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, 2000
                          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.)

  1 Brickell Square  801 Brickell Avenue, Suite 900, Miami, Florida     33131
             (Address of Principal Executive Offices)                 (Zip Code)

                                1 Brickell Square
                         801 Brickell Avenue, Suite 900
                              Miami, Florida 33131
                                 (305) 371-0056
                (Issuer's Telephone Number, Including Area Code)

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

         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 [ ]

<PAGE>

         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]

         State issuer's revenues for its most recent fiscal year: $2,759,417.

         State the aggregate market value of the voting stock held by
non-affiliates of the registrant on March 30, 2001, computed by reference to the
price at which the stock was sold on that date: $362,726.

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, $.0001 par value, as of December 31,
2001.

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

DOCUMENTS INCORPORATED BY REFERENCE

         None

<PAGE>

                         ANDEAN DEVELOPMENT CORPORATION
                              Report on Form 10KSB
                   For the Fiscal Year Ended December 31, 1999

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                                PAGE
<S>           <C>                                                                                                <C>
                                                      PART I

Item 1.       Description of the Business.................................................................        1
Item 2.       Description of the Property.................................................................       11
Item 3.       Legal Proceedings...........................................................................       11
Item 4.       Submission of Matters to Vote of Security Holders...........................................       12

                                                      PART II

Item 5.       Market for Common Equity and Related Stockholder Matters....................................       13
Item 6.       Management's Discussion and Analysis........................................................       14
Item 7.       Financial Statements........................................................................       18
Item 8.       Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure....................................................................       18

                                                     PART III

Item 9.       Directors, Executive Officers, Promoters and Control Persons................................       19
Item 10.      Executive Compensation......................................................................       21
Item 11.      Security Ownership of Certain Beneficial Owners And Management..............................       23
Item 12.      Certain Relationships and Related Transactions..............................................       24

                                                      PART IV

Item 13.      Exhibits and Reports on Form 8-K............................................................       26

Signatures    ............................................................................................       28
</TABLE>

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

                                    BUSINESS

GENERAL

         Andean Development Corporation ("ADC" or the "Company") is a Holding
company. Its operations are conducted by 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&AI and INA are
collectively referred to herein as the "Company."

         E&A acts as the agent in the sale of major electrical and mechanical
equipment and in technical assistance for both turnkey and non-turnkey major
works, mainly related to the developing and construction of energy, water and
sewage treatment projects in Chile. Since 1991, more than $700 million of such
projects have been sold in connection with the work of E&A. See "Core Business."

         INA generates revenue by providing engineering and project management
services for water and energy related private and public works. Since 1986,
alone and in conjunction with Norconsult International S.A. ("Norconsult") a
worldwide engineering company with head office in Sandvika, Oslo, Norway and
branches in 17 countries, INA has generated revenues of over $25 million. See
"Core Business"

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 Errazuriz y
Asociados Ingenieros S.A ("E&A") and Igenor Andina S.A ("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

                                       1
<PAGE>

between Norconsult SA, a worldwide engineering consulting company based in Oslo,
Norway and Errazuriz y Asociados Arquitectos S.A. ("EAA"). Norconsult
subsequently sold its participation to Igenor Ingenierie et Gestion, S.A., a
Swiss corporation ("Igenor"). 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." Recently, EAA sold its participation to
INA.

HISTORY AND ECONOMIC OVERVIEW

         Since the inception of INA in 1986, the Company has expanded its
engineering and project management activities to the sale of equipment,
commercial work and to support of manufacturers or international consortiums in
the sale of large turnkey projects. Following its November 1996 initial public
offering, the Company diversified its business. Pursuant to the Company's
initial business plan, and consistent with the strategy that the Company
initiated in 1996 of investing in businesses that should provide a steady cash
flow to compensate the irregularity of the incomes of its core business, the
Company purchased interests in related and unrelated businesses. For example, in
1997 the Company purchased an interest in Ingesis S.A., an engineering company
specializing in software and in Negociaciones y Servidumbre, S. A., an
engineering company specializing in evaluations and negotiations of land needed
for infrastructure projects; in 1998 the Company purchased an interest in
Construcciones Electromecanicas Consonni, S.A. ("Consonni"), a manufacturing
facility of industrial electric equipment. While not related to the core
business, the Company also diversified by purchasing an equity position in a
winery in 1997 and in a vineyard in 1998. The purpose of this equity
participation in those companies was to create in the medium term a steady cash
flow, an increase in the net revenues and, in general, to expand and diversify
the Company's business.

         The Company's services have historically been provided to both private
companies and governmental agencies, with most of the Company's revenues coming
from the private sector. Many of the largest utilities in Chile, Argentina and
Peru have been regular customers of the Company, such as ENDESA S.A., GENER
S.A., COLBUN S.A. (the three largest Chilean utilities); EDEGEL S.A., the
largest Peruvian utility and COSTANERA S.A. and CBA S.A. two very noteworthy
Argentinean utilities. Codelco (copper), Petrox S.A. (petrochemical) Puerto
Ventanas S.A. (a Chilean Port), among others, are regular customers of the
Company. The Company has also been a consultant to some multinational well-known
companies as Mitsubishi and Siemens.

         Through the Company's relationship with Consonni and its presence in
Spain, the Company developed customers in Spain, such as IBERDROLA S.A. and
other utilities and most of the major Spanish corporations in the petrochemical
and refineries industries, such as REPSOL S.A.

         While the Company generated some revenues during 1999 and 2000, due to
the impact of adverse economic conditions in the core business segment over the
last two years, the core business incurred losses which were only partially
compensated during 1999 by the revenues obtained by Consonni.

                                       2
<PAGE>

         This business structure did not achieve the intended results. It was
difficult and costly to manage geographically and across separate and distinct
markets. The legal and accounting expenses incurred in order to comply with
federal securities became excessive and while CONUSA generated revenues, it
failed to achieve the level of profitability that offset the additional costs
and management time that was required.

         Over the course of the past year, the Company has revised its business:

o        to simplify the Company's corporate structure by combining subsidiaries
         that had the same core business function (business derived from
         engineering and sales) but were historically organized as separate
         entities;

o        to develop the educational software business of E&A, which has the
         endorsement and support of the government of Chile; which management
         believes can be a source of substantial revenue and profits; and

o        to sell all the Company's interests in Chilean subsidiaries whose
         business was inconsistent with the Company's core business and its new
         education software business.

         The effect of revising the Company's business is to accomplish the
following:

o        consolidate the Company's business activities as a means to make the
         Company more attractive to investors;

o        reduce the enormous and redundant legal and auditing expenses for
         numerous subsidiaries located in three continents; and

o        concentrate the attention of the Company's management and resources for
         the core business and the educational software business.

         Currently, the Company, is well positioned in the core business segment
to take advantage of an economic upturn in the large projects sector, since the
Company is well established in its marketplace and has maintained customers who
are established in their specialties. Furthermore, the Company has invested a
considerable amount of effort and financial resources in the development of
software through INA. The initial project involving this software is expected
for the second quarter 2000.

                                       3
<PAGE>

                      SALE OR CONSOLIDATION OF SUBSIDIARIES

         In fiscal 2000, the Company either consolidated its subsidiaries or
divested itself of most of its subsidiaries. The Company sold all of its
interests in the following previously consolidated subsidiaries:

         o        On June 30, 2000 - Aguas y Ecologia, S. A., Negociaciones y
                  Servidumbre, S. A. and Nysacar, S. A.

         o        On August 31, 2000 - Bodegas Garcia Errazuriz, S. A.

         The Company consolidated its subsidiaries Errazuriz y Asociados
Division Comercial S.A., Ingesis S.A. and Igenor Andina S.A. into one company,
named "E&A Ingesis S.A.". E&A Ingesis S.A. will concentrate its business on the
education segment of the Company. For tax reasons E&A was retained in its
current form. The engineering activities shall be conducted through Errazuriz y
Asociados Ingenieros S.A. and the Spanish sales and trading will continue to be
operated by Equipos de Control Electrico S.A. ("ECESA").

         On December 12, 2000, Consonni USA, Inc., a 61% owned subsidiary of the
Registrant ("CONUSA") sold approximately 78% of its capital stock in
Construcciones Electromecanicas Consonni, S.A. ("Consonni") to unrelated
minority shareholders of Consonni. The purchase price was two hundred nine
million pesetas (209,000,000 Ptas.) or approximately one million, two hundred
thousand U.S. dollars (U.S. $1,200,000). As a consequence of this transaction,
CONUSA will retain only a 19% equity interest in Consonni.

         The initial payment of fifty million pesetas (50,000,000 Ptas.) or
approximately two hundred eighty three thousand, dollars (U.S. $283,000.) has
been received by CONUSA. The balance is to be paid to CONUSA over five years as
follows: ten payments semiannually commencing on June 20, 2001, the first
payment in the amount of fifteen million pesetas (15,000,000. Ptas.) or
approximately eighty thousand U.S. dollars (U.S. $85,000) and the remaining nine
payments to be in the amount of sixteen million pesetas (16,000,000 Ptas.) or
approximately ninety two thousand U.S. dollars (U.S. $92,000).

         In August, 2000, E&A Ingesis, S.A., a 99.9% owned subsidiary of the
Company, sold its interest in Bodegas Garcia Errazuriz S.A., a vineyard in
Chillan, Chile. The vineyard was sold for a price marginally in excess of its
book value. Under the terms of the sale, the Company received 66.6% of the
consideration in the transaction, with the remainder to be paid over the
following three years.

         The Company recognized a loss of approximately $1,451,000 on the sale
of its interest in Consonni and income from discontinued operations of
approximately $501,000.

         The following is a list of the Company's subsidiaries, domicile and
percentage ownership:

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                                                        Ownership
                   Subsidiary                                 Domicile                 Percentage
                   ----------                                 --------                 ----------

<S>                                                     <C>                                <C>
Errazuriz y Asociados Ingenieros, S. A. ("EAI")         Chilean Corporation                100%

Errazuriz y Asociados Ingenis, S.A.                     Chilean Corporation                100%

CONUSA*                                                 U.S. Corporation                    61%
</TABLE>

         *CONUSA owns a 19% interest in Consonni (located in Bilboa, Spain) and
         a 92% interest in ECESA.

         REVISED BUSINESS PLAN: CORE BUSINESS

         The core business of the Company will comprise now two major segments:
(i) Engineering and development of energy, water and sewage projects and (ii)
Education software, hardware and communications.

1.       Engineering

                  (a) Energy. E&A, in association with Norconsult, generates
         revenues through the design, coordination, project management and
         quality assurance of tunnels, material handling, civil works and power
         islands for thermal and hydroelectric power plants. Management expects
         revenues to be produced through joint ventures with large international
         consortiums in the preparation of tenders for turnkey projects & public
         works. The Company's services include forecasting of market trends,
         selection of secondary suppliers, imparting knowledge of the decision
         making procedures and desired scheduling of projects, advising on local
         materials, products, engineering and subcontractors and coordination
         with the customer during the construction and commissioning steps. In
         addition, although to a lessor extent, the Company has obtained some
         direct representations in certain energy, water, and sewage projects.
         See "Major Representations".

                  (b) Water & Sewage. E&A, in association with Pridesa, SA, a
         Spanish company specializing in water and sewage treatment projects,
         generates revenues through the design, construction, quality assurance
         and project management of installations to produce drinkable water,
         treat sewage, dispose of waste, industrial and chemical refuse and
         sewage, desalt sea water for industrial and human use.

                  (c) ECESA. The Company intends to retain its interest in
         ECESA, the current marketing and sales arm of Consonni. As a means to
         provide ECESA with its own source of revenues and eliminate its
         connection with Consonni, ECESA has employed Mr. Horacio Civile as its
         executive president. Mr. Horacio Civile is a well-

                                       5
<PAGE>

         known civil engineer and highly qualified industrial salesman. Prior to
         June 2000, Mr. Horacio Civile was Latin American Sales Vice President
         for "Kvaerner Energy A.S." of Norway, Sweden and England (a
         transnational company presently operating as "GE Hydro", a subsidiary
         of General Electric). Management anticipates that ECESA's new
         management will expand its customer base and revenues. Furthermore,
         management of the Company believes that ECESA is strategic for
         developing new markets in Spain for the core business and preparing the
         Spanish educational software needed for the educational software
         business.

                  (d) Arrieta S.A. ("Arrieta"): Management is still evaluating
         the potential acquisition of Arrieta.

2.       Educational Software, Hardware & Communications.

                  The Company is in the initial stages of developing this
         segment. This segment focuses on two separate but related subdivisions;
         (i) Rural area remote education, and (ii) post grade professional
         education "at home" for Union leaders and top employees.

                  In the rural area distant education subdivision, the Company
         is initiating the design, production, and installation of a
         communication system that will provide high-speed connection to the
         Internet and to television in remote rural regions. The Company will
         also provide the preparation, training of users and maintenance of
         software dedicated to the transmittal of education information to
         remote regions.

                  In the post grade professional education "at home" for Union
         leaders and top employees subdivision, the Company is preparing the
         requisite software and is pursuing Union and Government support and
         finances for the project.

                  Both subdivision businesses require the design and
         installation of specialized portals that would direct the user to
         specific areas relevant to the proposed educational program. These
         programs can be adapted and developed in other countries in South
         America. Management is exploring joint ventures with United States
         companies with expertise in providing remote education, and with
         Ibermatica S.A., a Spanish leader in informatics and computer science
         applied to business and educational developments with branches all over
         South America.

3.       Selected Companies for which ADC has worked on a non-exclusive basis

<TABLE>
<CAPTION>
         <S>                                <C>                 <C>
         ABB                                Energy              Hydro and Thermal Power Plants

         ABB Solyvent Ventec                Mining              Blowers

         Babcock & Wilcox, Cranes Div.      Port                Cranes for bulk cargo handling

         Babcock & Wilcox Espanola          Energy              Mejillones Power Plant

         GEC Mechanical Handling            Ports               Cement Storage & Conveyors
</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
         <S>                                <C>                 <C>
         Ibermatica S.A.                    Informatics         Education, Computer Technology

         Mitsubishi Corporation             Energy              Thermoelectric CC Power Plants

         Siemens A.G.                       Energy              Hydro and Thermal Power Plants

         Westinghouse Electric Co.          Energy              Combined Cycle Plants
</TABLE>

4.       Major Representations

<TABLE>
<CAPTION>
         <S>                                <C>                 <C>
         Norconsult                         Norway              Engineering

         Pridesa, SA                        Spain               Water Treatments, Tailings

         TPO Ltd., Pratt & Whitney Div.     USA                 Energy

         Union Espanola de Explosivos       Spain               Mining Explosives
</TABLE>

5.       Recent Projects

                  The Company has a history of being associated with the main
         contractor or supplier on numerous significant energy, water and sewage
         projects. The Company's business associations have included Pangue,
         Bayesa, San Ignacio, Nehuenco, Mejillones and Tocopilla in Chile;
         Yanango, Chimay and Santa Rosa in Peru; and Central CBA and Costanera,
         in Argentina. The Company has also been retained as a consultant or
         supplier to build new units related to these projects.

                  In 2000, the Company participated in many projects, while many
         others projects were postponed until 2001. Those more noteworthy
         projects in 2000 were:

   2nd Power Line from Argentine to Brasil (1000MW, 500KV)  Started & ended 2000

                  Consultant on a project to develop a market for the sale of
                  energy and provide ecological assessment, market studies, and
                  other services to the manufacturer.

   Costanera S.A., Commissioning of a Power Plant                   Started 2000

                  Advisor for resolving coordination and customer requests

   Advisor for Pratt & Whitney, Energy Division        Started and Finished 2000

6.       Main Projects for 2000/2001

   Consonni / Endesa Chile - Palmucho                      To be decided in 2001

                  A power plant related to Ralco Project.

   FUNDACION FREI & ENDESA / Fundacion Tucapel Jimenez          Starts June 2001

                                       7
<PAGE>

   a) Pilot Plan based on 100 Schools in the IX Region

                  (South of Chile) to install a system of distant education and
                  communications (software and hardware) to be studied by
                  Ingesis S.A.

   b) Remote education to Union Leaders and High           Starts September 2001

                  Employees, sponsored by the Government

   ALFALFAL II, Los Bronces Preliminary Studies            To be started in 2001

                  Engineering for a major Power Plant near Santiago. Norconsult
                  did the prefeasibility project for Gener S.A.

   PIEDRABUENA POWER PLANT                                To be started Oct 2001

                  An 800 MW power plant to be built

No assurances can be given however that these project will be initiated or
completed.

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.

COMPETITION

         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. A number of the Company's competitors are better
capitalized, have more experienced management and may have greater access to
resources. 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's remote education segment is, in the opinion of management,
unique in the market and does not have any competition as yet. It is possible
that a future competitor may offer an identical but similar product that will
compete with the Company.

         The providing of Internet education to executives and employees of the
Government and industries has the special characteristic of being prepared and
sponsored by the Unions, the Government and a well known university, Universidad
Padre Hurtado, specially dedicated to the learning of graduate degree students
and to persons interested in information related with the

                                       8
<PAGE>

workers field. While there is considerable competition in the provision of
Internet based education to post graduates, management of the Company believe
that its focus on a very specific market and the Company's support of the
Government, the Unions and the Universidad Padre Hurtado, will provide the
Company with a competitive advantage.

GOVERNMENT REGULATIONS

         The Company business in South America and in Spain is subject to the
normal range of governmental regulations and supervision universally applicable
to commercial activities, including labor laws, social security laws, public
health, environmental laws, securities laws and anti-trust laws.

         Some of the activities of the Company, like sewage treatment and the
disposal of effluents from plants, installations of satellite or any other kind
of antennas, design of dams and design and construction of power or
communications lines, are subject to special regulations that vary from one
country to the other. This requires the Company to comply with each countries
unique rules and regulations. The Company obtains legal counsel specialized in
each jurisdiction's rules and regulations.

FOREIGN INVESTMENT LAWS AND REGULATIONS

         The Chilean Constitution and the laws of Spain establishes that any
citizen of their country or foreigner may freely develop any activity in each
respective country so long as the activity in that country does not contravene
existing laws dealing with public morals, public safety or national security and
follows the laws that regulate such activity. It also establishes the principle
of non-discrimination, thus guaranteeing foreign investors equal protection
under their national laws. Additionally, each countries' laws prohibit any
discretionary acts by the government or other entity 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 each respective country by persons who are not residents of that
country follow the same rules as investments made by their citizens.

FOREIGN CORRUPT PRACTICES ACT

         Substantially all of the Company's operations are transacted in South
America and in Spain. 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.

         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

                                       9
<PAGE>

followed by its officers, directors, employees and anyone acting on its behalf,
that no such payments can or 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 results in dismissal. Further, the Company
conducts periodic reviews of this policy with all employees to ensure full
compliance.

EMPLOYEES

         As of December 31, 2000, the Company employed 21 full-time employees,
three of whom are managers, twelve of which are engineers/professionals and six
of whom are administrative employees. Employees of the Company are not
represented by labor unions. The Company considers its relationship with its
employees to be good.

ITEM 2. DESCRIPTION OF PROPERTY

Facilities

         The Company leases approximately 4,300 square feet of office in
Santiago, Chile. The lease commenced on November 1, 1997 and will terminate on
October 30, 2005. Monthly rental payments were approximately $8,000. Rent
expense for the year ended December 31, 2000 totaled approximately $80,000.

         Future minimum rental payments under the lease are as follows:

               Year Ending                            Annual
              December 31,                           Payments
              ------------                           --------
                  2001                                 76,360
                  2002                                 76,360
                  2003                                 76,360
                  2004                                 76,360
                  2005 and thereafter                  31,817
                                                     --------
                                                     $337,257

         The Company leases a common space in Miami, Florida at a monthly rate
of $900. The lease commenced on June, 2000 and will terminate on June, 2001.

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.

                                       10
<PAGE>

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

         The Company's Annual Meeting of Shareholders was held on November 30,
2000. The results of the voting with respect to matters presented at the Annual
Meeting were as follows:

                                          Common Stock Voted
                                      For        Against      Withheld
                                   ---------     -------      --------
(a)      Election of Directors
         Pedro P. Errazuriz        1,469,350        0          22,700
         Jose Luis Yrarrazaval     1,469,350        0          22,700
         Alberto Coddou            1,469,350        0          22,700
         Sergio Jimenez            1,469,350        0          22,700
         Claude Mermier            1,469,350        0          22,700

(b)      Ratification of the appointment of Spear, Safer, Harmon & Co., as the
Company's Certified Public Accountants for the Company's 2000 fiscal year.

                                          Common Stock Voted
                                      For        Against      Withheld
                                   ---------     -------      --------
                                   1,470,450        0          21,600

                                       11
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Following 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 were
traded principally on the National Association of Security Dealers Automatic
Quotation - Small Cap Market System under the symbols "ADCC" and "ADCCW",
respectively. On March 15, 2000, the Nasdaq Listing Qualifications Panel
delisted the Company's securities from the Nasdaq SmallCap Market. The
securities were then listed on the over-the-counter Bulletin Board until May 15,
2000. On May 15, 2000, the securities were delisted from the over-the-counter
Bulletin Board and the securities currently are listed on the "pink sheets."

         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 or as
reflected in the "pink sheets." These quotations reflect prices between dealers,
do not include retail mark-ups, markdowns or commissions and may not necessarily
represent actual transactions.

                              Common Stock                   Warrants
                           ------------------            -----------------
      Period                 High       Low               High        Low
      ------               -------     ------            ------      -----
Quarter ended on:
March 31, 1999             2-7/8       1-1/2              9/16       3/16
June 30, 1999              1-6/16      1-1/32             5/16       5/32
September 30, 1999         1-5/16        3/4              3/16       1/16
December 31, 1999          1-1/2         6/16             5/16       1/32
March 31, 2000             1-11/16     1-/32             10/32       3/32
June 30, 2000              1-1/32        3/16             5/8        1/128
September 30, 2000           5/8         3/8              1/128      1/128
December 31, 2000            19/32       3/16             1/128      1/128

         On December 31, 2000, the closing bid price for the Common Stock was
3/8, and 1/128 for the Warrants.

         In 1997, the Company declared dividends of $.10 per share which
approximated $282,000. In December 1997, the Company paid $137,000 of the
$282,000. The balance was paid on January 31, 1998. Also during 1998, the
Company declared dividends of $.20 per share to be paid in four installments on
dates to be determined by the Board of Directors of the Company. During July
1999, the first installment was paid ($.05 per share). On March 30, 2001, the
board of directors of the Company eliminated the payment of the accrued
dividends still outstanding of approximately $423,000, due to the decline in the
financial condition of the Company from the dates the dividends were declared.

                                       12
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

GENERAL

         Management's Discussion and Analysis contains various "forward looking
statements" within the meaning 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.

         The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements and the Notes thereto
included in Part II, Item 7 of this Report.

Results of Operations (2000 compared to 1999)

Gross Revenues, Costs of Operations and Gross Profit

Gross revenues. Gross revenues decreased from $4,607,538 in 1999 to $2,759,417
in 2000, a decrease of $1,848,121. The decrease in gross revenues is a result of
the sale of certain subsidiaries during fiscal 2000.

Cost of Operations. Cost of Operations decreased from $3,240,902 in 1999 to
$1,968,744 in 2000, a decrease of $1,272,158. This decrease comes primarily from
a decrease in operational costs following the sale of certain subsidiaries
during fiscal 2000 and the decrease in revenues from Consonni..

Gross Profit. Gross profit decreased from $1,366,636 in 1999 to $790,673 in
2000, a decrease of $575,963. The decrease in gross profit is a result of the
sale of certain subsidiaries during fiscal 2000 and the decrease in revenues
from Consonni.

Selling and Administrative Expenses, Incomes from Operations and Other Income
(Expenses)

Selling and Administrative Expenses. Selling and Administrative Expenses
decreased from $2,002,628 in 1999 to $847,484 in 2000, a decrease of $1,155,144.
This decrease is primarily

                                       13
<PAGE>

the result of the sale of certain subsidiaries during fiscal 2000 and the
decrease in revenues from Consonni.

Income (Loss) from Operations. Losses decreased from ($635,992) in 1999 to a
loss of ($56,811) in 2000, a decrease of $579,181 primarily from the sale of
certain subsidiaries during fiscal 2000 and increased revenues from the Chilean
operations.

Other Income (Expenses). Expenses decreased from $2,215,452 in 1999 to
$2,085,930 in 2000, a decrease of $129,522. Other income and expenses included a
write off of goodwill in the amount of $1,256,932 for the year ended December
31, 2000.

Net Income and Income Tax. Income taxes increased from $13,412 in 1999 to
$27,682 in 2000, an increase of $14,270.

Net Profit (Loss) Net losses increased from $2,961,591 in 1999 to $3,087,904 in
2000, an increase of $126,313, primarily from the loss on the sale of Consonni
of approximately $1,451,000 and writing off of goodwill for $1,256,932.

Liquidity and Capital Resources

         The Company has financed its operations and other working capital
requirements principally from operating cash flow and bank financing.

Current Assets

Cash and Short Term Investments. As of December 31, 2000, the Company had
$213,589 in cash as compared to $125,163 as of December 31, 1999, an increase of
$88,426. As of December 31, 2000, the Company had no short-term investments as
compared to $145,794 in December 31, 2000.

Accounts receivable. Accounts receivable decreased from $4,243,673 at December
31, 1999 to $2,511,838 at December 31, 2000. This was due to the decrease in
revenues during 2000 as a result of the sale of certain subsidiaries during
fiscal 2000.

Inventory and other current assets. As of December 31, 1999, the Company had
$923,393 in inventory as compared to $51,408 as of December 31, 2000, a
decrease of $871,985, due to the sale of certain subsidiaries during fiscal
2000.

Total Current Assets. As of December 31, 1999, the Company had $5,743,882 in
total assets as compared to $3,300,083 as of December 31, 2000, a decrease of
$2,443,799. This was primarily due to the sale of certain subsidiaries during
fiscal 2000 offset against the receipt of promissory notes in the amounts of
$194,809 and $148,000.

                                       14
<PAGE>

Property, plant and equipment. Property, plant and equipment decreased from
$3,362,741 at December 31, 1999 to $503,651 at December 31, 2000, a decrease of
$2,859,090, primarily due to the sale of certain subsidiaries during fiscal
2000, including Bodegas Garcia Errazuriz S.A. (the vineyard).

Other assets. Other assets decreased from $4,890,084 at December 31, 1999 to
$2,149,841 at December 31, 2000, a decrease of $2,740,243. This decrease is
primarily the result of a decrease in investments in subsidiaries in 2000, a
write off of goodwill, and the sale of subsidiaries during fiscal 2000.

Liabilities

Current liabilities. Current liabilities decreased from $4,542,524 at December
31, 1999 to $2,597,055 at December 31, 2000, a decrease of $1,945,469 of a
result of the sale of certain subsidiaries during fiscal 2000.

Long-term liabilities. Long-term liabilities decreased from $3,460,958 at
December 31, 1999 to $495,382 at December 31, 2000, a decrease of $2,965,576.
This decrease is a result of the sale of certain subsidiaries during fiscal
2000.

The Company anticipates that its cash requirements will decrease as a result of
the sale of certain subsidiaries during fiscal 2000. The Company will focus on
its Core Business and developing its modified business plan in 2001. The Company
currently anticipates that its available cash resources and cash generated from
operations will be sufficient to meet its presently anticipated working capital
and capital expenditure requirements for the next twelve months. As of December
31, 2000, there were no commitments for long term capital expenditures. If the
Company is unable to achieve profitability, or seeks further expansion,
additional funding will become necessary. No assurances can be given that either
equity or debt financing will be available.

Results of Operations (1999 compared to 1998)

Gross Revenues, Costs of Operations and Gross Profit

Gross revenues. Gross revenues increased from $2,630,429 in 1998 to $4,607,538
in 1999, an increase of $1,977,109 or 75%. The Core Business Gross Revenues were
reduced from $2,630,429 to $ 617,159 (a decrease of 76.5%).

Cost of Operations. Cost of Operations increased from $727,022 in 1998 to
$3,240,902 in 1999, an increase of $2,513,880 or 346%.

Selling and Administrative Expenses, Incomes from Operations and Other Income
(Expenses) Selling and Administrative Expenses. Selling and Administrative
Expenses increased from $1,170,042 in 1998 to $2,002,628 in 1999, an increase of
$832,586 or 71%.

                                       15
<PAGE>

Income from Operations. Income from Operations decreased from $733,365 in 1998
to a loss of $635,992, primarily from losses generated by the Core Business.

Other Income (Expenses). Other Income (Expenses) decreased from $71,771 in 1998
to a loss of $2,215,452.

Profit (losses) Origin Of the total losses of the year, amounting to $2,961,591,
the losses arising from the Core Business were $2,700,370, of which $694,055
were operational losses and $289,898 attributable to expenses for auditing,
legal fees, public relations, etc. The remaining losses from the Core Business,
totaling $1,760,260, are the result of a write-off of approximately $950,000 in
uncollectable amounts, including accounts receivables from certain long term
projects, as well as the write-off of certain acquisition costs and other
deferred charges. The losses of Consonni come mainly from the amortization and
depreciation of the factory and equipment.

Net Income and Income Tax. Income taxes decreased from $124,214 in 1998 to
$13,412 in 1999, as a consequence of the lower level of Income before Taxes,
decreasing from $805,136 in 1998 to a loss of $2,851,444 in 1999. Net Income
decreased from $635,360 for 1998 to a loss of $2,961,591 in 1999.

Liquidity and Capital Resources The Company has financed its operations and
other working capital requirements principally from operating cash flow.

Current Assets

Cash and Short Term Investments. As of December 31, 1999, the Company had
$125,163 in cash as compared to $65,036 as of December 31, 1998, an increase of
$60,127. As of December 31, 1999, the Company had $145,794 in short-term
investments as compared to $23,483 as of December 31, 1998, an increase of
$122,311.

Accounts receivable. Accounts receivable increased from $2,176,462 at December
31, 1998 to $4,243,673 at December 31, 1999.

Inventory and other current assets. As of December 31, 1999, the Company had
$923,393 in inventory as compared to none as of December 31, 1998, an increase
of $923,393, due to the acquisition of CONUSA. As of December 31, 1999, the
Company had $305,859 in other assets as compared to $230,218 as of December 31,
1998, an increase of $75,641.

Total Current Assets. As of December 31, 1999, the Company had $5,743,882 in
total assets as compared to $2,495,199 as of December 31, 1998, an increase of
$3,248,683.

Property, plant and equipment. Property, plant and equipment increased from
$1,689,410 at December 31, 1998 to $3,362,741 at December 31, 1999, an increase
of $1,673,331.

Other assets. Other assets have decreased from $6,304,267 at December 31, 1998
to $4,890,084 at December 31, 1999, a decrease of $1,414,183.

                                       16
<PAGE>

Liabilities

Current liabilities. Current liabilities increased from $1,297,744 at December
31, 1998 to $4,695,542 at December 31, 1999, an increase of $3,677,798.

Long-term liabilities. Long-term liabilities increased from $618,656 at December
31, 1998 to 3,037,940 at December 31, 1999, an increase of $2,419,284.

                                  RISK FACTORS

         The following risk factors, as well as the risks described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," may cause actual results to differ materially from those in any
forward-looking statements contained in the MD&A or elsewhere in this report or
made in the future by the Company or its representatives. Such forward-looking
statements involve known risks, unknown risks and uncertainties and other
factors, which may cause the actual results, performance or achievements
expressed or implied by such forward-looking statements to differ significantly
from such forward looking statements.

Risk of New Phase of Business

         Results of operations in the future will be influenced by numerous
factors, including market acceptance of the Company's products, particularly its
educational software, in Chile and possibly through South America, the Company's
capacity to develop and manage its projects, competition, and the ability of the
Company to control costs. There can be no assurance that revenue growth will be
sustained or that these products or businesses will be profitable. Additionally,
the Company will be subject to all the risks incidental to a business entering
new markets. Accordingly, there can be no assurances that the Company will be
able to implement its revised business plan, expand its operations, or develop
and sustain profitable operations.

Reliance on Third Party Manufacturers May Disrupt Operations

         The core business of the Company does not manufacture or sell any
equipment. Rather, the Company, on a contract basis, relies on third-party
manufacturers for the equipment sold. Reliance on such manufacturers may subject
the Company to various risks associated with scheduling and timely production
and delivery of equipment, availability of completed products, as well as
administrative problems dealing with one or more manufacturers or suppliers.
These risks include, among others, the possibility of a change in the amount of
commission payable and a postponement of a commission owed to the Company. While
the Company has never been subject to any material disruptions in its
operations, any such disruption could have a material adverse effect on the
Company.

Competition

         In its core business, the Company is engaged in a highly competitive
segment of an industry which is very active and consistently attracts new
competitors. The Company, in its core business, competes directly or indirectly
with a number of companies, many of which are

                                       17
<PAGE>

larger, better capitalized, more established and have greater access to
resources necessary to produce a competitive advantage. The Company's major
competitors represent well-known manufacturers in Chile and include Gildemeister
S.A.C. (Caterpillar), Sigdo Koppers Comercial S.A.C. (Dresser International
Bridgestone), Pfeninger and Co. (Sulzer Escher Wyss, Joy Manufacturing) and the
local offices of larger manufacturers or traders such as Marubeni, Babcock
Wilcox, Mitsubishi, General Electric, and GEC Alsthom.

Control by Management and Present Shareholders of the Company

         Pedro Pablo Errazuriz, the President, Chief Executive Officer and
Chairman of the Board of the Company, and his immediate family, directly or
indirectly, own approximately 71% of the Company's issued and outstanding Common
stock. Since holders of the Common Stock do not have any cumulative voting
rights and directors are elected by plurality vote, Mr. Errazuriz is in a
position to control the election of directors as well as the other affairs of
the Company.

Dependence on Key Personnel

         The success of the Company is highly dependent upon the continued
services of Pedro Pablo Errazuriz and of Mr. Jose Luis Yrarrazaval, Vice
Chairman of the Board, Chief Financial Officer and Director. The loss of the
services of any of these individuals could have a material adverse effect on the
business of the Company.

         With the implementation of the Company's revised business strategy, it
will become necessary for the Company to hire additional experienced
professional individuals to meet its expanding needs. The Company intends to use
certain of its existing staff to perform a number of these duties and to
participate in the selection of new personnel, as required. Such individuals may
include engineers, technicians, management, marketing personnel or specialized
consultants. While the Company believes that by offering competitive salaries
and benefit packages, it will be able to solicit and hire qualified individuals,
no assurances can be made that such individuals will accept employment with the
Company or will continue to be employed by the Company, or that qualified
individuals will be available to the Company when needed.

Considerations Relating to Chile

         In the past, geopolitical frictions have existed between countries
located in the southern areas of South America, which includes Argentina,
Brazil, Bolivia, Chile, Paraguay, Peru and Uruguay (the "Southern Cone"
countries). This tension has resulted in difficulties in foreign trade, and
particularly the inherent adverse effects that may develop when goods (including
equipment sold through the Company) are delayed by customs. Additionally, there
have been problems with citizens of one Southern Cone country freely traveling
to other Southern Cone countries. Furthermore, countries have been reluctant to
hire nationals of one country for executive positions in other Southern Cone
countries.

         Although recently, travel and commerce among the Southern Cone
countries have become increasingly easier and the Company has not been adversely
affected by geopolitical,

                                       18
<PAGE>

economical, legal or other problems inherent in doing business with foreign
countries, there can be no assurances that such problems will not occur in the
future.

Currency Fluctuations

         Economic policies in Chile and any future changes in the value of the
Chilean peso against the United States dollar could aversely affect the value of
the Company's common stock. The Chilean peso has been subject to large
devaluations in the past and may be subject to significant fluctuations in the
future.

         Currency fluctuations may have an effect on the Company's current
activities by the fact that the Company's operational expenses (costs) are tied
to the Chilean peso, while revenues are generally tied to the United States
dollar or other foreign currencies (depending from whom equipment is purchased
or for whom services are provided). A weakening of the United States dollar (or
other foreign currencies) against the Chilean peso means that while the
Company's revenues may remain unaffected by the weakening of the United States
dollar against the currencies, the Company's costs (which are paid in these
currencies) will increase. Conversely, if the Chilean peso is weak against
foreign currencies, the cost of local goods and services are less expensive.
While currency fluctuations have not had a material effect on the financial
condition of the Company, no assurances can be made that any such currency
fluctuation will not adversely affect the Company.

Foreign Corrupt Practices Act

         Substantially all of the Company's operations are transacted in South
America and Spain. To the extent that the Company conducts operations and sells
its products outside the United States, the Company is subject to the Foreign
Corrupt Practices Act which makes it unlawful for any issuer to corruptly 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.

Volatility of Stock Prices

         The over-the-counter markets for securities such as the Company's
common stock historically have experienced extreme price and volume fluctuations
during certain periods. Other factors that also may affect the market price of
the Company's common stock include, but are not limited to the following:

         o        New product developments

         o        Fluctuations in the financial markets

         o        Changes in market valuations of companies in our industry

         o        General economic conditions

                                       19
<PAGE>

         o        Quarterly variations in the Company's results of operations

         o        The loss of a major customers, suppliers or business partners

         o        The addition or departure of key personnel

There has been a limited trading market for our common stock.

         The Company's common stock is traded on the "pink sheets.". The common
stock has only a limited trading market. The Company cannot assure the
shareholders that a more active trading market will develop or, if developed,
that it will be maintained. As a result, a shareholder might find it difficult
to dispose of, or to obtain accurate quotations as to the value of, the common
stock.

Our listing on the "Pink Sheets" subjects trading of the common stock to
additional regulations.

         Our common stock has a limited trading market as it is listed on the
"pink sheets" and the trading price of the common stock is less than $5.00 per
share. Trading in the common stock is therefore subject to the requirements of
Rule 15g-9 promulgated under the Exchange Act. Under such rule, broker-dealers
who recommend low-priced securities to persons other than established customers
and accredited investors must satisfy special sales practice requirements. The
common stock is also subject to the Securities Enforcement Remedies and Penny
Stock Reform Act of 1990, which requires additional disclosure in connection
with any trades involving a stock defined as a penny stock (generally, according
to recent regulations adopted by the Securities and Exchange Commission, any
equity security not traded on an exchange or quoted on Nasdaq that has a market
price of less than $5.00 per share, subject to certain exceptions). Such
requirements could severely limit the market liquidity of the common stock.

ITEM 7. FINANCIAL STATEMENTS

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

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

         On March 7, 2000, the Company engaged PricewaterhouseCoopers to act as
the Company's independent certified public accountant. PricewaterhouseCoopers
replaced Spear, Safer, Harmon & Co. There have been no disagreements with Spear,
Safer, Harmon & Co. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure or any reportable
events.

         On June 13, 2000, the Company engaged Spear, Safer, Harmon & Co., to
act as the Company's independent certified public accountant. Spear, Safer,
Harmon & Co. replaced PricewaterhouseCoopers. There were no Auditors Reports on
the financial statements for the Company prepared by PricewaterhouseCoopers and
there was no adverse opinion or a disclaimer

                                       20
<PAGE>

of opinion. There have been no disagreements with PricewaterhouseCoopers on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure or any reportable events.

                                       21
<PAGE>

                                    PART III

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

EXECUTIVE OFFICERS AND DIRECTORS

The directors and executive officers are as follows:

<TABLE>
<CAPTION>
       NAME                 AGE                            POSITION
       ----                 ---                            --------
<S>                          <C>       <C>
Pedro Pablo Errazuriz        64        Chairman of the Board, Chief Executive Officer
Jose Luis Yrarrazaval        61        Vice Chairman of the board/Chief Financial Officer/Secretary Director
Alberto Coddou               62        Director
Sergio Jimenez               63        Director
Claude Mermier               65        Director
</TABLE>

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 and sole Director of
Andean Export Corporation since February 9, 1995, and as Director of Andean
Engineering & Finance Corp. since its inception in July 1997. Mr. Errazuriz has
also served as Chairman of the Board of Directors 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 the Company
since March 20, 1995 and has served as Chief Financial Officer from March 20,
1995. In January, 1998, he was appointed Vice Chairman of the Board of Directors
of the Company. 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 served as the General Manager of both E&A and INA, which
responsibilities included all financial matters and personnel management.

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 of Directors and Legal
Representative of Consorio Periodistico de Chile S.A., the owners and editors of
a Chilean newspaper called La Epoca.

                                       22
<PAGE>

SERGIO JIMENEZ has served on the Board of Directors of the Company since March
20, 1995. Through June 1997 he was the President of the Santiago Water and
Sewage Company "EMOS". In June 1995, Mr. Jimenez was appointed as a member of
the Board of Directors of ENAP (Empresa Nacional del Petroleo), the Chilean oil
company owned by the government. 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 the Company since March
20, 1995. Mr. Mermier has served as the Chairman of the Board of Directors 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.

BOARD OF DIRECTORS

         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 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 do not receive additional compensation for their services as directors.

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, 1999, the members of
these committees consisted of 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 are authorized to grant options pursuant to the terms of these
plans.

                                       23
<PAGE>

         During the year ended December 31, 2000, the Company's Board of
Directors held six meetings. All of the directors attended this meeting. During
the year ended December 31, 2000 the Investment and the Compensation Committee
met three times. The functions of the other committees were performed by the
entire Board of Directors during 2000.

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, 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, 2000, all of the Section 16(a) filing requirements applicable to
its officers, directors and greater than 10% beneficial owners have been
satisfied.

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.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                       OTHER ANNUAL
NAME AND PRINCIPAL POSITION                  YEAR          SALARY        BONUS         COMPENSATION
---------------------------------------- ------------- -------------- ------------- ------------------
<S>                                          <C>          <C>            <C>          <C>
Pedro P. Errazuriz                           2000         $ 0.00         $ 0.00       $   20,000.00*
    President Chief Executive Officer        1999         $ 0.00         $ 0.00       $   20,000.00*
    Chairman                                 1998         $ 0.00         $ 0.00       $   20,000.00*
</TABLE>

         * This is allocated to an annual automobile allowance

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.

                                       24
<PAGE>

         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.

         Options granted under the Stock Option Plan are 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.

         No options have been issued under either plan.

                                       25
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of December 31, 2000, 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, 1999, there were 2,820,100 shares issued
and outstanding.

<TABLE>
<CAPTION>
                                                                          AMOUNT AND NATURE OF      PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1)                                  BENEFICIAL OWNERSHIP(2)  OF CLASS(3)
------------------------------------------------------------------------ -----------------------  -----------
<S>                                                                            <C>                    <C>
Alberto Coddou(4).......................................................               0                 0%
Pedro P. Errazuriz(5)(8)................................................       1,511,500              53.6%
Sergio Jimenez..........................................................               0                 0%
Claude Mermier(6).......................................................               0                 0%
Jose Luis Yrarrazaval...................................................          11,450                  *

All directors and executive officers as a group (6 persons).............       1,522,950               54.%
Igenor, Ingenierie et Gestion, S. A.(7).................................       1,425,000              50.5%
Berta Dominguez(7)(8)...................................................       1,425,000              50.5%
</TABLE>

--------------
*Less than one percent.

(1)      Unless otherwise indicated, the address of each beneficial owner is
         Avenida Americo Vespucio Sur #100, Piso 16, Las Condes 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. Based on
         2,820,100 shares issued and outstanding as of the date hereof.

(3)      Based on 2,820,100 issued and outstanding as of the date hereof.

(4)      Mr. Coddou's address is Santa Lucia 280-OF.12, Santiago, Chile.

(5)      Includes 1,450,000 shares of Common Stock owned by Igenor, Ingenierie
         et Gestion, S.A., a Swiss corporation ("Igenor") of which Mr. Pedro P.
         Errazuriz owns 50% the outstanding capital stock. Also includes 86,500
         shares of Common Stock owned directly by Mr. Pedro P. Errazuriz.

(6)      Mr. Mermier's address is c/o Etude Montavan-Mermier, 22, rue Etienne
         Dumont, 1211 Geneve 3, Switzerland.

                                       26
<PAGE>

(7)      The principal shareholders of Igenor are Mr. Pedro P. Errazuriz (50%),
         the Chairman of the Company's Board of Directors; Mrs. Berta Dominguez
         (49.50%), the wife of Mr. Pedro P. Errazuriz; Mr. Pedro Pablo Errazuriz
         Dominguez, a son of Mr. Pedro P. Errazuriz and Mrs. Berta Dominguez
         (0.25%); and Pierre Yves Montavon (0.25%), an unrelated third party.
         The address for this company is c/o Etude Montavan-Mermier, 22, rue
         Etienne Dumont, 1211 Geneve 3, Switzerland.

(8)      Consists of 1,425,000 shares of Common Stock owned by Igenor, of which
         Mrs. Berta Dominguez owns 49.50% of the outstanding capital stock. Mrs.
         Berta Dominguez is the wife of Mr. Pedro P. Errazuriz, the Company's
         Chairman of the Board of Directors.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions Between the Company and its Officers, Directors and Affiliates

         The Company holds a note receivable from Mr. Errazuriz, the Company's
Chairman of the Board. The original note balance amounted to $606,031 payable in
four annual installments with interest at 8-1/2% per year beginning January 15,
1998. As of December 31, 2000, the balance amounted to approximately $214,000
(including interest). On June 30, 1999, the Company acquired 1,332,600 shares of
common stock of CONUSA, representing 50% of the issued and outstanding common
stock of CONUSA, from Mr. Errazuriz, CONUSA's controlling shareholder. The
Company acquired the CONUSA common stock in exchange for certain assets,
including certain real property located in Chile, as well as the forgiveness of
debt in the sum of approximately $125,000 due from Mr. Errazuriz.

         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.

                                       27
<PAGE>

ITEM 13. 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

3.1      Company's Amended and Restated Articles of Incorporation(1)
3.2      Company's Revised Amended and Restated Bylaws(1)
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)
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)
10.4     Agreement between ESSAN and Bayesa for the Final Disposal of the
         Antofagasta Sewage (New translation with Appendices No. 1-5 but without
         maps)(1)
10.19    Letter from Westinghouse Electric Corporation to the Company, 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, dated July 19,
         1995.(1)
10.21    Buy/Sell of Shares, Concession of Rights, Commitments To Social
         Modifications and Changes in Debt Balances between C.E. Consonni &
         Ecesa.(2)
21       Subsidiaries of Registrant(1)
23.1     Consent of Independent Auditors(3)

(1)      Incorporated by reference from the Company'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 as exhibit 2.1 to the Company's Form 8-K dated March 26, 2001 and
         incorporated herein by reference.
(3)      Filed herewith.

(b) Reports on Form 8-K. The Company did not file any Reports on Form 8-K during
the fourth quarter of the year ended December 31, 2000.

                                       28
<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.

Dated:  April 9, 2000            By: /s/ Pedro P. Errazuriz
                                    --------------------------------------------
                                     Pedro P. Errazuriz, President, Chief
                                     Executive Officer and Chairman of the
                                     Board of Directors (Principal executive
                                     officer)

Dated: April 9, 2000             By: /s/ Jose Luis Yrarrazaval
                                    --------------------------------------------
                                     Jose Luis Yrarrazaval, Chief Financial
                                     Officer, Secretary and Director (Principal
                                     financial and accounting officer)

Dated: April 9, 2000             By: /s/ Alberto Coddou
                                    --------------------------------------------
                                     Alberto Coddou, Director

Dated April 9, 2000              By: /s/ Alberto Coddou
                                    --------------------------------------------
                                     Alberto Coddou, Director

Dated: April 9, 2000             By: /s/ Sergio Jimenez
                                    --------------------------------------------
                                     Sergio Jimenez, Director

                                       29
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 1999

                                                                          Page
                                                                          ----

Independent Auditors' Report..........................................     F-2

Consolidated Balance Sheets...........................................     F-3

Consolidated Statements of Operations.................................     F-5

Consolidated Statements of Shareholders' Equity.......................     F-6

Consolidated Statements of Cash Flows.................................     F-7

Notes to Consolidated Financial Statements............................     F-9

                                       F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
of Andean Development Corporation and Subsidiaries
Miami, Florida

We have audited the accompanying consolidated balance sheets of Andean
Development Corporation and Subsidiaries (the "Company") as of December 31, 2000
and 1999 and the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended. These consolidated 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Andean Development
Corporation and Subsidiaries as of December 31, 2000 and 1999 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.

Miami, Florida
February 10, 2001

                                       F-2
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 2000 and 1999

                                     ASSETS
<TABLE>
<CAPTION>
                                                         2000           1999
                                                     -----------    -----------
<S>                                                  <C>            <C>
Current Assets:
   Cash                                              $   213,589    $   125,163
   Short-term investments                                     --        145,794
   Accounts receivable                                 2,511,838      4,243,673
   Notes receivable                                      148,000             --
   Inventory                                              51,408        923,393
   Other current assets                                  180,439        305,859
                                                     -----------    -----------
         Total Current Assets                          3,105,274      5,743,882
                                                     -----------    -----------
Property, Plant and Equipment, net                       503,651      3,362,741
                                                     -----------    -----------
Other Assets:
   Real estate held for investment                            --         96,872
   Goodwill                                              205,157      2,631,359
   Notes receivable from related parties and other     1,739,558      1,300,933
   Investment in unconsolidated subsidiaries             243,168        392,435
   Deferred charges                                           --        138,984
   Deposits and other                                    156,767        329,501
                                                     -----------    -----------
                                                       2,344,650      4,890,084
                                                     -----------    -----------
                                                     $ 5,953,575    $13,996,707
                                                     ===========    ===========
</TABLE>

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

                                       F-3
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                     Consolidated Balance Sheets (Continued)

                           December 31, 2000 and 1999

                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                               2000             1999
                                                           ------------     ------------
<S>                                                        <C>              <C>
Current Liabilities:
   Obligations with banks                                  $    989,571     $    441,553
   Current portion of long-term debt                                 --          603,628
   Accounts payable and accrued expenses                      1,607,484        2,110,669
   Due to related parties                                            --          114,304
   Current portion of due to public entities                         --          760,881
   Deferred gain on sale of land                                     --          511,489
                                                           ------------     ------------
         Total Current Liabilities                            2,597,055        4,542,524
                                                           ------------     ------------
Long-Term Liabilities:
   Long-term debt, excluding current portion                         --          404,846
   Staff severance indemnities                                   72,364           66,685
   Due to public entities                                            --        2,566,409
   Dividends payable                                            423,018          423,018
                                                           ------------     ------------
                                                                495,382        3,460,958
                                                           ------------     ------------
Minority Interest                                               572,182          540,442
                                                           ------------     ------------
Shareholders' Equity:
   Preferred stock, $.0001 par value, 5,000,000 shares
     authorized, no shares issued and outstanding                    --               --
   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
   Accumulated deficit                                       (3,124,172)         (36,268)
   Accumulated other comprehensive income (loss)               (311,474)        (235,551)
                                                           ------------     ------------
         Total Shareholders' Equity                           2,288,956        5,452,783
                                                           ------------     ------------
                                                           $  5,953,575     $ 13,996,707
                                                           ============     ============
</TABLE>

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

                                       F-4
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Operations

                     Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                             2000            1999
                                                          -----------     -----------
<S>                                                       <C>             <C>
Revenues                                                  $ 2,759,417     $ 2,126,811
Cost of Operations                                          1,968,744       1,488,768
                                                          -----------     -----------
Gross Profit                                                  790,673         638,043
Selling and Administrative Expenses                           847,484         549,370
                                                          -----------     -----------
                                                              (56,811)         88,673
                                                          -----------     -----------
Other Income (Expense):
   Interest income (expense), net                             (98,303)         72,023
   Equity in earnings from unconsolidated subsidiaries         96,168          60,092
   Impairment of goodwill                                  (1,256,932)             --
   Other                                                     (484,583)        178,686
   Provision for uncollectible accounts                            --        (955,417)
   Depreciation and amortization                             (342,280)     (1,223,836)
                                                          -----------     -----------
                                                           (2,085,930)     (1,868,452)
                                                          -----------     -----------
Loss from Continuing Operations Before
Income Taxes and Minority Interest                         (2,142,741)     (1,779,779)
Income Taxes                                                   27,682          13,412
                                                          -----------     -----------
Loss from Continuing Operations                            (2,170,423)     (1,793,191)

Discontinued Operations (See Note 7):
   Income (loss) from operations, net                         501,301      (1,071,665)
   Loss on sale, net                                       (1,450,522)             --
                                                          -----------     -----------
Total Loss from Discontinued Operations                      (949,221)     (1,071,665)
                                                          -----------     -----------
Loss Before Minority Interest                              (3,119,644)     (2,864,856)
Minority Interest                                              31,740         (96,735)
                                                          -----------     -----------
Net Loss                                                   (3,087,904)     (2,961,591)

Other Comprehensive Income (Loss):
   Foreign currency translation adjustment                    (75,923)        (95,602)
                                                          -----------     -----------
Comprehensive Income (Loss)                               $(3,163,827)    $(3,057,193)
                                                          ===========     ===========
Per Common Share:
  Net Loss From Continuing Operations                     $     (0.77)    $     (0.64)
  Discontinued Operations, Net                                  (0.34)          (0.38)
  Minority Interest                                              0.01           (0.03)
                                                          -----------     -----------
Net Loss Per Share - Basic                                $     (1.10)    $     (1.05)
                                                          ===========     ===========
Weighted Average Shares Outstanding - Basic                 2,820,100       2,820,100
                                                          ===========     ===========
</TABLE>

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

                                       F-5
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Shareholders' Equity

                     Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                                         Retained Earnings  Accumulated Other     Total
                                             Common       Additional       (Accumulated       Comprehensive    Shareholders'
                                              Stock     Paid-In Capital       Deficit)        Income (Loss)       Equity
                                           -----------    -----------       -----------        -----------      -----------
<S>                                        <C>            <C>               <C>                <C>              <C>
Balance at December 31, 1998               $       282    $ 5,724,320       $ 2,925,323        $  (139,949)     $ 8,509,976

Net loss                                            --             --        (2,961,591)                --       (2,962,591)

Translation adjustment                              --             --                --            (95,602)         (95,602)
                                           -----------    -----------       -----------        -----------      -----------
Balance at December 31, 1999                       282      5,724,320           (36,268)          (235,551)       5,452,783

Net loss                                            --             --        (3,087,904)                --       (3,087,904)

Foreign currency translation adjustment             --             --                --            (75,923)         (75,923)
                                           -----------    -----------       -----------        -----------      -----------
Balance at December 31, 2000               $       282    $ 5,724,320       $(3,124,172)       $  (311,474)     $ 2,288,956
                                           ===========    ===========       ===========        ===========      ===========
</TABLE>

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

                                       F-6
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                     Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                                2000            1999
                                                            -----------     -----------
<S>                                                         <C>             <C>
Cash Flows from Operating Activities:
   Net loss                                                 $(3,087,904)    $(2,961,591)
   (Income) loss from discontinued operations                  (501,301)      1,071,665
   Loss on sale of discontinued operations                    1,450,522              --
   Minority interest                                            (31,740)         96,735
                                                            -----------     -----------
                                                             (2,170,423)     (1,793,191)
   Adjustments to reconcile net loss to net cash
    provided by operating activities:
     Depreciation and amortization                              342,280       1,223,836
     Provision for uncollectible accounts                            --         955,417
     Equity in earnings from unconsolidated subsidiaries         96,168          60,092
     Impairment of goodwill                                   1,256,932              --
     Foreign currency translation adjustment                    (75,923)        (95,602)
     Changes in assets and liabilities:
       (Increase) decrease in:
         Accounts receivable                                    674,278       1,348,720
         Inventory                                              (15,501)        313,532
         Other current assets                                   113,005        (456,971)
         Note receivable                                        313,500      (1,445,206)
         Note receivable from related party                          --         318,043
         Deferred charges                                       138,984              --
         Deposits and other                                     158,054        (226,568)
       Increase (decrease) in:
         Accounts payable                                       770,947        (614,829)
         Deferred revenue                                      (511,489)        511,489
         Staff severance indemnities                            (29,267)         12,584
         Accrued expenses and other                              33,179        (190,280)
         Income taxes payable                                    22,178        (108,915)
                                                            -----------     -----------
Net Cash Provided by Operating Activities                     1,116,902         726,093
                                                            -----------     -----------
Cash Flows from Investing Activities:
   Purchase of property, plant and equipment                     (1,542)       (428,341)
   Sale of real estate held for investment                       96,872         261,070
   Investment in unconsolidated subsidiaries                    149,267              --
   Proceeds from (purchase of) short-term investments            60,058         (92,671)
                                                            -----------     -----------
Net Cash Provided by (Used in) Investing Activities             304,655        (259,942)
                                                            -----------     -----------
</TABLE>

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

                                       F-7
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                Consolidated Statements of Cash Flows (Continued)

                     Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                                     2000            1999
                                                                 -----------     -----------
<S>                                                              <C>             <C>
Cash Flows from Financing Activities:
   Net (payments to) proceeds from related parties               $  (601,216)    $   562,335
   Net proceeds from obligations  with bank                          548,018         283,894
   Principal payments on long-term debt                           (1,279,933)     (1,111,251)
   Dividends paid                                                         --        (141,002)
                                                                 -----------     -----------
Net Cash Used in Financing Activities                             (1,333,131)       (406,024)
                                                                 -----------     -----------
Net Increase in Cash                                                  88,426          60,127
Cash at Beginning of Year                                            125,163          65,036
                                                                 -----------     -----------
Cash at End of Year                                              $   213,589     $   125,163
                                                                 ===========     ===========

Supplemental Disclosure of Cash Flow Information:
   Cash paid during the year for interest                        $   148,998     $   178,152
                                                                 ===========     ===========
Supplemental Disclosure of Non-Cash Investing Activities:
   Net assets acquired from consolidated subsidiaries:
     Short-term investments                                      $        --     $    29,640
     Accounts receivable                                                  --       4,730,401
     Inventory                                                            --       1,236,925
     Due from related parties                                             --          35,928
     Property, plant and equipment                                        --       1,466,734
     Other current assets                                                 --         532,612
     Other assets                                                         --          20,801
     Accounts payable                                                     --      (2,118,745)
     Accrued expenses                                                     --        (356,885)
     Due to public entities                                               --      (3,327,290)
     Long-term debt                                                       --      (1,508,939)
                                                                 -----------     -----------
                                                                 $        --     $   741,182
                                                                 ===========     ===========
   Net assets disposed of on sale of discontinued operations:
     Property, plant and equipment                               $ 2,516,810     $        --
     Goodwill                                                      1,169,270              --
     Due to public entities                                       (3,327,290)             --
                                                                 -----------     -----------
                                                                 $   358,790     $        --
                                                                 ===========     ===========
</TABLE>

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

                                       F-8
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization - Andean Development Corporation ("ADC" or the "Company")
         was incorporated in the State of Florida on October 19, 1994. ADC
         operates its lines of business principally in Chile, Peru, Argentina
         and Spain. The Company provides engineering and project management
         services for energy and private works projects and sells, as agent,
         major electrical and mechanical equipment. The Company also advises and
         assists large private utilities and government agencies in obtaining
         land easements from private owners for installation of electrical
         lines, sewer plant infrastructure and piping and roads and develops
         educational and training software.

         Basis of Presentation - The accompanying consolidated financial
         statements include the accounts of ADC and the following consolidated
         subsidiaries:

<TABLE>
<CAPTION>
                                                                                             Ownership
                                  Subsidiary                                  Domicile       Percentage
                                  ----------                                  --------       ----------
<S>                                                                             <C>             <C>
Errazuriz y Asociados Ingenieros, S. A. ("EAI") Chilean Corporation             Chile           100%

Errazuriz y Asociados Ingenis, S.A. ("E&A Ingesis S.A.") Chilean Corporation    Chile           100%

CONUSA* U.S. Corporation                                                        Spain            61%
</TABLE>

         * CONUSA owns a 19% interest in Consonni (located in Bilboa, Spain) and
         a 92% of Equipos de Control Electrico S.A. ("ECESA").

         ADC and the above subsidiaries are collectively referred to as the
         Company. All significant intercompany balances and transactions have
         been eliminated in consolidation.

         During 2000, the Company sold 100% of its ownership in the following
         previously consolidated subsidiaries:

         o        June 30, 2000 - Aguas y Ecologia, S. A., Negociaciones y
                  Servidumbre, S. A. and Nysacar, S. A.

         o        August 31, 2000 - Bodegas Garcia Errazuriz, S. A.

         On December 12, 2000, Consonni USA, Inc. ("CONUSA"), a 61% owned
         subsidiary of the Registrant, sold approximately 78% of its capital
         stock in Construcciones Electromecanicas Consonni, S.A. ("Consonni") to
         unrelated minority shareholders of Consonni. The purchase price was
         approximately U.S. $1,200,000. As a consequence of this transaction,
         CONUSA will retain only a 19% equity interest in Consonni.

         The initial payment of approximately $266,700 has been received by
         CONUSA. The balance is to be paid to CONUSA over five years as follows:

         Approximately $80,000 on June 20, 2001; and

         Nine semiannually payments of approximately $85,000 commencing December
         2001

                                       F-9
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

         The Company recognized a loss of approximately $1,451,000 on the sale
         of its interest in Consonni and income from discontinued operations of
         approximately $501,000, which are stated separately in the accompanying
         consolidated statements of operations. In addition, as a result of the
         sale, the remaining goodwill of $1,256,932, connected with the original
         acquisition of Consonni, was considered impaired and written off.

         In addition, The Company consolidated its subsidiaries Errazuriz y
         Asociados Division Comercial S.A., Ingesis S.A. and Igenor Andina S.A.
         into one company, named E&A Ingesis S.A. E&A Ingesis S.A. will
         concentrate its business on the education segment of the Company. The
         engineering activities shall be conducted through Errazuriz y Asociados
         Ingenieros S.A. and the Spanish sales and trading will continue to be
         operated by ECESA.

         The Company's proportionate share of income or loss for subsidiaries
         sold during the year is included in the accompanying consolidated
         statements of operations as discontinued operations.

         Functional Currency - The consolidated financial statements have been
         translated in accordance with the provisions set forth in Statement of
         Financial Accounting Standards No. 52, from Chilean pesos and Spanish
         pesetas (the functional currencies) into US dollars (the reporting
         currency). The exchange rate used at December 31, 2000 for assets and
         liabilities was 573.73 Chilean pesos to U.S. $1.00 and 176.68 Spanish
         pesetas to U.S. $1.00. Shareholders' equity components are translated
         at historical rates. The weighted average exchange rates used during
         the years ended December 31, 2000 and 1999, respectively, for results
         of operations were 537.64 Chilean pesos to U.S. $1.00 and, 179.86
         Spanish pesetas to U.S. $1.00. The effects of exchange rate changes are
         reflected as a separate component of shareholders' equity.

         Revenue Recognition - The Company earns revenue principally from
         commissions associated with the sale of equipment and from fees for the
         performance of engineering services and providing technical assistance
         in the development of specialized projects.

         Revenues for fees associated with services are recognized when
         performed and are based on standard billing rates.

         The Company earns commissions on the sale of equipment. For turnkey
         jobs, commissions are earned when the contracts are signed and "Orders
         to Proceed" are issued. In some instances, due to the significant time
         the Company is required to wait for payment, commissions that the
         Company initially believed it had earned are changed. Due to the
         Company's inability to determine the amount of commissions, the
         Company, commencing in 1999, recognizes commissions only when they are
         received. This change in policy is not deemed to have a material impact
         on the Company's consolidated financial statements.

                                      F-10
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

NOTE 1 - ORGANIZATION AND 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 cash, 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 significant
         size of the Company's customers and the Company's ongoing efforts to
         monitor the credit worthiness of its customers.

         Fair Values of Financial Instruments - The fair value of a financial
         instrument is the amount at which the instrument could be exchanged in
         a current transaction between willing parties. The fair value of cash,
         short-term investments, accounts receivable, notes receivable, accounts
         payable and notes payable approximate the carrying amounts at December
         31, 2000 and 1999.

         Property, Plant and Equipment - Property, plant and equipment are
         recorded at cost. Depreciation is computed using the straight-line
         method over the estimated useful lives of the assets, usually five to
         seven years.

         Staff Severance Indemnities - The Company provides for certain lump sum
         severance indemnities that are required to be paid by Chilean law to
         its employees at the end of their employment. 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 - The Company is a holding company for foreign
         entities, operating primarily in South America and Spain. In South
         America and Spain the potential for both economic and political change
         in the business environment is different from that of the United
         States. Therefore, the Company's results of operations and financial
         position could be materially affected by sudden changes in the business
         and political environments in the countries that the Company operates.

         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 as income or
         loss in the period that includes the enactment date.

         Income tax expense totaled $27,682 and $13,412 for the years ended
         December 31, 2000 and 1999, respectively.

                                      F-11
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Earnings Per Common Share - Basic earnings per common share are based
         on the weighted average number of shares outstanding of 2,820,100 for
         the years ended December 31, 2000 and 1999, respectively, after giving
         effect to common stock equivalents 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.

         Recent Pronouncements - In June 1998, the Financial Accounting
         Standards Board ("FASB") issued Statement of Financial Accounting
         Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
         Hedging Activities" ("SFAS 133"). SFAS 133 requires the recognition of
         the fair value of all derivative instruments on the balance sheet.
         Subsequent to the issuance of SFAS 133, the FASB received many requests
         to clarify certain issues causing difficulties in implementation. In
         June 2000, the FASB issued SFAS 138, which responds to those requests
         by amending certain provisions of SFAS 133. These amendments include
         allowing foreign-currency exposures that reduce the need for
         third-party derivatives and redefining the nature of interest rate risk
         to avoid sources of ineffectiveness. The impact of adopting SFAS 133,
         as amended by SFAS 138, is not significant.

         In February 1999, the Financial Accounting Standards board Issued
         Statement of Financial Accounting Standards No. 135 "Recission of FASB
         Statement No. 75 and Technical Corrections" which is effective for
         financial statements issued after February 15, 1999. There is no impact
         to the Company's financial reporting or presentation due to the
         adoption of SFAS No. 135.

         In December 1999, the Securities and Exchange Commission issued Staff
         Accounting Bulletin 101, "Revenue Recognition in Financial Statements"
         ("SAB 101"). SAB 101 provides guidance on the recognition, presentation
         and disclosure of revenues in financial statements and requires
         adoption no later than the fourth quarter of fiscal 2001. The Company
         is currently evaluating the impact of SAB 101 and its related
         interpretations to determine the effect it will have on the Company's
         consolidated financial position and results of operations.

         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.

         Reclassifications - Certain amounts in the 1999 consolidated financial
         statements have been reclassified for comparative purposes to conform
         with the presentation in the 2000 consolidated financial statements.

NOTE 2 - SHORT-TERM INVESTMENTS

         Short-term investments at December 31, 1999 consist of time deposits
         totaling $145,794 invested in local Chilean and Spanish banks with
         maturity dates ranging from three months to one year. These investments
         earned an annual rate of interest ranging from 1.44% to 3.60%. There
         were no short-term investments at December 31, 2000.

                                      F-12
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

NOTE 3 - OTHER CURRENT ASSETS

         Other current assets consist of the following at December 31:

         <TABLE>
         <CAPTION>

                                                       2000            1999
                                                   -----------     -----------
         <S>                                       <C>             <C>
         Recoverable taxes                         $   158,013     $   142,067
         Advances to suppliers                              --          29,943
         Other                                          22,426         133,849
                                                   -----------     -----------
                                                   $   180,439     $   305,859
                                                   ===========     ===========
         </TABLE>

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET

         Property, plant and equipment, net, consist of the following at
         December 31:

         <TABLE>
         <CAPTION>
                                                       2000            1999
                                                   -----------     -----------
         <S>                                       <C>             <C>
         Land and building                         $        --     $ 1,113,639
         Vineyard                                           --         588,532
         Vehicles                                      250,010         237,356
         Installations and machinery                        --       1,355,173
         Other installations and equipment                  --         678,255
         Office equipment                               70,324          88,789
         Furniture and fixtures                        117,942         760,661
         Leasehold improvements                        404,312         371,796
         Leased property                                    --          47,780
                                                   -----------     -----------
         Total property, plant and equipment,
            at cost                                    842,588       5,241,981

         Less accumulated depreciation and
            amortization                              (338,937)     (1,879,240)
                                                   -----------     -----------
                                                   $   503,651     $ 3,362,741
                                                   ===========     ===========
         </TABLE>

         Depreciation expense approximated $342,000 and $1,224,000 for the years
         ended December 31, 2000 and 1999, respectively.

NOTE 5 - 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, fees for services or commissions on sales have been received
         from or paid to affiliated companies.

                                      F-13
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

NOTE 6 - NOTE RECEIVABLE FROM RELATED PARTY AND OTHER

         During 1997, the Company received a note from Pedro Pablo Errazuriz,
         the Company's Chairman of the Board, in the amount of $606,031, payable
         in four annual installments, plus interest at 8 1/2% per year,
         commencing January 15, 1998. The note was in exchange for the purchase
         of real estate. As of December 31, 2000 and 1999 the balance of this
         note approximated $214,000.

         During 1999, Ingenor Andina, S. A., a subsidiary of the Company, sold
         land in exchange for an $890,000 note. The note is payable in four
         annual installments commencing June 2000. U.S. generally accepted
         accounting principles (GAAP) requires certain criteria to be met before
         the revenue on on the sale of land can be recognized. Revenue from the
         sale of land is recognized when (i) the cash received is at least 20%
         of the selling price, (ii) the earnings process is complete and (iii)
         the collection of any remaining receivable is reasonably assured. Since
         there was no cash received at the time of the sale (less than 20% of
         the selling price was paid), the $511,000 gain on the sale of the land
         was deferred and was included in the accompanying consolidated balance
         sheets as of December 31, 1999. During 2000, Ingenor Andina, S. A.
         reacquired the land due to the non-payment of the note and the sale was
         reversed.

         The amounts due from the affiliated companies totaled $902,499 (derived
         from the sale of interest in Consonni) and $197,183 at December 31,
         2000 and 1999, respectively. At December 31, 1999, funds payable to
         affiliated companies' totaled $114,304 (none in 2000).

NOTE 7 - DISCONTINUED OPERATIONS

         During the year 2000, the Company adopted a formal plan to sell the net
         assets of Consonni, S.A. and certain Chilean subsidiaries. The disposal
         date of Consonni was December 19, 2000.

         The following represents the results of operations of the discontinued
         subsidiaries during the year ended December 31, 2000:

         <TABLE>
         <CAPTION>
                                                      Consonni, S.A.
                                                         Chilean        Combined
                                         (Spain)      Subsidiaries        Total
                                       -----------     -----------     -----------
         <S>                           <C>             <C>             <C>
         Revenues                      $ 9,319,985     $    77,007     $ 9,396,992
         Cost of sales                  (7,569,478)        (95,173)     (7,664,651)
                                       -----------     -----------     -----------
         Gross margin                    1,750,507         (18,166)      1,732,341

         General and administrative
           expenses                       (864,500)        (49,261)       (913,761)

         Other - net                      (379,868)         62,589        (317,279)
                                       -----------     -----------     -----------
         Net income (loss) from
          discontinued operations      $   506,139     $    (4,838)    $   501,301
                                       ===========     ===========     ===========
         </TABLE>

                                      F-14
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

NOTE 8 - DEFERRED CHARGES

         Deferred charges consist of the following at December 31:

                                                    1999
                                                 ----------
         Intangible assets                       $   51,292
         Covenant not to compete                     87,692
                                                 ----------
                                                 $  138,984
                                                 ==========

         Acquisition costs were being amortized on a straight-line basis over 10
         years. Amortization commenced in 1998 and amounted to approximately
         $11,700. Intangible assets and covenants not to compete were amortized
         on a straight-line basis over 3 to 5 years beginning in 1999. During
         2000, the Company sold Negociaciones y Servidumbre, the subsidiary that
         owned these assets (See Note 1).

NOTE 9 - OBLIGATION WITH BANKS

         Obligations with banks consist of lines-of-credit with local Chilean
         and Spanish banks. Interest rates on all 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.

         These lines-of-credit are secured by an assignment of the Company's
         accounts receivable. Obligations with banks under lines-of-credit
         amounted to approximately $990,000 and $442,000 at December 31, 2000
         and 1999, respectively. The Company owed approximately $26,000 to
         Chilean banks and $964,000 to Spanish banks at December 31, 2000.

NOTE 10 - LONG-TERM DEBT

         Long-term debt consists of the following at December 31:

         <TABLE>
         <CAPTION>
                                                               1999
                                                           -----------
         <S>                                               <C>
         Notes payable, collateralized by trade
           receivables with interest payable at 6.25%
           payable monthly                                 $   547,040

         Note payable, collateralized by  mortgage
           on the real estate held for investment, with
           interest at 8.7% and payable monthly                 94,923

         Note payable, collateralized by mortgage
           on vineyard property with interest at 10.4%
           and payable monthly                                 315,938
                                                           -----------
         Total notes payable                                 1,008,474
         Less current portion                                 (603,628)
                                                           -----------
         Total long-term debt                              $   404,846
                                                           ===========
         </TABLE>

                                      F-15
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

NOTE 10 - LONG-TERM DEBT (Continued)

         During 2000, the Company paid off the above notes payable. These notes
         were related to the subsidiaries sold during the year.

NOTE 11 - RESEARCH AND DEVELOPMENT

         The Company is developing software to educate and to provide job
         training for residents of the rural communities in Chile via the
         Internet. The Company expects to market the final product to the
         Chilean government and private educational institutions.

         The Company incurred and expensed research and development costs of
         approximately $272,000 and $355,000 in 2000 and 1999, respectively.

NOTE 12 - SHAREHOLDERS' EQUITY

         During 1998, the Company declared dividends of $.20 per share to be
         paid in four installments on dates to be determined by the Board.
         During July 1999, the first installment was paid ($.05 per share). The
         balance of approximately $423,000 was still outstanding at December 31,
         2000. On March 30, 2001, the board of directors of the Company
         rescinded the dividends still payable of approximately $423,000.

NOTE 13 - INCOME TAXES

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

         <TABLE>
         <CAPTION>
                                                2000       1999
                                              --------   --------
         <S>                                      <C>        <C>
         Chilean statutory tax rate               15.0%      15.0%
         Other, net                                 .4         .4
                                              --------   --------
         Effective income tax rate                15.4%      15.4%
                                              ========   ========
         Spanish effective income tax rate        --         30.0%
                                              ========   ========
         </TABLE>

NOTE 14 - COMMITMENTS AND CONTINGENCIES

         Lease

         The Company leases offices in Santiago, Chile under various operating
         leases. Monthly rental payments were approximately $6,700 and $9,100
         during 2000 and 1999, respectively. Rent expense was $80,000 for the
         years ended December 31, 2000 and 1999.

                                      F-16
<PAGE>

                 ANDEAN DEVELOPMENT CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                     Years Ended December 31, 2000 and 1999

                                  (continued)

NOTE 14 - COMMITMENTS AND CONTINGENCIES (Continued)

         Future minimum rental payments under the lease are as follows:

                   Year Ending                       Annual
                   December 31,                     Payments
                   ------------                     --------
                       2001                        $   76,360
                       2002                            76,360
                       2003                            76,360
                       2004                            76,360
                       2005                            31,817
                                                   ----------
                                                   $  337,257
                                                   ==========

NOTE 15 - LIQUIDITY AND CAPITAL RESOURCES

         In reaction to the loss of $3,087,904 for the year ended December 31,
         2000 and the loss of $2,961,591 for the year ended December 31, 1999,
         management has simplified its corporate structure and sold off and
         concluded certain segments of its operations during 2000. The Company's
         management believes the course of action taken during 2000 can restore
         profitability. No assurance can be given that the Company will be
         successful in these efforts.

                                      F-17
<PAGE>

                                 EXHIBIT INDEX

EXHIBIT           DESCRIPTION
-------           -----------
 23.1             Consent of Independent Auditors