During  the last  quarter  of the  period  covered  by this  report the
Company filed no reports on Form 8-K.


-------------------------------------------------------------------------------

SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE EXCHANGE ACT BY REGISTRANTS  WHICH HAVE NOT  REGISTERED  SECURITIES
PURSUANT TO SECTION 12 OF THE EXCHANGE ACT:

The Registrant  has not sent to its security  holders any annual report or proxy
material  during the last  fiscal  year.  If such  report or proxy  material  is
furnished to security holders  subsequent to the filing of this Form 10-KSB, the
Registrant  shall furnish copies of such material to the  Commission  when it is
sent to security holders.


                                      -14-

<PAGE>


                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  the  Registrant  caused  this report to be signed on its behalf by the
undersigned, thereunto duly autho rized.

Date:  June 30, 1998
                                   COGENCO INTERNATIONAL, INC.

                                   By /s/ David W. Brenman
                                      ----------------------------------
                                      David W. Brenman, President


         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following person on behalf of the Registrant and in the
capacities and on the date indicated.



Date:  June 30, 1998               By /s/ David W. Brenman
                                      ------------------------------------------
                                      David W. Brenman, President, Principal
                                      Executive Officer, Principal Accounting
                                      Officer, Principal Financial Officer
                                      and sole Director







                                      -15-
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



The Board of Directors and Shareholders
Cogenco International, Inc.


We have audited the balance sheet of Cogenco International,  Inc. (a development
stage  company) as of March 31, 1997 and 1998,  and the  related  statements  of
operations, stockholders' equity and cash flows for the years then ended and for
the period from inception of the development stage (July 26, 1990) through March
31, 1998.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based upon our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Cogenco International,  Inc. as
of March 31, 1997 and 1998, and the results of its operations and its cash flows
for the years then ended and the period from inception of the development  stage
through  March 31,  1998,  in  conformity  with  generally  accepted  accounting
principles.


Denver, Colorado                                     CAUSEY DEMGEN & MOORE INC.
May 18, 1998



                                      F-1
<PAGE>

                           COGENCO INTERNATIONAL, INC.
                          (A Development Stage Company)

                                  BALANCE SHEET

                             March 31, 1997 and 1998

                                     ASSETS
                                     ------

                                                            1997        1998
                                                            ----        ----
Current asset:
   Cash, in interest bearing accounts                    $ 125,699   $ 117,617

Computer equipment, at cost, net of accumulated
   depreciation of $637 (1997) and $1,789 (1998)             2,935       1,783
                                                         ---------   ---------
                                                            


                                                         $ 128,634   $ 119,400
                                                         =========   =========


                              STOCKHOLDERS' EQUITY
                              --------------------


Contingencies (Note 2)

Stockholders' equity:
   Preferred stock, $.01 par value; 10,000,000 shares
    authorized, no shares issued and outstanding        $        -  $        -
   Common stock, $.01 par value; 50,000,000 shares
    authorized, 1,788,756 shares issued and outstanding     17,888      17,888
   Additional paid-in capital                            2,054,400   2,054,400
   Accumulated deficit (including $583,427 deficit
    accumulated during the development stage)           (1,943,654) (1,952,888)
                                                        ----------  ---------- 

    Total stockholders' equity                          $  128,634  $  119,400
                                                        ==========  ==========

                            See accompanying notes.
                                      F-2
<PAGE>
                           COGENCO INTERNATIONAL, INC.
                          (A Development Stage Company)

                            STATEMENT OF OPERATIONS

       For the Years Ended March 31, 1997 and 1998 and Cumulative Amounts
 from Inception of the Development Stage (July 26, 1990) Through March 31, 1998


                                                                    Cumulative
                                                                   amounts from
                                                1997        1998     Inception
                                                ----        ----   ------------
Revenues:
   Interest income                           $   4,781   $   4,230   $  28,144
Costs and expenses:
   Legal fees - related party (Note 5)           5,863       7,197     148,457
   Consulting and travel expenses -
    related party                                4,228           -     144,865
   Dry hole costs (Note 6)                           -           -     123,086
   General and administration                    6,074       5,115     193,374
   Depreciation                                    637       1,152       1,789
                                             ---------   ---------   ---------
    Total costs and expenses                    16,802      13,464     611,571
                                             ---------   ---------   ---------
      Net loss (Note 4)                      $ (12,021)  $  (9,234)  $(583,427)
                                             =========   =========   ========= 
Basic and diluted loss per common share      $   (0.01)  $   (0.01)  $   (0.48)
                                             =========   =========   ========= 
Weighted average number of common
   shares outstanding                        1,788,756   1,788,756   1,219,226
                                             =========   =========   =========

                            See accompanying notes.
                                      F-3

<PAGE>
<TABLE>
<CAPTION>
                                          COGENCO INTERNATIONAL, INC.
                                         (A Development Stage Company)

                                    STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

        For the Period from Inception of the Development Stage (July 26, 1990) through March 31, 1998

                                                              Common Stock          Additional                       Total
                                                          --------------------       paid-in       Accumulated    stockholders'
                                                           Shares      Amount        capital         deficit         equity
                                                          --------    --------      ----------     -----------    -------------
<S>                                                       <C>          <C>          <C>            <C>             <C>
Balance at July 25, 1990                                     72,415    $   724      $1,358,508     $(1,369,461)    $ (10,229)

Sale of common stock to employees of the
   related law firm for cash ($.50 per share)
   July 26, 1990                                             13,600        136           6,664               -         6,800

Sale of common stock to an unrelated entity
   for cash ($.50 per share) July 26, 1990                   12,000        120           5,880               -         6,000

Shares of common stock issued in settlement
   of an account payable to the related law
   firm in October 1990 ($.50 per share)                      1,985         20             973               -           993
                                    

Net loss for the period ended March 31, 1991                      -          -               -         (11,922)      (11,922)
                                                          ---------    -------      ----------     -----------     --------- 
                                                                    
Balance at March 31, 1991                                   100,000      1,000       1,372,025      (1,381,383)       (8,358)

Shares of common stock issued in settlement
   of an account payable to the related law
   firm in February 1992 ($.50 per share)                    28,756        288          13,975               -        14,263
                  
Net loss for the year ended March 31, 1992                        -          -               -         (13,545)      (13,545)
                                                          ---------    -------      ----------     -----------     ---------
Balance, March 31, 1992                                     128,756      1,288       1,386,000      (1,394,928)       (7,640)

Sale of common stock to two individuals for cash
   and cash payments to the Company's president
   in March 1993 ($.11 per share) (Note 3)                1,610,000     16,100         158,900               -       175,000
</TABLE>

                                                         See accompanying notes.
                                                                  F-4

<PAGE>
<TABLE>
<CAPTION>
                                          COGENCO INTERNATIONAL, INC.
                                         (A Development Stage Company)

                                    STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

        For the Period from Inception of the Development Stage (July 26, 1990) through March 31, 1998

                                                              Common Stock          Additional                       Total
                                                          --------------------       paid-in       Accumulated    stockholders'
                                                           Shares      Amount        capital         deficit         equity
                                                          --------    --------      ----------     -----------    -------------
<S>                                                       <C>          <C>          <C>            <C>             <C>
Net loss for the year ended March 31, 1993                        -          -               -        (100,291)     (100,291)
                                                          ---------    -------      ----------     -----------      -------- 

Balance, March 31, 1993                                   1,738,756     17,388       1,544,900      (1,495,219)       67,069

Capital contribution of two shareholders
   consisting of cash payments to the
   Company's president in April 1993 (Note 3)                     -          -          10,000               -        10,000

Sale of stock to an individual for cash ($10.00
   per share) (Note 3)                                       50,000        500         499,500               -       500,000

Net loss for the year ended March 31, 1994                        -          -               -        (368,020)     (368,020)
                                                          ---------    -------      ----------     -----------      -------- 

Balance, March 31, 1994                                   1,788,756     17,888       2,054,400      (1,863,239)      209,049

Net loss for the year ended March 31, 1995                        -          -               -         (42,581)      (42,581)
                                                          ---------    -------      ----------     -----------      -------- 

Balance, March 31, 1995                                   1,788,756     17,888       2,054,400      (1,905,820)      166,468

Net loss for the year ended March 31, 1996                        -          -               -         (25,813)      (25,813)
                                                          ---------    -------      ----------     -----------      -------- 

Balance, March 31, 1996                                   1,788,756     17,888       2,054,400      (1,931,633)      140,655

Net loss for the year ended March 31, 1997                        -          -               -         (12,021)      (12,021)
                                                          ---------    -------      ----------     -----------      -------- 

Balance, March 31, 1997                                   1,788,756     17,888       2,054,400      (1,943,654)      128,634

Net loss for the year ended March 31, 1998                        -          -               -          (9,234)       (9,234)
                                                          ---------    -------      ----------     -----------      -------- 

Balance, March 31, 1998                                   1,788,756    $17,888      $2,054,400     $(1,952,888)     $119,400
                                                          =========    =======      ==========     ===========      ========
</TABLE>

                                                         See accompanying notes.
                                                                  F-5

<PAGE>
                           COGENCO INTERNATIONAL, INC.
                          (A Development Stage Company)

                             STATEMENT OF CASH FLOWS

       For the Years Ended March 31, 1997 and 1998 and Cumulative Amounts
 from Inception of the Development Stage (July 26, 1990) Through March 31, 1998

                                                                     Cumulative
                                                                    amounts from
                                                1997        1998     Inception
                                                ----        ----    ------------
Cash flows from operating activities:
   Net loss                                   $(12,021)   $ (9,234)  $(583,427)
   Adjustment to reconcile net loss to net
    cash used in operating activities:
      Depreciation expense                         637       1,152       1,789
      Consulting fees paid directly by
       common stock purchasers                       -           -      50,000
      Increase (decrease) in accounts
       payable                                    (450)          -       4,997
                                              --------    --------   --------- 
      Net cash used in operations              (11,834)     (8,082)   (526,641)

Cash flows from investing activities:
   Purchase of computer equipment               (3,572)          -      (3,572)
                                              --------    --------   ---------
      Net cash used in investing activities     (3,572)          -      (3,572)

Cash flows from financing activities:
   Proceeds from sale of common stock                -           -     647,800
   Short-term borrowings                             -           -     100,000
   Repayments of short-term borrowings               -           -    (100,000)
                                              --------    --------   --------- 
      Net cash provided by financing
       activities                                    -           -     647,800
                                              --------    --------   ---------
Net increase (decrease) in cash                (15,406)     (8,082)    117,587

Cash and cash equivalents at
   beginning of year                           141,105     125,699          30
                                              --------    --------   ---------
Cash and cash equivalents at
   end of year                                $125,699    $117,617   $ 117,617
                                              ========    ========   =========
Supplemental disclosure of non-cash
 financing activities:

   Consulting fees paid directly by
    common stock purchasers                   $      -    $      -   $  50,000
                                              ========    ========   =========
   Stock issued in settlement of an account
    payable to a related party                $      -    $      -   $  15,256
                                              ========    ========   =========

                            See accompanying notes.
                                      F-6

<PAGE>

                          COGENCO INTERNATIONAL, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 1997 and 1998


1.   Significant accounting policies
     -------------------------------

     Organization:

     Cogenco  International,  Inc. (the "Company") was incorporated in the State
     of Colorado  on June 27, 1983 as an  investment  of  Scientific  Management
     Corporation,  a privately owned business development company. Prior to July
     26, 1990,  the Company was engaged in the  development of  cogeneration  of
     electricity  and the sale of the  electricity  to  end-users  on site or to
     public  utilities.  The  Company  is  currently  considered  to be  in  the
     development  stage  as  more  fully  defined  in the  Financial  Accounting
     Standards  Board  Statement  No. 7. The  Company  has  engaged  in  limited
     activities in the oil and gas business,  but has not generated  significant
     revenues to date. The Company is currently seeking business opportunities.

     Use of estimates:

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

     Fair value of financial instruments:

     The carrying amount of cash and cash  equivalents is assumed to approximate
     fair value because of the short maturities of those instruments.

     Loss per share:

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

     Income taxes:

     The Company has adopted  Statement of Financial  Accounting  Standards  No.
     109,  Accounting for Income Taxes. This statement  provides for a liability
     approach under which deferred  income taxes are provided based upon enacted
     tax laws and rates  applicable  to the  periods  in which the taxes  become
     payable.

     Cash flows:

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

                                      F-7
<PAGE>

                           COGENCO INTERNATIONAL, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 1997 and 1998


1.   Significant accounting policies (continued)
     ------------------------------------------

     Concentrations of credit risk:

     Financial   instruments   which   potentially   subject   the   Company  to
     concentrations  of credit risk  consist  principally  of cash.  The Company
     places its cash with high quality  financial  institutions,  which deposits
     are insured up to $100,000 per institution by the Federal Deposit Insurance
     Corporation (FDIC). At March 31, 1997 and 1998, the Company's cash deposits
     exceeded  the FDIC  insurance  limit of $100,000  by $25,699  and  $17,617,
     respectively, at one institution.

     Computer equipment:

     Computer  equipment  is stated at cost.  Depreciation  is  provided  by the
     Company on  straight-line  and  accelerated  methods over estimated  useful
     lives of three to five years.

2.   Cogeneration facilities and equipment
     -------------------------------------

     In March 1985,  the Company  entered  into an  agreement  with an unrelated
     entity  whereby the Company  would  design,  install,  operate and maintain
     cogeneration equipment at a swimming pool in Arvada, Colorado for a 15-year
     period ending in 2000.

     On January 9, 1986, the Arvada Pool facility was sold to Anjo  Construction
     Company  (Anjo),  a company owned by certain  officers and directors of the
     Company, and the Company entered into a 60-month leaseback agreement.

     The Company assigned its rights to the cogeneration facility, its rights in
     several  lawsuits  (as  a  plaintiff),   and  its  obligations   under  the
     cogeneration contract to Anjo in January 1990.










                                      F-8
<PAGE>
                          COGENCO INTERNATIONAL, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 1997 and 1998


3.   Stockholders' equity
     --------------------

     Stock issuances:

     On March 4, 1993,  the  Company  entered  into a letter of intent  with two
     individuals,  previously  unrelated to the  Company,  pursuant to which the
     individuals agreed to provide funding to the Company of $175,000. 1,610,000
     shares of common  stock were  issued for the  $175,000  subscription  price
     (approximately $.11 per share).  These individuals have sold 483,334 shares
     to the  Company's  president,  40,000  shares to a former  director  of the
     Company,  transferred  543,333  shares  to a  non  affiliated  company  and
     transferred 543,333 shares to the Company's law firm for services performed
     for that individual.

     The  two  individuals  agreed  to  advance  $10,000  per  month  to pay the
     Company's  President for time and services  rendered in connection with the
     operation of the Company prior to  consummation  of the above  transaction.
     The Company's  President was paid $50,000 ($10,000 per month) from December
     1992 through April 1993  pursuant to the letter of intent.  The $50,000 was
     recorded as additional  paid-in  capital and  consulting  expense.  The two
     individuals  also loaned  $100,000 to the Company,  due upon demand with no
     interest and unsecured. This loan was repaid in full in March 1993.

     On July 6, 1993,  the Company  issued  50,000  shares of its $.01 par value
     common stock to a previously unrelated individual for cash consideration of
     $500,000, in a private offering. A portion of the proceeds of this offering
     ($200,000  in  the  aggregate)  was  used  to  fund  the  initial  drilling
     requirements  of an oil and gas prospect in Texas,  as discussed more fully
     in Note 6.

     On January 15, 1994, a company owned by the two  individuals  purchased for
     $10 warrants to purchase  750,000  shares of the Compan's  common stock at
     $10 per share  exercisable  through  June 30,  1998.  These  warrants  were
     transferred to another company on May 11, 1995.

4.   Income taxes
     ------------
     No  provision  for income  taxes is required  for the years ended March 31,
     1997 and 1998 or the period from inception of the  development  stage (July
     26,  1990)  through  March 31, 1998  because the Company has  incurred  net
     operating losses for the periods. The net operating losses generated may be
     carried   forward  to  offset  future   taxable   income.   The  amount  of
     carryforwards from 1993 and prior years that may be used in the future will
     be limited pursuant to Sections 382 and 383 of the Internal Revenue Code of
     1986,  as  amended.  The  1993  and  prior  aggregate  net  operating  loss
     carryforward  for  Federal  income  tax  reporting  purposes  is limited to
     approximately  $177,000, of which only $11,800 may be used in any one year.
     If not used to offset future taxable income,  the carryforwards will expire
     as follows:


                                       F-9


<PAGE>
                           COGENCO INTERNATIONAL, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 1997 and 1998


4.    Income taxes (continued)
      ------------------------

                         2003                                 $ 19,000
                         2004                                   36,000
                         2006                                    5,000
                         2007                                   14,000
                         2008                                  103,000
                         2009                                  368,000
                         2010                                   43,000
                         2011                                   26,000
                         2012                                   11,000
                         2013                                    9,000
                                                              --------

                                                              $634,000
                                                              ========

     As of March 31,  1997 and 1998,  total  deferred  tax assets and  valuation
     allowance are as follows:

                                                     1997             1998
                                                     ----             ----

      Deferred tax assets resulting from loss
        carryforward                              $ 225,000        $ 228,000
      Valuation allowance                          (225,000)        (228,000)
                                                  ---------        --------- 
                                                  $       -        $       -
                                                  =========        =========


5.   Related party transactions
     --------------------------

     For the years  ended  March  31,  1997 and 1998 and from  inception  of the
     development  stage, the Company incurred legal costs of $0, $0 and $88,221,
     respectively, from a law firm which was formerly a principal stockholder. A
     former  principal of that law firm is a relative of an officer and director
     of the Company.

     For the years  ended  March  31,  1997 and 1998 and from  inception  of the
     development stage, the Company incurred legal costs of $5,863,  $7,197, and
     $60,236, respectively, from a law firm in which a principal of the law firm
     is a relative of an officer and director of the Company.

6.   Dry Hole costs
     --------------

     The Company  entered into a letter of intent with Cody  Resources,  Inc., a
     privately-held  corporation engaged in the oil and gas production industry,
     in April of 1993,  which  provided  for the  drilling of a test well in the
     West Pine  Prospect,  Victoria  County,  Texas.  The results of the initial
     drilling were  unsuccessful.  The  Company's  share of the related dry hole
     amounted to $123,086.



                                      F-10