U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-KSB

|X|  Annual report under Section 13 or 15 (d) of the Securities  Exchange Act of
     1934 for the fiscal year ended December 31, 1997
|_|  Transition report under Section 13 or 15 (d) of the Securities Exchange Act
     of 1934 for the transition period from _____________to _____________

Commission File Number    33-28562
                          ---------

                             TOUCAN GOLD CORPORATION
                 (Name of Small Business Issuer in Its Charter)

         Delaware                                              75-2661571
-------------------------------                            -------------------
(State or Other Jurisdiction of                             (I.R.S. Employer
Incorporation or Organization)                             Identification No.)

8201 Preston Road
Suite 600
Dallas, Texas                                                      75225
----------------------------------------                   -------------------
(Address of Principal Executive Offices)                        (Zip code)

                                 (214) 890-8088
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code.)

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

 Title of Each Class                                      Name of Each Exchange
 -------------------                                       on Which Registered
      NONE                                                ---------------------
                                                                    N/A

Securities registered under Section 12(g) of the Exchange Act:       None
                                                              ------------------
                                                               (Title of class)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 past 90 days.

Yes             X            No
     --------------------          --------------------

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, 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-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 and  non-voting  stock held by
non-affiliates  of the registrant as of March 31, 1998 was $2,592,110 based upon
the  average  bid and ask price of the  common  stock on such date of $0.750 per
share on the OTC  Electronic  Bulletin  Board of Nasdaq.  For  purposes  of this
computation,  all executive officers, directors and 10% stockholders were deemed
affiliates.  Such a  determination  should not be construed as an admission that
such executive officers, directors or 10% stockholders are affiliates.

As of March 31, there were 7,714,600 shares of the common stock, $.01 par value,
of the registrant issued and outstanding.


Transitional Small Business Disclosure Format: Yes         No    X
                                                  -------    -------- 
<PAGE>
                             Toucan Gold Corporation

                                                                     Page Number
                                                                     -----------

PART I   .......... ...........................................................1

Items 1 and 2.  Description of Business and Property...........................1

Item 3.  Legal Proceedings.....................................................7

Item 4.  Submission of Matters to a Vote of Security-Holders...................7

PART II  ......................................................................8

Item 5.  Market for Common Equity and Related Stockholder Matters..............8

Item 6.  Management's Discussion and Analysis of Financial Condition or Plan
         of Operation.........................................................10

Item 7.  Financial Statements.................................................13

Report of Independent Certified Public Accountants...........................F-2

Consolidated Balance Sheet as of December 31, 1997...........................F-3

Consolidated Statements of Operations for the years ended December 31,
         1997, 1996 and the period from November 3, 1995 to December 31,
         1997................................................................F-4

Consolidated Statements of Stockholders' Equity for the years ended
         December 31, 1997, 1996.............................................F-5

Consolidated Statement of Cash Flows for the years ended December 31,
         1997, 1996 and the period from November 3, 1995 to December 31,
         1997................................................................F-6

Notes to Financial Statements................................................F-7

PART III .....................................................................14

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act....................14

Item 10.  Executive Compensation..............................................16

Item 11.  Security Ownership of Certain Beneficial Owners and Management......16

Item 12.  Certain Relationships and Related Transactions......................19

Item 13.  Exhibits, List and Reports on Form 8-K..............................21

SIGNATURES....................................................................23

INDEX TO EXHIBITS........................................................INDEX-1


<PAGE>

                                     PART I

Items 1 and 2.  Description of Business and Property

General

     Toucan Gold  Corporation  (the  "Company" or "Toucan") was organized in the
State of Delaware on July 22, 1996. The Certificate of  Incorporation  of Toucan
authorizes  a class of  30,000,000  shares of common  stock,  par value $.01 per
share (the "Company Common Stock"), and 2,000,000 shares of preferred stock, par
value $.01 per share. The Company was formed for the purposes of reincorporating
Starlight Acquisitions, Inc., a Colorado corporation ("Starlight"), in the State
of Delaware (the  "Reincorporation").  Starlight was incorporated on January 20,
1989. The  Reincorporation was effected by merging (the "Merger") Starlight into
the Company, which, prior to the Reincorporation,  was a wholly owned subsidiary
of  Starlight,  pursuant  to an  Agreement  and  Plan  of  Merger  (the  "Merger
Agreement").  Upon  completion  of the Merger,  Starlight  ceased to exist,  and
Toucan continued to operate the business of Starlight under the name Toucan Gold
Corporation.  The Reincorporation became effective on July 29, 1996. As a result
of the  Reincorporation,  each then outstanding share of Starlight common stock,
no par value (the  "Starlight  Common  Stock"),  was converted into one share of
Company Common Stock.  Existing warrants (the "Starlight  Warrants") to purchase
an aggregate of 100,000 shares of Starlight Common Stock at an exercise price of
$4.00 per share were exchanged into warrants (the "Toucan Warrants") to purchase
an aggregate of 100,000  shares of Company  Common Stock at an exercise price of
$4.00 per share.

The Share Exchange

     Effective May 10, 1996, Toucan Mining Limited, an exploration stage company
incorporated  on  November  3, 1995  under the laws of the Isle of Man  (British
Isles)  ("Toucan  Mining"),  became a wholly owned  subsidiary of Starlight when
Starlight  acquired all of the  outstanding  capital  stock of Toucan  Mining in
exchange for 4,534,999  shares of Starlight  Common Stock (the "Share  Exchange)
pursuant to a Share Exchange  Agreement (the "Share Exchange  Agreement").  As a
result of the Share Exchange,  each  shareholder of Toucan Mining received seven
shares of Starlight Common Stock for each share of common stock of Toucan Mining
held by such  shareholder.  The shares of Starlight Common Stock received by the
Toucan Mining  shareholders  in the Share  Exchange were issued in a transaction
exempt from  registration  under the  Securities  Act of 1933,  as amended  (the
"Securities  Act") and,  therefore,  are  restricted  securities.  The Starlight
Warrants issued in connection with  Starlight's  initial public offering expired
pursuant to their terms prior to the Share  Exchange and the Starlight  Warrants
were  issued  on May 10,  1996 to  purchase  an  additional  100,000  shares  of
Starlight  Common  Stock at an  exercise  price of $4.00 per  share,  which were
immediately  exercisable  and  expire on the later of (i) the  eighteenth  month
anniversary  of the  issuance  date or (ii)  the six  month  anniversary  of the
closing  of the  first  registration  of  securities  by the  Company.  The  new
Starlight  Warrants were issued to former officers and directors of Starlight in
consideration of, among other things, their agreement to indemnify Toucan Mining
and  Starlight  with respect to certain  representations  in the Share  Exchange
Agreement and the  cancellation  of their prior  warrants to purchase  Starlight
Common  Stock.   The  Starlight   Warrants   provided  for  certain   piggy-back
registration  rights  with  respect  to the  shares of  Starlight  Common  Stock
underlying  the  Starlight  Warrants.  Pursuant  to  the  Reincorporation,   the
Starlight  Warrants  were  exchanged  into the Toucan  Warrants  to  purchase an
aggregate  of 100,000  shares of Company  Common  Stock at an exercise  price of
$4.00 per share.  The holders of the Toucan  Warrants  have  certain  piggy-back
registration  rights  with  respect  to  the  shares  of  Company  Common  Stock
underlying the Toucan Warrants. The Toucan Warrants are immediately  exercisable
and expire on the six month anniversary of the closing of the first registration
of securities by the Company.

Toucan Mining Limited

     General.  Toucan conducts its operations primarily through its wholly owned
subsidiary,  Toucan Mining.  The principal  executive office of Toucan Mining is
located at Celtic  House,  Victoria  Street,  Douglas,  Isle of Man IM99 1QZ. In
turn,  Toucan Mining conducts its operations  primarily through its wholly owned
subsidiary,  Mineradora de Bauxita Ltda. ("MBL"),  which is an authorized mining
company organized under the laws of Brazil.  The shares of MBL are held in trust
by related Brazilian  parties for  the benefit of  Toucan Mining. The registered


                                        1

<PAGE>



office of MBL is  located at Rua 24 de Outubro  n(0)  3313,  Santarem,  state of
Para,  Brazil. In April 1997, MBL set up an operations office for geological and
exploration  staff in Cuiaba at Trav.  Mestre  Joao Monge  Guimarae  82 - Cuiaba
Mt-Brazil.  In November 1997, MBL set up a small  warehouse to process and store
drilling  samples  on the  outskirts  of Cuiaba.  The assets of MBL are  mineral
claims in the Cuiaba Basin, Mato Grosso, Brazil. See "Description of Exploration
and Mining Concessions" below.

     Management.  The directors of Toucan Mining are Robert P. Jeffcock,  Paraic
O'Dowd and David  Karran.  Mr.  Jeffcock  serves as Managing  Director of Toucan
Mining and/or  President of the Company.  See  "Directors,  Executive  Officers,
Promoters,  and Control  Persons".  The  directors  of MBL are Julio  Lambertson
Rabello and Carlos Edvardo Lins E Silva. Igor Mousasticoshvily,  a United States
educated and trained geologist,  is responsible for the overall  negotiation and
management of Toucan Mining and MBL's mining claims. See "Certain  Relationships
and Related Transactions".  During the last five years, Mr. Mousasticoshvily has
provided consulting services to various Brazilian business interests, especially
in the mining industry.  Mr. David  Carmichael,  a Canadian educated and trained
geologist,  is responsible for onsite geology and day-to-day  management of MBL.
Since April,  1997, Mr. Carmichael has served as the General Manager of MBL. See
"Certain  Relationships  and  Related  Transactions".  Prior to that  time,  Mr.
Carmichael  had served as geologist and plant  manager for several  companies in
Brazil and Chile.  Neither  Toucan  Mining nor MBL are  required  to have titled
officers.

Mining Claims

     As of December 31, 1997, MBL purchased and filed for exploration claims for
approximately  1,370,900 million Hectares [5,293 square miles] ("Ha") (259 Ha to
1 square mile) in the Cuiaba Basin.  This area is  approximately  160 kilometers
long in a northeast/southwest  direction and is from 30-100 kilometers wide. The
claims are located  between  15(0) - 16(0) 30' South  latitude and between 55(0)
40' - 57(0) West longitude. The large, provincial city of Cuiaba, the capital of
Mato Grosso, is located within MBL's claim area.

     MBL is the owner of exploration claims to approximately 1.233,300 Ha [4,762
square miles] that were filed in 1995 with the Departamento  Nacional De Produca
Mineral ("DNPM"),  the Brazilian  governmental agency responsible for regulating
mineral  rights.  These claims  included  303,190 Ha, which were  contested by a
previous  claimant.  The Ministry of Mines and Energy ruled against the previous
claimant,  and the decision was published in the Government Gazette on April 22,
1996. Accordingly,  MBL's claim to the additional 303,190 Ha became effective on
May 23,  1996,  after which MBL was able to apply to the DNPM,  which is also an
agency of the  Ministry of Mines and  Energy,  for formal  documentation  of the
claim. See "Description of Exploration and Mining Concessions" below.

     During  1997,  the  Company was  informed  by the DNPM that  certain of the
Company's claims were subject to the existing claims of others already on record
with the DNPM.  Conversely,  the DNPM also  informed the Company that it was the
owner of claims that were previously  believed by the DNPM to be held by others.
As well,  Brazilian law prohibits  mining  activity on claims located inside the
city limits of designated  Brazilian cities. As a result, the Company was forced
to  surrender  those claims that it held which were subject to such law. The net
effect of these series of changes is that the  Company's  claims were reduced by
37,385 Ha of its overall claims to approximately 1,370,900 Ha.

     In November  1996,  the Company  entered into an agreement with a Brazilian
individual (the "seller") to acquire twenty-five (25) additional priority claims
in the Cuiaba  Basin.  Pursuant  to this  agreement,  the seller  granted to two
representatives   (the   "Representatives")   of  the  Company  an   irrevocable
power-of-attorney  over all  twenty-five  (25)  claims in the  aggregate  in the
Cuiaba  Basin in  exchange  for the  Company (i) paying to the seller an initial
payment in cash;  (ii)  paying to the  seller  additional  payments  in cash and
issuing  shares of Company  Common Stock the amounts of both to be determined by
the number of claims the DNPM  certifies  is held with  priority,  having  good,
clean and  transferable  title. The  Representatives  have executed an agreement
with  Toucan  Mining  pursuant  to which the  Representatives  hold the power of
attorney and such claims in trust on behalf of Toucan Mining.  See  "Description
of Exploration and Mining Concessions" and "Market for Common Equity and Related
Stockholder Matters - Recent Sales of Unregistered Securities" below.

     The  Representatives now hold on behalf of the Company an irrevocable power
of attorney,  over all of such claims, which entitles the Company,  upon payment
for such claims as hereinabove provided,  to transfer such claims as hereinabove


                                        2

<PAGE>



provided, to transfer such claims to MBL or another subsidiary of Toucan Mining.
Fifteen (15) of the twenty-five (25) claims,  which cover approximately  119,584
Ha, have been  certified by the DNPM as held in priority,  with good,  clean and
transferable  title.  Legal title to these fifteen (15) claims is in the process
of being  transferred to MBL or such other  subsidiary of Toucan Mining pursuant
to the  power-of-attorney.  There is no assurance  that the  remaining  ten (10)
claims will be certified by the DNPM and transferred to the Company.

     The Company has  previously  reported that sixteen (16) of the  twenty-five
(25)  claims had been  certified  by the DNPM.  In March of 1998,  however,  the
Company was informed by the DNPM that the seller did not hold priority  title on
one of the  sixteen  (16)  claims.  As a result,  the  Company  currently  holds
priority claim on only fifteen (15) claims.

     On November 18, 1997, Igor Mousasticoshvily  acquired 10,000 Ha of priority
exploration  claims (the  "Mousasticoshvily  Claims") in the Cuiaba  Basin for a
purchase price of $150,000.  On December 8, 1997, the Company agreed to purchase
the Mousasticoshvily Claims for $150,000 consisting of a cash payment of $50,000
with the  remaining  $100,000  balance  being paid in shares  (the  "Acquisition
Shares") of Company Common Stock valued at $.75 per share (i.e., 133,333 shares)
and the issuance to Mousasticoshvily of warrants (the "Acquisition Warrants") to
purchase  133,333  shares of Company Common Stock at an exercise price of $1.50.
The Acquisition  Warrants will be exercisable until January 1, 2000. See "Market
for Common Equity and Related Stockholder  Matters--Recent Sales of Unregistered
Securities."

Quadros Claims.

     On December 20, 1996, the DNPM issued to Professor  Alvaro Pizatto  Quadros
("Quadros")  a  certificate  granting  Quadros  priority in the eight (8) claims
located in the Cuiaba Basin (the "Quadros  Claims").  In early 1997, the Company
authorized the purchase of the Quadros Claims by MBL,  through MBL's agent,  Mr.
Igor Mousasticoshvily,  for the sum of $100,000. During 1997, Quadros granted an
irrevocable  power of attorney over the Quadros  Claims to Mr.  Mousasticoshvily
for the benefit of MBL. In March 1998,  the Company was  informed  that the DNPM
had mistakenly issued Quadros the priority  certificate in four (4) of the eight
(8) Quadros Claims.  As a result,  the Company is currently in discussions  with
the DNPM to determine its priority rights,  if any, with respect to the four (4)
Quadros Claims  mistakenly  certified to Quadros and is  considering  what other
remedies it may have under  Brazilian  law with respect to such four (4) Quadros
Claims.

     Access to Claims. The Cuiaba Basin has a network of hard top roads that are
generally in good condition.  MBL's claims are also  criss-crossed with sand and
gravel  roads,  the  majority  of which  are well  maintained.  Daily  scheduled
commercial air service is available to and from Cuiaba.

Mining Operations

     The following  discussion of MBL's mining operations  includes a discussion
of  Brazilian  law.  The  discussion  of Brazilian  law matters  represents  the
Company's current  understanding of applicable Brazilian law based on it and its
advisors' and consultants' review of information relating thereto made available
to them as of the date hereof.

     Description  of  Exploration  and Mining  Concessions.  Under the Brazilian
Federal Constitution,  all mineral resources belong to Brazil. The government of
Brazil  does not  grant  outright  ownership  of a mineral  deposit  to a mining
company.  Exploration  and mining of mineral  resources  may be carried out only
following the grant of an exploration  permit or mining  concession by the DNPM,
which  administers  the  Brazilian  Mining  Code and other laws and  regulations
governing  prospecting and mining operations in Brazil.  Mining  concessions are
granted  only to  Brazilian  companies  that have been  duly  authorized  by the
Ministry of Mines and Energy to act as a mining company.  In 1995, the Brazilian
government  approved a constitutional  amendment that eliminated the requirement
of Brazilian control of mining companies, so that a Brazilian mining company can
be 100% foreign owned and still qualify as a mining company.


                                        3

<PAGE>

     Under  Brazilian  law,  in order to  obtain a mining  concession,  a mining
company must first obtain an exploration permit (referred to herein as a claim).
The first step in  obtaining a mining  claim is filing an  application  with the
DNPM,  which must  include an  exploration  plan as well as comply with  certain
other requirements.

     Under Brazilian law, if a claim is granted, the granting of the claim will,
in due course,  be  published by the  Brazilian  authorities  in the  Government
Gazette.  Such  publication  can occur from one to twenty years from the date of
the claimant making such application with respect to such claim.  Once the claim
is published in the Government  Gazette an annual tax of $0.90 per Ha is payable
on the published claim.

     The granting of an exploration  claim conveys the right to explore the area
covered by the claim.  Claims are granted for a  three-year  term,  renewable on
request, subject to an annual fee. Exploration must begin in accordance with the
exploration  plan forming part of the application  within a specified  period of
the claim being granted. The claim may be canceled at the discretion of the DNPM
if the  claim  holder  suspends  exploration  for a period  of more  than  three
consecutive months or 120 non-consecutive days. The holder of a terminated claim
may reapply to regain the claim area.  The onus is on the claim holder to notify
the DNPM of any changes to the  exploration  plan.  On completion of the work, a
final  report  must be  filed  with  the  DNPM  describing  the  results  of the
exploration program.

     Mining  concessions  are granted only after  exploration  demonstrates  the
existence of a mineral deposit that is economically exploitable.  Therefore, the
report filed by the claimant  with the DNPM must include an economic  assessment
of the claim  area and a  feasibility  analysis.  Moreover,  the  claimant  must
demonstrate  to the DNPM that it has the  financial  capability to carry out the
proposed  plan.  The   application   for  a  concession  must  also  include  an
environmental plan, covering water treatment, soil erosion, air quality control,
re-vegetation and reforestation and site reclamation. Once granted, the terms of
the  concession  will include  conditions  concerning  mitigating  environmental
impacts,  site safety,  construction codes, waste disposal and site reclamation.
Following application, the DNPM may request additional information.

     A mining  concession  grants the right to extract  and  process the mineral
contained in the deposit in  accordance  with the plan  approved by the DNPM and
allows a mining company to exploit the deposit to exhaustion,  usually without a
predetermined  or fixed term. The concession  holder also has the right to sell,
transfer or lease such rights to a third party subject to DNPM  approval.  After
the grant of the mining  concession is published in the  Government  Gazette,  a
concession holder has 90 days to request possession of the deposit,  and initial
work in  accordance  with the mining  plan must  begin  within six months of the
publishing  date.  Once begun,  mining may not be suspended for a period of more
than six months on penalty of a possible  cancellation  of the concession at the
discretion of the DNPM. However,  management understands that longer suspensions
have been granted by the DNPM.  Annual  statistical  data on production  must be
reported to the DNPM,  which will also send  representatives  on  periodic  site
inspections.  Failure to comply with  regulations and mining plans may result in
penalties ranging from fines and other restitution to cancellation of the mining
concession and/or prison terms for officers of the company.

     The Brazilian Mining Code and the Federal  Constitution of Brazil impose on
mining  companies  requirements  relating to, among other things,  the manner in
which  mineral  deposits are  exploited,  the health and safety of workers,  the
protection and restoration of the  environment,  the prevention of pollution and
the promotion of the health and safety of local  communities where the mines are
located.  The  Mining  Code also  imposes  certain  notification  and  reporting
requirements.

     Landowners. The majority of land covered by MBL's claims is a sandy gravely
soil  covered in light  scrub.  Cattle  ranching is the  principal  agricultural
activity.  Except  where the claims fall within a township  such as Cuiaba,  the
majority of the land is agricultural and has a low value.

     The Brazilian  Mining Code requires a claim holder to obtain the consent of
the surface owners to access the surface of the property.  This usually  entails
some  form of an  agreement  between  the  claim  owner  and the  surface  owner
involving the payment of  compensation to the surface owners for damage and loss
of income  caused by the use and  occupation  of their land in  connection  with
mining  activities.  In the event that an  agreement  cannot be reached with the
surface owner,  MBL may seek legal recourse under  Brazilian law, which provides
that a claim  holder has the right  of access if  conducting mineral exploration


                                        4

<PAGE>

activities,  by  seeking a  judicial  order to  determine  the amount of surface
damage to the  property  and to grant  the  surface  owner a  royalty  on future
production.

     Brief History of Previous Operations. Gold mining in the Cuiaba Basin began
around 1719.  Mining activity was sporadic,  tending to coincide with periods of
high gold price or technical  innovations that enabled profitable  extraction of
the gold.  The most recent phase of activity  occurred  during the 1980's when a
period of high gold prices  coincided with the  availability of metal detectors.
Miners  quickly  realized  that  by  using  this  equipment,  near surface  gold
mineralization (nuggets) could be readily located and recovered with the help of
earth  moving  equipment.  Thousands  of  hectares  were  stripped  of soil  and
vegetation.  Under present economic conditions, the mining by garimpeiros of the
easily  located  nugget fields is not feasible as near surface  quartz veins and
mineralized  host rock are only  accessible  by using bulk earth and rock moving
equipment, not generally available to the garimpeiros.

     Climate.  Exploration  and mining  operations  are possible  throughout the
year.  The  rainy  season is from  December  through  to  April.  There are only
occasional thunder storms from May to December.  In summer (December - February)
the  temperature  can reach as high as 45 degrees  Centigrade  although the mean
temperature is 35 degrees Centigrade.

     Environmental  Laws. Previous miners have stripped thousands of hectares of
soil and  vegetation  in the Cuiaba  Basin.  MBL will  arrange to  document  the
existing  environmental  condition  of its  claims to place on  record  with the
environmental  authorities  the  damage  done  to the  environment  by  previous
operators.  Environmental  regulation  and  protection  in  Brazil  is  based on
provisions  of the Federal  Constitution,  and of federal,  state and  municipal
legislation.  Mining and  industrial  activities  require the  preparation of an
environmental  impact statement and the acquisition of an environmental  permit.
In addition,  the Mining Code requires the  reclamation and restoration of mined
areas.

     In  March of 1998,  Brazilian  Federal  Law No.  9605,  which  reclassifies
certain practices against the environment as crimes,  became effective.  Some of
the activities which are enumerated as "crimes against the environment" include:
(1)  performing  research,  mining or  extraction of mineral  resources  without
authorization and (2) inducing  mortality in the animal life existing in rivers,
lakes, dams, ponds, bays or waters under Brazilian  jurisdiction.  Additionally,
the new law  provides for the  possibility  of forced  liquidation  of any legal
entity formed or used primarily  with the intent to permit,  facilitate or cover
up crimes against the environment.

     Gold Sales.  Gold mined in Brazil  must be sold (i) to the Central  Bank of
Brazil (via one of their registered agents), (ii) to the Sao Paulo gold exchange
or (iii) to any registered gold buyer in Brazil.  The price paid is normally the
London  afternoon  Gold Fix. On occasion a premium is paid of typically  2%. The
agent charges a commission  that is normally  between 0.5 - 1.0%.  The seller of
the gold is paid in U.S. Dollars.

     Brazilian Taxation. In general, Brazilian mining companies are subject to a
25%  income  tax  and an 8%  social  security  contribution.  Dividends  paid to
shareholders  domiciled  abroad  are  subject  to a 15%  withholding  tax by the
Brazilian taxing authority.

     Exchange Controls.  Exchange  transactions are generally  controlled by the
Central Bank of Brazil which  authorizes a series of banks to act in the foreign
exchange market,  selling and buying  currencies.  There is a commercial rate of
exchange  published  daily by the Central Bank based upon market results on said
day. A free market,  and quotation  system  exists,  mainly dealing with tourist
activities.  Both rates have been  extremely  close since the  inception  of the
stabilization  plan  ("Plano  Real")  several  years  ago.  Subject  to  certain
registration  requirements  with the Central Bank of Brazil and compliance  with
certain  regulations,  MBL may repatriate U.S. Dollars earned from its Brazilian
operations  to Toucan  Mining or the Company  through the repayment of loans and
the payment of dividends. On occasions in the past, Brazil has imposed temporary
restrictions  on the conversion and remittance of foreign  capital,  for example
when there was a serious  imbalance  in Brazil's  balance of  payments.  In such
circumstances,  the Company could be adversely affected, if the exchange control
rules were changed to delay or deny remittances abroad from MBL.



                                        5

<PAGE>

     Description of Present  Condition of Property;  Modernization  and Physical
Condition of Plant and  Equipment.  MBL intends to obtain mining  concessions by
undertaking  a program of mineral  exploration  to target and  explore  selected
areas of its  exploration  claims to  determine  which  areas are most likely to
contain  economic gold  mineralization.  It may effectuate  this program through
joint ventures or other  arrangements.  In order to facilitate these activities,
the Company,  in March 1997, opened an office in Brazil. The Brazilian office is
staffed by fifteen  employees and  consultants,  consisting of geologists,  land
personnel,  administrative  personnel and field hands.  MBL conducts its mineral
exploration program through third-party drilling operators.

     The  Company  has  completed a 5,000  meter  reverse  circulation  drilling
program  involving  six  separate  locations  in the  Cuiaba  District  on which
artisanal  mine  workings  ("nugget  patches")  have taken  place.  The  Company
believes that these nugget patches are de facto geochemical anomalies reflecting
the possible presence of disseminated gold  mineralization in the subsurface.  A
total of 73 holes were  drilled to an average  depth of 69 meters and sampled at
one-meter intervals. In addition to intersecting variable quantities of "visible
gold" at all six of the localities tested, drilling has revealed the presence of
metasediments with imbedded metavolcanic rocks of Proterozoic age. Approximately
5,000 samples weighing  approximately 25 kg. were split, and approximately 3 kg.
from  each  sample  were  sent for  assay  testing  at two  well-known  Canadian
laboratories.

     An assay test is a chemical  test  performed on a sample of ore or minerals
to determine the amount of valuable minerals  contained in such sample. An assay
test  does  not  constitute,  and  should  not be  read  as,  a  reserve  report
reflectingn proven or probable reserves.

     The  Company's  drilling  program  was  designed  to  penetrate  the  upper
saprolite  and  geochemically  sample  lower  saprolitic  material.   Management
expected any gold  mineralization  in the lower  saprolite to be finer  grained,
more homogeneous and reliably sampled by reverse circulation drilling.  However,
the assay reports reflected a wide variation of results ranging from less than 5
parts per billion to 23.64 grams per ton.  Because  such  results can occur when
sampling "coarse gold"  mineralization,  management conducted additional testing
of the samples utilizing a commonly practiced manual inspection technique, which
have  revealed  the presence of "visible  gold" in some of the samples,  many of
which  appeared,  on the  basis of the  prior  assay,  to have  negligible  gold
content.  Based on such testing,  management believes that the weathering of the
saprolite extends deeper into the surface than was originally estimated and that
its drilling did not sample the lower  saprolite.  Because of the  indication of
coarse gold mineralization, management concluded that it could not rely upon the
individual  values  obtained  in the  original  assay.  Accordingly,  management
resubmmitted 132 larger samples containing "visible gold" for re-assaying to one
of the Canadian laboratories in order to use such laboratory's special method of
sample  preparation  and testing  suited for the  detection and  measurement  of
coarse gold  mineralization.  Most of the later  assayed  samples  were found to
contain  consistently  higher gold content than the previously  assayed samples.
Management  believes  almost  all  of  the  drilling  to  date  has  intersected
fringe-type  mineralization  of  the  type  often  found  adjacent  to  stronger
potential economic mineralization.

     Management is encouraged by the results of the overall  geochemical testing
program and believes that the new sample  collection and processing  method will
more accurately  reflect the level and grade of gold  mineralization  present in
the upper saprolite.  Accordingly,  subject to raising additional  capital,  the
Company has planned a detailed program on the six previously mentioned locations
and their adjacent areas of advanced  technology soil geochemistry  testing and
detailed ground  geophysics using electrical and magnetic  methods.  The program
will also cover further geological mapping of the remaining nugget patches. More
reverse circulation drilling on all of these areas (testing appropriately larger
samples) is expected to follow.  This program is expected to take  fourteen (14)
months and is designed to establish whether there are potential orebodies in the
upper  saprolite in these areas.  This program could involve joint  ventures and
other  arrangements  that may result in a dilution of the Company's  interest in
its mining claims.

     Additional  regional  exploration,  to be carried out concurrently with the
detailed "nugget patch" exploration, is planned and will be aimed at identifying
the mineralization potential of all MBL claims in order to discard those without
any potential. This is to be carried out by revision of all geologic information
and supported by Landsat Thematic  Mapper,  extensive field work, and a regional
airborne geophysical survey over the area of highest potential.  The Company has
commissioned a 4,300 kilometer aerial geophysical survey of part of its priority
claims and is currently  awaiting  appropriate  governmental  licenses  prior to
proceeding with this aspect of the exploration program.

     At this time,  MBL is an  exploration  stage company and has no probable or
proven reserves as defined by the rules and regulations of the Commission.



                                        6

<PAGE>

Exploration and Development Risks

     The  exploration  for  and   development  of  mineral   deposits   involves
significant risks that even a combination of careful evaluation,  experience and
knowledge may not eliminate.  While the discovery of gold reserves may result in
substantial  rewards,  few properties that are explored are ultimately developed
into producing mines. Major expenses may be required to establish gold reserves,
to develop  metallurgical  processes  and to  construct  mining  and  processing
facilities at a particular  site. There can be no assurance that the exploration
programs  planned by the  Company,  Toucan  Mining  and/or MBL will  result in a
profitable commercial mining operation.  There is aggressive  competition within
the mining industry for the discovery and  acquisition of properties  considered
to have commercial  potential.  The Company,  Toucan Mining and MBL will compete
with other interests,  many of which have greater financial  resources than they
will have, for the opportunity to participate in promising projects. Significant
capital investment is required to achieve commercial  production from successful
exploration efforts.

     Whether a mineral deposit will be  commercially  viable depends on a number
of factors,  some of which are the particular attributes of the deposit, such as
size,  grade and proximity to  infrastructure,  as well as gold prices which are
highly cyclical and government  regulations,  including  regulations relating to
prices,  taxes,  royalties,  land use,  importing  and exporting of minerals and
environmental protection. The exact effect of these factors cannot be accurately
predicted,  but the  combination  of these factors may result in the Company not
receiving an adequate return on investment capital.

     The  economic  feasibility  of  prospective  projects,  such as the mineral
claims in the Cuiaba  Basin,  is based upon,  among other  things,  estimates of
reserves,  metallurgic  characteristics,  recoverability,  capital and operating
costs of such  projects  and future  gold  prices.  These and other  prospective
projects are also subject to the successful  completion of feasibility  studies,
issuance of necessary permits and receipt of adequate financing.

     Development projects have no operating history upon which to base estimates
of  future  cash  operating  costs  and  capital  requirements.  In  particular,
estimates of reserves,  metal recoveries and cash operating costs are to a large
extent based upon the  interpretation of geologic data obtained from drill holes
and other sampling  techniques and feasibility studies which derive estimates of
cash  operating  costs  based upon  anticipated  tonnage and grades of ore to be
mined and processed,  the configuration of the ore body, expected recovery rates
of  various  metals  from the ore,  comparable  facility  and  equipment  costs,
anticipated  climate  conditions and other factors.  As a result, it is possible
that actual cash operating costs and economic returns of any and all development
projects may materially differ from the costs and returns initially estimated.

     In addition, exploration activities and mining operations generally involve
a high degree of risk. If MBL were to discover gold reserves and bring them into
production,  MBL would be  subject  to all of the  hazards  and  risks  normally
encountered in the  exploration,  development and production of gold,  including
unusual and unexpected geology formations,  rock bursts, cave-ins,  flooding and
other  conditions  involved in the drilling and removal of materials,  and which
could  result in damage  to,  or  destruction  of,  mines,  equipment  and other
producing  facilities,  damage to life or  property,  environmental  damage  and
possible legal liability. Although adequate precautions to minimize risk will be
taken,  mining  operations are subject to hazards (such as equipment  failure or
failure of retaining dams around tailings,  disposal areas), which may result in
environmental pollution and consequent liability.

Employees.

     As of March 31, 1998, the Company employed eleven (11) individuals.


                            Item 3. Legal Proceedings

     The  Company is not a party to any  pending  legal  proceeding,  nor is the
Company's property the subject of a pending legal proceeding.


                                        7

<PAGE>



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

     No matter was submitted  during the fourth quarter of the fiscal year ended
December  31,  1997  to  a  vote  of  the  Company's  stockholders  through  the
solicitation of proxies or otherwise.


                                        8

<PAGE>



                                     PART II

        Item 5. Market for Common Equity and Related Stockholder Matters

     The Company Common Stock is listed on the OTC Electronic  Bulletin Board of
NASDAQ.  The following  table indicates the quarterly high and low bid price for
the Company  Common Stock on the OTC  Electronic  Bulletin  Board for the period
during 1997 and for the first  quarter of fiscal year ending  December 31, 1998.
Such inter-dealer  quotations do not necessarily  represent actual transactions,
and do not reflect retail mark-ups, mark-downs or commissions.

                                                  OTC ELECTRONIC
                                                  BULLETIN BOARD
                                                     BID PRICE

                                                     HIGH              LOW
         Calendar 1997
         1st Quarter                                $ 2.125          $ 1.250
         2nd Quarter                                $ 1.469          $ 0.438
         3rd Quarter                                $ 1.375          $ 0.406
         4th Quarter                                $ 2.125          $ 0.406

         Calendar 1998
         1st Quarter                                $ 1.500          $ 0.688

     On March 31, 1998, the bid price of the Company Common Stock as reported on
the OTC Electronic Bulletin Board was $0.750.

     As of March 31, 1998,  there were  approximately  344  holders of record of
the Company Common Stock.

     The Company has not  declared  or paid any cash or other  dividends  on the
Company  Common  Stock  to date for the last  two (2)  fiscal  years  and in any
subsequent  period  for  which  financial  information  is  required  and has no
intention of doing so in the foreseeable future.

Recent Sales of Unregistered Securities

     The following contains information for all securities that the Company sold
within the past year without  registering  the  securities  under the Securities
Act:

1.   On December  23,  1997,  the Company  completed a private  placement  of an
     aggregate of 400,000 shares (the "Investor Shares") of Company Common Stock
     to three of its existing stockholders at a purchase price of $.75 per share
     of Company Common Stock. Roy G. Williams,  Zalcany Limited  ("Zalcany") and
     Mustardseed Estates Limited purchased 68,000,  292,000 and 40,000 shares of
     Company Common Stock, respectively. Along with each share of Company Common
     Stock sold in the  private  placement,  the  Company  granted to the holder
     thereof  a warrant  (the  "Investor  Warrants")  to  purchase  one share of
     Company Common Stock at an exercise price of $1.50.  The Investor  Warrants
     will be  exercisable  until  January 1, 2000.  The  proceeds of the private
     placement will be used for the Company's working capital purposes.

2.   On November 18, 1997 Mousasticoshvily, a consultant to MBL, acquired 10,000
     Ha of priority  exploration claims (the  "Mousasticoshvily  Claims") in the
     Cuiaba  Basin for a purchase  price of $150,000.  On December 8, 1997,  the
     Company  agreed  to  purchase  the  Mousasticoshvily  Claims  for  $150,000
     consisting of a cash payment of $50,000 with the remaining $100,000 balance
     being paid in shares (the  "Acquisition  Shares") of Company  Common  Stock
     valued  at $.75 per  share  (i.e.,  133,333  shares)  and the  issuance  to
     Mousasticoshvily  of  warrants  (the  "Acquisition  Warrants")  to purchase
     133,333 shares of Company  Common Stock at an exercise price of $1.50.  The
     Acquisition Warrants will be  exercisable until January 1, 2000.  As of the


                                        9

<PAGE>

     end of fiscal year ended December 31, 1997,  neither the Acquisition Shares
     nor the Acquisition Warrants had been issued.

3.   On  November  1,  1996,  the  Company,   pursuant  to  the  exemption  from
     registration  provided by  Regulation S of the  Securities  Act of 1933, as
     amended  (the  "Securities  Act"),  completed  the offering  (the  "Yorkton
     Offering") of 1,600,000  Units for aggregate  gross proceeds of $4 million.
     Each Unit  consisted of one share of Company  Common Stock,  par value $.01
     per share and one Company Common Stock share purchase warrant (the "Company
     Warrants").  Each Company Warrant  entitles the holder to subscribe for one
     additional  share of Company  Common Stock at a price of $3.50 per share at
     any time prior to the close of  business  on the first  anniversary  of the
     original  date of issue of the Company  Warrants,  subject to adjustment in
     connection with certain  anti-dilution  provisions.  The price of the Units
     was $2.50 per Unit. During October 1997, the expiration date of the Company
     Warrant was extended to January 31, 1998.  As a result of such  adjustment,
     the Company Warrants have expired according to their terms.

     Certain of the net proceeds of the Yorkton  Offering were to be used by MBL
     or another  Brazilian  mining  subsidiary of the Company to acquire  mining
     claims in the Cuiaba Basin. These claims,  which number twenty-five (25) in
     the  aggregate,  are in the  process  of  being  acquired  pursuant  to the
     following agreement and understanding:

     (i) The Company will make an initial payment to the seller in the amount of
     $500,000. Upon receiving this initial payment, the seller will grant to the
     Representatives  of the Company an irrevocable  power-of-attorney  over all
     twenty-five (25) Claims.

     (ii) The  Company  will pay to the seller cash in the amount of $36,000 for
     each claim that the DNPM  certifies  is held with  priority,  having  good,
     clean and  transferable  title.  See "Description of Exploration and Mining
     Concessions".

     (iii) The  Company  will issue to the seller  12,000  shares of the Company
     Common  Stock for each claim  that DNPM  certifies  is held with  priority,
     having good, clean and transferable title.

     (iv) The Company will issue to the seller a bonus  payment of 50,000 shares
     of the Company Common Stock if and when the seller transfers good and clean
     title to all twenty-five (25) claims to the Company.

4.   The initial payment of $500,000 has been made by the Company to the seller.
     Hence, the Representatives on behalf of the Company now hold an irrevocable
     power of attorney over all such claims,  which  entitles the Company,  upon
     payment for such claims as hereinabove provided, to transfer such claims to
     MBL or another subsidiary of Toucan Mining. In December 1996, fourteen (14)
     of the  twenty-five  (25)  claims  were  certified  by the  DNPM as held in
     priority,  with good, clean and transferable  title. In April 1997, two (2)
     additional  claims were  certified  by the DNPM as held in  priority,  with
     good, clean and transferrable  title. As noted above, in March of 1998, the
     Company  was  informed  by the DNPM that the seller  did not hold  priority
     title on one of the sixteen (16) claims. As a result, the Company currently
     holds priority claim on only fifteen (15) claims. Accordingly,  the Company
     is  obligated  to issue to seller  180,000 (15 x 12,000)  shares of Company
     Common Stock. The shares of Company Common Stock to be issued in connection
     with this transaction  have been  authorized,  but as of December 31, 1997,
     they have not been issued.

5.   On September  27, 1997,  the Company  granted  options to purchase,  in the
     aggregate,   100,000  shares  of  Company  Common  Stock  to  two  separate
     individuals  in their  capacities as employees of the Company.  The options
     allowed each  individual to purchase  50,000 shares of Company Common Stock
     at an  exercise  price of $1.00 per share.

          (i) The first  block of  options,  allowing  the  grantee to  purchase
          50,000  shares  of  Company   Common  Stock,   was  granted  to  David
          Carmichael.  Mr. Carmichael  serves  as the  General Manager for  MBL.


                                       10

<PAGE>

          These options  would vest in increments of 17,000,  17,000 and 16,000.
          The initial  grant of options to purchase  17,000 shares vested on the
          date of grant.  The remaining blocks of 17,000 and 16,000 options will
          vest on April 1, 1998 and  April 1,  1999,  respectively,  only in the
          event that Mr. Carmichael is employed with the Company on those dates.

          (ii) The second  block of  options,  allowing  the grantee to purchase
          50,000 shares of Company Common Stock, was granted to L. Clark Arnold,
          a Director and Vice President - Exploration,  whose  responsibility is
          overseeing  the  Company's  exploration  program,  for his  continuing
          contributions to the Company in discharging such responsibilities. Mr.
          Arnold  options  vested  on the date of grant and are  exercisable  up
          until September 27, 1999.

     On September 27, 1997, the Company  granted 50,000 shares of Company Common
     Stock to Mr. Jay Lutsky,  for his continuing  contributions  as an investor
     relations  consultant to the Company.  Mr. Lutsky also served as an officer
     and a director of Starlight Acquisitions, Inc.

6.   On  February 2, 1998,  the  Company  granted  options to  purchase,  in the
     aggregate,   250,000  shares  of  Company  Common  Stock  to  two  separate
     individuals  in their  capacities as Directors of the Company.  The options
     allowed  Robert P.  Jeffcock  and Robert A. Pearce to purchase  200,000 and
     50,000 shares of Company Common Stock,  respectively,  at an exercise price
     of $1.00 per share.  Mr.  Jeffcock and Mr. Pearce received their options as
     part of their  remuneration  for  services  rendered to the  Company.  Each
     individual's  options  vested on the date of grant and are  exercisable  up
     until December 31, 1999.

     The  securities  placements  described in paragraphs 1, 2, 4, 5 and 6 above
were  effectuated  pursuant  to the  exemption  from  registration  set forth in
Section 4(2) and  Regulation D of the  Securities  Act of 1933,  as amended (the
"Securities Act"); therefore,  such securities are "restricted securities" under
Rule 144 of the Securities Act.

     Item 6. Management's Discussion and Analysis of Financial Condition or
                                Plan of Operation

     Effective May 10, 1996,  Starlight acquired all of the outstanding  capital
stock of Toucan Mining in exchange for shares of Starlight  Common  Stock.  As a
result of the Share Exchange, a change in control of Starlight occurred, whereby
Toucan  Mining  is  deemed  to  have  acquired  Starlight.  See  "Notes  to  the
Consolidated Financial Statements."

     Toucan Mining is a development  stage company that conducts its  operations
primarily  through its  wholly-owned  subsidiary,  MBL,  which is an  authorized
mining  company  organized  under  the laws of  Brazil.  MBL has  been  financed
entirely by Toucan  Mining for the purpose of  conducting  mineral  exploration,
specifically gold exploration.

     During  July  1996,   Starlight   formed  the  Company  as  a  wholly-owned
subsidiary. On July 29, 1996, Starlight merged into the Company, and pursuant to
the terms of the Merger,  the outstanding  shares of Starlight Common Stock were
canceled in exchange for shares of the Company's Common Stock.

     The  consolidated  financial  statements for the fiscal year ended December
31, 1997, reflect the results of Toucan's operations, which consisted of opening
and  operating  a  Brazilian  exploration  office,  completion  of a 5,000 meter
reverse  circulation  drilling  program,  maintenance of Toucan Mining and MBL's
various  claims  and  purchase  of new  claims  which  were  capitalized  in the
financial statements. Legal, accounting, investor relations, consulting, travel,
subsistence expenses and other general administrative costs were expensed.

     The  Company  has begun a program  of  mineral  exploration  to target  and
explore  selected  areas of its mining claims to determine  which areas are most
likely to contain  economic gold  mineralization  or to effectuate  this program
through joint ventures. In order to facilitate these activities, the Company, in
March  1997,  opened an office in  Brazil.  The  Brazilian  office is staffed by
fifteen  employees and consultants,  consisting of geologists,  land acquisition
personnel, mapping specialists and various support personnel.

     The  Company  has  completed a 5,000  meter  reverse  circulation  drilling
program  involving  six  separate  locations  in the  Cuiaba  District  on which
artisanal  mine  workings  ("nugget  patches")  have taken  place.  The  Company
believes that these nugget patches are de facto geochemical anomalies reflecting
the possible presence of disseminated  gold mineralization in the subsurface.  A


                                       11

<PAGE>

total of 73 holes were  drilled to an average  depth of 69 meters and sampled at
one-meter intervals. In addition to intersecting variable quantities of "visible
gold" at all six of the localities tested, drilling has revealed the presence of
metasediments  with imbedded  metavolcanic  rocks of  Proterozoic  age.  Samples
weighing  approximately  25 kg. were split,  and  approximately  3 kg. from each
sample were sent for assay testing at two well-known Canadian laboratories.

     The  Company's  drilling  program  was  designed  to  penetrate  the  upper
saprolite  and  geochemically  sample  lower  saprolitic  material.   Management
expected any gold  mineralization  in the lower  saprolite to be finer  grained,
more homogeneous and reliably sampled by reverse circulation drilling.  However,
the assay reports  reflected a wide  variation of results.  Because such results
can occur when  sampling  "coarse  gold"  mineralization,  management  conducted
additional  testing  of  the  samples  utilizing  a  commonly  practiced  manual
inspection  technique,  which revealed the presence of "visible gold" in some of
the samples,  many of which had  appeared,  on the basis of the prior assay,  to
have negligible gold content.  Based on such testing,  management  believes that
the  weathering  of the  saprolite  extends  deeper  into the  surface  than was
originally  estimated and that its drilling did not sample the lower  saprolite.
Because of the indication of coarse gold  mineralization,  management  concluded
that it could not rely  upon the  individual  values  obtained  in the  original
assay.  Accordingly,   management  resubmitted  132  larger  samples  containing
"visible gold" for re-assaying to one of the Canadian  laboratories  that tested
the original samples in order to use such laboratory's  special method of sample
preparation  and testing suited for the detection and measurement of coarse gold
mineralization.  Most  of the  later  assayed  samples  were  found  to  contain
consistently higher gold content than the previously assayed samples. Management
believes  that almost all of the  drilling to date has  intersected  fringe-type
mineralization  of  the  type  often  found  near  stronger  potential  economic
mineralization.

     Management  is  encouraged  by  the  results  of the  overall  geochemmical
testing  program and believes  that the new sample  collection  and  processing
method will more accurately  reflect the level and grade of gold  mineralization
present in the upper  saprolite.  Accordingly,  subject  to  raising  additional
capital,  the  Company  has  planned a detailed  program  on the six  previously
mentioned  locations  and their  adjacent  areas  of advanced  technology  soil
geochemistry  testing  and  detailed  ground  geophysics  using  electrical  and
magnetic methods.  The program will also cover further geological mapping of the
remaining  nugget  patches.  More reverse  circulation  drilling on all of these
areas (testing appropriately larger samples) is expected to follow. This program
is expected to take  fourteen  (14) months and is designed to establish  whether
there are  potential  orebodies  in the upper  saprolite  in these  areas.  This
program could involve joint ventures and other arrangements that may result in a
dilution of the Company's interest in its mining claims.

     Additional  regional  exploration,  to be carried out concurrently with the
detailed "nugget patch" exploration, is planned and will be aimed at identifying
the mineralization potential of all MBL claims in order to discard those without
any potential. This is to be carried out by revision of all geologic information
and supported by Landsat Thematic  Mapper,  extensive field work, and a regional
airborne geophysical survey over the area of highest potential.  The Company has
commissioned a 4,300 kilometer aerial geophysical survey of part of its priority
claims and is currently  awaiting  appropriate  governmental  licenses  prior to
proceeding with this aspect of the exploration program.

     However,  the program to fully  explore  and develop its entire  claim area
will  take  several  years,  and  it  could  involve  joint  ventures  or  other
arrangements  that may result in a dilution  of the  Company's  interest  in its
claims.  In the  event of  encouraging  results  in a  particular  area,  a more
concentrated  study will be  undertaken  to provide  the basis of a  feasibility
study for mineral  development.  MBL will also be working to acquire  additional
claims in the Cuiaba  Basin and will cease to explore  those  claims  that prove
unproductive.

     The Company will incur major  expenses to establish  the  existence of gold
reserves.  Accordingly,  to fund the Company's  exploration  program through May
1999 and to pay for normal  expenses  during that period,  the Company  believes
that it will  need to raise  approximately  $1.6  million  or enter  into  joint
ventures  with  industry  partners who agree to provide such funds.  This amount
does not  include  any  expenditures  for  lease  acquisitions.  There can be no
assurance  that the Company  will be able to raise such  capital if needed or on
terms that are favorable to the Company or to enter into such joint  ventures on
terms  favorable  to the Company.  The plan will be subject to review  depending
upon the results obtained.  Costs could rise if, among other things, the weather
proves  untypically   harsh,   unforeseen  ground  conditions  are  encountered,
equipment  becomes difficult to source,  the availability of drilling  operators
becoming  increasingly  scarce  and  their  rates  increasing  accordingly,   or
negotiations with surface owners become prolonged. MBL may spend more or less on
claim acquisitions than currently estimated.  There can be no assurance that the
exploration   program   will  result  in  the   discovery   of   economic   gold
mineralization.  The Commpany's financial statements have been prepared assuming
that  the  Company  will  continue  as  a  going   concern.   Furthermore,   the
recoverability  of the cost of  mineral  rights is  dependent  on the  Company's
ability  to  continue  exploration,  establish  the  existence  of  economically
recoverable reserves,  develop these reserves, and achieve profitable production
or obtain sufficient  proceeds from the disposition of the rights. The Company's
financial  statements do not include any adjustments  that might result from the
outcome  of  these   uncertainties.   The  matters   discussed   herein  contain
forward-looking   statements  that  involve  certain  risks,  uncertainties  and
additional  costs  detailed  herein.  The actual  results  that are achieved may
differ  materially  from any  forward-looking  projections,  due to such  risks,
uncertainties and additional costs.

     The Company has raised  approximately  $3.6 million in net proceeds through
the issuance of 1,600,000  Units at $2.50 per Unit,  each Unit consisting of one
share of  Company  Common  Stock and a warrant  to  purchase  a share of Company
Common  Stock  at an  exercise  price  of  $3.50,  in an  offering  exempt  from
registration  under the  Securities  Act pursuant to Regulation S. This offering
was completed on November 1, 1996. The expiration date for such warrants was set
at the  close of  business  on  October  31,  1997,  subject  to  adjustment  in
connection  with certain  anti-dilution  provisions.  On October 31,  1997,  the
expiration  date for the  warrants  was extended by the Company from October 31,
1997 to January 31, 1998. The warrants have expired by their terms.

     The Company has used certain of the proceeds  from the sale of the Units to
finance the purchase of additional  mining claims in the Cuiaba Basin,  to begin
its  exploration  program,  and for general  working  capital  purposes.  If the
purchase of all of such claims is  consummated,  the  aggregate  purchase  price
would consist of approximately  $1,400,000 in cash and 350,000 shares of Company
Common Stock,  of which  $1,076,000  has been paid to date and 192,000 shares of

                                       12

<PAGE>

Company  Common  Stock are to be issued for claims  that have been  acquired  to
date.  While the  Company  has an  agreement  with the owner of such claims with
respect  to the  purchase  terms  with  respect  to the  remaining  claims,  the
Company's  obligations  thereunder  are  subject to its review of  documentation
relating to such claims.  There can be no assurance that the  acquisition of the
remaining claims will be consummated.

     In order to  finance  the  Company's  exploration  activities  and  general
working capital needs, including maintaining its Brazilian office and paying the
personnel of the Brazilian office, the Company will require additional  capital.
The  Company  is  exploring  several  financing   alternatives  to  obtain  such
additional capital.  The Company is currently funding its day-to-day  operations
with a demand loan from  Zalcany,  a company  affiliated  with Roy G.  Williams,
while it continues to seek  additional  financing.  The loan from Zalcany  bears
interest at the annual rate of 10% and is  unsecured.  As of April 8, 1998,  the
principal  amount of the loan was $54,000 and shall be repaid with the  proceeds
of any additional  financing.  Zalcany has indicated to the Company an intent to
provide additional short-term financing on the same basis in anticipation of the
Company obtaining  longer-term  additional  financing in a short period of time;
however,  Zalcany is not obligated to advance  additional  funds to the Company.
See Item 7 - Financial Statements Notes to Financial Statements (Note C).

     In  addition,  the Company had entered into a letter of intent (the "Letter
of  Intent")  with  Eldorado  Gold  Corporation  ("Eldorado")  pursuant to which
Eldorado would earn a 50% interest on 10% of MBL mining claims to be selected by
Eldorado,  through the expenditure of Canadian $5 million by Eldorado within two
years. The Letter of Intent was subject to a number of conditions, including the
negotiation  and  execution  of a  definitive  agreement  within a certain  time
period. These conditions were not fulfilled, and the Letter of Intent expired by
its terms. On October 30, 1997, the Vice President of Legal Affairs for Eldorado
sent a letter to the Company  confirming  that  Eldorado  and the  Company  have
agreed  to  terminate  any  obligations  they may have  had to the  other  party
pursuant  to such  Letter of  Intent or any  further  agreements  in  connection
therewith.

     Certain of the  information  contained in this Annual Report on Form 10-KSB
constitutes  forward looking statements within the meaning of Section 27A of the
Securities  Act and  Section  21E of the  Securities  Exchange  Act of 1934,  as
amended,  that  involves  certain  risks,  uncertainties  and  additional  costs
described  herein.  The actual  results that are achieved may differ  materially
from any  forward  looking  projections,  due to such risks,  uncertainties  and
additional costs. Although the Company believes that the expectations  reflected
in such forward looking statements are based upon reasonable assumptions, it can
give no assurance that its expectations will be achieved. Subsequent written and
oral forward looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by reference to such risks,
uncertainties and additional costs.


                          Item 7. Financial Statements

     Filed herewith  beginning on page F-1 are the following  audited  financial
statements of the Company:

                                                                        Page No.
                                                                        --------

Report of Independent Certified Public Accountants...........................F-2

Consolidated Balance Sheet as of December 31, 1997...........................F-3

Consolidated Statements of Operations for the years ended December 31,
     1997, 1996 and the period from November 3, 1995 to December 31, 1997....F-4

Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 1997, 1996.................................................F-5

Consolidated Statement of Cash Flows for the years ended December 31,
     1997, 1996 and the period from November 3, 1995 to December 31, 1997....F-6

Notes to Financial Statements................................................F-7

                                       13

<PAGE>



                 CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                             TOUCAN GOLD CORPORATION
                          (a development stage company)

                           December 31, 1997 and 1996

          




<PAGE>






          









               Report of Independent Certified Public Accountants



Board of Directors
Toucan Gold Corporation


We have  audited  the  accompanying  consolidated  balance  sheet of Toucan Gold
Corporation as of December 31, 1997, and the related consolidated  statements of
operations,  stockholders'  equity,  and cash flows for the years ended December
31, 1997 and 1996.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Toucan  Gold
Corporation  as of December 31, 1997,  and the results of its operations and its
cash flows for the years ended  December 31, 1997 and 1996, in  conformity  with
generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the  Company  will  continue  as a going  concern.  The  Company  is in its
development  stage and is not generating cash from  operations.  As discussed in
Note C,  additional  financing  is  necessary  for the Company to  continue  its
exploration and development  activities.  These matters raise  substantial doubt
about the Company's ability to continue as a going concern.  Management's  plans
in  regard  to these  matters  are also  described  in Note C. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


GRANT THORNTON LLP


/s/ Grant Thornton LLP
----------------------


Dallas, Texas
March 25, 1998





<PAGE>





<TABLE>
<CAPTION>

                             Toucan Gold Corporation
                          (a development stage company)

                           CONSOLIDATED BALANCE SHEET

                                December 31, 1997

          
                                     ASSETS
<S>                                                                                                   <C> 

Cash                                                                                                   $    504,795

Prepaid expenses                                                                                             16,375
                                                                                                       ------------
                  Total current assets                                                                      521,170

Mineral rights                                                                                            3,087,895
                                                                                                       ------------

                                                                                                        $ 3,609,065
                                                                                                       ============
                                       LIABILITIES AND STOCKHOLDERS' EQUITY

Amounts payable to related parties                                                                        $ 131,139

Accrued expenses and other liabilities                                                                       67,974
                                                                                                       ------------

                 Total current liabilities                                                                  199,113
  

Stockholders' equity
    Preferred stock, par value .01 per share; authorized, 2,000,000
       shares; issued and outstanding, none                                                                      -
    Common stock, $.01 par value per share; authorized 30,000,000
       shares; issued and outstanding 8,039,933 shares                                                       80,399
    Additional paid-in capital                                                                            4,488,606
    Deficit accumulated during the development stage                                                     (1,159,053)
                                                                                                       ------------

                  Total stockholders' equity                                                              3,409,952
                                                                                                       ------------
                                                                                                        $ 3,609,065
                                                                                                       ============

</TABLE>


         The accompanying notes are an integral part of this statement.

                                       3

<PAGE>

<TABLE>
<CAPTION>

                             Toucan Gold Corporation
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      


                                                                                                    For the period
                                                                                                   November 3, 1995
                                                                                                     (commencement
                                                                      For the years ended           of operations)
                                                                             December 31,                  through
                                                                      1997           1996          December 31,1997
                                                                     ------         ------         ----------------
<S>                                                              <C>            <C>                <C>

Cost and expenses
    Legal and professional fees                                  $  312,007      $ 156,442         $   470,949
    Consulting fees                                                 237,288         24,000             261,288
    Travel costs                                                     82,254        114,264             239,071
    Public relations                                                 59,613         33,655              93,268
    Other                                                            92,553         30,110             122,953
                                                                    -------        -------          ----------

                  Total cost and expenses                           783,715        358,471           1,187,529

Other (income) expense
    Interest income                                                 (59,168)       (17,650)            (76,818)
    Interest expense                                                     -          48,342              48,342
                                                                    -------        -------          ----------

                  Total other (income) expense                      (59,168)        30,692             (28,476)
                                                                    -------        -------          ----------

                  Net loss                                        $ 724,547       $389,163         $ 1,159,053
                                                                    =======        =======          ==========

Loss per share                                                         $.09           $.09                $.20
                                                                        ===            ===                 ===

Weighted average shares outstanding                               7,476,372      4,210,334           5,717,736
                                                                  =========      =========           =========


</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4


<PAGE>


<TABLE>
<CAPTION>



                             Toucan Gold Corporation
                          (a development stage company)

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                 For the years ended December 31, 1997 and 1996

                      


                                                                                         Deficit
                                                                                       accumulated
                                                                        Additional       during
                                                     Common stock         paid-in      development
                                                 Shares        Amount     capital         stage                Total
                                                 ------        ------   ----------     ------------          ---------
<S>                                            <C>           <C>        <C>              <C>                <C> 

Balance at January 1, 1996                       647,857     $ 96,170   $        -     $   (45,343)         $   50,827

Recapitalization of Toucan Mining
    Limited and merger with Starlight
    Acquisitions, Inc.                         4,453,602      (50,787)     150,787               -             100,000

Issuance of common stock, net of
    expenses of $519,700                       2,331,141       28,943    3,899,892               -           3,928,835

Net loss                                               -            -            -        (389,163)           (389,163)
                                               ---------    ---------    ---------      -----------          ---------

Balance at December 31, 1996                   7,432,600       74,326    4,050,679        (434,506)          3,690,499

Issuance of common stock                         607,333        6,073      437,927               -             444,000

Net loss                                               -            -            -        (724,547)           (724,547)
                                               ---------    ---------    ---------      ----------           ---------

Balance at December 31, 1997                   8,039,933   $   80,399   $4,488,606     $(1,159,053)         $3,409,952
                                               =========    =========    =========      ==========           =========


</TABLE>

         The accompanying notes are an integral part of this statement.

                                        5


<PAGE>

<TABLE>
<CAPTION>

                             Toucan Gold Corporation
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                      


                                                                                                    For the period
                                                                                                   November 3, 1995
                                                                                                     (commencement
                                                                      For the years ended           of operations)
                                                                          December 31,                  through
                                                                      1997           1996          December 31,1997
                                                                     ------         ------         ----------------
<S>                                                               <C>            <C>                 <C> 

Operating activities
    Net loss                                                      $ (724,547)    $ (389,163)         $(1,159,053)
    Net changes in operating assets and liabilities
       Prepaid expenses                                              (10,001)         1,626              (16,375)
       Accrued expenses and other liabilities                        169,802        (11,289)             199,113
                                                                   ---------      ---------           ----------

                  Net cash used in operating activities             (564,746)      (398,826)            (976,315)

Investing activities
    Acquisition and exploration of mineral rights                 (1,396,453)    (1,235,912)          (2,721,895)

Financing activities
    Net repayments/borrowings from related parties                    (9,051)       (72,260)                   -
    Issuance of common stock, net of expenses                        444,000      3,624,835            4,103,005
    Proceeds from merger with Starlight Acquisitions, Inc.                 -        100,000              100,000
                                                                   ---------      ---------           ----------

                  Net cash provided by financing activities          434,949      3,652,575            4,203,005
                                                                   ---------      ---------           ----------

                  Net (decrease) increase in cash                 (1,526,250)     2,017,837              504,795

Cash at beginning of period                                        2,031,045         13,208                    -
                                                                   ---------      ---------           ----------

Cash at end of period                                             $  504,795    $ 2,031,045           $   504,795
                                                                   =========     ==========            ==========

Cash paid during the year for:
------------------------------
    Interest                                                      $        -    $    48,342           $    48,342

Noncash investing and financing activities:

     Mineral  rights were acquired for 24,000 and 168,000 shares of common stock
     valued at $30,000 and $336,000 in 1997 and 1996, respectively.


</TABLE>


        The accompanying notes are an integral part of these statements.

                                        6


<PAGE>





                             Toucan Gold Corporation
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1997 and 1996

                      


NOTE A - ORGANIZATION AND NATURE OF OPERATIONS

     Organization
     ------------

     Starlight  Acquisitions,  Inc.  (Starlight)  was  formed  in 1989 and was a
     publicly-held  development stage company with no principal operations since
     its  incorporation.  On May 10, 1996,  Starlight  merged with Toucan Mining
     Limited (Toucan Mining),  an Isle of Man corporation which began operations
     on November 3, 1995.  Pursuant to the terms of the merger  agreement,  each
     stockholder  of Toucan  Mining  received  seven shares of Starlight  common
     stock for each share of Toucan Mining common stock.  Immediately  after the
     merger,  the stockholders of Toucan Mining owned  approximately  89% of the
     outstanding  common  stock of  Starlight.  Therefore,  the  merger has been
     accounted  for as a reverse  merger,  whereby  Toucan  Mining is deemed for
     accounting purposes to have acquired Starlight.

     During July 1996,  Starlight formed Toucan Gold Corporation (Toucan Gold or
     the Company), a wholly-owned subsidiary and a Delaware corporation. On July
     29, 1996,  Starlight  merged into Toucan Gold, and pursuant to the terms of
     the merger,  the outstanding  shares of Starlight were canceled in exchange
     for shares of Toucan Gold. (See Note G).

     Nature of Operations
     --------------------

     The  Company is engaged in  acquiring,  exploring  and  developing  mineral
     rights in Brazil.


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of the significant  accounting policies  consistently  applied in
     the preparation of the accompanying financial statements follows:

     Consolidation
     -------------

     The consolidated  financial  statements include the accounts of the Company
     and its  wholly-owned  subsidiary,  Toucan Mining and Mineradora de Bauxita
     Ltda.  (MBL),  a  Brazilian  company  whose  shares  are  held in  trust by
     Brazilian  related  parties for the benefit of Toucan Mining.  All material
     intercompany accounts and transactions have been eliminated.

     Mineral Rights
     --------------

     Acquisition costs of mineral rights and related exploration and development
     expenditures are deferred.  If deferred  expenditures  exceed estimated net
     realizable  values,  the assets will be written down to their estimated net
     realizable  values.   Costs  relating  to  abandoned   properties  will  be
     written-off when such a decision is made.





                                        7


<PAGE>


                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1996

                      


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Financial Instruments
     ---------------------

     The carrying amounts  reported in the balance sheet for cash,  payables and
     accrued expenses  approximate fair value due to the short-term  maturity of
     these financial instruments.

     Use of Estimates
     ----------------

     In preparing  financial  statements in conformity  with generally  accepted
     accounting  principles,  management  is  required  to  make  estimates  and
     assumptions that affect the reported amounts of assets and liabilities, the
     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 C - REALIZATION OF ASSETS

     The accompanying financial statements have been prepared in conformity with
     generally accepted accounting principles, which contemplate continuation of
     the company as a going concern. However, the Company is a development stage
     company which has undertaken a program of mineral exploration to target and
     explore  selected  areas of its claims to  determine  which  areas are most
     likely to contain economic gold reserves. The Company has incurred costs of
     $3,087,895 for the acquisition of claims and exploration  since  inception,
     November 3, 1995.

     The  recoverability  of the cost of  mineral  rights  is  dependent  on the
     Company's  ability to continue  exploration,  establish  the  existence  of
     economically  recoverable  reserves,  develop these  reserves,  and achieve
     profitable production or obtain sufficient proceeds from the disposition of
     the rights. The Company's ability to continue exploration is dependent upon
     raising  additional  capital or embarking into joint ventures to fund these
     activities.  Management  is in the process of  negotiating  with  potential
     funding sources and joint venture partners.

     In view of the matters described in the preceding paragraph, recoverability
     of a major portion of the recorded asset amounts shown in the  accompanying
     balance sheet is dependent  upon  continued  successful  exploration by the
     Company,  which in turn is dependent  upon the Company's  ability to obtain
     financing to support such exploration activities.  The financial statements
     do  not  include  any  adjustments   relating  to  the  recoverability  and
     classification of recorded asset amounts and  classification of liabilities
     that  might be  necessary  should  the  Company  be unable to  continue  in
     existence.








                                        8


<PAGE>

                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1996

                      


NOTE D - MINERAL RIGHTS

     Mineral rights include the following as of December 31, 1997:

         Consideration paid for priority claims                       $1,642,000
         Other acquisition and exploration costs (Note E)              1,445,895
                                                                       ---------

                                                                      $3,087,895
                                                                       =========

     The Company owns priority claims for 1,233,317 hectares which were filed in
     1995  with  the  Departamento  Nacional  De  Produca  Mineral  (DNPM),  the
     Brazilian  governmental  agency  responsible for regulating mineral rights.
     The  Company  was not  required  to make any  payments to the DNPM or third
     parties in relation to the filing of these claims.

     In November 1996, the Company  entered into a transaction  with a Brazilian
     individual to acquire 25 additional priority claims, over a period of time,
     as each of these  claims were  confirmed  by the DNPM.  As of December  31,
     1997, the Company had acquired 16 of these claims, approximately 480 square
     miles,  although  the Company was  informed by the DNPM that the Seller did
     not hold priority title on one of these 16 claims. As a result, the Company
     currently  holds priority claim on only 15 claims.  Consideration  paid for
     these  claims  included  $1,076,000  in cash and  192,000  shares of common
     stock,  which were  unissued at December 31,  1997.  These shares have been
     reflected  as  outstanding  as of  December  31,  1997 in the  accompanying
     financial statements.

     On December 8, 1997, the Company  acquired 10 claims from a stockholder for
     $50,000 in cash and  133,333  shares of the  Company's  common  stock.  The
     stockholder holds the claims on behalf of the Company under an agreement of
     beneficial ownership.



NOTE E - RELATED PARTIES

     Amounts payable to related parties consist of the following at December 31:

                                                         1997              1996
                                                        ------            ------
                                                                                
     Loans                                             $      -           $9,051
        Amounts due for consulting and other
        professional services                           131,139                -
                                                        -------            -----
                                                       $131,139           $9,051
                                                        =======            =====

     Advances  and  repayments  during  1996 under the loans were  $646,704  and
     $767,564,  respectively.  Interest  expense  paid  to  related  parties  in
     relation to these loans was $48,342 in 1996.






                                        9


<PAGE>





                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1996

                      



NOTE E - RELATED PARTIES - Continued

     In 1997 and 1996, the Company made payments of  approximately  $525,514 and
     $307,000,  respectively,  to related parties,  including five stockholders,
     for various consulting  services  including  geological surveys and advice,
     working  with the DNPM to  establish  beneficial  ownership of the priority
     claims,  Brazilian legal and regulatory  advice in relation to the priority
     claims,   and  the  registration  of  MBL.  Included  in  these  costs  are
     approximately $330,000 and $250,000 in 1997 and 1996,  respectively,  which
     are considered to be costs relating to the  acquisition  and exploration of
     mineral  rights and have been  capitalized as mineral rights as of December
     31, 1997.  See Note D regarding other related party transactions.


NOTE F - PER SHARE DATA

     Loss per share is determined  by dividing net loss by the weighted  average
     number of common shares  outstanding  during the period. No effect has been
     given to  assumed  exercise  of  warrants  because  their  effect  would be
     antidilutive.


NOTE G - STOCK WARRANTS

     During 1997, the Company issued warrants to certain individual stockholders
     to purchase 633,000 shares of the Company's common stock at exercise prices
     ranging  from  $1.00 to $1.50  per  share.  The  warrants  are  immediately
     exercisable and expire between December 31, 1998 and April 1, 2002.

     On November 1, 1996, the Company  completed an offering of 1,600,000  units
     for gross  proceeds  of $4  million.  Each unit  consisted  of one share of
     common stock, par value $.01 per share, and one common stock share purchase
     warrant (the "Company  Warrants").  The Company Warrants expired on January
     31, 1998.

     As described in Note A,  Starlight's  outstanding  shares were cancelled in
     exchange for shares of the Company. Additionally, Starlight warrants issued
     on May 10, 1996 to  purchase  an  additional  100,000  shares of  Starlight
     common stock at an exercise price of $4.00 per share were exchanged for the
     Company's warrants to purchase 100,000 shares of the Company's common stock
     at an exercise price of $4.00 per share. The holders of these warrants have
     certain  piggy-back  registration  rights with respect to the shares of the
     Company's   common  stock   underlying  the  warrants.   The  warrants  are
     immediately exercisable and expire on the later of January 10, 1998, or the
     six month anniversary of closing of the first registration of securities by
     the Company.






                                       10


<PAGE>




                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1996

                      



NOTE H - INCOME AND OTHER TAXES

     At  December  31,  1997,  the  Company  had  approximately  $815,000 of net
     operating  loss  carryforwards  which expire  through  2012.  The Company's
     deferred tax asset at December 31, 1997 and 1996  relating to net operating
     loss carryforwards was approximately  $277,000 and $58,000, respectively. A
     valuation  allowance  for this  asset  has been  recorded  in each  period.
     Accordingly, no tax benefit is reflected in the statements of operations.

     Under  Brazilian  tax law, MBL is liable for  property  taxes on the claims
     under  exploration.  These taxes are due upon the public  disclosure of the
     claims by the Brazilian authorities.


NOTE I - COMMITMENT

     Under an  agreement  with a Brazilian  individual  (Note D), the Company is
     committed to acquire 9 additional  priority  claims upon clearance of title
     by the DNPM. The  consideration  for each claim will be $36,000 in cash and
     12,000  shares of common  stock.  In  addition,  a bonus  payment of 50,000
     shares is due to the seller if all 9 claims are delivered to the Company.


NOTE J - FOURTH QUARTER ADJUSTMENT

     During  the fourth  quarter of 1997,  the  Company  capitalized  as mineral
     rights $246,046 of costs which were recorded as expenses in the nine months
     ended September 30, 1997.


NOTE K - RECLASSIFICATIONS

     Certain   reclassifications  have  been  made  to  prior  years'  financial
     statements to conform to the 1997 presentation.




                                       11


<PAGE>


                                    PART III

      Item 9. Directors, Executive Officers, Promoters and Control Persons

     The Board of Directors  currently  consists of four (4) persons,  Robert P.
Jeffcock,  L. Clark Arnold,  Don Box and Robert A. Pearce.  The following  table
sets forth information about all Directors and executive officers of the Company
and all persons nominated or chosen to become such:

<TABLE>
<CAPTION>
                                                                                                         YEAR FIRST
                                                                                                           ELECTED
NAME AND BUSINESS ADDRESS                    AGE                         OFFICE                           DIRECTOR
-------------------------                    ---                         ------                           --------
<S>                                          <C>     <C>                                                    <C> 

Robert P. Jeffcock                            58     President, Chief Executive Officer,                    1996
Apt. B42 ROC Fleuri                                  Chairman of the Board of Directors, Vice
1 Rue du Tenao  MONACO                               President and Secretary

L. Clark Arnold                               57     Director and Executive Vice President-                 1996
201 East Rudasill Road                               Exploration
Tucson, Arizona

Don Box                                       48     Director and Assistant Secretary                       1996
8201 Preston Road, Suite 600
Dallas, Texas

Robert A. Pearce                              53     Director and Chief Financial Officer                   1998
Rycote Oasthouse, Wyck Lane
East Worldham
Hants, United Kingdom GU34-3AW

</TABLE>

     Robert  Jeffcock - Mr.  Jeffcock has served as the Chairman of the Board of
Directors,  Chief Financial  Officer and Secretary of the Company since the date
of the Share  Exchange  (May 10,  1996),  and also served as President and Chief
Executive  Officer  of the  Company  from the date of the Share  Exchange  until
December 31, 1996.  Mr.  Jeffcock  resumed his  positions as President and Chief
Executive Officer of the Company on May 31, 1997 after the resignation of Oliver
Lennox-King. Mr. Jeffcock is currently the President and Chief Executive Officer
in addition to his other positions. Since 1995, Mr. Jeffcock has been a Director
of Toucan Mining. From 1987 until 1990 Mr. Jeffcock was the Managing Director of
Blue Angel  Mining  Ltd.,  a gold  exploration  company in Ecuador and from 1990
until 1994 he was a director of Atlantis  Diamonds  Ltd.,  which was involved in
diamond exploration and production in Brazil. From 1990 until 1994, Mr. Jeffcock
was President of Rand Industries  Inc., a mining company.  In 1981, Mr. Jeffcock
was the co-founder  and President of Isle  Resources  Inc., a public oil and gas
company.  In 1984, Mr. Jeffcock co-founded Lysander Petroleum Ltd., which is now
Pentex   Energy Plc. Mr.  Jeffcock was educated at Bedales  School and at Aiglon
School Villars, Switzerland.

     L. Clark Arnold - Mr.  Arnold has served as a Director and  Executive  Vice
President-Exploration  of the Company since the date of the Share Exchange.  Mr.
Arnold is a registered professional geologist in the State of Arizona. Since the
mid-1970s  Mr.  Arnold has engaged in a consulting  practice  located in Tucson,
Arizona, focused on mineral exploration in Southwest U.S., South America and the
Southwest  Pacific.  Mr. Arnold holds a MS Degree and a Pd.D. Degree in Geology,
both from the University of Arizona.  Mr. Arnold provides consulting services to
the Company and receives  remuneration at the rate of $450 per day. Expenses are
at Mr. Arnold's cost. In 1997, Mr. Arnold received remuneration from the Company
in the amount of $23,934,  which includes Mr. Arnold's expenses. In addition, in
1997, Mr. Arnold was granted certain  options to purchase  Company Common Stock.
See "Certain Relationships and Related Transactions".

     Don Box - Mr. Box has served as a Director and  Assistant  Secretary of the
Company since the date of the Share Exchange.  Mr. Box has served since November
1, 1997,  as the  Executive  Vice  President of Remington  Oil and Gas Corp.,  a
publicly held oil and gas exploration and production company.  Mr. Box served as
Chairman of the Board of Directors  of Box Energy  Corporation, a public company


                                       14

<PAGE>

owning oil and gas interests in the Gulf of Mexico and mainland U.S.,  from 1993
until  Novmeber  1, 1997,  and served as Chief  Executive  Officer of Box Energy
Corporation from January 1, 1997, until November 1, 1997. Since 1992 Mr. Box has
been President and a Director of Box Brothers Holding Company ("Box  Brothers"),
which is engaged in the oil and gas business.  Box Brothers  underwent a plan of
reorganization  pursuant  to Chapter 11 of the U.S.  Bankruptcy  Code in Federal
Bankruptcy Court in Delaware in 1995. Since 1988, Mr. Box has been the President
of CKB Petroleum,  which is engaged in the oil and gas business. Since 1984, Mr.
Box has been the President of CKB Petroleum, which is engaged in the oil and gas
business. From 1990 until 1996, Mr. Box was President of Race Circuit Management
of Texas,  which is engaged in motor sports promotion.  Mr. Box holds a Bachelor
of Arts degree from the University of Pennsylvania, a Bachelor of Science degree
in  Economics  from the  Wharton  School of  Business  and a  Masters  degree in
Business Administration from Southern Methodist University.

     Robert A. Pearce - Mr. Pearce has served as a Director and Chief  Financial
Officer of the Company  since  January 31,  1998.  From 1992 through  1993,  Mr.
Pearce served as a director, and subsequently as the chairman, of Aspermont Ltd.
("Aspermont"),  a publicly  traded  holding  company  holding  interests  in the
television broadcasting and engineering industries. Also during 1993, Mr. Pearce
served as the Executive  Chairman of A. I.  Engineering  Ltd., a publicly traded
engineering  firm in the mining  industry.  From 1994 until his  appointment  as
Director  and  Chief  Financial  Officer  of  the  Company,  Mr.  Pearce  was an
independent  consultant to various companies in the United States and the United
Kingdom.  Mr. Pearce is a certified  accountant  having  received his accounting
certificate from the Institute of Chartered Accountants of Australia.  Aspermont
and its  subsidiary,  Darling Downs TV Ltd.  ("Darling  Downs"),  were in severe
financial  distress prior to Mr. Pearce's  appointment to the Board of Directors
of  Aspermont  in 1992.  On  October  15,  1993,  Darling  Downs  was  placed in
receivership as a result of its inability to meet its obligations to its secured
creditor.  Mr.  Pearce  negotiated  with the secured  creditors of Aspermont and
Darling Downs,  the payment of all unsecured  creditors,  the sale of the assets
subject to the security  interest of the secured  creditors and the write-off of
the balance of the secured  indebtedness.  Such  claims  were  settled,  and the
receivership was terminated. Mr. Pearce provides services to the Company one day
per  week and such  additional  time as is  requested  by the  President  of the
Company.   Mr.  Pearce   receives   remuneration  at  the  rate  of  500  pounds
(approximately  $825)  per day for  such  day and  such  additional  time,  plus
reimbursement of reasonable business expenses. In addition,  Mr. Pearce received
certain  options  to  purchase  Company  Common  Stock  in  connection  with his
appointment  as Chief  Financial  Officer  and  Chief  Accounting  Officer.  See
"Certain Relationships and Related Transactions."

     The Company is not aware of any "family  relationships" (as defined in Item
401(c)  of  Regulation  S-B  promulgated  by the  Commission)  among  directors,
executive  officers,  or persons  nominated  or chosen by the  Company to become
directors or executive officers.

     Except as set forth above, the Company is not aware of any event (as listed
in Item 401(d) of Regulation S-B  promulgated by the  Commission)  that occurred
during the past five years that are material to an  evaluation of the ability or
integrity of any  director,  person  nominated  to become a director,  executive
officer, promoter or control person of the Company.


                         Item 10. Executive Compensation

     The following table sets forth the compensation  paid by the Company to its
Chief  Executive  Officer  during the fiscal year ended  December 31,  1997;  no
executive officer, other than Robert P. Jeffcock, earned in excess of $100,000.




                                       15

<PAGE>

<TABLE>
<CAPTION>


                                                                        Annual Compensation

                                                     Year
               Name/Principal                       Ending                                       Other Annual
                  Position                       December 31         Salary         Bonus        Compensation

<S>                                                  <C>            <C>              <C>              <C>

           Robert P. Jeffcock, CEO                   1995             N/A            N/A              N/A
                                                     1996           $32,000          $ 0              $ 0
                                                     1997           $120,000         $ 0              $ 0
</TABLE>


     Oliver Lennox-King served as the Chief Executive Officer and as a member of
the Board of  Directors  of the Company from January 1, 1997 until May 31, 1997.
In connection with his resignation from these positions,  Mr. Lennox-King agreed
to the  termination  of all stock  options with regard to the  Company's  Common
Stock that had been  granted to him by the  Company.  Further,  Mr.  Lennox-King
relinquished  any claim  against  the  Company  that he held at the time of such
resignation.


     Item 11. Security Ownership of Certain Beneficial Owners and Management

     The  following  table sets forth,  as of the close of business on March 31,
1998, information as to the beneficial ownership of shares of the Company Common
Stock for all  directors,  each of the named  executive  officers (as defined in
Item  402(a)(2)  of  Regulation  S-B  promulgated  by the  Commission),  for all
directors and executive  officers as a group, and any person or "group" (as that
term is defined in Item 403 of Regulation S-B promulgated by the Commission) who
or which is known to the Company to be the  beneficial  owner of more than 5% of
the outstanding shares of Company Common Stock. In addition, except as set forth
below,  the  Company  does not know of any  person  or group  who or which  owns
beneficially  more than 5% of its outstanding  shares of Company Common Stock as
of the close of business on March 31, 1998.




                                       16

<PAGE>
                             PRINCIPAL STOCKHOLDERS

     The  following  table  sets  forth  information  regarding  the  beneficial
ownership of Company  Common Stock as of March 31, 1998 by (i) each person known
by the Company to own more than 5% of the outstanding Company Common Stock, (ii)
each of the Company's Directors and executive officers,  and (iii) all Directors
and executive officers of the Company as a group.

<TABLE>
<CAPTION>

                                                                           Amount and
                                                                           Nature of
Name of Individual or                                                      Beneficial                Percent
Number of Persons in Group                                                  Owner(1)               of Class(2)

<S>                                                                        <C>                       <C>

Robert P. Jeffcock(3)(4)(5)..........................................        200,000                  2.53%

Don D. Box(3)........................................................              0                    *

Robert A. Pearce(3)(9)...............................................         50,000                    *

L. Clark Arnold(3)(10)...............................................        470,000                  6.05

Caithness Limited(5).................................................        965,445                 12.51

Zalcany Limited(6)...................................................      1,088,000                 13.59

Roy G. Williams(6)(7)................................................      1,556,000                 19.18

Reads Trustees Limited(5)............................................      1,554,453                 20.15

J. P. Jeffcock No. 2 Settlement(5)...................................        484,008                  6.27

Carlos Lins E. Silva(8)..............................................        210,000                  2.68

Igor Mousasticoshvily(8).............................................        476,666                  6.07

All Directors and executive
officers as a group (4 persons)......................................        670,000                  8.98
<FN>
--------------------

     *    Less than 1%

     (1)  The persons  named in this table have record  ownership of such shares
          and except as  indicated in the  footnotes to this table,  the persons
          name in the table have sole voting  power with respect to shares shown
          as beneficially owned by them.

     (2)  Based on 7,714,600 shares of Company Common Stock outstanding.

     (3)  Director and officer of the Company.

     (4)  Mr. Robert Jeffcock is included in a class of potential  beneficiaries
          in a Trust  which  owns  Caithness  Limited.  Includes  an  option  to
          purchase  200,000  shares of Company  Common  Stock that is  presently
          exercisable.

     (5)  Reads  Trustees  Limited,  as trustee,  has sole voting and investment
          control with respect to the shares held by the following shareholders:
          Caithness Limited (965,445) J.P. Jeffcock No. 2 Settlement  (484,008);
          The Magnum Trust (105,000).

     (6)  Zalcany  Limited is a company  ultimately  controlled and owned by Mr.
          Roy G. Williams,  Mr. R. M. Harris and Mr. J.D. Harris.  Together they
          effectively share the voting and investment power of the shares in the
          Company held by Zalcany Limited. Each of R. M. Harris and J. D. Harris
          owns individually, beneficially and of record, 42,000 shares. Includes
          a warrant to acquire  292,000  shares of Company Common Stock that are
          presently exercisable.

     (7)  Mr.  Roy  G.  Williams'  family  owns  the  equity  share  capital  of
          Mustardseed Estates Limited. Accordingly, Mr. Roy G. Williams controls
          or shares voting investment power over the following shareholders: Roy
          G. Williams  (110,000);  Zalcany  Limited  (796,000);  and Mustardseed
          Estates  Limited  (250,000).  Includes  warrants  to  acquire  68,000,
          292,000 and 40,000 shares of Company  Common Stock by Roy G. Williams,
          Zalcany Limited and Mustardseed  Estates Limited,  respectively,  that
          are presently exercisable.

                                       17

<PAGE>



     (8)  Consultant to MBL, the principal  mining  subsidiary  of the  Company.
          Includes an option to acquire  133,333  shares of Company Common Stock
          that is presently exercisable.

     (9)  Includes an option to acquire  50,000  shares of Company  Common stock
          that is presently exercisable.

     (10) Includes an option to acquire  50,000  shares of Company  Common stock
          that is presently exercisable.

</FN>
</TABLE>


                                       18

<PAGE>



             Item 12. Certain Relationships and Related Transactions

     Cardinal  Holdings,  a company  affiliated  with Roy G. Williams,  made two
unsecured loans to the Company to permit the Company to fund the Initial Payment
with respect to the November 1996  agreement  with the  Brazilian  individual to
acquire  additional  mining claims in the Cuiaba Basin prior to the consummation
of the  Yorkton  Offering.  See  "Items 1 and 2.  Description  of  Business  and
Property  -  Mining  Claims."  One  loan was  made on  October  18,  1996 in the
principal  amount  of  $100,000  at an  interest  rate of 10% per  annum  plus a
commitment  fee of  $10,000.  The other loan was made on October 23, 1996 in the
principal  amount  of  $400,000  at an  interest  rate of 10% per  annum  plus a
commitment fee of $20,000. Both loans were repaid by the Company on November 15,
1996.

     In April, 1998, Zalcany, a company affiliated with Roy G. Williams, made an
unsecured loan to the Company to fund the Company's current operations. The loan
is a demand  loan and bears an  interest  rate of 10% per annum.  As of April 8,
1998, the principal amount of the loan was $54,000.

     Certain officers of the Company or MBL received consulting fees for various
consulting services as follows:

     Mr. Arnold,  Vice President - Exploration of the Company,  received in 1997
and 1996  fees  totaling  $23,934  and  $22,368,  respectively,  in  return  for
geological  consulting  services.  In addition,  in 1996,  Mr.  Arnold  received
payment for $4,571.64 in fees for geological  consulting services in the form of
shares of Toucan Mining Limited capital stock,  which shares were exchanged into
shares of Starlight Common Stock in the Share Exchange.

     In addition,  Igor Mousasticoshvily,  Sr., a consultant to MBL, received in
1997 and 1996 fees totaling $167,000 and $158,503,  respectively, for geological
and  general  consulting  services.  Carlos E. Lins e Silva,  a director of MBL,
received in 1996 fees  totaling  $50,000 for certain  success fees in connection
with certain transactions.

     On December  23,  1997,  the Company  completed a private  placement  of an
aggregate of 400,000 shares (the  "Investor  Shares") of Company Common Stock to
three of its  existing  stockholders  at a  purchase  price of $.75 per share of
Company Common Stock. Roy G. Williams,  Zalcany, and Mustardseed Estates Limited
received   68,000,   292,000  and  40,000   shares  of  Company   Common  Stock,
respectively.  Zalcany  and  Mustardseed  Estates  are  affiliated  with  Roy G.
Williams.  See "Security Ownership of Certain Beneficial Owners and Management."
Along with each share of Company Common Stock sold in the private placement, the
Company  granted to the holder  thereof a warrant (the  "Investor  Warrants") to
purchase one share of Company  Common Stock at an exercise  price of $1.50.  The
Investor Warrants will be exercisable until January 1, 2000. The proceeds of the
private placement was used for the Company's working capital purposes.

     On September  27, 1997,  the Company  granted  options to purchase,  in the
aggregate, 100,000 shares of Company Common Stock to two separate individuals in
their  capacities  as  employees  of  the  Company.  The  options  allowed  each
individual  to purchase  50,000  shares of Company  Common  Stock at an exercise
price of $1.00.

          (1) The first  block of  options,  allowing  the  grantee to  purchase
          50,000  shares  of  Company   Common  Stock,   was  granted  to  David
          Carmichael.  Mr.  Carmichael  serves as the  General  Manager for MBL.
          These options  would vest in increments of 17,000,  17,000 and 16,000.
          The initial  grant of options to purchase  17,000 shares vested on the
          date of grant.  The remaining blocks of 17,000 and 16,000 options will
          vest on April 1, 1998 and  April 1,  1999,  respectively,  only in the
          event that Mr. Carmichael is employed with the Company on those dates.

          (2) The second  block of  options,  allowing  the  grantee to purchase
          50,000 shares of Company Common Stock, was granted to L. Clark Arnold,
          a Director and Vice President - Exploration,  whose  responsibility is
          overseeing  the  Company's  exploration  program,  for his  continuing
          contributions to the Company in discharging such responsibilities. Mr.
          Arnold  options  vested  on the date of grant and are  exercisable  up
          until September 27, 1999.


                                       19

<PAGE>



     On September  27, 1997,  the Board of Directors  approved and  confirmed an
Employment Agreement,  dated as of April 1, 1997, by and between the Company and
David Carmichael (the  "Agreement").  The Agreement provides that Mr. Carmichael
is to  receive  (i) a signing  bonus of  $20,000;  (ii) a base  gross  salary of
$90,000 per annum payable in equal monthly  installments  with the first payment
being  made on April 30,  1997;  and (iii) an annual  bonus set at a minimum  of
$20,000 and a maximum of $30,000 to be determined at the discretion of the Board
of Directors of the Company and payable  three months  following the end of each
year of employment  commencing with Mr.  Carmichael's second year of employment.
The  Agreement  further  provides  for a grant to Mr.  Carmichael  of options to
purchase 50,000 shares of Company Common Stock.  The Agreement shall continue in
effect from the date of grant on a year to year basis until terminated according
to the  provisions of the Agreement.  In 1997,  Mr.  Carmichael was paid $87,500
pursuant to the Agreement.

     On  February 2, 1998,  the  Company  granted  options to  purchase,  in the
aggregate, 250,000 shares of Company Common Stock to two separate individuals in
their  capacities  as Directors of the Company.  The options  allowed  Robert P.
Jeffcock and Robert A. Pearce to purchase  200,000 and 50,000  shares of Company
Common Stock, respectively,  at an exercise price of $1.00. Mr. Jeffcock and Mr.
Pearce  received  their  options  as part of  their  remuneration  for  services
rendered to the Company.  Each individual's  options vested on the date of grant
and are exercisable up until December 31, 1999.


                                       20

<PAGE>



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

(a)      Exhibits

Exhibit
Number                                Description of Exhibit
-------                               ----------------------

2.1      Agreement and Plan  of Merger, dated  July 29, 1996,  and among  Toucan
         Gold Corporation and  Starlight  Acquisitions,  Inc.  (incorporated  by
         reference from the  Current  Report on  Form  8-K dated  July 29, 1996,
         Exhibit 2.1).

2.2      Share Exchange Agreement, dated May 10, 1996,  by and  among  Starlight
         Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
         from the Current Report on Form 8-K dated May 13, 1996, Exhibit 2).

3.1      Certificate of Incorporation  of Toucan Gold  Corporation filed on July
         22, 1996  with  the  Secretary  of  State  of  the  State  of  Delaware
         incorporated  by reference  from the Current  Report on Form  8-K dated
         July 29,  1996, Exhibit 4.1).

3.2(1)   Bylaws of Toucan Gold Corporation (Exhibit 3.2).

10.1*    Option Agreement, dated September 27, 1997, by and between  the Company
         and David Carmichael.

10.2*    Option Agreement, dated September 27, 1997, by and between  the Company
         and L. Clark Arnold.

10.3*    Option Agreement, dated  February 2, 1998,  by and between  the Company
         and Robert P. Jeffcock.

10.4*    Option Agreement, dated  February 2, 1998,  by and between  the Company
         and Robert A. Pearce.

10.5(2)  Warrant  Agreements, dated as of December 31, 1997,  by and between the
         Company and Roy  G. Williams, Zalcany  Limited and Mustardseed  Estates
         Ltd. (Exhibit 10.1)

10.6(2)  Warrant Agreement  dated as of December  31,  1997,  by and between the
         Company and Igor Mousasticoshvily (Exhibit 10.2)

10.7(3)  Employment  Agreement,  dated as of April 1, 1997,  by and  between the
         Company and David Carmichael (Exhibit 10.1)

10.8(1)  Warrant Agreement,  dated July 29,  1996,  by and  between  Toucan Gold
         Corporation and R. Haydn Silleck (Exhibit 10.1).

10.9(1)  Warrant Agreement  dated July 29,  1996,  by and  between  Toucan  Gold
         Corporation and John B. Marvin (Exhibit 10.2).

10.10(1) Warrant  Agreement  dated July 29,  1996,  by and  between  Toucan Gold
         Corporation and Peter S. Daley (Exhibit 10.3).

10.11(1) Warrant  Agreement  dated July 29,  1996,  by and  between  Toucan Gold
         Corporation and Jay Lutsky (Exhibit 10.4).

10.12    Indemnification Agreement, dated May 10, 1996, by and  between R. Haydn
         Silleck, John B. Marvin,   Peter  S.  Daley,   Jay  Lutsky,   Starlight
         Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
         from the Current Report on Form 8-K dated May 13, 1996, Exhibit 10.2).


                                       21

<PAGE>



 
10.13    Letter of Intent, dated August  23,  1996,  by and  among  Toucan  Gold
         Corporation, Toucan Mining Limited,  HRC  Development  Corporation  and
         Eldorado Gold Corporation (Schedule A to the  Letter of Intent has been
         omitted pursuant to Item 601(b)(2) of Regulation S-B) (incorporated  by
         reference from the Current Report on Form 8-K, dated  August 23,  1996,
         Exhibit 10).

10.14    Agreement with Yorkton  Securities,   Inc.,   dated  October  17,  1996
         (incorporated by reference from the Current  Report on Form 8-K,  dated
         October 21, 1996, Exhibit 10).

10.15    Amendment to the Agreement with Yorkton Securities, Inc., dated October
         23, 1996 (incorporated  by reference from  the Current Report  on  Form
         8-K, dated October 29, 1996, Exhibit 10.2).

21*      Subsidiaries of the Company.

22.1(1)  Notice and Proxy Statement dated July 16, 1996 (Exhibit 22.1).

22.2     Form of Supplement, dated July 19, 1996, to Notice and Proxy Statement,
         dated July 16, 1996.

27*      Financial Data Schedules.

*Filed herewith

(1)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the Company's  Annual  Report on Form 10-KSB for the period ended  December
     31, 1996, filed by the Company with the Securities and Exchange Commission.

(2)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the Company's  Current  Report on Form 8-K,  filed January 8, 1998 with the
     Securities and Exchange Commission.

(3)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the  Company's  Quarterly  Report  on  Form  10-QSB  for the  period  ended
     September 30, 1997,  filed by the Company with the  Securities and Exchange
     Commission.

(b)  Reports on Form 8-K

     The Company filed the following Reports on Form 8-K during the last quarter
of the Company's fiscal year ended December 31, 1997:

     (i)  On  January  29,  1997,  the  Company  filed with the  Securities  and
          Exchange  Commission  a  Current  Report  on Form  8-K  reporting  the
          acquisition of certain mining claims in the Cuiaba Basin.

     (ii) On January 8, 1998, the Company filed with the Securities and Exchange
          Commission  a  Current  Report  on  Form  8-K  reporting  the  private
          placement  of 400,000  shares of Company  Common Stock to three of its
          existing  stockholders.  Along with the  issuance of this  stock,  the
          Company  issued to such  stockholders  an equal  amount of warrants to
          purchase Company Common Stock.

          The  Company   further   reported  that  it  had  acquired  from  Igor
          Mousasticoshvily  additional  mining claims in the Cuiaba  Basin.  The
          Company paid cash and Company Common Stock to Mr.  Mousasticoshvily as
          consideration for the additional claims.



                                       22

<PAGE>



                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  registrant  has duly caused this annual  report on Form 10-KSB to be
signed on its behalf by the undersigned thereto duly authorized.

                             Toucan Gold Corporation
                             (Registrant)


Date: April 14, 1998          By:  /s/ Robert P. Jeffcock
                                   ---------------------------------------------
                                   Robert P. Jeffcock, President and
                                   Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
annual report on Form 10-KSB has been signed below by the  following  persons on
behalf of the registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>

            SIGNATURE                                OFFICE                                  DATE
          -------------                           ------------                            ----------
<S>                                  <C>                                                <C>  


/s/ Robert P. Jeffcock               President, Chief Executive Officer and             April 14, 1998
------------------------------------ Chairman of the Board of Directors (Principal
Robert P. Jeffcock                   Executive Officer)

/s/ L. Clark Arnold                  Director and Executive Vice President-             April 14, 1998
------------------------------------ Exploration
L. Clark Arnold

/s/ Don Box                          Director and Assistant Secretary                   April 14, 1998
------------------------------------
Don Box

/s/ Robert A. Pearce                 Director and Chief Financial Officer               April 14, 1998
------------------------------------ (Principal Financial Officer and Chief
Robert A. Pearce                     Accounting Officer)

</TABLE>


                                       23

<PAGE>



                                Index to Exhibits

(a)      Exhibits

Exhibit
Number                                Description of Exhibit
-------                               ----------------------

2.1      Agreement and Plan  of Merger, dated  July 29, 1996,  and among  Toucan
         Gold Corporation and  Starlight  Acquisitions,  Inc.  (incorporated  by
         reference from the  Current  Report on  Form  8-K dated  July 29, 1996,
         Exhibit 2.1).

2.2      Share Exchange Agreement, dated May 10, 1996,  by and  among  Starlight
         Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
         from the Current Report on Form 8-K dated May 13, 1996, Exhibit 2).

3.1      Certificate of Incorporation  of Toucan Gold  Corporation filed on July
         22, 1996  with  the  Secretary  of  State  of  the  State  of  Delaware
         incorporated  by reference  from the Current  Report on Form  8-K dated
         July 29,  1996, Exhibit 4.1).

3.2(1)   Bylaws of Toucan Gold Corporation (Exhibit 3.2).

10.1*    Option Agreement, dated September 27, 1997, by and between  the Company
         and David Carmichael.

10.2*    Option Agreement, dated September 27, 1997, by and between  the Company
         and L. Clark Arnold.

10.3*    Option Agreement, dated  February 2, 1998,  by and between  the Company
         and Robert P. Jeffcock.

10.4*    Option Agreement, dated  February 2, 1998,  by and between  the Company
         and Robert A. Pearce.

10.5(2)  Warrant  Agreements, dated as of December 31, 1997,  by and between the
         Company and Roy  G. Williams, Zalcany  Limited and Mustardseed  Estates
         Ltd. (Exhibit 10.1)

10.6(2)  Warrant Agreement  dated as of December  31,  1997,  by and between the
         Company and Igor Mousasticoshvily (Exhibit 10.2)

10.7(3)  Employment  Agreement,  dated as of April 1, 1997,  by and  between the
         Company and David Carmichael (Exhibit 10.1)

10.8(1)  Warrant Agreement,  dated July 29,  1996,  by and  between  Toucan Gold
         Corporation and R. Haydn Silleck (Exhibit 10.1).

10.9(1)  Warrant Agreement  dated July 29,  1996,  by and  between  Toucan  Gold
         Corporation and John B. Marvin (Exhibit 10.2).

10.10(1) Warrant  Agreement  dated July 29,  1996,  by and  between  Toucan Gold
         Corporation and Peter S. Daley (Exhibit 10.3).

10.11(1) Warrant  Agreement  dated July 29,  1996,  by and  between  Toucan Gold
         Corporation and Jay Lutsky (Exhibit 10.4).

10.12    Indemnification Agreement, dated May 10, 1996, by and  between R. Haydn
         Silleck, John B. Marvin,   Peter  S.  Daley,   Jay  Lutsky,   Starlight
         Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
         from the Current Report on Form 8-K dated May 13, 1996, Exhibit 10.2).


                                    Index - 1

<PAGE>



 
10.13    Letter of Intent, dated August  23,  1996,  by and  among  Toucan  Gold
         Corporation, Toucan Mining Limited,  HRC  Development  Corporation  and
         Eldorado Gold Corporation (Schedule A to the  Letter of Intent has been
         omitted pursuant to Item 601(b)(2) of Regulation S-B) (incorporated  by
         reference from the Current Report on Form 8-K, dated  August 23,  1996,
         Exhibit 10).

10.14    Agreement with Yorkton  Securities,   Inc.,   dated  October  17,  1996
         (incorporated by reference from the Current  Report on Form 8-K,  dated
         October 21, 1996, Exhibit 10).

10.15    Amendment to the Agreement with Yorkton Securities, Inc., dated October
         23, 1996 (incorporated  by reference from  the Current Report  on  Form
         8-K, dated October 29, 1996, Exhibit 10.2).

21*      Subsidiaries of the Company.

22.1(1)  Notice and Proxy Statement dated July 16, 1996 (Exhibit 22.1).

22.2     Form of Supplement, dated July 19, 1996, to Notice and Proxy Statement,
         dated July 16, 1996.

27*      Financial Data Schedules.

*Filed herewith

(1)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the Company's  Annual  Report on Form 10-KSB for the period ended  December
     31, 1996, filed by the Company with the Securities and Exchange Commission.

(2)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the Company's  Current  Report on Form 8-K,  filed January 8, 1998 with the
     Securities and Exchange Commission.

(3)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the  Company's  Quarterly  Report  on  Form  10-QSB  for the  period  ended
     September 30, 1997,  filed by the Company with the  Securities and Exchange
     Commission.


                                   Index - 2