SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ------- to -------

Commission File No. 33-55254-11

                                 WHY NOT?, INC.
             (Exact name of Registrant as specified in its charter)

       NEVADA                                           87-0438458
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                    Identification Number)

3098 SOUTH HIGHLAND DRIVE, SUITE 460
SALT LAKE CITY, UTAH                                      84106
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code (801) 485-7775

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act: NONE

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

Indicate by  check mark if  disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in  definitive proxy or
information statements incorporated by  reference in Part III  of this Form 10-K
or any amendment to this Form 10-K.    [X]

As of February,  1997,  there is no  aggregate  market value of the voting stock
held by non-affiliates of the registrant.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

           Class                               Outstanding as of February, 1997
$.001 PAR VALUE CLASS A COMMON STOCK                   1,000,000 SHARES

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None



<PAGE>

                                     PART I
                               ITEM 1. Business.

         The Company was incorporated under the laws of Utah on  January 7, 1986
and subsequently  reorganized under the laws of Nevada on December 30, 1993. The
Company's  reorganization  plan was  formulated  for the purpose of changing the
state of domicile and provided that the Company form a new corporation in Nevada
which  acquired  all of the  contractual  obligations,  shareholder  rights  and
identity of the Utah  corporation,  and then the Utah corporation was dissolved.
The Company is in the developmental  stage, and its operations to date have been
limited to the sale of shares to Capital  General  Corporation  and the gifts of
shares to the giftees. The Company is in the process of investigating  potential
business ventures which, in the opinion of management,  will provide a source of
eventual profit to the Company. Such involvement may take many forms,  including
the  acquisition  of an  existing  business  or the  acquisition  of  assets  to
establish  subsidiary  businesses.  The Company's  management does not expect to
remain involved as management of an acquired  business;  presently  unidentified
individuals would be retained for such purposes.

         As an unfunded  venture,  the Company will be extremely  limited in its
attempts to locate potential business situations for investigation. However, the
Company's  officers,  directors and major  shareholder  have  undertaken to make
loans to the  Company  in amounts  sufficient  to enable  it  to  satisfy    its
reporting  and other  obligations  as a public  company,  and to commence,  on a
limited basis,  the process of  investigating  possible  merger and  acquisition
candidates,  and that the Company's  status as a publicly-held  corporation will
enhance its ability to locate such potential business ventures.

         No  assurance  can be given as to when the Company may locate  suitable
business  opportunities  and such  opportunities  may be  difficult  to  locate;
however,  the Company intends to actively search for potential business ventures
for the next five years.  The Company intends not to allocate any incoming funds
specifically,  should there be any in the future, to general use for the purpose
of  seeking,  investigating  and  acquiring  or  becoming  engaged in a business
opportunity.  Decisions  concerning  these  matters  may be made  by  management
without the participation or authorization of the shareholders.

         Management  anticipates  that due to its lack of funds, and the limited
amount of its resources,  the Company may be restricted to participation in only
one  potential  business  venture.  This  lack  of  diversification   should  be
considered a  substantial  risk because it will not permit the Company to offset
potential losses from one venture against gains from another.

         Business opportunities,  if any arise, are expected to become available
to the  Company  principally  from the  personal  contacts of its  officers  and
directors.  While it is not expected  that the Company will engage  professional
firms specializing in business  acquisitions or reorganizations,  such firms may
be  retained  if funds  become  available  in the  future,  and if  deemed to be
advisable.  Opportunities may thus become available from professional  advisers,
securities  broker-dealers,   venture  capitalists,  members  of  the  financial
community, and other sources of unsolicited proposals. In certain circumstances,
the  Company  may agree to pay a  finder's  fee or other  form of  compensation,
including  perhaps  one-time cash payments,  payments based upon a percentage of
revenues or sales volume,  and/or payments involving the issuance of securities,
for services provided by persons who submit a business  opportunity in which the
Company shall decide to  participate,  although no contracts or  arrangements of
this nature  presently  exist. The Company is unable to predict at this time the
costs of locating a suitable business opportunity.

                                       2
<PAGE>

         The Company will not restrict  its search to any  particular  business,
industry or  geographical  location,  and  reserves the right to evaluate and to
enter into any type of business  opportunity,  in any stage of their development
(including  the  "start  up"  stage),  in any  location.  In  seeking a business
venture,  Management  will not be  influenced  primarily  by an  attempt to take
advantage  of the  anticipated  or  perceived  appeal  of a  specific  industry,
management  group,  or product or industry,  but rather will be motivated by the
Company's business objective of seeking long term capital  appreciation in their
real value.  In addition,  the Exchange Act reporting  requirements  require the
filing of the Form 8-K disclosing any businesses acquired and requires certified
financial  statements  of  such  companies.  These  reporting  requirements  may
substantially   limit  the  businesses  which  may  be  available  for  possible
acquisition candidates.

         The analysis of business  opportunities  will be undertaken by or under
the  supervision  of the Company's  management,  none of whom is a  professional
analyst and none of whom have significant general business experience. Among the
factors  which  management  will  consider  in  analyzing   potential   business
opportunities are the available technical,  financial and managerial  resources;
working capital and financial  requirements;  the history of operation,  if any;
future prospects; the nature of present and anticipated  competition;  potential
for  further  research,   development  or  exploration;   growth  and  expansion
potential;  profit potential;  the perceived public recognition or acceptance of
products or services; name identification, and other relevant factors.

         It is not  possible at present to predict the exact manner in which the
Company  may   participate  in  a  business   opportunity.   Specific   business
opportunities  will be reviewed  and,  based upon such review,  the  appropriate
legal structure or method of  participation  will be decided upon by management.
Such structures and methods may include,  without limitation,  leases,  purchase
and  sale  agreements,   license,   joint  ventures;  and  may  involve  merger,
consolidation  or  reorganization.  The Company may act  directly or  indirectly
through an interest in a partnership, corporation or other form of organization.
However,  it is most likely that the Company will acquire a business  venture by
conducting a reorganization  involving the issuance of the Company's  restricted
securities.  Such a reorganization may involve a merger (or combination pursuant
to state corporate statutes,  where one of the entities dissolves or is absorbed
by the other), or it may occur as a consolidation,  where a new entity is formed
and the  Company  and such other  entity  combine  assets in the new  entity.  A
reorganization may also occur, directly or indirectly, through subsidiaries, and
there is no assurance that the Company would be the surviving  entity.  Any such
reorganization  could  result in  additional  dilution  to the book value of the
shares and loss of control of a majority of the shares.  The  Company's  present
directors may be required to resign in connection with a reorganization.

         A  reorganization  may be structured in such a way as to take advantage
of certain beneficial tax consequences available in business reorganizations, in
accordance  with  provisions of the Internal  Revenue Code of 1986 (as amended).
Pursuant  to  such  a  structure,  the  number  of  shares  held  prior  to  the
reorganization  by all of the Company's  shareholders  might be less than 20% of
the  total  shares  to be  outstanding  upon  completion  of the  trans  action.
Substantial  dilution of percentage  equity ownership may result to the giftees,
in the discretion of management.

         Generally,  the issuance of securities in a reorganization  transaction
would  be  undertaken  in  reliance  upon  one  or  more   exemptions  from  the
registration  provisions of applicable  federal  securities laws,  including the
exemptions  provided  for  non-public  or limited  offerings,  distributions  to
persons resident in only one state and similar exemptions provided by state law.
Shares issued in a reorganization  transaction based upon these exemptions would
be  considered  "restricted"  securities  under the 1933  Act,  and would not be
available  for  resale for a period of two years,  in  accordance  with Rule 144
promulgated  under  the 1933 Act.  However,  the  Company  might  undertake,  in
connection  with  such  a  reorganization   transaction,   certain  registration
obligations in connection with such securities.

                                       3
<PAGE>

         The  Company  may  choose  to  enter  into  a  venture   involving  the
acquisition  of or  merger  with a  company  which  does  not  need  substantial
additional  capital but desires to establish a public  trading  market for   its
securities.  Such a company may desire to consolidate  its  operations  with the
Company  through  a  merger,   reorganization,   asset  acquisition,   or  other
combination,  in order to avoid possible adverse consequences of undertaking its
own public offering.  (Such consequences  might include expense,  time delays or
loss of  voting  control.)  In the event of such a merger,  the  Company  may be
required to issue significant  additional shares, and it may be anticipated that
control over the Company's  affairs may be transferred to others. It should also
be noted that this type of business  venture  might have the effect of depriving
the  giftee shareholders of the protection of federal and state securities laws,
which normally affect the process of a company's becoming publicly held.

         It  is  likely  that  the   investigation  and  selection  of  business
opportunities  will be complex,  time-consuming  and extremely  risky.  However,
management believes that even though the Company will have limited capital,  the
fact that  its  securities  will  be  publicly-held  will  make it a  reasonably
attractive business prospect for other firms.

         As  part of  their  investigation  of  acquisition  possibilities,  the
Company's  management may meet with  executive  officers of the business and its
personnel;  inspect its facilities;  obtain independent analysis or verification
of the  information  provided,  and conduct other  reasonable  measures,  to the
extent permitted by the Company's  limited  resources and  management's  limited
expertise.  Generally,  the Company  intends to analyze and make a determination
based upon all available  information without reliance upon any single factor as
controlling.

         In all likelihood,  the Company's  management will be  inexperienced in
the areas in which potential  businesses  will be investigated  and in which the
Company may make an acquisition or investment. Thus, it may become necessary for
the  Company  to retain  consultants  or  outside  professional  firms to assist
management in evaluating potential  investments,  and to hire managers to run or
oversee the operations of its acquisitions or investments.  The Company can give
no assurance that it will be able to find suitable consultants or managers.  The
Company  intends not to employ any of its  affiliates,  officers,  directors  or
principal  shareholders as consultants.  The Company has no policy regarding the
use of consultants,  however, if management, in its discretion,  determines that
it is in the best interests of the Company,  management may seek  consultants to
review  potential merger or acquisition  candidates.  It is anticipated that the
total  amount of fees paid to any  consultant  would not  exceed  $5,000.00  per
transaction.  The  fee,  it is  anticipated,  would be paid by  Capital  General
Corporation or by the potential target company. There are currently no contracts
or agreements  between any  consultant  and any companies that are searching for
"shell"  companies  with  which  to  merge.   There  have  been  no  preliminary
discussions or understandings between the Company and any market maker regarding
the  participation of any such market maker in the aftermarket for the Company's
securities  inasmuch as no market for the securities is expected to arise due to
the lack of transferability on the Company's shares until an acquisition is made
and a Form 8-K is filed with the Commission.

         It may be  anticipated  that the  investigation  of  specific  business
opportunities   and  the   negotiation,   drafting  and  execution  of  relevant
agreements,  disclosure documents and other instruments will require substantial
management time and attention, and substantial costs for accountants,  attorneys
and  others.  Should  a  decision  thereafter  be made not to  participate  in a
specific  business  opportunity,  it is likely that costs already expended would
not be  recoverable.  It is  also  likely,  in the  event a  transaction  should
eventually  fail to be consummated,  for any reason,  that the costs incurred by
the Company would not be recoverable.  The Company's  officers and directors are
entitled to reimbursement  for all expenses  incurred in their  investigation of
possible  business  ventures on behalf of the Company,  and no assurance  can be
given that if the Company has available  funds they will not be depleted in such
expenses.

                                       4
<PAGE>

         In addition to the severe limitations placed upon the Company by virtue
of its unfunded status,  the Company will also be limited,  in its investigation
of  possible  acquisitions,  by the  reporting  requirements  of the  Securities
Exchange Act of 1934, pursuant to which certain information must be furnished in
connection with any significant  acquisitions.  The Company would be required to
furnish,  with  respect  to any  significant  acquisition,  certified  financial
statements for the acquired company, covering one, two or three years (depending
upon the relative size of the acquisition).  Consequently, acquisition prospects
which do not have the requisite certified financial statements, or are unable to
obtain them, may be inappropriate  for acquisition  under the present  reporting
requirements of the 1934 Act.

         The Company does not intend to take any action which would render it an
investment company under The Investment  Companies Act of 1940 (the "1940 Act").
The 1940 Act defines an investment  company as one which (1) invests,  reinvests
or  trades  in  securities  as its  primary  business,  (2)  issues  face-amount
certificates of the installment type or (3) invests,  reinvests,  owns, holds or
trades  securities  or owns or  acquires  investment  securities  having a value
exceeding 40 percent of the value of its total assets  (exclusive  of Government
securities  and cash  items) on an  unconsolidated  basis.  The above 40 percent
limitation may be exceeded so long as a company is primarily  engaged,  directly
or through  wholly-owned  subsidiaries,  in a business or businesses  other than
that of investing,  reinvesting,  owning,  holding or trading in  securities.  A
wholly-owned  subsidiary  is  defined  as one which is at least 95% owned by the
company.

         Neither the Company nor any of its officers or directors are registered
as investment  advisers under the Investment Advisers Act of 1940 (the "Advisers
Act"),  and so there is no  authority  to  pursue  any  course  of  business  or
activities  which  would  render  the  Company  or  its  management  "investment
advisers" as defined in the Advisers Act.  Management believes that registration
under  the  Advisers  Act  is not  required  and  that  certain  exemptions  are
available,  including  the  exemptions  for persons  who may render  advice to a
limited number of other persons and who may advise other persons  located in one
state only.

         The Company expects to encounter intense  competition in its efforts to
locate  suitable  business   opportunities  in  which  to  engage.  The  primary
competition  for  desirable  investments  may come from  other  small  companies
organized  and funded for  similar  purposes,  from small  business  development
corporations and from public and private venture capital  organizations.  As the
Company  will be  completely  unfunded,  it can  fairly  be said that all of the
competing  entities  will  have  significantly  greater  experience,  resources,
facilities,  contacts  and  managerial  expertise  than the  Company  and  will,
consequently,  be in a better position than the Company to obtain access to, and
to engage in, business opportunities.  Due to its lack of funds, the Company may
not be in a position to compete  with larger and more  experienced  entities for
business  opportunities which are low-risk.  Business opportunities in which the
Company may ultimately  participate  are likely to be highly risky and extremely
speculative.


ITEM 2.  Properties.

         The Company owns no properties and utilizes space on a rent-free  basis
in the office of its principal  shareholder,  Capital General Corporation.  This
arrangement  is  expected to  continue  until such time as the  Company  becomes
involved in a business venture which necessitates its relocation, as to which no
assurances  can be given.  The Company  has no  agreements  with  respect to the
maintenance or future acquisition of office facilities, however, if a successful
merger/acquisition  is  negotiated,  it is  anticipated  that the  office of the
Company will be moved to that of the acquired company.

                                       5
<PAGE>

ITEM 3.  Legal Proceedings.

         On January 7, 1994, the Bureau of Securities of the State of New Jersey
filed a complaint in the matter of Capital General Corporation,  David R. Yeaman
and 74 other  named  defendants,  Nevada  and Utah  corporations  including  the
Company,  which  complaint  proposes  that civil  monetary  penalties  totalling
$30,000.00  be  assessed   against  Capital  General   Corporation  for  alleged
violations of the Uniform  Securities Law (1967),  N.J.S.A.  49:3-47 et. seq. by
(1)  selling  to 24 New  Jersey  residents  between  April  1986  and May  1991,
securities in 25 of the 74 above  referred to respondent  corporations  named in
the proceeding,  including the Company, which were neither registered nor exempt
from  registration,  and (2)  making  untrue  statements  of  material  fact and
omitting to state material  facts in connection  with said New Jersey sales in 6
of the  74 above  referred to  resident  corporations  named in  the proceeding,
including the Company.  Also on January 7, 1994, the Bureau of Securities of the
State of New Jersey, based on substantially  similar allegations as in the above
referred complaint, issued its Order Denying Exemptions and to Cease and Desist.
This order summarily  denied the exemptions  contained in N.J.S.A.  49:3- 50(b),
(1),  (2),  (3),  (9),  (11)  and  (12) of the  securities  of  Capital  General
Corporation  and the other 74  respondent  corporations,  including the Company,
except that  excluded  from the summary  denial of the  exemption  contained  in
N.J.S.A.   49-3-50(b)(12)   is  the  Offer  of  Rescission  by  Capital  General
Corporation to 24 New Jersey residents pursuant to the offer of rescission which
began about April 28, 1993. This order also ordered Capital General  Corporation
and David Yeaman to Cease and Desist from offering or selling any  securities in
blind pool corporations into, or from the State of New Jersey.

         Capital  General and David  Yeaman filed  answers  denying the material
allegations  of said  complaint  and  resisting  the  imposition  of said  civil
monetary  penalties,  and the said  Order  Denying  Exemptions  and to Cease and
Desist.  Subsequently the issues raised in said complaint and order were settled
by agreement  between the said Bureau of  Securities  and Mr. Yeaman and Capital
General  Corporation  in a consent  order dated July 11, 1994 and approved by an
administrative law judge of the State of New Jersey Office of Administrative Law
September  2, 1994.  Under the terms of said  consent  order,  all claims in the
complaint  against all named  respondents  were settled by the payment of $3,000
civil penalty, and the order was modified so that it does not apply to 27 of the
respondent companies; however said order does still apply to the Company.

         During 1986 and 1987,  Capital General gifted very small percentages of
stock  (usually 100 shares to each  giftee) in the  following  companies,  which
includes the Company, to approximately 1,000 persons or entities: Amenity, Inc.,
Dogmatic,  Inc., Mystic Industries,  Inc.,  Highland Mfg., Inc.,  Kowtow,  Inc.,
Noble  Industries,  Inc.,  Oryan Capital  Corporation,  Pegasus Star Enterprise,
Inc., Showstoppers,  Inc., Hightide, Inc., Grandeur, Inc., Fantastic Industries,
Inc.,  Jugglar,  Inc.,  Xebec Galleon,  Inc.,  Golden Home Health Care Equipment
Centers,  Inc., Nighthawk Capital,  Inc.,  Instrument  Development  Corporation,
Panther Industries,  Inc., Owl Enterprises,  Inc., Quail, Inc., GBS Technologies
Corporation, H & B Carriers, Inc., Florida Growth Industries, Inc., Macaw, Inc.,
Longhorn Enterprise, Inc., Koala Corporation,  Yahwe Corporation,  Star Dolphin,
Inc., Jackal, Inc., Hyena Capital,  Inc., Gopher, Inc., Flamingo Capital,  Inc.,
Egret,  Inc.,  Cetacean  Industries,  Inc.,  Bonito,  Inc.,  Alpaca,  Inc., Zeus
Enterprise,   Inc.,   Tamarind,   Inc.,  Saber,  Inc.,  Radar,  Inc.,  Quiescent
Corporation,  Vanadium,  Inc., Upsilon,  Inc., Why Not?, Inc.,  Bestmark,  Inc.,
Missouri Illinois Mining Co., Inc.

         Capital General did not register the gifts of shares in these companies
with  the  Securities  Division  of the  State  of Utah or with  the  Securities
Exchange  Commission  because it believed these gifts to be outside the scope of
the Utah Uniform  Securities  Act and the  Securities  Act of 1933 in as much as
such acts  require  registration  for sales and do not require  registration  of
gifts.  Nevertheless,  in  connection  with the  distribution  of  shares of its
subsidiaries,  Capital General was found by the Utah Securities  Advisory Board,
in  two  decisions  affirmed by  the Utah  State  Courts,  to have  violated the

                                       6
<PAGE>

registration  provisions of the Utah  Uniform Securities Act.  See In re Amenity
Inc., No. SD-86-11 (Utah  Sec. Adv. Bd.  February 18,  1987) aff'd  C87-2625 (3d
Dist. Ct. September 18, 1987) aff'd sub  nom Capital General Corp. v. Utah Dep't
of Business Reg., 777 P.2d 494, 498 (Utah  Ct. App.) cert.  denied, 781 P.2d 873
(Utah S.Ct. 1989); In re H&B Carriers Inc., No. 87-09-28-01 (Utah Sec. Adv. Bd.,
Apr. 15, 1988) aff'd  No. 88-5900053 (3d Dist. Ct. Sept 10, 1990)  aff'd sub nom
Capital General  Corp. v. Utah  Dep't of Business Reg., Case No 91-196 (Utah Ct.
App. February  10, 1992.  All  of  the  remaining  companies  listed  above were
parties to the H&B Carriers order.

         Both of these actions  sought  suspension of  transactional  exemptions
respecting the shares of these companies  pursuant to Section 14 (3) of the Utah
Uniform  Securities Act.  Capital  General  defended both actions on the grounds
that the Utah Uniform Securities Act did not apply to gifts of securities,  that
the gifts were good faith gifts  specifically  exempted by the Act,  and that in
any event even if it had "sold"  shares in violation of the Act,  suspension  of
transactional  exemptions was not an authorized remedy under the statute.  These
defenses were  rejected at the  administrative  agency level,  and upon judicial
review at the District Court level and by the Utah Court of Appeals.

         See also Item 10  regarding  legal  proceedings  against  officers  and
directors.

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

         No matter was  submitted to the Company's  security  holders for a vote
during the fiscal year ending December 31, 1996.

                                     PART II

ITEM 5.  Market for Registrant's Common Equity and Related Stockholders Matters.

         There  currently is not a trading  market for the  Company's  $.001 par
value common stock nor has there been a trading  market for the Company's  stock
since its inception.

         As of February,  1997,  there were 934 record  holders of the Company's
common stock.  The Company has not previously  declared or paid any dividends on
its  common  stock  and does  not  anticipate  declaring  any  dividends  in the
foreseeable future.

ITEM 6.  Selected Financial Data.
<TABLE>
<CAPTION>
                                 WHY NOT?, INC.
                              SUMMARY OF OPERATIONS
                                  DECEMBER 1996

                               1996              1995             1994            1993             1992
                               ----              ----             ----            ----             ----
<S>                            <C>               <C>              <C>             <C>              <C>
Total Assets.............         0                 0                0               0                0
Revenues................          0                 0                0               0                0
Operating Expenses....            0                 0                0               0                0
  Net Earnings (Loss)..           0                 0                0               0                0
Per Share Data
  Earnings (Loss).......          0                 0                0               0                0

Average Common Shares
  Outstanding.....             1,000,000         1,000,000        1,000,000       1,000,000        1,000,000

</TABLE>

                                       7
<PAGE>

ITEM 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operation.

         The  Company  has had no  operational  history and has yet to engage in
business of any kind.  All risks inherent in new and  inexperienced  enterprises
are inherent in the Company's business.  The Company has not made a formal study
of the economic potential of any business.  At the present,  the Company has not
identified any assets or business opportunities for acquisition.

         As of February,  1997,  the Company has no  liquidity  and no presently
available capital resources, such as credit lines, guarantees, etc. and should a
merger or acquisition prove unsuccessful, it is possible that the Company may be
dissolved by the State of Nevada for failing to file reports, at which point the
Company  would no longer be a viable  corporation  under Nevada law and would be
unable to function as a legal entity.  Should  management  decide not to further
pursue its acquisition activities, management may abandon its activities and the
shares of the Company would become worthless.  However,  the Company's officers,
directors and major shareholder,  have made an oral undertaking to make loans to
the  Company  in  amounts  sufficient  to enable  it to  satisfy  its  reporting
requirements and other obligations  incumbent on it as a public company,  and to
commence,  on a limited basis, the process of investigating  possible merger and
acquisition candidates.  The Company's status as a publicly-held corporation may
enhance its ability to locate  potential  business  ventures.  The loans will be
interest  free and are  intended to be repaid at a future  date,  if or when the
Company shall have received  sufficient funds through any business  acquisition.
The loans are intended to provide for the payment of filing  fees,  professional
fees, printing and copying fees and other miscellaneous fees.

         Based  on  current  economic  and  regulatory  conditions,   Management
believes that it is possible,  if not probable,  for a company like the Company,
without  assets or  liabilities,  to  negotiate a merger or  acquisition  with a
viable private company.  The opportunity arises principally  because of the high
legal  and  accounting   fees  and  the  length  of  time  associated  with  the
registration process of "going public".  However, should any of these conditions
change,  it is very possible that there would be little or no economic value for
anyone taking over control of the Company.

ITEM 8.  Financial Statements and Supplementary Data.

         See Item 14.

ITEM 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

         Not Applicable.

                                       8
<PAGE>

                                    PART III

ITEM 10.  Directors and Executive Officers of the Registrant.

         The following table shows the positions held by the Company's  officers
and  directors.  The directors  were appointed at inception and will serve until
the  next  annual  meeting  of  the  Company's  stockholders,  and  until  their
successors have been elected and have qualified.  The officers were appointed to
their  positions,  and  continue in such  positions,  at the  discretion  of the
directors.

Name                               Age      Position
Krista Nielson                     34       President, Director

David R. Yeaman                    50       Secretary/Treasurer, Director

         KRISTA NIELSON,  has been Director of the Company since  inception.  In
addition to her management position with the Company, she has been since 1986 an
officer and director of Capital  General  Corporation,  a  Utah-based  financial
consulting  firm,  and has been  involved in the  organization  and promotion of
various shell  companies.  Ms. Nielson received a Business degree from Salt Lake
Community  College  in 1987.  She serves as an officer  and/or  director  in the
following  private   corporations:   Yeaman  Enterprises,   Inc.  and  Universal
Associates,  Inc.,  family  holding  companies,  Yeaman  Auto  Sales,  Inc.,  an
automobile  dealership  company,  Four Star Ranch, Inc., a farmland  development
company, Creative Financial Corporation and Visual Impact Corporation, financial
consulting companies, and National Stock Transfer, Inc., a stock transfer agency
company. Ms. Nielson devotes her time primarily to her role as Vice President of
Capital  General and to the  financial  consulting  activities  in which Capital
General engages.

         DAVID R. YEAMAN, has been Director of the Company since inception, and,
in addition to his management  position with the Company,  has been President of
Capital  General  Corporation  since its  inception in 1971 to the present.  Mr.
Yeaman has been  involved  in  numerous  development  stage  companies  since he
assisted  in  organizing  Capital  General.  During  the  last  five  years,  in
connection  with  Capital  General,  he  has  been  primarily  involved  in  the
organization and promotion of various shell  companies.  Mr. Yeaman serves as an
officer  and/or  director  in  the  following   private   corporations:   Yeaman
Enterprises,  Inc., a family holding company,  Four Star Ranch, Inc., a farmland
development company,  Yeaman Auto Sales, Inc., an automobile dealership company,
Financial  Connections,  Inc. and Peak Experience,  Inc.,  financial  consulting
companies.  Mr.  Yeaman  devotes his time  primarily to his role as President of
Capital  General and to the  financial  consulting  activities  in which Capital
General engages.

         The management of Capital  General is  essentially  the same as that of
the Company and, as the Company's  largest  shareholder,  Capital General exerts
considerable  influence in the election of the Company's officers and directors.
Capital  General is a private  venture  capital and financial  consulting  firm,
incorporated in Utah in 1971. Capital General is a closely held corporation with
eight  shareholders  and is not  an  investment  company  under  The  Investment
Companies  Act of 1940.  A majority of the stock of Capital  General is owned by
Yeaman  Enterprises,  Inc., a private  corporation  which is, in turn,  owned by
certain  members of the  family of David R.  Yeaman;  Krista  Nielson is also an
officer and director of Yeaman Enterprises, Inc.

                                       9
<PAGE>

         Management of the Company have, in their various  capacities at Capital
General over the past ten years,  assisted in the  organization of approximately
75  corporations  similar  to  the  Company  which  are  in  varying  stages  of
development and  approximately 50 of such  corporations have completed a merger/
acquisition  transaction.  In  merger/acquisition  transactions similar to those
contemplated  by the  Company,  present  management  would  be  replaced  by new
management and additional shares would be issued in consideration for the assets
being  transferred  into the Company.  Present  management  does not  anticipate
operating  the  business  of  the  Company  subsequent  to any  acquisition  and
therefore the future  success of the Company will be primarily  dependent on new
management which is now unknown.

         Each of the above  directors  of the  Company  is a  director  of Arrow
Management,  Inc., Vicuna, Inc.,  Saber Capital,  Inc.,  Grandeur, Inc., Kowtow,
Inc., Radar Resources, Inc.,  Alpaca,  Inc., Bonito Industries,  Inc.,  Cetacean
Industries, Inc.,  Star Dolphin,  Inc., Flamingo  Capital,  Inc., Gopher,  Inc.,
Hyena Capital, Inc., Jackal Industries, Inc., Longhorn Inc., Macaw Capital, Inc,
Environmental Development Corporation,  Ultronics Corporation,  Bioethics, Ltd.,
Quantitative  Methods  Corporation,  and  Bio-Chem,  Inc.  which  are  companies
subject to the requirements of section 15(d) of the  Exchange  Act.  None of the
directors  are  directors  or  officers  of any  other  company with  a class of
securities registered  pursuant  to  Section 12  of  the  Exchange  Act  or  the
requirements of  Section  15(d) of such Act  or any  company  registered  as  an
investment  company  under the Investment Company Act of 1940.

         On February 8, 1996,  David R. Yeaman was charged in the United  States
District Court for the Eastern District of Pennsylvania  with  conspiracy,  wire
fraud and fraud in the offer,  purchase and sale of securities,  in violation of
18 U.S.C.  Sections 2, 371 and 1343; 15 U.S.C. Sections 77q(a), 77x, 78j(b), and
78ff; and Rule 10b-5  promulgated  by the  Securities  and Exchange  Commission,
Title 17, Code of Federal Regulations, Section 240.10b-5 (1986).

         On February 22,  1996,  Mr.  Yeaman  entered his not guilty plea to all
charges. The allegations against Mr. Yeaman are based on the government's claims
that he and five of the other  defendants  named in the proceeding  violated the
aforesaid laws by inflating the apparent worth of certain reinsurance  companies
by leasing them alleged worthless securities.  Specifically,  it is alleged that
Mr. Yeaman, with other defendants,  engaged in practices which falsely increased
the quoted prices of the securities and misrepresented  restricted securities as
free trading  securities.  Based on these  allegations,  the charges against Mr.
Yeaman include one count of conspiracy,  seven counts of wire fraud,  six counts
of securities  fraud,  and aiding and abetting with respect to each count.  This
matter is scheduled for trial on March 10, 1997.

         The U.S.  Securities  and Exchange  Commission,  Securities Act of 1933
Release No. 7008 and Securities Exchange Act of 1934 Release No. 32669 announced
that  on July  23,  1993,  it  ordered  David  R.  Yeaman  and  Capital  General
Corporation to permanently  cease and desist from  committing or causing further
violations of Section 5(a) and (c) and 17(a) of the  Securities  Act of 1933 and
Sections 10(b) and 13(g) of the Securities Exchange Act of 1934 and Rules 10b-5,
12b-20 and 13d-1(c) thereunder.

         Krista  Nielson  was  ordered  to  permanently  cease and  desist  from
committing or causing further  violations of Section 17(a) of the Securities Act
and Section 10(b) of the Exchange Act and Rules 10b-5 and 12b-20 thereunder.  In
addition,  the  Commission  ordered the  revocation of the  registration  of the
common  stock of Altara  International,  Inc.,  Arrow  Management,  Inc.,  Atlas
Equity, Inc., Dynamic Associates,  Inc., Energy Systems,  Inc., Four Star Ranch,
Inc., Panorama Industries,  Inc., Partisan Corporation,  Quiescent  Corporation,
Saber, Inc., Upsilon,  Inc., Vicuna, Inc., Why Not?, Inc., Xebec Galleon,  Inc.,
Zebu, Inc., and Zeus Enterprises, Inc. pursuant to Section 12(j) of the Exchange
Act.  The  Commission  found that each of the issuers  had filed a  registration
statement on Form 10 that contained  materially false and misleading  statements
in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

                                       10
<PAGE>

         Each of the respondents had submitted an Offer of Settlement consenting
to the entry of the Order without  admitting or denying the  allegations  in the
Order. Prior to the submission of the Offers of Settlement,  Capital General, on
behalf of the above mentioned companies,  except for Panorama Industries,  Inc.,
filed a registration  statement on Form S-1 during  December of 1992 to register
the  common  stock  of  those  companies  under  the  Securities  Act  of  1933.
Concurrently  with the  signing of the Offers of  Settlement,  the  Registration
Statement was declared  effective on June 30, 1993. A Post  Effective  Amendment
was filed and declared effective September 2, 1993. Although the registration of
the common  stock  under  Section  12(g) of the 1934 Act was revoked on July 23,
1993, the companies are now registered and reporting under the Securities Act of
1933 by virtue of the filing of Form S-1 as indicated by Commission File No.
33-55254.

ITEM 11.  Executive Compensation.

         The  Company  has  made no  arrangements  for the  remuneration  of its
officers  and   directors,   except  that  they  will  be  entitled  to  receive
reimbursement for actual, demonstrable out-of-pocket expenses,  including travel
expenses if any, made on the Company's  behalf in the  investigation of business
opportunities.  No  remuneration  has been  paid to the  Company's  officers  or
directors  prior  to the  filing  of  this  form.  There  are no  agreements  or
understandings  with  respect to the amount or  remuneration  that  officers and
directors  are expected to receive in the future.  Management  takes no salaries
from  the  Company  and  does  not  anticipate  receiving  any  salaries  in the
foreseeable  future. No present  prediction or representation  can be made as to
the  compensation  or other  remuneration  which may  ultimately  be paid to the
Company's  management,  since  upon the  successful  consummation  of a business
opportunity,  substantial  changes may occur in the structure of the Company and
its  management.  At such time,  contracts may be negotiated with new management
requiring the payment of annual  salaries or other forms of  compensation  which
cannot  presently  be  anticipated.  Use of the  term  "new  management"  is not
intended  to  preclude  the  possibility  that any of the  present  officers  or
directors  of the  Company  might be  elected  to  serve in the same or  similar
capacities  upon the Company's  decision to  participate in one or more business
opportunities.

         Capital  General and the Company's  management may benefit  directly or
indirectly  by payments of  consulting  fees,  payment of finders fees to others
from Capital  General's  consulting  fees, sales of insiders' stock positions in
whole or in part to the  private  company,  the  Company  or  management  of the
Company,  or through the payment of salaries,  or any other  methods of payments
through which insiders or current investors receive funds,  stock,  other assets
or  anything  of value  whether  tangible  or  intangible.  There  are no plans,
proposals, arrangements or understandings with respect to the sale of additional
securities to affiliates,  current  shareholders or others prior to the location
of a business opportunity.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management.

         The following  table sets forth,  as of December 31, 1996,  information
regarding the beneficial ownership of shares by each person known by the Company
to own five percent or more of the outstanding  shares, by each of the directors
and by the officers and directors as a group.

                                       11
<PAGE>

<TABLE>
<CAPTION>

                          Name and address                                      Amount of                  Percent
Title of class            of beneficial owner                                   beneficial ownership       of class
<S>                       <C>                                                   <C>                        <C>
Common Stock              Capital General Corporation(1,2)                      486,800                    48.68%
                          3098 So. Highland Drive, Suite 460
                          Salt Lake City, Utah  84106

Common Stock              Yeaman Enterprises, Inc.(1,2)                         300,000                    30.00%
                          3098 So. Highland Drive, Suite 460
                          Salt Lake City, Utah  84106

Common Stock              Krista Nielson(1,2)                                    40,000                      4.0%
                          3098 So. Highland Drive, Suite 460
                          Salt Lake City, Utah  84106

Common Stock              All Officers and
                          Directors as a Group(2)                               826,800                    82.68%
</TABLE>

  (1)Capital General Corporation,  Yeaman Enterprises,  Inc., Krista Nielson and
David R. Yeaman may be deemed to be the  Company's  "parents"  and  "promoters,"
pursuant to the Rules and Regulations promulgated under the 1933 Act.

  (2)Capital General Corporation is a private  corporation.  The majority of its
shares (80%) are owned by another private corporation,  Yeaman Enterprises, Inc.
The  stockholders  of Yeaman  Enterprises  are members of the family of David R.
Yeaman,  who is also an officer and director of the Company and Capital General.
Mr.  Yeaman's  beneficial  ownership of the  securities of the Company  includes
shares directly owned by Capital General and Yeaman Enterprises. Although Yeaman
Enterprises is nominally owned by Mr. Yeaman's children, Mr. Yeaman beneficially
owns shares  nominally  owned by Yeaman  Enterprises in that he has the power to
vote or direct the voting of the shares and the power to dispose of or to direct
the  disposition  of the shares.  Other  owners of the stock of Capital  General
include  Krista  Nielson,  the Company's  president.  Mr. Yeaman and Ms. Nielson
control and have beneficial ownership of the shares owned by Capital General and
Yeaman  Enterprises and exercise shared voting power and shared investment power
over those shares.

ITEM 13.  Certain Relationships and Related Transactions.

         No officer,  director, nominee for election as a director, or associate
of such  officer,  director  or  nominee  is or has been in debt to the  Company
during the last fiscal year.  However,  the  Company's  officers,  directors and
major shareholder, have made an oral undertaking to make loans to the Company in
amounts sufficient to enable it to satisfy its reporting  requirements and other
obligations  incumbent on it as a public company, and to commence,  on a limited
basis, the process of investigating possible merger and acquisition  candidates.
The Company's  status as a publicly-held  corporation may enhance its ability to
locate  potential  business  ventures.  The loans will be interest  free and are
intended  to be repaid  at a future  date,  if or when the  Company  shall  have
received  sufficient  funds  through  any  business  acquisition.  The loans are
intended to provide for the payment of filing fees,  professional fees, printing
and copying fees and other miscellaneous fees.

                                       12
<PAGE>

                                     PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

         Financial Statements and Financial Statement Schedules.

         Financial Statements - December 31, 1996, 1995 and 1994.


         Reports on Form 8-K.

         There were no reports on Form 8-K filed  during the fiscal  year ending
         December 31, 1996.



                                   SIGNATURES


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



                                 WHY NOT?, INC.



Date:  February 25, 1997          By: s\Krista Nielson
                                     -------------------------------------------
                                     Krista Nielson, President, CEO and Director



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


Date:  February 25, 1997          By: s\Krista Nielson
                                     -------------------------------------------
                                     Krista Nielson, President, CEO and Director



Date:  February 25, 1997          By: s\David R. Yeaman
                                     -------------------------------------------
                                     David R. Yeaman, Secretary/Treasurer, CFO
                                         and Director

                                       13
<PAGE>

                                 SMITH & COMPANY
                          CERTIFIED PUBLIC ACCOUNTANTS

MEMBERS OF:                                          CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF                                          10 WEST 100 SOUTH
     CERTIFIED PUBLIC ACCOUNTANTS                     SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF                              TELEPHONE:       (801) 575-8297
     CERTIFIED PUBLIC ACCOUNTANTS                FACSIMILE:       (801) 575-8306
--------------------------------------------------------------------------------



                          INDEPENDENT AUDITOR'S REPORT


Board of Directors
WHY NOT?, INC. (A Development Stage Company)

We have audited the accompanying balance sheets of WHY NOT?, INC.
(a development stage company) as of December 31, 1996 and 1995,  and the related
statements of  operations,  changes in  stockholders' equity, and cash flows for
the years ended December 31, 1996, 1995 and 1994  and for the  period of January
7, 1986 (date of inception) to December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of WHY NOT?, INC.
(a development stage company) as of December 31, 1996 and 1995  and the  results
of its operations,  changes  in  stockholders' equity and its cash flows for the
years ended  December  31,  1996, 1995 and 1994 and for the period of January 7,
1986 (date of  inception)  to  December 31, 1996  in  conformity  with generally
accepted accounting principles.



                                              s\Smith & Company
                                              CERTIFIED PUBLIC ACCOUNTANTS


Salt Lake City, Utah
February 28, 1997

                                      F-1
<PAGE>

<TABLE>
<CAPTION>


                                 WHY NOT?, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS



                                                                         12/31/96               12/31/95
                                                                         --------               --------
<S>                                                                        <C>                    <C>
CURRENT ASSETS
         Cash in bank                                                      $    0                 $    0
                                                                           ------                 ------

                      TOTAL CURRENT ASSETS                                      0                      0

OTHER ASSETS
         Organization costs (Note 1)                                            0                      0
                                                                           ------                 ------
                                                                                0                      0
                                                                           ------                 ------

                                                                           $    0                 $    0
                                                                           ======                 ======

             LIABILITIES & EQUITY

CURRENT LIABILITIES
         Accounts payable                                                  $    0                 $    0
                                                                           ------                 ------
                      TOTAL CURRENT LIABILITIES                                 0                      0

STOCKHOLDERS' EQUITY Common Stock $.001 par value:
          Authorized - 100,000,000 shares
          Issued and outstanding
          1,000,000 shares                                                  1,000                  1,000
         Additional paid-in capital                                         1,000                  1,000
         Deficit accumulated during
          the development stage                                            (2,000)                (2,000)
                                                                           ------                 ------

                      TOTAL STOCKHOLDERS' EQUITY                                0                      0
                                                                           ------                 ------

                                                                           $    0                 $    0
                                                                           ======                 ======


See Notes to Financial Statements.
</TABLE>

                                      F-2
<PAGE>

<TABLE>
<CAPTION>


                                 WHY NOT?, INC.
                          (A Development Stage Company)
                            STATEMENTS OF OPERATIONS



                                                                                                         1/07/86 (Date
                                               Year ended          Year ended         Year ended       of inception) to
                                                12/31/96            12/31/95           12/31/94           12/31/96

<S>                                             <C>                 <C>                <C>                <C>
Net sales                                       $       0           $       0          $       0          $       0
   Cost of sales                                        0                   0                  0                  0
                                                ---------           ---------          ---------          ---------

                      GROSS PROFIT                      0                   0                  0                  0


General & administrative
 expenses                                               0                   0                  0              2,000
                                                ---------           ---------          ---------          ---------

                  NET LOSS                      $       0           $       0          $       0          $  (2,000)
                                                =========           =========          =========          =========


Net income (loss) per weighted
 average share                                  $     .00           $     .00          $     .00
                                                =========           =========          =========


Weighted average number of
 common shares used to compute
 net income (loss) per weighted
 average share                                  1,000,000           1,000,000          1,000,000
                                                =========           =========          =========


See Notes to Financial Statements.
</TABLE>

                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                                 WHY NOT?, INC.
                          (A Development Stage Company)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                                                                                         Deficit
                                                                                                       Accumulated
                                                       Common Stock                  Additional          During
                                                     Par Value $0.001                 Paid-In          Development
                                                 Shares          Amount               Capital             Stage

<S>                                              <C>             <C>                  <C>              <C>
Balances at 1/07/86
         (Date of inception)                             0       $       0            $       0        $       0
         Issuance of common
             stock (restricted)
             at $.002 per share
             at 1/07/86                          1,000,000           1,000                1,000
         Net loss for period                                                                              (1,950)
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/86                             1,000,000           1,000                1,000           (1,950)
         Net loss for year                                                                                   (10)
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/87                             1,000,000           1,000                1,000           (1,960)
         Net loss for year                                                                                   (10)
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/88                             1,000,000           1,000                1,000           (1,970)
         Net loss for year                                                                                   (10)
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/89                             1,000,000           1,000                1,000           (1,980)
         Net loss for year                                                                                   (10)
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/90                             1,000,000           1,000                1,000           (1,990)
         Net loss for year                                                                                   (10)
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/91                             1,000,000           1,000                1,000           (2,000)
         Net income for year                                                                                   0
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/92                             1,000,000           1,000                1,000           (2,000)
         Net income for year                                                                                   0
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/93                             1,000,000           1,000                1,000           (2,000)
         Net income for year                                                                                   0
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/94                             1,000,000           1,000                1,000           (2,000)
         Net income for year                                                                                   0
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/95                             1,000,000           1,000                1,000           (2,000)
         Net income for year                                                                                   0
                                                 ---------       ---------            ---------        ---------
Balances at 12/31/96                             1,000,000       $   1,000            $   1,000        $  (2,000)
                                                 =========       =========            =========        =========


See Notes to Financial Statements.
</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>


                                 WHY NOT?, INC.
                          (A Development Stage Company)
                            STATEMENTS OF CASH FLOWS




                                                                                                          1/07/86 (Date of
                                                     Year ended         Year ended        Year ended       Inception) to
                                                      12/31/96           12/31/95          12/31/94          12/31/96
<S>                                                <C>                <C>               <C>               <C>
OPERATING ACTIVITIES
         Net income (loss)                         $            0     $            0    $            0    $       (2,000)
         Adjustments to reconcile
          net income (loss) to
          cash used by operating
          activities:
             Amortization                                       0                  0                 0                50
                                                   --------------     --------------    --------------    --------------

                      NET CASH USED BY
                      OPERATING ACTIVITIES                      0                  0                 0            (1,950)

INVESTING ACTIVITIES
         Organization costs                                     0                  0                 0               (50)
                                                   --------------     --------------    --------------    --------------

                      NET CASH USED BY
                      INVESTING ACTIVITIES                      0                  0                 0               (50)

FINANCING ACTIVITIES
         Proceeds from sale of
          common stock                                          0                  0                 0             2,000
                                                   --------------     --------------    --------------    --------------

                      NET CASH PROVIDED BY
                      FINANCING ACTIVITIES                      0                  0                 0             2,000
                                                   --------------     --------------    --------------    --------------

                      INCREASE IN CASH
                      AND CASH EQUIVALENTS                      0                  0                 0                 0

         Cash and cash equivalents
         at beginning of year                                   0                  0                 0                 0
                                                   --------------     --------------    --------------    --------------

                      CASH & CASH EQUIVALENTS
                      AT END OF YEAR               $            0     $            0    $            0    $            0
                                                   ==============     ==============    ==============    ==============



See Notes to Financial Statements.
</TABLE>

                                      F-5
<PAGE>

                                 WHY NOT?, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996


NOTE 1:                SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
         Accounting Methods
         The Company  recognizes income and expenses based on the accrual method
         of accounting.

         Dividend Policy:
         The  Company  has not yet  adopted  any  policy  regarding  payment  of
         dividends.

         Organization Costs:
         The Company amortized its organization costs over a five year period.

         Income Taxes:
         The Company  records the income tax effect of  transactions in the same
         year that the  transactions  enter  into the  determination  of income,
         regardless of when the  transactions  are  recognized for tax purposes.
         Tax credits are  recorded in the year  realized.  Since the Company has
         not yet realized income as of the date of this report, no provision for
         income taxes has been made.

         In February,  1992, the Financial  Accounting  Standards  Board adopted
         Statement of Financial  Accounting  Standards No. 109,  Accounting  for
         Income Taxes, which supersedes substantially all existing authoritative
         literature for  accounting  for income taxes and requires  deferred tax
         balances  to be  adjusted to reflect the tax rates in effect when those
         amounts are expected to become payable or refundable. The Statement was
         applied in the  Company's  financial  statements  for the  fiscal  year
         commencing January 1, 1993.

         At December 31, 1996 a deferred tax asset has not been  recorded due to
         the  Company's  lack of  operations  to  provide  income to use the net
         operating loss carryover of $2,000 which expires as follows:

         Year Ended              Expires                            Amount

         December 31, 1986       December 31, 2001              $    1,950
         December 31, 1987       December 31, 2002                      10
         December 31, 1988       December 31, 2003                      10
         December 31, 1989       December 31, 2004                      10
         December 31, 1990       December 31, 2005                      10
         December 31, 1991       December 31, 2006                      10
                                                                ----------
                                                                $    2,000
                                                                ==========

NOTE 2:                DEVELOPMENT STAGE COMPANY
         The  Company  was  incorporated  under the laws of the State of Utah on
         January  7,  1986  and  has  been  in  the   development   stage  since
         incorporation.  On December  30, 1993,  the Company was  dissolved as a
         Utah corporation and reincorporated as a Nevada corporation.

NOTE 3:                CAPITALIZATION
         On the date of incorporation,  the Company sold 1,000,000 shares of its
         common  stock to Capital  General  Corporation  for $2,000  cash for an
         average  consideration  of $.002 per share.  The  Company's  authorized
         stock includes 100,000,000 shares of common stock at $.001 par value.

NOTE 4:                RELATED PARTY TRANSACTIONS
         The Company  neither owns or leases any real property.  Office services
         are provided,  without  charge,  by Capital General  Corporation.  Such
         costs are  immaterial to the financial  statements,  and,  accordingly,
         have not been  reflected  therein.  The officers  and  directors of the
         Company  are  involved  in other  business  activities  and may, in the
         future, become involved in other business opportunities.  If a specific
         business  opportunity  becomes  available,  such  persons  may  face  a
         conflict in  selecting  between  the  Company and their other  business
         interests.  The Company has not  formulated a policy for the resolution
         of such conflicts.

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