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

                                   FORM 10-KSB

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



[X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the fiscal year ended June 30, 2000

[ ]       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:___________

                        Fuzzy Logic Software Corporation
             (Exact name of registrant as specified in its charter)

Delaware                                                              33-0880355
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

505 Burrard Street, Suite 680, Vancouver, British Columbia, Canada       V7X 1M4
(Address of principal executive offices)                              (Zip Code)

                                 (604) 688-5180
              (Registrant's Telephone Number, Including Area Code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. [ ]

State issuer's revenues for its most recent fiscal year. $0.00

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) As of October 11, 2000, approximately $69,890.

As of October 11, 2000, there were 4,575,456 shares of the issuer's $.0001 par
value common stock issued and outstanding.

Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.

Transitional Small Business Disclosure format (check one):

                            Yes [ ]    No [X]


                                       1
<PAGE>

                                     PART I

Item 1. Description of Business.

Our Business. Fuzzy Logic Software Corporation, a Delaware corporation, was
incorporated in the State of Delaware on or about August 25, 1997. Our executive
offices are located at 505 Burrard Street, Suite 680, Vancouver, British
Columbia, Canada. Our telephone number is 604.688.5180.

We were originally incorporated for the purpose of developing software programs
and manufacturing control boards and computer chips for "Fuzzy Logic" control
applications. Fuzzy Logic is a computer modeling language that recognizes
multi-valued states between zero and one, thereby allowing computers to
represent or manipulate terms with greater complexity; and to exercise
"human-like" judgment in the automation of sophisticated tasks. This system
eliminates the on/off rigidity typical of computer control systems and results
in more flexible and subtle process controls. On September 16, 1997, FZZ, Inc.,
a Colorado corporation ("FZZ") was merged into and with us. Prior to the merger,
FZZ had not conducted any operations. In July 1999, our management changed and
new management decided to establish an environmental remediation business.

In October 1999, we entered into a Letter of Intent with Ethxx International
Inc., an Ontario corporation, to acquire environmental remediation technology.
Our negotiations with Ethxx International Inc. failed to materialize into a
final agreement to acquire the environmental remediation technology.

In April 2000, we entered into a Letter of Intent to acquire all of the issued
and outstanding shares of common stock of The Anvil Group Inc., an international
security company, which provides physical and online, web-based corporate
security solutions. In September 2000, our negotiations with The Anvil Group
Inc. failed to materialize into a final agreement and we abandoned our
intentions to acquire them.

As a result of our failure to consummate the acquisition of The Anvil Group
Inc., we are currently reviewing and revising our business plan. We believe that
acquisitions and joint ventures will be necessary to obtain the proper expertise
and complimentary services with firms able to provide services which will
support our future operation. We also anticipate that additional specialized and
conventional services and expertise, which are not fundamental to our
anticipated operations, will be procured as required from time to time by
contract, joint venture and/or acquisition.

Item 2. Description of Property.

Property held by Us. As of the date specified in the following table, we held
the following property:

                ================================================
                       Property                   June 30, 2000
                ------------------------------------------------
                Cash                                 $3,912
                ------------------------------------------------
                Property and Equipment                $0.00
                ================================================

Our Facilities. At this time, we occupy facilities provided by our Canadian
securities counsel at no charge to us. This office space is located at 505
Burrard Street, Suite 680, Vancouver, British Columbia, Canada.

Item 3. Legal Proceedings.

We are not aware of any pending litigation nor do we have any reason to believe
that any such litigation exists, except for the following:

On or about October 28, 1998, Ronald Content, a former employee of the Company,
filed an action in the Province of Ontario, Canada seeking damages arising from
the termination of his employment contract with the Company. The Company has
settled the matter for $10,000 in May, 2000.


                                       2
<PAGE>

Item 4. Submission of Matters to Vote of Security Holders

Not applicable.

                                     PART II

Item 5. Market Price for Common Equity and Related Stockholder Matters.

Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission. The public may read and copy any materials filed with the
SEC at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington,
D.C. 20549. The public may also obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The address
of that site is http://www.sec.gov.

Prices of Common Stock. We participate in the OTC Bulletin Board, an electronic
quotation medium for securities traded outside of the Nasdaq Stock Market, and
prices for our common stock are published on the OTC Bulletin Board under the
trading symbol "FZZY". This market is extremely limited and the prices quoted
are not a reliable indication of the value of our common stock. Over the last 52
weeks, our common stock had a low bid price of $0.00 per share and a high bid
price of $2.00 per share. The bid price is currently approximately $0.25 per
share.

The following table specifies the reported high and low sales or closing prices
of our common stock on the OTCBB for the periods indicated.

================================================================================
             Period                            High                  Low
--------------------------------------------------------------------------------
April 1, 2000 - June 30, 2000                  $1.65                $0.75
--------------------------------------------------------------------------------
January 1, 2000 - March 31, 2000               $2.00                $0.25
--------------------------------------------------------------------------------
October 1, 1999 - December 31, 1999            $1.06                $0.18
--------------------------------------------------------------------------------
July 1, 1999 - September 30, 1999              $0.00                $0.00
================================================================================

We are authorized to issue 30,000,000 shares of $.0001 par value common stock,
each share of common stock having equal rights and preferences, including voting
privileges. As of October 11, 2000, 4,575,456 shares of our common stock were
issued and outstanding. We are also authorized to issue 5,000,000 shares of
$.0001 par value preferred stock, none of which is issued and outstanding.

Common Stock. The holders of our common stock are entitled to one vote for each
share held of record on all matters to be voted on by those shareholders. In the
event of liquidation, dissolution, or winding up of the Company, the holders of
our common stock are entitled to share ratably in all assets remaining available
for distribution to them after payment of our liabilities and after provision
has been made for each class of stock, if any, having preference over our common
stock. Holders of shares of our common stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to our common stock.

Non-Cumulative Voting. The holders of shares of our common stock do not have
cumulative voting rights, which means that the holders of more than 50% of our
outstanding common stock, voting for the election of our directors, may elect
all of our directors to be elected, if they so desire, and, in such event, the
holders of our remaining common stock may not be able to elect any of our
directors.

Registration Rights. Existing holders of shares of our common stock are not
entitled to rights with respect to the registration of such shares under the
Securities Act.

Dividends. The payment by us of dividends, if any, in the future, shall be
determined by our Board of Directors, in its discretion, and will depend on
among other things, our earnings, our capital requirements, and our financial
condition,


                                       3
<PAGE>

as well as other relevant factors. We have not paid or declared any dividends to
date. Holders of common stock are entitled to receive dividends as declared and
paid from time to time by our Board of Directors from funds legally available.
We intend to retain any earnings for the operation and expansion of our business
and do not anticipate paying cash dividends in the foreseeable future.

Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:

     o    a description of the nature and level of risk in the market for penny
          stocks in both public offerings and secondary trading;

     o    a description of the broker's or dealer's duties to the customer and
          of the rights and remedies available to the customer with respect to
          violation to such duties or other requirements of securities' laws;

     o    a brief, clear,  narrative  description of a dealer market,  including
          "bid" and "ask"  prices for penny stocks and the  significance  of the
          spread between the "bid" and "ask" price;

     o    a toll-free telephone number for inquiries on disciplinary actions;

     o    definitions of significant terms in the disclosure document or in the
          conduct of trading in penny stocks; and

     o    such other information and is in such form (including language, type,
          size and format), as the Securities and Exchange Commission shall
          require by rule or regulation.

Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:

     o    the bid and offer quotations for the penny stock;

     o    the compensation of the broker-dealer and its salesperson in the
          transaction;

     o    the number of shares to which such bid and ask prices apply, or other
          comparable information relating to the depth and liquidity of the
          market for such stock; and

     o    monthly account statements showing the market value of each penny
          stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.

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

This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.


                                       4
<PAGE>

The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. No assurance can be
given that any of the assumptions relating to the forward-looking statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.

Liquidity. We have been in the development stage since August 25, 1997
(inception). As of June 30, 2000, we had total assets of $108,586, the majority
of which is represented by note receivables totaling $104,674. In anticipation
of the transaction with The Anvil Group, Inc., we advanced $68,650 to The Anvil
Group, Inc. and Anthony Humble and $36,024 to Anthony Humble, individually,
pursuant to two (2) promissory notes, each dated June 27, 2000. The notes bear
interest at ten percent (10%) and the principal and interest are due on December
24, 2000. We believe that The Anvil Group, Inc. and Anthony Humble have the
financial capability to repay those notes. However, we cannot guaranty that
those notes will be paid.

At June 30, 2000, we had current liabilities of $300,281, the majority of which
is represented by $297,031 due to a related party, one of our former major
shareholders. At inception, we entered into a fee and cost reimbursement
arrangement with this former major shareholder. In connection with this
arrangement, a management fee of $100,000 per year is charged to us.

We are not aware of any trends, demands, commitments or uncertainties that will
result in our liquidity decreasing or increasing in a material way. We believe
that from our current cash resources we will be able to maintain our current
operations. However, should these resources prove to be insufficient, we may be
required to raise additional funds or arrange for additional financing over the
next 12 months to adhere to our development schedule. No assurance can be given,
however, that we will have access to additional cash in the future, or that
funds will be available on acceptable terms to satisfy our cash requirements.

Results of Operations. As of June 30, 2000, we have not yet realized any revenue
from operations. The Statement of Operations for the fiscal year ended June 30,
2000 specifies a net loss of $192,441.

Our success is materially dependent upon our ability to satisfy additional
financing requirements. We are reviewing our options to raise substantial equity
capital. We cannot presently estimate when we will begin to realize revenues. In
order to satisfy our requisite budget, management has held and continues to
conduct negotiations with various investors. We anticipate that these
negotiations will result in additional investment income for us. To achieve and
maintain competitiveness, we may be required to raise additional substantial
funds. We anticipate that we will need to raise significant capital to develop,
promote and conduct our operations. Such capital may be raised through public or
private financing as well as borrowing and other sources. There can be no
assurance that funding for our operations will be available under favorable
terms, if at all. If adequate funds are not available, we may be required to
curtail operations significantly or to obtain funds by entering into
arrangements with collaborative partners.

Our Plan of Operation For Next 12 Months. As a result of our failure to
consummate the acquisition of The Anvil Group Inc., we are currently reviewing
and revising our business plan. We plan to continue to seek other merger
candidates, although we have not identified any potential candidates. We believe
that acquisitions and joint ventures will be necessary to obtain the proper
expertise and complimentary services with firms able to provide services which
will support our future operation. We cannot guaranty that we will be able to
successfully locate a merger candidate. Our failure to locate a merger candidate
will significantly affect our ability to continue operations.

Changes in Number of Employees. During the next 12 months, depending on the
success of our proposed operations, we may be required to hire additional
employees; however, we are not able to provide a reasonable estimate of the
number of such additional employees which may be required at this time.


                                       5
<PAGE>

Item 7. Financial Statements

Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.

Item 8. Changes in and Disagreements with Accountants.

There have been no changes in or disagreements with our accountants since our
formation required to be disclosed pursuant to Item 304 of Regulation S-B.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons.

Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could have a material adverse effect on our operations, profits and
future development, if suitable replacements are not promptly obtained. We
anticipate that we will enter into employment agreements with each of our key
executives; however, no assurance can be given that each executive will remain
with us during or after the term of his or her employment agreement. In
addition, our success depends, in part, upon our ability to attract and retain
other talented personnel. Although we believe that our relations with our
personnel are good and that we will continue to be successful in attracting and
retaining qualified personnel, there can be no assurance that we will be able to
continue to do so. Our officers and directors will hold office until their
resignation or removal.

Our sole director and principal executive officer is specified on the following
table:

                ===================================================
                     Name           Age               Position
                ---------------------------------------------------
                Michael Lynch        32    President and a Director
                ===================================================

Michael Lynch is the President and one of our directors since July 1999. From
1996 to 1999, Mr. Lynch operated a real estate construction and development
company in Vancouver, British Columbia. Prior to 1996, Mr. Lynch operated a real
estate development firm in London, Ontario, Canada.

Other than Mr. Lynch, there are no significant employees expected by us to make
a significant contribution to our business. Our directors will serve until the
next annual meeting of stockholders. Our executive officers are appointed by our
Board of Directors and serve at the discretion of the Board of Directors.

There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining Mr. Lynch from engaging in or continuing any conduct, practice or
employment in connection with the purchase or sale of securities, or convicting
him of any felony or misdemeanor involving a security, or any aspect of the
securities business or of theft or of any felony.

Section 16(a) Beneficial Ownership Reporting Compliance. We do not presently
have knowledge as to whether all of our officers, directors, and principal
shareholders have filed all reports required to be filed by those persons on,
respectively, a Form 3 (Initial Statement of Beneficial Ownership of
Securities), a Form 4 (Statement of Changes of Beneficial Ownership of
Securities), or a Form 5 (Annual Statement of Beneficial Ownership of
Securities).


                                       6
<PAGE>

Item 10. Executive Compensation

Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.

Remuneration of Officers. Mr. Lynch is our only officer and does not earn either
compensation or remuneration from us for services provided to us.

Remuneration of Directors. As of June 30, 2000, no compensation has been paid to
Mr. Lynch for his services to us as a director.


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

(a) Security Ownership of Certain Beneficial Owners. The following represents
those shareholders, other than directors and officers, who are beneficial owners
of 5% or more of our issued and outstanding common stock as of June 30, 2000:

                           Name and Address of        Amount of          Percent
     Title of Class          Beneficial Owner      Beneficial Owner     of Class
     --------------          ----------------      ----------------     --------

     Common Stock       Cede & Co.                 4,063,089 shares (1)  40.4%
                        P.O. Box 20
                        Bowling Green Station
                        New York, New York 10274

(1) We have attempted to obtain information on the beneficial holders of the
stock held by Cede & Co. To the best of our knowledge, there are no beneficial
owners of 5% or over holding stock in the name of Cede & Co.

(b) Security Ownership of Management. Our directors and principal executive
officers beneficially own, in the aggregate, 20,000 shares of our common stock,
or approximately 0.49% of the issued and outstanding shares, as set forth on the
following table:

                           Name and Address of         Amount of         Percent
     Title of Class          Beneficial Owner       Beneficial Owner    of Class
     --------------          ----------------       ----------------    --------

      Common Stock     Michael Lynch, President      20,000 shares        0.49%
                       and Director

Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of our common stock
which may be acquired upon exercise of stock options or warrants which are
currently exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the optionees. Subject to community
property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of our
common stock indicated as beneficially owned by them.

Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.


Item 12. Certain Relationships and Related Transactions.

Transactions with Promoters.

Not applicable.

Related Party Transactions. There have been no related party transactions which
would be required to be disclosed pursuant to Item 404 of Regulation S-B, except
for the following:

At inception, we entered into a fee and cost reimbursement arrangement with a
related party who is a former major shareholder of ours. In connection with this
arrangement, a management fee of $100,000 per year is charged to us. Our
expenses are paid by the related party and have been accrued.


                                       7
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

Copies of the following documents are filed with this Registration Statement,
Form 10-KSB as exhibits:

3.1        Certificate of Incorporation of Fuzzy Logic          E-1 through E-6
           Software Corporation (Charter document)*

3.2        Bylaws of Fuzzy Logic Software Corporation           E-7 through E-14
           (Charter document)*

27         Financial Data Schedule


* Previously filed as exhibits to Registration Statement on Form 10-SB filed on
November 12, 1999.


                                       8
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned in the City of Vancouver, British Columbia, on October 12, 2000.

                                               Fuzzy Logic Software Corporation,
                                               a Delaware corporation


                                               By:  /s/ Michael Lynch
                                                    ----------------------------
                                                    Michael Lynch
                                               Its: President, Director

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.

Fuzzy Logic Software Corporation

By:   /s/ Michael Lynch
      ---------------------------
      Michael Lynch
Its:  President, Director


                                       9
<PAGE>

xxxxx

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                              Financial Statements

                        As of June 30, 2000 and 1999 and
         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                        Index to the Financial Statements

                        As of June 30, 2000 and 1999 and
         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000
--------------------------------------------------------------------------------


     Report of Independent Auditors ...........................................1

     Financial Statements of Fuzzy Logic Software Corporation:

          Balance Sheets, June 30, 2000 and 1999...............................2

          Statements of Operations for each of the two years in
          the period ended June 30, 2000 and for the period from
          August 25, 1997 (inception) to June 30, 2000.........................3

          Statements of Shareholders' Deficit for each of the two
          years in the period ended June 30, 2000 and for the
          period from August 25, 1997 (inception) to June 30, 2000.............4

          Statements of Cash Flows for each of the two years in
          the period ended June 30, 2000 and for the period from
          August 25, 1997 (inception) to June 30, 2000.........................5

     Notes to Financial Statements.............................................7

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors
Fuzzy Logic Software Corporation

We have  audited  the  accompanying  balance  sheets  of  Fuzzy  Logic  Software
Corporation (a development  stage company) as of June 30, 2000 and 1999, and the
related statements of operations, shareholders' deficit, and cash flows for each
of the two years  ended June 30,  2000 and for the period  from  August 25, 1997
(inception) to June 30, 2000. These financial  statements are the responsibility
of the  company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the  financial  position  of  Fuzzy  Logic  Software
Corporation (a development  stage company) as of June 30, 2000 and 1999, and the
results of its  operations  and its cash  flows for each of the two years  ended
June 30, 2000 and for the period from  August 25, 1997  (inception)  to June 30,
2000 in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company has no operations,  products, or facilities,
significant resources will be required to implement its plan of operations,  and
it relies on a related party to meet its cash flow requirements, thereby raising
substantial doubt about its ability to continue as a going concern. Management's
plan in regard  to these  matters  is also  described  in Note 1. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


Kelly & Company
Newport Beach, California
October 12, 2000

<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                                 Balance Sheets

                             June 30, 2000 and 1999

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

                                     ASSETS

                                                            2000         1999
                                                         ---------    ---------
Current assets:
     Cash                                                $   3,912         --
     Notes Receivable                                      104,674         --
                                                         ---------    ---------
Total assets                                             $ 108,586         --
                                                         =========    =========

                LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
     Accrued liabilities                                 $   3,250    $   1,213
     Due to related party                                  297,031      212,031
                                                         ---------    ---------
Total liabilities                                          300,281      213,244
                                                         ---------    ---------
Shareholders' deficit:
     Common stock, $.0001 par value;
        30,000,000 shares authorized;
        4,575,456 and 4,075,456 shares
        issued and outstanding at
        June 30, 2000 and 1999, respectively                   458          408
     Preferred stock, $.0001 par value;
        5,000,000 shares authorized, none
        issued and outstanding at June 30, 2000
        and 1999                                              --           --
     Additional paid-in capital                            217,707        3,767
     Deficit accumulated during the development stage     (409,860)    (217,419)
                                                         ---------    ---------
Total shareholders' deficit                               (191,695)    (213,244)
                                                         ---------    ---------
Total liabilities and shareholders' deficit              $ 108,586         --
                                                         =========    =========

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


                                       2
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                            Statements of Operations

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

<TABLE>
<CAPTION>
                                                                           Period from
                                               For the       For the     August 25, 1997
                                             Year Ended    Year Ended    (Inception) to
                                           June 30, 2000  June 30, 1999  June 30, 2000
                                           -------------  -------------  -------------
<S>                                          <C>            <C>            <C>
Revenues                                          --             --             --
Cost of revenues                                  --             --             --
                                             ---------      ---------      ---------
     Gross profit                                 --             --             --

Consulting fees                              $ 130,860      $ 100,000      $ 330,860
Organization costs                                --             --            5,000
Legal and accounting                            37,450           --           42,818
Settlement Expense                              10,000           --           10,000
Loss on investment                                --              175            175
General and administrative expenses             14,156          5,608         21,032
                                             ---------      ---------      ---------
     Total operating costs                     192,466        105,783        409,885
Interest income                                    (25)          --              (25)
                                             ---------      ---------      ---------
Net loss                                     $ 192,441      $ 105,783      $ 409,860
                                             =========      =========      =========


Loss per common share - basic and diluted    $    0.04      $    0.03      $    0.10
                                             =========      =========      =========
</TABLE>

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


                                       3
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                       Statements of Shareholders' Deficit

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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





















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


                                       4
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                      Statements of Shareholders' Deficit

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

<TABLE>
<CAPTION>
                                                                          Price             Additional
                                     Preferred    Preferred      Common    Per   Common       Paid-in     Accumulated
                                      Shares        Stock        Shares   Share  Stock        Capital      (Deficit)        Total
                                      ------        -----        ------   -----  -----        -------      ---------        -----
<S>                                      <C>          <C>      <C>             <C>           <C>           <C>           <C>
Formation of corporation,
  August 25, 1997                         --           --           --               --            --            --            --
     Common shares issued to
       the founders of the
       Company                            --           --      5,075,456       $      508    $    4,667          --      $    5,175
     Purchase and retirement of
       common stock                       --           --     (1,000,000)            (100)         (900)         --          (1,000)
     Net loss                             --           --           --               --            --      $ (111,636)     (111,636)
                                    ----------   ----------   ----------       ----------    ----------    ----------    ----------
Balance, June 30, 1998                    --           --      4,075,456              408         3,767      (111,636)     (107,461)
     Net loss                             --           --           --               --            --        (105,783)     (105,783)
                                    ----------   ----------   ----------       ----------    ----------    ----------    ----------
Balance, June 30, 1999                    --           --      4,075,456              408         3,767      (217,419)     (213,244)
     Common shares issued in a
       private placement offering,
       net of offering costs              --           --        500,000  0.50         50       213,940          --         213,990
     Net loss                             --           --           --               --            --        (182,441)     (182,441)
                                    ----------   ----------   ----------       ----------    ----------    ----------    ----------
Balance, June 30, 2000                    --           --      4,575,456       $      458    $  217,707    $ (399,860)   $ (181,695)
                                    ==========   ==========   ==========       ==========    ==========    ==========    ==========
</TABLE>

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


                                       5
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                            Statements of Cash Flows

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

<TABLE>
<CAPTION>
                                                                                                       Period from
                                                                 For the             For the         August 25, 1997
                                                               Year Ended          Year Ended        (Inception) to
                                                              June 30, 2000       June 30, 1999       June 30, 2000
                                                              -------------       -------------       -------------
<S>                                                             <C>                 <C>                 <C>
Cash flows from operating activities:

          Net loss                                              $(182,441)          $(105,783)          $(399,860)
     Adjustments to reconcile net loss to
       net cash used in operating
       activities:
          Shares issued to founders of the Company                   --                  --                 5,175
          Investment received in connection with
             the issuance of shares to founders                      --                  --                  --
          Shares reacquired                                          --                  --                (1,000)
          Loss on investment                                         --                   175                --
     Increase (decrease)  in liabilities:
          Accrued liabilities                                       2,037                 (55)              3,250
          Due to related party                                     75,000             105,663             287,031
                                                                ---------           ---------           ---------
Cash used in operating activities                                (105,404)               --              (105,404)
                                                                ---------           ---------           ---------
Cash flows provided by investing activities:

     Increase in notes receivable                                (104,674)               --              (104,674)
                                                                ---------           ---------           ---------
Cash provided by investing activities                            (104,674)               --              (104,674)
                                                                ---------           ---------           ---------
Cash flows provided by financing activities

     Proceeds from the issuance of common stock                   213,990                --               213,990
                                                                ---------           ---------           ---------
Cash used in financing activities                                 213,990                --               213,990
                                                                ---------           ---------           ---------

Net increase (decrease) in cash                                     3,912                --                 3,912

Cash at beginning of period                                          --                  --                  --
                                                                ---------           ---------           ---------
Cash at end of period                                           $   3,912                --             $   3,912
                                                                =========           =========           =========
</TABLE>

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


                                       6
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                            Statements of Cash Flows

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

                Supplemental Disclosure of Cash Flow Information
                                                                   Period from
                                   For the          For the      August 25, 1997
                                 Year Ended       Year Ended      (Inception) to
                               June 30, 2000    June 30, 1999     June 30, 2000
Interest paid                        --               --                 --
Income taxes paid                    --               --                 --

             Supplemental Schedule of Non-Cash Financing Activities
Repurchase of shares                 --            $ 1,000            $ 1,000
Increase in payable                  --            $(1,000)           $(1,000)
Organization expenses                --            $ 5,175            $ 5,175
Issuance of founders shares          --            $(5,175)           $(5,175)


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


                                       7
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                          Notes to Financial Statements

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

1.   Development Stage Operations

     Fuzzy  Logic  Software  Corporation  (a  development  stage  company)  (the
     "Company") was incorporated in the state of Delaware on August 25, 1997. It
     has no operating history,  no revenues,  no products,  nor technology.  The
     Company's  initial  business plan  anticipated  the development of computer
     hardware  and  software.  As such,  the Company is subject to the risks and
     uncertainties  associated with a new business. The success of the Company's
     future  operation is dependent upon the Company's  ability to  successfully
     develop and market its yet  unidentified  products and obtain the necessary
     capital.

     In this  connection,  during  fiscal year ended June 30, 2000,  the Company
     entered  into  a  letter  of  intent  to  acquire  all of  the  issued  and
     outstanding shares of The Anvil Group, Inc. However, in September 2000, the
     transaction  was terminated due to the inability to obtain  financing.  The
     Company plans to continue to seek other merger opportunities.

     The Company has historically relied on Cascade, Inc., a related party (Note
     6), to meet its cash flow  requirements  under the terms of the  management
     and cost  reimbursement  agreement.  However,  in the event  Cascade,  Inc.
     should be unable to  continue to satisfy  the cash flow  requirements,  the
     Company's  ability  to  continue  as a going  concern  could  be  adversely
     affected.

2.   Summary of Significant Accounting Policies

     Revenue Recognition

     Revenue  will  be  recognized  when  goods  are  shipped  or  services  are
     performed.

     Start-up Costs

     The Company expenses start-up costs as they are incurred.

     Management 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.

     Disclosures about Fair Value of Financial Instruments

     The Company will account for the value of financial  instruments  using the
     fair value method.


                                       8
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                          Notes to Financial Statements

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

2.   Summary of Significant Accounting Policies, Continued

     Income Taxes

     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax  bases.   Deferred   tax   assets,   including   tax  loss  and  credit
     carryforwards,  and  liabilities  are  measured  using  enacted  tax  rates
     expected to apply to taxable  income in the years in which those  temporary
     differences are expected to be recovered or settled. The effect on deferred
     tax assets and liabilities of a change in tax rates is recognized in income
     in the period that includes the enactment date. Deferred income tax expense
     represents  the change  during the  period in the  deferred  tax assets and
     deferred tax  liabilities.  The  components  of the deferred tax assets and
     liabilities are individually  classified as current and noncurrent based on
     their  characteristics.  Deferred  tax  assets are  reduced by a  valuation
     allowance  when, in the opinion of  management,  it is more likely than not
     that some portion or all of the deferred tax assets will not be realized.

3.   Notes Receivable

     In April 2000,  the Company  entered into a letter of intent to acquire all
     of the issued and  outstanding  shares of common  stock of The Anvil Group,
     Inc., a company that  provides  physical  and online,  web-based  corporate
     security  solutions.  In  anticipation  of  the  transaction,  the  Company
     advanced $68,650 to The Anvil Group,  Inc. and Anthony Humble,  and $36,024
     to Anthony  Humble,  individually,  under  promissory  notes dated June 27,
     2000.  The note  with  Anthony  Humble,  individually,  is  denominated  in
     Canadian  dollars.  The amount due has been  translated  into U.S.  dollars
     using the exchange  rate in effect at the balance  sheet date.  Translation
     gain or loss  arising  from  exchange  rate  fluctuations  is  included  in
     operations.  The amount of the translation  difference from the date of the
     notes  to  the  balance  sheet  date  is  immaterial.  The  notes  are  not
     collateralized  and bear  interest  at 10% per  annum  with  principal  and
     interest  due December 24,  2000.  In September  2000,  the Company and The
     Anvil Group, Inc.  terminated the planned transaction because the financing
     desired for the combined  companies  after  consummation of the transaction
     could not be obtained.

     The Company  believes  The Anvil Group,  Inc.  and Anthony  Humble have the
     financial  capability  to satisfy  these note  obligations  when due and an
     allowance for uncollectibility is not required.


                                       9
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                          Notes to Financial Statements

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

4.   Deferred Income Taxes

     The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                        Period from
                                                    For the             For the       August 25, 1997
                                                  Year Ended          Year Ended      (Inception) to
                                                June 30, 2000       June 30, 1999      June 30, 2000
                                                -------------       -------------      -------------
<S>                                                <C>                <C>                <C>
          Current tax expense

               Federal                                  --                 --                 --
               State                                    --                 --                 --
                                                   ---------          ---------          ---------
                                                        --                 --                 --
                                                   ---------          ---------          ---------
          Deferred tax expense:

               Federal                                  --                 --                 --
               State                                    --                 --                 --
                                                   ---------          ---------          ---------
                                                        --                 --                 --
                                                   ---------          ---------          ---------
          Total provision                               --                 --                 --
                                                   =========          =========          =========
</TABLE>

     Significant  components  of the  Company's  deferred  income tax assets and
     liabilities at June 30, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                                        Period from
                                                    For the             For the       August 25, 1997
                                                  Year Ended          Year Ended      (Inception) to
                                                June 30, 2000       June 30, 1999      June 30, 2000
                                                -------------       -------------      -------------
<S>                                                <C>                <C>                <C>
          Deferred income tax asset:
               Capitalized start-up expenses       $ 135,893          $  73,863          $ 135,893
                                                   ---------          ---------          ---------
          Total deferred income tax asset            135,893             73,863            135,893
               Valuation allowance                  (135,893)           (73,863)          (135,893)
                                                   ---------          ---------          ---------
          Net deferred income tax liability             --                 --                 --
                                                   =========          =========          =========
</TABLE>


                                       10
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                          Notes to Financial Statements

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

4.   Deferred Income Taxes, Continued

     Reconciliation  of the effective tax rate to the U.S.  statutory rate is as
     follows:

<TABLE>
<CAPTION>
                                                                                         Period from
                                                        For the           For the      August 25, 1997
                                                      Year Ended        Year Ended     (Inception) to
                                                     June 30, 2000     June 30, 1999    June 30, 2000
                                                     -------------     -------------    -------------
<S>                                                      <C>               <C>              <C>
             Tax expense at U.S. statutory rate          (34.0)%           (34.0)%          (34.0)%
             Change in the valuation allowance            34.0              34.0             34.0
                                                         -----             -----            -----
           Effective income tax rate                       --                --               --
                                                         =====             =====            =====
</TABLE>

5.   Stock Transactions

     Private Placement Offering

     In November 1999,  the Company  completed a private  placement  offering of
     500,000 units at a price of $.50 per unit,  and received  total proceeds of
     $213,990  net of offering  costs of $36,010,  of which  $25,000 was paid to
     Cascade,  Inc. as a finder's  fee.  Each unit  consists of one share of the
     Company's  common  stock and a warrant to  purchase  the  Company's  common
     stock.  Each  warrant is  exercisable  into one share of common  stock at a
     price of $.50 per share,  is exercisable at any time, and expires two years
     after the closing date of the offering.

     Founders Shares

     In August  1997,  the  Company  issued  5,175,456  shares to the  founders.
     Additionally,  the Company  received  from the  founders,  an investment of
     non-market grade corporate stock valued at $175. In the year ended June 30,
     1999, the shares received were deemed worthless and were written off.

     Stock Repurchase

     In October 1997, the Company reacquired and retired 1,000,000 shares of its
     outstanding common stock from a major shareholder for $1,000 (par value).

     Common Stock Reserved for Future Issuance

     At June 30, 2000, the Company has reserved 500,000 shares of its authorized
     but unissued  common stock for possible  future  issuances  for exercise of
     stock purchase warrants.


                                       11
<PAGE>

                        Fuzzy Logic Software Corporation
                          (A Development Stage Company)

                          Notes to Financial Statements

         For Each of the Two Years in the Period Ended June 30, 2000 and
        For the Period from August 25, 1997 (Inception) to June 30, 2000

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

6.   Related Party Transactions

     The  Company  has  a  management  and  cost  reimbursement  agreement  (the
     "agreement") with Cascade, Inc., a former major shareholder of the Company.
     Cascade, Inc. is a related party as some of its principals are shareholders
     of the Company and exercise  control over the Company's  activities.  Under
     the terms of the agreement, Cascade, Inc. receives an annual management fee
     of  $100,000   plus  amounts  for   additional   consulting   services  and
     reimbursement of Company expenses paid by Cascade. In this connection,  the
     Company paid Cascade, Inc. approximately $107,000, $0, and $107,000 for the
     years ended June 30,  2000,  1999,  and for the period from August 25, 1997
     (inception) to June 30, 2000,  respectively.  At June 30, 2000, the Company
     owed Cascade, Inc. $297,031.

     In addition, in October 1998, a former employee of the Company filed an
     action in the Province of Ontario, Canada, seeking damages arising from the
     termination of his employment contract with the Company. In May 2000, a
     settlement was reached with the former employee. In this connection,
     Cascade paid the former employee $10,000 on behalf of the Company.
     Accordingly, the Company recorded a liability to Cascade and recognized a
     settlement expense of $10,000.

7.   Loss Per Common Share

     Basic and diluted loss per common share have been  computed by dividing the
     loss available to common  shareholders  by the  weighted-average  number of
     common shares for the period.

     The  computations  of basic and diluted  loss per common share for the year
     ended  June 30,  2000 and 1999 and for the  period  from  August  25,  1997
     (inception) to June 30, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                                    Period from
                                                                  For the          For the        August 25, 1997
                                                                Year Ended        Year Ended      (Inception) to
                                                              June 30, 2000      June 30, 1999     June 30, 2000
                                                              -------------      -------------     -------------
<S>                                                             <C>               <C>               <C>
          Net loss available to common shareholders             $  192,441        $  105,783        $  409,860
          Weighted-average shares, basic and diluted             4,387,785         4,075,456         4,132,624
                                                                ----------        ----------        ----------
          Loss per common share, basic and diluted              $     0.04        $     0.03        $     0.10
                                                                ==========        ==========        ==========
</TABLE>

     No potentially dilutive securities have been issued by the Company.