SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                -----------------
                                
                                   FORM 10-KSB
                            Annual Report Pursuant to
                       the Securities Exchange Act of 1934
                           
                               -------------------

                       For the fiscal year ended 12-31-94
                          Commission file number 012139

                          LEESBURG LAND & MINING, INC.
                          ----------------------------
             (Exact name of registrant as specified in its charter)

               Colorado                                  82-0379959
       ------------------------                      ------------------
       (State of incorporation)                       (I.R.S. Employer
                                                     Identification No.)

               c/o 10200 W. 44th Ave., #400, Wheat Ridge, CO 80033
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

            Registrant's telephone number, including area code: None

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

                            Title of each class: None
                                                 ----

                 Name of each exchange on which registered: N/A
                                                            ----

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

                    Title of each class: Common No Par Value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for at least the past 90 days.

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

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained,  to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.   
                  -----

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

Transitional Small Business Disclosure Format:

                  ______ Yes                ___X____ No


<PAGE>




Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant as of December 31, 1994: $0

Number of outstanding  shares of the  registrant's no par value common stock, as
of December 31, 1994: 49,976,317*.



*Includes  shares  authorized  by the Board in  settlement  of accounts  but not
issued.


<PAGE>



                                     PART 1

Item 1.  Business

     Leesburg Land & Mining, Inc. (the Company), was organized under the laws of
     the State of Colorado on June 21, 1983.  The Company is in the  development
     stage as defined in Financial Standards Board Statement No. 7.

     In 1983, the Company sold 30,000,000 shares of no par value common stock in
     an S-18 public  offering.  The offering  price for each share was $.10. The
     Company received $2,550,000, net of offering costs, from the sale of common
     stock in the public offering.  In 1985 the shareholders  authorized and the
     board implemented a one for forty share reverse split of the common shares.

     From June 21,  1983  (Inception)  to  December  31,  1984,  the Company was
     engaged in the  exploitation  of a gold placer  claim  located near Salmon,
     Idaho.  As of December  31,  1984,  the  Company's  only  mining  claim was
     abandoned.  Pursuant  to a change in control of the  company in April 1985,
     the Company  purchased an interest in a coal company.  The Company sold its
     interest  in the coal  company in November  1985.  In  December  1985,  the
     Company entered into a contract with a non-affiliated  partnership to drill
     and  complete a  geothermal  well,  construct  a power  plant and assist in
     obtaining needed financing on a fixed-price  basis. The geothermal well was
     plugged and  abandoned  in 1986 when the  underground  resource  was deemed
     inadequate.  The  Partnership  failed to make payments to the Company under
     the contract.  The Company has never derived significant  revenues from any
     of its attempted operations.

     In 1987,  the Company filed for a Chapter 11  bankruptcy,  but  voluntarily
     withdrew the filing in 1988.  Since 1988,  the Company has been selling its
     claims,   property  and  equipment.  In  addition,  the  Company  has  been
     eliminating  its debt and seeking a private company with which to merge. No
     such company has been identified or found.

     No  significant  business  activity was conducted by the Company during the
     fiscal year. As a result, no income was realized by the Company in its last
     fiscal year.

     The Company was inactive and presently does not participate in any industry
     segment.  The Company had no material  revenues,  or  operating  profits or
     identifiable assets attributable to its industry segment.

Item 2.  Property

     The  Company  does not have any  formal  offices at year end.  Records  are
     maintained and mail received at 10200 W. 44th Ave.,  #400,  Wheat Ridge, CO
     80033.  The company owns no  property,  but has three (3) pieces of surplus
     and mining equipment of a value of less than $1,000.


<PAGE>
        

Item 3.  Legal Proceedings

     The Company is a party to no pending legal proceedings, nor is its property
     subject  to such  proceedings,  at year  end  1994,  except a  judgment  by
     Halliburton for $26,000 which was settled in January of 1996 for $14,000.

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

     No matters were submitted  during the fiscal year covered by this report to
     a vote of security  holders of the  Company,  through the  solicitation  of
     proxies or otherwise.

                                     PART II

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

     As of the date of this report,  management knows of no trading or quotation
     of the Company's common stock. The range of high and low bid quotations for
     each fiscal  quarter  since the last  report,  as reported by the  National
     Quotation Bureau Incorporated, was as follows:

                  1994                         High               Low
              -------------                    ----               ---
              First quarter                      *                 *
              Second quarter                     *                 *
              Third quarter                      *                 *
              Fourth quarter                     *                 *

                  1993                         High               Low
              --------------                   ----               ---
              First quarter                      *                 *
              Second quarter                     *                 *
              Third quarter                      *                 *
              Fourth quarter                     *                 *

-------------
          * No quotations reported

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

     As of December  31, 1994 there were 1,059 record  holders of the  Company's
     common Stock.



<PAGE>



     The Company has not declared or paid any cash dividends on its common stock
     and does not anticipate paying dividends for the foreseeable future.

Item 6.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations
         ----------------------------------------------

         Financial Condition and Changes in Financial Condition
         ------------------------------------------------------

     No operations  were  conducted and no revenues were generated in the fiscal
     year although the company received $2,883 in  miscellaneous  income in 1994
     as compared  with $6,834 in  miscellaneous  income in 1993.  The Company at
     year end had no capital, no cash, and a few pieces of miscellaneous  mining
     equipment.  The  Company at year end was  totally  illiquid  and would have
     needed cash infusions from  shareholders to provide capital,  or loans from
     any sources.
          
         Results of Operations
         ---------------------

     During the fiscal  year ended  December  31,  1994,  the  Company  incurred
     $28,072 general and administrative  expenses,  $14,680 in interest expense,
     and $10,000  for  services  contributed  by  officers.  In 1993 the Company
     incurred  $13,685  in  General  and  Administrative  expenses,  $59,283  in
     interest  expense,  and $30,000 for services  contributed  by officers.  At
     present, the Company has no business income or operations. Accordingly, the
     reported  financial  information  herein  may not be  indicative  of future
     operating results.

Item 7.  Financial Statements and Supplementary Data
         --------------------------------------------

         Please refer to pages F-1 through F-13.

Item 8.  Changes in and Disagreements on Accounting and Financial Disclosure
         -------------------------------------------------------------------

     In  connection  with audits of two most recent fiscal years and any interim
     period  preceding  resignation,  no  disagreements  exist  with any  former
     accountant on any matter of accounting  principles or practices,  financial
     statement disclosure,  or auditing scope of procedure,  which disagreements
     if not resolved to the  satisfaction  of the former  accountant  would have
     caused him to make  reference in connection  with his report to the subject
     matter of the disagreement(s).

     The principal  accountant's  report on the financial  statements for any of
     the past two years  contained no adverse opinion or a disclaimer of opinion
     nor was qualified as to uncertainty,  audit scope, or accounting principles
     except for the "going concern" qualification.
       


                                    PART III

Item 9.  Directors and Executive Officers of the
         Registrant and Compliance with Section 16(a)
         --------------------------------------------

     The  directors  and  executive  officers of the Company as of December  31,
     1994, are as follows:**

     Name                     Age                  Position
     ----                     ---                  --------

Robert Beaton                  47                President, Director
James Poulos                   68                Vice President, Director
Michael Schranz                52                Secretary, Treasurer, Director


<PAGE>

     The term of office  of each  director  and  executive  officer  ends at, or
immediately  after,  the next annual  meeting of  shareholders  of the  Company.
Except as otherwise indicated,  no organization by which any director or officer
has been  previously  employed  is an  affiliate,  parent or  subsidiary  of the
Company.

     Robert Beaton,  age 47,  received his BA in Business from the University of
Alabama in 1970.  Mr. Beaton has acted as President and a director of registrant
since 1985.  In 1987 during Mr.  Beatons term as  President  and  director,  the
company filed a chapter 11  Bankruptcy  Petition.  The Petition was  voluntarily
dismissed in 1988. Mr. Beaton has acted as an independent consultant for mergers
and acquisitions by public companies, for his own account since 1988.

     James  Poulos,  age 68, acted as a mining  engineer for his career.  He has
acted as an officer  and  director of the Company  since 1988.  He is  otherwise
retired.

     Michael Schranz, age 52, obtained his B.S. in Civil Engineering from Purdue
University in 1965 and received his MBA at the  University of Denver in 1975. He
is a Certified Public  Accountant in Colorado.  He has been a Vice President and
Director of Registrant  since 1988.  Mr.  Schranz has been a Vice  President and
Director of One Capital  Corp.  from 1982-96 and Vice  President and Director of
Overthrust  Resources,  Ltd.  from  1980-96.  He has been  Managing  Director of
Polaris Coal Co., from 1988-96.

Section 16(a) Reporting Delinquencies
-------------------------------------

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange Act"), requires the Company's officers and directors,  and persons who
own more than 10% of a registered class of the Company's equity  securities,  to
file reports of ownership  and changes in ownership of equity  securities of the
Company  with the  Securities  and  Exchange  Commission  and NASDAQ.  Officers,
directors and  greater-than  10% shareholders are required by the Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) filings.

     1. The  following  persons did not file reports  under Section 16(a) during
the most recent fiscal year or prior years:

     a.  Robert Beaton                    President and Director
     b.  James Poulos                     Secretary and Director
     c.  Michael Schranz                  Vice President and Director

     2. For each person, listed by subparagraph letter above:




<PAGE>

                                  Number of                
                               transactions not         
Number of late                  reported on a                Known failures
reports                         timely basis                  to file forms
-------                         ------------                  -------------

a.       1991 to 1994(5)          1 (1994)                 i) Annual Form 5(x4)
                                                           ii)Form 4

b.       1991 to 1994(5)          1 (1994)                 i) Annual Form 5(x4)
                                                           ii)Form 4

c.       1991 to 1994(6)          1 (1994)                 i) Annual Form 5(x4)
                                                           ii)Forms 4, 3

Item 10.  Executive Compensation
          ----------------------       

         The Company  accrued a total of $10,000  compensation  to the executive
officers as a group for services  contributed  to the Company in all  capacities
during the 1994 fiscal year. No one executive officer  received,  or has accrued
for his benefit,  in excess of $60,000 for the year. No cash bonuses were or are
to be paid to such persons.

     The Company does not have any employee incentive stock option plans.

     There are no plans pursuant to which cash or non-cash compensation was paid
or  distributed  during  the last  fiscal  year,  or is  proposed  to be paid or
distributed in the future, to the executive  officers of the Company except that
certain  accruals for officer's  services were settled with stock issued as more
particularly  set forth in "Certain  Transactions".  No other  compensation  not
described  above was paid or  distributed  during  the last  fiscal  year to the
executive  officers  of  the  Company.   There  are  no  compensatory  plans  or
arrangements,  with respect to any executive office of the Company, which result
or will result from the resignation, retirement or any other termination of such
individual's  employment  with the  Company  or from a change in  control of the
Company or a change in the individual's  responsibilities  following a change in
control.



<PAGE>
<TABLE>
<CAPTION>

                                     SUMMARY COMPENSATION TABLE OF EXECUTIVES

                                            Annual Compensation                                       Awards

==================================================================================================================================
Name and                  Year           Salary             Bonus          Other Annual            Restricted        Securities
Principal                                ($)                ($)            Compensation            Stock             Underlying
Position                                                                   ($)                     Award(s)          Options/
                                                                                                   ($)               SARs (#)
----------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>            <C>                <C>            <C>                     <C>               <C>
                          1992           0                  0              0                       0                 0
                        ----------------------------------------------------------------------------------------------------------
Robert Beaton,            1993           0                  0              0                       0                 0
President
                        ----------------------------------------------------------------------------------------------------------
                          1994           9,200*             0              0                       0                 0
                                         **
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                          1992           0                  0              0                       0                 0
                        ----------------------------------------------------------------------------------------------------------
James Poulos,             1993           0                  0              0                       0                 0
Secretary
                        ----------------------------------------------------------------------------------------------------------
                          1994           3,000*             0              0                       0                 0
                                         **
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                          1992           0                  0              0                       0                 0
                        ----------------------------------------------------------------------------------------------------------
Michael                   1993           0                  0              0                       0                 0
Schranz,
Vice
President
                        ----------------------------------------------------------------------------------------------------------
                          1994           0**                0              0                       0                 0
===================================================================================================================================
</TABLE>


* Designates unpaid accruals for management services.

**  Restricted  common  stock shares  totalling  47,600,000  were issued for the
unpaid accruals for services and forgiveness of debt.(See "Certain Relationships
and Related  Transactions")  The shares had no market  value and a negative  net
tangible book value at the time of the award.

     Option/SAR Grants Table (None)

     Aggregated  Option/SAR  Exercises in Last Fiscal Year an FY-End  Option/SAR
value (None)

     Long Term Incentive Plans - Awards in Last Fiscal Year (None)




<PAGE>

<TABLE>
<CAPTION>


                   DIRECTOR COMPENSATION FOR LAST FISCAL YEAR

(Except for  compensation of Officers who are also Directors which  Compensation
is listed in Summary Compensation Table of Executives)

                                    Cash Compensation                                           Security Grants
==================================================================================================================================
Name                               Annual               Meeting             Consulting               Number          Number of
                                   Retainer             Fees ($)            Fees/Other               of              Securities
                                   Fees ($)                                 Fees ($)                 Shares          Underlying
                                                                                                     (#)             Options/SARs
                                                                                                                     (#)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                  <C>                 <C>                      <C>             <C>
A. Director                        0                    0                   0                        0               0
Robert Beaton
----------------------------------------------------------------------------------------------------------------------------------
B. Director                        0                    0                   0                        0               0
James Poulos
----------------------------------------------------------------------------------------------------------------------------------
C. Director                        0                    0                   0                        0               0
Michael Schranz
==================================================================================================================================


</TABLE>

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

     The following table sets forth  information,  as of December 31, 1994, with
respect to the  beneficial  ownership of the Company's no par value common stock
by each person known by the Company to be the beneficial owner of more than five
percent of the  outstanding  common stock.  

<TABLE>
<CAPTION>

                                                            Amount and
                                                             Nature of
Stock             Names and Address                          Beneficial            Percent 
Title of Class    of Beneficial Owner                        Ownership            of Class
--------------    -------------------                        ---------            --------

<S>            <C>                                            <C>                   <C> 
Common        American International                          1,185,700              2.3%*
              Systems, Inc.                                  (see note 1)
              12002 W. 14th Avenue                           (see note 2)
              Golden, CO  80401
              (Note 1:  Robert  Beaton  owns  44% of the
                        shares  of  American   International
                        Systems, Inc.)

Common        Robert Beaton                                   28,500,000              57%*
              12002 W. 14th Avenue
              Golden, CO  80401

Common        James Poulos                                    19,000,000              38%
              4065 Easley Rd.
              Golden, CO  80403
              (Note 2:  James Poulos owns 15.95% of American
              International Systems, Inc. which if combined
              with his personal holding, would result in
              40.3% ownership)

* combined 59.3%
</TABLE>


<PAGE>




     Security Ownership of Certain Beneficial Owners and
     Management (Continued)

     The following table sets forth  information,  as of December 31, 1994, with
respect to the  beneficial  ownership of the Company's no par value common stock
by the directors and officers of the Company,  both individually and as a group.
<TABLE>
<CAPTION>

                                                            Amount and
                                                             Nature of
Stock             Names and Address                          Beneficial            Percent 
Title of Class    of Beneficial Owner                        Ownership            of Class
--------------    -------------------                        ---------            --------

<S>               <C>                                        <C>                    <C>    
Common            Robert Beaton, Pres. & Dir.
                  as 44% shareholder of
                  American International                      1,185,700             2.3%*
                  Systems, Inc.
                  12002 W. 14th Avenue
                  Golden, CO  80401
                  (Note 1:  Robert  Beaton  owns  44% of the
                  shares  of  American   International
                  Systems, Inc.)

Common            Robert Beaton, Pres & Dir.                  28,500,000             57%*
                  12002 W. 14th Avenue
                  Golden, CO  80401

Common            James Poulos, Secy. & Dir.                  19,000,000             38%
                  4065 Easley Rd.
                  Golden, CO  80403
                  (Note 2: James Poulos owns 15.95% of American
                  International Systems, Inc. which if combined
                  with his personal holding, would result in
                  40.3% ownership)

Common            Michael Schranz, V.P. & Dir.                    244,254             .5%
                  **
                  410 17th Street, Ste. 1940
                  Denver, CO  80202


* combined 59.3%
** through Capital One and Polaris Resources of which he is a control party.

                  Officers and Directors as a group                                 97.3%
</TABLE>


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

     The Company agreed to and did issue shares to certain  officers,  directors
and  shareholders  as  compensation  and for  forgiveness  of certain claims for
services rendered as follows:

     a.   Robert M.  Beaton & James F.  Poulos  for wages  accrued  from 1987 to
          1994;


<PAGE>

          i.   Robert M. Beaton:  28.5 million  shares for $750 value and waiver
               of all other amounts;

          ii.  James F. Poulos:  19 million  shares for $500 value and waiver of
               all other amounts

          iii. Michael  Schranz was issued 100,000 shares for services  rendered
               as an officer.

     
                                     PART IV

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

          The following documents are filed as part of this report:

          1.  Reports on Form 8-K: None

          2.  Exhibits:
                                                                Form 10-K
Regulation                                                      Consecutive
S-K Number               Exhibit                                Page Number
----------               -------                                -----------

3.1               Articles of Incorporation         * Incorporated by reference
                                                      to Registration Statement
                                                      #2-87742-D
                    
3.3               Bylaws                            * Incorporated by reference
                                                      to Registration Statement
                                                      #2-87742-D

27.1              Financial Data Schedule             13-16





<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.

                                            LEESBURG LAND & MINING, INC.
                                            ------------------------------------
                                            (Registrant)

Date: October 31, 1996                       /S/  ROBERT BEATON
                                            ------------------------------------
                                             President, Chief Executive Officer


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

                                            LEESBURG LAND & MINING, INC.
                                            (Registrant)

Date:  October 31, 1996
                                            /S/  ROBERT BEATON
                                            ------------------------------------
                                            Director

                                            /S/  MICHAEL SCHRANZ
                                            ------------------------------------
                                            Director

                                            /S/  JAMES POULOS
                                            ------------------------------------
                                            Director



<PAGE>


                                    CONTENTS





                                                                     Page
                                                                     ----

Independent Auditors' Report                                           1

Financial Statements:

      Balance Sheets                                                   2

      Statements of Operations                                         3

      Statements of Stockholders' Equity                               4

      Statements of Cash Flows                                       5 - 6

Notes to Financial Statements                                        7 - 13




<PAGE>


                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Leesburg Land & Mining, Inc.
Golden, Colorado

We have audited the accompanying  balance sheets of Leesburg Land & Mining, Inc.
(a development  stage company) as of December 31, 1994 and 1993, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended.  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  financial  statements  of Leesburg Land &
Mining,  Inc.  (a  development  stage  company)  for the  period  June 21,  1983
(Inception)  to December 31, 1985 were audited by other  auditors,  whose report
dated April 11, 1986 on those statements  included  explanatory  paragraphs that
questioned the Company's ability to continue as a going concern.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Leesburg Land & Mining, Inc. (a
development  stage company) as of December 31, 1994 and 1993, and the results of
its  operations  and cash flows for the years then  ended,  in  conformity  with
generally accepted accounting principles.

As described in Note 1 to the financial statements,  the accompanying  financial
statements have been prepared assuming that the Company will continue as a going
concern.  As  shown  in the  financial  statements,  the  Company  has  incurred
cumulative  net losses of  $4,144,692  since  inception.  At December  31, 1994,
liabilities  exceeded assets by $64,151.  These factors raise  substantial doubt
about the  Company's  ability to  continue  as a going  concern.  The  financial
statements do not include any adjustments  that might result from the outcome of
the above uncertainties.

In addition,  Notes 1, 2 and 3 to the financial statements describe management's
elimination  of  certain  payables  based on the  expiration  of the  statute of
limitations pursuant to legal opinions from the Company's attorneys.


                           HOLBEN, BOAK, COOPER & CO.

March 18, 1996
Denver, Colorado
                                                                       Page F-1

<PAGE>

                       LEESBURG LAND AND MINING CO., INC.
                           (A Development Stage Company)
                                  BALANCE SHEET
                           DECEMBER 31, 1994 AND 1993

                                                  1994               1993
                                               ---------           --------
 ASSETS

 CURRENT ASSETS:
    Cash                                       $      -            $ 2,159
    Accounts Receivable                               -             17,300
                                               ---------          --------
    TOTAL CURRENT ASSETS                                            19,459

 PROPERTY AND EQUIPMENT
    Vehicle                                    20,818              20,818
    Less:  Accumulated Depreciation           (20,818)            (20,818)
                                              --------           --------
    TOTAL PROPERTY AND EQUIPMENT                    -                   -
                                              --------           --------

 TOTAL ASSETS                                $      -            $  19,459
                                             =========           =========


 LIABILTIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 CURRENT LIABILITIES:
   Accounts Payable (Note 3)                 $  39,517           $  33,787
   Accounts Payable to officers  (Note 6)            -             108,151
   Interest Payable (Note 3)                    24,634              89,580
                                             ---------           ---------
   TOTAL CURRENT LIABILITIES                    64,151             231,518

 NOTE PAYABLE (Note 2)                               -              62,386
                                             ---------           ---------

 TOTAL LIABILITIES                              64,151             293,904

 STOCKHOLDERS' EQUITY (DEFICIT):
   Preferred stock, 1,000,000 shares of
     no par value authorized, none issued
   Common Stock, No Par Value;
       Authorized, 100,000,000 Shares;
         Issued and Outstanding, 49,976,317
         Shares in 1994 and 2,476,317 shares
         in 1993                              4,080,541          3,820,378

   (Deficit) Accumulated During the
      Development Stage                      (4,144,692)        (4,094,823)
                                              ---------          ---------

    TOTAL STOCKHOLDERS' EQUITY (DEFICIT)        (64,151)          (274,445)
                                              ---------          ---------

 TOTAL LIABILITIES AND STOCKHOLDERS'
      EQUITY (DEFICIT)                        $       -          $  19,459
                                              =========          =========

See notes to financial statements                                      Page F-2



<PAGE>


                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                             STATEMENT OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
       AND FROM JUNE 21, 1983 (INCEPTION) TO DECEMBER 31, 1994 (Unaudited)


<TABLE>
<CAPTION>
                                            Cumulative
                                              During
                                         Development Stage
                                             Unaudited)              1994                1993
                                        -------------------        --------            --------
<S>                                        <C>                      <C>                <C>

REVENUE:
   Interest Income                           $  92,753             $      -            $       -
   Geo Contract                                 90,000                    -                    -
   Equipment Rental Income                      13,500
   Miscellaneous Income                         14,014                 2,883               6,834
                                             ---------             ---------           ---------
      TOTAL REVENUES                           210,267                 2,883               6,834


EXPENSES:
   Exploration Costs                           867,048                     -                   -
   General & Administrative                  1,203,475                28,072              13,685
   Interest Expense                            424,667                14,680              59,283
   Depreciation Expense                        790,967                     -                   -
   Abandonment of Claims and leases            626,637                     -                   -
   Loss - Sale of Mining Equipment             287,173                     -                   -
   Loss - Sale of Polaris Coal Co.             228,000                     -                   -
   Write Down of Mining Equipment              127,664                     -                   -
   Bad debts                                   196,985                     -                   -
   Services contributed by officers             60,000                10,000              30,000
                                              --------              --------            --------

     TOTAL COSTS & EXPENSES                  4,812,616                52,752             102,968
                                             ---------              --------            --------

     NET INCOME (LOSS) BEFORE
       EXTRAORDINARY ITEMS                  (4,602,349)              (49,869)            (96,134)

EXTRAORDINARY ITEM, Reduction of
   payables ( Note 2)                          457,657                     -             457,657
                                             ---------              --------            --------

      NET INCOME (LOSS)                    $(4,144,692)             $(49,869)           $361,523
                                             =========              ========            ========

NET INCOME (LOSS) PER SHARE:
   Income (loss) before
     extraordinary item                    $     (2.15)             $   (.02)           $   (.04)
   Extraordinary item                              .21                     -                 .19


     NET INCOME (LOSS)                     $     (1.94)                 (.02)                .15

WEIGHTED AVERAGE NUMBER
   OF SHARES OUTSTANDING                     2,139,307             2,606,454           2,476,317
                                            ==========            ==========           =========


See notes to financial statements                                                       Page F-3

</TABLE>



<PAGE>

                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
                                  (See Note 4)


<TABLE>
<CAPTION>


                                                                                         (Deficit)
                                                                                        Accumulated
                                                          Common Stock                   During the
                                                 --------------------------------        Development
                                                  Shares                 Amount             Stage                 Total
                                                 ---------             ----------        -----------           ----------
<S>                                              <C>                  <C>                <C>                    <C>
 Balances, December 31, 1992                     2,476,317            $ 3,790,378        $ (4,456,347)         $ (665,969)

    Management services
      contributed by officers                            -                 30,000                   -               30,000

    Net Income
                                                         -                      -             361,524              361,524
                                                  ---------             ---------           ---------             --------
 Balances, December 31, 1993                      2,476,317             3,820,378          (4,094,823)            (274,445)

    Management services
      contributed by officers                             -                10,000                   -               10,000

    Involuntary conversion of
       shareholders' debt                                 -               142,012                   -              142,012

    Debt forgiven by shareholders                         -               106,901                   -              106,901

    Stock issued shareholders
      in exchange for debt at
      $ .00003 per share                         47,500,000                 1,250                   -                1,250

    Net (Loss)                                            -                     -             (49,869)             (49,869)
                                                 ----------            ----------          -----------             -------
 Balances, December 31, 1994                     49,976,317           $ 4,080,541         $(4,144,692)            $(64,151)
                                                 ==========            ==========          ==========             ========










See notes to financial statements                                                                                  Page F-4


</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                           LEESBURG LAND AND MINING CO., INC.
                                             (A Development Stage Company)
                                                STATEMENT OF CASH FLOWS
                                      FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
                           AND FROM JUNE 21, 1983 (INCEPTION) TO DECEMBER 31, 1994 (Unaudited)

                                                                     Cumulative
                                                                        Since
                                                                      Inception
                                                                     (Unaudited)               1994                 1993
                                                                   ----------------        --------------       ------------
<S>                                                                 <C>                     <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                $ (4,144,692)           $ (49,869)            $  361,523
   Items Not Requiring Cash:
       Depreciation                                                      790,967                    -                      -
       Contributed Services                                               60,000               10,000                 30,000
       (Gain) Loss on Disposal of Mining Claims
          and Equipment                                                1,040,147               (2,883)                (6,834)
       Other                                                             (11,307)                   -                      -
       Contingency Recorded as Note Payable                               62,386                    -                      -
       Loss on Investment in Polaris                                     228,000                    -                      -
       Additional Payables Transfered to Equity                          187,777              187,777                      -
       (Increase) Decrease in Accounts Receivable
                                                                               -               17,300                (17,300)
       Increase  (Decrease) in Accounts Payable                           64,151             (167,367)              (413,283)
                                                                       ---------            ---------              ---------
          Cash provided (used) by operating activities                (1,722,571)              (5,042)               (45,894)


CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of Mining Claims                                             (72,301)                   -                      -
   Purchase of Vehicles                                                 (103,614)                   -                      -
   Purchase of Mining Equipment                                       (1,319,676)                   -                      -
   Purchase of Other Equipment                                            (9,996)                   -                      -
   Purchase of Polaris Coal Company                                       (6,500)                   -                      -
   Proceeds - Sale of Mining Equipment                                   247,910                2,883                 44,700
                                                                      ----------            ---------              ---------
          Cash provided (used) by investing activities                (1,264,177)               2,883                 44,700
                                                                      ----------            ---------              ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Note Payable Payments                                                (110,130)                   -                      -
   Proceeds from  Sale of Common Stock and
     Warrants, net of Registration Costs                               3,111,194                    -                      -
   Purchase of Treasury Stock
                                                                         (14,316)                   -                      -
                                                                      ----------            ---------              ---------
                                                                       2,986,748                    -                      -
                                                                      ----------            ---------              ---------

Increase (Decrease) in Cash & Cash Equivalents                                 -               (2,159)                (1,194)


Cash & Cash Equivalents - Beginning of Year                                    -                2,159                  3,353
                                                                      ----------            ---------              ---------

Cash & Cash Equivalents - End of Year                                 $        -            $       -              $   2,159
                                                                      ==========            =========              =========




                                                 (Statement Continues)



See notes to financial statements                                                                                    Page F-5


</TABLE>

<PAGE>


                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                             STATEMENT OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
       AND FROM JUNE 21, 1983 (INCEPTION) TO DECEMBER 31, 1994 (Unaudited)
                                   (Continued)


Non-Cash Activities
-------------------

Capital transactions
--------------------

During 1994, officers  contributed $108,151 to the Company, for amounts due them
for past services, $1,250 of which was exchanged for 47,500,000 shares of common
stock.  Also during 1994,  the Company  unilaterally  eliminated  principal  and
interest payable of $142,012 and transferred the amount to equity (see Note 4).

Mining claims
-------------

In 1983, the Company  acquired  claims valued at  approximately  $2,000,000 from
certain  stockholders in exchange for debt and common stock. In 1984, the claims
were returned and the debt  terminated.  The common stock  (525,000  shares) was
retained by the stockholders.

Polaris Resources, Inc.
-----------------------

In 1985,  the Company  acquired all of the  outstanding  common stock of Polaris
Coal  Company  ("Polaris")  in exchange  for 750,000  shares of its common stock
(valued at $293,500),  assumption $1,200,000 of Polaris debt and $6,500 in cash.
Later in 1985,  the  Company  sold the stock of  Polaris  back to the  seller in
exchange for  cancellation  of the $1,200,000 debt and forgiveness of $53,000 in
interest. The Company's common stock was retained by the original seller and the
Company realized a loss of $228,000 on the sale.








                                                                       Page F-6

<PAGE>

                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1994 and 1993


Note 1  -  Operations and Summary of Significant Accounting Principles

          Leesburg  Land &  Mining,  Inc.  (the  "Company"  or  "Leesburg")  was
          incorporated  on June 21,  1983.  From June 21,  1983  (Inception)  to
          December 31, 1984,  the Company was engaged in the  exploitation  of a
          gold placer claim located near Salmon, Idaho. As of December 31, 1984,
          the Company's only mining claim was abandoned. Pursuant to a change in
          control  of the  Company  in April  1985,  the  Company  purchased  an
          interest in a coal company.  The Company sold its interest in the coal
          company in November 1985. In December 1985, the Company entered into a
          contract with a  non-affiliated  partnership  to complete a geothermal
          well, construct a power plant and assist in obtaining needed financing
          on a fixed-price  basis. The geothermal well was plugged and abandoned
          in 1986 when the  underground  resource  was  deemed  inadequate.  The
          Partnership failed to make payments to the Company under the contract.
          The Company has never  derived  significant  revenues  from any of its
          attempted operations.

          In  1987,  the  Company  filed  for  a  Chapter  11  bankruptcy,   but
          voluntarily  withdrew the filing in 1988.  Since 1988, the Company has
          been selling its claims,  property  and  equipment.  In addition,  the
          Company  has been  eliminating  its debt (Notes 2 and 3) and seeking a
          private  company  with  which  to  merge.  No such  company  has  been
          identified or found.

          The accompanying financial statements have been prepared assuming that
          the Company will continue as a going concern. However, the Company has
          incurred  cumulative  net losses of  $4,144,692  since  inception.  At
          December  31,  1994,   liabilities  exceeded  assets  by  $64,151.  In
          addition, the Company has recently eliminated amounts due to creditors
          based on the tolling of the statute of  limitations.  As  described in
          Notes 2 and 3, the statue of limitations  does not preclude  creditors
          from threatening or bringing litigation, which would be costly for the
          Company to defend. In view of these matters, the future of the Company
          is dependent upon management's ability to find a company with which to
          merge and a favorable  final  outcome  regarding  the  elimination  of
          debts.

          Property and equipment
          ----------------------

          Property  and  equipment  are  stated  at cost  and  depreciated  on a
          straight line basis over the  estimated  useful lives of the asset (10
          years for mining equipment,  4-7 years for vehicles and 5-10 years for
          furniture  and  fixtures).  Maintenance  and repairs  are  expensed as
          incurred.  When  assets  are sold or  retired,  the  cost and  related
          accumulated   depreciation  is  removed  from  the  accounts  and  the
          resulting gain or loss is included as income.  As of December 31, 1993
          all  of  the  mining  equipment  had  been  sold  and  the  costs  and
          accumulated depreciation had been written off against the sales price.
          The remaining asset on the balance sheet at December 31, 1994 and 1993
          has been fully depreciated.


                                                                       Page F-7
<PAGE>

                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1994 and 1993
                                   (CONTINUED)


Note 1  -  Operations and Summary of Significant Accounting Principles
           (Continued)

          Statement of cash flows
          -----------------------

          For statement of cash flows purposes, the Company considers short-term
          investments  with  original  maturities  of three months or less to be
          cash equivalents.

          Earnings per common share
          -------------------------

          Net income or (loss) per common share is based on the weighted average
          number of  shares  of common  stock  outstanding  during  the  periods
          presented.   The   cumulative   weighted   average  number  of  shares
          outstanding do not include shares issued to a Belgian company and then
          later rescinded and canceled by the Company (Note 4).

Note 2 -  Accounts Payable

          In  1985,  the  Company  contracted  to  drill a  geothermal  well and
          construct  a power plant in central  Nevada.  In 1986,  the  Company's
          consulting  engineer determined that the well was unsuccessful and, as
          a result of the Partnership's  failure to pay the Company, the Company
          did not have cash to pay its own creditors,  most of whom had supplied
          services and supplies  connected with the well. The payables  amounted
          to  approximately  $277,000.  In 1987, the Company filed to reorganize
          under  Chapter  11  of  the  Bankruptcy  Code,  listing  approximately
          $330,000 as payable to  creditors.  In 1988,  the Company  voluntarily
          withdrew  the  bankruptcy  filing,   without  having  yet  repaid  the
          creditors.  The only  creditor to reduce its  receivable to a note and
          judgment was Halliburton Energy Services ("Halliburton").  The Company
          made several  payments on this debt, but interest  continued to accrue
          through 1993 after which an agreement on settlement was reached.

          At December 31, 1993, on the advice of Counsel, the Company eliminated
          a substantial  amount of accounts payable and reported  $457,657 as an
          extraordinary  gain.  The  Company,  based on the  advice of its legal
          counsel,  determined  that the claims of these  creditors were outside
          the time  limitations  of the  statutes of the States of Colorado  and
          Nevada for causes of action most likely to be pled by such  creditors.
          The statute  expired for these claims in December  1993.  As a result,
          management and its attorney believe that the Company would most likely
          have a defense  that would be  reasonably  based upon fact and law and
          that the probability of these creditors successfully overcoming such a
          defense is substantially  remote. It is not impossible that a creditor
          could seek a  jurisdiction  other that  Colorado or Nevada in which to
          commence  collection and the Company would then be forced to defend or
          compromise  such claim at some  expense.  Legal Counsel to the Company
          has opined that the chance of such successful litigation by a creditor
          is substantially remote, although such an outcome cannot be absolutely
          determined with certainty at this time.

                                                                       Page F-8

<PAGE>

                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1994 and 1993
                                   (CONTINUED)


Note 2 -  Accounts Payable (continued)

          In late 1994, the Company reopened  negotiations with  Halliburton,  a
          creditor.  The  Company  and  Halliburton  agreed to a  settlement  of
          approximately  $15,000  in  early  1995.  Since  that  settlement  was
          substantially  less than the amount plus  interest  then recorded as a
          liability, the Company ceased to accrue interest. In January 1996, the
          Company  settled its debt to  Halliburton by paying  $14,000.  At that
          time, the Company will recognize $38,620, the amount of debt forgiven,
          as extraordinary income.

Note 3  -  Notes Payable

          In 1986,  the Company sold  128,000  shares of its common stock to Rio
          Delta Land Company  ("Rio  Delta").  The Company  planned to work in a
          venture with Rio Delta to develop a mining property. However, in 1987,
          after  expending  approximately  $70,000 on the  project,  the Company
          terminated  the  venture  with Rio Delta  and  agreed to pay Rio Delta
          approximately  $60,000  plus  interest in  exchange  for return of the
          common stock issued to Rio Delta. The Company never received its stock
          from Rio Delta but  nonetheless  maintained the debt on its books as a
          contingency  despite the fact that legally  there may be a valid claim
          against the Company.  The Company has unsuccessfully  tried to contact
          Rio Delta and its  controlling  shareholder  to  resolve  the  matter.
          Interest was accrued at 12% per annum from 1987  through  December 31,
          1994 and amounted to approximately approximately $80,000.

          As of December 31, 1994, the Company, based on the advice of its legal
          counsel,  determined  that any  claim by Rio  Delta,  if  valid,  lies
          outside the time  limitations  of the  statutes of the  limitation  of
          Colorado and Nevada.  The Company  believes  that it would most likely
          have a defense  that would be  reasonably  based upon fact and law and
          that the probability of this creditor  successfully  overcoming such a
          defense is  substantially  remote.  The statute of  limitations is six
          years on the debt due to Rio  Delta,  and that  limitation  expired in
          December,  1994. As a result of the above  determination,  on December
          31, 1994, the Company wrote off the principal,  plus accrued  interest
          and  estimated  legal  expenses,  totaling  $142,012,  to equity.  The
          128,000  shares of common  stock  sold to Rio Delta  currently  remain
          issued and outstanding.

          It is not impossible  that a creditor could seek a jurisdiction  other
          than  Colorado  or  Nevada  in which to  commence  collection  and the
          Company  would  then be forced to defend or  compromise  such claim at
          some  expense.  Legal Counsel to the Company has opined that chance of
          such successful  litigation by this creditor is substantially  remote,
          although  such  an  outcome  cannot  be  absolutely   determined  with
          certainty at this time.

                                                                       Page F-9

<PAGE>
   
                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1994 and 1993
                                   (CONTINUED)


Note 4 -  Stockholders' Equity

          The  Company  amended  its  Articles of  Incorporation  authorize  the
          issuance of 1,000,000 shares of preferred stock with no par value. The
          preferred stock may be issued from time to time with such designation,
          rights,  preferences  and  limitations  as the Board of Directors  may
          determine  by  resolution.  As of  September  30,  1994,  no shares of
          preferred stock have been issued.

          The Company has been in the  development  stage since its inception in
          1983 and the stockholders'  equity transactions from inception through
          December  31,  1992  are  summarized  in  the  schedule   below.   The
          transactions  in that  schedule  from  January 1, 1986 to December 31,
          1992 have not been audited.

<TABLE>
<CAPTION>
                                                                Common Stock               
                                                          --------------------------       Cumulative
                                                             Shares          Amount        (Deficit)
                                                          -----------     ----------       ----------
            <S>                                            <C>              <C>             <C>    

               Initial stockholder private
                  placements for cash                       329,167       $  492,500        $        -
               Issuance of common stock
                  for mining claims                         525,000          380,000                 -
               Public offering, net of offering costs       750,000        2,490,594                 -
               Issuance of common stock warrants                  -              100                 -
               Retirement of treasury stock                  (6,250)         (14,316)                -
               Issuance of common stock for
                  Polaris Coal Company                      750,000          293,500                 -
               Net (losses) Inception to
                  December 31, 1985                               -                -        (2,945,073)
                                                          ---------       ----------        ----------
               Balances,
                  December 31, 1985 (Audited)             2,348,317        3,642,378        (2,945,073)

               Issuance of common stock for cash            128,000          128,000                 -
               Services contributed by shareholders               -           20,000                 -
               Net (losses), January 1, 1986
                  to December 31, 1992                            -                -        (1,511,274)
                                                          ---------       ----------        ----------
          
               Balances,
                  December 31, 1992 (Unaudited)           2,476,317       $3,790,378       $(4,456,347)
                                                          =========       ==========       ===========



                                                                                             Page F-10


</TABLE>


<PAGE>
   
                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1994 and 1993
                                   (CONTINUED)


Note 4 -  Stockholders' Equity (continued)

          In 1989,  the Company sold  2,500,000  shares of the Company's  common
          stock to a  Belgian  company,  N.V.  Handels-Kreditkantoor/Comtoir  de
          Credit s.a.  ("HKCC") in exchange for  7,500,000  fine art prints.  In
          addition,  the  Company  issued  650,000  shares to Asher  Investments
          Limited  ("Asher") as a finder's fee. As part of the sales  agreement,
          HKCC  agreed to loan the  Company  $300,000.  The  Company  valued the
          combined transaction at $2,520,000.  However, HKCC never delivered the
          prints or made the loan. As a result, in 1990, the Company  negotiated
          the recission of the stock  issuance.  Since the transaction was never
          fully  executed,  it has not been included in the schedule above or in
          calculation of weighted  average shares  outstanding  for  determining
          earnings  (loss) per share.  The stock  transfer  agent  canceled  the
          outstanding shares in 1994.

          The  Company's  officers  contributed  management  services  valued at
          $30,000 and $10,000 during 1993 and 1994,  respectively.  During 1994,
          The President waived $62,618 owed to him for past services rendered in
          exchange  for  28,500,000  shares of common  stock for which  $750 was
          deemed  consideration.  During 1994, the Vice President waived $45,532
          owed to him for past  services  rendered  in exchange  for  19,000,000
          shares of common stock for which $500 was deemed consideration.  These
          transactions were authorized by the Board of Directors and the amounts
          were credited to stockholders' equity.

          Also during 1994, the Company  unilaterally  transferred  the debt and
          accrued  interest owed to Rio Delta,  a major  shareholder,  to equity
          (see Note 3). The  principal  and  interest  totaled  $142,012 and was
          transferred  after the time  period  for the  statute  of  limitations
          expired.

Note 5  -  Income taxes

          At December 31, 1993, the Company has approximately  $3,628,865 of net
          operating  loss and  $20,000 of  investment  tax  credit  carryforward
          available  to  offset  the  future  federal  taxable  income.  If  not
          utilized, the carryforwards will expire beginning in 1999.

          The Company adopted  Statement of Financial  Accounting  Standards No.
          109,  "Accounting for Income Taxes",  as of January 1, 1993. There was
          no material  cumulative effect of this change in accounting for income
          taxes as of January 1, 1993. At December 31, 1994, the Company had net
          operating   loss   ("NOL")   carry-forwards   for  tax   purposes   of
          approximately  $3,647,884  (expiring  in the years  1999 to 2013).  In
          addition,  the Company had tax credit  carry-forwards of approximately
          $20,000 (expiring in the years 1999 to 2000).


                                                                      Page F-11

<PAGE>

                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1994 and 1993
                                   (CONTINUED)


Note 5  -  Income taxes (continued)

          Deferred tax assets (liabilities) at December 31, 1994 and 1993 are as
          follows:
                            
                                                     1994              1993
                                                  ---------         ---------


               Deferred tax assets due to:
                 Payables                         $    9,922         $   88,430
                 Receivables                               -              2,595
                 Net operating loss 
                     carry-forward                 1,405,925          1,398,507
                                                   ---------          ---------
                                                   1,415,847          1,489,532

               Valuation allowance for
                     deferred tax assets          (1,415,847)        (1,489,532)
                                                  ----------         ----------
                     Net deferred tax asset       $        -          $       -
                                                  ==========          ========= 
                           


          Deferred income taxes are recorded to reflect the tax  consequences on
          future  years of  differences  between  the tax  basis of  assets  and
          liabilities  and their financial  reporting  amounts at each year end.
          Deferred   income  tax  assets  are   recorded   to  reflect  the  tax
          consequences  on future  years of income tax  carry-forward  benefits,
          reduced by benefit amounts not expected to be realized by the Company.

          The components of income tax expenses for the years ended December 31,
          1994 and 1993 are as follows:


               Current tax liability                $       -        $  124,243
               Benefits of net operating
                 loss carryforward                          -          (124,243)
               Deferred                                     -                 -
                                                    ---------       -----------

               Net income tax expense               $       -        $        -
                                                    =========        ==========
              
                      


                                                                      Page F-12

<PAGE>
                                                           
                       LEESBURG LAND AND MINING CO., INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1994 and 1993
                                   (CONTINUED)


Note 5  - Income taxes (continued)

          The  effective  income tax rate  applicable  to the current  provision
          before applying the tax  carry-forward  benefit was 0% and 34% for the
          years ended December 31, 1994 and 1993, respectively.


Note 6 -  Related party transactions

          The Company  utilizes  office  space  provided  free by an officer and
          shareholder.  The Company  provides an automobile for the  president's
          use. In prior years,  the Company paid for the  vehicle's  maintenance
          and  operating  costs.  The  president  currently  pays for all of the
          vehicle's   maintenance  and  operating   costs.   The  officers  have
          contributed  management  services to the Company without  compensation
          (Note 4). In 1994,  the Company's  officers  contributed  past amounts
          owed to them in  exchange  for a  substantial  number of shares of the
          Company's common stock (Note 4).

Note 7 -  Subsequent events

          In 1995 and 1996,  the  Company's  president  personally  borrowed and
          loaned  approximately  $20,000  to the  Company.  The Loan is due upon
          demand  and  bears  interest  at  8%  per  annum.   The  Company  used
          approximately  $5,000 of the loan to pay legal and accounting fees and
          approximately $14,000 to settle the debt owed to Halliburton.

          As of December  31, 1995,  the Company  issued  2,500,000  shares to a
          shareholder  and member of the board of directors in exchange for $100
          of management services.


                                                                      Page F-13