FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

            X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
                For the Fiscal Year ended:    DECEMBER 31, 1997
                                       OR
          ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
             For the transition period from __________________ to _____________
          Commission file number      1-355

                            DRAGON MINING CORPORATION
             (Exact name of registrant as specified in its charter)

                        UTAH                                   87-0159350
            State or other jurisdiction of             (I.R.S. Employer
            incorporation or organization             Identification No.)

          107 WEST WADE, SUITE 7, P.O. BOX 9, PAYSON, ARIZONA
85547-0009
                      (Address of principal executive offices)

         Registrant's telephone number, including area code:   (520) 474-9151


             Securities registered pursuant to Section 12(b) of the Act:

                   Title of each class                     Name of each exchange
on which registered
                      COMMON STOCK $.001 PAR VALUE
 NONE

          Securities registered pursuant to section 12(g) of the Act:
                                       N/A

                                (Title of class)

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

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of March 22, 1998: N/A (SEE ITEM 5)

Number of shares outstanding of registrant's common stock, $.001 par value, as
of March 22, 1998:  23,143,826

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (S 229.405 of this chapter) is not contained herein,  and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information statements  incorporated by reference in Part III of this Form 10-K.
[X] [Added in Release No.  34-28869  (84,709),  effective  May 1, 1991,  56 F.R.
7242.]

Exhibit index on consecutive page  ___                     Page 1 of       pages


<PAGE>



                                      INDEX

                                     PART I


                                                                     Page

Item 1.      Business                                                      3

Item 2.      Properties                                                    5

Item 3.      Legal Proceedings                                             5

Item 4.      Submission of Matters to a Vote of Security  Holders          6

                                     PART II

Item 5.      Market for Registrant's Common Equity and
             Related Stockholder Matters                                   6

Item 6.      Selected Financial Data                                       7

Item 7.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations                           7

Item 8.      Financial Statements and Supplementary Data                   8

Item 9.      Changes In and Disagreements with Accountants
             on Accounting and Financial Disclosure                        8

                                    PART III

Item 10.     Directors and Executive Officers of the Registrant            8

Item 11.     Executive Compensation                                        9

Item 12.     Security Ownership of Certain Beneficial Owners
             and Management                                               10

Item 13.     Certain Relationships and Related Transactions               10

                                     PART IV

Item 14.     Exhibits, Financial Statements Schedules and Reports
             on Form 8-K                                                  11


                                        2

<PAGE>



                                     PART I

ITEM 1.  BUSINESS

GENERAL AND HISTORICAL BACKGROUND

     The Company was incorporated in 1911 in Utah as Dragon  Consolidated Mining
Company and operated  profitably for many years in the Tintic Mining District of
Utah.  In  January  1985,  the  Company   changed  its  name  to  Dragon  Mining
Corporation. For a substantial period, the Company realized the major portion of
its income in the form of  royalties  from clay mining  operations  conducted by
lessees  within its "Dragon Pit" near Eureka,  Utah.  (See Item 2.  PROPERTIES.)
From July 1, 1977 to March 1983,  the Company did not conduct  operations.  From
May 1940 to October  1984,  the  Company  was  controlled  by North Lily  Mining
Company,  a subsidiary of the Anaconda  Company from June 1925 to March 1983. In
March  1983,  Claude K. Lee and  others  acquired  direct  control of North Lily
Mining Company and indirect control of the Company.

     Due to a  failure  to  file a 1992  Utah  annual  report  the  Company  was
mistakenly dissolved by the State of Utah. The Company has been reincorporated.

     During 1986,  North Lily Mining  Company  ("North  Lily")  consummated  the
acquisition  of 4,725,923  shares of the Company's  common stock in exchange for
shares of North Lily common stock,  thereby increasing North Lily's ownership of
the Company from 20.5% to 78.4%.

     During  May  1993  North  Lily  completed  the  sale of  6,055,836  shares,
representing 74.4% of the issued and outstanding shares, of the Company's common
stock to Van-Cap Equities Ltd.
("Van-Cap").

     On June 24, 1994 Van-Cap sold  6,055,836 of the  Company's  common stock to
Marbella Capital Corporation ("Marbella").

     There are no current operations.

     The Company has no full-time employees.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     No information is presented as to industry  segments.  The Company has been
primarily  engaged in a single line of business:  the acquisition,  exploration,
development of mineral properties and production therefrom.


                                        3

<PAGE>





GOVERNMENT REGULATIONS

     The Company's mining,  processing and exploration activities are subject to
various  laws  governing  the  protection  of  the   environment,   prospecting,
development,  production, exports, taxes, labor standards,  occupational health,
waste  disposal,  toxic  substances,  mine  safety  and  other  matters.  Mining
operations and exploration activities are also subject to substantial regulation
under these laws by governmental agencies.

      Failure  to comply  with  applicable  laws and  regulations  may result in
orders  being issued that may cause  operations  to cease or be curtailed or may
require  installation  of  additional  equipment.  Violators  may be required to
compensate  those  suffering  loss or damage by reason of violations  and may be
fined if convicted of an offense under such legislation.

     The  Company  believes  it is in  compliance  with  all  material  laws and
regulations applicable to it or its prior operations.

     Additional legislation or amendments may be proposed from time to time that
might affect the Company's business. The Company is unable to predict in advance
which  proposals may be enacted or their  effective  dates.  Such changes could,
however,  require increased capital or operating expenditures or both, and could
prevent or delay certain operations by the Company.

     Outlined  below are some of the more  significant  aspects of  governmental
controls and regulations which materially affect the Company.

     The Company is subject to federal, state and provincial income taxes, state
and local franchise  taxes,  personal  property taxes and state severance taxes.
State  severance  taxes vary between the states and within a single  state.  The
amount  of the tax,  based on a  percentage  of the value of the  mineral  being
extracted, may vary from mineral to mineral.  Operations are subject to taxation
by each  locality  in which  mineral  properties  are owned or business is done.
Because many state and local tax laws are not  uniform,  the Company runs a risk
of double taxation on portions of its income by various jurisdictions.  This may
adversely effect earnings, if any.

ENVIRONMENTAL REGULATIONS

     Legislation and implementing  regulations adopted or proposed by the United
States  Environmental  Protection  Agency, the Bureau of Land Management ("BLM")
and  comparable  agencies in various states  directly and indirectly  affect the
mining  industry  in the  United  States.  These  laws and  regulations  address
potential  contamination  of air,  soil and water  from  mining  operations.  In
particular,  legislation  such as the Federal Water  Pollution  Control Act, the
Comprehensive  Environmental  Response and the  Compensation  and  Liability Act
impose effluent

                                        4

<PAGE>



standards, new source performance standards, air quality and emission standards,
waste disposal  requirements and other requirements with respect to present, and
in some cases past, mining and mineral processing, including gold mining.

     U.S.  mine  operators  must comply with the Federal  Mine Safety and Health
Act, which is enforced by the Mine Safety and Health Administration ("MSHA"), an
agency within the Department of Labor. All mines,  both underground and surface,
are  subject  to  inspections  by  MSHA.  The  Occupational  Safety  and  Health
Administration  also has  jurisdiction  over  safety  and health  standards  not
covered by the  Federal  Mine Safety and Health  Act,  although  there are areas
where the authority of both administrative agencies overlap.

     Existing laws and  regulations  with respect to the  reclamation  of mining
operations  are in place and may  necessitate  substantial  planning and bonding
requirements.

     The Company  may be  required  to prepare  and  present to federal,  state,
provincial or local authorities data pertaining to the effect or impact that any
proposed  exploration  for,  or  production  of,  minerals  may  have  upon  the
environment.

     It may be anticipated that future legislation will significantly  emphasize
the protection of the environment,  and that as a consequence, the activities of
the Company may be more closely  regulated to further the cause of environmental
protection. Such legislation, as well as future interpretation of existing laws,
may require  substantial  increases  in  equipment  and  operating  costs to the
Company and delays, interruptions, or a termination of operations, the extent of
which cannot now be predicted.

EMPLOYEES AND FACILITIES

     As of March 22, 1998, the Company had no full-time  employees.  The Company
has the  following  officers:  Thomas J. Ian Wright,  Chairman;  Thomas L. Crom,
President; Nick DeMare, Secretary and Treasurer.

Dragon's office at 107 West Wade, Suite 7, Payson, Arizona is leased.

ITEM 2.  PROPERTIES
DRAGON PIT
         The Company no longer owns the Dragon Pit or any other  property in the
state of Utah.  This  property  was was sold to North  Lily  Mining  Company  in
exchange for the cancellation of all debt to North Lily.

ITEM 3.  LEGAL PROCEEDINGS

                               None

                                        5

<PAGE>





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

         None


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS


     Dragon's  common  stock  has  traded  on the  over-the-counter  market  for
approximately  60 years.  The range of high and low bid prices  for each  fiscal
quarter  during the two most  recently  completed  fiscal  years and the current
fiscal year is as follows:


         1997                             HIGH                     LOW

         First quarter                    $0.10                    $0.01
         Second quarter                   $0.10                    $0.01
         Third quarter                    $0.10                    $0.01
         Fourth quarter                   $0.10                    $0.01


         1996                             HIGH                     LOW

         First quarter                    $0.10                    $0.01
         Second quarter                   $0.10                    $0.01
         Third quarter                    $0.10                    $0.10
         Fourth quarter                   $0.10                    $0.10


     On March 22,  1998,  the high bid price of the  common  stock was $0.10 per
share.

     The  above bid  quotations  reflect  inter-dealer  prices,  without  retail
mark-up,  mark-down,  or commission  and may not  necessarily  represent  actual
transactions.

     As of December 31, 1997,  there were 311 record holders of Dragon's  common
stock.

     In the  past ten  (10)  years  Dragon  has not  paid or  declared  any cash
dividends and does not anticipate  paying dividends for the foreseeable  future.
It is  expected  that  any  net  income  will  be  retained  by  Dragon  for the
development of its business.



                                        6

<PAGE>



ITEM 6.                        SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                               1993                           1994                  1995             1996                1997
                               ----                           ----                  ----             ----             -------
<S>                            <C>                       <C>                    <C>               <C>                 <C>
Revenues                       $  0                          $0                   $ 177           $    221            $    151
Net (loss)                     $  (829)                  $(1,246)               $(399)            $(8,689)            $(7,648)
 per share                     $   (.01)                  $(.01)                $  (.01)          $ (.01)             $ (.01)
Total assets                   $   379                   $ 259                  $ 14,825          $ 9,869             $6,538
Shareholder's
  Equity                       $(2,100,430)              $(2,101,676)           $(2,087,075)      $(2,095,764)        $(2,103,412)
Cash dividends
 declared                      $     -0-                 $    -0-               $  -0-            $   -0-             $   -0-


</TABLE>

ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

     Dragon  Mining  Corporation  (the  Company)  was  incorporated  in 1911 and
operated  as a mining  exploration  company  until  1977.  The  Company  has not
received  any  revenue  from  planned  principal  operations  since 1977 and has
primarily been engaged in the  development of plans and  acquisitions  of assets
for its proposed mining and explorations operations. Accordingly, the Company is
considered to be in the development stage.

LIQUIDITY AND CAPITAL RESOURCES

     At  December  31,  1997,  1996 and 1995 the  Company  had  working  capital
deficiencies of $2,103,411, $2,095,764 and $2,087,075 respectively.

CORPORATE PLANS FOR 1998 AND BEYOND

     The  Company  is  attempting  to  acquire   additional  assets  by  issuing
additional  stock. It is also continuing  negotiations  with its major creditor,
who is also its shareholder, to restructure its debt.
There is no assurance that these efforts will be successful.

     During the year ended  December  31,  1995 the  Company  issued  15,000,000
shares for $15,000 to Marbella Capital Corp.  ("Marbella").  Marbella  increased
its ownership from 55.7% to 84.4% as result of this placement.

RESULTS OF OPERATIONS

1997 COMPARED TO 1996
      The Company  activities were limited to maintaining its status as a public
company which  generated a net loss of $(7,648)  compared to a loss of $( 8,689)
in 1996.



                                        7

<PAGE>



1996 COMPARED TO 1995
     The Company  activities  were limited to maintaining its status as a public
company which generated a net loss of $(8,689) compared to $(399) in 1995

1995 COMPARED TO 1994

     The Company had very little activity  resulting in just $576 of general and
administrative  expenses in 1995  compared  to $1,246 in 1994.  As a result of a
private placement the Company's cash increased which resulted in interest income
of $177.

IMPACT OF INFLATION

     Dragon will be affected by inflation  because market value of its potential
products (gold and silver) tends to fluctuate with inflation.  Other major costs
should not increase at a rate in excess of inflation.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated  financial  statements are filed under this Item beginning
on page F-1 the financial statements schedules required under Regulation S-X are
filed pursuant to Item 14 of this report.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  following  table  sets forth the names and ages of all  directors  and
executive officers of the Company as of the date of this report,  indicating all
positions and offices with the Company held be each person:

<TABLE>

              NAME                               AGE         SINCE                   POSITION AND OFFICE
<S>                                              <C>         <C>                     <C>
Thomas J.Ian Wright                              69          1994                    Chairman of the Board of Directors
Anton R. Hendriksz                               51          1994                    Director
Thomas L. Crom                                   42          1986                    President, Chief Executive Officer and
                                                                                     Director.
Nick DeMare                                      43          1994                    Secretary, Treasurer, Chief Financial Officer
                                                                                     and Director

</TABLE>

                                        8

<PAGE>



     No  family  relationships  exist  between  the  executive  officers  of the
registrant.  No  arrangements  or  understandings  exist  between any  executive
officer  and any other  person  appointed  by which the  executive  officer  was
elected or appointed.
     The  directors  of the Company  are  elected to hold office  until the next
annual meeting of shareholders  and until their  respective  successors are duly
elected and qualify.  Officers of the Company are elected  annually by the Board
of  Directors  and hold  office  until  their  successors  are duly  elected and
qualify.

     THOMAS J. IAN WRIGHT,  Chairman of the Board of Directors  since June 1994,
has director of European  operations for Barrington  Communications  Group since
1992. Mr. Wright is also a director of several other mining companies. From 1977
through  1992  he was a  mining  consultant  for  Laing  &  Cruickshank  a stock
brokerage firm based in the United Kingdom.

THOMAS L. CROM,  President  and a Director  since  February  1988.  Mr. Crom was
President of North Lily Mining Company, a publicly traded mining company,  until
October 1993. Mr Crom worked at North Lily in various  positions  from July 1988
until he  resigned in October  1993 to  establish a  management  company  called
Eureka Ventures, Inc. Mr. Crom is President of Eureka Ventures,Inc.  Eureka is a
management  consulting firm which provides services to the mining industry.  Mr.
Crom is a certified public  accountant and has a masters degree in business.  He
has been involved in the mining business for 15 years.

NICK DEMARE, a director since 1994 is president of a management  company,  Chase
Management,  which is based in  Vancouver  Canada.  In  addition  he  serves  as
director of various other public companies.  Mr DeMare is a Chartered Accountant
and has been involved in the mining business for 14 years.

ANTON R.  HENDRIKSZ,  a director  since 1994,  is Chairman of Eureka  Ventures a
management company which provides services to the mining industry. Mr. Hendriksz
was Chairman of North Lily Mining Company, a publicly traded company,  from 1991
until  August  1993.  Mr  Hendriksz  had been with North Lily  since  1987.  Mr.
Hendriksz is a chemical  engineer and has been  involved in the mining  business
for 26 years.

   ITEM 11.    EXECUTIVE COMPENSATION

     The  Company  has no  paid  employees  and  Directors  do not  receive  any
compensation for serving as directors.
     To provide  incentive  compensation  to officers  and key  employees of the
Company,  the shareholders of the Company adopted an Incentive Stock Option Plan
(the "Plan") on December 18, 1994.  The Plan provides for the  granting,  in the
discretion of the Company,  of options (the "Options") to purchase up to 300,000
shares of the Company's common stock. The Options are immediately exercisable at
a price which will not be less than the fair market value of the common stock on
the date of grant,  or 110% of such  fair  market  value if the  amount of stock
owned by an Option holder is more than 10% of the total combined voting power of
all  classes of the capital  stock of the  Company as of the date of grant.  the
Options are  exercisable for a period of up to ten years from the date of grant.
The Plan expired on October 31, 1994.
     Under this plan, there are outstanding Options to purchase a total of
150,000 shares of

                                        9

<PAGE>



common stock, all of which were granted during 1988 as follows:

<TABLE>
<CAPTION>
                                    Number of shares                                 Exercise price                      Expiration
OPTIONEE                            COVERED BY OPTIONS                                  PER SHARE                            DATE
<S>                                 <C>                                                  <C>                             <C>   <C>
Thomas L. Crom                      150,000                                              $0.02                           03/20/98

</TABLE>
     The Company is under no  obligation  to register or assist any  optionee in
registering  either the Options or the Option Stock under the federal securities
laws or any state securities laws. Both the Options and all Option Stock will be
"registered  securities"  as  defined  in  Rule  144 of the  General  Rules  and
Regulations of the  Securities  Act of 1933 (the "Act"),  and may not be offered
for sale,  sold,  or  otherwise  transferred  except  pursuant  to an  effective
registration  statement  under  the  Act  or  pursuant  to an  exemption  to the
satisfaction of the Company.  Accordingly,  all certificates  evidencing  shares
covered  by the  Options  and any  securities  issued and  replace or  exchanged
therefor, will bear a restrictive legend to this effect.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

     The  following  table sets forth  information,  as of March 22, 1998,  with
respect to the beneficial ownership of the Company's common stock by each person
known by the Company to be the beneficial owner of more than five percent of the
outstanding  common stock,  and by directors  and officers of the Company,  both
individually and as a group:

<TABLE>
<CAPTION>
                                  Shares owned
             BENEFICIAL OWNERS                                           BENEFICIALLY                        PERCENT OF CLASS
             -----------------                                           ------------                        ----------------
<S>                                                                      <C>                                             <C>
Thomas J. Ian Wright                                                     1,513,959                                       6.54%
128 Limmer Lane
Felpham,W. Bogner Regis
W. Sussex, England

Marbella Capital Corp.(1)<F1>                                            19,541,877                                      84.44%
1090 W. Georgia Street
Suite 1395
Vancouver, B.C. Canada

Thomas L. Crom                                                           150,000(2)<F2>                                  1.8%



     Based on 23,143,826  shares  outstanding  where the persons  listed on this
table have the right to obtain  additional  shares within 60 days from March 23,
1998.  These  additional  shares are deemed to be outstanding for the purpose of
the computing  securities of the class owned by such persons, but are not deemed
to  outstanding  for the purpose of computing  the  percentage  of class for any
other persons.

<FN>
<F1>
(1) Marbella Capital Corp.  is a privately owned Canadian corporation is owned 40% by Anton
R. Hendriksz, 30% by Nick DeMare and 30% by the 1993 Crom Living Trust.
<F2>
(2)  Includes 150,000 shares issuable upon exercise of an option. (See Item 11. EXECUTIVE
COMPENSATION).
</FN>
</TABLE>
                                       10

<PAGE>



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     At December 31, 1997 the amounts owed to Marbella were $2,100,000.




                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
         ON FORM 8-K

       A)          The following documents are filed as part of this report:

                   1.         Financial Statements:

                              Report of Independent Accountants
                              Consolidated Balance Sheets
                              Consolidated Statements of Operations
                              Consolidated Statements of Shareholders' Equity
                              Consolidated Statements of Cash Flows
                              Notes to Consolidated Financial Statements

                         2.   Financial Statements Schedules:

                              Schedule  V  - Property, Plant, and Equipment
                              Schedule VI  - Accumulated Depreciation and
                                             Amortization of Property, Plant
                                             and Equipment


     All other  schedules have been omitted  because they are not required,  are
inapplicable,  or  the  information  is  otherwise  included  in  the  financial
statements or notes thereto.

                         3.         Exhibits:

                                                              Form 10-K
Regulation                                                   consecutive
S-K NUMBER                          EXHIBITS                 PAGE NUMBER

    27            Financial Data Schedule                        ___




                                       11

<PAGE>






                                   SIGNATURES


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


                            DRAGON MINING CORPORATION



March 22, 1998                        By:    /S/THOMAS L. CROM
                                       Thomas L. Crom
                                       President, Chief executive officer and
                                       Director


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

March 22, 1998                     /S/THOMAS J. IAN WRIGHT
                                   Thomas J. Ian Wright, Chairman of the Board
                                   of Directors


March 22, 1998                    /S/THOMAS L. CROM
                                  Thomas L. Crom, President and Director
                                  (Principal Executive Officer)


March 22, 1998                    /S/NICK DEMARE
                                  Nick DeMare, Secretary, Treasurer
                                 (Principal Financial Officer)
                                  and Director


March 22, 1998
                                  Anton R. Hendriksz, Director












                                       12

<PAGE>



                            DRAGON MINING CORPORATION

                          (A DEVELOPMENT STAGE COMPANY)













                         UNAUDITED FINANCIAL STATEMENTS
                of an inactive Registrant per SEC 50456 Rule 3-11
                          for the years ended December
                           31, 1997, 1996 and 1995 and
                           period from January 1, 1978
                            through December 31, 1997











<PAGE>

<TABLE>


                            DRAGON MINING CORPORATION
                   BALANCE SHEETS, DECEMBER 31, 1997 AND 1996
<CAPTION>


                                    ASSETS                                       1997                             1996
                                                                                 ----                             ----
<S>                                                                             <C>                     <C>
Current Asset:
            Cash and Cash equivalents                                            $    6,538              $       9,869
                                                                                 ----------              -------------
                        Total current assets                                     $    6,538              $       9,869
Plant and equipment, net                                                                  0                          0
Mineral properties, net                                                                   0                          0
                                                                                 ----------              -------------
                        Total asset                                              $    6,538              $       9,869
                                                                                 ==========              =============


                       LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities:
            Accounts payable                                                     $   9,950                       5,633
            Due to Related Party                                                 2,100,000                   2,100,000
                                                                                 ---------                   ---------
                        Total current liabilities                                2,109,950                   2,105,633
                                                                                 ---------                   ---------

                        Total liabilities                                        2,109,950                   2,105,633
                                                                                 ---------                   ---------

Shareholders' deficit:
            Common  stock,  $001  par  value;   authorized  25,000,000;   issued
              23,143,826 shares as of December 31, 1997
              and 1996 respectively                                                 23,144                      23,144

            Additional paid-in Capital                                           3,103,889                   3,103,889
            Accumulated Deficit                                                 (5,230,445)                 (5,222,797)
                                                                                -----------                 -----------
                        Total shareholders' equity                              (2,103,412)                 (2,095,764)
                                                                                -----------                 -----------

                        Total liabilities and shareholder's equity              $    6,538                  $    9,869
                                                                               ===========                  ==========



</TABLE>







    The accompanying notes are an integral part of the financial statements.
                                       F-2


<PAGE>

<TABLE>


                            DRAGON MINING CORPORATION
                             STATEMENTS OF OPERATION
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>


                                                            1997                    1996                        1995
                                                          ------                  ------                  ----------
<S>                                                    <C>                      <C>
Revenue:
            Interest income                              $   151                 $   221                 $       177
                                                         -------                 -------                 -----------
                        Total Revenue                        151                     221                         177

Operating expense:
            General and administrative expenses            7,799                    8,910                        576
                                                           -----                -----------             ------------
                        Total operating expenses           7,799                    8,910                        576


                                    Net Income (Loss)    $(7,648)                $(8,689)               $      (399)
                                                         ========                ========               ============



Income (Loss) per common share                          $   (.01)                $  (.01)              $      (.01)
                                                        =========                ========              ============


Weighted average shares outstanding                    23,143,826                23,143,826              13,768,826
                                                       ==========                ==========              ==========

</TABLE>

















    The accompanying notes are an integral part of the financial statements.
                                       F-3


<PAGE>

<TABLE>


                            DRAGON MINING CORPORATION
                       STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE YEARS ENDED DECEMBER 31, 1997 1996 AND 1995
<CAPTION>



                                                                                                Deficit
                                                                                                Accumulated
                                                                                Additional      during  the
                                                        COMMON STOCK             Paid-in        Development
                                                SHARES               AMOUNT      CAPITAL        STAGE                     TOTAL
<S>                                            <C>                <C>         <C>               <C>                    <C>
Balance, December 31, 1978                      1,875,000            $1,875      $ 868,232      $ (338,814)             $ 531,293

Dividends paid in 1982 ($.27 per share)             -0 -             -0-         (167,436)           -0-                 (167,436)

Common stock issued:
    1982                                          418,000             418         149,582            -0-                  150,000
    1983                                        4,620,000            4,620      1,640,088            -0-                1,644,708
    1984                                        1,230,826            1,231        437,173            -0-                  438,404

Capital contribution in 1986                        -0-                -0-        176,250            -0-                  176,250

Net loss ten years ended December 31, 1987          -0-               -0-          -0-          (4,080,804)            (4,080,804)
                                               -------------      -----------   ---------       -----------            -----------

Balance, December 31, 1987                      8,143,826            8,144      3,103,889       (4,419,618)            (1,307,585)

Net (loss) year ended December 31, 1988               -0-             -0-           -0-           (999,912)              (999,912)
Net (loss) year ended December 31, 1989               -0-             -0-           -0-           (681,585)              (681,585)
Net (loss) year ended December 31, 1990               -0-             -0-           -0-           (474,867)              (474,867)
Net income year ended December 31, 1991               -0-             -0-           -0-          1,361,063              1,361,063
Net income year ended December 31, 1992               -0-             -0-           -0-              3,285                  3,285
Net (loss) year ended December 31, 1993               -0-             -0-           -0-               (829)                  (829)
Net (loss) year ended December 31, 1994               -0-             -0-           -0-             (1,246)                (1,246)
Net (loss) year ended December 31, 1995               -0-             -0-           -0-               (399)                  (399)

Common stock issued in 1995                     15,000,000          15,000          -0-                -0 -                15,000

Net (loss) year ended December 31, 1996             -0-               -0-           -0-             (8,689)                (8,689)
Net (loss) year ended December 31, 1997             -0-               -0-           -0-             (7,648)                (7,648)
                                                -------               ---           ---         -----------                -------

Balance, December 31, 1996                      23,143,826         23,144     3,103,889         (5,230,445)            (2,103,412)
                                                ==========         ======      =========        ===========            ===========

</TABLE>


















    The accompanying notes are an integral part of the financial statements.
                                       F-4


<PAGE>



<TABLE>

                                                                 DRAGON MINING CORPORATION
                                                                  STATEMENTS OF CASH FLOWS
                                                    FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>
                                                                                                                       Cumulative
                                                            1997                    1996               1995            PERIOD
                                                            ----                    ----               ----            ------
<S>                                                         <C>                     <C>              <C>               <C>
Cash flows from operating activities:
  Net (loss)                                                (7,648)                 (8.689)            (399)           (4,891,631)

Adjustments   to  reconcile  net  (loss)  to  net  cash  provided  by  operating
activities:
   Depreciation                                               -0-                   -0-                -0-                328,376
   Loss on sale of equipment                                  -0-                   -0-                -0-                188,562
   Realized loss on sale of securities                        -0-                   -0-                -0-                 40,515
   Unrealized loss on securities                              -0-                   -0-                -0-                 32,620
    Deferred income tax benefit                               -0-                   -0-                -0-                (75,000)
    Write-down and abandonment of mineral properties          -0-                   -0-                -0-              1,834,127
    Write-down and abandonment of equipment                   -0-                   -0-                -0-              1,166,102
    (Increase) decrease of receivables                        -0-                   -0-                -0-                 12,746
    (Decrease) increase of liabilities                       4,317                  (3,733)             35              1,040,167
                                                            ------                  -------            ---              ---------
        Total adjustments                                    4,317                  (3,733)             35              4,568,215
                                                            ------                  -------            ---              ---------
             Net cash provided by operating activities      (3,331)                 (4,956)           (434)              (325,816)
                                                            -------                 -------           -----             ---------

Cash flows from investing activities:
   Sale of marketable equity securities                       -0-                   -0-                -0-                 76,866
   Sale of certificates of deposits                           -0-                   -0-                -0-                828,024
   Proceeds from sale of equipment                            -0-                   -0-                -0-                 77,500
   Acquisition of office equipment                            -0-                   -0-                -0-                (20,335)
   Construction of mill and equipment                         -0-                   -0-                -0-             (2,099,058)
   Acquisition and exploration of mineral properties          -0-                   -0-                -0-             (1,909,127)
                                                            -----                   ---                ---             -----------

            Net cash used in investing activities             -0-                   -0-                -0-             (3,046,130)
                                                            -----                   ---                ---             -----------

Cash flows from financing activities:
   Proceeds from issuance of common stock                     -0-                   -0-                15,000           2,248,112
   Payments of debt                                           -0-                   -0-                -0-             (1,081,259)
   Proceeds from issuance of debt                             -0-                   -0-                -0-              2,705,123
   Dividends paid                                             -0-                   -0-                -0-               (506,250)
                                                            -----                   -----              ---             -----------
            Net cash provided by
            financing activities                              -0-                   -0-                15,000           3,365,726
                                                            -----                   ------             -------         ----------

            Net increase (decrease) in cash                 (3,331)                 (4,956)           (14,566)             (3,820)

Cash and cash equivalents at beginning of year               9,869                  14,825                 259             40,721
                                                            ------                  ------           ---------            -------

Cash and cash equivalents at end of year                     6,538                   9.869              14,825             36,901
                                                            ======                  ======           =========             ======



                          Supplemental schedule of noncash investing and financing activities

Cash paid during the year for:
    Interest                                                  -0-                     -0-              -0-                  -0-
                                                              -0-                     -0-              -0-                  -0-
                                                             ====                    ====             ====                 ====
</TABLE>



    The accompanying notes are an integral part of the financial statements.
                                       F-5


<PAGE>



                            DRAGON MINING CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

            OPERATIONS AND BASIS OF PRESENTATION:

            Dragon Mining  Corporation (the Company) was incorporated in Utah in
            1911 and operated as a mining and mineral  exploration company until
            1977. The Company has not received any revenue from operations since
            1977 and has been primarily  engaged in the development of plans and
            acquisition  of  assets  for its  proposed  mining  and  exploration
            operations.  Accordingly,  the  Company is  considered  to be in the
            development  stage, and cumulative  amounts required to be presented
            by development  stage  enterprises have been presented since January
            1, 1978 in the accompanying financial statements.

            Due to a failure to file a 1992 Utah  annual  report the Company was
            mistakenly dissolved by the State of Utah.  Subsequently the Company
            has been reincorporated in the State of Utah.

            The Company's financial  statements have been presented on the basis
            that it is a going concern,  which  contemplates  the realization of
            assets and the  satisfaction  of liabilities in the normal course of
            business.  The Company has incurred  substantial  losses  during the
            last three years.  The Company's  current  liabilities  exceeded its
            current  assets by $2,103,411  at December 31, 1997.  The Company is
            continuing  discussions  with its major creditor and  shareholder to
            restructure the Company's debt.  Continued  existence of the Company
            is  dependent  upon the  Company's  ability to perform  the above is
            uncertain and,  therefore,  the Company may be unable to continue in
            existence.

            CASH EQUIVALENTS:

            The Company  defines  cash  equivalents  as all  short-term,  highly
            liquid investments with original maturity dates less than 90 days.

            MARKETABLE SECURITIES:

            Current  marketable  equity  securities  are carried at the lower of
            their aggregate cost or market value.  Net realized gains and losses
            on   security   transactions   are   determined   on  the   specific
            identification cost basis. Unrealized losses net of unrealized gains
            are included in the determination of net income.




                                    Continued
                                       F-6


<PAGE>



                            DRAGON MINING CORPORATION
                     NOTES TO FINANCIAL STATEMENT, CONTINUED

            PLANT AND EQUIPMENT:

            Plant  and  equipment  is  carried  is  carried  at  cost.  Mill and
            equipment are depreciated using the straight-line  method over their
            estimated  useful lives of 5 to 15 years or the  units-of-production
            method based on estimated  tons of ore reserves if the  equipment is
            located at a producing property with a shorter economic life. Mining
            equipment is being depreciated  using the straight-line  method over
            their   estimated   useful   life   of  3  to  15   years   or   the
            units-of-production  method based on estimated tones of ore reserves
            if the  equipment is located at a producing  property with a shorter
            economic life.  Office equipment and fixtures are being  depreciated
            using the straight-line method over their estimate useful lives of 3
            to 10 years. When such assets are sold or otherwise disposed of, the
            costs and  accumulated  depreciation  are removed from the accounts,
            and any resulting gains or losses are charged to operations.

            MINERAL PROPERTIES:

            Direct costs related to the acquisition, exploration and development
            of mineral properties held or controlled by the Company are deferred
            on an individual property basis until the viability of a property is
            determined. General exploration costs are expensed as incurred. When
            a property is placed in commercial  production,  such deferred costs
            are depleted using the units-of-production method. Management of the
            Company  periodically  reviews the recoverability of the capitalized
            mineral  properties  and  mining  equipment.  Management  takes into
            consideration  various  information  including,  but not limited to,
            historical  production  records taken from previous mine operations,
            results  of  exploration  activities  conducted  to date,  estimated
            future metal prices and reports and opinions of outside  geologists,
            mine  engineers,  and  consultants.  When  it is  determined  that a
            project or property will be abandoned or its carrying value has been
            impaired,  a provision is made for any expected  loss on the project
            or property.

            RECLAMATION COSTS:

            Post-closure  reclamation and site  restoration  costs are estimated
            based upon  environmental  and regulatory  requirements  and accrued
            over the  life of the mine  using  the  units-of-production  method.
            Current   expenditures   relating  to  ongoing   environmental   and
            reclamation programs are expensed as incurred.





                                    Continued
                                       F-7


<PAGE>



                            DRAGON MINING CORPORATION
                    NOTES TO FINANCIAL STATEMENTS, CONTINUED

            INCOME TAXES:

            Certain  expenses  charged  against  income for financial  reporting
            purposes are  deductible  in other  periods for income tax purposes.
            Deferred  taxes are  provided  for such timing  differences  and are
            calculated by the net-change method.

            LOSS PER COMMON SHARE:

            Loss per common  share for each of the three years  presented do not
            include the effect of outstanding stock options,  as their effect is
            antidilutive.

2.          PLANT AND EQUIPMENT:

            Plant and  equipment  consists of the following at December 31, 1997
and 1996:

<TABLE>
<CAPTION>
                                                                     1997                    1996
                                                                   --------                -------
                        <S>                                        <C>                    <C>
                        Mining equipment                           $   -0-                $  -0-
                        Office equipment and fixtures                  -0-                   -0-
                                                                   ---------              ---------
                                                                       -0-                   -0-
                        Less accumulated depreciation                  (0)                  (-0-)
                                                                   ----------             ---------
                                    Mining equipment, net          $    0                 $       0
                                                                   ===========            =========
</TABLE>

3.          MINERAL PROPERTIES:

            The  Company  owned the Dragon Pit which  consists of a total of 380
            acres in Juab County,  Utah.  The original  cost of this property of
            $1,769,972  was fully  amortized in prior years.  This  property was
            sold in 1996.

            The Company's  investment  in mineral  properties as of December 31,
            1997 and 1996 is as follows:

<TABLE>
<CAPTION>

                                                                 1997                    1996
                                                             ------------            ------------
                        <S>                                  <C>                     <C>
                        Mineral properties                   $      -0-              $     -0-
                        Less accumulated amortization               -0-                   (-0-)
                                                             ------------            ------------
                                    Mineral properties, net  $       0               $      0
                                                             ============            ============
</TABLE>





                                    Continued
                                       F-8


<PAGE>



                            DRAGON MINING CORPORATION
                    NOTES TO FINANCIAL STATEMENTS, CONTINUED

4.          NOTES PAYABLE TO RELATED PARTY:

            Notes payable to related party  $2,100,000 bear interest at 8% as of
            December 31, 1997 and 1996 and is due on demand (see also note 7).

<TABLE>
<CAPTION>

                                                                                           1997                    1996
                                                                                        ----------              ----------
                        <S>                                                             <C>                     <C>
                        Demand note to related party                                    $2,100,000              $2,100,000
                                                                                        ----------              ----------
                                                                                        $2,100,000              $2,100,000
                                                                                        ==========              ==========
</TABLE>

5.          INCOME TAXES:

            For  U.S.  income  tax  reporting  purposes,  the  Company  has  net
            operating loss  carry-forwards of approximately  $5,097,584 expiring
            from the year 2000 to the year 2016,  as of the year ended  December
            31, 1997.  Utilization  of these net operating  losses is restricted
            under Internal Revenue Code Section 382.

6.          STOCK OPTION AGREEMENTS:

            On  December  18,  1984 the  shareholders  adopted  and  approved an
            incentive  stock option plan. The plan provides for officers and key
            employees  of the Company to  purchase  up to 300,000  shares of the
            Company's  unregistered  common stock. The options granted under the
            plan are  immediately  exercisable  at the fair market value of free
            trading  stock on the  date of  grant  or 110% of such  value if the
            optionee  owns more  than 10% of the  combined  voting  power of all
            classes of the Common  stock as of the grant  date.  The options are
            exercisable over a period not longer than ten years from the date of
            grant.

            Under this plan,  the Company  granted  options to purchase  150,000
            shares of  unregistered  common stock at an exercise  price of $0.02
            per  share to a member  of the  Board of  Directors  in 1988.  As of
            December  31,  1997  150,000 of the  options  were  outstanding  and
            exercisable,  and they expire on March 20, 1998,  ten years from the
            date of grant.










                                    Continued
                                       F-9



<PAGE>



                            DRAGON MINING CORPORATION
                    NOTES TO FINANCIAL STATEMENTS, CONTINUED




7.           RELATED PARTY TRANSACTIONS:

            During the year ended December 31, 1997:

                        -The Company was  provided  management,  consulting  and
                        office  administration by its majority  shareholder at a
                        cost of $4,800.

                        -Interest expense of $168,000 on the note payable to
                        related party was cancelled.

            During the year ended December 31, 1996:

                        -The Company was  provided  management,  consulting  and
                        office  administration by its majority  shareholder at a
                        cost of $4,800..

                        -Interest expense of $168,000 on the note payable to
                        related party was cancelled.

            During the year ended December 31, 1995:

                        -The Company was  provided  management,  consulting  and
                        office   administration  at  no  cost  by  its  majority
                        shareholder.

                        -Interest expense of $168,000 on the note payable to
                        related party was cancelled.















                                    Continued
                                      F-10


<PAGE>

<TABLE>

                            DRAGON MINING CORPORATION
                                   SCHEDULE VI
            ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>
                                   Balance at
                                   Beginning                                                   Other               Balance at
            CLASSIFICATION         OF YEAR     ADDITIONS               RETIREMENT              CHANGES             END OF YEAR

<S>                                <C>              <C>               <C>                       <C>                <C>
Year ended December 31, 1997:
 Office Equipment                  $    -0-         -0-                   -0-                    -0-               $       -0-
 Mining and Milling Equipment      $    -0-         -0-                   -0-                    -0-               $       -0-
                                   --------         ---                   ---                    ---               -----------
                        Total      $    -0-         -0-                   -0-                    -0-               $       -0-
                                   ========         ===                   ===                    ===               ===========

Year ended December 31, 1996:
   Office Equipment                $ 20,535         -0-                (20,535)                  -0-               $       -0-
   Mining and Milling Equipment    $280,214         -0-                (280,214)                 -0-               $       -0-
                                   --------        ----               ----------                -----              -----------
                        Total      $300,549         -0-                (300,549)                 -0-               $       -0-
                                   ========        ====               ==========                =====              ===========


Year ended December 31, 1995:
 Office Equipment                  $ 20,535         -0-                   -0-                    -0-               $    20,535
 Mining and Milling Equipment      $280,214         -0-                   -0-                    -0-               $   280,214
                                   --------       -----                  -----                  -----              -----------
                        Total      $300,549         -0-                   -0-                    -0-               $   300,549
                                   ========       =====                  =====                  =====              ===========


</TABLE>





                                    Continued
                                      F-11


<PAGE>


<TABLE>


                            DRAGON MINING CORPORATION
                                   SCHEDULE V
                          PROPERTY, PLANT AND EQUIPMENT
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<CAPTION>
                                         Balance at
                                         Beginning                                    Other              Balance at
            CLASSIFICATION               OF YEAR     ADDITIONS         RETIREMENT     CHANGES            END OF YEAR

<S>                                      <C>              <C>       <C>                 <C>               <C>
Year ended December 31, 1997:
   Office Equipment                      $      -0-       -0-              -0-          -0-               $     -0-
   Mining and Millling Equipment         $      -0-       -0-              -0-          -0-               $     -0-
                                         ----------       ---              ---          ---               ---------
                        Total            $      -0-       -0-              -0-          -0-               $     -0-
                                         ==========       ===              ===          ===               =========

Year ended December 31, 1996:
   Office Equipment                      $  20,535        -0-       (   20,535)         -0-               $     -0-
   Mining and Milling Equipment          $ 280,214        -0-         (280,214)         -0-               $     -0-
                                         ---------        ---         ---------         ---               ---------
                        Total            $ 300,549        -0-         (300,549)         -0-               $     -0-
                                         =========        ===         =========         ===               =========


Year ended December 31, 1995:
 Office Equipment                        $ 20,535         -0-              -0-          -0-               $  20,535
 Mining and Milling Equipment            $280,214         -0-              -0-          -0 -              $ 280,214
                                         --------         ---              ---          ----              ---------
                        Total            $300,549         -0-              -0-          -0-               $ 300,549
                                         ========         ===              ===          ===               =========

</TABLE>























                                    Continued
                                      F-12


<PAGE>







                                   Exhibit 27

                            Financial Data Schedule

<PAGE>