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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  Form 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 [Fee Required]

                        For the fiscal year ended      December 31, 1997
                                                 ------------------------------

[ ]  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    33-79320
                                               --------------------------------

                         SUNNYLAND HOLDINGS CORPORATION
-------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)


            Delaware                                     54-1706550
----------------------------------------   ------------------------------------
    (State or other jurisdiction of        (I.R.S. Employer Identification No.)
    incorporation or organization)


           6231 Leesburg Pike, Suite 308 Falls Church, Virginia 22044
----------------------------------------   ------------------------------------
(Address of principal executive offices)                (Zip Code)


Issuer's telephone number (703)   237-8230-
                         ------ -----------------------


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


         Title of each class                Name of each exchange on which
                                            registered
        Common
----------------------------------------   ------------------------------------


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


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


-------------------------------------------------------------------------------
                                (Title of class)

-------------------------------------------------------------------------------
                                (Title of class)


     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 [ ]


SEC 2337 (02-94)


<PAGE>

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not 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]

     State issuer's revenues for its most recent fiscal year.    -0-
                                                              -----------

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act).

Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.

    (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.  Yes [ ]  No [ ]

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
    2,195,000
-----------------


                      DOCUMENTS INCORPORATED BY REFERENCE

     If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).

Transitional Small Business Disclosure Format (Check one):  Yes    ; No
                                                               ----    ----

                              GENERAL INSTRUCTIONS

A.   Use of Form 10-KSB.

     This Form may be used by a "small business issuer," defined in Rule 12b-2
of the Exchange Act, for its annual and transitional reports under section 13 or
15(d) of that Act. For further information as to eligibility to use this Form
see Item 10(a) of Regulation S-B (17 CFR 228.10 et seq.). Annual reports on this
form shall be filed within 90 days after the end of the fiscal year covered by
the report. Transition reports shall be filed within the time period specified
in Rules 13a-10 or 15d-10 of the Exchange Act (ss 240.13a-10 or 240.15d-10
of this chapter).

B.   Application of General Rules and Regulations.

     The General Rules and Regulations under the Exchange Act (ss 240.0-1
et seq.), particularly Regulation 12B (ss 240.12b-1 et seq.) contain
certain general requirements for reports on any form which should be carefully
read and observed in the preparation and filing of reports on this Form.

C.   Signature and Filing of Report.

1.   File three "complete" copies and five "additional" copies of the
     registration statement with the Commission and file at least one complete
     copy with each exchange on which the securities will be registered. A
     "complete" copy includes financial statements, exhibits and all other
     papers and documents. An "additional" copy excludes exhibits. One of the
     copies filed with the Commission and each exchange should be manually
     signed; all other copies should have typed or printed signatures.


                                       2


<PAGE>

ITEM 1.  Description of Business

         The Company was incorporated in the State of Delaware on November 5,
1993. Since inception, the principal activity of the Company has been directed
to organizational efforts and obtaining initial financing, as of the date
hereof, the Company has not entered into any other business activity. Company
startup costs have been provided by financing from the president and vice
president of the company, as disclosed in the financial statements herewith. No
other initial financing has been obtained.

         The company was organized to engage in the acquisition, construction
and/ or operation of income properties, and any and all business activities
incidental thereto ("Income properties"). Initially, the Company expects to seek
out income properties in Seoul and Cheju Island, South Korea. As of the date
hereof, the Company has not acquired or entered into any definitive contracts to
acquire any income properties. The Company expects to consider other areas in
the Pacific Rim for development at such time as, in the opinion of Management,
there are opportunities for the Company's involvement. There are no immediate
plans for evaluation of sites in the pacific rim. In addition, the Company
intends to seek out income properties in the United States. The Company
recognizes that, as a result of its limited financial, managerial and other
resources, the number of available, suitable income properties from which to
choose may be limited.

         In general, Management intends to finance income properties through
debt obligation such as mortgages at competitive market rates, debentures,
and/or investors' equity. Management contacted various sources for possible
financing and will continue to meet with potential private investors or lenders.
The Company has not set a time frame within which its financing goals must be
met, other than seeking to make the arrangement for financing at the earliest
possible time. If such financing is arranged, repayment of debt and debenture
obligations will be made from earnings from operation of income properties,
stock offerings, and/or equity interest in the Company.

         The Company will minimize its cash requirements by deferring salaries
to its officers until and if acquisition of one or more income properties is
accomplished. Incidental expenses of operation prior to acquisition of income
properties will be provided by loans to the company or purchases of stock from
the company by one or more of its current shareholders. The Company expects said
current shareholders to provide such assistance until an acquisition is
accomplished or until the Company changes its plan of operation or terminates
its activities. There is no binding agreement pursuant to which the current
shareholders must continue to make such loans.

         If income properties are not available at the time the Company is
prepared to make an acquisition or if on further investigation such projects are
not suitable, the Company will continue to seek investment projects. As of the
date hereof, the Company has not entered into any binding agreements or
contracts, written or otherwise, for such financing; nor has management selected
any form of financing or entered into any contracts of arrangement thereof.



<PAGE>

         The Company does not plan to do any product research or development in
the next twelve months or thereafter, nor does the Company expect any
significant changes in the number of employees. The Company does not presently
have any expectation of purchasing any plant or significant equipment.

         The Company's principal business objective is to seek long term growth
potential in income properties in which it participates rather than immediate
short-term earnings. There can be no assurance that any of Management's
objectives or intentions will be met.

ITEM 2.  Description of property

         The Company does not own property. It leases office space from S.D.
Sunnyland Enterprises, Inc., (its parent company) and is physically located in
the same offices.

ITEM 3.  Legal Proceeding

         There are no legal proceedings affecting the company to date.

                                     PART II

ITEM 6.  Management Discussion and Analysis

         During the next year the Board of Directors will concentrate on
acquiring commercial properties in the United States; particularly in Northern
Virginia. Such acquisition will depend on the Company's ability to raise capital
in the future.

         Mr. Kyung Hoon Pyun of Seoul, Korea was reappointed to the Board of
Directors effective July 16, 1997.

         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

                                         /s/ Syung D. Han
                                     By_______________________________
                                         Syung D. Han, President, CEO

                                             March 30, 1998
                                     Date______________________________


                                         /s/ Albert L. Stewart
                                     By_______________________________
                                         Albert L. Stewart, Vice President
                                         Secretary

                                             March 30, 1998
                                     Date______________________________




<PAGE>


                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                DECEMBER 31, 1997, 1996 AND 1995 AND THE PERIOD
                       FROM NOVEMBER 5, 1993 (INCEPTION)
                              TO DECEMBER 31, 1997









                           These financial statements
                             may be reproduced only
                               in their entirety.


<PAGE>



                         SUNNYLAND HOLDINGS CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

          FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND THE
          PERIOD FROM NOVEMBER 5, 1993 (INCEPTION) TO DECEMBER 31, 1997

TABLE OF CONTENTS
================================================================================

INDEPENDENT AUDITOR'S REPORT                                                   2

EXHIBIT A    Balance Sheets
               December 31, 1997 and 1996                                      3


EXHIBIT B    Statements of Changes in Stockholders' Deficit
               For the Years Ended December 31, 1997, 1996 and 1995 and
               For the Period From November 5, 1993 (Inception)
               to December 31, 1997                                            4


EXHIBIT C    Statements of Operations
               For the Years Ended December 31, 1997, 1996 and 1995 and
               For the Period From November 5, 1993 (Inception)
               to December 31, 1997                                            5


EXHIBIT D    Statements of Cash Flows
               For the Years Ended December 31, 1997, 1996 and 1995 and
               For the Period From November 5, 1993 (Inception)
               to December 31, 1997                                            6


NOTES TO FINANCIAL STATEMENTS                                               7-10


<PAGE>

                 [ROSS, LANGAN & McKENDREE, L.L.P. LETTERHEAD]


                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------

Board of Directors and Stockholders
Sunnyland Holdings Corporation
Falls Church, Virginia

We have audited the accompanying balance sheets of the Sunnyland Holdings
Corporation (a development stage company) as of December 31, 1997 and 1996 and
the related statements of changes in stockholders' deficit, operations and cash
flows for the years ended December 31, 1997, 1996 and 1995, and for the period
from November 5, 1993 (inception) to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Sunnyland Holdings
Corporation as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years ended December 31, 1997, 1996 and 1995, and
from November 5, 1993 (inception), to December 31, 1997, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 4 to the financial
statements, the Company has not commenced operations or obtained any outside
financing or capital. These conditions raise substantial doubt about its ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note 4. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


                                         /s/ Ross, Langan & McKendree L.L.P.
                                         ______________________________________
                                         CERTIFIED PUBLIC ACCOUNTANTS

McLean, Virginia
March 11, 1998


Home page: http://www.rimcpa.com  E-mail: info@rimcpa.com     Page 2 of 10 Pages


<PAGE>

                                                                       EXHIBIT A

                         SUNNYLAND HOLDINGS CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEETS



                                     ASSETS

                                                                December 31,
                                                            -------------------
                                                              1997       1996
                                                            --------  ---------
CURRENT ASSETS
  Cash and cash equivalents (Note 1)                        $  1,085   $    112
                                                            -------------------

TOTAL ASSETS                                                $  1,085   $    112
                                                            ===================

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accrued expenses (Note 4)                                 $     -    $ 25,000
  Current portion of related party
   notes payable (Note 2)                                         -      39,077
                                                            -------------------

TOTAL CURRENT LIABILITIES                                         -      64,077

LONG TERM LIABILITIES
  Related party notes payable - net
   of current portion (Note 2)                                81,967     27,526
                                                            -------------------

TOTAL LIABILITIES                                             81,967     91,603
                                                            - - - - -  - - - - -

COMMITMENTS AND CONTINGENCIES (Note 4)                            -          -

STOCKHOLDERS' DEFICIT (Exhibit B)
  Common stock; $.00001 par value;
  100,000,000 shares authorized; 2,195,000
  issued and outstanding as of December 31, 1997
  and 1996                                                        22         22
  Additional paid-in-capital                                 294,530    224,753
  Deficit accumulated during development stage              (375,434)  (316,266)
                                                            --------------------

TOTAL STOCKHOLDERS' DEFICIT                                  (80,882)   (91,491)
                                                            -------------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                 $  1,085  $     112
                                                            ===================


See independent auditor's report. The accompanying notes are an integral part of
these financial statements.

                                                              Page 3 of 10 Pages


<PAGE>

                                                                       EXHIBIT B

                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
            FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND
     FOR THE PERIOD FROM NOVEMBER 5, 1993 (INCEPTION) TO DECEMBER 31, 1997



<TABLE>
<CAPTION>
                                                     Common Stock         Additional           Deficit            Total
                                                ----------------------     Paid-in       Accumulated During    Stockholders'
                                                 Shares        Amount      Capital       Development Stage       Deficit
                                                --------      --------    ----------     ------------------    -------------
<S><C>
BALANCE AT NOVEMBER 5, 1993                           -       $    -       $    -            $     -             $     -

    Original common stock issue
      ($.00001 per share, February 5, 1994)
        (Note 3)                                3,120,000           31          -                  -                    31
    Contributed services and
      facilities (Note 5)                             -            -         85,230                -                85,230
    Net loss (Exhibit C)                              -            -            -             (149,162)           (149,162)
                                             -------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1994                    3,120,000           31       85,230           (149,162)            (63,901)
    Contributed services and
      facilities (Note 5)                             -            -         69,737                -                69,737
    Net loss (Exhibit C)                              -            -            -              (84,654)            (84,654)
                                             ------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1995                    3,120,000           31      154,967           (233,816)            (78,818)

    Cancellation of common stock (Note 3)      (1,000,000)         (10)          10                -                   -
    Contributed services and
      facilities (Note 5)                             -            -         69,777                -                69,777
    Common stock issue (Note 3)                    75,000            1           (1)               -                   -
    Net loss (Exhibit C)                              -            -            -             (82,450)             (82,450)
                                             ------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1996                    2,195,000           22      224,753          (316,266)             (91,491)
    Contributed services and
      facilities (Note 5)                             -            -         69,777                -                69,777
    Net loss (Exhibit C)                              -            -            -             (59,168)             (59,168)
                                             ------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1996                    2,195,000         $ 22     $294,530         ($375,434)            ($80,882)
                                             ==============================================================================
</TABLE>

See independent auditor's report.  The accompanying notes are an integral part
of these financial statements.

                                                              Page 4 of 10 Pages

<PAGE>

                                                                       EXHIBIT C

                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS
        FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND FOR THE
         PERIOD FROM NOVEMBER 5, 1993 (INCEPTION) TO DECEMBER 31, 1997


<TABLE>
<CAPTION>
                                                       Years Ended December 31,         November 5, 1993
                                                    -------------------------------      (Inception) to
                                                      1997       1996        1995       December 31, 1997
                                                    --------   --------    --------     -----------------
<S><C>
REVENUE                                             $    -     $    -      $    -           $       -
                                                    - - - - - - - - - - - - - - - -         - - - - - -

EXPENSES
    Salaries - related parties                        65,000     65,000      65,000             270,830
    Payroll taxes - related parties                    4,777      4,777       4,737              20,091
    Rent and telephone - related parties (Note 4)      8,400      8,400       7,500              32,700
    Professional fees                                  3,492      3,150       3,371              62,641
    Office expense                                        56        233       1,007               2,049
    Travel                                             2,262        -         2,762               9,065
    Fees and licenses                                    -          768         -                 1,458
    Printing                                             -          -            69                 901
    Bank charges                                         132        122         108                 513
    Miscellaneous                                         49        -           100                 186
                                                    -------------------------------         -----------

    Total expenses                                    84,168     82,450      84,654             400,434
                                                    -------------------------------         -----------


NET LOSS FROM OPERATIONS                             (84,168)   (82,450)    (84,654)           (400,434)

OTHER INCOME                                          25,000        -           -                25,000
                                                    -------------------------------         -----------
NET LOSS                                            ($59,168)  ($82,540)   ($84,654)          ($375,434)
                                                    ===============================         ===========
NET LOSS PER SHARE                                   ($ 0.02)    ($0.03)     ($0.03)             ($0.13)
                                                    ===============================         ===========
WEIGHTED AVERAGE NUMBER OF SHARES                  2,361,660  2,541,875   3,120,000           2,799,250
                                                   ================================         ===========
</TABLE>

See independent auditor's report. The accompanying notes are an integral part of
these financial statements.

                                                              Page 5 of 10 Pages



<PAGE>

                                                                       EXHIBIT D

                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF CASH FLOWS
        FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 AND FOR THE
         PERIOD FROM NOVEMBER 5, 1993 (INCEPTION) TO DECEMBER 31, 1997

                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


<TABLE>
<CAPTION>
                                                     Years Ended December 31,            November 5, 1993
                                               ------------------------------------       (Inception) to
                                                  1997         1996          1995        December 31, 1997
                                                --------     --------      --------      -----------------
<S><C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss (Exhibit C)                        ($59,168)    ($82,450)     ($84,654)         ($375,434)
    Adjustments to reconcile net loss to net
      cash used by operating activities:
        Contributed services and facilities -
        related parties                           69,777       69,777        69,737            294,552
        Decrease in accrued expenses             (25,000)         -             -                  -
                                                 ----------------------------------          ---------

        Net cash used by operating activities    (14,391)     (12,673)      (14,917)           (80,882)
                                                 ----------------------------------          ---------


CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from related party notes payable     15,364       12,354        15,025             81,967
                                                 ----------------------------------          ---------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS                                     973         (319)          108              1,085

CASH AND CASH EQUIVALENTS -
BEGINNING OF THE YEAR                                112          431           323                -
                                                 ----------------------------------          ---------

CASH AND CASH EQUIVALENTS -
END OF THE YEAR                                  $ 1,085     $    112      $    431          $   1,085
                                                 ==================================          =========
</TABLE>


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

    The Company issued 3,120,000 shares of common stock at inception, and
    received contributed capital in exchange for services rendered and office
    facilities from various related parties. The value of the common stock and
    contributed capital totals $224,775.

    During 1996, the Company acquired and cancelled, at no cost, 1,000,000
    shares of previously issued common stock in exchange for 75,000 shares of
    common stock.

    During 1997, the Company consolidated related party notes payable having an
    aggregate balance of $66,603 and issued new notes payable (Note 2).

See independent auditor's report. The accompanying notes are an integral part of
these financial statements.

                                                              Page 6 of 10 Pages


<PAGE>

                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

    Development Stage Operations

    Sunnyland Holdings Corporation (the Company) was incorporated on November 5,
    1993 for the purpose of acquiring, constructing and operating hotels and
    parking facilities in South Korea and its Cheju Island territory. The
    Company is currently in the development stage of operations. Efforts are
    currently concentrated in the areas of marketing and raising equity capital.
    The Company has registered with the Securities and Exchange Commission.

    Cash and Cash Equivalents

    The Company considers all highly liquid debt instruments purchased with an
    original maturity of three months or less to be cash equivalents.

    Estimates

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of the financial
    statements and the reported amounts of revenues and expenses during the
    reporting period. Actual results could differ from those estimates.

NOTE 2 - RELATED PARTY NOTES PAYABLE

    At January 1, 1997, the related party notes payable consisted of multiple
    notes and the balances were as follows:

       Company's President and Board Member               $ 43,673
       Company's Vice President and Board Member             1,936
       S.D. Sunnyland Enterprise, Inc.                      20,994
                                                          --------

       Total                                              $ 66,603
                                                          ========


       During 1997, the notes were consolidated and new notes were executed for
    the above balances. The terms of these notes and additional borrowings
    during the year are summarized below.

    Company's President and Board Member

    Note payable executed on April 2, 1997 in the
    amount of $43,673; non-interest bearing; due
    in full on May 2, 2000                                   $43,673

    Notes payable executed on various dates in 1997
    non-interest bearing; due in full on various dates
    in 2000 and 2001                                           6,362
                                                             -------

                                                             $50,035

See independent auditor's report. The accompanying notes are an integral part of
these financial statements.

                                                              Page 7 of 10 Pages


<PAGE>

                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2 - RELATED PARTY NOTES PAYABLE (Continued)

    Company's Vice-President and Board Member

    Note payable executed on April 2, 1997 in the
    amount of $1,936; non-interest bearing; due in
    full on May 2, 2000.                                   $ 1,936

    Notes payable executed on various dates in 1997;
    non-interest bearing; due on various dates in 2000
    and 2001.                                                  602
                                                           -------
                                                                     $ 2,538

    S.D. Sunnyland Enterprises, Inc. (shareholder)

    Note payable executed on April 2, 1997 in the
    amount of $20,994; non-interest bearing; due
    in full on April 3, 2000.                               20,994

    Notes payable executed on various dates in 1997;
    non-interest bearing; due in full on various dates
    in 1998 and 1999                                         8,400
                                                            ------
                                                                      29,394
                                                                     -------
                                         Total                       $81,967
                                                                     =======

    Future maturities at December 31, 1997 are as follows:

                  December 31,                 Amount
                  -----------                  ------
                      1998                    $   -
                      1999                        -
                      2000                     78,974
                      2001                      2,993
                                               ------

                      Total                   $81,967
                                              =======


    All of the related party note obligations are unsecured and contain a
    provision by which any principal outstanding after the due date will accrue
    interest at the highest rate allowed by law.

See independent auditor's report. The accompanying notes are an integral part of
these financial statements.

                                                              Page 8 of 10 Pages


<PAGE>

                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 3 - COMMON STOCK - RELATED PARTIES

    The Board of Directors authorized the issuance of common stock to the board
    members, and to two companies of which board members serve as president, in
    exchange for services rendered related to formation of the Company.

    During 1996, the Company acquired and cancelled 1,000,000 shares of common
    stock from a shareholder, and reissued 75,000 shares of common stock to the
    same shareholder. There was no cash exchanged in the transaction.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

    Contracts

    At December 31, 1996, the Company was contingently liable to its law firm
    for $25,000 upon commencement of public trading of the Company's securities.
    The law firm is no longer providing services for the Company. The contingent
    liability has been recognized as other income for the year ended December
    31, 1997.

    Leases

    For the period from November 5, 1993 to April 30, 1994, the Company shared
    rent free office space with S.D. Sunnyland Enterprises, Inc., a majority
    shareholder. The fair market value of the rent has been recorded as
    contributed capital. Effective May 1, 1994, the Company entered into a lease
    agreement with the aforementioned related party. The lease was renewed
    effective May 1, 1997, and provides for monthly payments of $600 for office
    space, and $100 for telephone and fax service. The lease expires in May
    1998. Future minimum lease commitments at December 31, 1997 total $2,800.
    Total rent expense consists of the following:


<TABLE>
<CAPTION>
                                   Years Ended December 31,         November 5, 1993
                                ------------------------------       (Inception) to
                                 1997        1996        1995       December 31, 1997
                                ------      ------      ------      -----------------
<S><C>
    Rent expense                $7,200      $7,200      $6,300           $27,700
    Telephone and fax services   1,200       1,200       1,200             5,000
                                ------      ------      ------           -------

    Total                       $8,400      $8,400      $7,500           $32,700
                                ======      ======      ======           =======
</TABLE>


    Going Concern

    The Company's financial statements have been presented on the basis that it
    is a going concern. The Company's ability to commence operations is
    dependent on developing its business activities and raising the required
    capital. The Company intends to raise capital through conventional means
    such as debt financing or private placements for use in acquiring its income
    properties. The Company is currently seeking such financing and has not
    established a deadline for accomplishing the financing. The Company's
    operations will continue to be financed through stockholder loans until
    planned acquisitions generate revenues.

See independent auditor's report. The accompanying notes are an integral part of
these financial statements.

                                                              Page 9 of 10 Pages


<PAGE>


                         SUNNYLAND HOLDINGS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)

                         NOTES TO FINANCIAL STATEMENTS


NOTE 5 - CONTRIBUTED SERVICES AND FACILITIES

    The services and facilities contributed by the Company's shareholders have
    been recorded as an expense and a contribution of capital. The services and
    facilities have been recorded at their fair market value.

NOTE 6 - FAIR VALUES OF FINANCIAL INSTRUMENTS

    Based on existing rates and economic conditions, the carrying amount of cash
    and cash equivalents at December 31, 1997 and 1996 is assumed to approximate
    fair market value. The Company's other financial instruments include related
    party notes payable for which it is not practicable to estimate fair value.
    None of the Company's financial instruments are held for trading purposes.

NOTE 7 - INCOME TAXES

    At December 31, 1997 and 1996, the Company had net operating loss
    carryforwards of approximately $73,000 and $67,000, respectively. Due to
    conditions that raise substantial doubt about the Company's ability to
    continue as a going concern, a valuation allowance has been applied to the
    entire carryforward amount. No current or deferred tax benefit or provision
    has been recorded on the Company's financial statements.

    The amounts and expiration dates of the operating loss carryforwards are as
follows:

          Expiration Date                        Amount
         -----------------                      -------
         December 31, 2009                      $40,000
         December 31, 2010                       15,000
         December 31, 2011                       12,000
         December 31, 2012                        6,000
                                                -------

               Total                            $73,000
                                                =======


See independent auditor's report. The accompanying notes are an integral part of
these financial statements.

                                                             Page 10 of 10 Pages