UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                Form 10-QSB

 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITITES
     EXCHANGE ACT OF 1934.	For the quarter ended October 31, 2000

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



                           VECTOR ENERGY CORPORATION
                 (Name of small business issuer in its charter)


                                     Texas
                        (State or other jurisdiction of
                         incorporation or organization)



                                  76-0582614
                               (I.R.S. Employer
                              Identification No.)


                          11757 Katy Freeway, Suite 950
                              Houston, Texas 77056
                    (Address of principal executive office)

                                (281) 589-2526
                          (Issuer's telephone number)





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 [  ].

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                 PROCEEDINGS DURING THE PRECEEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court 	Yes [  ] No [  ].

                    APPLICABLE ONLY TO CORPORATE  ISSUERS

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

At December 18, 2000 there were 25,823,216 shares of  no par value common
stock outstanding.

Transitional Small Business Disclosure Format (Check one)	Yes [  ] No [X].
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

The unaudited financial statements of the Company appearing at page F-1
through F-10 hereof are incorporated by reference.

Item 2.   Management's Discussion and Analysis or Plan of Operation

On October 31, 2000, The Company had a working capital deficit of $8,798,079.
This is primarily due to net payables assumed in the acquisition of oil and
gas properties, and the classification of the Company's secured debt as
current.  The Company has begun to settle many of the assumed payables
for a combination of cash and the Company's common stock.  Management
believes that they will be able to continue this. On November 4, 1998, the
Company entered into an asset acquisition transaction by which the Company
acquired the right, title, and interest in certain oil, gas, and mineral
leases and working interests in approximately fifteen producing oil and gas
wells located in Oklahoma, Louisiana and Texas.  The transaction consisted
of a purchase and sale agreement with Texas Energy and Environmental, Inc.
and Cougar Oil and Gas, Inc. (collectively the "Sellers"). In conjunction
with the asset acquisition transaction, the Company executed an amended and
restated credit agreement with its lender whereby its borrowing base was
increased by $800,000.  On November 4, 1998, the Company drew down the
additional $800,000 and used the proceeds to repay the bank debt and certain
of the other liabilities assumed in the asset acquisition transaction.  In
addition, the Company borrowed $500,000 from a stockholder under a six-month
promissory note.  Such note bears interest at 10% per annum and is
subordinate to the Company's credit agreement.  The holder of the promissory
note received warrants to purchase 100,000 shares of the Company's common
stock at $.10 per share.  Such warrants expire ten years from the date
granted.  The holder of the note is entitled to receive 300,000 shares of the
Company's common stock under certain provisions extending the term of the
note.  The note also provides that the Company will use its best efforts to
raise additional equity capital, and any capital so raised shall be used to
repay the promissory note.

Liquidity and Capital Resources

The secured debt assumed by the Company is a $10,000,000 revolving credit
note which terminates on March 15, 2001.  Interest on the note is payable
monthly at a floating rate which is was 10.14% at October31, 2000.  The
borrowing base under the note is determined periodically based upon the
collateral value assigned to the mortgaged properties, and is currently
$6,689,596.  Principal payments were scheduled at $10,000 per month and
increasing to $75,000 per month beginning on February 15, 1999 and $125,000
per month beginning May 15, 1999.  In addition, the note placed certain
restrictions on the use of the revenues from the mortgaged properties,
required the Company to satisfy the net accounts payable assumed by
May 31, 1999 and required the expenditure of $300,000 on the development of
the mortgaged properties by April 14, 1999.  The Company does not anticipate
that the borrowing base under the note can be increased without incurring
development costs which are significantly greater than those required under
the terms of the note.

On February 23, 1999, the Company entered into an agreement with its lender
to amend its revolving credit note.  Such amendment modifies the principal
payments under the note to $75,000 per month beginning April 15, 1999 and
increasing to $125,000 on May 15, 1999.  In addition, the amendment deferred
a portion of the interest payment due in February for a period of one month.
In addition, certain of the deadlines relating to the settlement of
liabilities assumed and expenditures for the development of the mortgaged
properties were extended or modified.  The Company is currently negotiating
a restructure of this agreement with its lender.  It is anticipated
<PAGE>

that such restructure will involve the reduction of the debt by $3 million
in exchange for stock and a new amortization schedule and maturity date.
The exact terms of this restructure have not yet been finalized.

Currently, the Company's oil and gas revenues are sufficient to satisfy its
oil and gas operating expenses and interest payments.  The Company's general
and administrative expenses and development costs are being funded primarily
from the proceeds from the sale of stock.  The Company believes that the
asset acquisition transaction and the planned development of its properties
will result in an increase in oil and gas revenues which will be sufficient
to its meet operating, general and administrative, interest and debt service
requirements.  However, there can be no assurance that this will occur.
It is anticipated that an additional $2,000,000 in equity funding will be
required to meet the current needs of the Company.  Any inability of the
Company to raise additional capital will limit the development of most of its
oil and gas properties and may prevent the Company from meeting its cash
requirements.

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

The Company is involved from time to time in various claims, lawsuits and
administrative proceedings incidental to its business.
In the opinion of management, the ultimate liability thereunder, if any, will
not have a materially adverse effect on the financial condition or results of
operations of the Company

Item 2.   Changes in Securities and Use of Proceeds

The information required by this item is provided in the Notes to Financial
Statements appearing at pages F-7 through F-10 hereof and are incorporated by
reference.

Item 3.   Defaults Upon Senior Securities

None

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

None.

Item 5.   Other Information

None

Item 6.   Exhibits and Reports on Form 8-K

(a) Exhibit 27 - FINANCIAL DATA SCHEDULE

(b) Reports on Form 8-K

    None
<PAGE>

SIGNATURES

In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


						VECTOR ENERGY CORPORATION
						(Registrant)


						By	/S/ Randal B. McDonald, Jr
					    -----------------------------
          			Randal B. McDonald, Jr.
								     Chief Financial Officer
							      Principal Financial and Accounting Officer

						Date:	 December 20, 2000


						By	/S/ Stephen F. Noser
							  -----------------------------
	            Stephen F. Noser
								     President
							      Principal Executive Officer

						Date: 	December 20, 2000
<PAGE>

									               Vector Energy Corporation


                          FINANCIAL STATEMENTS

                            October 31, 2000

                             (Unaudited)

                                 F-1

<PAGE>

                                CONTENTS




UNAUDITED CONSOLIDATED BALANCE SHEET - ASSETS						               F-3 to F-4

UNAUDITED CONSOLIDATED STATEMENT OF INCOME                 			         F-5

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW						                    F-6

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS				          F-7 to F-10

                                   F-2
<PAGE>

                         Vector Energy Corporation
                        CONSOLIDATED BALANCE SHEET
										                   October 31, 2000
                               (Unaudited)




		ASSETS

CURRENT ASSETS
     Cash                          							               $   	 266,948
					Revenue accounts receivable 							                       380,358
     JIB accounts receivable                                   116,136
                                                         -------------
	         Total current assets							                          763,442
                                                         -------------
PROVED OIL AND GAS PROPERTIES USING THE
   FULL COST METHOD OF ACCOUNTING                           16,320,357

   Less accumulated depreciation, depletion,
  			amortization and impairment	                     			      502,552

                                                         -------------
	    Net oil and gas properties 							                     15,817,805
										                                               -------------

OTHER ASSETS
   Other property and equipment, less accumulated
     depreciation of $37,150                                    57,744
   Long term accounts receivable                               197,235
   Deferred loan costs - net                                   122,866
   Other assets                                                 16,432
                                                         -------------
      Total other assets                                       394,277
                                                         -------------

						                                 	                 $  16,975,524
										                                               =============

The accompanying notes are an integral part of the financial statements
								                          F-3
<PAGE>

                       Vector Energy Corporation
                      CONSOLIDATED BALANCE SHEET
                            October 31, 2000
                             (Unaudited)

   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Line of Credit                                						$  	6,689,596
					Notes payable								                                     608,645
     Production payments payable                               100,000
     Accounts payable - trade                                  995,295
     Royalties payable                                         429,602
     Working interest revenues payable                         200,075
     Taxes payable                                             134,327
     Advances from related party                               152,992
     Accrued payroll                                           109,279
     Accrued interest                                          141,710
                                                         -------------
							Total current liabilities                             9,341,833
                                                         -------------

STOCKHOLDERS' EQUITY
     Preferred stock class AA, 6% cumulative
        convertible; $100.00 par value per share,
        30,000 shares authorized;
        no shares issued and outstanding			                     -
     Preferred stock class B, noncumulative
        nonconvertible; $1.00 par value per share,
        500,000 shares authorized;
        500,000 shares issued and outstanding                   50,000
     Preferred stock class C, 5% cumulative
        convertible; $100 par value per share,
        10,000 shares authorized;
        no shares issued and outstanding                          -
     Common stock, no par value; 100,000,000
        shares authorized; 25,255,911 shares issued
        and	outstanding	at October 31, 2000		                2,418,828
     Additional paid in capital								                     17,467,064
     Retained earnings							                              (12,521,889)
      								                                            -------------
     Total stockholders' equity							                       7,414,003
                                                          -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    					       $ 16,975,524
								                                                  =============






  The accompanying notes are an integral part of the financial statements.
									                         F-4
<PAGE>

                       Vector Energy Corporation
                     CONSOLIDATED STATEMENT INCOME
                   Six Months Ended	October 31, 2000
                             (Unaudited)


REVENUES
   Oil sales				                                       $   130,171
   Gas sales                                               727,516
   Production byproducts                                    14,464
   Interest income                                              66
                                                       ------------
      Total revenues                                       872,218
                                                       ------------

EXPENSES
   Production taxes  					                                  30,542
   Lease operating expense						                           297,632
   Depletion of oil and gas properties 					                55,990
   Interest expense                                        379,750
   General and administrative expense 						             1,471,783
                                                       ------------
       Total expenses 				                               2,235,697
                                                       ------------

NET LOSS					                                          $(1,363,480)
                                                       ============

NET LOSS PER COMMON SHARE
   Basic					                                          $     (0.06)
										                                             ============

WEIGHTED AVERAGE NUMBER SHARES	OUTSTANDING 						       21,753,469
                                                       ============

  The accompanying notes are an integral part of the financial statements.
										                      F-5
<PAGE>

                        Vector Energy Corporation
                  CONSOLIDATED STATEMENT OF CASH FLOW
                   Six Months Ended October 31, 2000
                              (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss				                                               $(1,363,480)
	    Adjustments to reconcile net loss to
     net cash used by operating activities:
		        Depletion of oil and gas properties				                  55,990
          Amortization expense                                    175,218
          Depreciation expense                                     10,126
          Stock issued for consulting fees                        989,220
          Increase in accounts receivable                        (102,263)
          Increase in other assets                                 (9,506)
          Increase in accounts payable                             39,337
          Increase in royalties and revenues payable              246,714
          Increase in other current liabilities                    90,255
                                                              ------------
              Net cash provided by operating activities           131,611
                                                              ------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Sales of oil and gas properties                               30,000
	    Development costs incurred                                  (170,670)
     Purchase of fixed assets                                     (16,349)
                                                              ------------
              Net cash used by investing activities			           (157,019)
                                                              ------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Payment on line of credit					                               (40,000)
     Note repayments                                              (21,168)
     Borrowings under production payments                         100,000
     Advances from related party                                    7,000
     Stock sales                                                  140,506
                                                              ------------
		             Net cash provided by financing activities				      186,338
                                                              ------------
NET INCREASE IN CASH
  AND CASH EQUIVALENTS 					                                      160,930

CASH AND CASH EQUIVALENTS,
	    BEGINNING OF PERIOD			                                       106,018
                                                              ------------

CASH AND CASH EQUIVALENTS,
	    END OF PERIOD				                           	            $   266,948
                                                              ============

  The accompanying notes are an integral part of the financial statements.
										                         F-6
<PAGE>

			                     Vector Energy Corporation
             Notes to Unaudited Consolidated Financial Statements
                               October 31, 2000


Management's Representation of Interim Financial Information

The accompanying financial statements have been prepared by Vector Energy
Corporation (The Company)without audit pursuant to the rules and regulations
of the Securities and Exchange Commission.  Certain information and footnote
disclosure normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted as allowed by such rules and regulations, and management believes
that the disclosures are adequate to make the information presented not
misleading.  These financial statements include all of the adjustments which,
in the opinion of management, are necessary to a fair presentation of
position and results of operations.  These financial statements should be
read in conjunction with the audtited financial statements included in the
Company's Form 10-KSB, as of April 30, 2000.

Business and Organization

Vector Energy Corporation, a Texas corporation (together with its subsidiary,
Vector Exploration, Inc., collectively, "the Company") was formed on June 18,
1998 as a result of an agreement and plan of reorganization.  The Company is
primarily engaged in the acquisition, development, production and exploration
of oil and natural gas properties in the United States.

Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary.  All significant intercompany accounts and
transactions have been eliminated in consolidation.

Oil and Gas Properties

The Company follows the full cost method of accounting for its oil and gas
properties.  All costs associated with property acquisition, exploration, and
development activities are capitalized in a single, United States cost center.
Internal costs directly identified with the acquisition, exploration and
development activities of the Company are also capitalized.  Capitalized costs
are amortized on the unit-of-production basis using proved oil and gas
reserves.  Capitalized costs are limited to the present value of estimated
future net revenues less estimated future expenditures using a discount factor
of ten percent.  Sales and abandonments of oil and gas properties are treated
as reductions of the capitalized cost pool.  At October 31, 2000, there were
no costs of unproved properties or major development projects included in the
capitalized cost pool.

Other Property and Equipment

Other property and equipment of the Company consists primarily of computer
equipment, vehicles and furniture and fixtures, which are depreciated over
estimated useful lives, ranging from three to seven years, on a straight-line
basis.

Loss Per Share

Loss per share has been calculated using the weighted average number of shares
outstanding.  Outstanding warrants and other potentially dilutive securities
have been excluded from the calculation of loss per share, as their effect
would be anti-dilutive.

                                  F-7
<PAGE>

                       Vector Energy Corporation
     Notes to Unaudited Consolidated Financial Statements (Continued)
                             October 31, 2000

Organizational Costs

Certain organizational costs incurred by the Company have been capitalized
and are being amortized over a sixty-month period.

Statement of Cash Flows

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

The following is a summary of all significant noncash investing and financing
activities and payments made for interest and income taxes for the three
months ended October 31, 2000:
<TABLE>
<S>                                                              <C>
Noncash activities:
     Common stock issued for consulting fees	                   $   989,220
     Common stock issued for development of properties          $    58,329
     Common stock issued in settlement of accounts payable	     $   259,264
     Common stock issued for oil and gas properties             $    38,047
</TABLE>
<TABLE>
<S>                                                              <C>
Cash payments
    	Interest        	                                          $   345,360

Acquisitions of Oil and Gas Properties

On May 8, 1998, the Company acquired various working and royalty interests in
wells located in Texas, Louisiana and Oklahoma.  To effect the transaction,
the Company issued 30,000 shares of class AA preferred stock, valued at
$3,000,000, and 313,124 shares of common stock, valued at $939,372.  In
addition, the Company assumed $6,100,000 in bank debt and $511,465 in accounts
payable, net of accounts receivable and cash acquired.  The Company has
capitalized $251,704 in expenses incurred in conjunction with this
transaction.  Subsequently, the Company issued 116,014 shares of common stock,
valued at $163,065, for additional working interests in certain of the
properties acquired.

On November 4, 1998, the Company acquired various working interests in wells
located in Louisiana, Texas and Oklahoma.  To effect the transaction, the
Company issued 1,226,667 shares of common stock, valued at $1,840,000, and a
$120,000 non-interest bearing note payable to the sellers.  In addition, the
Company assumed $690,522 in bank debt and $600,954 in accounts payable.  The
Company has capitalized $15,145 in expenses incurred in conjunction with this
transaction.  The Company was also required to expend a minimum of $500,000
in capital investment on the properties acquired within nine months.  Because
capital investment was not made, the sellers were entitled to receive an
additional 500,000 shares of common stock.  Subsequently, the Company
exchanged the working interests acquired in certain properties in Texas and
$30,000 for additional working interests in the properties acquiredin
Louisiana.

On March 7, 2000, the Company closed a purchase and sale agreement with a
company, which is a debtor in possession in a Chapter 11 Bankruptcy.  Under
the agreement, the Company acquired all of the Bankrupt Debtor's interest
in a block located in the Offshore Texas, Mustang Island Area for 550,000 shares
of common stock valued at $550,000.  In accordance with the agreement, the
Company immediately repurchased 16,667 shares of common stock at $3.00 per
share, for a total of $50,000.  Under the terms of the agreement, in the event
that the daily rate of production from the properties acquired averages at
least 5,000 Mcf per day over a complete calendar month, the seller has the
right to put 150,000 shares of common stock to the Company at $3.00 per
share.  If the seller fails to exercise such right, the Company has the right
to call 150,000 shares of common stock at $3.00 per share.  In addition, the
Company may be required to issue a maximum of 370,000 additional shares of
common stock to the sellers based upon the required future development costs
associated with the properties acquired.

Line of Credit

The Company has a $10 million revolving credit note with the First Union
National Bank which terminates on March 15, 2001.  Interest on the note is
payable monthly at a floating rate which was 10.14% at October 31, 2000.  The
borrowing base under the note is determined periodically based upon the
collateral value assigned to the mortgaged properties, and is currently
$6,689,596.  The borrowing base may be redetermined at the Bank's sole
discretion.  Principle payments are scheduled at $125,000 per month.  In
addition, the note places certain restrictions on the use of the revenues
from the mortgaged properties.  The Company does not anticipate that the

                                 F-8
<PAGE>

                      Vector Energy Corporation
       Notes to Unaudited Consolidated Financial Statements (Continued)
                             October 31, 2000

borrowing base under the note can be increased without incurring development
costs which are significantly greater than those required under the terms of
the note.

The line-of-credit with First Union National Bank has the following financial
 covenants:  The Company is required to submit to the bank audited financial
statements in accordance with GAAP, and have nothing indicative of an ongoing
concern in the audit report.  The Company's debt service ratio (ratio of
EBITDA to consolidated debt service) shall not be less than 1.25 to 1.00 at
all times throughout the remaining term of the loan.  The Company's interest
coverage ratio (ratio of EBITDA to consolidated interest expense) shall not
be less than 3.00 to 1.00 at all times throughout the remaining term of the
loan.  The Company shall maintain a positive current ratio (current assets to
current liabilities).  The current ratio should not exceed 1.00 to 1.00 at any
time during the loan (excluding any past due payables through May 31, 1999,
only).

The bank waived default of all financial covenants through November 30, 1999.
However, the Company has not made any of the scheduled principal payments,
which were due beginning in December, 1999, with the exception of $10,000
per month which has been paid since June , 2000.  The Company's failure to
meet the scheduled principal payments constitutes an event of default under
the note agreement.  However, the bank has not issued a notice of default, and
the Company is currently in negotiation with the bank to restructure the loan.
Accordingly, the Company hasreflected the entire line of credit amount as a
current liability.

Notes payable

The Company is obligated under a 10% promissory note payable to the brother
of the Company's president.  In conjunction with the issuance of the note,
the Company issued a warrant to purchase 100,000 shares of the Company's
common stock at $0.10 per share.  Such warrant expires on October 30, 2008.
The note had an original maturity date of April 30, 1998, which was extended
by the Company until October 30, 1999 by the issuance of 100,000 shares of
common stock to the holder.  Under the terms of the note, the Company issued
an additional 200,000 shares of common stock to the holder due to its failure
to pay the balance due by the extended maturity date.  The balance of
principal and accrued interest at October 31, 2000 was $500,000 and $99,726,
respectively.

The Company is obligated under unsecured installment notes, which were issued
to various vendors in settlement of accounts payable.  The notes, which bear
interest at rates ranging from 0% to 13.6% call for monthly payments totaling
$11,484 at October 31, 2000.  The outstanding principal balances totaled
$108,645 at October 31, 2000.

Stockholder's Equity

 Preferred Stock
The Company has 20,000,000 authorized shares of preferred stock of which
30,000 shares are designated as Class AA Cumulative Convertible Preferred
Stock, par value $100.00 per share.  The holders of the Class AA Cumulative
Convertible Preferred Stock are entitled to receive a 6%, or $6.00 per share
cumulative cash dividend payable quarterly.  As of October 31, 2000 no shares
of the Class AA Cumulative Convertible Preferred Stock were issued and
outstanding.  The 6% Class AA Cumulative Convertible Preferred Stock is
redeemable in whole, but not in part, at the option of the Corporation by

                                  F-9
<PAGE>
                       Vector Energy Corporation
     Notes to  Unaudited Consolidated Financial Statements (Continued)
                            October 31, 2000

unanimous resolution of its Board of Directors at any time after
December 31, 1998, at $100 per share, plus all dividends accrued and unpaid
up to the date fixed for redemption.  The Class AA Cumulative Convertible
Preferred Stock may also be converted at the option of each holder, into
100 fully paid and non-assessable shares of the Corporation's common stock,
no par value per share.  Each share of Class AA Preferred Stock is entitled
to cast a number of votes equal to the number of shares of common stock into
which the Class AA Preferred Stock is convertible.

The Company is authorized to issue 500,000 shares of Class B Preferred Stock,
par value $1.00 per share.  Class B Preferred Stock is subordinate to Class AA
6% Preferred Stock in priority, both of which are senior to any and all
capital stock.  The holders of Class B Preferred Stock are not entitled to
receive any dividends.  As of October 31, 2000 500,000 shares of the Class B
Preferred Stock were issued and outstanding.  The Class B Preferred Stock is
redeemable in whole, but not in part, at the option of the Corporation by
resolution of the Corporation's Board of Directors at anytime at $1.00 per
share.  Each share of Class B Preferred Stock has the voting rights equal to
100 shares of the Company's common stock.  The holders of Class B shares are
entitled to elect at least two directors to the Board of Directors of the
Corporation.  The holders of Class B Preferred Stock voting as a class will
have the right to remove without cause at any time and replace any director
such holders have elected.

The Company is authorized to issue out of the 20,000,000 authorized shares of
preferred stock, 10,000 shares of Class C Cumulative Convertible Preferred
Stock (Class C Preferred Stock).  Class C Preferred Stock has a par value of
$100.00 per share and is entitled to receive cumulative cash dividends at the
annual rate of 5%, or $5.00 per share, payable quarterly at the rate of $1.25
per share.  As of October 31, 2000 no shares of Class C Preferred Stock were
issued and outstanding.  Class C Preferred Stock is redeemable in whole, but
not in part by unanimous resolution of the Board of Directors at any time
after July 31, 1999, at the rate of $100.00 per share plus all dividends
accrued and unpaid at such date.  Class C Preferred Stock has no voting
rights.  Class C Preferred Stock is subordinate to all other shares of
preferred stock in priority.  The Class C Preferred Stock may be converted
into common stock at the option of the shareholder at the rate of 25 common
shares to one share of Class C Preferred Stock.  At any time on or after
July 31, 1999, each holder of shares of the 5% Preferred Stock may, at such
holders option, tender any or all such shares for redemption at the rate of
$100.00 per share plus all dividends accrued and unpaid up to the redemption
date.

Stock Options and Warrants

In August 2000, the Company granted options to certain key employees of the
Company to purchase 1,880,000 shares of the Company'scommon stock at the
purchase price of $0.23 per share.  These options may be exercised at any
time until their expiration on August 25, 2005 and are non-transferable.
The options, which were issued at a price equal to or exceeding the market
value of the underlying stock on the date of grant, are not intended to
qualify as incentive stock options under Internal Revenue Code Section 422.
The Company has applied Accounting Principles Board No. 25, Accounting for
Stock Isued to Employees, and related interpretations in accounting for
these options.

Also outstanding at July 31, 2000 are warrants for the purchase of 400,000
shares of the Company's common stock at a purchase price of $0.10 per share.
The warrants expire in May and November of 2008.

                                 F-10
<PAGE>



</TABLE>