===============================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

          For the Fiscal Year Ended: December 31, 1996

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934

          For the Transition Period From ____ to ____
                  ---------------------------------------------

                        Commission File Number: 033-26750

                           CURBSTONE ACQUISITION CORP.
             ------------------------------------------------------             
                Name of Registrant as specified in its charter)

       DELAWARE                                                 75-2254743
-------------------------------                            ---------------------
(State or other jurisdiction of                            (I.R.S. Employer
Incorporation or organization)                              Identification No.)

4180 La Jolla Village Drive, Suite 500, La Jolla, California      92037
------------------------------------------------------------   -----------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code:            (619) 457-3800

Securities registered pursuant to Section 12(b) of the Act:      None

Securities registered pursuant to Section 12(g) of the Act:      None

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part II of this Form 10-K or any amendments to this
Form 10-K. /X/

     As of December 31, 1996,  there were 3,521,876  shares of the  Registrant's
Common  Stock,  $.0001 par value,  outstanding.  The  aggregate  market value of
shares  of Common  Stock  held by  non-affiliates  of the  Registrant  cannot be
determined  since there has been no market for such Common Stock during the past
year.

===============================================================================
<PAGE>                           

                          CURBSTONE ACQUISITION CORP.

                                    FORM 10-K

                   For The Fiscal Year Ended December 31, 1996

                                      INDEX

                                                                         Page
                                                                         ----
                                     PART I

Item 1.   Business ..................................................      1

Item 2.   Properties ................................................      1

Item 3.   Legal Proceedings .........................................      1

Item 4.   Submission of Matters to a Vote of Security Holders .......      2


                                     PART II

Item 5.   Market for the Registrant's Common Equity and Related
          Stockholder Matters ........................................     3

Item 6.   Selected Financial Data ....................................     3

Item 7.   Management Discussion and Analysis of Financial Condition
          and Results of Operations ..................................     3

Item 8.   Financial Statements and Supplementary Data .................    4

Item 9.   Changes in and Disagreements with Accountants on Accounting 
          and Financial Disclosure ....................................    4

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant ..........    14

Item 11.  Executive Compensation ......................................    15

Item 12.  Security Ownership of Certain Beneficial Owners
          and Management ..............................................    16

Item 13.  Certain Relationships and Related Transactions ..............    16

                                     PART IV

Item 14.  Exhibits, Financial Statements Schedules and Reports 
          on Form 8-K .................................................    17

          Signatures ..................................................    18



<PAGE>

                                     PART I

Item 1.   THE BUSINESS

General

     The Registrant was incorporated  under the laws of the State of Delaware on
November 29, 1988,  and issued  500,000  shares of its Common Stock,  $.0001 par
value (the "Common  Stock") to TRIM-A-LAWN on January 23, 1989, for $1,000 cash.
The  Registrant  was organized  with a view toward (a) the  distribution  of the
500,000  shares  of  the  Registrant's  Common  Stock  to  the  shareholders  of
TRIM-A-LAWN  and (b) the subsequent  search for,  location of and combination of
the Registrant with a privately-held business enterprise.  The Registrant has no
current  business  operations,  except  for  the  activities  of  its  officers,
directors and consultants in searching for a potential  combination partner. The
Registrant  has limited assets and no operating  income.  Since  inception,  the
costs associated with the  Registrant's  search for a merger candidate have been
and will be paid by the  Registrant  and by the  officers  and  directors,  on a
discretionary  basis.  The  Registrant's  offices  are  located at 4180 La Jolla
Village Drive, Suite 500, La Jolla, California 92037.

     The Registrant proposes to combine with an existing, privately-held company
which  is  profitable   and,  in   management's   view,  has  growth   potential
(irrespective  of the industry in which it is  engaged).  A  combination  may be
structured as a merger, consolidation, exchange of the Registrant's Common Stock
for stock or  assets  or any  other  form  which  will  result  in the  combined
enterprise's  being a  publicly-held  corporation.  The Registrant will pursue a
combination with a company or business enterprise that satisfies its combination
suitability  standards by advertising in one or more  newspapers or magazines to
establish  contact with,  or by otherwise  contacting,  selected  privately-held
companies which are profitable and are believed to have growth potential.  There
are no assurances  that  management of the  Registrant  will be able to locate a
suitable  combination  partner or that a combination  can be structured on terms
acceptable to the Registrant.

     Pending  negotiation  and  consummation  of a  combination,  the Registrant
anticipates  that  it  will  have  limited  business  activities,  will  have no
significant  sources  of  revenue  and will  incur no  significant  expenses  or
liabilities. If expenses are incurred and funds are necessary the Registrant may
undertake  a private  placement  of its  common  stock or borrow  the  necessary
capital from its officers and directors.  Should  necessary  funds be available,
the Registrant will engage  attorneys,  accountants  and/or other consultants to
evaluate and assist in completing a potential combination.

Capital Expenditures

     The Registrant plans no significant expenditures.

Employees

     As of December 31, 1996 the Registrant had no full or part time employees.

ITEM 2.   PROPERTIES

     As of December 31, 1996 the Registrant did not own any property.

ITEM 3.   LEGAL PROCEEDINGS

     The Registrant is not a party to any material legal proceedings, nor to the
Registrant's   knowledge,   are  there  any  other  material  legal  proceedings
contemplated against it.

                                     Page 1

<PAGE>

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

     During the fourth  quarter of the fiscal year covered by this  report,  the
Registrant  held its 1996 Annual Meeting of Shareholders  and submitted  various
matters  to be  voted  on by  the  shareholders.  The  1996  Annual  Meeting  of
Shareholders  was held on  Tuesday,  October  29,  1996,  at 3:00 p.m.,  at 3900
Paradise Road, Suite 263, Las Vegas, Nevada,  pursuant written notice. As of the
Record  Date,  October 15,  1996,  there were issued and  outstanding  2,185,000
shares  (pre-reverse split) of the Registrant's common stock entitled to vote at
said annual meeting.  There were present in person or by proxy 1,414,374  shares
at said meeting.  The matters  submitted to the vote of the shareholders and the
results of said vote are as follows:

     (1) Proposal No. 1 was the election of four (4)  directors  for the ensuing
year and term ending December 31, 1997. The nominees for directors were,  Thomas
R. Brooksbank,  George G. Chachas, James E. Franklin and Joseph Milanowski.  All
four nominees were elected as directors to serve for the ensuing year with votes
for the election of directors being cast as follows:

<TABLE>
<CAPTION>

Nominees Name            Votes For           Votes Withheld
-------------            ------------        ----------------
<S>                      <C>                 <C>
Thomas R. Brooksbank     1,414,374           None

George G. Chachas        1,414,374           None

James E. Franklin        1,414,374           None

Joseph Milanowski        1,414,374           None 

</TABLE>

     (2) Proposal No. 2 was to ratify and approve the  appointment  of McBride &
Reeves as  independent  auditors of the Registrant for the fiscal years 1996 and
1997.  The  shareholders  approved  the  appointment  of  McBride  &  Reeves  as
independent  auditors of the Registrant for the fiscal years 1996 and 1997, with
1,414,384  votes  cast in favor of such  appointment  and no  votes  against  or
abstaining.

     (3) Proposal No. 3 was to ratify and approve the amendment and  restatement
of the  Certificate  of  Incorporation  in its  entirety in order to correct the
errors  on the  original  Certificate  of  Incorporation  and to  eliminate  the
Registrant's class of preferred stock in its entirety. The shareholders approved
and adopted  proposal no. 3 with 1,414,384  votes cast in favor of said proposal
and no votes against or abstaining.

     (4) Proposal No. 4 was to ratify and approve the amendment and  restatement
of the  Bylaws of the  Registrant  to  clarify  the  rights  and  ability of the
Registrant's  directors  and  shareholders  to  take  action  on  behalf  of the
Registrant.  The shareholders approved and adopted proposal no. 4 with 1,414,384
votes cast in favor of said proposal and no votes against or abstaining.

     (5)  Proposal  No. 5 was to ratify  and  approve a one (1) for one  hundred
(100)  reverse  split  of the  shares  of the  Common  Stock  of the  Registrant
effective on the seventh day following the Annual Meeting of  Shareholders.  The
shareholders  approved and adopted  proposal no. 5 with 1,413,365  votes cast in
favor of said  proposal,  1,009 votes cast  against  said  proposal and no votes
abstaining.  The one (1) for 100  reverse  split of the issued  and  outstanding
shares  of  Common  Stock of the  Registrant  became  effective  on the close of
business on November 5, 1997.

     (6) Proposal  No. 6 was to ratify,  adopt and approve the  1996-1997  Stock
Compensation Plan in order to allow the Registrant to compensate such attorneys,
accountants  and consultants as necessary to maintain the  Registrant's  federal
and state corporate, securities and tax filings and in seeking out a combination
partner for the Registrant. The shareholders approved and adopted proposal no. 6
with 1,413,365 votes cast in favor of said proposal,  no votes cast against said
proposal and 1,009 votes abstaining.

                                     Page 2

<PAGE>
                                     PART II

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

Market for Common Stock

     There is no established  public trading market for the Registrant's  Common
Stock. As of December 31, 1996,  there were 3,521,876 shares of the Registrant's
Common Stock issued and outstanding and approximately 425 shareholders.

Dividends

     The  Registrant  has never declared or paid any cash dividend on its shares
of common stock and does not  anticipate  paying  dividends  in the  foreseeable
future.


ITEM 6.   SELECTED FINANCIAL DATA

                              Financial Highlights

<TABLE>
<CAPTION>

                                        For Years Ended December 31,
                                  1996      1995      1994      1993      1992
                                  ----      -----     -----     -----     -----
<S>                               <C>       <C>       <C>       <C>       <C>
Net Revenues ..................   $0.00     $0.00     $0.00     $0.00     $0.00
Net Income .................... (81,112)    0.00    (9,025)      0.00      0.00
Earnings per share ............  ( 0.13 )    0.00    ( 0.82)     0.00      0.00
Return on net revenues.........    0.00      0.00      0.00      0.00      0.00
Cash and short-term investments.. 4,953      0.00      0.00      0.00      0.00
Total assets..................... 4,953      0.00      0.00      0.00      0.00
Stockholders' equity............. 4,488      0.00      0.00      0.00      0.00

</TABLE>

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

General

     The Registrant is in the  development  stage with a view towards  combining
with an  existing,  privately-held  company  or  business  enterprise  which  is
profitable and, in management's  opinion,  has growth potential.  The Registrant
has no  significant  assets,  revenues or  expenses  and the  Registrant  is not
expected  to  have  significant  operations  until  a  business  combination  is
effected.

Liquidity and Capital Resources

     With the exception  with the sale $12,000  raised in September 1996 through
the sale of a total of 600,000 shares  (pre-reverse  split) of the  Registrant's
Common Stock to Thomas R. Brooksbank,  George G. Chachas,  James E. Franklin and
Thomas Hantges,  there have been no material changes in the financial  condition
of the Registrant  since its  inception,  nor is a material  change  anticipated
until the Registrant is able to identify and consummate a business combination.

     However,  it should be noted  the  working  capital  of the  Registrant  is
extremely  low and  thus the  Registrant  may have to  undertake  an  additional
private  placement of its Common Stock on short notice if  additional  funds are
needed by the Registrant.

                                     Page 3
<PAGE>

Results of Operations

     For the year ended  December 31, 1996 the  Registrant had a loss of $80,112
or $0.13 per  share.  This  compares  with a net  income of $0.00,  or $0.00 per
share,  for the previous  year ended  December 31, 1995. It should be noted that
the loss per share of common  stock was computed by dividing the net loss by the
weighted  average number of shares of common stock  outstanding for the year and
prior  periods.  For 1996 the weighted  average number of shares of Common Stock
was 622,210 shares after accounting for a 1 for 100 reverse stock split approved
on October 29, 1996 and effective November 5, 1996.

     There are two main reasons for the  Registrant's net loss incurred in 1996.
First, the Registrant had no revenue in 1996.  Second,  the Registrant  incurred
certain legal and  consulting  services,  which totaled  $75,600,  in 1996.  The
$75,600  accounted  for  94%  of  the  operating  costs  of  the  Company.   The
Registrant's common stock was issued in exchange for these services, and thus no
cash was expended by the Registrant in for these services. A portion of the cash
raised in September  1996 was  expended in bringing  current the past due filing
fees,  taxes,  processing fees and auditor fees with the Securities and Exchange
Commission,  state of Delaware, proxy companies and the Registrant's independent
auditors, respectively.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          Index to Financial Statements
                                                                          Page
                                                                          ----
Report of Independent Accountants ....................................      5
Balance Sheets - for the Years ended December 31, 1996 and 1995.......      6
Statement of Operations...............................................      7
Statement of Stockholders' Equity.....................................    8-9
Statement of Cash Flows...............................................     10
Notes to Financial Statements.........................................  11-13

     All other  schedules are not submitted  because they are not  applicable or
not required or because the information is included in the financial  statements
or notes thereto.


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

     None.

                                     Page 4

<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Curbstone Acquisition Corp.
La Jolla, California


We have audited the accompanying  balance sheets of Curbstone  Acquisition Corp.
(a Delaware  corporation in the development  stage), as of December 31, 1996 and
1995, and the related statements of operations,  stockholders'  equity, and cash
flows as of December 31, 1996, 1995 and 1994. 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.  The statements of
operations,  stockholders' equity and cash flows of Curbstone  Acquisition Corp.
as of December 31, 1991 and from November 29, 1988 (inception),  were audited by
other auditors  whose report dated  February 29, 1992,  expressed an unqualified
opinion on those financial statements.

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 provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Curbstone Acquisition Corp. as
of December 31, 1996 and 1995,  and the results of its  operations  and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.



/S/  MCBRIDE & REEVES, CPA'S


March 14, 1997
Las Vegas, Nevada

                                     Page 5

<PAGE>


                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                                 Balance Sheets
                           December 31, 1996 and 1995

<TABLE>
<CAPTION>

                                                   1996                1995
                                                  --------            -------
<S>                                               <C>                 <C>
Assets

     Cash                                         $ 4,953             $   -
                                                  ---------           --------
       Total Assets                               $ 4,953             $   -
                                                  =========           ========

Liabilities

Accrued liabilities                               $  465              $    -
                                                  ----------          --------
Stockholders' Equity
--------------------

Stockholders' equity:
  Preferred stock, $1.00 par value
  1,000,000 shares authorized, none
  issued & outstanding (Note 1)                        -                   -

  Common stock, $.0001 par value 60,000,000
  shares authorized, 3,521,876 issued
  & outstanding (Note 1)                              521                  85

  Additional paid-in capital                      100,104              15,940

  Deficit accumulated during
   development stage                            (  96,137)          (  16,025)
                                                -----------         -----------

     Total Liabilities and
      Stockholders' Equity                       $  4,953             $    -
                                                ===========           =========

</TABLE>


    The accompanying notes are an integral part of the financial statements

                                     Page 6

<PAGE>

                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                            Statements of Operations
            For the Years Ended December 31, 1996, 1995 and 1994, and
               For the Period from November 29, 1988 (inception), 
                              to December 31, 1996

<TABLE>
<CAPTION>
                                                                  November 29,
                                                                      1988
                                                                 (Inception) to
                                                                   December 31,
                              1996         1995         1994          1996
                             -------    ---------     ---------   -------------                  
<S>                          <C>        <C>           <C>         <C>
Revenue                      $    -      $     -      $     -     $        -                                                
                             ---------  ---------     ---------   -------------

Expenses
 General and administrative 
 (Note 4)                      80,112          -        9,025           96,137
                             ---------  ---------     ---------   -------------  
Net Loss before income taxes ( 80,112)         -      ( 9,025)      (   96,137)
                                                                    
Income tax benefit(Note 5)        -            -            -              -
                             ---------  ---------     ---------   -------------

Net Loss                    $( 80,112)   $     -      $( 9,025)    $   (96,137)
                            ==========  =========     ==========  =============

Net Loss per common 
shares (as restated 
for reverse stock split)    $   (0.13)   $     -      $  (0.82)    $      0.15)
                            ==========  ==========    ==========  =============

Weighted average common 
shares outstanding 
(Note 1)                      622,210      13,250       11,000          622,210
                            ==========  ==========    ==========  =============              

</TABLE>

The accompanying notes are an integral part of the financial statements

                                     Page 7

<PAGE>

                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                       Statements of Stockholders' Equity
            For the Years Ended December 31, 1996, 1995 and 1994, and
               For the Period From November 29, 1988 (inception),
                              to December 31, 1996

<TABLE>
<CAPTION>

                                                            Accumulated
                              Number                         Deficit
                                of               Additional  During
                              Common             Paid- In  Development
                              Shares    Amount   Capital     Stage     Total
-------------------------------------------------------------------------------
<S>                           <C>       <C>       <C>       <C>        <C>
Balance, November 29, 1988         -    $   -     $    -     $    -     $   -
                                   -        -          -          -         -

Net Loss 1988                ---------  --------  ---------  --------  --------

Balance, December 31, 1988         -        -          -          -         -

Stock issued January 25, 
1989                          500,000       50       3,200   ( 6,000)  ( 2,750)
                                                                                                    
Stock issued under stock 
bonus plan (Note 2)           250,000       -          -          -         -

Stock issued form converted 
debentures(Note 3)            250,000       25       3,725        -       3,750                                             -

Net Loss 1989                      -        -          -     (  880)     ( 880)
                             ---------  --------  ---------  --------  --------

Balance December 31, 1989    1,000,000      75       6,925   (6,880)       120

Net Loss 1990                      -        -          -     (  120)     ( 120)

Balance December 31, 1990    1,000,000      75       6,925   (7,000)        -
Net Loss 1991, 1992 
and 1993                           -        -          -          -         -
                             ---------  --------  ---------  --------  --------

Balance December 31, 1993    1,000,000      75       6,925   (7,000)        -

Stock issued for legal 
fees (Note 4)                  100,000      10       4,990        -       5,000
                                                                    
Additional paid in capital
for accounting fees (Note 4)       -        -        4,025        -       4,025

Net Loss 1994                     -         -          -     (9,025)    (9,025)                                        9,025)
                             ---------  --------  ---------  --------  --------

Balance December 31, 1994   1,100,000       85      15,940   (16,025)       -

Stock issued for directors' 
fees (Note 4)                 225,000       -          -          -         -

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

Balance December 31, 1995   1,325,000       85       15,940  (16,025)       -

Stock issued for legal 
fees (Note 4)                  60,000        6          594       -         600

Stock issued for cash         800,000       80       13,920       -      14,000
                                                                          
Stock reverse split 
(Note 1)                   (2,163,124)      -           -         -         -

</TABLE>

The accompanying notes are an integral part of the financial statements

                                     Page 8

<PAGE>


                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                 Statements of Stockholders' Equity (continued)
            For the Years Ended December 31, 1996, 1995 and 1994, and
               For the Period From November 29, 1988 (inception),
                              to December 31, 1996
<TABLE>
<CAPTION>

                                                            Accumulated
                              Number                         Deficit
                                of               Additional  During
                              Common             Paid- In  Development
                              Shares    Amount   Capital     Stage     Total
-------------------------------------------------------------------------------
<S>                           <C>       <C>       <C>       <C>        <C>
Stock issued for legal and 
consulting services 
(Note 4)                     3,500,000    350      69,650       -        70,000
                            
Net Loss 1996                     -        -          -       (80,112)  (80,112)
                             ---------  --------  ---------  --------  --------

Balance December 31, 1996    3,521,876  $ 521     $100,104   $(96,137)  $ 4,488
                             =========  ========  =========  =========  =======

</TABLE>

The accompanying notes are an integral part of the financial statements

                                     Page 9

<PAGE>


                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                            Statements of Cash Flows
            For the Years Ended December 31, 1996, 1995 and 1994, and
               For the Period from November 29, 1988 (inception),
                              to December 31, 1996

<TABLE>
<CAPTION>
                                                                  November 29,
                                                                      1988
                                                                 (Inception) to
                                                                   December 31,
                              1996         1995         1994          1996
                             -------    ---------     ---------   -------------                  
<S>                          <C>        <C>           <C>         <C>
Net Cash Flows from 
Operating Activities:
Net Loss                    $(80,112)   $    -        $  (9,025)   $ (  96,137)
Adjustments to reconcile   
net income to net cash
provided by operating
activities:
Increase in accounts 
  payable                       465          -              -               465

Issuance of stock 
  for services               70,600          -            5,000          78,850
                            ---------   ---------    -----------   ------------

Net cash used in 
operating activities        ( 9,047)         -        (  4,025)      (  16,822)

Cash flows used in 
investing activities:           -            -              -               -

Cash Flows used in 
financing activities:
 Stock issued for cash       14,000          -              -            14,000
       
Additional paid in 
 capital                        -            -           4,025            4,025

Proceeds from issuance 
of convertible debentures       -            -              -             3,750
                            ---------   ---------    -----------   ------------                            

Net cash provided by 
financing activities         14,000          -              -            21,775
                            ---------   ---------    -----------   ------------
                                            
Net increase in cash          4,953          -              -             4,953
                         
Cash, beginning of period       -            -              -               -

Cash, end of period           4,953          -              -             4,953
                            =========   ==========   ============   ===========

Supplemental disclosures:

 Interest paid              $    -      $    -       $      -       $       -    
                            =========   ==========   ============   ===========

Taxes paid                  $    -      $    -       $      -       $       -    
                            =========   ==========   ============   ===========

</TABLE>

The accompanying notes are an integral part of the financial statements

                                     Page 10

<PAGE>
                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                        Notes the to Financial Statements
                           December 31, 1996 and 1995

(1) Summary of Organization and Significant Accounting Policies

(a) Organization

The Company was  organized  as a Delaware  corporation  on November 29, 1988 and
re-organized  on October 29, 1996. The Company's  intention is to combine with a
privately-held business enterprise.

On April 6, 1989 the Company was  registered  (Form S-1) with the Securities and
Exchange Commission, file number 033-26750.

From the date of inception,  through the  registration  with the  Securities and
Exchange Commission,  and subsequently through December 31, 1996 the Company has
had no business  operations  (except minimal operating costs) and has no planned
business  activities,  except  for  the  identification  of  and  merger  with a
privately-held business enterprise.

(b) Capital Stock

The authorized,  issued and outstanding  shares of capital stock at December 31,
1996 were as follows:

Preferred stock: $1.00 par value;  1,000,000 shares authorized,  eliminated as a
class of stock October 29, 1996 by amendment to the articles of incorporation.

Common  Stock:  $.0001 par value;  authorized  50,000,000  shares,  increased to
60,000,000   shares   October  29,  1996  by   amendment   to  the  articles  of
incorporation; 3,521,876 shares issued and outstanding.

(c)  Loss Per Share

Loss per share of common  stock was  computed  by  dividing  the net loss by the
weighted  average number of shares of common stock  outstanding for the year and
for prior periods (622,210 shares after accounting for a 1 for 100 reverse split
approved October 29, 1996 and effective November 5, 1996).

(d)  Dividends Per Share

No dividends have been paid as of December 31, 1996.


                                    Page 11

<PAGE>

                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 1996 and 1995


(2) Stock Compensation Plan

On October 5, 1996 the Company  amended and  extended to December  31, 1997 it's
Stock  Compensation  Plan for the benefit of its employees and certain  contract
service  providers.  The plan  allows  for the award of a maximum  of  4,000,000
common shares of the Company.  On April 7, 1989,  the Company  provided  250,000
shares of common  stock to officers  of the  Company.  On November  19, 1996 the
Company provided 3,500,000 shares of common stock to officers of the Company and
to certain  attorneys and consultants who had rendered  services to the Company.
No other stock compensation awards have occurred through December 31, 1996.

(3) Convertible Debentures

On January 23, 1989, the Company issued to Capital Investment Managers, Inc., an
affiliate  of each of the  officers  of the  Company  by  common  ownership,  8%
convertible  debentures totaling $3,750. The debentures were exercised April 17,
1989 and were  converted to common stock of the Company at a conversion  rate of
$.015 in common stock value per each $1.00 in debenture. The conversion resulted
in the issuance of an additional 250,000 shares if common stock of the Company.

(4) Related Party Transactions

Certain operating costs incurred by the Company were paid for by the issuance of
common stock.  At December 31, 1996,  3,501,600  shares of common stock had been
issued in exchange for legal and consulting services in the amount of $ 75,600.

During 1995,  the Company issued 225,000 shares of common stock to the directors
of the Company, which the Company has valued and recorded at the market value of
the Company, or zero.

There were  certain  operating  costs  incurred  by the  Company  that were paid
directly by stockholders.  These costs are de minimis and the parties paying the
costs do not expect to be repaid or reimbursed by the Company. The expenses paid
by related  parties in 1994  amounted to $ 4,025 and are recorded as  additional
paid in capital.

(5) Income Taxes

The Company  accounts for income taxes in accordance with Statement of Financial
Accounting Standard 109, "Accounting for Income Taxes" which requires the use of
the  "liability  method" of  accounting  for income  taxes.  Under the liability
method,  deferred tax assets and  liabilities  are  recognized for the estimated
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax  bases  and to the  effects  of  operating  loss and tax  credit
carry-forwards.  Deferred tax assets and  liabilities are measured using enacted
tax rates in effect for the year in which temporary  differences are expected to
be recovered or settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

                                    Page 12

<PAGE>
                           CURBSTONE ACQUISITION CORP.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 1996 and 1995

(5) Income Taxes (continued)

At December 31, 1996 the Company's deferred tax asset position is as follows:

                          Deferred income taxes       $  32,686
                          Valuation allowance        (   32,686)
                                                     ---------- 
                          Income tax benefi           $      -
                                                     ==========

At December 31, 1996 the Company's  deferred tax assets are solely  attributable
to the future tax benefits of operating  losses carried  forward which expire as
follows:

<TABLE>
<CAPTION>

                         Loss            Expiring
                         ----------      -----------
                         <S>            <C>
                         $   6,880         2004
                               120         2005
                             9,025         2009
                            80,112         2011
                         ----------
                         $  96,137
</TABLE>

                                    Page 13


<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following  table lists all of the  Directors and Executive  Officers of
the Registrant,  and provides certain  information  concerning each such person,
including  the number of shares of Common Stock of the  Registrant  beneficially
owned  directly  or  indirectly  by such  person at the close of  business as of
December 31, 1996.  As of December 31, 1996 there were  3,521,876  shares of the
Registrant's Common Stock, $.0001 par value, outstanding.

<TABLE>
<CAPTION>

                                                           Amount and
                                           Position        Nature of    Percent
                                             with          Beneficial      of
      Name                Age     Since   Registrant       Ownership      Class
---------------------    -----    -----   --------------   -----------  -------
<S>                      <C>      <C>     <C>              <C>          <C>
Thomas R. Brooksbank       42     1995    President,       859,402      24.40%
                                          Chief Financial
                                          Officer and
                                          Director

James E. Franklin          32     1996    Vice President   859,401      24.40%
                                          and Director

Joseph D. Milanowski       35     1995    Director          25,250       0.71%

George G. Chachas          34     1996    Secretary        859,402      24.40%
                                          and Director


</TABLE>

------------  
Notes:  1. Thomas R.  Brooksbank  is the  principal  and owner of  Brooksbank  &
Associates,  the registered owner of 859,402 shares of the  Registrant's  common
stock as set forth above.

Principal Occupation

Thomas R. Brooksbank - Mr.  Brooksbank was elected as Director on March 7, 1995.
Mr. Brooksbank was subsequently elected President and Chief Financial Officer of
the Company on July 27, 1996,  following the  resignation  of Thomas A. Hantges.
Mr. Brooksbank is the principal and owner of Brooksbank & Associates,  Attorneys
at Law,  a  commercial  and  financial  institution  collection  law  firm.  Mr.
Brooksbank  was admitted to the State Bar of Nevada in 1987 and the State of Bar
of Arizona in 1995. Mr. Brooksbank received a Bachelor of Science degree in 1975
from the  University  of Maryland,  DDS in 1981 and his Juris Doctor degree from
California Western School of Law in 1986 graduating magna cum laude.

James F. Franklin - Mr.  Franklin was elected as Director and Vice  President on
July 27, 1996 following the resignation of Thomas  Hantges.  Mr. Franklin is the
founder and President and Chief Executive Officer of IPO Consultants,  a company
who provides  investment  banking and other services  which assist  Companies in
raising capital, going public or finding a merger candidate.

Joseph D. Milanowski - Mr.  Milanowski was elected as a Director on September 1,
1995  following  the  resignation  of  David M.  Berkowitz.  Mr.  Milanowski  is
currently  employed by USA  Commercial  Mortgage  Company.  Prior to joining USA
Commercial  Mortgage  Company,  Mr.  Milanowski  was  employed  by  USA  Capital
Management  Group and Southwest Gas  Corporation  as a financial  analyst in its
Treasury  Services  Department  from  July  1988 to July  1993.  Mr.  Milanowski
graduated  from the  University of Michigan with a BA in Economics in 1983,  and
from the  University  of Arizona with an MBA in Finance in 1988.  He was awarded
the Chartered Financial Analyst (CFA) designation in 1991.

                                    Page 14

<PAGE>

George G. Chachas - Mr.  Chachas was elected as a Director and  Secretary of the
Company on March 11, 1996. Mr. Chachas is partner with the law firm of Wenthur &
Chachas is La Jolla, California. Mr. Chachas practices in the areas of corporate
and securities  transactions.  Mr. Chachas received a Bachelor of Arts degree in
1984 from the San  Diego  State  University  and his Juris  Doctor  degree  from
California Western School of Law in 1986.


ITEM 11.  EXECUTIVE COMPENSATION

          Compensation of Officers

     With the exception of the shares of Common Stock issued to Mr.  Brooksbank,
Mr. Chachas and Mr. Franklin under their respective  Consulting  Agreements,  no
officer of the Registrant received any compensation during the fiscal year ended
December 31, 1996.

          Employment Contracts/Stock Incentive Plans

     No employment  contracts were adopted or granted by the  Registrant  during
the fiscal year ended December 31, 1996. On October 5, 1996, the Company adopted
the Curbstone  Acquisition  Corp.,  1996-1997  Stock  Compensation  Plan for the
benefit of its offices, directors,  consultants,  attorneys and certain contract
service  providers.  The plan  allows  for the award of a maximum  of  4,000,000
shares of the Common Stock of the Registrant.  Said 1996-1997 Stock Compensation
Plan was  approved  and ratified by the  shareholders  at its annual  meeting on
October 29, 1996. On October 7, 1996,  the  Registrant  entered into  consulting
agreements  with  attorneys,  George G. Chachas and  Brooksbank & Associates  to
provide the necessary  legal  services and  consulting  services to maintain the
Registrant in good  standing in its  securities,  corporate and tax filings.  On
October 7, 1996,  Registrant  entered into  consulting  agreements with James E.
Franklin and Thomas A. Hantges to provide  services to the  Registrant to locate
and negotiate  with a combination  partner.  On November 6, 1996, the Registrant
filed a  Registration  Statement  on Form S-8  registering  3,500,000  shares of
Common  Stock to be issued  under the  1996-1997  Stock  Compensation  Plan.  On
November 19, 1996,  the Board of  Directors  authorized  the issuance of 855,552
shares of Common Stock registered  under said Form S-8 to Thomas  Brooksbank and
856,402  shares of Common  Stock to George G. Chachas for their  consulting  and
legal  services to the  Registrant.  The Registrant  also  authorized and issued
855,145 shares of Common Stock to Thomas A. Hantges and 857,901 shares of Common
Stock to James E. Franklin, for the consulting services to the Registrant.

          Compensation of Directors

     With the exception of the shares of Common Stock issued to Mr.  Brooksbank,
Mr. Chachas and Mr. Franklin under their respective  consulting  agreements,  no
director of the  Registrant  received  any  compensation  during the fiscal year
ended December 31, 1996.  During 1996,  there were nine meetings of the Board of
Directors  or  actions  taken by the Board of  Directors  by  Unanimous  Written
Consent of which all directors were present.

                                    Page 15

<PAGE>

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth  information,  to the extent  known by the
Registrant,  as to the persons and  companies who owned  beneficially  more than
five  percent  (5%)  of the  outstanding  shares  of  the  Common  Stock  of the
Registrant  at the close of business on December  31, 1996,  and the  beneficial
ownership of the  Registrant,  as a group, as of such date. The number of shares
held by each Director is set forth in Item 10. hereinabove.

<TABLE>
<CAPTION>

Title of                                     Amount and Nature of       Percent
Class     Name and Address                   Beneficial Ownership      of Class
--------  ------------------------           --------------------      --------
<S>       <C>                                <C>                       <C>
Common    Brooksbank & Associates(1)         859,402                    24.40%
          201 W. Liberty Street
          Suite 1
          Reno, Nevada 89505

Common   George G. Chachas                   859,402                    24.40%
         4130-75 Porte De Merano
         San Diego, CA 92122

Common   James E. Franklin                   859,401                    24.40%
         5060 Shoreham Place
         Suite 200
         San Diego, CA 92122

Common   Thomas A. Hantges(2)                859,301                    24.39%
         4420 Euclid Avenue
         Las Vegas, NV 89121

         All Directors and                 2,603,455                    73.92%
         Officers as a Group
        (Four [4] Persons as
        of the date of this Amendment.)
</TABLE>

-------------- 
Notes: 

     1.  Thomas  R.  Brooksbank  is the  principal  and  owner of  Brooksbank  &
Associates,  the registered owner of 859,402 shares of the  Registrant's  common
stock as set forth above.

     2. The Hantges  Children's  Education Trust is the beneficial  owner of 100
shares of the common  stock of the  Registrant.  These  shares are  separate and
distinct from those owned by Thomas A Hantges.  The Hantges  Education Trusts is
an  Irrevocable  Trust with an independent  third party  Trustee,  Helen Miller.
Thomas A. Hantges has no direct or indirect control over the trust or the shares
beneficially owned by the Trust.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Purchase of Unregistered Shares of the Company's Common Stock.

     In September 1996, Thomas R. Brooksbank, President, Chief Financial Officer
and a  Director  of the  Registrant,  George G.  Chachas,  the  Secretary  and a
Director of the Registrant, James E. Franklin, the Vice President and a Director
of the Registrant,  and Thomas A. Hantges,  each purchased 150,000  (pre-reverse
split) shares of unregistered and restricted  Common Stock of the Registrant for
$3,000  each.  Consulting  Agreements  with  George  G.  Chachas,  Brooksbank  &
Associates,  James E.  Franklin  and Thomas R.  Hantges  and  Issuance of Shares
Registered on Form S-8 to Such Consultants.

                                    Page 16

<PAGE>

     On October 7, 1996, the Registrant entered into consulting  agreements with
attorneys,  George G.  Chachas  and  Brooksbank  &  Associates  to  provide  the
necessary  legal services and consulting  services to maintain the Registrant in
good standing in its securities,  corporate and tax filings. On October 7, 1996,
Registrant  entered into  consulting  agreements  with James E. Franklin and Tom
Hantges to provide  services to the  Registrant to locate and  negotiate  with a
combination  partner.  On November 6, 1996, the Registrant  filed a Registration
Statement on Form S-8 registering  3,500,000 shares of Common Stock to be issued
under the 1996-1997 Stock  Compensation Plan. On November 19, 1996, the Board of
Directors  authorized the issuance of 855,552 shares of Common Stock  registered
under said Form S-8 to Thomas  Brooksbank  and 856,402 shares of Common Stock to
George G. Chachas for their consulting and legal services to the Registrant. The
Registrant  also  authorized and issued 855,145 shares of Common Stock to Thomas
A.  Hantges and 857,901  shares of Common  Stock to James E.  Franklin,  for the
consulting services to the Registrant.

                                     PART IV

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

     (a) Documents filed as a part of this report:

     (1) Financial  Statements of Curbstone  Acquisition  Corp.  set forth under
Item 8 are filed as part of this report.

     (2) The Financial  Statement  Schedules  other than those listed above have
been  omitted  because  they are either not  required,  not  applicable,  or the
information is otherwise included.

     (b) Information filed as part of this report from Form 8-K:

     (1) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.



                                    Page 17

<PAGE>


                                   SIGNATURES

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


                                                   CURBSTONE ACQUISITION CORP.
                                                          (Registrant)


 Date: March 26, 1997                             /S/ Thomas R. Brooksbank
                                                  -----------------------------
                                                  By:  Thomas R. Brooksbank
                                                  Its: President and
                                                       Chief Financial Officer



Date: March 26, 1997                              /S/ George G. Chachas
                                                  -----------------------------
                                                  By:  George G. Chachas
                                                  Its: Secretary

                                    Page 18