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, 1998 

|_|  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)890-8065
--------------------------------------------------------------------------------
                (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

The  aggregate  market  value  of  the  voting  and  non-voting  stock  held  by
non-affiliates  of the  registrant as of March 29, 1999 was $440,548  based upon
the average bid and ask price of the common stock on such date of $.10 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 29, 1999, there were 8,027,933 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
<TABLE>
<CAPTION>

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



<S>                                                                                                         <C>

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

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

Item 3.  Legal Proceedings........................................................................................9

Item 4.  Submission of Matters to a Vote of Security-Holders......................................................9

PART II  ........................................................................................................10

Item 5.  Market for Common Equity and Related Stockholder Matters................................................10

Item 6.  Management's Discussion and Analysis of Financial Condition or Plan of Operation........................11

Item 7.  Financial Statements....................................................................................14

Report of Independent Certified Public Accountants..............................................................F-1

Consolidated Balance Sheet as of December 31, 1998..............................................................F-2

Consolidated Statements of Operations for the years ended December 31, 1998, 1997
  and the period from November 3, 1995 to December 31, 1998.....................................................F-3

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997, 1996
  and the period from November 3, 1995 to January 1, 1996.......................................................F-4

Consolidated Statement of Cash Flows for the years ended December 31, 1998, 1997
  and the period from November 3, 1995 to December 31, 1998.....................................................F-5

Notes to Financial Statements...................................................................................F-6

PART III ........................................................................................................15

Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance with
         Section 16(a) of the Exchange Act.......................................................................15

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

Item 11.  Security Ownership of Certain Beneficial Owners and Management.........................................17

Item 12.  Certain Relationships and Related Transactions.........................................................18

Item 13.  Exhibits, List and Reports on Form 8-K.................................................................20

SIGNATURES.......................................................................................................22

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

</TABLE>



<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 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. Of the 10,000 issued and outstanding
capital  shares of MBL,  all but one (1) are  owned  and held by Toucan  Mining.
Pursuant to the corporate  regulations of Brazil,  a Brazilian  corporation must
have at least one capital  shareholder who is a Brazilian  entity or individual.
The  single  capital  share of MBL that is not held by Toucan  Mining is held in
trust by a Brazilian  citizen for the benefit of Toucan  Mining.  The registered
office of  MBL is  located  in  Cuiaba  at  Trav.  Mestre  Joao  Monge  Guimarae


                                        i

<PAGE>



82 - Cuiaba - Mt - Brazil where, in April 1997, MBL set up an operations  office
for  geological  and  exploration  staff.  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, Francis
Howard and Douglas Powley.  Mr.  Jeffcock serves as Managing  Director of Toucan
Mining and/or  President of the Company.  See  "Directors,  Executive  Officers,
Promoters,  and Control Persons".  The director of MBL is Igor  Mousasticoshvily
("Mr. Mousasticoshvily"), a United States educated and trained geologist, who 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
served as geologist and plant manager for several companies in Brazil and Chile.
Neither Toucan Mining nor MBL are required to have titled officers.

Minmet Transactions

         On  December   4,  1998,   the  Company   consummated   the   following
transactions,  involving,  among other things,  the grant of an option to Minmet
Plc ("Minmet"),  an Irish company,  whose shares ("Minmet Shares") are quoted on
the Exploration  Securities Market of the Irish Stock Exchange,  to purchase all
of the issued share capital of MBL (the "Minmet Transactions").

         Toucan Mining granted an option (the "MBL Option") to Minmet to acquire
all of the issued  share  capital of MBL.  Toucan  Mining  received  7.5 million
Ordinary  Shares  (the  "Option  Shares")  in Minmet  solely for  Toucan  Mining
granting the MBL Option.  The MBL Option  expires on June 30,  1999,  subject to
earlier termination under certain circumstances.  If the MBL Option is exercised
by Minmet, Minmet will acquire all of the issued share capital of MBL by issuing
an additional 25 million Ordinary Shares (the "Completion  Shares") in Minmet to
Toucan Mining.

         Toucan Mining is  restricted  from selling or  distributing  the Option
Shares  during  the term of the MBL  Option  and for two (2)  months  thereafter
without the  consent of Minmet,  provided,  however,  that such  two-month  hold
period does not apply if the MBL Option is exercised prior to June 30, 1999.

         The sale and distribution of the Completion  Shares are also restricted
as  follows.  Toucan  Mining  or the  Company  may sell up to 3  million  of the
Completion  Shares in each of the three six (6) month periods after the issuance
thereof.  Any Completion Shares not disposed of in a six (6) month period may be
added to the number of Completion Shares that may be sold in later periods.

         Minmet has agreed that the Option Shares and the Completion  Shares may
be placed through  Minmet's  brokers with Minmet's  consent and that it will act
reasonably  in respect of all such  requests  by the Company for the sale of the
Option Shares and the Completion Shares.

         Pursuant to the terms and conditions of the  Transaction  Documents (as
defined  below),  from  November  1, 1998 to the  expiration  of the MBL Option,
Minmet is obligated:  (i) to conduct  detailed  ground and airborne  geophysical
surveys of MBL's claims and  additional  geological  mapping  (the  "Exploration
Plan"),  (ii) to prepare and complete all appropriate plans. logs and records of
the  Exploration  Plan,  (iii) to spend a minimum of $500,000 on the Exploration
Plan, or, if the Exploration  Plan expenses do not exceed  $500,000,  pay to the
Company the difference  between $500,000 and the Exploration Plan expenses,  and
(iv)  cover  all of MBL's  reasonable  overhead  and costs  not  related  to the
Exploration Plan. MBL will have the benefit of these obligations even if the MBL
Option is not exercised.

         In  addition,  the  Company  granted an option  (the "Loan  Option") to
Minmet to acquire  from the Company the benefit of the loans that it has made to
MBL in the approximate  principal  amount of $975,000.  The Company received the
sum of U.S.  $275,000 solely for the Company granting the Loan Option.  The Loan
Option expires on June 30, 1999,  subject to earlier  termination  under certain
circumstances.  If the Loan Option is exercised,  Minmet will pay to the Company
the further sum of U.S.  $250,000  and will issue to the Company  warrants  (the
"Warrants") to subscribe for a further 7.7 million Ordinary Shares (the "Warrant
Shares") of Minmet at an exercise price of (pound)0.08p per share.


                                        2

<PAGE>

         The grant of the MBL Option and Loan Options to Minmet was accomplished
through the sale of all of the issued share capital of Anagram Limited,  a newly
formed,  wholly-owned  subsidiary of Toucan Mining and a private limited company
incorporated  under  the  laws of the  Isle of Man  ("Anagram")  pursuant  to an
Agreement  dated  December 3, 1998 among the Company,  Toucan  Mining and Minmet
(the  "Purchase  Agreement").  Through the purchase of Anagram by Minmet and the
assumption by Minmet of that certain Option Agreement among the Company, MBL and
Anagram  dated  December  3,  1998 (the  "Option  Agreement")  and that  certain
Supplemental  Agreement dated December 3, 1998 among the Company,  MBL,  Anagram
and  Minmet  (the  "Supplemental  Agreement,"  collectively  with  the  Purchase
Agreement  and  the  Option  Agreement,  the  "Transaction  Documents"),  Minmet
obtained  the MBL  Option  and the Loan  Option  and  incurred  the  obligations
detailed above.

         In the event that Minmet  exercises  the MBL Option,  the Company  will
likely  cease  to have  any  rights  to any  Brazilian  claims,  other  than the
potential  rights  to the  six  (6)  claims  offered  for  delivery  by  Seller.
Therefore,  upon  exercise of the Minmet  Option,  it is likely that the Company
will at such time,  cease doing  business in Brazil and  discontinue  all of its
mining operations.

         The  Company  has  reached  agreement  with  certain of its  creditors,
including  certain  affiliates  of the  Company,  for the  creditors  to receive
Ordinary  Shares of Minmet from the Option Shares held by the Company in payment
of the  obligations of the Company to such  creditors.  Such creditors  received
such Minmet  Shares with the same  restrictions  on transfer  applicable  to the
Company and described  above.  For this purpose the Minmet Shares were valued at
approximately  $0.09  per  share,  and  the  Company  extinguished  $641,300  of
obligations with 7,100,000 Minmet Shares.

         Among the creditors  described  above is Roy G. Williams  ("Williams").
The Company has agreed to pay Williams  certain fees for  introducing  Minmet to
the Company,  negotiation of the MBL Option, arranging short term funding of the
Company's operations,  and providing basic office accommodations and secretarial
assistance.  On the execution of the Transaction Documents,  Williams was paid a
fee of $60,000.  The Company paid the fee by issuing to Williams  180,000 shares
in the Company  valued for this purpose at $0.20 per share and  transferring  to
Williams  265,000 Minmet Shares valued for this purpose at  approximately  $0.09
per share.  On the  exercise of the MBL Option,  Williams  will be entitled to a
further fee of $60,000 payable as to $36,000 in cash or the equivalent  value in
shares of the  Company  and as to  $24,000  in cash or the  equivalent  value in
shares of Minmet. See "Certain Relationships and Related Transactions."

         While the  Transaction  Documents  may permit the Company to distribute
the Option Shares, the Completion  Shares, the Warrants,  and the Warrant Shares
(collectively,  the "Minmet Securities") to stockholders of the Company, subject
to certain limitations,  the Board of Directors of the Company, in approving the
various  agreements with Minmet,  has determined for securities law reasons that
no Minmet  Securities  will be distributed to  stockholders  of the Company as a
dividend or in any similar distribution.  Accordingly, the Board of Directors of
the  Company  has no  present  intention  of  distributing  any  of  the  Minmet
Securities  to  stockholders  of the  Company  as a dividend  or in any  similar
distribution,  and no  such  distribution  can be made  to  stockholders  of the
Company  unless with the  unanimous  consent of the Board based on an opinion of
counsel  that  such  distribution  will  not  require   registration  under  the
Securities Act of the issuance of the Minmet  Securities to Toucan Mining or the
Company or such distribution.  Consequently,  depending on the amount and nature
of other assets owned by the Company at relevant times,  the Company may need to
acquire  non-securities  assets  or  sell or  otherwise  dispose  of the  Minmet
Securities in order to avoid being deemed to be an investment  company under the
Investment Company act of 1940, as amended.

Mining Claims

         As of December 31, 1998,  MBL has purchased  and filed for  exploration
claims with the Departamento Nacional De Produca Mineral ("DNPM"), the Brazilian
governmental agency responsible for regulating mineral rights, for approximately
941,000  Hectares  [3,633  square miles] ("Ha") (259 Ha to 1 square mile) in the
Cuiaba  Basin.  Management  believes  that these  claims will be approved by the
DNPM. This area is  approximately  165 kilometers long in a  northeast/southwest
direction  and is  approximately  60  kilometers  wide.  The claims are  located
between  15(0) and 16(0)  15'  South  latitude  and  between  56(0)  57(0)  West
longitude.  The large, provincial city of Cuiaba, the capital of Mato Grosso, is
located within MBL's claim area.


                                        3

<PAGE>

         In  September  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 (the "Claims  Agreement").  Pursuant to the
terms of the Claims Agreement,  as the Company understood it, the Company was to
make an initial  payment to the  Seller in the  amount of  $500,000.  The Claims
Agreement  provided that the Seller would receive $36,000 in cash for each claim
(a "Certified  Claim") that was certified by the DNPM as held by the Seller with
priority,  having good,  clean and  transferrable  title. As of the date of this
Annual Report on Form 10-KSB (the "Annual Report"),  the Company has paid to the
Seller the initial  cash  payment of  $500,000,  as  contemplated  by the Claims
Agreement,  and an additional payment of $576,000 in cash as payment for sixteen
(16) claims that the Company believed at the time of the transfer of such claims
to the Company to be Certified  Claims.  Additionally,  pursuant to the terms of
the Claims  Agreement as the Company  understood it, the Company was required to
issue to the Seller  12,000  shares of Company  Common Stock for each  Certified
Claim,  and the Company was  required to issue to the Seller a bonus  payment of
50,000 shares of Company Common Stock,  if and when the Seller  transfers to the
Company twenty-five (25) Certified Claims.

         The DNPM has determined that one of the sixteen (16) claims referred to
above was defective from a title  perspective and informed the Company that such
claim was not a Certified Claim. During 1998,  management determined that it was
not economically  efficient to maintain  ownership of two (2) of the claims that
were originally  delivered to the Company.  Therefore,  these two (2) claims, of
the original sixteen (16) claims, were dropped from the Company's current roster
of mining claims.  The Company,  therefore,  is the beneficial owner of thirteen
(13) claims in connection with the Claims Agreement,  which cover  approximately
99,645 Ha. See "Description of Exploration and Mining Concessions" below.

         In early 1999,  the DNPM  determined  that the  instruments of transfer
presented by the Seller to the Company, representing the remaining thirteen (13)
claims,  contained registration errors that have resulted in the DNPM requesting
the Company to provide  additional  transfer  documentation with respect to such
claims.  Management believes that the additional  transfer  documentation is not
required  and  has  requested   that  the  DNPM  review  its  request  for  such
documentation.

         Also  during  1998,  the Seller  offered  to deliver to the  Company an
additional six (6) claims.  The Seller also asserted that his  understanding  of
the Claims Agreement was different from the Company's understanding as set forth
above.  The Seller  asserted  that  delivery to the Company of an  aggregate  of
twenty-one  (21) of the  twenty-five  (25) claims  resulted in the Seller  being
entitled to full payment for all twenty-five (25) claims under his understanding
of the Claims  Agreement.  The Seller  has  refused to accept  shares of Company
Common  Stock  as  consideration  for  claims  as was set  forth  in the  Claims
Agreement  and has  requested  that the  Company pay the  consideration  for the
remainder  of the  claims  solely in cash.  Additionally,  a dispute  has arisen
between  the Seller and the  Company as to the amount  that is to be paid by the
Company in connection  with the delivery of the claims.  Management is currently
in negotiations with the Seller to resolve these matters.

         In connection  with the issuance of Company  Common Stock to the Seller
pursuant  to the terms of the  Claims  Agreement,  the  Company in 1996 and 1997
reported in the notes to its financial  statements  that the number of shares of
Company Common Stock to be issued to the Seller pursuant to the Claims Agreement
have been  authorized  for  issuance  to the  Seller  but that the  certificates
representing such shares have not been physically delivered to the Seller. As of
the Date of this Annual Report, these shares have not been issued to the Seller.

         On  November  18,  1997,  Mr.  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 Mr.  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. In March 1999, the Company issued to Mr.  Mousasticoshvily  the
Acquisition Shares. The Acquisition Shares had been authorized and accounted for
by the Company in 1997, but had not been physically  issued and delivered to Mr.
Mousasticoshvily until 1999.



                                        4

<PAGE>

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 purchased the Quadros Claims through MBL's agent, Mr.  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.
After  extensive  discussions  with the DNPM, it was determined that the Company
had no priority rights to the four (4) contested  Quadros  Claims.  As a result,
the Company has eliminated these claims from its list of active 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.

         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 $0.47 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.

                                        5

<PAGE>

         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
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.



                                        6

<PAGE>



         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.

         Description  of  Present  Condition  of  Property;   Modernization  and
Physical  Condition of Plant and Equipment.  MBL, through its Brazilian  office,
with funds  provided  in  connection  with the Minmet  Transactions,  intends to
continue its 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.  The
Brazilian office is staffed by eight (8) employees and  consultants,  consisting
of geologists,  land personnel,  administrative  personnel and field hands.  MBL
conducts its mineral exploration program through third-party operators.

         During  December  1997,  the Company  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.  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
reflecting proven or probable reserves.

         The Company's 1997 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 and 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
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
extended deeper into  the surface than  was  originally estimated  and  that its


                                        7

<PAGE>



drilling did not sample the lower saprolite. Because of the indication of course
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 in order to use such laboratory's special method of
sample  preparation  and testing  suited for the  detection and  measurement  of
course gold  mineralization.  Most of the later  assayed  samples  were found to
contain consistently higher gold content than the previously assayed samples.

         With funds  provided in connection  with the Minmet  Transactions,  the
Company has begun conducting additional exploration, both regional and detailed.
In March 1999, the Company  commenced an aerial survey of the certain regions in
the Cuiaba Basin covering an area of approximately 6,745 Km2 . It is anticipated
that this aerial survey will provide to the Company the magnetic and radiometric
detail  required to analyze  typical  mineral  targets  located in the  surveyed
region. Additionally,  the aerial survey will provide to the Company information
necessary to analyze  certain  mineral  targets  currently known to the Company.
This information will help the Company to prioritize the mineral targets so that
any  exploration  efforts will be directed at those targets with highest mineral
potential.

         Also, MBL is currently  conducting  geochemical  orientation surveys on
five chosen  nugget  patches.  These tests are being  conducted to determine the
utility to the Company's of the new MMI technology.  MMI technology,  considered
to be cutting edge geochemical  technology,  is a recent Australian development,
that is proving to be a very useful tool in mineral  exploration.  Finally,  MBL
has just completed a regional  geochemical BLEG ("bulk leach extractable  gold")
survey. The results of the first assay tests from these BLEG surveys are not yet
conclusive.

         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.

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 being conducted 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.


                                        8

<PAGE>




         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 29, 1999, the Company employed nine (9) 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.


           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, 1998 to a vote of the  Company's  stockholders  through the
solicitation of proxies or otherwise.







                                        9

<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 1998 and for the first  quarter of fiscal year ending  December 31, 1999.
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 1998
         1st Quarter                                 $ 1.500           $ .625
         2nd Quarter                                 $ 1.06            $ .41
         3rd Quarter                                 $ .875            $ .08
         4th Quarter                                 $ .53             $ .055

         Calendar 1999
         1st Quarter                                 $ .13             $ .05

         On March  29,  1999,  the bid  price  of the  Company  Common  Stock as
reported on the OTC Electronic Bulletin Board was $.07.

         As of March 29, 1999, there were approximately 348 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 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.

2.       In connection with the Minmet  Transactions,  the Company has agreed to
         pay  Williams  certain  fees for  introducing  Minmet  to the  Company,
         negotiation  of the MBL  Option,  arranging  short term  funding of the
         Company's  operations,  and providing basic office  accommodations  and
         secretarial assistance.  On the execution of the Transaction Documents,
         Williams was paid a fee of $60,000. The Company paid the fee by issuing
         to Williams  180,000  shares in the Company  valued for this purpose at
         $0.20 per share and  transferring  to Williams  265,000  Minmet  Shares
         valued for this purpose at approximately $0.09 per share.

3.       On   November   18,   1997,   Mr.    Mousasticoshvily    acquired   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  the
         Acquisition  Shares  (133,333  shares of Company  Common Stock) and the
         issuance  to  Mr.  Mousasticoshvily  of  the  Acquisition  Warrants  to


                                       10

<PAGE>



         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. In March 1999, the Company  issued to Mr. Mousasticoshvily the
         Acquisition  Shares. The Acquisition  Shares had been authorized by the
         Company and reflected in the  Company's  financial  statements in 1997.
         Therefore,  the holding period  for the  Acquisition  Shares under Rule
         144 of the Securities Act began in 1997.

         The  securities  placements  described  in  paragraphs  1, 2 and 3 were
effectuated  pursuant to the exemption  from  registration  set forth in Section
4(2)  of  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. From its inception
until the  December  of 1998,  MBL was  financed  entirely by the  Company.  The
Company  sought  to  capitalize  MBL  for  the  purpose  of  conducting  mineral
exploration, specifically gold exploration. Pursuant to the Minmet Transactions,
MBL has received additional capital infusions from Minmet for the same purposes.

         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.

         In December  1998,  the  Company  consummated  the Minmet  Transactions
pursuant to which Toucan  Mining  granted the MBL Option to Minmet giving Minmet
the right to acquire  all of the issued  share  capital  of MBL.  Toucan  Mining
received the Option  Shares as  consideration  for  granting the MBL Option.  In
addition, the Company granted the Loan Option to Minmet to acquire certain loans
that  the  Company  had made to MBL.  The  Company  received  U.S.  $275,000  as
consideration  for granting the Loan Option.  See Items 1 and 2. "Description of
Business and Property - Minmet Transactions."

         The  consolidated  financial  statements  for  the  fiscal  year  ended
December 31, 1998, reflect the results of Toucan's  operations,  which consisted
primarily of the Minmet  Transactions  and the  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.  See
Description of Business and Property--Minmet Transactions.

         A substantial portion of the cash proceeds of the Loan Option were used
by the Company to pay  creditors  of the Company  and/or MBL.  The resale of the
Option Shares to third  parties to raise funds for the  Company's  operations by
Toucan Mining and  affiliates  is  restricted  by  provisions of the  agreements
entered  into in  connection  with the Minmet  Transactions.  See Items 1 and 2.
"Description of Business Property - Minmet Transactions."  Therefore, the Option
Shares provide only limited liquidity to the Company.

         Pursuant to the terms and conditions of the Transaction Documents, from
November  1, 1998 to the  expiration  of the MBL Option in June 1999,  Minmet is
obligated:  (i) to conduct detailed ground and airborne  geophysical  surveys of
MBL's claims and additional geological mapping (the "Exploration Plan"), (ii) to
prepare and complete all appropriate  plans. logs and records of the Exploration
Plan,  (iii) to spend a minimum of $500,000 on the Exploration  Plan, or, if the
Exploration  Plan  expenses  do not  exceed  $500,000,  pay to the  Company  the
difference  between $500,000 and the Exploration  Plan expenses,  and (iv) cover
all of MBL's reasonable  overhead and costs not related to the Exploration Plan.
MBL will have the  benefit  of these  obligations  even if the MBL Option is not
exercised.



                                       11

<PAGE>



         MBL,  through its Brazilian  office,  with funds provided in connection
with the Minmet  Transactions,  intends to continue  its 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.  The Brazilian office is staffed by eight
(8)  employees  and  consultants,  consisting  of  geologists,  land  personnel,
administrative  personnel and field hands. MBL conducts its mineral  exploration
program through third-party operators.

         During  December  1997,  the Company  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.  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
reflecting proven or probable reserves.

         The Company's 1997 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 and 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
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
extended  deeper into the surface  than was  originally  estimated  and that its
drilling did not sample the lower saprolite. Because of the indication of course
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 in order to use such laboratory's special method of
sample  preparation  and testing  suited for the  detection and  measurement  of
course gold  mineralization.  Most of the later  assayed  samples  were found to
contain consistently higher gold content than the previously assayed samples.

         With funds  provided in connection  with the Minmet  Transactions,  the
Company has begun conducting additional exploration, both regional and detailed.
In March 1999, the Company  commenced an aerial survey of the certain regions in
the Cuiaba Basin covering an area of approximately 6,745 Km2 . It is anticipated
that this aerial survey will provide to the Company the magnetic and radiometric
detail  required to analyze  typical  mineral  targets  located in the  surveyed
region. Additionally,  the aerial survey will provide to the Company information
necessary to analyze  certain  mineral  targets  currently known to the Company.
This information will help the Company to prioritize the mineral targets so that
any  exploration  efforts will be directed at those targets with highest mineral
potential.

         Also, MBL is currently  conducting  geochemical  orientation surveys on
five chosen  nugget  patches.  These tests are being  conducted to determine the
utility to the Company's of the new MMI technology.  MMI technology,  considered
to be cutting edge geochemical  technology,  is a recent Australian development,
that is proving to be a very useful tool in mineral  exploration.  Finally,  MBL
has just completed a regional  geochemical BLEG ("bulk leach extractable  gold")
survey. The results of the first assay tests from these BLEG surveys are not yet
conclusive.

         Management  believes that with funds  provided in  connection  with the
Minmet  Transactions,  the  Company  will  have  sufficient  funds  to meet  its
obligations  through the end of the MBL Option period,  June 30, 1999, except as
set forth below.

         The Seller has offered to deliver an  additional  six (6) claims to the
Company and pursuant to his  understanding  of the Claims Agreement has asserted
that he is entitled to full  payment for all of the  twenty-five  (25) claims in
cash, which would result in an additional cash payment of approximately $324,000
with  respect  to  such  claims.  costs  and  economic  returns  of any  and all
development  projects may materially differ from the costs and returns initially
estimated.


                                       12

<PAGE>

         In the event that Minmet exercises the Minmet Option,  the Company will
likely  cease  to have  any  rights  to any  Brazilian  claims,  other  than the
potential  rights to the six (6) claims  offered  for  delivery  by the  Seller.
Therefore, upon the exercise of the Minmet Option, it is likely that the Company
will cease its mining  operations in Brazil  altogether  and will no longer be a
participant in the mining industry.  As a result of exercising the Minmet Option
and the Loan  Option,  the Company  will  receive  the  Completion  Shares,  the
Warrants  and U.S.  $250,000  in cash.  The Company  believes  that it will have
sufficient  cash  proceeds  from the exercise of the Minmet  Option and the Loan
Option to pay the Seller with respect to the additional claims.

         Conversely, if the Minmet Option is not exercised, the Company, through
MBL, will (i) maintain is Brazilian mining operations,  (ii) have the benefit of
the funds provided in connection  with the Minmet  Transactions,  (iii) will own
and will derive the benefits of the surveys  conducted  by Minmet in  connection
with the Minmet  Transactions  and other assets that are derived  from  Minmet's
operations conducted in connection therewith, and (iv) will continue its program
to acquire and explore additional claims in the Cuiaba Basin.

         In the event that the Minmet Option is not exercised,  the Company will
need a substantial  amount of additional  capital to meet its obligations to the
Seller with  respect to the  additional  claims and to finance  its  exploration
activities  and to meet its working  capital needs beyond June 30, 1999. In that
event the Company will explore  strategic  alternatives that may involve any one
or a combination of further capital  raising,  a joint venture,  sale of part or
all of its  exploration  assets,  a  merger,  restructuring  or  other  business
arrangements.  Such possible  transactions may result in substantial dilution or
even elimination of the Company's interest in its mining claims. There can be no
assurance  that the  Company  will be able to raise such  additional  capital or
negotiate and consummate such other  transactions on terms that are favorable to
the Company.

         The  program  to fully  explore  and  develop  its claim area will take
several years.  The costs  associated with  continuing the Company's  operations
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  Company'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.

         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  in this Annual  Report on Form  10-KSB.  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.





                                       13

<PAGE>



                          Item 7. Financial Statements

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

                                                                                                           Page No.
                                                                                                           --------

<S>                                                                                                        <C>
Report of Independent Certified Public Accountants..............................................................F-1

Consolidated Balance Sheet as of December 31, 1998..............................................................F-2

Consolidated Statements of Operations for the years ended December 31, 1998, 1997
  and the period from November 3, 1995 to December 31, 1998.....................................................F-3

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997, 1996
  and the period from November 3, 1995 to January 1, 1996.......................................................F-4

Consolidated Statement of Cash Flows for the years ended December 31, 1998, 1997
  and the period from November 3, 1995 to December 31, 1998.....................................................F-5

Notes to Financial Statements...................................................................................F-6

</TABLE>

                                       14

<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, 1998, and the related consolidated  statements of
operations,  stockholders'  equity,  and cash flows for the years ended December
31,  1998 and 1997 and the period  from  November  3, 1995  (inception)  through
December 31, 1998.  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, 1998,  and the results of its operations and its
cash flows for the years  ended  December  31, 1998 and 1997 and the period from
November 3, 1995  through  December  31,  1998,  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

Dallas, Texas
March 5, 1999



                                       F-1

<PAGE>


<TABLE>
<CAPTION>

                             Toucan Gold Corporation
                          (a development stage company)

                           CONSOLIDATED BALANCE SHEET

                                December 31, 1998




                                     ASSETS
<S>                                                                                                    <C> 

Cash                                                                                                   $     83,973

Receivables and other assets                                                                                 47,844
                                                                                                         ----------

                  Total current assets                                                                      131,817

Mineral rights                                                                                            2,559,869
                                                                                                         ----------

                                                                                                         $2,691,686
                                                                                                         ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses and other liabilities                                                                  $   100,436

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, 8,237,933 shares                                                    82,379
     Additional paid-in capital                                                                           4,526,226
     Deficit accumulated during the development stage                                                    (2,017,355)
                                                                                                         ----------

                  Total stockholders' equity                                                              2,591,250
                                                                                                         ----------
                                                                                                         $2,691,686
                                                                                                         ==========
        The accompanying notes are an integral part of these statements.
</TABLE>


                                       F-2

<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
                                                             1998             1997            December 31, 1998
                                                         ------------     -----------   -----------------------
<S>                                                         <C>              <C>               <C> 

Cost and expenses
     Legal and professional fees                             $  141,261      $  312,007        $   612,210
     Consulting Fees                                            214,985         237,288            476,273
     Abandoned claims                                           385,420          50,000            435,420
     Travel costs                                                14,818          82,254            253,889
     Public relations                                            62,766          59,613            156,034
     Other                                                       15,101          42,553             88,054
                                                             ----------      ----------        -----------
                  Total cost and expenses                       834,351         783,715          2,021,880

Other expense (income)
     Interest income                                             (1,898)        (59,168)           (78,716)
     Interest expense                                            25,849              --             74,191
                                                             ----------      ----------        -----------
                  Total other expense (income)                   23,951         (59,168)            (4,525)
                                                             ----------      ----------        -----------
                  Net loss                                   $  858,302      $  724,547        $ 2,017,355
                                                             ==========      ==========        ===========
Basic and diluted loss per share                                  $0.11            $.09
                                                                   ====             ===
Weighted average shares outstanding                           8,050,891       7,476,372
                                                              =========       =========

</TABLE>















         The accompanying notes are an integral part of these statement.


                                       F-3

<PAGE>


<TABLE>
<CAPTION>

                                              Toucan Gold Corporation
                                           (a development stage company)

                                  CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY



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

Balance at November 3, 1995                         --      $       --    $        --    $           --     $        --
Issuance of common stock                       647,857          96,170             --                --          96,170
Net Loss                                            --              --             --          (45,343)        (45,343)
                                           -----------     -----------    -----------    -------------      ----------
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             2,331,141          28,943      3,899,892                --       3,928,835
     expenses of $519,700
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
Issuance of common stock                       198,000           1,980         37,620                --          39,600
Net loss                                            --              --             --         (858,302)        (858,302)
                                           -----------     -----------    -----------    -------------      -----------
Balance at December 31, 1998                 8,237,933     $    82,379    $ 4,526,226      $(2,017,355)     $ 2,591,250
                                           ===========     ===========    ===========    =============      ===========

</TABLE>










         The accompanying notes are an integral part of these statement.


                                       F-4

<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
                                                                       1998                 1997    December 31, 1998
<S>                                                                 <C>                 <C>           <C> 
                                                                     --------             --------  -----------------
Operating activities
     Net loss                                                       $(858,302)          $(724,547)    $(2,017,355)
     Adjustments to reconcile net loss to net cash provided by
         (used in) operating activities
             Claims written off                                       385,420              50,000         435,420
     Net changes in operating assets and liabilities
         Receivables and other assets                                 (19,269)            (10,001)        (35,644)
         Accrued expenses and other liabilities                       220,007             169,802         419,120
                                                                    ---------           ---------     -----------
                  Net cash provided by (used in) operating
                        activities                                   (272,144)           (514,746)     (1,198,459)

Investing activities
     Acquisition and exploration of mineral rights                   (710,748)         (1,446,453)     (3,512,645)
     Sale of option (Note C)                                          275,000                  --         275,000
                                                                    ---------           ---------       --------- 
                                                                     (435,748)         (1,446,453)     (3,237,643)
Financing Activities
     Net repayments/borrowings from related parties                   287,070              (9,051)        287,070
     Issuance of common stock, net of expenses                             --             444,000       4,133,005
     Proceeds from merger with Starlight Acquisitions, Inc.                --                  --         100,000
                                                                    ---------           ---------       ---------
             Net cash provided by financing activities                287,070             434,949       4,520,075
                                                                    ---------           ---------       ---------
             Net increase (decrease) in cash                         (420,822)         (1,526,250)         83,973
Cash at beginning of period                                           504,795           2,031,045              --
                                                                    ---------           ---------       ---------
Cash at end of period                                                 $83,973          $  504,795      $   83,793
                                                                    =========           =========       =========
Cash paid for:
     Interest                                                          $7,680          $       --      $   56,022
Noncash investing and financing activities:
     Mineral rights acquired for common stock                           3,600              30,000         369,600
     Securities received on sale of option                            677,500                  --         677,500
     Securities used to satisfy liabilities                           665,300                  --         665,300
     Common stock issued for services                                  36,000                  --          58,500

</TABLE>





         The accompanying notes are an integral part of these statement.


                                       F-5

<PAGE>



                             Toucan Gold Corporation
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS




NOTE A - NATURE OF OPERATIONS

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

     Toucan Gold Corporation and  subsidiaries,  collectively  (the Company) are
     engaged in acquiring, exploring and developing mineral rights in Brazil. No
     revenues  have  been  generated.  See Note C  regarding  sale of  option to
     purchase the Company's mineral rights.

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 Toucan Gold
     Corporation  and  its  wholly-owned  subsidiaries,  Toucan  Mining  Limited
     (Mining),  an Isle of Man company, and Mineradora de Bauxita Ltda. (MBL), a
     Brazilian company.

     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 are written-off
     when such a decision is made.

     Currency Translation
     --------------------

     The functional  currency of the Company's foreign  subsidiaries is the U.S.
     dollar. The remeasurement of local currencies and transactions  denominated
     in local currencies creates  translation  adjustments which are included in
     operations.  For 1998 and  1997,  these  translation  adjustments  were not
     material.

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

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




                                       F-6

<PAGE>



                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED




NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     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 - SALE OF OPTION TO PURCHASE MINERAL RIGHTS

     On December 3, 1998, the Company sold an option to Minmet PLC (Minmet),  an
     Irish  publicly-traded  company, to purchase all of the outstanding capital
     stock of MBL. The option price was 7.5 million  shares of Minmet  valued at
     $677,500.  The option has an exercise price of 25 million Minmet shares and
     expires June 30, 1999.  In connection  with the purchase of option,  Minmet
     agreed to spend $500,000 on exploration of MBL's mineral claims,  to make a
     survey of the claims,  and to pay the operating costs of MBL for the period
     from November 1, 1998 to June 30, 1999.

     Minmet also acquired  from the Company for  $275,000,  an option to acquire
     $995,000 of debt owed by MBL to the Company.  The option  exercise price is
     $250,000 plus warrants to purchase 7.7 million  Minmet shares at (pound).08
     per share. This option also expires on June 30, 1999.

     The  proceeds of $952,500  from the sale of the options  have been  applied
     against the carrying  value of the mineral  interests.  Based on the market
     price of Minmet shares on March 1, 1999 of (pound).075  ($.12), the Company
     would  recognize  a gain of  approximately  $700,000 if both  options  were
     exercised. However, there is no assurance the options will be exercised.

NOTE D - 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.




                                       F-7

<PAGE>



                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED



NOTE D - REALIZATION OF ASSETS - Continued

     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.

     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.  As  discussed in Note C, the Company has
     sold an option to Minmet PLC for the purchase of mineral rights.

NOTE E - MINERAL RIGHTS

     Mineral rights include the following as of December 31, 1998:

     Consideration paid for priority claims                           $1,350,680
     Other acquisition and exploration costs (Note F)                  2,161,689
                                                                      ----------
                                                                       3,512,369
     Less proceeds from sale of options                                  952,500
                                                                      ----------
                                                                      $2,559,869
                                                                      ==========

     The Company owns priority claims for  approximately  480,000 hectares which
     were  filed for  exploration  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 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  97,000  hectares,
     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  claims on only 15 of these claims.  Consideration
     paid for these claims  included  $1,076,000  in cash and 210,000  shares of
     common stock.

     In 1997, the Company  acquired 10 claims from a stockholder  for $50,000 in
     cash,  133,333 shares of the Company's common stock, a warrants to purchase
     133,333 shares at $1.50 per shares. The warrants expire in January 1, 2000.
     In 1998,  the  Company  acquired  one claim from the same  stockholder  for
     $48,000. The stockholder holds the claims on behalf of the Company under an
     agreement of beneficial ownership.



                                       F-8

<PAGE>



                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED



NOTE E - MINERAL RIGHTS - Continued

     In 1998, the Company  abandoned 85 claims  covering  approximately  800,000
     hectares,  which  resulted  in a  write-off  of  $385,420.  No  significant
     exploration had been performed on these claims.

     At December 31, 1998, the Company's  remaining claims filed for exploration
     covered  approximately  941,000 hectares.  The number of hectares for which
     exploration  is granted by DNPM is  expected  to be less than the number of
     hectares for which the Company has filed.

NOTE F - RELATED PARTIES

     In 1998 and 1997, the Company made payments of  approximately  $259,000 and
     $526,000,  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 $174,000 and $330,000 in 1998 and 1997,  respectively,  which
     are considered to be costs relating to the  acquisition  and exploration of
     mineral rights and have been capitalized as mineral rights.

     In 1998,  a fee of $60,000 was paid to a related  party for  assistance  in
     connection with the sale of the option to Minnet PLC (Note C).

     In 1998,  related parties advanced  $434,000 to the Company.  Substantially
     all of these  advances,  including  interest  of  $18,000,  were  repaid by
     December 31, 1998 with shares of Minmet PLC received in connection with the
     sale of an option  (Note  C).  See Note E  regarding  other  related  party
     transactions.

NOTE G - 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 options and  warrants  because  their  effect
     would be antidilutive.

NOTE H - STOCK OPTIONS AND WARRANTS

     The Company has issued stock options to employees. All options were granted
     at prices no less than market price at date of grant.  The Company accounts
     for  stock  option  grants  pursuant  to the  provisions  of APB No. 25 and
     accordingly,  has recognized no expense related to the grants.  All options
     are exercisable  immediately,  and expire over periods of approximately two
     to four years after grant.



                                       F-9

<PAGE>


<TABLE>
<CAPTION>

                 Toucan Gold Corporation Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED



NOTE H - STOCK OPTIONS AND WARRANTS - Continued

     Option activity for 1997 and 1998 is as follows:


                                                                                   Number of                Weighted average
                                                                                     Shares                  exercise price
                                                                                   ---------                ----------------
<S>                                                                                 <C>                          <C> 

Outstanding at January 1, 1997                                                            --                        --
Granted                                                                              633,000                     $1.42
                                                                                     -------
Outstanding at December 31, 1997                                                     633,000                      1.42
Granted                                                                              250,000                      1.00
                                                                                     -------
Outstanding at December 31, 1998                                                     883,000                     $1.30
                                                                                     =======
</TABLE>

The weighted average  remaining life at December 31, 1997 of the options was 1.1
years.

If the Company had  elected to account  for stock  options  under the fair value
method pursuant to Statement of Financial Accounting Standards No. 123, net loss
and loss per share would have been  increased to the pro forma amounts set forth
below:


                                                         1998            1997
                                                         ----            ----
Net loss:
     Actual                                            $858,302        $724,547
     Pro forma                                          950,802         759,547

Loss per share
     Actual                                               $0.11           $0.09
     Pro forma                                            $0.12           $0.10

The  fair  value of these  options  was  estimated  at date of grant  using  the
Black-Scholes option pricing model with the following assumptions used:

                                                          1998            1997
                                                          ----            ----
Dividend yield                                              0%              0%
Volatility                                                122%            122%
Risk-free interest rate                                   5.0%            5.0%
Expected life                                           1 year         2 years

The weighted  average  fair value per share of options  granted in 1998 and 1997
were $0.23 and $0.35, respectively.



                                      F-10

<PAGE>



                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED



NOTE H - STOCK OPTIONS AND WARRANTS - Continued

     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 warrants expired on January 31, 1998.

     Warrants to purchase  100,000  shares of the  Company's  common stock at an
     exercise  price of $4.00 per share were issued in 1996 in  connection  with
     the Company's merger with Starlight Acquisitions, Inc. 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 six month  anniversary  of
     closing of the first registration of securities by the Company.

NOTE I - INCOME AND OTHER TAXES

The tax effects of temporary  differences  that give rise to deferred tax assets
were as follows:

                                                             December 31,
                                                             ------------
                                                        1998             1997
                                                        ----             ----
Deferred tax asset
     Net operating loss carryforwards                 $188,000         $105,000
     Organization costs                                172,000          172,000
                                                    ----------       ----------
Gross deferred tax assets                              360,000          277,000
Valuation allowance                                   (360,000)        (277,000)
                                                    ----------       ----------
     Net deferred taxes                            $        --     $         --
                                                   ===========     ============

At  December  31,  1998,  the  Company had  approximately  $550,000 of U.S.  net
operating loss carryforwards expiring through 2013.

Under  Brazilian  tax law,  MBL must begin to pay  property  taxes on the claims
under  exploration  upon the public  disclosure  of the claims by the  Brazilian
authorities.





                                      F-11

<PAGE>


                             Toucan Gold Corporation
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED







NOTE J - COMMITMENT AND CONTINGENCIES

     Under an  agreement  with a Brazilian  individual  (Note E), the Company is
     committed to acquire 9 additional  priority  claims upon clearance of title
     by the DNPM.  A dispute has arisen  between the parties as to the amount to
     be paid for the additional  claims. The Company interprets the agreement to
     provide  for  consideration  for each  claim of  $36,000 in cash and 12,000
     shares of common stock.  Pending  resolution of the dispute,  the Brazilian
     individual is withholding transfer  documentation for the registration with
     the DNPM of the 15 claims  previously  delivered  (Note E). While  transfer
     documentation is not a prerequisite to registration of claims,  the lack of
     documentation  complicates  and  prolongs  the  registration  process.  The
     Company has commenced the registration process and believes that it will be
     successful in obtaining registration of all 15 claims. However, there is no
     assurance that these claims will be certified by the DNPM.

     The Company is  required to obtain the consent of surface  owners to access
     the surface property for exploration and mining.  In the event an agreement
     cannot be  reached  with the  surface  owner,  the  Company  may seek legal
     recourse  under  Brazilian law which provides the claim holder the right to
     access if conducting mineral exploration activities.
     The surface owner is granted a royalty on future production.


NOTE K - RECLASSIFICATIONS

     Certain   reclassifications  have  been  made  to  prior  years'  financial
statements to conform to the 1998 presentation.




                                      F-12

<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                            59     President, Chief Executive Officer,                    1996
2 The Promenade                                      Chairman of the Board of Directors and
Castle Town                                          Secretary
Isle of Man
United Kingdom 1M9-1BJ
L. Clark Arnold                               58     Director and Executive Vice President-                 1996
201 East Rudasill Road                               Exploration
Tucson, Arizona
Don Box                                       49     Director and Assistant Secretary                       1996
8201 Preston Road, Suite 600
Dallas, Texas

Robert A. Pearce                              54     Director and Chief Financial Officer                   1998
Rycote Oasthouse, Wyck Lane
East Worldham
Hants, United Kingdom GU34-3AW

</TABLE>


     Robert P.  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.

     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
owning oil and gas interests in the Gulf of Mexico and mainland U.S.,  from 1993
until  November  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


                                       15

<PAGE>



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. 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 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 tables set forth the compensation  paid by the Company to its
Chief  Executive  Officer during the fiscal years ended December 31, 1998,  1997
and 1996 and the options granted by the Company to its Chief  Executive  Officer
during the fiscal year ended  December 31, 1998; no executive  officer earned in
excess of $100,000.
<TABLE>
<CAPTION>

                               Annual Compensation


                                        Year                                                    Stock
        Name/Principal                 Ending                                                  Options      Other Annual
           Position                  December 31              Salary             Bonus         Granted      Compensation
------------------------------ ----------------------  --------------------- ------------- -----------    --------------
<S>                                     <C>                  <C>                  <C>         <C>                <C>

    Robert P. Jeffcock, CEO             1996                  $32,000             $ 0            0               $ 0
                                        1997                 $120,000             $ 0            0               $ 0
                                        1998                  $90,000             $ 0         200,000            $ 0

</TABLE>

<TABLE>
<CAPTION>

                                         Option Grants in Last Fiscal Year


                                      Number of              % of Total                                                  
                                      Securities         Options Granted to         Exercise                             
        Name/Principal                Underlying            Employees in             Price                               
           Position                     Options              Fiscal Year           (Per Share)       Expiration Date
----------------------------- -----------------------  --------------------- ------------------- --------------------
<S>                                     <C>                      <C>                  <C>           <C>
Robert P. Jeffcock, CEO                 200,000                  80%                  $1.00         December 31, 1999

</TABLE>


CORPDAL:124319.7  29976-00001
                                                        16

<PAGE>



     Item 11. Security Ownership of Certain Beneficial Owners and Management

     The  following  table sets forth,  as of the close of business on March 29,
1999, 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 29, 1999.


                             PRINCIPAL STOCKHOLDERS

     The  following  table  sets  forth  information  regarding  the  beneficial
ownership of Company  Common Stock as of March 29, 1999 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               2.43%
Don D. Box(3)........................................................             0                 *
Robert A. Pearce(3)(9)...............................................        50,000                 *
L. Clark Arnold(3)(10)...............................................       470,000               5.82
Caithness Limited(5).................................................       965,445              12.03
Zalcany Limited(6)...................................................     1,088,000              13.08
Roy G. Williams(6)(7)................................................     1,736,000              20.6
Reads Trustees Limited(5)............................................     1,554,453              19.36
J. P. Jeffcock No. 2 Settlement(5)...................................       484,008               6.03
Carlos Lins E. Silva(8)..............................................       210,000               2.57
Igor Mousasticoshvily(8).............................................       476,666               5.84
All Directors and executive
officers as a group (4 persons)......................................       720,000               8.65

---------------
<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 8,027,933 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.



                                       17

<PAGE>



     (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
          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)  Williams' family owns the equity share capital of Mustardseed  Estates
          Limited.  Accordingly,  Williams  controls or shares voting investment
          power over the following  shareholders:  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 Williams,  Zalcany  Limited and  Mustardseed  Estates
          Limited, respectively, that are presently exercisable.

     (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>



             Item 12. Certain Relationships and Related Transactions

         During 1998, Zalcany Limited,  a company affiliated with Williams,  who
is a principal  stockholder of the Company,  made various unsecured loans to the
Company to fund the Company's  current  operations.  Such loans were made in the
aggregate  principal  amount of $350,796,  each of which had an annual  interest
rate of 10%. During 1998, the entire amount of these loans,  including interest,
were repaid to Zalcany  Limited by the Company in full.  All but $9,960 of these
loans were repaid  through the transfer to Zalcany  Limited of 3,935,000  Minmet
Shares  received by the Company in the Minmet  Transactions,  which  shares were
valued at $0.09 per share.

         Likewise,  during  1998,  Robert  P.  Jeffcock,  the  President,  Chief
Executive  Officer and Chairman of the Board of  Directors of the Company,  made
various unsecured loans to the Company to fund the Company's current operations.
Such loans were made in the aggregate  principal amount of $82,373 each of which
had an annual  interest  rate of 10%. All but $5,000 of these  loans,  including
interest,  were repaid through the transfer to Mr. Jeffcock of 1,325,000  Minmet
Shares  received by the Company in the Minmet  Transactions,  which  shares were
valued at $0.09 per share. At the time of the Minmet Transactions,  Mr. Jeffcock
had accrued $40,000 in salary as part of his compensation package which had not,
at that time, been paid by the Company. A portion of the 1,325,000 Minmet Shares
issued to Mr. Jeffcock pursuant to the Minmet Transactions were remuneration for
the $40,000 in salary that was accrued but unpaid.

         Additionally,  in connection with the Minmet Transactions,  the Company
has agreed to pay Williams  certain fees for introducing  Minmet to the Company,
negotiation  of the MBL Option,  arranging  short term funding of the  Company's
operations,   and  providing   basic  office   accommodations   and  secretarial
assistance.  On the execution of the Transaction Documents,  Williams was paid a
fee of $60,000.  The Company paid the fee by issuing to Williams  180,000 shares
in the Company  valued for this purpose at $0.20 per share and  transferring  to
Williams  265,000 Minmet Shares valued for this purpose at  approximately  $0.09
per share.  On the  exercise of the MBL Option,  Williams  will be entitled to a
further fee of $60,000 payable as to $36,000 in cash or the equivalent  value in
shares of the  Company  and as to  $24,000  in cash or the  equivalent  value in
Minmet Shares.

         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
1998 and 1997 fees  totaling  $6,891 and  $23,934,  respectively,  in return for
geological consulting services.

         Mr. Pearce, a Director and the Chief Financial  Officer of the Company,
received in 1998 and 1997 fees  totaling  $64,985 and $9,900,  respectively,  in
return for consulting services.

         In  addition,  Mr.  Mousasticoshvily,  the sole  member of the Board of
Directors of MBL, received in 1998 and 1997 fees totaling $125,000 and $167,000,
respectively, for geological and general consulting services.



                                       18

<PAGE>



         Following the consummation of the Minmet Transaction,  the Company paid
certain  creditors  with  Minmet  Shares  that  were part of the  Option  Shares
received by the Company in the Minmet Transactions, including certain affiliates
of the Company in addition to the Minmet Shares  transferred to Zalcany Limited,
Williams and Robert P. Jeffcock, as described above. For this purpose the Minmet
Shares were valued at $0.09 per share.  The following  affiliates  also received
Minmet Shares in satisfaction of obligations  owed to them by the Company and/or
MBL:  L.  Clark  Arnold,  Vice   President-Exploration   (70,000  shares);  Igor
Mousasticoshvily  (800,000  shares)  and Robert A.  Pearce,  Director  and Chief
Financial Officer (500,000 shares).

         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.  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 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 second grant of
                  options vested on April 1, 1998 and the final grant of options
                  will vest on April 1, 1999.  Mr.  Carmichael  must be employed
                  with the Company on April 1, 1999,  to receive his final grant
                  of 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.

         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.




                                       19

<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(4) Option  Agreement,  dated September 27, 1997, by and between the Company
        and David Carmichael (Exhibit 10.1).

10.2(4) Option  Agreement,  dated September 27, 1997, by and between the Company
        and L. Clark Arnold (Exhibit 10.2).

10.3(4) Option Agreement, dated February 2, 1998, by and between the Company and
        Robert P. Jeffcock (Exhibit 10.3).

10.4(4) Option Agreement, dated February 2, 1998, by and between the Company and
        Robert A. Pearce (Exhibit 10.4).

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).



                                       20

<PAGE>



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).

10.13 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).

10.14 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).

10.15(5)  Agreement  for the sale and  purchase of the whole of the issued share
     capital of Anagram  Limited,  dated  December 3, 1998,  among Toucan Mining
     Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.1).

10.16(5)  Supplemental  Agreement,  dated  December 3, 1998 among Toucan  Mining
     Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.2).

10.17(5) Option Agreement  Regarding  Mineradora De Bauxita Ltda, dated December
     3, 1998,  among Toucan Mining Limited,  Toucan Gold  Corporation,  Inc. and
     Anagram Limited (Exhibit 10.3).

10.18(5)  Agreement for the purchase of the whole of the issued share capital of
     Mineradora  de Bauxita  Ltda,  dated  December 3, 1998 among Toucan  Mining
     Limited, Toucan Gold Corporation, Inc. and Anagram Limited (Exhibit 10.4).

10.19(5) Form of Minmet Plc Warrant Instrument (Exhibit 10.5).

21*  Subsidiaries of the Company.

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.

(4)  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, 1997, filed by the Company with the Securities and Exchange Commission.

(5)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the Company's  Current Report on Form 8-K, filed January 5, 1999,  filed by
     the Company with the Securities and Exchange Commission.

(b)  Reports on Form 8-K

         The Company filed no reports on Form 8-K during the last quarter of the
Company's fiscal year ended December 31, 1998. The Company did, however,  file a
Current  Report on Form 8-K,  dated  January  5,  1999,  describing  the  Minmet
Transactions.



                                       21

<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: March  31, 1999             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             March 31, 1999
------------------------------------ Chairman of the Board of Directors (Principal
Robert P. Jeffcock                   Executive Officer)

/s/ L. Clark Arnold                  Director and Executive Vice President-             March 29, 1999
------------------------------------ Exploration
L. Clark Arnold                     

/s/ Don Box                          Director and Assistant Secretary                   March 30, 1999
------------------------------------
Don Box

/s/ Robert A. Pearce                 Director and Chief Financial Officer               March 31, 1999
------------------------------------ (Principal Financial Officer and Chief
Robert A. Pearce                     Accounting Officer)


</TABLE>

                                                        22

<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(4) Option  Agreement,  dated September 27, 1997, by and between the Company
     and David Carmichael (Exhibit 10.1).

10.2(4) Option  Agreement,  dated September 27, 1997, by and between the Company
     and L. Clark Arnold (Exhibit 10.2).

10.3(4) Option Agreement, dated February 2, 1998, by and between the Company and
     Robert P. Jeffcock (Exhibit 10.3).

10.4(4) Option Agreement, dated February 2, 1998, by and between the Company and
     Robert A. Pearce (Exhibit 10.4).

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).



                                    Index - 1

<PAGE>



10.12Indemnification  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).

10.13Agreement   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).

10.14Amendment 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).

10.15(5)  Agreement  for the sale and  purchase of the whole of the issued share
     capital of Anagram  Limited,  dated  December 3, 1998,  among Toucan Mining
     Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.1).

10.16(5)  Supplemental  Agreement,  dated  December 3, 1998 among Toucan  Mining
     Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.2).

10.17(5) Option Agreement  Regarding  Mineradora De Bauxita Ltda, dated December
     3, 1998,  among Toucan Mining Limited,  Toucan Gold  Corporation,  Inc. and
     Anagram Limited (Exhibit 10.3).

10.18(5)  Agreement for the purchase of the whole of the issued share capital of
     Mineradora  de Bauxita  Ltda,  dated  December 3, 1998 among Toucan  Mining
     Limited, Toucan Gold Corporation, Inc. and Anagram Limited (Exhibit 10.4).

10.19(5) Form of Minmet Plc Warrant Instrument (Exhibit 10.5).

21*  Subsidiaries of the Company.

27*  Financial Data Schedule.

*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.

(4)  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, 1997, filed by the Company with the Securities and Exchange Commission.

(5)  Incorporated  by reference to the exhibit shown in parenthesis  included in
     the Company's  Current Report on Form 8-K, filed January 5, 1999,  filed by
     the Company with the Securities and Exchange Commission.






                                    Index - 2