SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB
[ X ] ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
      ACT OF 1934

                   For the fiscal year ended December 31, 1997

                                       OR

[   ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                   For the transition period from to ________

                        Commission File Number 333-07727

                           ALLEGIANT TECHNOLOGIES INC.
                 (Name of Small Business Issuer in Its Charter)

                Washington                      98-0138706
      (State or Other Jurisdiction of        (I.R.S. Employer
      Incorporation or Organization)       Identification  No.)

     609 Granville Street, Suite 1500
          Vancouver, B.C., Canada                 V7Y 1G5
 (Address of Principal Executive Offices)        (Zip Code)

         Issuer's Telephone Number, Including Area Code: (604) 687-0888

         Securities registered under Section 12(b) of the Exchange Act:

                                    Name of Each Exchange on
    Title of Each Class                 Which Registered

           None                               None

         Securities registered under Section 12(g) of the Exchange Act:

                                      None

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

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  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.[X]

Allegiant  Technologies  Inc.'s  revenues  for the most recent  fiscal year were
$585,266.



The  aggregate  market  value  of the  voting  stock of the  Registrant  held by
non-affiliates  of the  Registrant,  based upon the closing  price of the Common
Stock on the OTC Bulletin  Board on March 16, 1998 was  approximately  $175,000.
Shares of Common  Stock held by each officer and director and by each person who
owns 5% or more of the outstanding  Common Stock have been excluded in that such
persons may be deemed to be affiliates.  This  determination of affiliate status
is not necessarily a conclusive determination for other purposes.

The number of shares  outstanding of the registrant's  Common Stock, as of March
16, 1998 was 26,393,007.

                       DOCUMENTS INCORPORATED BY REFERENCE

Document of the Registrant                 Form 10-KSB Reference Location
         None.                                         N/A










































<PAGE>


                                     PART I


Item 1.  Description of Business.

General

The Company has a limited history of operations. It was incorporated on December
28, 1993,  acquired SuperCard together with its customer  franchise,  from Aldus
Corporation on February 4, 1994, and released its first product  upgrade in June
1994.  Since then the Company released version 2.0, 2.5 and 3.0 of SuperCard and
a two new  products  called  Marionet  and  Flamethrower.  The Company  incurred
substantial  start up,  development  and other  expenses in excess of  revenues,
which resulted in cumulative net losses to December 31, 1997 of $5,037,672.  The
Company's revenues were substantially  derived from the sale of SuperCard and to
a much  lesser  extent  the  sale  of  Marionet  and  Flamethrower,  all for the
Macintosh platform.

The Company's  results of operations  for the year ended  December 31, 1997 were
adversely  impacted by the  following  factors:  (1) the Company was not able to
secure adequate financing to complete new products under development,  including
a Windows version of SuperCard,  and to maintain effective marketing strategies,
(2) the Company's  existing products are sold into a market segment that has, in
the past two years,  experienced significant sales declines, and (3) the decline
in sales of Macintosh  computers and related Macintosh software in general. As a
consequence   of  these   factors  the  Company  was  forced  to  cease  product
development,  reduce its full time staff from  twenty-six to two, close down its
offices in San Diego,  sell the  majority  of its  tangible  capital  assets and
commence a capital reorganization (refer to Item 6-"Reorganization Plan").


                                  RISK FACTORS

This report contains  forward-looking  statements.  Actual results of operations
may vary from such forward-looking  statements for reasons,  which include those
set forth below.

Going Concern

The  Company  does not have  available  working  capital to market its  products
effectively.  As a  consequence,  sales have  significantly  decreased and it is
expected  that sales will  continue to be  adversely  affected.  There  exists a
substantial  risk that the Company will have to discontinue its current business
operations.

Liquidity and Capital Resources

The Company has sustained  substantial operating losses and has used substantial
amounts of  working  capital in its  operations  to  December  31,  1997.  As of
December  31,  1997 the Company  had cash  equivalents  of $35,245 and a working
capital deficit of $158,146.  Total liabilities exceeded the book value of total
assets by $891,507.

Included in total  liabilities  of  $994,179  as at December  31, 1997 are Share
Subscriptions in the aggregate amount of $750,000, which were settled on January
15, 1998 by issuing equity securities (refer to Item 6-"Reorganization Plan").

The  Company's  ability to satisfy the balance of its  liabilities  and meet its
obligations  as  they  become  due is  dependent  upon  its  ability  to  secure
additional  funding  through  public or private sales of  securities,  including
equity securities of the Company. Presently, there is no credible basis on which
the Company can project  future cash flow from current  operations and there are
no  assurances  that the  Company  will be  successful  in  securing  additional
funding.  As a consequence,  there exists a risk that the Company will be forced
to seek  protection  from  its  creditors  under  federal  or  state  bankruptcy
statutes.

It is management's opinion, after reasonable investigation and inquiry, that the
realizable  value of the Company's  assets upon  liquidation is  insufficient to
satisfy the claims of creditors.

Legal Proceedings and Defaults

The Company has received  notices of judgement  liens  against the assets of the
Company,  in the approximate  amount of $15,000,  for failure to pay amounts due
for the purchase of goods or services. Such amounts are properly recorded in the
Company's accounts as due and payable.

The Company borrowed the sum of $100,000  pursuant to a secured  promissory note
dated  February  13,  1997.  The terms of the note  provided  for the payment of
interest each quarter  commencing on July 15, 1997.  The Company  failed to make
any  payment of  interest  on or since July 15,  1997.  The note is secured by a
registered  lien  against all of the assets of the  Company.  The lender has not
commenced  any  action or  proceeding  against  the  Company  as a result of the
default.  The lender was  appointed  to the Board of  Directors  of the  Company
effective October 31, 1997.

There  exists a risk that such  creditors  will  attempt to seize  assets of the
Company to satisfy their respective claims.

New Management; Future Operations

Effective  October  31,  1997,  the  Company  appointed  new  management.   Such
management  does not have the  depth of  software  industry  experience  that is
considered  necessary  to  maintain  and grow the  Company's  existing  business
operation. As a consequence,  it intends to sell the Company's technology assets
and customer franchise, and explore and enter into as yet undetermined new lines
of  business,  which may be  highly  speculative  ventures  and which may not be
profitable.

Item 2.  Description of Property.

Item 2 is not applicable

Item 3.  Legal Proceedings.

The Company has received  notices of judgement  liens  against the assets of the
Company,  in the approximate  amount of $15,000,  for failure to pay amounts due
for the purchase of goods or services. Such amounts are properly recorded in the
Company's accounts as due and payable.

The Company is not a party to any other material pending legal proceedings.

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

There have been no matters  submitted to a vote of security  holders  during the
quarter ended December 31, 1997.





<PAGE>


                                     PART II


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

Market for Common Equity

The Company's Common Stock is traded on the OTC Bulletin Board, under the symbol
"ALGT",  and has been so traded since February 1, 1996. It is also traded on the
Vancouver  Stock  Exchange,  under the trading symbol  "AGH.U",  and has been so
traded since May 24, 1995.

The  following  table  sets  forth  the high  and low  prices  per  share of the
Company's  Common Stock on the OTC Bulletin Board for all fiscal  quarters since
the stock was first traded on the OTC Bulletin  Board in February,  1996.  These
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission and may not represent actual transactions.

   Quarter
   Ended                            High                        Low

   March 31, 1996                   $3.63                      $2.00
   June 30, 1996                    $3.25                      $0.87
   September 30, 1996               $1.75                      $0.75
   December 31, 1996                $0.94                      $0.25

   March 31, 1997                   $0.50                      $0.28
   June 30, 1997                    $0.25                      $0.12
   September 30, 1997               $0.16                      $0.06
   December 31, 1997                $0.15                      $0.03

The  following  table  sets  forth  the high  and low  prices  per  share of the
Company's  Common Stock on the Vancouver  Stock Exchange for all fiscal quarters
since January 1, 1996.

  Quarter
  Ended                             High                       Low

  March 31, 1996                   $3.50                      $2.00
  June 30, 1996                    $2.95                      $1.00
  September 30, 1996               $2.00                      $0.71
  December 31, 1996                $0.88                      $0.25

  March 31, 1997                   $0.45                      $0.29
  June 30, 1997                    $0.40                      $0.08
  September 30, 1997  $0.10        $0.03
  December 31, 1997   $0.24        $0.03


On March 16, 1998,  the last  reported bid and ask prices of the Common Stock on
the OTC Bulletin Board and on the Vancouver Stock Exchange were as follows:

                                          Bid               Ask
OTC Bulletin Board                       $0.03             $0.06
Vancouver Stock Exchange                 $0.04             $0.07

     As of December  31, 1997 there were  approximately  50 holders of record of
the Company's Common Stock.

Dividends

The Company has not paid any dividends on its Common Stock since its  inception.
The payment of future  cash  dividends  will depend on such  factors as earnings
levels, anticipated capital requirements,  the operating and financial condition
of the Company and other factors deemed relevant by the Board of Directors.

Sales of Unregistered Securities

Sales of unregistered securities, by the Company, during the year ended December
31, 1997 are as follows:

<TABLE>
<CAPTION>
Date                       Securities
Of  Issuance               Identity               Sold                 Consideration             Exemption
<S>                        <C>                    <C>                  <C>                       <C>

February 13, 1997          Investor               Secured Note         $100,000                  Section 4(2)
                           (1 person)

April 15, 1997             Investor               28,571 shares of     $  10,000                 Regulation S.
                           (1 person)             common stock and
                                                  warrants to purchase
                                                  28,571 shares of
                                                  common stock

April 15, 1997             Investors             257,141 shares of      $  90,000                 Section 4(2)
                           (5 persons)           common stock and
                                                 warrants to purchase
                                                 257,141 shares of
                                                 common stock
</TABLE>



Sales of unregistered securities,  by the Company,  subsequent to the year ended
December 31, 1997 are as follows (refer to Item 6-"Reorganization Plan"):

<TABLE>
<CAPTION>
Date                       Securities
Of  Issuance               Identity               Sold                 Consideration             Exemption
<S>                        <C>                    <C>                  <C>                       <C>

January 15, 1998           Investors              5,600,000 shares of  $210,000                  Section 4(2)
                           (2 persons)            common stock (1)

January 15, 1997           Creditor               1,200,000 shares of  $ 45,000
                           (1 person)             common stock                                   Regulation S.

January 15, 1997           Creditors              13,200,000 shares of $495,000                  Section 4(2)
                                                  Common stock (2)

(1)  The Company shall issue warrants to purchase an additional 1,400,000 shares
     of common stock of the Company  upon the  completion a four for one reverse
     split (refer to Item 6-"Reorganization Plan")

(2)  The Company shall issue  warrants to purchase an additional  283,333 shares
     of common stock of the Company  upon the  completion a four for one reverse
     split (refer to Item 6-"Reorganization Plan")

</TABLE>

Item 6.  Management's Discussion and Analysis and Plan of Operations.

This  section  contains  forward-looking   statements  regarding  the  Company's
business and financial condition.  No assurance can be given that actual results
of operations  will not differ  materially from the  forward-looking  statements
contained herein. See "Business-Risk Factors."

Overview

The Company has a limited history of operations and no history of profitability.
As at December  31, 1997 the Company had  cumulative  net losses of  $5,037,672.
During the year then ended the Company was forced to cease product  development,
reduce its full time staff from twenty-six to two, close down its offices in San
Diego,  sell the majority of its tangible  capital assets and commence a capital
reorganization, described below.

See  Notes  to the  Financial  Statements  for a  description  of the  Company's
significant accounting policies.



<PAGE>


Liquidity and Capital Resources

The Company has sustained  substantial operating losses and has used substantial
amounts of  working  capital in its  operations  to  December  31,  1997.  As of
December  31,  1997 the Company  had cash  equivalents  of $35,245 and a working
capital deficit of $158,146.  Total liabilities exceeded the book value of total
assets by $891,507.

Included in total  liabilities  of  $994,179  as of December  31, 1997 are Share
Subscriptions  of $540,000 and $210,000,  which were settled on January 15, 1998
by issuing equity securities as described below (refer to Note 5 to the attached
Financial Statements).

The  Company's  ability to satisfy the balance of its  liabilities  and meet its
obligations  as  they  become  due is  dependent  upon  its  ability  to  secure
additional  funding  through  public or private sales of  securities,  including
equity securities of the Company. Presently, there is no credible basis on which
the Company can project  future cash flow from current  operations and there are
no  assurances  that the  Company  will be  successful  in  securing  additional
funding.  As a consequence,  there exists a risk that the Company will be forced
to seek  protection  from  its  creditors  under  federal  or  state  bankruptcy
statutes.

It is management's opinion, after reasonable investigation and inquiry, that the
realizable  value of the Company's  assets upon  liquidation is  insufficient to
satisfy the claims of creditors.

Reorganization Plan

In  September,  1997 the Company made  agreements  in principle to  facilitate a
reorganization  of its capital and to change  management and the Company's Board
of Directors as follows:

     1. Principals of the Company agreed to surrender for cancellation 2,000,000
escrowed  shares  of common  stock.  A total of  650,000  of these  shares  were
surrendered  and  cancelled  before  the end of the  year.  The  balance,  being
1,350,000 shares, were cancelled on March 4, 1998.

     2. The Company will seek  approval for a four for one reverse  split of its
common  stock  and a  change  of its  name  at the  Company's  next  meeting  of
shareholders.   Management  intends  to  vote  its  shares  in  favor  of  these
resolutions.  After the  reverse  split the number of common  shares  issued and
outstanding will be, subject to any further share issuances, 6,598,252.

     3. The Company agreed to issue 3,600,000  shares of common stock (the "Debt
Settlement  Shares") at a deemed price of $0.15 per share,  post reverse  split,
and two year  non-transferable  warrants  to purchase  283,333  shares of common
stock,  at $0.15  per share in the first  year and at  $0.1725  per share in the
second  year,  in full  settlement  and  satisfaction  of debts  of the  Company
amounting to $540,000.  In January,  1998 the Company  received  Vancouver Stock
Exchange  approval to issue the Debt  Settlement  Shares on a pre reverse  split
basis  resulting in the issuance of 14,400,000  shares of common stock (refer to
Item 5-"Sales of Unregistered Securities"). The warrants will be issued upon the
completion of the reverse split.

     4. The Company arranged for a private placement of 1,400,000 Units at $0.15
per Unit,  post reverse  split,  for aggregate  proceeds of $210,000.  Each Unit
consists of one share of common stock and one two year non-transferable  warrant
to purchase one  additional  share of common stock at $0.15 per share during the
first year and at $0.1725 per share during the second year.  The proceeds of the
private  placement  were primarily used to fund the settlement of trade debts of
the Company as described below, and for costs of the reorganization. In January,
1998 the Company received  Vancouver Stock Exchange approval to issue the shares
relating to the private  placement on a pre reverse split basis resulting in the
issuance  of  5,600,000  shares  of common  stock  (refer  to Item  5-"Sales  of
Unregistered  Securities").  The warrants will be issued upon the  completion of
the reverse split.

     5. The Company  has paid,  in cash,  the  approximate  sum of $168,000  and
delivered title to certain used property and equipment  having a deemed value of
approximately  $23,000  in full  settlement  and  satisfaction  of  debts of the
Company in the  approximate  amount of $  685,000.  This  resulted  in a gain on
settlement of debts of $494,658.

     6. On October 31, 1997 Joel Staadecker and Leonard  Petersen  resigned from
the Board of Directors of the Company and Joel Staadecker  resigned as President
and Chief Executive Officer of the Company.  Mr. Steven  Rothstein,  Chairman of
National  Securities  Corporation  of Chicago Ill.,  was appointed  Chairman and
Chief Executive Officer of the Company.

     7. New management does not have the depth of software  industry  experience
that is  considered  necessary  to  maintain  and  grow the  Company's  existing
business  operation.  As  a  consequence,  it  intends  to  sell  the  Company's
technology  assets and  customer  franchise,  and  explore and enter into as yet
undetermined new lines of business, which may be highly speculative ventures and
which may not be profitable.




















Results of Operations

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
operating data as a percentage of net revenue.

<TABLE>
<CAPTION>
                                                                                     1997             1995         1996
     <S>                                                                             <C>              <C>          <C>
     Revenue:

        Net product sales                                                             89%             93%           100%
        Service fees and royalty income                                               11               7              -
                                                                            -------------------------------------------
                                                                                     100             100            100
Net revenue
     Cost of revenue                                                                  29              22             42
                                                                            -------------------------------------------
                                                                                      71              78             58
    Gross profit
     Expenses:
        Sales and marketing                                                           47             108             49
        Research and development                                                      27              77             39
        General and administrative                                                    39              84            100
        Amortization of purchased intangibles                                          6              10             11
                                                                            -------------------------------------------
                                                                                     119             279            199
                                                                            -------------------------------------------
     Loss from Operations                                                            (48)           (201)          (141)

     Other Income (Expense)
        Interest income (expense), net                                                 1              (2)            (5)
        Write-off of intangibles                                                       -               -            (34)
        Loss on disposal of property and equipment                                     -               -             (7)
        Gain on settlement of debts                                                    -               -             86
                                                                            -------------------------------------------

     Net loss                                                                         (4 7)%        (203)%         (101)%
                                                                            =============================================
</TABLE>

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Net revenue includes revenues from sales of software products and services, less
reserves for  anticipated  product  returns and future vendor support  services.
Total net revenues  decreased by 57% from $1,357,965 for the year ended December
31, 1996 to $585,266 for the year ended  December 31, 1997.  The decrease is due
to the  following  factors:  (1) the  Company  was not able to  secure  adequate
financing to complete new product under development, including a Windows version
of SuperCard, and to maintain effective marketing strategies,  (2) the Company's
existing  products  are sold into a market  segment  that  has,  in the past two
years,  experienced  significant sales declines, and (3) the decline in sales of
Macintosh  computers and related Macintosh  software in general.  It is expected
that sales will continue to be adversely affected.

Cost of revenue includes the cost of manuals,  diskettes and their  duplication,
packaging materials,  assembly,  paper goods, bundled products,  and shipping as
well as  royalties  and  reserves for  inventory  obsolescence.  Cost of revenue
increased  as a percentage  of net  revenues 22% for 1996 to 42% for 1997.  This
increase is primarily due to the write down of obsolete inventories in 1997.

Sales and marketing expenses include the costs of advertising,  promotion, trade
shows and printed  collateral  materials,  salaries and the costs of  contracted
services.  Total sales and marketing costs decreased from $1,466,254 for 1996 to
$287,386  (108% of net  revenues  to 49%) for 1997.  The  decrease is due to the
cessation of substantially all marketing activities during the year.

Research and development  expenditures consisted of personnel expenses, costs of
independent   contractors  and  supplies   required  to  conduct  the  Company's
development  efforts.  Research  and  development  expenditures  decreased  from
$1,045,712  for 1996 to  $231,260  (77% of net  revenues  to 39%) for 1997.  The
decrease in research and  development  costs is due to the  cessation of product
development activities during the year.

General  and  administrative  expenses  consist  primarily  of the  costs of the
Company's finance and  administrative  personnel,  including the chief executive
officer, rent, telephone and utilities and all costs associated with maintaining
a public company in good standing. General and administrative expenses decreased
from $1,141,990 for 1996 to $585,319 (84% of net revenues to 100%) for 1997. The
decrease in general and administrative  expenses is attributable  primarily to a
reduction in staffing and the closure of the San Diego  office.  These  expenses
increased as a percentage of net revenues  because they were relatively fixed in
nature. It is expected that they will decrease  substantially during the ensuing
year.

The  Company  claimed  amortization  on  intangible  assets to June 30,  1997 of
$62,298 at which time  management  concluded that the future  realization of the
costs of  intangible  assets  through  product  sales was doubtful and therefore
charged to deficit $197,293 being the unamortized balance of such costs.

During the year the  Company  was able to reach  agreements  and settle  certain
trade debts and employee  claims for amounts  less than their face value.  These
agreements resulted in a gain on settlement of debts of $494,658.

Item 7.  Financial Statements.

The  Financial  Statements  of the Company  identified in the Index to Financial
Statements  appearing under "Item 13".  Exhibits and Reports on Form 8-K of this
report are incorporated by reference to Item 13.

Item 8.  Changes In and Disagreements With Accountants on Accounting and
         Financial Disclosure

     In 1997 the Company selected Moss Adams LLP as its new auditors. During the
year ended December 31, 1997, 1996 and 1995,  there were no  disagreements  with
Moss Adams LLP or Ernst & Young LLP, the predecessor  auditors, on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure, which if not resolved to the satisfaction of the firm, would
have caused them to make reference to the subject  matter of such  disagreements
in their reports on such financial statements.



<PAGE>


                                    PART III


Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons;
         Compliance  With Section 16(a) of the Exchange Act.


The  following  individuals  are the  Directors  and  executive  officers of the
Company. Pertinent information relating to these individuals is set forth below.
There are no family relationships between any of the Directors and officers.

The following  table sets forth  certain  information  concerning  the executive
officers and directors of the Company.

    Name                                        Age      Position

Steven A. Rothstein(1).......................... 47      President,
                                                         Chief Executive Officer
                                                         and Director
William D. McCartney(1)......................... 42      Director
Craig Gould(1).................................. 28      Director
Leonard Petersen ............................... 43      Secretary
--------------------

(1)  Member of the Audit Committee

     Mr.  Rothstein  was  appointed  President,  Chief  Executive  Officer and a
Director of the Company on October 31, 1997. From June, 1995 to the present,  he
has been the  Chairman  and  Chief  Executive  Officer  of  National  Securities
Corporation  and more  recently  the  Chairman  and Chief  Executive  officer of
Olympic Cascades Financial  Corporation.  Prior to 1995 Mr. Rothsetien worked at
Bear  Stearns & Co.  and  Oppenheimer  & Co. He has an A..B.  degree  from Brown
University.

     Mr.  Gould was  appointed  as Director of the Company on October 31,  1997.
From 1995 to the  present,  he has been a Vice  President  Corporate  Finance of
National  Securities  Corporation.  Prior  to  1995,  Mr.  Gould  was a  finance
consultant  at  Merrill,  Lynch,  Pierce,  Fenner and Smith,  Inc. He has a B.A.
degree from the University of Wisconsin.

     Mr. McCartney has been Director of the Company since January,  1994. He was
Chief  Financial  Officer and  Secretary  of the Company  from  January  1994 to
October 31, 1997. From 1990 to the present, he has been the President of Pemcorp
Management Inc., which provides corporate finance services to public and private
companies.  Mr.  McCartney is a chartered  accountant in the Province of British
Columbia,  Canada and has a  bachelors  degree in  business  from  Simon  Fraser
University.

     Mr. Petersen was appointed Secretary of the Company on October 31, 1997. He
was a Director of the Company from February, 1994 to October 31, 1997. From 1990
to the present,  he has been a senior officer of Pemcorp  Management Inc., which
provides  corporate  finance  services  to public  and  private  companies.  Mr.
Petersen has been a director of CVD Financial  Corporation since May 1995 and of
Logan  International  Corp.  since  January  1994.  Mr.  Petersen is a chartered
accountant in the Province of British Columbia, Canada.

Beneficial Ownership Reporting Compliance

Not applicable.

Item 10.  Executive Compensation.

The following table sets forth all  compensation  awarded to, earned by, or paid
for  services to the  Company in all  capacities  during the fiscal  years ended
December 31, 1996 and 1997 to the Company's chief executive  officer.  Except as
described below, no director or executive officer received total compensation in
respect of the 1996 or 1997 fiscal year exceeding $100,000.

                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                       Annual Compensation
                                                    Year              Salary          Other(1)           Total
<S>                                                <C>                <C>            <C>               <C>
Joel B. Staadecker                                 1997              $  47,000       $ 17,100          $ 64,100
President, C.E.O., Director
to October 31, 1997                                1996              $ 100,000       $ 22,800          $122,800

Steven A. Rothstein.............................   1997               nil            nil               nil
President, C.E.O., Director
from November 1 to
December 31, 1997

(1) Housing allowance
</TABLE>

Directors' Compensation

The Company  does not  currently  compensate  its  directors  under any standard
arrangement,  but are reimbursed for their out-of-pocket  expenses in serving on
the Board of Directors.

The  Company  has  entered  into  indemnification  agreements  with  each of its
directors,  which provide for indemnification of the directors by the Company to
the fullest extent permitted by Washington law.

Grants of Stock Options

No stock options were granted during the year and no options were outstanding as
of December 31, 1997.


<PAGE>


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

The following  table sets forth certain  information  with respect to beneficial
ownership of Common Stock as of March 15, 1998,  by (i) each person who is known
by the Company to  beneficially  own more than 5% of the  outstanding  shares of
Common Stock, (ii) each of the Company's directors,  (iii) each of the executive
officers named in the Summary  Compensation Table and (iv) all current directors
and executive officers as a group.  Unless otherwise  indicated in the footnotes
to the table,  each person or entity has sole voting and  investment  power with
respect to all shares of Common Stock shown as beneficially owned by such person
or entity.

<TABLE>
<CAPTION>
                                                Number of
                                                  Shares                           Percentage of
                                                Beneficially                        Outstanding
Name of Stockholder                                Owned                                Shares(1)
-------------------                             ------------                       --------------
<S>                                               <C>                                     <C>
Steven A. Rothstein
Chief Executive Officer, Director
2737 Illinois Road
Chicago, Illinois...............................  2,800,000(2)                              10.6%

Craig Gould
Director
1560-875 Michigan Ave.
Chicago Illinois................................  3,622,220                                 13.7%

William D. McCartney
Director
1500-609 Granville Street
Vancouver, Canada...............................  1,545,000(3)                               5.8%

Leonard Petersen
Secretary
1500-609 Granville Street
Vancouver, Canada...............................  1,545,000(4)                               5.8%

Steven Rabinovici
48 Country Drive
Plainview, New York.............................  2,800,000(5)                              10.6%

Kelly O'Brien
1540 North Paulina Ave.
Chicago, Illinois...............................  3,622,224                                 13.7%



Mark Roth
2200-1001 Fourth Ave.
Seattle, Washington.............................  3,622,224                                 13.7%

Joel B. Staadecker
1-1091 Walkers Hook Road
Salt  Spring Island, Canada.....................  1,995,000                                 7.6%

Geller & Friend Partnership I
650-3333 Michelson Drive
Irvine, California..............................  1,133,333(6)                              4.3%

All directors and executive
officers as group (4 persons)...................  8,267,220                                 31.3%


     (1)The  percentages  reflected  in this column are based on the  assumption
that  the  respective  owner  exercises  any  rights  he or it has  to  purchase
additional  shares of Common  Stock  within  sixty days from the date hereof and
excludes all other shares of Common Stock reserved for issuance upon exercise of
outstanding options and warrants.

     (2) Does not include  warrants to purchase the  equivalent of an additional
2,800,000 shares of common stock (refer to Item 6-"Reorganization Plan").

     (3)  Includes  1,200,000  shares  held  indirectly  by  a  company  jointly
controlled by Mr.  McCartney and Mr. Petersen  (further  reference to these same
shares  is made in note  4).  The  balance  of  shares  are held  indirectly  by
companies controlled by Mr. McCartney.

     (4)  Includes  1,200,000  shares  held  indirectly  by  a  company  jointly
controlled by Mr. Petersen and Mr.  McCartney  (further  reference to these same
shares  is made in note  3).  The  balance  of  shares  are held  indirectly  by
companies controlled by Mr. Petersen.

     (5) Does not include  warrants to purchase the  equivalent of an additional
2,800,000 shares of common stock (refer to Item 6-"Reorganization Plan").

     (6) Does not include  warrants to purchase the  equivalent of an additional
1,133,333 shares of common stock (refer to Item 6-"Reorganization Plan").

</TABLE>

Item 12.  Certain Relationships and Related Transactions.

Pemcorp  Management Inc., a management  advisory services company  controlled by
Mr. McCartney and Mr. Petersen,  was paid $69,000 for services  rendered for the
year ended December 31, 1997.




<PAGE>


                                     PART IV

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

(a)    Index to Financial Statements.                                   Page

       Report of Independent Accountants

       Balance Sheet at December 31, 1996 and 1997

       Statements of Operations For the Years Ended December 31, 1995,
       1996 and 1997.

       Statement of Shareholders' Equity For the Period from December 31, 1994
       Through December 31, 1997

       Statements of Cash Flows For the Years Ended December 31, 1995,
       1996 and 1997.

       Notes to Financial Statements

       All schedules are omitted because the required information is not present
       in amounts  sufficient to require  submission of the schedules or because
       the  information  is  included  in the  financial  statements  and  notes
       thereto.

(b)    Exhibits.


(c)    Reports on Form 8-K.

       October 10, 1997
       December 5, 1997
       January 16, 1998













<PAGE>

                                   SIGNATURES

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

                                       ALLEGIANT TECHNOLOGIES INC.



Date: March 31, 1998                   By:   /s/ Steven A. Rothstein
                                                 Steven A. Rothstein
                                                 President and Director
                                                 (Chief Executive Officer)



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.


/s/ Steven A. Rothstein                                    March 31, 1998
Steven A. Rothstein
President and Director
(Chief Executive Officer)


/s/ William D. McCartney                                   March 31, 1998
William D. McCartney
Director
(Principal Financial and Accounting Officer)


/s/ Craig Gould                                            March 31, 1998
Craig Gould
Director


<PAGE>
                              FINANCIAL STATEMENTS


                           ALLEGIANT TECHNOLOGIES INC.


                  Years Ended December 31, 1997, 1996 and 1995
                      with Report of Independent Auditors'






<PAGE>



                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and Stockholders
Allegiant Technologies, Inc.

We have audited the balance sheet of Allegiant Technologies, Inc. as of December
31, 1997, and the related statements of operations,  retained earnings, and cash
flows for the year then ended. These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these  financial  statements  based on our audit.  The  financial  statements of
Allegiant  Technologies,  Inc. as of December 31, 1996 and 1995, were audited by
other auditors whose report dated March 4, 1997 expressed an unqualified opinion
on those  statements with an emphasis  paragraph  expressing  substantial  doubt
about the Company's ability to continue as a going concern.

We conducted our audit in accordance with generally  accepted auditing standards
in the United States. The results of the audit would not be materially different
had the audit been  conducted in accordance  with  generally  accepted  auditing
standards in Canada.  However,  in the United  States,  reporting  standards for
auditors  require  the  addition  of an  explanatory  paragraph  when  financial
statements are affected by conditions and events that cast substantial  doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to these financial  statements.  Those standards require that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free from material misstatement.  An audit includes examining, on
a test basis,  evidence  supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Allegiant Technologies, Inc.
as of December 31, 1997,  and the results of its  operations  and cash flows for
the year then ended in conformity with generally accepted accounting principles.





<PAGE>



The accompanying financial statements have been prepared assuming that Allegiant
Technologies,  Inc. will continue as a going concern.  As discussed in Note 1 to
the financial statements, the Company has sustained substantial operating losses
since inception and has a working capital deficit of  approximately  $150,000 at
December 31, 1997. These conditions raise  substantial doubt about the Company's
ability to continue as a going  concern.  The 1997  financial  statements do not
include  any   adjustments  to  reflect  the  possible  future  effects  on  the
recoverability  and  classifications of assets or the amounts and classification
of liabilities that may result from the outcome of this uncertainty.



/s/ Moss-Adams LLP

Seattle, Washington
March 12, 1998

<PAGE>
              Report of Ernst & Young L.L.P., Independent Auditors


The Board of Directors
Allegiant Technologies, Inc.

     We have  audited the balance  sheet of Allegiant  Technologies,  Inc. as of
December 31,  1997,  and the related  statements  of  operations,  shareholders'
equity  (deficit) and cash flows for the years ended December 31, 1995 and 1996.
These financial statements are the responsibililty 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 in the United States. The results of the audit would not be materially
different had the audit been  conducted in accordance  with  generally  accepted
auditing standards in Canada. However, in the United States, reporting standards
for auditors require the addition of an explanatory paragraph when the financial
statements are affected by conditions and events that cast substantial  doubt on
the Company's ability to continue as a going concern, such as those described in
Note 1 to the 1996 financial  statements.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from 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,  these  financial  statements  referred  to above  present
fairly,  in  all  material   respects,   the  financial  position  of  Allegiant
Technologies,  Inc. at December 31, 1996,  and the results of its operations and
its cash flows for the years ended December 31, 1995 and 1996 in conformity with
generally accepted accounting principles.





<PAGE>



     The  accompanying  financial  statements  have been prepared  assuming that
Allegiant  Technologies,  Inc. will continue as a going concern. As discussed in
Note 1 to the 1996 financial  statements,  the Company has sustained substantial
operating  losses  since  inception  and has a  working  capital  deficiency  of
approximately  $850,000 at December 31, 1996. These conditions raise substantial
doubt  about the  Company's  ability to continue  as a going  concern.  The 1996
financial  statements  do not include any  adjustments  to reflect the  possible
future effects on the  recoverability and classification of liabilities that may
result from the outcome of this uncertainty.



                               /s/ ERNST & YOUNG LLP

San Diego, California
March 4, 1998


<PAGE>



ALLEGIANT TECHNOLOGIES INC.
BALANCE SHEETS
(Expressed in United States Dollars)
AS OF DECEMBER 31

<TABLE>
<CAPTION>
                                                                                                       1996                1997
                                                                                                    ----------          ---------
<S>                                                                                                 <C>                 <C>
ASSETS
Current assets:
 Cash                                                                                              $    116,610         $   35,245
 Accounts receivable, net of allowance for doubtful accounts                                             37,084             12,642
 of $32,892 in 1996 and $10,062 in 1997
 Inventories                                                                                            200,203             38,146
 Prepaid expenses and other                                                                              48,121                  -
                                                                                                    -----------

 Total current assets                                                                                   402,018             86,033


Property and equipment, net                                                                             200,041             16,639
Intangible assets, net                                                                                  259,591                  -

Deposits                                                                                                 17,708                  -

Deferred offering costs                                                                                  15,000                  -
                                                                                                   ------------

                                                                                                   $    894,358         $  102,672
                                                                                                   ============         ==========

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
    Debentures payable                                                                             $    495,775         $       -
    Notes payable                                                                                         9,034            165,000
    Accounts payable                                                                                    401,968             62,074
    Accrued liabilities                                                                                 309,004             17,105
    Deferred revenues                                                                                    34,563                  -
                                                                                                    -----------         ----------

             Total current liabilities                                                                1,250,344            244,179


Deferred rent                                                                                            36,502                  -

Share subscriptions payable                                                                                   -            750,000
                                                                                                    -----------         ----------

                                                                                                      1,286,846            994,179
                                                                                                    -----------         ----------

Shareholders' deficit:

 Preferred stock, 50,000,000 shares authorized, $0.01 par value,
 none issued or outstanding                                                                                    -                 -

 Common stock, 100,000,000 shares authorized, $0.01 par value, 8,107,295 and
 7,743,007 issued and outstanding, in 1996 and 1997, respectively                                        81,073             77,430
 Additional paid-in capital                                                                           3,965,092          4,068,735
 Accumulated deficit                                                                                (4,438,653)         (5,037,672)
                                                                                                   ------------        -----------

                                                                                                      (392,488)          (891,507)
                                                                                                   -----------         -----------

                                                                                                   $    894,358        $   102,672
                                                                                                   ============        ===========

</TABLE>
                                                  See accompanying notes.


<PAGE>



ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31
(Expressed in United States Dollars)


<TABLE>
<CAPTION>
                                                                    1995                1996               1997
                                                               ---------------      ------------       ------------
<S>                                                           <C>                    <C>               <C>
NET REVENUE                                                   $      2,227,582       $ 1,357,965       $    585,266

COST OF REVENUE                                                        646,547           303,715            249,092
                                                              ----------------       -----------       ------------

GROSS PROFIT                                                         1,581,035         1,054,250            336,174
                                                              ----------------       -----------       ------------


EXPENSES
    Sales and marketing                                              1,045,383         1,466,254            287,386
    Research and development                                           607,012         1,045,712            231,260
    General and administrative                                         863,535         1,141,990            585,319
    Amortization of purchased intangibles                              131,263           130,846             62,298
                                                              ----------------        ----------         ----------

                                                                     2,647,193         3,784,802          1,166,263
                                                              ----------------        ----------         ----------


LOSS FROM OPERATIONS                                               (1,066,158)       (2,730,552)          (830,089)


OTHER INCOME (EXPENSE)
    Interest income                                                     14,966            24,505                239
    Interest expense                                                   (6,174)          (48,542)           (28,188)
    Write-off of intangibles                                                 -                 -          (197,293)
    Loss on disposal of property and equipment                               -                 -           (38,346)
    Gain on settlement of obligations                                        -                 -            494,658
                                                              ----------------      ------------         ----------


NET LOSS                                                      $    (1,057,366)      $(2,754,589)        $ (599,019)
                                                              ================      ===========         ==========


BASIC LOSS PER SHARE                                          $         (0.24)      $     (0.47)        $    (0.09)
                                                              ================      ===========         ==========


SHARES USED IN COMPUTING PER SHARE AMOUNTS                           4,372,592        5,803,075          6,310,816
                                                              ================       ===========         =========

</TABLE>



                                                  See accompanying notes.

<PAGE>



ALLEGIANT TECHNOLOGIES INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
(Expressed in United States Dollars)

<TABLE>
<CAPTION>
                                                                                                                          Total
                                                   Common Stock                       Additional          Accumulated  Shareholders'
                                                  Shares               Amount           Paid-in             Deficit       Deficit
<S>                                              <C>        <C>                 <C>                 <C>     <C>         <C>
Balances at December 31, 1994                    5,634,000  $           56,340  $        1,205,660  $        (626,698)  $ 635,302

Shares issued
 - cash                                            875,000               8,750             866,250                        875,000
 - corporate finance fee                            64,545                 645              63,900                         64,545
 - exercise of warrants                            218,750               2,188             216,562                        218,750
 - conversion of note payable                      250,000               2,500             247,500                        250,000
 - issuance of warrants                                  -                 -                39,000                         39,000

Offering costs                                                                           (234,474)                       (234,474)

Net loss                                                                                                   (1,057,366) (1,057,366)
                                               -----------              -------         ---------           ---------   ---------


Balances at December 31, 1995                    7,042,295              70,423           2,404,398         (1,684,064)    790,757

Shares issued
 - cash                                            815,000               8,150           1,621,850                      1,630,000
 - exercise of warrants                            250,000               2,500             247,500                        250,000

Offering costs                                                                           (308,656)                       (308,656)

Net loss                                                                                                   (2,754,589) (2,754,589)
                                               -----------              -------         ---------           ---------   ---------

Balances at December 31, 1996                    8,107,295              81,073           3,965,092         (4,438,653)   (392,488)

Shares issued
 - cash                                            285,712               2,857              97,143                        100,000

Shares canceled                                  (650,000)             (6,500)               6,500                             -

Net loss                                                                                                     (599,019)  (599,019)
                                               -----------              -------         ----------          ---------   --------

Balance at December 31, 1997                     7,743,007            $ 77,430         $ 4,068,735        $(5,037,672) $(891,507)
                                               ===========              ======          ==========          =========    =======

</TABLE>

                                                  See accompanying notes.


<PAGE>







ALLEGIANT TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31
(Expressed in United States Dollars)

<TABLE>
<CAPTION>
                                                                                     1995                1996             1997
                                                                                ---------------   ----------------   -------------
<S>                                                                             <C>               <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                                                       $    (1,057,366)  $    (2,754,589)   $   (599,019)
 Adjustments to reconcile net loss to net cash from
   operating activities
 Amortization and depreciation                                                           168,086           273,346         126,523
 Write-off of intangibles                                                                      -                 -         197,293
 Loss on disposal of property and equipment                                                    -                 -          38,346
 Gain on settlement of obligations                                                                                       (494,650)
 Changes in operating assets and liabilities
 Accounts receivable                                                                      63,349            97,192          24,442
  Inventories                                                                           (48,417)         (100,836)         162,057
 Prepaid expenses and other                                                             (44,568)             7,986          80,829
 Accounts payable and accrued liabilities                                                 64,222           465,033        (31,327)
 Deferred revenues                                                                        33,998          (19,235)        (34,563)
                                                                                ----------------  ---------------    ------------

                                                                                       (820,696)       (2,031,103)       (530,069)
                                                                                ---------------   ---------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment                                                    (194,268)          (60,388)               -
 Proceeds on sale of property and equipment                                                    -                 -          62,738
                                                                                ----------------  ---------------    -------------

                                                                                       (194,268)          (60,388)          62,738
                                                                                ---------------   ---------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from issuance of capital stock, net                                            891,717         1,632,594         100,000
 Proceeds from share subscriptions                                                             -                 -         210,000
 Proceeds from issuance of notes payable                                                       -                 -         100,000
 Payments on notes payable                                                              (39,506)          (51,460)        (16,534)
 Proceeds from debentures payable                                                        500,000                 -               -
 Payment on debentures payable                                                                 -                 -         (7,500)
 Deferred rent                                                                            26,403            10,099               -
                                                                                ----------------   --------------     ------------

                                                                                       1,378,614         1,591,233         385,966
                                                                                ----------------   ---------------    ------------

Change in cash and cash equivalents                                                      363,650         (500,258)        (81,365)

Cash and cash equivalents, beginning of period                                           253,218           616,868         116,610
                                                                                ----------------   --------------     ------------

Cash and cash equivalents, end of period                                        $        616,868  $        116,610   $      35,245
                                                                                ================   ===============    ============


SUPPLEMENTAL CASH FLOW INFORMATION
    Interest paid                                                               $          6,174  $         48,542   $      20,188
                                                                                ================   ===============    ============

    Non-cash investing and financing activities
       Note payable issued for royalty buy-out                                  $        100,000
                                                                                ================
       Common stock issued for conversion of note payable                       $        250,000
                                                                                ================
       Common stock issued for corporate finance fee                            $         64,545
                                                                                ================
       Share subscription issued for settlement of debentures                                                        $     450,000
                                                                                                                      ============
       Note payable issued for settlement of debentures                                                              $      42,500
                                                                                                                      ============
</TABLE>


                                                  See accompanying notes.



<PAGE>



ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



1.      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Nature of Operations

     Allegiant Technologies Inc. was incorporated in Washington State, U.S.A. on
December  28,  1993 and was  registered  to carry on  business  in the  State of
California on March 23, 1994.

    The Company's principal line of business included developing,  marketing and
supporting interactive multimedia development software.

    Management Plans on Continued Existence

    The accompanying  financial statements have been prepared in conformity with
generally  accepted  accounting   principles,   in  the  United  States,   which
contemplates  the continuation of the Company as a going concern.  However,  the
Company has sustained  substantial operating losses and used substantial amounts
of working  capital in its operations in recent years.  As of December 31, 1997,
current  liabilities  exceed current assets by $158,146,  and total  liabilities
exceed total assets by $891,507.

    In  view  of  these   circumstances,   the  Company   discontinued   product
development,  closed its offices in  California,  resigned  the  majority of its
staff and sold off  unused  property  and  equipment.  In  addition,  management
concluded that the future  realization of the costs of intangible assets through
product  sales is doubtful  and  therefore  charged to deficit  the  unamortized
balance of such costs.  It is  management's  intent to discontinue its principal
line of business,  liquidate remaining assets and settle remaining  obligations.
After  completing this process the Company will remain dormant until  additional
financing and new operations are determined.

    The  Company's  ability to continue as a going  concern is  dependent  upon,
among  other  things,  its  ability to secure  additional  funding  which is not
assured.  The  financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.

    Use of Estimates

    The  preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

        Cash and Cash Equivalents

    Cash  and  cash  equivalents  include  cash on  deposit  and  highly  liquid
investments with original maturities of three months or less.

    Inventories

    Inventories consist primarily of software media, manuals and related packing
materials. Inventories are valued at standard cost, which approximates the lower
of cost, determined on a first-in, first-out basis, or market.

        Property and Equipment

    Property and equipment are recorded at cost.  Depreciation  is provided over
the  estimated  useful  lives  ranging  from  three to  seven  years  using  the
straight-line method.




<PAGE>



ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    Intangible Assets

    Intangible  assets are recorded at cost.  Amortization  is provided over the
estimated useful lives of five years using the straight-line method.  Management
evaluates the future  realization of intangible assets quarterly and writes down
any amounts  that  management  deems  unlikely to be  recovered  through  future
product sales. The unamortized balance of $197,293 was charged to expense during
1997.

    Advertising Costs

    Advertising costs are expensed as incurred.  Included in sales and marketing
expense are  advertising  costs of $376,860,  $447,115 and $55,924 in 1995, 1996
and 1997, respectively.

    Revenue Recognition

    Revenue is derived from product  sales and licenses,  maintenance  contracts
and  consulting,  training and other  services.  Revenues from product sales and
licenses are  recognized  upon shipment of the  products.  Revenue from software
maintenance  contracts is recognized on a  straight-line  basis over the term of
the contract,  generally one year.  Revenue from consulting,  training and other
services are recognized in the period in which services are performed and earned
in accordance with the respective  agreements.  To the extent that an engagement
is projected  to be completed at a loss, a provision  for the full amount of the
loss is provided at that time.

    The  Company  may enter into  agreements  whereby it  licenses  products  or
provides  customers  the right to multiple  copies.  Such  agreements  generally
provide for  non-refundable  fixed fees which are  recognized at delivery of the
product  master or the first  copy.  Per copy  royalties  in excess of the fixed
minimum amounts and refundable  license fees are recognized as revenue when such
amounts are reported to the Company and no longer refundable.

    The Company will sell its products throughout the world,  however,  the most
significant geographical area is the United States. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral on
domestic sales. The Company  maintains an allowance for potential credit losses.
Additionally,  the Company  maintains an allowance  for  anticipated  returns on
products sold to distributors.

    Foreign Currency Translation

    The Company translates foreign currency  transactions and balances using the
temporal  method.  Under  this  method,  monetary  assets  and  liabilities  are
translated at period-end rates whereas  non-monetary  assets and liabilities are
recorded at rates prevailing at the transaction dates.  Revenue and expenses are
translated at the average monthly rate throughout the period. Currency gains and
losses are reflected in the results of  operations  for the periods and were not
significant.

    Stock Options

    The Company has elected to follow  Accounting  Principles  Board Opinion No.
25,   "Accounting   for  Stock  Issued  to  Employees"   (APB  25)  and  related
Interpretations  in accounting  for its employee  stock  options.  Under APB 25,
because the exercise price of the Company's employee stock options equals, or is
greater than, the market price of the underlying  stock on the date of grant, no
compensation expense is recognized.


<PAGE>



ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    Earnings Per Share

    During 1997 the Company adopted Statement of Financial  Accounting  Standard
(SFAS) No. 128.  "Earnings  Per Share".  Under SFAS No. 128 basic  earnings  per
share (EPS) of common stock is calculated based upon the weighted average number
of common stock  outstanding.  The  computation of diluted EPS is similar to the
computation of basic EPS except that the denominator is increased to include the
number of  additional  common  shares  that would have been  outstanding  if the
dilutive potential common shares had been issued. As the Company recorded losses
in 1995, 1996 and 1997 there were no dilutive potential common shares.  Adoption
of SFAS No. 128 did not result in a difference  from loss per share,  previously
stated in 1995 and 1996.

        New Accounting Standards

        In June 1997, the Financial  Accounting  Standards Board issued Nos. 130
        and 131. SFAS No. 130 establishes standards for reporting and display of
        comprehensive  income  and its  components.  SFAS  No.  131  establishes
        standards for reporting about operating segments, products and services,
        geographic  areas, and major  customers.  The standards become effective
        for fiscal years beginning after December 15, 1997.  Management plans to
        adopt these standards in the year ending  December 31, 1998.  Management
        believes  that  provisions  of SFAS  Nos.  130 and 131  will  not have a
        material  effect on its  financial  condition  or  reported  results  of
        operation.

        United States Generally Accepted Accounting Principles

        Accounting   under  United  States  and  Canadian   generally   accepted
        accounting  principles  is  substantially  the same with  respect to the
        accounting  principles  used by the Company in the  preparation of these
        financial statements.


2.      PROPERTY AND EQUIPMENT


Property and equipment at December 31 consists of:
<TABLE>
<CAPTION>
                                                                                               1996              1997
                                                                                         --------------   ---------------
<S>                                                                                     <C>               <C>
 Furniture and fixtures                                                                 $       154,240   $          6,639
 Office equipment                                                                                23,723             15,998
 Computer equipment                                                                             187,473             37,035
                                                                                        ---------------   ----------------

                                                                                                365,436             59,672
Accumulated depreciation                                                                      (165,395)           (43,033)
                                                                                        --------------    ----------------

                                                                                        $       200,041   $         16,639
                                                                                        ===============   ================
</TABLE>



<PAGE>



ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



3.      INTANGIBLE ASSETS

Intangible assets at December 31 consist of:

<TABLE>
<CAPTION>
                                                                                               1996            1997
                                                                                        ---------------   ----------------
<S>                                                                                     <C>               <C>
 Acquisition costs                                                                      $       498,000   $        498,000
 Royalty buyout                                                                                 100,000            100,000
                                                                                        ---------------   ----------------

                                                                                                598,000            598,000
Accumulated amortization                                                                      (338,409)          (400,707)
Write-off of unamortized balance                                                                      -          (197,293)
                                                                                        ---------------   ----------------

                                                                                        $       259,591   $             -
                                                                                        ===============   ================

</TABLE>


        Acquisition  costs  include  goodwill,  product  technology  and related
acquisition costs.


4.      NOTES PAYABLE
<TABLE>
<CAPTION>
                                                                                           1996              1997
                                                                                        ---------------   ----------------
<S>                                                                                     <C>               <C>
Note payable - On February 13, 1997 the Company issued a note payable (the              $             -   $        100,000
"Note") in connection with a proposed private placement of debt securities in
the amount of $750,000.  The Company was advanced the sum of $100,000
under the Note.  The Note is secured by the assets of the Company and bears
interest at the First National Bank & Trust Company of Chicago prime rate plus
2% per annum, which is payable quarterly commencing on July 15, 1997.
Amounts advanced under the Note, together with accrued interest, are due on
the earlier of the date on which the Company completes any offering of equity
securities for an amount of not less than $1,500,000, or February 13, 1999. On
July 15, 1997, the Company failed to make an interest payment as required
under the terms of the Note.  As a consequence of this default, the Note,
together with accrued interest, is currently due and payable upon demand.

Note payable, due November 4, 1998.  The note is unsecured, non-interest                              -             42,500
bearing and convertible into common shares of the Company at the option of
the holder at any time after October 30, 1998 and before November 4, 1998 at
a deemed price per share equal to the average closing price of the Company's
shares on the Vancouver Stock Exchange for the ten days immediately
proceeding November 4, 1998.

Notes payable in increments of $3,000 per month.  The note is unsecured and                           -             22,500
non-interest bearing.

Note payable paid in 1997.                                                                        9,034                  -
                                                                                        ---------------    ----------------

                                                                                        $         9,034   $        165,000
                                                                                        ===============    ================
</TABLE>



<PAGE>







ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



5.      SUBSCRIPTIONS PAYABLE

<TABLE>
<CAPTION>
                                                                                            1996                1997
                                                                                        ---------------    ---------------
<S>                                                                                     <C>               <C>
On October 15, 1997, the Company received proceeds from a private placement             $             -   $        210,000
of 1,400,000 Units.  These Units are to be issued at $0.15 each after giving
effect to four for one reverse split of the Company's common stock.  Each Unit
consists of one share of common stock and one two year non-transferrable
warrant to purchase on additional share of common stock at $0.15 per share
during the first year and at $0.1725 per share during the second year, on a post
reverse split basis.   The proceeds of the private placement are accounted for as
a non-interest bearing loan until the Units are issued.  These subscription
proceeds are repayable if the reverse split is not effected and the Units are not
issued by June 30, 1998.

The Company agreed to issue, after giving effect to a four for one reverse split        $            -   $        540,000
                                                                                        ---------------    ---------------
of the Company's common stock, 3,600,000 shares of common stock at a
deemed price of $0.15 per share post reverse split, and two year non-
transferable warrants to purchase an additional 283,333 shares of  common
stock, at $0.15 per share in the first year and at $0.1725 per share in the second
year, in full settlement and satisfaction of certain debts of the Company.  These
debts are due and payable if the reverse split is not effected and the Units are
not issued by June 30, 1998.
                                                                                        $            -   $        750,000
                                                                                        ===============   ===============

</TABLE>

        Subsequent  to  December  31,  1997,  the  Company  sought and  received
        approval  from the  Vancouver  Stock  Exchange to issue shares of common
        stock on a  pre-reverse  split  basis  in  connection  with the  private
        placement and the settlement of debts,  as described  above.  On January
        18,  1998,  the Company  issued  20,000,000  shares (the  equivalent  of
        5,000,000  shares on a post reverse  split basis as described  above) of
        common  stock  in  partial  settlement  of  subscriptions  payable.  The
        warrants,  described  above,  will be issued upon the  completion of the
        reverse split.


6.      INCOME TAXES

        Significant  components  of the  Company's  deferred  tax  assets  as of
        December 31, 1997 and 1996,  respectively,  are shown below. A valuation
        allowance  has been  recognized  to offset  the  deferred  tax assets as
        realization of such assets is uncertain.

<TABLE>
<CAPTION>
                                                                                               1996              1997
                                                                                         --------------   ----------------
<S>                                                                                     <C>               <C>
Deferred tax assets:
 Net operating loss carryforwards                                                       $     1,666,000   $      1,935,000
 Research and development credits                                                               157,000            157,000
 Other - net                                                                                     66,000             30,000
                                                                                        ---------------   ----------------

Total deferred tax assets                                                                     1,889,000          2,122,000
Valuation allowance for deferred tax assets                                                  (1,889,000)        (2,122,000)
                                                                                        ---------------    ---------------
                                                                                        $            -     $            -
                                                                                        ===============    ===============
</TABLE>



<PAGE>



ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



6.      INCOME TAXES (Continued)

     At December  31,  1997,  the Company  has  federal and  California  tax net
operating loss  carryforwards  of  approximately  $4.9 million and $4.4 million,
respectively.  The  Company  also has  federal and  California  research  credit
carryforwards of approximately $114,000 and $64,000,  respectively.  The federal
tax loss carryforward and the research credit  carryforwards will begin expiring
in 2009 unless  previously  utilized.  The California tax loss carryforward will
begin expiring in 2002 unless previously utilized.

     In  accordance  with certain  provisions  of the Internal  Revenue  Code, a
change in  ownership  of a  corporation  of  greater  than 50  percent  within a
three-year period will place an annual  limitation on the corporation's  ability
to utilize its existing tax loss and tax credit carryforwards.


7.      CAPITAL STOCK

    Performance shares

    Included in issued and  outstanding  common  shares at December 31, 1996 and
1997 are 2,000,000 and 1,350,000 performance shares,  respectively,  which would
be  released  from escrow on the basis of 1 share for every $0.52 Cdn of pre-tax
cash earned by the Company on a cumulative  basis. In March 1998, the holders of
these shares  surrendered them for  cancellation  without  consideration.  These
shares are not included in the determination of loss per share.

    Stock options

    The Company established a stock option plan ("the Plan") to grant options to
purchase  common stock to  employees,  officers,  non-employee  directors of the
Company and certain other individuals.  The Plan authorizes the Company to issue
or grant stock options to purchase up to 2,517,902 shares of its common stock as
of December 31, 1997.

     A summary of the Company's stock option activity,  and related  information
for the years ended December 31, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                      1996                              1997
                                                       ---------------------------------------------------------------------
                                                                               Weighted                             Weighted
                                                                               Average                              Average
                                                                               Exercise                             Exercise
                                                               Options            Price             Options            Price

<S>                                                           <C>           <C>                  <C>             <C>
Outstanding at beginning of year                                1,530,000  $        1.14            1,927,500    $       0.75
 Granted                                                        2,087,500           0.93                    -              -
 Canceled                                                     (1,690,000)           1.20          (1,927,500)            0.75
                                                         ---------------   -------------         -------------    -----------

Outstanding at end of year                                      1,927,500           0.75                    -              -
Exercisable at end of year                                      1,203,541           0.75                    -              -
Weighted-average fair value of
 options granted during the year                                                    0.94                                   -

</TABLE>


<PAGE>



ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



7.      CAPITAL STOCK  (Continued)

        Pro forma information  regarding net loss is required to be disclosed in
        accordance  with SFAS No. 123, and has been determined as if the Company
        has accounted for its employee stock options under the fair value method
        prescribed  in that  Statement.  The fair  value of  these  options  was
        estimated at the date of grant using the Black-  Scholes  option pricing
        model with the following  weighted  average  assumptions  for 1996; risk
        free  interest  rate  of  5%  to  6%,   dividend  yield  of  0%,  and  a
        weighted-average life of the options of 5 years.

        For purposes of pro forma  disclosures,  the estimated fair value of the
        options is amortized  to expense over the vesting  period of the related
        options. The Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                                                               1996             1997
                                                                                         --------------    ---------------
<S>                                                                                     <C>               <C>
Pro forma net loss                                                                      $     2,823,194   $        589,995
Pro forma loss per share                                                                $          0.55   $           0.09
</TABLE>

    Warrants

    In 1997, the Company sold, pursuant to a private placement, 285,712 Units at
$0.35 per  Unit.  Each  Unit  consisted  of one  common  share  and one  warrant
entitling the holder to purchase one additional  common share at $0.35 per share
until April 15, 1998 and at $0.40 per share thereafter until April 15, 1999.

    As of December 31, 1997, the Company has outstanding  warrants entitling the
holders to purchase a total of 924,712 common shares of the Company as follows:

<TABLE>
<CAPTION>
                              Number
                                of                       Exercise
                              Shares                       Price                               Expiration Date
                              <S>                     <C>                                        <C>
                              150,000                 Cdn$    3.62                               April 26, 1998
                              489,000                         2.30                               April 26, 1998
                              285,712                         0.35      to April 15, 1998        April 15, 1999
                                                              0.40      to April 15, 1999

                              924,712

</TABLE>

8.      RELATED PARTY TRANSACTIONS

        During  1995,  1996 and 1997,  the  Company  paid or  accrued,  $30,000,
        $60,000 and  $69,000,  respectively,  in  management  fees to  companies
        controlled by certain directors and officers of the Company.

        Included  in Notes  Payable  and accrued  liabilities  is the  aggregate
        amount of  $118,500,  including  accrued  interest  of $8,000,  owing to
        directors of the Company or to  companies  controlled  by directors  and
        officers of the Company.

        Included in  Subscription  Payable at December 31, 1997 is the aggregate
        amount of $285,833  owing to  directors  of the Company or to  companies
        controlled by directors and officers of the Company.




<PAGE>


ALLEGIANT TECHNOLOGIES INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1997



9.      GEOGRAPHIC INFORMATION

    Substantially all the Company's operations, employees and assets are located
in the United States.

    A  significant  portion of the  Company's  sales are to customers in foreign
countries:

<TABLE>
<CAPTION>
                                                                               1995               1996              1997
                                                                         -------------      ---------------    --------------

<S>                                                                     <C>                 <C>              <C>
Sales by geographical region
 Japan                                                                  $        260,506   $        139,960  $         27,350
 Europe                                                                          246,231            223,799            93,378
 Other                                                                           131,856             99,966            36,604
                                                                        ----------------    ---------------   ---------------

Total export sales                                                               638,593            463,725           157,332
United States                                                                  1,588,989            894,240           427,934
                                                                        ----------------    ---------------   ---------------

Net sales                                                               $      2,227,582   $      1,357,965  $        585,266
                                                                        ================    ===============   ===============
</TABLE>