U.S. 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

                      For the Year Ended December 31, 1997
                          Commission File No. 33-90696

                         ANDEAN DEVELOPMENT CORPORATION
                 (Name of Small Business Issuer in Its Charter)

           FLORIDA                                       65-0420146
(State of Other Jurisdiction of                       (I.R.S. Employer
 Incorporation or Organization)                       Identification No.)

1900 GLADES ROAD, SUITE 351, BOCA RATON, FLORIDA             33431           
  (Address of Principal Executive Offices)                 (Zip Code)

                                 (561) 416-8930
                  (Issuer's Telephone Number, Including Area Code)

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


                                                   Name of Each Exchange
  Title of Each Class                              on Which Registered

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

Securities registered under Section 12(g) of the Exchange Act:
                         COMMON STOCK, $.0001 PAR VALUE
                                (Title of Class)

                    REDEEMABLE COMMON STOCK PURCHASE WARRANTS
                                (Title of Class)

         Check whether the issuer (1) has 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 issuer 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 contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X

<PAGE>

         State issuer's revenues for its most recent fiscal year:  $3,529,296

         State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of March 30, 1998 computed
by reference to the closing bid price of the Common Stock was $4.813 on that
date: $13,573,141.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

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

         2,820,100 shares of Common Stock, $.001 par value, as of December 31,
1997.

         Transitional Small Business Disclosure Format (check one) Yes    No   X

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


                                       2
<PAGE>



                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

         Andean Development Corporation ("ADC") was organized in 1994 as a
holding company to acquire Errazuriz y Asociados Ingenieros S.A. ("E&A") and
Igenor Andina S.A. ("INA"), both Chilean corporations located in Santiago,
Chile. Except as otherwise specifically noted, ADC, E&A and INA are collectedly
referred to herein as the "Company."

         E&A, organized in February 1991, specializes, as an agent, in the sale
of major electrical and mechanical equipment, and in the representation of
foreign manufacturers of electrical and mechanical equipment in South America.
E&A also offers technical assistance for both turnkey and non-turnkey public
works and development projects to be constructed in South America and primarily
in Chile. Since 1991, E&A has facilitated the sale of more than $550 million of
equipment and installations including generators, turbines and conveyors, which
has generated commission for the Company. See "Core Business."

         INA, organized in 1986, focuses on providing engineering consulting
services and project management for irrigation, water treatment plants,
tunneling and hydroelectric power plants. Since 1986, INA, alone and in
conjunction with Norconsult International, A.S. of Norway ("Norconsult"), an
international engineering company, has provided engineering, consulting and
project management services relating to engineering projects valued at
approximately $22 million since inception, of which approximately $11.6 million
was revenues the Company has realized. See "Core Business."

         The Company's strategy consists of (i) capitalizing on its historical
participation in the electric utility sector, ecology and irrigation projects,
and the potable and waste water treatment fields in order to expand its core
business, and (ii) investing in businesses that will provide a steady cash flow
to the Company. The Company also expects that the continuing stability of the
Chilean economy, inflation rates and privatization of business in Chile which
have increased investment in Chile will have a positive impact on the Company
and its operations. Additionally, other South American countries have undertaken
privatization policies similar to Chile, which may provide other opportunities
to the Company's core business.

         Pursuant to the Company's business plan, during August 1997, the
Company purchased a 31% equity interest for $85,325 in a wine processing
facility in Chile ("Vina Valle del Itata S.A.") that is expected to commence
full initial production capability of approximately 1.5 million liters of wine,
as of March 1998. In November 1997, the Company also purchased a 670 acre farm
in the Itata Region in Chile for $1,073,000 to establish a vineyard. As of
December 31, 1997, the Company was also in the process of purchasing a 70%
equity interest for $101,032 in Ingesis, a Chilean software development company
("Ingesis") and a 51% equity interest in Negociaciones y Servidumbre S.A., a
Chilean corporation ("NYSA") for $125,508. Ingesis has developed 


<PAGE>

a system, utilizing a digital signature generated by encrypting a logarithm on a
computer chip and NYSA specializes in negotiation and purchasing of land for use
by electrical utilities.

         In May 1997, Pedro Pablo Errazuriz, the Company's Chief Executive
Officer ("CEO"), President and Chairman of the Board, acquired a 20% interest in
Construcciones Electromecanicas Consonni S.A., a Spanish corporation that
manufactures motor control centers and switchgear ("Consonni") and in Equipos de
Control Electrico S.A., a Spanish corporation and the international marketing
and sales arm of Consonni ("ECESA", and collectively with Consonni,
"Consonni/ECESA") from unrelated third parties, increasing his equity interest
in Consonni/ECESA to 77%. In June and July 1997, the Company purchased an 11%
equity interest in Consonni/ECESA for approximately $671,000 from unrelated
third parties. Subsequently, during August 1997, Mr. Errazuriz, on behalf of his
interest of 77% and the 11% interest owned by the Company, entered into a share
exchange agreement with Consonni USA, Inc., a Florida corporation ("CONUSA"),
where the aggregate 88% interest of Consonni/ECESA was exchanged for 2,300,000
shares of CONUSA Common Stock (representing approximately a 76.7% interest in
CONUSA). Effective December 31, 1997 and subject to shareholder approval, the
Company will acquire Mr. Errazuriz's interest in CONUSA for approximately $4.3
million for stock and other consideration. See "1997 Investments in New
Companies - Consonni/ECESA" and "Certain Relationships and Related
Transactions."

         The Company's offices are currently located at 1900 Glades Road, Boca
Raton, Florida, U.S.A. and its telephone number is (561) 416-8930. Its fiscal
year end is December 31.

BACKGROUND

         The Company was incorporated as a Florida corporation on October 19,
1994 under the name "Igenor U.S.A., Inc." On January 10, 1995, the Company
changed its name to "Andean Development Corporation." The Company undertook a
reorganization upon the closing of its November 1996 initial public offering,
but which was given effect as of December 31, 1994, whereby E&A and INA became
majority owned (99.99%) subsidiaries of the Company pursuant to share exchange
agreements. Chilean corporate law requires that a Chilean corporation have no
less than two different shareholders at any given time and thus, one share of
INA is owned by E&A and one share of E&A is owned by INA.

         E&A was organized on February 28, 1991, in Santiago, Chile, as a
Chilean limited partnership under the name "Errazuriz y Asociados Ingenieros
Limitada." On September 21, 1994, E&A was reorganized as a Chilean corporation
and its name was changed to "Errazuriz y Asociados Ingenieros S.A."

         INA was organized on June 11, 1986, in Santiago, Chile as a Chilean
limited partnership under the name "Ingenieria Norconsult Andina Limitada."
Initially INA was a joint venture between Norconsult, a worldwide engineering
consulting company based in Oslo, Norway and Errazuriz y Asociados Arquitectos
S.A. ("EAA"), a major shareholder of ADC. See "Principal Shareholders."
Norconsult subsequently sold its participation to Igenor Ingenierie et Gestion,


                                       2
<PAGE>

S.A., a Swiss corporation ("Igenor"), which is also a majority shareholder of
the Company. On September 15, 1994, pursuant to Chilean law, INA was reorganized
from a limited partnership to a Chilean corporation, and its name was changed to
"Igenor Andina S.A."

         In September 1996, the Company organized ADC Andean, S.A. ("ADC Swiss")
as a Swiss corporation. ADC Swiss is a wholly-owned corporation of ADC.

         In July 1997, the Company organized AEFC as a Florida corporation. As
of December 31, 1997, AEFC is a wholly-owned subsidiary of the Company.

HISTORY AND ECONOMIC OVERVIEW

         Since the inception of INA in 1986, the Company has transitioned itself
from sales of equipment to sales of commercial work and procuring large turnkey
projects as a consultant to and representative of international consortiums.
Since 1991, the Company, through INA, has focused on the energy and
infrastructure sectors. In connection with these activities, the Company has
also acted as project manager and supplier of specialized engineering services.
Generally, all services related to engineering, design, consulting, supervising
and inspecting of construction projects have been initiated by INA, and those
related to sale of equipment for construction projects have been initiated by
E&A.

         The Company's services have historically been provided to both private
companies and governmental agencies, with more than half of the Company's total
revenues coming from the private sector during recent years. The Company has
been a supplier of equipment, spare parts and engineering services for most of
the largest utilities in Chile including, among others, private companies such
as ENDESA, S.A. (the largest electrical utility company in Chile), Chilgener
S.A. (the second largest electrical utility company in Chile), Minera Valparaiso
S.A. (a mining company), CREO (Cooperative Regional Ectrica de Osorno) (an
electrical utility company), and Edelnor S.A. (an electrical distribution
company); and government owned companies such as Codelco (Corporacion Nacional
del Cobre de Chile) (the largest government owned mining company in Chile),
Colbun S.A. (an electrical utility company), and Petrox S.A. (a petrol-chemical
and oil company).

CORE BUSINESS

E&A

         E&A specializes, as an agent, in the sale of major electrical and
mechanical equipment in the representation of foreign manufacturers. A
substantial amount of its sales is for equipment relating to the electrical
utilities, mining, and materials handling industries. This include medium and
high voltage generators, transformers, controls, cables, gas and steam turbines
and industrial boilers, as well as other materials such as cranes, unloading
facilities, coal handling systems, crushers, air cleaning systems and
ventilators. Additionally, E&A offers technical assistance to bidders during the
preparation of tender (bid) documents for turnkey and non-turnkey projects,


                                       3
<PAGE>

as well as throughout a project, once bids have been awarded. E&A has been
successful in obtaining and maintaining its representations of foreign equipment
manufacturers by offering engineering and sales support by experienced civil and
industrial engineers. These professionals are knowledgeable in both the
technical and sales aspects of a project and also have established contacts and
networks in Chile necessary to successfully compete with larger international
companies. While many of the services offered by the Company are comparable to
those of its competitors, because of the Company's historical presence in Chile
and its reputation for quality services, it can effectively compete with larger
competitors and offer additional services not available from its competitors.
See "Competition."

         The services offered by E&A include, but are not limited to:

         1.       /bullet/ Forecasting of market trends.
                  /bullet/ Market research
                  /bullet/ Financing (expertise in local and foreign loans)

                  /bullet/ Packaging with other manufacturers

                  /bullet/ Knowledge of the decision making procedures and the
                           scheduling of projects

         2.       /bullet/ Local engineering support (by the Company's employees
                           or through subcontractors) 
                  /bullet/ Procurement of local materials and products 
                  /bullet/ Construction and plant erection capabilities 
                  /bullet/ Project managing capabilities 
                  /bullet/ Coordination with customer and customer engineering

         While E&A does not charge any fee for the services described in item 1
above and funds the related operating costs, the services described in item 2
above are developed for a customer on a fee basis once a project is secured.
Additionally, equipment manufacturers pay E&A a commission upon receipt of the
award of a project. The commission is typically based on a percentage of the
amount of the sale, which varies depending upon the size and scope of a project.
See "Recent Projects."

         In preparing bid documents for various projects, E&A has and will
continue to form consortiums of various equipment manufacturers who provide
products on competitive terms and conditions. E&A intend to assist in obtaining
financing of projects through both domestic (Chile) and international financial
institutions.

INA

         INA focuses primarily on providing engineering consulting services for
hydroelectric plants and civil construction projects (tunneling projects). Most
of the engineering services provided by INA result from INA's exclusive
representation of Norconsult. Currently, one or two hydroelectric plants are
built in Chile every year, while each year Norconsult participates 


                                       4
<PAGE>

worldwide in the design of 10 to 15 of such plants. As a result, INA's
relationship with Norconsult provides INA with the ability to offer its
customers state-of-the-art knowledge for these types of projects while, at the
same time, associating with local engineering companies in preparing bid
documents for such projects. INA also offers most services not only relating to
hydroelectric power plants, but also to infrastructure and irrigation projects,
from the pre-construction stage through the commissioning of the project.

         Additionally, INA has the ability to erect small electro-mechanical
installations and material handling systems. As a project manager for an
installation, INA coordinates with a consortium of equipment manufacturers in
the preparation and delivery of turnkey projects after a bid has been awarded.
INA also provides local engineering support to its clients.

         Both E&A and INA believe they have built superior reputations in their
specific areas of expertise, having been involved in the greater majority of all
hydroelectric plants built in Chile since 1985, as well as other major
electro-mechanical projects than its Chilean competitors. A major part of the
Company's know-how is its understanding of a customer's needs and being its
ability to offer its customers goods and services that deviate only to the
extent that such deviations or substitutions make a bid more competitive. The
Company believes that in order to be awarded a bid, a bidder needs to know the
end user and through the years, the Company has obtained this knowledge by
working with the major companies in Chile (both private and public) who request
these bids. See "Major Projects."

         The Company intends to further grow its core business by expanding in
North America and Europe as well as to seek additional representation of U.S.
and other North American based companies for sales to be made in Chile. To
facilitate this growth, the Company has established a U.S. office located in
Boca Raton, Florida. The Company has also acquired a 77% equity interest in
Consonni/ECESA from Mr. Errazuriz, subject to shareholder approval at the
Company's 1997 Annual Shareholders Meeting which shall be held as soon as
practicable. See "1997 Investments in New Companies - Consonni/ECESA" and
"Certain Relationships and Related Transactions." The Company believes that by
establishing its presence in the U.S. and Europe, it will be more competitive
because it will have more direct access to foreign manufacturers located in
North America, as well as other countries in North America and in Europe.

Major Representations (Exclusive)

<TABLE>
<CAPTION>
NAME OF COMPANY                                      COUNTRY OF ORIGIN                  SECTOR
---------------                                      -----------------                  ------

<S>                                                  <C>                                <C> 
Accusonic, Inc./O.R.E. Intl. Inc.                    U.S.A.                             Ecology & water treatment
Berdal Stromme A.S.                                  Norway                             Engineering
Consonni S.A.                                        Spain                              Energy and electricity
Kvaerner Energy A.S.                                 Norway                             Energy
Kvaerner Turbin A.B.                                 Sweden                             Mech. equip. for energy
Linde A.G                                            Germany                            Mining processor, chemical plants
Norconsult Int. A.S.                                 Norway                             Engineering
Union Espanola de Explosivos                         Spain                              Mining explosives
</TABLE>


                                       5
<PAGE>

Selected Special Sales Representations (Non-Exclusive)

<TABLE>
<CAPTION>
NAME OF COMPANY                                      COUNTRY OF ORIGIN                  NAME OF PROJECT
---------------                                      -----------------                  ---------------

<S>                                                  <C>                                <C>  
ABB-Air Preheater                                    U.S.A.                             Ventanas Power Plant
ABB-Sweden                                           Sweden                             Pangue
ABB-Switzerland                                      Switzerland                        Curillinque
ABB-Solyvent Ventec                                  Spain                              Various mines (Exxon)
AEG                                                  Germany                            Pangue
Babcock & Wilcox/Cranes Div.                         Spain Ventanas                     Cranes
Babcock & Wilcox Espanola, S.A.                      Spain                              Mejillones Power Plant
Baedeker y Navarro  (BYNSA)                          Spain                              Tocopilla Cranes
Combustion Engineering                               U.S.A.                             Chuquicamata
G.E.C. Large Machines                                U.K.                               Guardia Vieja
G.E.C. Mechanical Handling                           U.K.                               Cement Storage and Conveyor
Ingemas                                              Spain                              Ventanas Conveyor System
Marubeni Corp.                                       Japan                              Copper Concentrates Distr.
Mitsubishi Corp.                                     Japan                              Polpaico
National Drying Machinery Co.                        U.S.A.                             Invertec
Siemens A.G.                                         Germany                            Mejillones Th Power Plant
                                                                                        Loma Alta Hydroelectric
Sumitomo Corp.                                       Japan                              Submarine Cables
Westinghouse Electric Company                        U.S.A.                             Turbines/Edegel, Peru

</TABLE>

RECENT PROJECTS - 1993 - 1996

         Below is a representative list of the main equipment, turnkey projects
and engineering sales made by the Company from 1993 to 1996.(1)(2)

<TABLE>
<CAPTION>
                                                                                                                     APPROXIMATE
NAME OF PROJECT            EQUIPMENT                 TYPE OF PROJECT           CUSTOMER         SUPPLIER             VALUE
---------------            ---------                 ---------------           --------         --------             -----
<S>                        <C>                       <C>                       <C>              <C>                  <C>       
1993

Ortiga Tunnel              Redesign of tunnel        Engineering               Exxon            Norconsult           $100,000
Canutillar                 Power Plant tunnels       Engineering               Endesa           Norconsult           $200,000
Mejillones                 Thermal power plant       Advisory                  Edelnor          Babcock Wilcox       $100 million
Capullo                    Hydropower                Advisory                  CREO             Kvaerner             $5 million
                                                     & erection                Norconsult

1994

Pangue                     General design &          Engineering               Kvaerner         Norconsult A.S.      $2.7 million
                           supplier coordination
Pangue                     Hydropower                Advisory                  Pangue S.A.      Kvaerner Turnbin     $70 million
Antafagasta                Sewage system             Engineering               Bayesa           Biwater Int'l.       $8 million
  Wastewater
</TABLE>


                                       6
<PAGE>


<TABLE>
<CAPTION>
                                                                                                                     APPROXIMATE
NAME OF PROJECT           EQUIPMENT                     TYPE OF PROJECT       CUSTOMER         SUPPLIER              VALUE
---------------           ---------                     ---------------       --------         --------              -----
<S>                       <C>                           <C>                   <C>              <C>                   <C> 
1995

Patache                   Cranes                        Advisory              CELTA            Babcock Wilcox -      $10 million
                                                                                               Espana
Lorna Alta                Hydropower                    Advisory              Pehuenche        Siemens-              $20 million
                                                                                               hidrovevey
San Ignacio               Thermal-electrical plant      Advisory              Endesa           Misubishi             $100 million

1996

Andina                    Water tunnel system           Engineering           Codelco          Norconsult            $100,000
Nehuenco                  Thermal-electrical plant      Advisory              Colbun           Siemens               $100 million
Costanera,
   Argentina              Thermal electrical plant      Advisory              Endesa           Mitsubishi            $200 million
</TABLE>

         (1)      A number of the bids awarded for the projects described above
                  were awarded to a group of bidders forming a consortium.

         (2)      Typically, for projects valued in excess of $100 million, the
                  Company will earn a commission of between 0.03% to 1% of the
                  bid price of the project; for projects valued between $20
                  million and $100 million, from 1% to 3.5%; and from $1 million
                  to $20 million, between 3% and 5%. For sales less than $1
                  million, the commission typically ranges between 5% and 10%.
                  Factors that determine the amount of commission include, among
                  others, the amount of engineering services provided by the
                  Company.

1997 Projects

         During 1997 the Company has participated in the following projects:

         /bullet/ ANDRADE GUTIERREZ S.A. (CORTADERAL/ALTO CACHAPOAL PROJECT).
                  Andrade Gutierrez S.A., a Chilean corporation, has developed a
                  400 megawatt hydroelectric power concern, which is currently
                  in the pre-construction stage. The Company represented Kvaener
                  Energy A.S. for the sale of four turbine generator sets and
                  other relevant equipment estimated to be $60,000,000 to
                  $70,000,000. The project was awarded to this group during
                  September 1996.

         /bullet/ HACIENDA SAN LORENZO S.A. (MAMPIL Y PEUCHEN POWER PLANT).
                  Elecnor S.A., along with Iberdrola (Spain), have been awarded
                  the bid for the construction, operation and partial ownership
                  of a group of small power plants in the south of Chile. The
                  Company has been invited to submit bids on behalf of Kvaerner
                  Turbin A.B. and Siemens for the equipment to be used in
                  connection with the powerhouses. During October, the
                  electrical aspect of the project was awarded to Siemens and
                  the contract was signed in January 1997.

         /bullet/ EL PERAL LAND DEVELOPMENT PROJECT. The Company was hired as
                  consultant to develop beachfront property near Santiago,. The
                  project was awarded and the Company is 


                                       7
<PAGE>

                  providing advising services regarding the sale of options on
                  the land.

         /bullet/ TOCOPILLA ELECTROANDINA PROJECT. Electroandina, the owner of
                  Tocopilla Power Plant - the main electric installation in the
                  north of Chile, requested bids to supply a 425 megawatt gas
                  powered thermal power plant to be located at Tocopilla, Chile,
                  and a similar device at Caleta Coloso, also in the north of
                  Chile. The Company participated in the project, which was
                  awarded to the consortium of which the Company is a part, in
                  December 1997.

         /bullet/ YAMANGO HYDROPOWER PLANT. Edegel, the largest Peruvian
                  electric utility, requested bids for a new hydropower electric
                  plant to be located at the East of Lima, Peru. The Company
                  participated in this bid and was awarded the project in
                  November 1997.

WATER RELATED PROJECTS

Aguas y Ecologia S.A. and the Bayesa Project

         While Chile has made significant economic gains over the past 12 years
in terms of foreign trade, the development of electrical utilities, the export
of agricultural and cellulose products, the efforts of the Chilean government to
take actions in the sanitary services and waste water treatment have been slower
in coming. The first steps toward waste water treatment commenced in 1987 when
the Ministry of Public Works called for bids to clean the Mapocho River Systems
(which account for 30% of all the waste water in Santiago), however a number of
political stalemates halted development in this area until 1993, which the
Chilean government commenced privatization of the water utility industry.

         The Company, through ADC Swiss, currently owns a 67.5% of Aguas y
Ecologia S.A. ("A&E"), a Chilean corporation. A&E, in turn, owns a 10% interest
in Biwater-Aguas y Ecologia S.A. ("Bayesa"), which owns and operates the Bayesa
Project (the "Bayesa Project"). The Bayesa Project includes the design,
construction, and management of a waste water treatment facility in Antafagasta,
Chile for ESSAN (which is the water supply and treatment facility for the second
region of Chile where Antofagasta), and the right to sell reclaimed industrial
grade water.

         The Bayesa Project will terminate after 30 years of operation, at which
time Bayesa anticipates that it will transfer the Bayesa Project to ESSAN for no
consideration. The Company took the reversion of the Bayesa Project back to
ESSAN into consideration when deciding to take an equity position in the Bayesa
Project. The Company concluded was that it was in the Company's best interest to
invest in the Bayesa Project, because of the potential profitability during the
30-year term of the contract.

         Realizing that there appeared to be an emerging business in water
purification and treatment in Chile, the Company decided to seek additional
relationships with foreign entities that have experience in water purification
and may be partners in an eventual privatization project. Below is an overview
of these relationships and proposed projects.


                                       8
<PAGE>

Pridesa

         Effective September 1997, the Company entered into an agreement with
Pridesa, a medium size Spanish company engaged in developing waste water
treatment and desalinization plants. Under the terms of this agreement, the
Company and Pridesa will seek to construct, own, and manage a 34,000 cubic meter
per day desalinization plant in Iquique in the northern region of Chile, one of
the driest regions in the world. It is anticipated, but there can be no
assurances, that 75% of the funding for this plant will come from Spanish
government loans on favorable terms. The guaranty of the funding is anticipated
to be provided as a project loan from various Chilean banks. It is expected that
the Company will have a significant equity position and management role in this
project.

Colina

         Colina is one of the main future suburbs for Santiago. Currently, many
first class real estate projects are under development in this area. It is
expected that within 15 years, the population of this area will grow to 600,000.
Water is currently available in limited supply and is expected to become a major
problem in the near future. The Company has been asked to analyze the
feasibility of a water treatment facility in this sector and will be interested
in participating in that business, if one develops.

Temuco

         A similar situation to Colina has occurred in Temuco, one of the
fastest growing city in Chile. In 1995, the population increase in Temuco was
23% and currently it has around 300,000 inhabitants. An independent third party
has requested the Company to investigate a water supply project that could be
developed in that city.

1998 PROJECTS

1)       RALCO
         Project's owner            :       Endesa, Chile
         Location                   :       Chile, 8th Region
         Type of project            :       Hydroelectric Power Plant
         Capacity                   :       560 megawatt approximately
         Bid submission date        :       Third Quarter, 1998
         Award estimated date       :       Last Quarter 1999
         Estimated Bid Price        :       $100 million

2)       GUAVIO
         Project's owner            :       Endesa (Emgesa, Colombia)
         Location                   :       200 km east of Bogota
         Type of project            :       Hydroelectric Project
         Capacity                   :       220 megawatt approximately
         Bid submission date        :       September 1998
         Award estimated date       :       November 1998
         Estimated Bid Price        :       $40 million


                                       9
<PAGE>

3)       PP. RIO de JANEIRO
         Project's owner            :       Cachoeira Dorada SA - Endesa/Edegel
         Location                   :       Rio de Janeiro, Brazil
         Type of project            :       Gas Powered Combined Cycle
         Capacity                   :       120 megawatt approximately
         Bid submission date        :       February 1998
         Award estimated date       :       April 1998
         Estimated Bid Price        :       $35 million

4)       COSTANERA ADVISORY
         Project's owner            :       Central Buenos Aires-Endesa/Entergy
         Location                   :       Buenos Aires, Argentina
         Type of project            :       Engineering Advisory
         Bid submission date        :       January 1998
         Award estimated date       :       January 1998
         End of Project             :       April 1998

5)       CHIMAY
         Project's owner            :       EDEGEL, Peru
         Location                   :       150 km east of Lima
         Type of project            :       Hydroelectric Plant
         Capacity                   :       60 megawatt approximately
         Bid submission date        :       February 1998
         Award estimated date       :       May 1998
         Estimated Bid Price        :       $100 million

6)       TERMO BIBLIS
         Project's owner            :       Electrica de Cartagena, Colombia - 
                                            Termo Biblis
         Location                   :       Cartagena
         Type of project            :       Gas powered Combined Cycle (Siemens)
         Capacity                   :       350 megawatt approximately
         Bid submission date        :       April/May 1998
         Award estimated date       :       June 1998
         Estimated Bid Price        :       $150 million

7)       COYA- PANGAL
         Project's owner            :       Codelco Chile
         Location                   :       100 south of Santiago
         Type of project            :       Hydroelectric Project, purchase of 
                                            Plant
         Capacity                   :       70 megawatt approximately
         Bid submission date        :       June/August 1998
         Award estimated date       :       December 1998
         Estimated Bid Price        :       $75 million


                                       10
<PAGE>

8)       DESALINIZATION ANTAFAGASTA
         Project's owner            :       ESSAN, Joint Venture
         Location                   :       Antafagasta, Chile
         Type of project            :       Desalting Plant, water production
         Capacity                   :       350 lkts/sec approx.
         Bid submission date        :       July 1998
         Award estimated date       :       October 1998
         Estimated Bid Price        :       $30 million

         A number of Chilean companies with whom the Company has established
relationships are now making investments and developing projects outside
Chile and as indicated above, a number of these companies have engaged the
Company to provide services for these projects.

STRATEGY FOR EQUITY PARTICIPATION

         While both E&A and INA have been profitable during recent years, their
ability to produce a steady cash flow for the Company is limited by the nature
of their businesses since their activities depend almost exclusively on the
number of bids that are awarded to each of them. Income from these businesses
requires that first, new projects are developed; second, appropriate equipment
is available to offer to a project at competitive prices; and third, and most
importantly, that the Company is successful in selling the equipment and
services. The Company believes that to expand the businesses of E&A and INA, the
Company may require higher fixed costs and less flexibility. Alternatively,
increasing the number of employees does not necessarily mean increased sales and
profitability to the Company.

         Management believes that by establishing an equity position in other
ventures will provide the Company with (a) diversified profitable growth; (b)
stabilized cash flow; and (c) the ability to further capitalize on the stability
of the Chilean economy. As a result, during 1997, the Company made a number of
equity investments in business which are anticipated to create a steady cash
flow to the Company and which will grow in the future.

1997 INVESTMENTS IN NEW COMPANIES

Consonni/ECESA

         In May 1997, Mr. Errazuriz, the Company's CEO, President and Chairman,
acquired a 20% interest in Consonni/ECESA from unrelated third parties,
increasing his equity interest in Consonni/ECESA to 77%. Consonni/ECESA are
Spanish corporations that market, manufacture, distribute and sell motor control
centers and switchgear. In June and July 1997, the Company purchased an 11%
equity interest in Consonni/ECESA for approximately $671,000 from unrelated
third parties.

         Consonni/ECESA has experienced significant operating losses up through
1996, resulting in a substantial accumulated deficit. Under Spanish government
regulations, a company is not 


                                       11
<PAGE>

allowed to operate with significant accumulated deficit without government
intervention. As a result, in July 1996, the Spanish government under judicial
orders, placed Consonni/ECESA under administrative supervision whereby
managements was required to present a strategic plan with the intent to
eliminate the supervision by demonstrating an ability to continue as a going
concern. As part of its plan, Consonni/ECESA developed a strategy to eliminate a
substantial amount of its debt and in particular, the amounts due to the Social
Security Administration of Spain and other governmental agencies and negotiated
with these governmental entities to reduce the amount of debt due to these
agencies, which reduction of debt was approved. In June and July 1997, once
these negotiations were substantially finalized, the Company purchased an 11%
interest in Consonni/ECESA for approximately $671,000 from unrelated third
parties.

         Subsequently, during August 1997, Mr. Errazuriz, on behalf of his
interest of 77% and the interest owned by the Company (subject to shareholder
approval) of 11%, entered into a share exchange agreement with CONUSA, whereby
the 88% interest of Consonni/ECESA was exchanged for 2,300,000 shares of CONUSA
Common Stock (representing approximately a 76.7% interest in CONUSA). CONUSA has
applied for inclusion of its common stock on the OTC Bulletin Board, which is a
limited market. CONUSA intends to apply for inclusion on the National
Association of Security Dealers Automated Quotation (Nasdaq) SmallCap Market
System at such time as CONUSA meets the initial listing requirements.

         Effective December 31, 1997, but subject to shareholder approval (which
approval shall be sought at the Company's 1997 Annual Shareholders' Meeting to
be held as soon as practicable), the Company will enter into an agreement with
Mr. Errazuriz whereby Mr. Errazuriz shall sell his 77% interest in CONUSA to the
Company for approximately $4.3 million, which shall be payable as follows (i)
approximately $212,000 in forgiveness of loans made by the Company to Mr.
Errazuriz,; (ii) 250,000 shares of Series A Preferred Stock, to which holders
shall be entitled to nine votes for each one share of Class A Preferred Stock
held, valued at approximately $1,203,250, based on the closing bid price of
$4.183 of the Company's common stock as of December 31, 1997, (iii) 50,000
shares of Company Common Stock, valued at approximately $240,650, based on the
closing bid price of $4.183 as of December 31, 1997, (iv) the "Villarrica Land,"
currently valued at approximately $789,450 (as described under "Properties" and
"Certain Relationships and Related Transactions"), subject to the outstanding
mortgages, (v) the "Villarrica Property," valued at approximately $494,000 (as
described under "Certain Relationships and Related Transactions"), and (vi) the
receivables for El Peral advisory services due to the Company, at $1,339,000.
See "Certain Relationships and Related Transactions." and "Notes to Financial
Statements."

NYSA

         Negociaciones y Servidumbre, S.A. (NYSA), a Chilean corporation, was
organized to advise the largest private utilities and the Minister of Public
Works in the acquisition of land rights from private owners in connection with
the installation of electrical lines, piping systems and roads. NYSA, on behalf
of these utilities, assists in determining the appropriate market value in order
to purchase (rather than to expropriate) privately owned property, and typically


                                       12
<PAGE>


undertakes all aspects of the acquisition (including legal matters). In July
1997, the Company commenced acquiring a 51% equity interest in NYSA for
$125,508.

Ingesis

         In August 1997, the Company commenced acquiring a 70% interest in
Ingesis, S.A. in consideration for $101,032. Ingensis is a computer software
company located in Santiago, Chile that has developed a system that utilizes a
digital signature generated by encrypting a logarithm on a computer chip, which
has been approved by the Chilean Internal Revenue Service as a replacement for
the current system of tracking and auditing the collection of value added taxes.
The Company intents to invest an additional $250,000 to develop and market these
products, and to help develop and implement Ingesis' business plan.

Vina Valle del Itata S.A

         Vina Valle del Itata S.A. ("VVISA"), a Chilean corporation, was
organized to produce wine processing grapes originated in the area called "Valle
del Itata" located approximately 400 kilometers south of Santiago. The initial
capacity of the installation is estimated to be 1.5 million liters of wine and
this capacity is expected to double within three years. The project is sponsored
by "Fundacion Chile" which is a joint venture between International Telephone
and Telegraph (ITT) and the Chilean Government and was created to develop new
industrial and agricultural ventures in Chile. The total investment by the joint
venture in this project will be $2.5 million of which $1 million will be used
for working capital. Banks and governmental Institutions will either finance or
guarantee 80% of these amounts. The Company currently owns a 31% share in
VVISA and has invested $85,325 to date. The installation was ready for operation
in March 1998 in time to process the 1998 vintage.

Vina "Rincon del Nuble"

         The Company purchased 670 acres near Chillan for $1,073,000, of which
$685,292 was paid during 1997 and the balance is due on May 3, 1998. During
1997, the Company commenced a program to plant 430 acres of vineyard from 1997
to 1999. The first harvest is expected during March 2000 and full production
will be attained three years later. The Company intends to sell up to 25% share
of the vineyard, mainly to selected strategic partners and to certain of its
employees and workers.

MARKETING AND SALES

         The Company's marketing and sales efforts are currently undertaken by
management, the Company's in-house engineers and other technical employees. A
substantial amount of the Company's marketing is accomplished by word of mouth,
personal contact, leads, and solicitation. The Company also uses written
marketing materials, including brochures, and does limited advertising in trade
journals and publications in Chile.


                                       13
<PAGE>

COMPETITION

Core Business

         The Company believes that each aspect of its business is competitive
and that competition is based not only on price but also on quality of service.
The Company's competitors include a number of international companies with local
offices in Santiago, Chile which consists of an administrative staff who, in
certain instances, are not engineers. While these larger competitors may bid on
the same projects as the Company, and although there can be no assurances that
the offers will be competitive, the Company believes that it has and will
continue to participate effectively in the bid process. To the Company's
knowledge, the majority of its competitors rely on the engineering expertise of
local subcontractors (such as the Company) or on engineering companies located
abroad.

         The Company believes that in the past, it has demonstrated the ability
to seek and enter into relationships with those manufacturers whose products are
most competitively priced, not only in terms of dollars, but also in terms of
overall product efficiency and support for specific projects. Moreover, the
Company has been successful in helping to put together consortiums of
manufacturers, in order to quote large multi-faceted projects. Nonetheless, the
Company believes that each area of the new projects and investments in which the
Company intends to become involved is highly competitive.

         A number of the Company's competitors may be larger, better
capitalized, and may have more experienced management and may have greater
access to resources, which may be necessary to produce a competitive advantage.

Recent Equity Investments

         The Company has only recently entered into new equity ventures, the
majority of which are outside the scope of its core business. Accordingly, a
number of the Company's competitors in these ventures are larger, better
capitalized, and may have more experienced management and may have greater
access to resources, which may be a competitive advantage.

GOVERNMENT REGULATIONS

Generally

         The Company's business is subject to the full range of governmental
regulation and supervision generally applicable to companies engaged in business
in Chile, including labor laws, social security laws, public health,
environmental laws, securities laws and anti-trust laws.


                                       14
<PAGE>

Environmental Regulations

         Bayesa's agreement with ESSAN for the Bayesa Project provides that
certain water, once treated at the Bayesa Project, will be disposed of in the
ocean. In order for the Bayesa Project to discard this water into the ocean, the
amount of contaminants remaining must meet the requirements mandated by Chilean
environmental laws.

FOREIGN INVESTMENT LAWS AND REGULATIONS

         The Chilean Constitution establishes that any Chilean or foreigner may
freely develop any activity in Chile so long as the activity in Chile does not
contravene existing laws dealing with public morals, public safety or national
security and follows the law that regulate such activity. It also establishes
the principle of non-discrimination, thus guaranteeing foreign investors equal
protection under Chilean law. Additionally, Chilean law prohibits any
discretionary acts by the Chilean government or other entities against the
rights of persons or property in derogation of this principle. Foreign investors
may transfer capital and net profits abroad. There are no exchange control
regulations which restrict the repatriation of the investment or earnings except
that the remittance of capital may take place starting a year after the date the
funds were brought into the country, but net profits can be remitted at any
time, after deduction of applicable withholding income taxes. Therefore, equity
investments in Chile by persons who are not Chilean residents follow the same
rules as investments made by Chilean citizens.

         These principles are the basis for the DL 600. See "Dividend Policy."
Based on DL 600, the foreign investor and the government sign a legally-binding
investment contract which may only be modified by mutual consent. The contract
sets forth the current tax and foreign exchange laws as each relates to the
specific investments by that investor in Chile. Thus, the investor is protected
against any subsequent changes in the law which could adversely affect the
investor or his investments in Chile. Although the Chilean Government has been
successful in keeping this principle in place for the last 23 years, there is no
case regarding unilateral breach of an investment contract by the Government and
there can be no assurances that a breach by the Government will not occur in the
future or that it would not adversely affect the rights of the Company to do
business in Chile. Moreover, while there has been no precedent that political
changes had determined changes in these rules, no assurances can be made that
such changes will not occur in the future.

FOREIGN CORRUPT PRACTICES ACT

         Substantially all of the Company's operations are transacted in South
America. To the extent that the Company conducts operations and sells its
products outside the U.S., the Company is subject to the Foreign Corrupt
Practices Act which makes it unlawful for any issuer to pay or offer to pay, any
money or anything of value to any foreign official, foreign political party or
official thereof or any candidate for foreign political office ("Foreign
Officials") or any person with knowledge that all or a portion of such money or
thing of value will be offered, given, or promised, directly or indirectly, to
any Foreign Official.


                                       15
<PAGE>

         The Company has not made any offers, payments, promises to pay, or
authorization of any money or anything of value to any Foreign Official and has
implemented a policy to be followed by its officers, directors, employees and
anyone acting on its behalf, that no such payments can and will be made. The
Company has made all employees cognizant of the need for compliance with the
Foreign Corrupt Practices Act and any violation of the Company policy will
result in dismissal. Further, the Company conducts periodic reviews of this
policy with all employees to ensure full compliance.

EMPLOYEES

         As of December 31, 1997, the Company employed 43 full-time employees,
eight of whom are managers/engineers and 35 of whom are administrative or
workers. Employees of the Company are not represented by labor unions. The
Company considers its relationship with its employees to be good. At its Boca
Raton, Florida office, the Company employs one person in management and one
administrative assistant.


ITEM 2. DESCRIPTION OF PROPERTY

         The Company leases approximately 4,300 square feet of office in
Santiago, Chile, at a monthly rate of $7,398.00 per month. The lease commenced
on November 1, 1997 and will terminate on October 30, 2005. The Company also
leases approximately 1,600 square feet of office space in Boca Raton, Florida at
a monthly rate of $3,300.00 The lease commenced on November 1, 1997 and will
terminate on October 31, 2000.

         The Company, through INA, currently owns land for future developments,
however, the land is limited in its capacity to be subdivided by local Chilean
regulations. The land is located near Villarrica in the south of Chile and
consists of approximately 107.75 acres of non-irrigated land, which is
classified as non-performing property ("Villarrica Land"). As of December 31,
1997, the book value of the land was $789,447 and had outstanding mortgages of
$149,074. Subject to shareholder approval, as part of the consideration to be
paid to Mr. Errazuriz in connection with the purchase of his interest of CONUSA,
the Company will transfer title to this property to Mr. Errazuriz, subject to
the existing outstanding mortgage. See "1997 Investments in New Companies -
Consonni/ECESA" and "Certain Relationships and Related Transactions." 

         In November 1997, the Company purchased 670 acres near Chillan (Vina
"Rincon del Nuble") for $1,073,000, of which $685,292 was paid during 1997 and
the balance is due on May 3, 1998. During 1997, the Company commenced a program
to plant 430 acres of vineyard from 1997 to 1999. The first harvest is expected
during March 2000 and full production will be attained three years later. The
Company intends to sell up to 25% share of the vineyard, mainly to selected
strategic partners and certain of its employees and workers. See "1997
Investments in New Companies - Vina "Rincon de Nuble".


                                       16
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

         The Company is not a party to any pending legal proceeding the
resolution of which, the management of the Company believes, would have a
material adverse effect on the Company's results of operations or financial
condition, nor to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.

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

         None


                                       17
<PAGE>


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Since the Company's initial public offering of its common stock, par
value $.0001 ("Common Stock") and redeemable common stock purchase warrants
("Warrants") on October 29, 1996, the Company's Common Stock and Warrants have
traded principally on the National Association of Security Dealers Automatic
Quotation - National Market System ("Nasdaq NMS") under the symbols "ADCC" AND
"ADCCW", respectively. Prior to October 29, 1996, there was no public market for
the Company's securities. The following table sets forth the high and low bid
quotations for the Common Stock and Warrants for the periods indicated, as
reported by NASDAQ. These quotations reflect prices between dealers, do not
include retail mark-ups, markdowns or commissions and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
                                                      COMMON STOCK                       WARRANTS
                                                      ------------                       --------
                                                      HIGH          LOW             HIGH            LOW
                                                      ----          ---             ----            ---
1996
----

<S>                                                   <C>          <C>              <C>            <C>
October 29, 1996 to December 31, 1997                 6-1/4          5              2-1/4            1/8

1997
----

January 1, 1997 to March 31, 1997                     5-7/8        4-1/8            1-9/16           7/8
April 1, 1997 to June 30, 1997                          6          3-1/2            1-7/16          9/16
July 1, 1997 to September 30, 1997                    5-7/16       4-1/8             1-3/8       1-25/32
October 1, 1997 to December 31, 1997                  5-7/8        4-3/8             1-3/4         1-1/8
</TABLE>

         On December 31, 1997, the closing bid price for the Common Stock was
$4.813, and for the Warrants was $1.688. As of December 31, 1997, the number of
record holders of the Company's Common Stock and Warrants were approximately 450
and 450, respectively.

         During 1997, the Company announced that it would pay dividends of $.20
per share, based on 1997 profits in two trenches. The first tranche of $.10 per
share was paid on December 31, 1997 and the second dividend was paid on or about
April 15, 1998.


                                       18
<PAGE> 


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

GENERAL

         Management's Discussion and Analysis or Plan of Operation contains
various "forward looking statements" within the meeting of the Securities Act of
1933, as amended, the Securities and Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act 1995. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may", "expect", "anticipate",
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology.

         The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.

         The Company does not have a policy of updating or revising
forward-looking statements and thus it should not be assumed that silence by
management of the Company over time means that actual events are bearing out as
estimated in such forward-looking statements.

OVERVIEW

         During 1997, the efforts of management were principally focused on the
acquisition and reorganization of selected companies that would provide a source
of stable cash flow and which assets would constitute a solid investment. See
"Business - Strategy for Equity Participation, 1997 Investments". In particular,
the Company has focused on small to medium size companies with good potential of
increasing sales and revenues in the future. Management believes that these
acquisitions and investments will have a significant impact on future earnings.
The Company's proposed acquisition of CONUSA, of which Consonni/ECESA is a
majority owned (88%) subsidiary, subject to approval by the Company's
shareholders, should significantly increase gross revenues and provide a more
constant cash flow. See "Note 15 to Notes to Financial Statements". Management
has begun to make certain management changes within Consonni/ECESA, which
includes (i) sourcing components from a wider variety of manufacturers and
thereby decreasing manufacturing cost, (ii) renegotiating bank lines to lower
finance charges, and (iii) creating a broader network of agents in order to
obtain more orders. Management believes that these changes and others that it
intends to undertake in the future should help increase the Consonni/ECESA
revenue base and produce an operational profitability in accord with the size of
the Company.

         At the same time, management believes that along with the acquisition
of tangible assets, the Company has also acquired the talents of highly
qualified professionals. While the Company believes that a number of these
investments, and specifically the vineyard and the wine processing installation,
will take some years to obtain full maturity and profitability, these assets
will still generate some revenues during 1998.


                                       19
<PAGE>



         In 1997, the economic crisis in Asia and particularly the investment
activity during the last quarter of 1997 had a negative impact on the Company's
operations. Most of the projects being undertaken by the Company during the last
quarter of 1997, as well as certain projects expected for the first quarter of
1998, were postponed until after June 30, 1998, which adversely affected the
Company's results of operations for the fourth quarter and had a direct impact
on the Company's 1997 results. We also failed in our estimate of increased
revenues from american sources through our subsidiary company, AEFC, which
showed unable of being profitable.

         Management believes that it is taking corrective measure to mitigate or
eliminate these problems during 1998. The Company's equity investment in the
Chillan Vineyard in Chile is not expected to begin producing any profits until
2000. Management, however, considers this investment to be important because the
vineyard will be the main source of supply for the Company's wine processing and
bottling plant, in which Company currently has a 31% equity interest. See
"Business 1997 Investments in New Companies". The Company believes that creating
a captive source of supply will facilitate the production of high quality wine
as is the rule in one place. Although Management believes the world demand for
wine will continue and that these investments will generated revenue sand profit
by the end of fiscal 2000.

         Notwithstanding these yearly setbacks, management believes that the
increased expenses incurred were necessary to develop the Company and to prepare
for its new phase of activities. Additionally, management also believes that
most of the extraordinary expenses were necessary to create attractive new
opportunities, even if certain of these opportunities were not profitable by
themselves. Management also believes that during 1997 and the first quarter of
1998, the markets has corrected themselves with regard to the Asian Crisis and
that during the third quarter of 1998 the activity postponed will again
commence.

PLAN OF OPERATIONS

         The Company intends to increase its efforts within its core business
and will seek additional markets in Peru, Argentina and Brazil, where a number
of the Chilean companies have made investments and undertaken new energy
projects. Mr. Errazuriz will again dedicate himself to sales, leaving the
administrative war to other officers of the Company. In particular, the Company
is presently negotiating for the construction and operation of a desalination
plant in the northern area of Chile, which has one of the driest deserts in the
world. The Company, on behalf and with Pridesa S.A., is currently negotiating
with ESSAN to obtain a joint venture in the distribution of water for a
desalination plant, which the Company and Pridesa intend to build. The Company
intends to have a minority equity interest and management role in this project.
See "Business - Water Related Projects - Pridesa".


                                       20
<PAGE>



RESULTS OF OPERATIONS

December 31, 1997 compared to December 31, 1996

         Gross revenues increased from $3,423,552 in 1996 to $3,879,062 at
December 31, 1997, an increase of 13%. This increase is based on increased
contracts being generated from the Company's core business activities.

         Cost of operations increased from $1,074,826 at December 31, 1996 to
$1,773,165 at December 31, 1997 or 65% due to the following two factors: (I) as
revenues increased for the period so to have the related costs of operations,
(ii) with the additional diversification in operations as a result of new
business ventures, additional personnel have been hired to meet those new needs,
even though at December 31, 1997, no significant revenues have yet been
realized.

         Selling and administrative expenses increased from $781,455 at December
31, 1996 to $1,053,221 at December 31, 1997, an increase of $271,766 or 35%
which is reflective of increased activities of both the Company's core business
as well as its new ventures and projects.

         Gross profits decreased from $2,348,726 at December 31, 1996 to
$2,105,897 in 1997, a decrease of $242,829 or 10%, also as a result of the items
mentioned in the aforementioned paragraph.

         Net income decreased from $1,342,074 at December 31, 1996 to $937,903
at December 31, 1997, a decrease of $404,171 or 30%. This is primarily due to
the increased cost referred to above as well as a higher effective income tax
rate resulting from tax credits provided in prior years not as prevalent during
1997.

LIQUIDITY AND CAPITAL RESOURCES

December 31, 1997 compared to December 31, 1996

         During the period ended in December 31, 1997, as compared to the year
ended December 31, 1996, there were significant changes in the liquidity, type
of assets, structure of debt and stockholder's equity. Management believes that
each of these changes are positive indications of the ability of the Company to
increase its stability and net positive results in the future as well as to
increase its base of steady revenues.


                                       21
<PAGE>

         Current liabilities increased from $498,217 to $1,844,578, due to
increase obligations and core business operations with banks, tied to a
short-term loan to acquire the vineyard and core business operations. The
company's current assets, however, continue to maintain a ratio of 2.5 to 1 with
respect to its current liabilities. This decrease in working capital of 13:1 to
2.5 to 1.0 is due to the increased investments in subsidiaries which are
reflected as non-current assets.

         Long term liabilities of $206,071 as of December 31, 1997, is up from
182,018 due to increased liabilities for staff severance benefits, common to
Chilean business practices.

         Fixed assets increased from $165,557 at December 31, 1996 to $672,875
at December 31, 1996 or $507,318 as a result of additional investment in new
office facilities and equipment and other minor items related to the new office.

         Other assets have increased from $1,833,130 for the period ended on
December 31, 1996 to $5,437,585 for the period ended December 31, 1997. This
increase corresponds to the investment in new business opportunities described
earlier. See Business - "Investment in New Companies during 1997" and to the
long term promissory note due from consulting activities.

ITEM 7. FINANCIAL STATEMENTS

         See "Index to Financial Statements" for a description of the financial
statements included in this Form 10-KSB.

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

         None.


                                       22
<PAGE>


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

EXECUTIVE OFFICERS AND DIRECTORS

         The directors and executive officers of ADC are as follows:

NAME                              AGE          POSITION
----                              ---          --------

Pedro Pablo Errazuriz             61           President Chief Executive Officer
                                               Chairman of the Board
Jose Luis Yrarrazaval             58           Vice Chairman of the Board
                                               Secretary/Director
Mauricio G. De la Barra           34           Chief Financial Officer
Alberto Coddou                    59           Director
Sergio Jimenez                    62           Director
Claude Mermier                    62           Director
--------------

PEDRO PABLO ERRAZURIZ has served as Chief Executive Officer and Chairman of the
Board of Directors of the Company since October 19, 1994, and its President
since January 11, 1995. He has also served as the President, the sole Director
of Andean Export Corporation since February 9, 1995, and a Director of Andean
Engineering & Finance Corp., since its inception in July 1997. Mr. Errazuriz
founded Ingenieria Norconsult Andina, the predecessor company of INA in 1986 as
a continuation of his activities in the sales of equipment, project management
and procurement for electricity generation projects and has served as its
President since its inception and through March 20, 1995. In 1991, Mr. Errazuriz
founded E&A and served as its President since its inception through March 20,
1995. Mr. Errazuriz has also served as Chairman of the Board of Kvaerner Chile
S.A., a subsidiary of Kvaerner A.S., a Norwegian-based manufacturer of
electrical and mechanical equipment) since 1992 and as the exclusive agent for
Kvaerner Turbin A.B. (Sweden) since 1994. Since 1986, Mr. Errazuriz has acted as
an exclusive agent in Chile for Norconsult. Mr. Errazuriz received an
engineering degree from the Catholic University of Chile in 1959.

JOSE LUIS YRARRAZAVAL has been a member of the Board of Directors of ADC since
March 20, 1995 and has served as Chief Financial Officer from March 20, 1995
until January 5, 1998, when he resigned to accept the position of Vice Chairman
of the Board of the Company, effective as of January 5, 1998. He also has served
as Executive Vice President and a Director of INA and E&A since March 20, 1995.
Between November 1993 and October 1997, Mr. Yrarrazaval has served as the
General Manager of both E&A and INA, which responsibilities included all
financial matters and personnel management. From April 1988 through October
1993, Mr. Yrarrazaval served as the project manager for INA, supervising the
projects of INA. From 1973 through 1988, Mr. Yrarrazaval was a partner and
technical manager of a construction company, involved in


                                       23
<PAGE>

the construction of industrial plants, buildings, and housing developments. He
also acted as supervisor in the construction of agro-industrial and cold storage
plants. Mr. Yrarrazaval has a civil engineering and construction degree from the
State Technical University in Santiago, Chile.

MAURICIO G. DE LA BARRA has served as Chief Financial Officer of Andean
Development Corporation since January 5, 1998. He has also served as the General
Manager of E&A and INA since October 15, 1997, where his responsibilities
include all financial matters and personnel management. Between March 1992 and
August 1997, Mr. De la Barra was an executive with the Interamerican Development
Bank (IDB) in charge of the development, financing and execution of
infrastructure projects where he also integrated a team project that designed
the framework and government regulation to increase the private investment in
the infrastructure projects. Mr. De la Barra is a civil engineer, having
received his degree from Universidad de Concepcion de Chile in 1987. He also has
received a degree in Economic Evaluation of Projects from Catholic University of
Chile in 1990 and his Master of Business Administration from the Loyola College
of the University in Maryland in 1996.

ALBERTO CODDOU has served as a member of the Board of Directors of the Company
since March 20, 1995, and as a member of the Board of Directors of E&A since
March 20, 1995. Mr. Coddou has been a partner with the law firm of Figueroa &
Coddou in Santiago, Chile since 1965. He has also been an Assistant Professor of
Law at the University of Chile, School of Law from 1959 through 1982. In May
1995, Mr. Coddou was appointed Chairman of the Board and Legal Representative of
Consorio Periodistico de Chile S.A., the owners and editors of a Chilean
newspaper called La Epoca.

SERGIO JIMENEZ has served on the Board of Directors of ADC since March 20, 1995.
Through June 1997 he was the President of the Santiago Water and Sewage Company
"EMOS". As of June 1995, Mr. Jimenez has been appointed as a member of the Board
of ENAP (Empresa Nacional del Petroleo), the Chilean oil company owned by the
government. Mr. Jimenez served as President of Edelnor S.A. from March 1990 to
March 1994. Edelnor, which generates and transmits electricity in the northern
regions of Chile, was a subsidiary of CORFO, the holding company of Chilean
state-owned companies before it was privatized in 1994. From 1990 through 1992,
Mr. Jimenez was President and Chief Executive Officer of Metro S.A., also a
subsidiary of CORFO, which operates the Santiago subway system. Mr. Jimenez is
also a partner and Managing Director of Consultora Jimenez y Zanartu Limitada,
which consults on engineering projects for segments of the Chilean government
related to public works. Mr. Jimenez is a civil engineer, having received his
degree from the University of Chile, in Santiago and has a post graduate degree
in Project Evaluation from the University of Chile.

CLAUDE MERMIER has served on the Board of Directors of ADC since March 20, 1995.
Mr. Mermier has served as the Chairman of the Board of INA since March 20, 1995.
Mr. Mermier has also served as Chairman of Igenor Ingenierie & Gestion S.A., a
principal shareholder of the Company, since its inception in March 1992. Since
1979, Mr. Mermier has been the President of Compagnie Financiere pour le
Commerce Exterieur S.A., a Swiss company involved in property development
throughout Europe.


                                       24
<PAGE>

         Directors are elected at the Company's annual meeting of shareholders
and serve for one year until the next annual shareholders' meeting or until
their successors are elected and qualified. Officers are elected by the Board of
Directors and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board. All of the Company's
executive officers are full-time employees of the Company. The Company pays its
Directors a fee of $1,000 per meeting attended, and reimburses all Directors for
their expenses in connection with their activities as directors of the Company.
Directors of the Company who are also employees of the Company will not receive
additional compensation for their services as directors. The Company intends to
purchase directors and officers insurance to the extent that it is available and
cost effective to do so.

COMMITTEES OF THE BOARD OF DIRECTORS

         The Company has five committees: the Audit Committee, Compensation and
Investment Committee, Nominating Committee, Employee Stock Option Committee, and
the Directors Stock Option Committee. As of December 31, 1997, the members of
these committees consisted of Mr. Jose Luis Yrarrazaval, Alberto Coddou and
Sergio Jimenez. Messrs. Coddou and Jimenez are considered by the Company to be
independent directors.

         The principal functions of the Audit Committees are to recommend the
annual appointment of the Company's auditors concerning the scope of the audit
and the results of their examination, to review and approve any material
accounting policy changes affecting the Company's operating results and to
review the Company's internal control procedures. The Investment and
Compensation Committee reviews and recommends investments, compensation and
benefits for the executives of the Company. The Nominating Committee seeks out
qualified persons to act as members the Company's Board of Directors. The
Employee Stock Option Committee and the Directors Stock Option Committee
administer and interpret the Company Stock Option Plan and the Directors Stock
Option Plan and is authorized to grant options pursuant to the terms of these
plans.

DIRECTORS AND OFFICERS OF THE SUBSIDIARIES

BERTA DOMINGUEZ, age 57, has served as a Director and President of Errazuriz y
Asociados Arquitectos Limitada, one of the principal shareholders of the Company
since 1990.

DAVID MAYER, age 56, has served as the President and a Director of Andean
Engineering & Finance Corp. since its inception in July 1997. Mr. Mayer has
served as a Director of Uniservice Corporation, a Florida corporation which
currently owns 29 Kentucky Fried Chicken(R)franchises in Chile. 
From January 1992 to March 1996, Mr. Mayer was a consultant to Premier Artists
Services, Inc., Corporate Entertainment Productions, Inc., and Alliance
Entertainment, Inc., where he assisted the companies in the implementation of
their respective business plans and various corporate matters.

         Mrs. Berta Dominguez is the wife of Mr. Pedro P. Errazuriz.


                                       25
<PAGE>

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company directors and executive officers, and persons who own
more than ten percent (10%) of the Company's outstanding Common Stock, to file
with the Securities and Exchange Commission (the "Commission") initial reports
of ownership and reports of changes in ownership of Common Stock. Such persons
are required by the Commission to furnish the Company with copies of all such
reports they file. The Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representation, as
of December 31, 1997, none of the Section 16(a) filing requirements applicable
to its officers, directors and greater than 10% beneficial owners have been
complied with, however the Company expects that all required reports shall be
filed as soon as practicable.


ITEM 10. EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS

         The following table sets forth compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and each executive officer whose
compensation exceeded $100,000 for the year ended December 31, 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                          OTHER ANNUAL
NAME AND PRINCIPAL POSITION                 YEAR       SALARY($)           BONUS ($)      COMPENSATION($)
---------------------------                 ----       ---------           ---------      ---------------

<S>                                         <C>        <C>                 <C>            <C>       
Pedro P. Errazuriz(1)(2)                    1997       $178,130            $70,705        $20,000(3)
  Chief Executive Officer                   1996       $51,475             $96,000        $73,016(4)
  Chairman                                  1995       $97,801             $92,000        $79,104(5)

Jose L. Yrarrazaval(1)(2)(6)                1997       $75,040             $35,000        $17,000(7)
  Vice Chairman of the Board/               1996       $37,419             $35,000        $32,932(8)
  Treasurer/Secretary/Director              1995       $56,886             $30,000        $17,700(9)

Juan Phillips(1)(2)                         1997       $75,060             $15,000        $15,000(10)
  General Manager INGESIS and NYSA          1          $34,608             $40,000        $31,488(11)
                                            1995       $48,000             $16,000            -0-
</TABLE>
--------------

(1)      Prior to the Company's public offering in November 1996, payment of the
         compensation to the persons set forth above was apportioned among the
         following subsidiaries and affiliated companies as follows: E&A - 35%;
         INA 25%; Electromecanica Osorno S.A. - 20%, a Chilean corporation
         currently owned by Errazuriz y Asociados Arquitectos Ltda. (EAA) and by
         Igenor, Ingenierie et Gestion, S.A. (Igenor), each principal
         shareholders of the Company; and Proyectos y Equipos, S.A. a Chilean
         corporation owned by EAA, Igenor, and a family member of Mr. Pedro P.
         Errazuriz, the Chief Executive Officer, President and Chairman of the
         Board of ADC. See "Principal Shareholders." The proportions established
         as compensation that were paid by the different companies were
         arbitrarily determined, intended to minimize tax payments and to
         indicate the involvement of the Company's executives in all related
         companies.

(2)      The gross salary includes social security and retirement benefits.
         Social Security in Chile was established as a private system that
         requires all companies to retain 20% of the gross salaries of its
         employees which 


                                       26
<PAGE>

         is used to pay both Administrators of Pension Funds Companies ("AFP")
         and Institutions of Provisional Health ("ISAPRE").

         The allocation of this 20% to each service is as follows:

                  (a) 10% to the AFP: This amount is deposited in an individual
         interest-bearing account of each employee to cover their retirement. In
         Chile, the age of retirement is 60 years in case of women and 65 years
         for men.

                  (b) 3% to the AFP: This amount covers any partial or permanent
         disability and, in the case of death, will provide a monthly amount to
         the deceased's spouse. The amount paid corresponds to 70% of an
         employee's average salary, based upon the last 10 years of the
         employee's life.

                  Both items (a) and (b) are limited to approximately $1,700 per
         month.

                  (c) 7% to the ISAPRE: This amount covers medical fees,
         hospitalization and clinical examinations, although in many instances
         it may be necessary to pay additional costs for health care.

                  Chilean law requires the payment of one month salary for each
         year worked by the employee when he is dismissed. When the employee
         terminates his or her employment, no compensation is legally required.

(3)      This is allocated to an annual automobile allowance.

(4)      Includes an annual allowance of $15,000 for automobile costs and
         maintenance; and annual housing/vacation allowance of $10,500, $7,200
         for domestic employees; and $40,316, based upon a percentage of the
         profit of the Company. The profit percentage was based on approximately
         3% of the total net profits of all related companies for 1996.

(5)      Includes an annual allowance of $15,000 for automobile costs and
         maintenance; an annual housing/vacation allowance of $10,500; $7,200
         for domestic employees; and $46,404, based upon a percentage of profit
         of the Company. This profit percentage was based on 2% of the total net
         profits of all related companies for 1995, calculated to Chilean
         accounting standards.

(6)      On January 5, 1998 Mr. Yrarrazaval has resigned his position as CFO.

(7)      This is allocated to an annual automobile allowance.

(8)      Includes an annual allowance of $17,000 for automobile costs and
         expenses, and an annual housing and vacation allowance of $15,932.

(9)      This is allocated to an annual automobile allowance.

(10)     This is allocated to an annual automobile allowance.

(11)     Includes an annual allowance of $17,000 for automobile costs and
         expenses, and an annual housing and vacation allowance of $14,488.



                                       27
<PAGE>

EMPLOYMENT AGREEMENTS

         On March 15, 1996, the Company entered into employment agreements with
Messrs. Pedro P. Errazuriz, Jose Luis Yrarrazaval, and Juan Phillips. Each of
the employment contracts are for one year, which agreements may be automatically
renewed. The salaries and social security benefits will not be less than those
for fiscal year 1995, which shall be determined by the Company's Board of
Directors. Additionally, these individuals will also be entitled to a bonus, as
determined by the Company's Board of Directors.

         Additionally, on September 15, 1998 the Company entered into a one year
employment agreement with Mr. Mauricio G. de la Barra, which may be
automatically renewed. Mr. De la Barra's base salary is $60,000 plus bonuses of
approximately $36,000. Mr. De la Barra is also entitled to social security
benefits.

INCENTIVE AND NON-QUALIFIED STOCK OPTION PLANS

         Pursuant to the Company's Stock Option Plan (the "Stock Option Plan")
and Directors Stock Option Plan (the "Directors Plan"), 175,000 shares of Common
Stock and 75,000 shares of Common Stock, respectively, are reserved for issuance
upon exercise of options. The Plans are designed to serve as an incentive for
retaining qualified and competent employees and directors. Both the Stock Option
Plan and the Directors Plan apply to Andean Development Corporation and each of
its subsidiaries. Only non- employee directors are eligible to receive options
under the Directors Plan.

         The Company's Board of Directors, or a committee thereof, administers
and interprets the Stock Option Plan and is authorized to grant options
thereunder to all eligible employees of the Company, including officers and
directors (whether or not employees) of the Company. The Stock Option Plan
provides for the granting of "incentive stock options" (as defined in Section
422 of the Internal Revenue Code), non-statutory stock options and "reload
options." Options may be granted under the Stock Option Plan on such terms and
at such prices as determined by the Board, or a committee thereof, except that
in the case of an incentive stock option granted to a 10% shareholder, the per
share exercise price will not be less than 110% of such fair market value. The
aggregate fair market value of the shares covered by incentive stock options
granted under the Plans that become exercisable by a grantee for the first time
in any calendar year is subject to a $100,000 limit.

         The purchase price for any option under the Stock Option Plan may be
paid in cash, in shares of Common Stock or such other consideration that is
acceptable to the Board of Directors or the committee thereof. If the exercise
price is paid in whole or in part in Common Stock, such exercise may result in
the issuance of additional options, known as "reload options," for the same
number of shares of Common Stock surrendered upon the exercise of the underlying
option. The reload option would be generally subject to the same provisions and
restrictions set forth in the Stock Option Plan as the underlying option except
as varied by the Board of Directors or the committee thereof. A reload option
enables the optionee to ultimately own the same number of shares as the optionee
would have owned if the optionee had exercised all options for cash.


                                       28
<PAGE>

         The Company initially intended that the Directors Plan would provide
for an automatic grant of an option to purchase 3,000 shares of Common Stock
upon a person's election as a director of the Company and an automatic grant of
an option to purchase 3,000 shares of Common Stock at each annual meeting
through which a director's term continues. Subsequently, the Company determined
that the issuance of options pursuant to the Directors Plan would be undertaken
by resolution of the Board of Directors.

         Options granted under the Stock Option Plan will be exercisable after
the period or periods specified in the option agreement, and options granted
under the Directors Plan are exercisable immediately. Options granted under the
Plans are not exercisable after the expiration of five years from the date of
grant and are not transferable other than by will or by the laws of descent and
distribution. The Plans also authorize the Company to make loans to optionees to
enable them to exercise their options.

         While the Company previously had intended to issue options As of
December 31,1997, the Company has not granted any options to purchase shares of
Common Stock under its Stock Option Plan and Directors Plan.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of December 31, 1997, the number of shares of
Common Stock which were owned beneficially by (i) each person who is known by
the Company to own beneficially more than 5% of its Common Stock, (ii) each
director, (iii) each executive officer and (iv) all directors and executive
officers as a group. As of December 31, 1997, there were 2,820,100 shares issued
and outstanding.

<TABLE>
<CAPTION>
                                                    PERCENTAGE OF
NAME AND ADDRESS OF                              AMOUNT AND NATURE OF                  OUTSTANDING
BENEFICIAL OWNER(1)                              BENEFICIAL OWNERSHIP (2)              SHARES OWNED(3)
-------------------                              ------------------------              ---------------
<S>                                                        <C>                             <C>   
Pedro P. Errazuriz(4)                                      450,100                         15.96%
     President, CEO and
     Chairman of the Board
Jose Luis Yrarrazaval                                        -0-                            -0-
     Chief Financial Officer, Treasurer,
     Secretary and Director
Alberto Coddou, Director(5)                                  -0-                            -0-
Sergio Jimenez, Director
Claude Mermier, Director(6)(7)                               2,250                   Less than 1%
All directors and executive officers                       452,350                         16.04%
As group (five persons)
Igenor, Ingenierie et Gestion, S.A.,
     a Swiss corporation(6)(8)                             900,000                         31.91%
Errazuriz y Asociados                                      600,000                         21,28%
Arquitectos, Limitada ,
</TABLE>


                                       29
<PAGE>

<TABLE>
<S>                                                        <C>                             <C>   
a Chilean limited partnership(9)
Berta Dominguez(10)791,250                                 791,250                         28.06%
</TABLE>
--------------

(1)      Unless otherwise indicated, the address of each beneficial owner is
         Avenue Americo Vespucio 100, piso 16, Santiago, Chile.

(2)      A person is deemed to be the beneficial owner of securities that can be
         acquired by such person within 60 days from the date hereof upon
         exercise of option and warrants. Each beneficial owner's percentage
         ownership is determined by assuming that option and warrants that are
         held by such person (but not those held by any other person) and that
         are exercisable within 60 days from the date hereof have been
         exercised.

(3)      Does not give effect to the exercise of warrants or options into shares
         of Common Stock.

(4)      Includes shares of Common Stock owned by Igenor, Ingenierie et Gestion,
         S.A. of which Mr. Errazuriz owns 50% of the outstanding equity and 100
         shares of Common Stock were issued to him on October 19, 1994.

(5)      The address is Santa Lucia 280-OF. 12, Santiago, Chile.

(6)      The address is c/o Etude Montavon-Mermier, 22, rue Etienne Dumont, 1211
         Geneve 3, Switzerland.

(7)      M. Mermier owns a 0.25% interest in Igenor, Ingenierie & Gestion, S.A.

(8)      This is a company organized pursuant to Swiss law. Based upon
         information provided to us by this company, the shareholders of this
         company are Mr. Pedro P. Errazuriz (50%), the President, Chief
         Executive Officer and Chairman of the Board of ADC; Ms. Berta Dominguez
         (49%), the wife of Mr. Errazuriz and the Chairman, Chief Executive
         Officer and director of E&A; Mr. Pedro Pablo Errazuriz, a son of Mr.
         Errazuriz and his wife (0.25%); Mr. Claude Mermier (0.25%), a director
         of Andean Development Corporation; and Pierre Yves Montavon (0.25%), an
         unrelated third party.

(9)      The partners are Ms. Berta Dominguez (58%), and the six children of Mr.
         Pedro P. Errazuriz and Ms. Dominguez, who each owns a 7% interest and
         who are (i) Pedro Pablo Errazuriz Dominguez, (ii) Berta Errazuriz
         Dominguez, (iii) Magdalena Errazuriz Dominguez, (iv) Juan Andres
         Errazuriz Dominguez, (v) Felipe Errazuriz Dominguez, and (vi) Arturo
         Errazuriz Dominguez. During first quarter of 1998, but effective
         December 31, 1998 the shares owed by EAA will be transferred to IIG.

(10)     Mrs. Dominguez owns 49,25% of Igenor, Ingenierie et Gestion, S.A. and
         58% interest in Errazuriz y Asocioados Arquitectos, Ltda. She is the
         wife of Mr. Errazuriz, the President, CEO and Chairman of ADC.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Aguas y Ecologia S.A. (A&E)

         During 1995 the Company acquired a 45% interest in A&E, which equals a
4.5% interest in the Bayesa Project. See "Business - Water Projects." The
interest was acquired from an affiliate of the Company, Invdemco, which is a
Chilean investment company. Immediately following the Company's initial public
offering in November 1996, the Company has purchased an additional 22.5%
interest in A&E from shares held by Invdemco,


                                       30
<PAGE>

which translates into an additional 2.25% interest in the Bayesa Project, for
$141,750. The shareholders of Invdemco are (i) Mr. Pedro P. Errazuriz (50%),
President, CEO, and Chairman of the Board of the Company, ADC, (ii) Berta
Dominguez, the wife of Mr. Errazuriz and Director and President of E & A, one of
the principal shareholders of the Company (45%); (iii) and Berta Errazuriz (5%),
a daughter of Mr. Errazuriz and Mrs. Dominguez. As of August 1, 1997, the
Company owned a 6.7% interest in the Bayesa Project.

Villarrica Property

         In November 1996, the Company sold to Invdemco a non-performing asset
of the Company consisting of a house located near Villarrica, Chile in the south
of Chile, situated on approximately 13.5 acres (the "Villarrica Property").
Invdemco paid $606,031.50, (50% of the purchase price) of the Villarrica
Property in cash at closing, with the balance being paid in four annual
installments of principal together with interest at the rate of 8-1/2% on the
unpaid balance, commencing January 15, 1998, which first installment payment has
been paid. See "Note 5 to Notes to Financial Statements." Subject to shareholder
approval, as part of the consideration to be paid to Mr. Errazuriz in connection
with the purchase of his 77% in Consonni/ECESA, the Company will forgive the
debt due to the Company by Invdemco in connection with the sale of the
Villarrica Property. See "Consonni/ECESA."

Villarrica Land

         The Company, through INA, currently owns land for future developments,
however, the land is limited in its capacity to be subdivided by local Chilean
regulations. The land is located near Villarrica in the south of Chile and
consists of approximately 107.75 acres of non-irrigated land, which is
classified as non-performing property (Villarrica Land). As of December 31,
1997, the book value of the land was $789,447 and had outstanding mortgages of $
149,074. Subject to shareholder approval, as part of the consideration to be
paid to Mr. Errazuriz in connection with the purchase of his 77% interest of
Consonni/ECESA. See "Consonni/ECESA".

Proyectos y Equipos S.A. and Electromecanica Osorno S.A.

         EAA and Igenor, the principal shareholders of the Company, also own, in
the aggregate, controlling interest in Proyectos y Equipos S.A. and
Electromecanica Osorno S.A., two Chilean corporations located in Santiago,
Chile. These companies specialize in the sale of air compressors and ventilators
and related products and small electrical equipment, respectively. The Company,
from time to time, intends to enter into agreements with these companies to
perform certain services, based upon competitive bids received from these
companies.

Consonni/ECESA

         In May 1997, Mr. Pedro Errazuriz, the Company's CEO, President and
Chairman of the Board, acquired a 20% interest in Consonni/ECESA from unrelated
third parties, increasing his 


                                       31
<PAGE>

equity interest in Consonni/ECESA to 77%. Consonni/ECESA are Spanish
corporations that market, manufacture, distribute and sell motor control centers
and switchgear. In June and July 1997, the Company purchased an 11% equity
interest in Consonni/ECESA for approximately $671,000 from unrelated third
parties. See "Business - 1997 Investment in New Companies."

         Subsequently, during August 1997, Mr. Errazuriz, on behalf of his
interest of 77% and the 11% interest owned by the Company, entered into a share
exchange agreement with CONUSA, whereby the 88% interest of Consonni/ECESA owned
by Mr. Errazuriz and the Company was exchanged for 2,300,000 shares of CONUSA
common stock (representing approximately a 76.7% interest in CONUSA, or a 67.5%
owned by Mr. Errazuriz and a 9.2% interest owned by the Company). CONUSA has
applied for inclusion of its common stock on the OTC Bulletin Board, which is a
limited market and intends to apply for inclusion on the National Association of
Security Dealers Automated Quotation (Nasdaq) SmallCap Market System at such
time as CONUSA meets the necessary listing requirements.

         Effective December 31, 1997, but subject to shareholder approval, which
approval shall be sought at the Company's 1997 Annual Shareholders' Meeting to
be held as soon as practicable, the Company will enter into an agreement whereby
Mr. Errazuriz shall sell his 77% interest in CONUSA to the Company for
approximately $4.3 million, which shall be payable as follows (i) approximately
$212,000 in forgiveness of loans made by the Company to Mr. Errazuriz,; (ii)
250,000 shares of Series A Preferred Stock, to which holders shall be entitled
to nine votes for each one share of Class A Preferred Stock held, valued at
approximately $1,203,250, based on the closing bid price of $4.183 of the
Company's common stock as of December 31, 1997, (iii) 50,000 shares of Company
Common Stock, valued at approximately $240,650, based on the closing bid price
of $4.183 as of December 31, 1997, (iv) the "Villarrica Land," currently valued
at approximately $789,450 (as described under "Properties" and "Certain
Relationships and Related Transactions"), subject to the outstanding mortgages,
(v) the "Villarrica Property," valued at approximately $494,000 (as described
under "Certain Relationships and Related Transactions"), and (vi) the El Peral
Property receivable due to the Company for its advisory services, at $1,339,000.
See "Certain Relationships and Related Transactions." and "Notes to Financial
Statements." The Company has previously represented Consonni/ECESA as its
representative in Chile.


                                       32
<PAGE>

Transactions Between the Company and its Officers, Directors and Affiliates

         In May 1997, the Company loaned Mr. Errazuriz the principal sum of
$200,000, plus interest at an annual rate of 8%. These funds were used by Mr.
Errazuriz to purchase a 20% interest in Consonni/ECESA. As part of the proposed
purchase by the Company of Mr. Errazuriz' 77% interest in Consonni, the Company
will forgive this obligation (plus accrued interest) of appropriately $212,000.
See "Consonni/ECESA."

         Mr. Pedro P. Errazuriz is a member of the Board of Directors and had
power of attorney for Kvaerner Chile, S.A. and Kvaerner Hydro, Agencia de
Kvaerner Turbin Aguas y Ecologia, S.A., corporations each involved in the
manufacturing and selling of electrical materials. Mr. Errazuriz has resigned
from the Board of Directors and has relinquished his power of attorney.

         All transactions between the Company and its officers, shareholders and
each of their affiliated companies have been made on terms no less favorable to
the Company than those available from unaffiliated parties. In the future, the
Company intends to handle transactions of a similar nature on terms no less
favorable to the Company than those available from unaffiliated parties.

                                     PART IV

                        EXHIBITS AND REPORTS ON FORM 8-K

The following documents are filed as a part of this report or are incorporated
by reference to previous filings, if so indicated:

         (a)      EXHIBITS

EXHIBIT NO.       DESCRIPTION OF EXHIBIT
-----------       ----------------------

1.1               Form of Underwriting Agreement(1)
1.1(a)            Revised Form of Underwriting Agreement(1)
1.1(b)            Revised Form of Underwriting Agreement(1)
1.1(c)            Revised Form of Underwriting Agreement(1)
1.2               Revised Form of Agreement Among the Representatives(1)
1.2(b)            Revised Form of Agreement Among Representatives(1)
1.2(c)            Revised Form of Agreement Among Underwriters(1)
1.3               Revised Form of Selling Group Agreement(1)
1.3(a)            Selected Dealers Agreement(1)
1.3(b)            Form of Selected Dealers Agreement(1)
2.1(a)(i)         Share Exchange Agreement between the Shareholders of Errazuriz
                  y Asociados Ingenieros S.A. and the Company(1)


                                       33
<PAGE>

2.1(a)(ii)        First Modification to Share Exchange Agreement between the 
                  Shareholders of Errazuriz y Asociados Ingenieros S.A. and the
                  Company dated June 15, 1995(1)
2.1(a)(iii)       Second Modification to Share Exchange Agreement between the
                  Shareholders of Errazuriz y Asociados Ingenieros S.A. and the
                  Company dated June 30, 1995(1)
2.1(b)(i)         Share Exchange Agreement between the Shareholders of Igenor
                  Andina S.A. and the Company(1)
2.1(b)(ii)        First Modification to Share Exchange Agreement between the
                  Shareholders of Igenor Andina, S.A. and the Company dated June
                  15, 1995(1)
2.1(b)(iii)       Second Modification to Share Exchange Agreement between the
                  Shareholders of Igenor Andina, S.A. and the Company dated June
                  30, 1995(1)
3.1(a)            Company's Amended and Restated Articles of Incorporation(1)
3.1(b)            Articles of Incorporation for Andean Engineering & Finance
                  Corporation(2)
3.1(c)            Articles of Incorporation and Corporation Bylaws for ADC 
                  Andean, S.A., a Swiss corporation(2)
3.2               Company's Revised Amended and Restated Bylaws(1)
3.2(b)            Andean Engineering & Finance Corporation Bylaws(2)
4.1               Form of Warrant Agreement together with the form of Warrant 
                  Certificate(1)
4.1(a)            Revised Form of Warrant Agreement together with the form of 
                  Warrant Certificate(1)
4.2               Revised Form of Representatives' Warrant Agreement together 
                  with the revised Form of Representatives' Purchase Warrant 
                  Certificate(1)
4.2(a)            Form of Representatives Warrant and Registration Rights 
                  Agreement together with the revised Form of Representatives'
                  Purchase Warrant Certificate(1)
4.2(b)            Revised Form of Representative's Warrant Agreement together 
                  with the revised Form of Representative's Purchase Warrant
                  Certificate(1)
4.3               Specimen of Common Stock Certificate.(1)
4.4               Specimen of Warrant Certificate (to be included in the revised
                  Form of Warrant Agreement in Exhibit 4.1(a) (1)
4.4(b)            Specimen of Warrant Certificate (to be included in the revised
                  Form of Warrant Agreement in Exhibit 4.2(b)) (1)
4.5               Form of Bridge Warrants(1)
10.1              Stock Option Plan(1)
10.1(a)           Revised Stock Option Plan(1)
10.2              Directors Stock Option Plan(1)
10.2(a)           Revised Directors Stock Option Plan(1)
10.3              Representation Agreement between Biwater and Errazuriz y 
                  Asociados Ingenieros Ltda.(1)
10.4              Agreement between ESSAN and Bayesa for the Final Disposal of 
                  the Antofagasta Sewage (New translation with Appendices No.
                  1-5  but without maps)(1)
10.5              Decree from the Municipality of Macul awarding the Land Grant
                  to Igenor Andina S.A.(1)
10.6              Agreement Between the Municipality of Macul and Igenor Andina
                  S.A. for the Land Grant (New translation)(1)


                                       34
<PAGE>

10.7              Agreement between Igenor Andina, S.A. and the owner of the 
                  restaurant "Donde la Cuca" to be located at the Macul Park 
                  (in English)(1)
10.8              Agreement between Canales, Errazuriz, Rodriguez, Arquitectos
                  Asociados and TDS International concerning designing and
                  consulting services for the Macul Project.(1)
10.9              Agreement between Capullo S.A. and Igenor Andina S.A. in 
                  Connection with the Capullo Hydroelectric Plant(1)
10.10             Form of Agreement Between Inversiones y Desarrollo Demco S.A.
                  ("Invdemco") and Igenor Andina Sociedad Anonima to Exchange 
                  the Interest of Invdemco in Aguas y Ecologia S.A. for Certain 
                  and Real Property Near Villarrica, Chile(1)
10.11             Protocolization Request - Final Reception Certificate No. 61 
                  for the Villarrica Property(1)
10.12             Lease Agreement between Juan Carlos Marti Medina, landlord, 
                  and Norconsult International A.S., tenant dated September 16,
                  1992(1)
10.13             Revised Employment Agreement between Andean Development 
                  Corporation and Pedro Pablo Errazuriz, President and CEO of
                  ADC, and Messrs. Jose Luis Yrarrazaval Torrealba, Juan 
                  Phillips Davila, Gonzalo Cordua Hoffman, Juan Andres Errazuriz
                  Dominguez and Pedro Pablo Errazuriz Ossa, dated March 15, 
                  1995(1)
10.14             Employment Agreement between Ingenieria Norconsult Andina 
                  Limitada and Jose Luis Yrarrazaval Torrealba dated November 3,
                  1993 (in English)(1)
10.15             Employment Agreement between Errazuriz y Asociados Ingenieros 
                  Limitada and Juan Phillips Davila dated November 2, 1993 
                  (in English)(1)
10.16             Employment Agreement between Ingenieria Norconsult Andina
                  Limitada and Gonzalo Cordua Hoffman dated August 1, 1993
                  (in English)(1)
10.17             Employment Agreement between Ingenieria Norconsult Andina
                  Limitada and Juan Andres Errazuriz Dominguez dated October 11,
                  1993 (in English)(1)
10.18             Employment Agreement between Errazuriz y Asociados Arquitectos
                  Limitada and Pedro Pablo Errazuriz Ossa dated January 1, 1992
                  (in English)(1)
10.19             Letter from Westinghouse Electric Corporation to the Company
                  acknowledging the parties' intent for the Company to act as an
                  agent for Westinghouse for certain projects in Chile dated 
                  July 31, 1995.(1)
10.19(a)          Special Sales Representative Agreement between Westinghouse 
                  Electric Company S.A. and Errazuriz Y Asociados Ingenieros 
                  S.A.(1)
10.20             Credit Line Agreement between Bayesa and Banco Security in 
                  connection with the Bayesa Project dated July 19, 1995.(1)
10.21             Commitment by Sociedad de Inversiones El Rincon S.A. to pay 
                  its remaining contribution of 20% in Inversiones Tiempo Libre 
                  S.A. dated April 26, 1995.(1)
10.22             Commitment by Inversiones Zukunft Ltda. to pay its remaining
                  contribution of 34% in Inversiones Tiempo Libre S.A. dated 
                  April 26, 1995.(1)
10.23             Commitment by Margarita Maria Errazuriz to pay her remaining
                  contribution of 13% in Inversiones Tiempo Libre S.A. dated
                  April 26, 1995.(1)
10.24             Contract with Westinghouse.(1)
10.25             Contract with Mitsuishi.(1)


                                       35
<PAGE>

10.26             Contract between Invdemco and Company for Villarrica
                  Property.(1)
10.27             Revised Shareholder Exchange Agreement(1)
10.28             Form of Financial Advisory Agreement(1)
10.29             Form of Merger and Acquisition Agreement(1)
10.30             Share Exchange Agreement between Consonni USA, Inc. and Pedro 
                  Pablo Errazuriz Ossa dated August 15, 1997(2)
21                Subsidiaries of Registrant(1)
23.1              Consent of Independent Auditors(2)
27                Financial Data Schedule(2)

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

(1)      Incorporated by reference from the Registrant's Registration Statement,
         as amended, on Form SB-2 filed with the Securities and Exchange
         Commission and declared effective on October 29, 1996.

(2)      Filed herewith

(b)      Reports on Form 8-K :      None.


                                       36
<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Andean Development Corporation has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                            Andean Development Corporation

                                            By: /S/ PEDRO P. ERRAZURIZ
                                               ---------------------------------
                                            Pedro P. Errazuriz, President, Chief
                                            Executive Officer,

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                             TITLE                                      DATE
---------                             -----                                      ----

<S>                                   <C>                                        <C> 
/S/ PEDRO P. ERRAZURIZ                
----------------------                Director, President,                       April 13, 1998
                                      Chief Executive Officer,
</TABLE>


                                       37
<PAGE>



                          INDEX TO FINANCIAL STATMENTS


                                      F-1
<PAGE>

                     [SPEAR, SAFER, HARMON & CO. LETTERHEAD]



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and Shareholders of
Andean Development Corporation
Boca Raton, Florida

We have audited the accompanying consolidated balance sheets of Andean
Development Corporation (the "Company") as of December 31, 1997 and 1996 and the
related consolidated statements of income, shareholders' equity and cash flows
for the years then ended. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Andean
Development Corporation as of December 31, 1997 and 1996 and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.


/S/ SPEAR, SAFER, HARMON & CO.
------------------------------
SPEAR, SAFER, HARMON & CO.


Miami, Florida
February 5, 1998


                                      F-2
<PAGE>




                         ANDEAN DEVELOPMENT CORPORATION

                           Consolidated Balance Sheets

                           December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                   A S S E T S

                                                               1997               1996
                                                          --------------      -------------
<S>                                                       <C>                 <C>          
Current Assets:
   Cash                                                   $      324,556      $     168,156
   Short-term investments                                        528,575          3,598,760
   Accounts receivable                                         3,205,385          2,912,723
   Due from related parties                                      520,000             17,072
   Deferred income taxes                                              -               4,589
   Other current assets                                          118,038            140,010
                                                          --------------      -------------

         Total Current Assets                                  4,696,554          6,841,310
                                                          --------------      -------------

Furniture and Equipment, net                                     672,875            165,557
                                                          --------------      -------------

Other Assets:
   Undeveloped real estate, held for investment                  789,447            789,447
   Note receivable from related party                            606,031            606,031
   Note receivable - other                                     1,339,766                 -
   Deferred income taxes                                              -               5,501
   Investment in unconsolidated subsidiaries                   1,629,998            425,250
   Other assets                                                1,072,343              6,901
                                                          --------------      -------------

                                                               5,437,585          1,833,130
                                                          --------------      -------------

                                                          $   10,807,014      $   8,839,997
                                                          ==============      =============
</TABLE>



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



                                      F-3
<PAGE>




                         ANDEAN DEVELOPMENT CORPORATION

                     Consolidated Balance Sheets (Continued)

                           December 31, 1997 and 1996

<TABLE>
<CAPTION>
                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                                        1997                    1996
                                                                                   --------------          -------------
<S>                                                                                <C>                     <C>         
Current Liabilities:
   Obligations with banks                                                          $      576,756          $          -
   Current portion of long-term debt                                                       30,320                 39,578
   Accounts payable                                                                       767,155                262,671
   Due to related parties                                                                  24,264                  7,562
   Income taxes payable                                                                   197,022                143,451
   Accrued expenses and withholdings                                                       77,531                 26,978
   Current portion of staff severance indemnities                                          21,530                 17,977
   Dividends payable                                                                      150,000                     -
                                                                                   --------------          -------------

         Total Current Liabilities                                                      1,844,578                498,217
                                                                                   --------------          -------------

Long-Term Liabilities:
   Long-term debt, excluding current portion                                              118,754                145,344
   Staff severance indemnities, excluding current portion                                  87,317                 36,674
                                                                                   --------------          -------------

                                                                                          206,071                182,018
                                                                                   --------------          -------------

Shareholders' Equity:
   Preferred stock, $.0001 par value, 5,000,000 shares
    authorized, 0 shares issued and outstanding at
    December 31, 1997 and 1996, respectively                                                    -                      -
   Common stock, $.0001 par value, 20,000,000 shares
    authorized, 2,820,100 shares issued and outstanding                                       282                    282
   Additional paid-in capital                                                           5,724,320              5,724,320
   Retained earnings                                                                    3,135,713              2,479,810
   Cumulative translation adjustment                                                     (103,950)               (44,650)
                                                                                   --------------          -------------

         Total Shareholders' Equity                                                     8,756,365              8,159,762
                                                                                   --------------          -------------

                                                                                   $   10,807,014          $   8,839,997
                                                                                   ==============          =============
</TABLE>




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


                                      F-4
<PAGE>


                         ANDEAN DEVELOPMENT CORPORATION

                        Consolidated Statements of Income

                     Years Ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                             1997                    1996
                                                        --------------          -------------
<S>                                                     <C>                     <C>          
Revenues from Operations:
   Revenues                                             $    3,879,062          $   3,423,552
   Cost of operations                                        1,773,165              1,074,826
                                                        --------------          -------------

Gross Profit                                                 2,105,897              2,348,726

Selling and Administrative Expenses                          1,053,221                781,455
                                                        --------------          -------------

                                                             1,052,676              1,567,271
                                                        --------------          -------------

Other Income (Expenses):
   Interest income                                             121,174                 11,406
   Interest expense                                            (32,795)              (325,777)
   Loss on foreign currency exchange                                -                  (1,660)
   Gain on sale of assets                                        6,031                274,715
   Depreciation and amortization                               (67,046)               (32,666)
                                                        --------------          -------------

                                                                27,364                (73,982)
                                                        --------------          -------------

Income Before Income Taxes                                   1,080,040              1,493,289

Income Taxes                                                   142,137                151,215
                                                        --------------          -------------

Net Income                                              $      937,903          $   1,342,074
                                                        ==============          =============


Net Income per Common Share                                      $ .33                  $0.81
                                                                 =====                  =====

Weighted Average Shares Outstanding                          2,820,100              1,656,859
                                                        ==============          =============
</TABLE>




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



                                      F-5
<PAGE>



                         ANDEAN DEVELOPMENT CORPORATION

                 Consolidated Statements of Shareholders' Equity

                     Years Ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                           ADDITIONAL                             CUMULATIVE            TOTAL
                                          COMMON             PAID-IN           RETAINED          TRANSLATION        SHAREHOLDERS'
                                          STOCK              CAPITAL           EARNINGS           ADJUSTMENT           EQUITY
                                      ------------        ------------       -----------        ------------        -------------
<S>                                   <C>                 <C>                <C>                <C>                 <C>          
Balance at December 31, 1995          $        150        $    674,122       $ 1,137,736        $    (46,091)       $   1,765,917

Additional paid-in capital
 associated with detachable
 stock warrants                                 -               75,600                -                   -                75,600
Net income                                      -                   -          1,342,074                  -             1,342,074
Translation adjustment                          -                   -                 -                1,441                1,441
Issuance of common stock                       132           6,765,000                -                   -             6,765,132
Costs associated with public
 offering charged to capital
 at effective date                                          (1,790,402)               -                   -            (1,790,402)
                                      ------------        ------------       -----------        ------------        -------------

Balance at December 31, 1996                   282           5,724,320         2,479,810             (44,650)           8,159,762

Net income                                      -                   -            937,903                  -               937,903

Dividends declared                              -                   -           (282,000)                 -              (282,000)

Translation adjustment                          -                   -                 -              (59,300)             (59,300)
                                      ------------        ------------       -----------        ------------        -------------


Balance at December 31, 1997          $        282        $  5,724,320       $ 3,135,713        $   (103,950)       $   8,756,365
                                      ============        ============       ===========        ============        =============
</TABLE>





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



                                      F-6
<PAGE>



                         ANDEAN DEVELOPMENT CORPORATION

                      Consolidated Statements of Cash Flows

                     Years Ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                                     1997                    1996
                                                                --------------          -------------
<S>                                                             <C>                     <C>          
Cash Flows from Operating Activities:
   Net income                                                   $      937,903          $   1,342,074
   Adjustments to reconcile net income to net cash
    used in operating activities:
     Depreciation and amortization                                      67,046                 32,666
     Deferred taxes                                                     10,090                 24,387
     Gain on sale of fixed assets                                       (6,031)               (18,923)
     Gain on sale of property held for sale                                 -                (255,792)
     Translation adjustment                                            (59,300)                 1,441
     Changes in assets and liabilities:
       (Increase) decrease in:
         Accounts receivable                                          (292,662)            (1,509,722)
         Other current assets                                           21,972                 37,479
         Note receivable                                            (1,339,766)                    -
         Other assets                                               (1,065,442)                (4,560)
       Increase (decrease) in:
         Accounts payable                                              504,484               (121,611)
         Provision for severance indemnity                              54,196                 13,936
         Accrued expenses and withholdings                              50,553                (12,621)
         Income taxes payable                                           53,571                107,437
                                                                --------------          -------------

Net Cash Used in Operating Activities                               (1,063,386)              (363,809)
                                                                --------------          -------------

Cash Flows from Investing Activities:
   Purchase of fixed assets                                           (581,961)              (134,694)
   Improvements on real estate held for investment                          -                 (60,530)
   Proceeds from sale of fixed assets                                   13,628                 48,704
   Proceeds from sale of subsidiaries                                       -                 194,359
   Proceeds from sale of property                                           -                 616,217
   Investment in unconsolidated subsidiaries                        (1,204,748)              (141,750)
   Proceeds from (investment in) short-term investments              3,070,185             (3,580,399)
                                                                --------------          -------------

Net Cash Provided by (Used in) Investing Activities                  1,297,104             (3,058,093)
                                                                --------------          -------------
</TABLE>




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


                                      F-7
<PAGE>


                         ANDEAN DEVELOPMENT CORPORATION

                Consolidated Statements of Cash Flows (Continued)

                     Years Ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                                                        1997                    1996
                                                                   --------------          -------------
<S>                                                                <C>                     <C>           
Cash Flows from Financing Activities:
   Payment of public offering cost                                 $           -           $  (1,790,402)
   Advances to related parties                                           (486,226)              (136,070)
   Proceeds from (payments on) notes payable to bank                      576,756               (367,658)
   Principal payments on long-term debt                                   (44,847)              (709,118)
   Principal borrowings on long-term debt                                   8,999                     -
   Proceeds from issuance of common stock                                      -               6,765,132
   Dividends paid                                                        (132,000)              (300,000)
   Proceeds from bridge loan                                                   -                  65,000
   Repayment of bridge loan                                                    -                 (65,000)
   Proceeds from issuance of detachable stock warrants                         -                  75,600
                                                                   --------------          -------------

Net Cash (Used in) Provided by Financing Activities                       (77,318)             3,537,484
                                                                   --------------          -------------

Net Increase in Cash                                                      156,400                115,582

Cash at Beginning of Year                                                 168,156                 52,574
                                                                   --------------          -------------

Cash at End of Year                                                $      324,556          $     168,156
                                                                   ==============          =============


Supplemental Disclosure of Cash Flow Information:
   Cash paid during the year for interest                          $       32,795          $     169,854
   Cash paid during the year for taxes                                     97,023                  7,764

Supplemental Disclosure of Non-Cash Investing Activities:
   Note received from sale of property                                         -                 606,031
</TABLE>




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



                                      F-8
<PAGE>


                         ANDEAN DEVELOPMENT CORPORATION

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 1997 and 1996




NOTE 1  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              ORGANIZATION - Andean Development Corporation, (the "Company"), is
              a Florida corporation incorporated on October 19, 1994. The
              Company is in the business of providing engineering, technical
              assistance and equipment in the development of specialized
              projects throughout the country of Chile and more recently in Peru
              and Argentina. In November 1996, the Company completed the sale of
              1,320,000 shares of its stock to the public in an initial public
              offering.

              BASIS OF PRESENTATION - The accompanying consolidated financial
              statements include the accounts of the Company, and its
              wholly-owned subsidiaries, Errazuriz y Asociados Ingenieros, S.A.
              and Igenor Andina, S.A., two Chilean service corporations, Andean
              Engineering and Finance Company, a Boca Raton Management Company
              and Andean Development Corp. - Suisse. All significant
              intercompany balances and transactions have been eliminated in
              consolidation. In addition, the Company has investments in the
              following unconsolidated entities:

                                                   OWNERSHIP        METHOD OF
                        SUBSIDIARY                 PERCENTAGE       ACCOUNTING
                        ----------                 ----------       ----------

              Aguas y Ecologia, S. A.  (A & E)        67.5            Equity
              Vinedos Valle del Itata, S. A.          31.5            Equity
              Bodegas Rincon del Nuble, S. A.         75.0            Equity


              The Company's proportionate share of income or loss is not
              included in the accompanying statements of income as the financial
              statements are unavailable and impracticable to produce at this
              time. Once finalized, the financial statements of the above are
              not expected to have a material impact on these consolidated
              financial statements.

              The following table reflects the revenue, net income and 
              intercompany transactions for the previously separate entities
              (Errazuriz y Asociados Ingenieros, S.A. and Igenor Andina, S.A.)
              prior to the  business combination.

<TABLE>
<CAPTION>
                                                                 1997                     1996
                                                            --------------           --------------
<S>                                                         <C>                      <C>           
              Revenues:
                Errazuriz y Asociados                       $      885,992           $      848,237
                Igenor Andina                                    1,579,848                1,243,015
                Revenues shared by the two firms
                 outside of Chile                                1,413,222                1,332,300
                                                            --------------           --------------

              Total Revenues                                $    3,879,062           $    3,423,552
                                                            ==============           ==============
</TABLE>




                                      F-9
<PAGE>


                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 1  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

<TABLE>
<CAPTION>
                                                                             1997                     1996
                                                                        --------------           --------------
<S>                                                                     <C>                      <C>           
              Net Income:
                Errazuriz y Asociados                                   $      189,191           $      239,846
                Igenor Andina                                                  308,657                  666,610
                Net income shared by the two firms
                 outside of Chile                                              440,055                  435,618
                                                                        --------------           --------------

                                                                        $      937,903           $    1,342,074
                                                                        ==============           ==============


              Intercompany Transactions:
                Due from Igenor to Errazuriz                            $           -            $      164,541
                Due from Errazuriz to Igenor                                   514,178                       -
                                                                        --------------           --------------

                                                                        $      514,178           $      164,541
                                                                        ==============           ==============
</TABLE>


              FUNCTIONAL CURRENCY - The financial statements have been
              translated in accordance with the provisions set forth in
              Statement of Financial Accounting Standards No. 52, from Chilean
              pesos (the functional currency) into US dollars (the reporting
              currency).

              REVENUE RECOGNITION - The Company earns revenue principally from
              commissions associated with the sale of major equipment items and
              the performance of engineering services.

              In the case of equipment sales, the Company earns a commission on
              the sale of equipment or turn-key jobs when the contract between
              the purchasing company (buyer of the equipment), is signed by both
              parties or an "Order of Proceed" is issued by the buyer. At this
              moment all the work of the Company has been completed and the
              commission has been earned regardless of any future developments
              between the supplier and the buyer. The collection of the
              commissions earned is determined by the practices of the countries
              involved. As a result, it is not unusual for it to take 60 to 180
              days for the funds to be transferred.

              Revenues associated with engineering services are recognized as
              services when performed based on standard billing rates.



                                      F-10
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 1  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              CONCENTRATIONS OF CREDIT RISK - Financial instruments which
              potentially subject the Company to concentrations of credit risk
              consist principally of periodic temporary investments of excess
              cash and trade receivables. The Company places its cash with high
              credit quality financial institutions. A significant portion of
              the Company's sales are to several large customers and, as such,
              the Company is directly affected by the well-being of those
              customers. However, the credit risk associated with trade
              receivables is minimal due to the Company's customer base and
              ongoing control procedures which monitor the credit worthiness of
              customers. Historically, the Company has not experienced losses on
              trade receivables. Therefore, no allowance for bad debts is deemed
              necessary. During 1997 and 1996, approximately 50% of the
              Company's consolidated accounts receivable was attributable to one
              customer.

              INCOME TAXES - Deferred tax assets and liabilities are recognized
              for the future income tax consequences attributable to the
              differences between the financial statement carrying amounts of
              existing assets and liabilities and their respective tax bases.
              Deferred tax assets 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. Additionally, the Company provides no
              deferred income taxes on its foreign earnings as the revenues will
              not be transferred to the United States; rather such earnings will
              be reinvested in foreign operations, thereby eliminating any
              deferred tax liability.

              A deferred tax asset was recognized at December 31, 1996 for
              $10,090. Income tax expense totalled $142,137 and $151,215 for the
              years ended December 31, 1997 and 1996.

              FURNITURE AND EQUIPMENT - Furniture and equipment are recorded at
              cost. Depreciation is computed using the straight-line method over
              the estimated useful lives of the assets, usually five years.

              STAFF SEVERANCE INDEMNITIES - The Company provides for certain
              lump sum severance indemnities to its employees at the end of
              their employment as required by Chilean law. The obligation is
              calculated based on the present value of the vested benefits to
              which an employee is entitled, the expected service lives of the
              employees and current salary levels. The Company believes that the
              above calculation is not materially different from the calculation
              required by SFAS 87, which would reflect expected future salary
              increases.

              FOREIGN OPERATIONS - As the Company is a holding company for two
              existing Chilean companies, operating exclusively in South
              America; the potential for both economic and political change in
              the business environment is different from that of the United
              States. The success of the Company depends on the success of the
              Chilean operations and a stable economic and political
              environment.


                                      F-11
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 1  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

              EARNINGS PER COMMON SHARE - Earnings per common share are based on
              the weighted average number of shares outstanding of 2,820,100 and
              1,656,859 for the years ended December 31, 1997 and 1996,
              respectively, after giving effect to common stock equivalents
              which consist of warrants issued with the initial public offering
              that would have a dilutive effect on earnings per share. Warrants
              issued with exercise prices greater than the existing market value
              of the company stock are deemed anti-dilutive and are not
              components of earnings per share.

              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 asset 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.

NOTE 2  - SHORT-TERM INVESTMENTS

              Short-term investments consist of time deposits totalling $37,858
              and $442,107 at December 31, 1997 and 1996, respectively, invested
              in local Chilean banks with maturity dates ranging from three
              months to one year. These investments earn an annual rate of
              interest ranging from 1.44% to 3.60%. In addition, the Company
              invested $490,717 and $3,156,653 in money market accounts in a
              United States bank at December 31, 1997 and 1996, respectively.
              The account earned interest at an annual rate of 2.5% to 3.0%.

NOTE 3  -  OTHER ASSETS

              Other assets consists of the following at December 31:

<TABLE>
<CAPTION>
                                                            1997                     1996
                                                       --------------           -------------
<S>                                                    <C>                      <C>          
              Deposits for future investments          $      897,254           $           -
              Acquisition costs                               148,957                       -
              Other                                            26,132                    6,901
                                                       --------------           --------------

                                                       $    1,072,343           $        6,901
                                                       ==============           ==============
</TABLE>




                                      F-12
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)



NOTE 3  -  OTHER ASSETS (CONTINUED)

              The Company is in the process of acquiring an interest in two
              Chilean entities, Negociaciones y Servidumbre, S.A. (NYSA) and
              Ingesis. The Company has paid $125,508 for a 51% participation in
              NYSA, a company organized to advise utilities and public works in
              the acquisition of rights to cross electrical lines, piping
              systems or roads through private properties. The Company has paid
              $101,032 to acquire a 70% participation in Ingesis, an engineering
              and manufacturing company specialized in certain electronic state
              of the art techniques.

              In addition, the Company is in the process of acquiring Consonni
              USA, Inc. ("CONUSA") and its Spanish subsidiaries, Construcciones
              Electromecanicas Consonni, S.A. ("CONSPAIN"), and Equipos de
              Control Electrico, S.A. ("ECSA"). CONSPAIN and ECSA manufacture
              low, medium and high voltage motor control centers and are
              domiciled in Bilbao, Spain. The Company plans to acquire 88% of
              CONUSA in 1998 subsequent to stockholder approval. Deposits made
              in acquiring this interest totalled approximately $671,000.

              Acquisition costs are recorded at cost and are to be amortized
              using the straight-line method over 10 years beginning in 1998.

NOTE 4  -  RELATED PARTY TRANSACTIONS

              The Company conducts a substantial amount of its business with
              companies that are affiliated with shareholders of the Company. As
              a result, commissions have been received or paid for both
              engineering and consulting services to and from affiliated
              companies.

              Commissions received from affiliated entities by the Company for
              the engineering of various projects totalled $684,895 and $62,073
              at December 31, 1997 and 1996, respectively. Income received from
              affiliated entities for consulting services totalled $346,351 and
              $103,800 at December 31, 1997 and 1996, respectively. In addition,
              fees charged to the Company for consulting services performed by
              its principal owners and immediate family totalled $45,665 and
              $53,386, at December 31, 1997 and 1996, respectively.

              The amounts due from the affiliated companies totalled $320,000
              and $17,072 at December 31, 1997 and 1996, respectively. Funds
              payable to these entities totalled $24,264 and $7,562 at December
              31, 1997 and 1996, respectively.

              In addition, Mr. Errazuriz, CEO, owed the Company $200,000 at 
              December 31, 1997.


                                      F-13
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 5  -  NOTE RECEIVABLE FROM RELATED PARTY

              On November 12, 1996, as a result of the completion of a public
              offering of stock, (see Note 11 for details of the Initial Public
              Offering), the Company sold its 100% ownership of property and a
              home in Villarrica, Chile, to a Chilean investment company,
              Inversiones y Desarrollo Demco, whose shareholders are Mr.
              Errazuriz, the Company's President and CEO, his wife, and one of
              his daughters. The real estate, formerly treated as a
              non-performing asset was sold at a price of $1,212,063.

              Payment terms were 50% in cash at the closing which was held on
              December 31, 1996, and the balance of $606,031 in four annual
              installments with interest at 8-1/2% per year beginning January
              15, 1998. This receivable is a component of note receivable from
              related party on the balance sheet.

              Initially, the agreement to sell the property in Villarrica
              required the transfer of five lots including a home to Inversiones
              y Desarrollo Demco. Upon the final transfer of the lots,
              management decided not to include two of the lots in the sale.
              This resulted in a realized gain to the Company during 1996 in the
              amount of $255,792. The remaining two lots are now components of
              undeveloped real estate in the accompanying balance sheet.

NOTE 6 - NOTE RECEIVABLE - OTHER

              In June 1997, the Company acted as a consultant in an option to
              purchase beach front property ("El Peral" project) close to
              Santiago resulting in revenues and a note receivable for
              $1,339,766, payable in 8 annual installments of $167,470 beginning
              June 1999, accruing interest at 7%.

NOTE 7  -  UNDEVELOPED REAL ESTATE - HELD FOR INVESTMENT

              The balance of property for sale relates to land near Villarrica,
              Chile, which was acquired for resale after being developed in a
              resort area and is being used in the meantime as a guarantee for
              some of the financial operations of the Company. The property is
              being carried at its historical cost (which is less than its net
              realizable value based on an independent appraisal). The Company
              has no intention to sell the property in the near future and is
              treating it as investment property.


                                      F-14
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 8  -  FURNITURE AND EQUIPMENT

              Furniture and equipment consist of the following at December 31,
1997 and 1996:

<TABLE>
<CAPTION>
                                                                                 1997                   1996
                                                                          ---------------         ---------------
<S>                                                                       <C>                     <C>            
              Vehicles                                                    $       202,330         $       207,074
              Office equipment                                                     72,387                  42,644
              Furniture and fixtures                                               80,533                   2,958
              Leasehold improvements                                              371,796                      -
              Leased property                                                      47,780                      -
                                                                          ---------------         --------------

              Total furniture and equipment, at cost                              774,826                 252,676

              Less accumulated depreciation and amortization                     (101,951)                (87,119)
                                                                          ---------------         ---------------

                                                                          $       672,875         $       165,557
                                                                          ===============         ===============
</TABLE>



NOTE 9 - INCOME TAXES

              The Company is subject to income tax in Chile. Reconciliations
              between the statutory income tax rate in Chile, and the Company's
              effective income tax rate as a percentage of income before income
              taxes is as follows:

                                                       1997            1996
                                                    ---------        --------

              Chilean statutory tax rate                15.0%           15.0%
              Other, net                                (1.9)           (4.9)
                                                    ---------         ------

              Effective income tax rate                 13.1%           10.1%
                                                        ====            ====



NOTE 10 - OBLIGATION WITH BANKS

              Obligations with banks consist of lines of credit with local 
              Chilean banks.

              Interest rates on all of these lines of credit are based on the
              Asociacion de Bancos y Entidades Financieras, (T.A.B.) rate, which
              represents a daily average of the interest paid by banks on its
              deposits. The rate is then adjusted upwards approximately 1.5% for
              the banks profit, and then an additional 1.0% - 1.7% reflecting
              the individual risk of the bank on the individual loan.


                                      F-15
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 10 - OBLIGATION WITH BANKS (CONTINUED)

              These lines of credit are secured by an assignment of the
              Company's term deposits and vehicles owned by the Company.

NOTE 11 - LONG-TERM DEBT

              Long-term debt consists of the following at December 31, 1997 and
              1996:

<TABLE>
<CAPTION>
                                                                             1997                     1996
                                                                        ---------------         ---------------
<S>                                                                    <C>                      <C>           
              Note payable, collateralized by mortgage
              on the undeveloped real estate held for 
              investment, due December 2002 with 
              interest at 8.7%, payable monthly.
              Currency:  UF                                            $      149,074           $      174,905

              Note payable, secured by an assignment
              of a vehicle, due April 1997 with interest
              at 10%, payable monthly.  Currency:  UF                              -                    10,017
                                                                        --------------           --------------

              Total notes payable                                              149,074                  184,922

              Less current portion                                              30,320                   39,578
                                                                        --------------           --------------

              Total long-term debt                                      $      118,754           $      145,344
                                                                        ==============           ==============
</TABLE>


              The UF is an indexed unit of account expressed in pesos and
              adjusted according to inflation (CPI). There are no covenants or
              restrictions imposed on the aforementioned obligations with any of
              the banks involved.


                                      F-16
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 11 - LONG-TERM DEBT (CONTINUED)

              The following table reflects the annual payments due for the next
              five years of the long-term debt.

               YEAR ENDING
              DECEMBER 31,
              ------------

                  1998                      $        30,320
                  1999                               29,118
                  2000                               30,985
                  2001                                   -
                  2002                               58,651
                                            ---------------

                                            $       149,074

NOTE 12 - SHAREHOLDERS' EQUITY

              On November 12, 1996, the Company successfully completed the sale
              of 1,200,000 shares of its common stock to the public in an
              initial public offering which raised approximately $6,150,000,
              before expenses. In addition, the Company sold one warrant with
              each share to purchase one share of stock at the original offering
              price of $5 per share. Also, the Company offered an additional 10%
              or 120,000 shares of stock with warrants to the underwriters of
              the offering, which were exercised in December, providing an
              additional $615,000 of capital before expenses.

              In 1997, the Company declared dividends of $.10 per share which
              approximated $282,000. In 1996, no dividends were declared. In
              December 1997, the Company paid $137,000 of the $282,000. The
              balance is being paid on March 31, 1998.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

              LEASE

              In September 1997, the Company relocated its office to new
              facilities in Santiago, Chile under an 8 year operating lease.
              Monthly rental payments were $7,398 and $4,507 during 1997 and
              1996, respectively. Rent expense for the years ended December 31,
              1997 and 1996 totalled $90,426 and $54,084, respectively.


                                      F-17
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

              Future minimum rental payments under the lease are as follows:

<TABLE>
<CAPTION>
               YEAR ENDING                                      ANNUAL
              DECEMBER 31,                                    PAYMENTS
              ------------                                    --------

<S>               <C>                                   <C>            
                  1998                                  $        88,771
                  1999                                           88,771
                  2000                                           88,771
                  2001                                           88,771
                  2002                                           88,771
                  2003 and thereafter                           266,313
                                                        ---------------

                                                        $       710,168
</TABLE>

NOTE 14 - INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

              During 1996, the Company sold an investment in a related entity to
              members of Mr. Errazuriz's family at the carrying value of
              $194,359.

              During 1995, the Company purchased 45% of the outstanding stock of
              Aguas y Ecologia, S.A. (A&E) which owns 10% of the outstanding
              stock in Bayesa, S.A. from a Chilean investment company. This
              equates to a 4.5% ownership of Bayesa, S.A. During the later part
              of 1996, the Company acquired an additional 22.5% of A&E or 2.25%
              of Bayesa, S.A. Financial statements of A&E as prepared in
              accordance with GAAP are unavailable and impracticable to produce
              at this time.

              During 1997, the Company purchased 31% of a wine bottling and
              processing plant in Chile for approximately $85,000. The wine
              processing and bottling plant will commence operations in March
              1998. The Company also purchased a 670 acre vineyard for
              approximately $1,073,000, which in the future will provide grapes
              for the wine processing and bottling plant.


                                      F-18
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 15 - UNAUDITED PROFORMA FINANCIAL STATEMENTS

              The Company is in the process of acquiring 88% of Consonni USA,
              Inc., subject to stockholder approval. A deposit of $670,714 has
              been placed in acquiring 11% of the Consonni USA, Inc. (Note 3 -
              Other Assets).

              The remaining 77% is to be acquired from Mr. Errazuriz, subject to
              shareholders approval, for approximately $4,278,000 to be paid by
              issuing to him 250,000 shares of preferred stock and 50,000 shares
              of common stock for the Company; forgiveness of long term
              receivable for approximately $493,000 originated in the sale of
              Villarrica House to Invdemco, a related company, less the first
              installment to be paid in January 15, 1998; forgiveness of
              $212,000 given to Mr. Errazuriz during 1997 to buy shares therein
              included $12,000 of interests; transferring of rights on a
              promissory note receivable in 8 year installments with a face
              value of $1,339,763; and transferring the Villarrica Land, a
              non-performing asset, at its book value of $789,447. The following
              unaudited proforma balance sheet and statement of income are
              presented as if the acquisition occurred on January 1, 1997.

                           Unaudited Proforma Balance Sheet

                                   AS S E T S

                                                               DECEMBER 31, 1997
                                                               -----------------
              Current Assets:
                Cash                                            $        987,201
                Short-term investments                                   528,575
                Accounts receivable                                    7,260,674
                Accounts receivable - other                              969,545
                Employee and officer loans receivable                     71,013
                Inventory                                              2,120,234
                Other current assets                                     118,038
                                                                ----------------

                      Total Current Assets                            12,055,280
                                                                ----------------

              Furniture and Equipment, net                             1,394,663
                                                                ----------------

              Other Assets:
                Note receivable from related party                       112,875
                Goodwill, net of accumulated amortization
                 of $197,298                                           3,760,669
                Deferred costs, net                                      159,697
                Investment in affiliated companies                     1,629,869
                Other assets                                             422,878
                                                                ----------------

                                                                       6,085,988
                                                                ----------------

                                                                $     19,535,931
                                                                ================



                                      F-19
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


NOTE 15 - UNAUDITED PROFORMA FINANCIAL STATEMENTS (CONTINUED)

                  Unaudited Proforma Balance Sheet (Continued)

<TABLE>
<CAPTION>
                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                          DECEMBER 31, 1997
                                                                          -----------------
<S>                                                                       <C>             
              Current Liabilities:
                Obligations with banks                                    $        541,167
                Current portion of long-term debt                                  806,414
                Accounts payable                                                 3,273,653
                Due to government entities                                         371,160
                Due to related parties                                              37,420
                Income taxes payable                                               197,022
                Accrued expenses and withholdings                                  222,162
                Current portion of staff severance indemnities                      21,530
                Deferred income                                                    107,946
                Dividends payable                                                  150,000
                                                                          ----------------

                      Total Current Liabilities                                  5,728,474
                                                                          ----------------

              Long-Term Liabilities:
                Long-term debt, excluding current portion                        3,759,841
                Staff severance indemnities, long-term portion                      87,317
                                                                          ----------------

                                                                                 3,847,158
                                                                          ----------------

              Shareholders' Equity:
                Preferred stock, $.0001 par value, 5,000,000 shares
                 authorized, 250,000 issued and outstanding                             25
                Common stock, $.0001 par value, 20,000,000 shares
                 authorized, 2,870,100 shares outstanding                              287
                Additional paid-in capital                                       7,168,191
                Retained earnings                                                   17,029
                Minority interest                                                  410,597
                Cumulative translation adjustment                                2,364,170
                                                                          ----------------

                      Total Shareholders' Equity                                 9,960,299
                                                                          ----------------

                                                                          $     19,535,931
                                                                          ================
</TABLE>




                                      F-20
<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION

             Notes to Consolidated Financial Statements (Continued)


                                                        13

NOTE 15 - UNAUDITED PROFORMA FINANCIAL STATEMENTS (CONTINUED)

                     Unaudited Proforma Statement of Income

                                                            DECEMBER 31, 1997
                                                            -----------------

              Revenues from Operations:
                Revenues                                    $     17,142,149
                Cost of operations                                 9,771,805
                                                            ----------------

              Gross Profit                                         7,370,344

              Selling and Administrative Expenses                  4,863,237
                                                            ----------------
                                                                   2,507,107
                                                            ----------------
              Other Income (Expenses):
                Interest income                                      133,174
                Miscellaneous income                                  45,140
                Interest expense                                    (153,484)
                Other financing expenses                            (109,933)
                Bad debt expense                                      (9,071)
                Consulting fees                                     (166,055)
                Gain on sale of assets                                 6,031
                Depreciation and amortization                       (513,854)
                                                            ----------------
                                                                    (768,052)
                                                            ----------------

              Income Before Income Taxes                           1,739,055

              Income Taxes                                           142,137
                                                            ----------------

              Net Income Before Minority Interest and
               Extraordinary Gain                                  1,596,918

              Gain on Forgiveness of Debt                          4,949,372
                                                            ----------------

              Net Income Before Minority Interest                  6,546,290

              Minority interest                                    1,307,056
                                                            ----------------

              Net Income                                    $      5,239,234
                                                            ================

              Net Income Before Extraordinary Gain per
               Common Shares                                $            .51

              Extraordinary Gain per Common Share                       1.58


              Minority Interest per Common Share                        (.42)
                                                            ----------------

              Net Income per Common Share                   $           1.67
                                                            ================

              Weighted Average Shares Outstanding                  3,120,100
                                                            ================


                                      F-21
<PAGE>



                                 EXHIBIT INDEX


EXHIBIT                            DESCRIPTION
-------                            -----------

3.1(b)   Articles of Incorporation for Andean Engineering & Finance Corporation

3.1(c)   Articles of Incorporation and Corporation Bylaws for ADC Andean, S.A.,
         a Swiss Corporation

3.2(b)   Andean Engineering & Finance Corporation Bylaws

23.1     Consent of Independent Auditors

27       Financial Data Schedule