U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


(Mark One)
[x]         ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                        For The Fiscal Year Ended: September 30, 1998

                                       or

[ ]         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934





For the transition period from                   to

                          Commission file number 0-730

                            PENN-PACIFIC CORPORATION
                 (Name of small business issuer in its charter)



         Delaware                                            95-3227748
State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization                            Identification No.)


               3539 Ocean View Blvd., Glendale, CA 91208
               (Address of principal executive offices)(Zip code)

                    Issuer's telephone number (818) 957-1414


Securities registered under Section 12(b) of the Act:     NONE

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

                           Common Stock Par Value $.10
                                (Title of Class)


                                        1

<PAGE>



     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing required for the past 90 days. Yes No X

                                                                 Total pages: 12
                                                          Exhibit Index Page: 11



     Check if there is no 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. [X]

     State issuer's revenues for its most recent fiscal year: None


     To the best  knowledge and belief of management  there has been no trading,
therefore the aggregate market value is not known.


                       DOCUMENTS INCORPORATED BY REFERENCE

     If the following documents are incorporated by reference,  briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):

     None

     Transitional Small Business Disclosure Format (check one): Yes NO X














                                        2

<PAGE>



                                TABLE OF CONTENTS


Item Number and Caption                                                     Page

PART I

Item 1.     Description of Business........................................   4

Item 2.     Description of Property........................................   4

Item 3.     Legal Proceedings..............................................   4

Item 4.     Submission of Matters to a Vote of Security Holders............   5

PART II

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

Item 6.     Management's Discussion and Analysis or Plan of Operations.....   6

Item 7.     Financial Statements...........................................   8

Item 8.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure...........................................   8

PART III

Item  9.    Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act..............   8

Item 10.    Executive Compensation.........................................   9

Item 11.    Security Ownership of Certain Beneficial Owners and Management.   9

Item 12.    Certain Relationships and Related Transactions.................  10

Item 13.    Exhibits and Reports on form 8-K...............................  11








                                        3

<PAGE>



                                     PART I



                         ITEM I DESCRIPTION OF BUSINESS


General

     The Company intends to acquire interests in various business opportunities,
which in the opinion of management will provide a profit to the Company.


History

     The Company was incorporated under the laws of the state of Delaware on May
18,  1971.  From  1979 to 1991 the  primary  business  of Penn  Pacific  and its
subsidiaries  was the  acquisition,  exploration,  development,  production  and
operation of oil and gas properties.  Penn Pacific has been inactive since 1991.
The Company filed a voluntary petition of reorganization under Chapter 11 of the
United  States  Bankruptcy  Code on January 27, 1994.  On January 13, 1997,  the
Company emerged from bankruptcy  pursuant to a final decree of the United States
Bankruptcy  Court for the Northern  District of Oklahoma.  The Company is in the
development stage since January 13, 1997 and has not commenced planned principal
operations.



                         ITEM 2 DESCRIPTION OF PROPERTY


     The Company at this time has no  properties.  As of September  30, 1998 and
1997 all  activities  of the Company have been  conducted by corporate  officers
from either their homes or business offices. Currently, there are no outstanding
debts  owed by the  company  for the use of these  facilities  and  there are no
commitments for future use of the facilities.



                            ITEM 3 LEGAL PROCEEDINGS


     The Company is not presently involved in any legal proceedings.






                                        4

<PAGE>




                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS



     No Matters  were  submitted to a vote of security  holders  during the last
quarter of the fiscal year ended September 31, 1998



                                     PART II


                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS



     The stock is traded on the Internet with the trading  symbol  "PENNC".  The
following high and low bid information was provided by NIPHIX  Investments  Inc.
The quotations  provided reflect  inter-dealer  prices,  without retail mark-up,
mark-down or commission and may not represent actual transactions.


          1998                  HIGH BID                LOW BID
                                  (To the best knowledge of
                                   management, there was no
                                   trading of shares for fiscal
                                   1998 and 1997.)


     The number of  shareholders  of record of the Company's  common stock as of
May 14, 1999 was approximately 6607.

     The Company has not paid any cash dividends to date and does not anticipate
paying  dividends  in the  foreseeable  future.  It is the present  intention of
management to utilize all available  funds for the  development of the Company's
business.

Recent Sales of Unregistered Securities.

     The Company over the past three years has sold  3,750,000  shares of common
stock.  The stock was not sold through an underwriter and was not sold through a
public offer. A summary of the transactions follows:

                                        5

<PAGE>




                                                             Common Stock
                                                        ------------------------
                                                          Shares        Amount
                                                        ----------    ----------
November 11, 1995 shares issued
   to an officer/director for services at
   $0.10 per share                                      $  200,000    $   20,000
October 1, 1996 shares issued
   to officers/directors for services at
   $0.10 per share                                       2,850,000       285,000
December 19, 1996 shares issued
   to officers/directors for promissory notes at
   $0.10 per share                                         500,000        50,000
April 17, 1997 shares issued
   to officers/directors for cash at
   $0.01 per share                                         200,000         2,000
Total                                                   $3,750,000    $  357,000

     These sales are exempt under Regulation D Rule 506 of the Securities Act of
1933.



                       ITEM 6 MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OR PLAN OF OPERATIONS


Plan of Operations

     The planned operations of the company during the next twelve months
are as follows:

     The Company intends to seek an acquisition of a larger and potentially more
profitable  business.  The Company intends to focus on  opportunities to acquire
new products or technologies in development as well as those currently  planned,
including a complete operating  business that has demonstrated  long-term growth
potential,   strong   marketing   presence,   and  the  basis   for   continuing
profitability.  The Company has not identified  any specific  target or possible
acquisition. As the Company pursues its acquisition program, it will incur costs
for ongoing  general  and  administrative  expenses as well as for  identifying,
investigating, and negotiating a possible acquisition.

Results of Operations - The Company filed a voluntary petition of reorganization
under  Chapter 11 of the United States  Bankruptcy  Code on January 27, 1994. On
January 13, 1997, the Company emerged from bankruptcy pursuant to a final decree
of the United States Bankruptcy Court for the Northern District of Oklahoma. The
Company is in the development stage since January 13, 1997 and has not commenced
planned principal operations.

Liquidity  and  Capital   Resources  -  The  Company  requires  working  capital
principally  to fund its current  operating  expenses  for which the Company has
relied on short-term  borrowings  and the issuance of  restricted  common stock.
There are no formal commitments from banks or other lending

                                        6

<PAGE>



sources for lines of credit or similar  short-term  borrowings,  but the Company
has been able to borrow any additional  working  capital that has been required.
From time to time in the past, required short-term borrowings have been obtained
from a principal shareholder or other related entities.

     Cash  flows.  Operating  activities  used  cash of  $7,000  for 1997 to pay
Chapter 11 administrative fees. Financing activities provided cash of $7,000 for
1997  from the sale of the  Company's  restricted  stock and  issuance  of notes
payable to stockholders..

     In order to  complete  any  acquisition,  the  Company  may be  required to
supplement  its  available  cash and other  liquid  assets  with  proceeds  from
borrowings,  the sale of additional securities,  including the private placement
of restricted stock and/or a public offering, or other sources.  There can be no
assurance  that  any such  required  additional  funding  will be  available  or
favorable to the Company.

     Because  management  controls  47.68 % of  voting  rights,  management  may
actively  negotiate or otherwise consent to the purchase of any portion of their
common  stock as a  condition  to or in  connection  with a  proposed  merger or
acquisition.  Furthermore,  management  could consent or approve any  particular
stock buy-out  transaction without  shareholder  approval.  In the event that an
appropriate  merger  candidate  is  located,  the  Company  may need to pay cash
finder's  fees or may issue  securities  (debt or  equity) as a  finders's  fee.
Finder's fees or other acquisition related compensation may be paid to officers,
directors,  promoters  or their  affiliates.  Any such  finder's  fee paid to an
officer,  director,  promoter,  or affiliate  may present a conflict of interest
because of the non-arms  length  nature of such  transaction.  There are no such
negotiations in progress or contemplated.

     There  are  no  arrangements  or  understandings   between   non-management
shareholders and management under which non-management shareholders may directly
or  indirectly  participate  in or influence  the  management  of the  Company's
affairs.

     The  Company may be required to  supplement  its  available  cash and other
liquid assets with proceeds from borrowing,  the sale of additional  securities,
or other sources.  There can be no assurance  that any such required  additional
funding will be  available  or, if  available,  that it can be obtained on terms
favorable to the Company.

Year 2000 Compliance

     The Company has made an effort to insure that the  software  components  of
its  information  and billing  systems are Year 2000  compliant.  Management has
confirmed  that  all  of  such  systems  are  Year  2000  compliant.  Upon  such
confirmation,  management believes that, after January 1, 2000, the Company will
be able to accurately track and bill for its services and products.  At the same
time, it is likely that the operations of a number of the Company's vendors rely
on software that is not Year 2000 compliant.



                                        7

<PAGE>




                           ITEM 7 FINANCIAL STATEMENTS


     The financial statements of the Company and supplementary data are included
beginning  immediately  following the signature page to this report. See Item 13
for a  list  of the  financial  statements  and  financial  statement  schedules
included.



              ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE


     There are not and have not been any  disagreements  between the Company and
its accountants on any matter of accounting  principles,  practices or financial
statements disclosure.



                                    PART III


               ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
                CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
                                THE EXCHANGE ACT


Directors and Executive Officers.

Director's Name          Age   Office                          Term of Office



James O'Brien            61    President and CEO/Director      February 23, 1998
Rose Fischer             45    Secretary/Treasurer/Director    February 23, 1998
Robert Dresser           70    Director                        January 1, 1999


Business Experience

James O'Brien, CEO/President,  founded Optimum Source International Ltd., during
the past five  years  Mr.  O'Brien  developed  software,  established  trade and
countertrade exchanges for Optimum Source International, Ltd.


                                        8

<PAGE>



Rose  Fischer,   Secretary/Treasurer/Director,   with  an  associate  degree  in
accounting,  has been Director and  Operations  Facilitator  for Optimum  Source
International,  Ltd. ("OSI") for the past two years, which includes finalization
and  implementation  of all  electronic  commerce.  Prior to OSI, Ms.  Fischer's
experience was as a financial consultant with a privately held firm since 1985.

Robert Dresser,  Director, a former newspaper executive, Mr. Dresser's tenure of
the past 32 plus  years  directing  the  Stockbrokers  Society  int the  leading
organization that assists public corporations  enhancing their visibility in the
financial and investment community.

Compliance With Reporting Requirements.

     Based upon a review of Forms 3, 4, and 5 furnished to the Company during or
with  respect to the  preceding  fiscal  year and written  representations  from
certain  reporting  persons,  the  Company  is not aware of any  failure  by any
reporting  person to make  timely  filings of those forms as required by Section
16(a) of the Securities Exchange Act of 1934.



                         ITEM 10 EXECUTIVE COMPENSATION


There has been no executive compensation.



                 ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
                                 AND MANAGEMENT


Principal Shareholders

     The table below sets forth  information  as to each person owning of record
or who  was  known  by the  Company  to own  beneficially  more  than  5% of the
18,939,054 shares of issued and outstanding  Common Stock,  including options to
acquire  stock  of the  Company  as of May 28,  1998 and  information  as to the
ownership of the Company's Stock by each of its directors and executive officers
and by the  directors  and  executive  officers as a group.  Except as otherwise
indicated,  all shares are owned  directly,  and the persons  named in the table
have  sole  voting  and  investment  power  with  respect  to  shares  shown  as
beneficially owned by them.









                                        9

<PAGE>



                                                       # of
Name and Address                   Nature of           Shares
of Beneficial Owners               Ownership           Owned            Percent
Directors

Principal Shareholders


John Allison                       Common              71,500              7.51
Alpha Beta LLC                     Common              90,945              9.56
Celex-Nevada                       Common              97,750             10.27
Wayne H. Creasy                    Common              66,063              6.94
Edwin K. Hiseroot                  Common              45,250              4.75
George White                       Common              70,500              7.41
                                                      -------             -----
         Total                                        442,008             46.44

Directors and Executive Officers


James O'Brien                      Common              11,860              1.247

All Executive Officers and
Directors as a Group (3
persons)                           Direct             679,514             47.68%
                                   Options               None             None %
          Total                                       679,514             47.68%



             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


     During 1997 various officers and directors  loaned the Company $5,000.  The
notes are payable on demand plus  interest.  During 1998 the note holders agreed
to accept 10,000 pre split shares of common stock in exchange for the debt.  The
balance due as of September 30, 1998 is $-0-.


     As of September  30, 1998 and 1997 all  activities of the Company have been
conducted by  corporate  officers  from either their homes or business  offices.
Currently,  there are no  outstanding  debts owed by the  company for the use of
these facilities and there are no commitments for future use of the facilities.


                                       10

<PAGE>




                   ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K


     (a)  The following documents are filed as part of this report.

1.     Financial Statements                                                Page

Report of Robison, Hill & Co., Independent Certified Public Accountants.....F-1
Balance Sheets
 September 30, 1998, and 1997...............................................F-2
Statements of Operations
  For the Years Ended September 30, 1998, and 1997..........................F-3
Statements of Changes in Stockholders' Equity
  For the Years Ended September 30, 1998, and 1997..........................F-4
Statements of Cash Flows
  For the Years Ended September 30, 1998, and 1997..........................F-5
Notes to Financial Statements
 September 30, 1998 and 1997................................................F-6

2.     Financial Statement Schedules

     All schedules are omitted  because they are not  applicable or the required
information is shown in the financial statements or notes thereto.

3.     Exhibits

     The following exhibits are included as part of this report:

Exhibit
Number           Title of Document

3.01 Articles of Incorporation and Bylaws of the registrant(1)

3.02 Amendments  to Article IV and IX of the  Articles of  Incorporation  of the
     Registrant,  as filed with the  Delaware  Secretary  of State on October 5,
     1988(1)

4    Instruments  defining  the  rights  of  security  holders  (Certificate  of
     Designation of Preferences of Series C preferred  Stock), as filed with the
     Delaware Secretary of State on October 5, 1988(1)

Other

23.01 Consent of Accountants(1)

     (1) Incorporated by Reference

     (b) No reports on Form 8-K were filed.

                                       11

<PAGE>




                                   SIGNATURES


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

                                        PENN-PACIFIC CORPORATION


Dated: May 21, 1999                     By  /S/     James O'Brien
                                        ---------------------------------------
                                        James O'Brien
                                        President and CEO

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 21st day of May 1999.

Signatures                               Title

/S/    James O'Brien
James O'Brien                            President, C.E.O., Director
                                        (Principal Executive, Financial
                                         and Accounting Officer)

/S/    Rose Fischer
Rose Fischer                             Secretary, Treasurer and Director


/S/    Robert Dresser
Robert Dresser                           Director














                                       12

<PAGE>









                          INDEPENDENT AUDITOR'S REPORT


Board of Directors
Penn Pacific Corporation
Glendale, California

Board Members:

     We have audited the accompanying balance sheets of Penn Pacific Corporation
(a  development  Stage  Company),  as of  September  30, 1998 and 1997,  and the
related  statements of operations,  changes in  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.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of Penn Pacific Corporation (a
development Stage Company),  as of December 31, 1998 and 1997 and the results of
its  operations,  and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

                                           Respectfully submitted,



                                           \s\ Robison, Hill & Co.
                                           Certified Public Accountants

Salt Lake City, Utah
May 14, 1999



                                      F - 1

<PAGE>

<TABLE>
<CAPTION>


                            PENN PACIFIC CORPORATION
                          (A Development Stage Company)
                                 BALANCE SHEETS



                                                               September 30,
                                                       ----------------------------
                                                           1998            1997
                                                       ------------    ------------
<S>                                                    <C>             <C>
ASSETS .............................................   $       --      $       --


LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Accounts payable .................................   $     11,523    $       --
  Accrued expenses .................................         11,757           9,036
  Notes payable - stockholders .....................           --             5,000
                                                       ------------    ------------

          Total Liabilities ........................         23,280          14,036
                                                       ------------    ------------

Stockholders' Equity
Preferred stock (par value $1.00), 50,000,000 shares
  authorized, no shares issued at September 30, 1998
  and 1997 .........................................           --              --
Common stock to be issued ..........................          8,154           4,967
Common stock (par value $.10), 100,000,000 shares
  authorized, 951,082 shares issued and outstanding
  September 30, 1998 and 1997 ......................         95,108          95,108
Capital in excess of par value .....................     35,686,105      35,683,105
Retained deficit ...................................    (35,735,361)    (35,735,361)
Deficit accumulated during development stage .......        (77,286)        (61,855)
                                                       ------------    ------------

          Total Stockholders' Equity ...............        (23,280)        (14,036)
                                                       ------------    ------------

          Total Liabilities and Stockholders' Equity   $       --      $       --
                                                       ============    ============




</TABLE>







   The accompanying notes are an integral part of these financial statements.

                                      F - 2

<PAGE>


<TABLE>
<CAPTION>

                            PENN PACIFIC CORPORATION
                          (A Development Stage Company)
                             STATEMENT OF OPERATIONS





                                                                               Cumulative
                                                                                  Since
                                                     For the Year Ended        Inception of
                                                        September 30,          Development
                                                 --------------------------
                                                     1998          1997           Stage
                                                 -----------    -----------    -----------
<S>                                              <C>            <C>            <C>
Revenues .....................................   $      --      $      --      $      --
                                                 -----------    -----------    -----------

Expenses
  Selling, general and administrative expenses        14,020          3,669         17,689
                                                 -----------    -----------    -----------

Operating Loss ...............................       (14,020)        (3,669)       (17,689)

Other income (expense):
   Interest expense ..........................         1,411         50,000         51,411

Reorganization items:
   Administrative fees .......................          --            8,186          8,186
                                                 -----------    -----------    -----------

Loss before taxes ............................       (15,431)       (61,855)       (77,286)
Income taxes .................................          --             --             --
                                                 -----------    -----------    -----------

       Net Loss ..............................   $   (15,431)   $   (61,855)   $   (77,286)
                                                 ===========    ===========    ===========


Per Share Amounts
Net Income (Loss) ............................   $     (0.01)   $     (0.06)
                                                 ===========    ===========

Weighted Average Shares Outstanding ..........     1,032,619      1,000,759

</TABLE>









     The accompanying nots are an integral part of these financial statements.

                                      F - 3

<PAGE>


<TABLE>
<CAPTION>

                            PENN PACIFIC CORPORATION
                          (A Development Stage Company)
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                                                                                                        Deficit
                                          Common Stock                                                                Accumulated
                         Preferred        To be Issued                 Common              Excess of    Accumulated     During
                             Stock     Shares      Amount        Shares        Amount      Par value      Deficit        Stage
                         ---------   ---------  ------------  ------------  ------------  ------------  ------------  ------------
<S>                           <C>    <C>        <C>             <C>         <C>           <C>           <C>           <C>
Balance October 1, 1996 as
originally reported .......... --    3,263,128  $    326,313    15,389,053  $  1,538,905  $ 33,807,923  $(35,735,361) $       --

Retroactive adjustment for 1
for 20 reverse stock split
February 23, 1998 ............ --   (3,099,970)     (309,997)  (14,615,471)   (1,461,547)    1,893,182          --            --
                               --   ----------  ------------  ------------  ------------  ------------  ------------  ------------

Restated Balance October 1,
1996 ......................... --      163,158        16,316       773,582        77,358    35,701,105   (35,735,361)         --

Issuance of stock ............ --     (142,500)      (14,250)      142,500        14,250          --            --            --

Issuance of stock for cash ... --         --            --          35,000         3,500       (18,000)         --            --

Stock to be issued in exchange
for debt (bankruptcy claims) . --       29,019         2,901          --            --            --            --            --

Net Loss ..................... --         --            --            --            --            --            --         (61,855)
                               --   ----------  ------------  ------------  ------------  ------------  ------------  ------------

Balance September 30, 1997 ... --       49,677         4,967       951,082        95,108    35,683,105   (35,735,361)      (61,855)

Stock to be issued in exchange
for debt .....................                                                      --          31,860         3,187         3,000

Net Loss ..................... --         --            --            --            --            --            --         (15,431)
                               --   ----------  ------------  ------------  ------------  ------------  ------------  ------------

Balance September 30, 1998 ... --       81,537  $      8,154       951,082  $     95,108  $ 35,686,105  $(35,735,361) $    (77,286)
                               ==   ==========  ============  ============  ============  ============  ============  ============

     The accompanying notes are an integral part of these financial statements.
</TABLE>

                                      F - 4

<PAGE>


<TABLE>
<CAPTION>

                            PENN PACIFIC CORPORATION
                          (A Development Stage Company)
                             STATEMENT OF CASH FLOWS

                                                                             Cumulative
                                                                                Since
                                                        For the Year Ended   Inception of
                                                          September 30,       Development
                                                     ----------------------
                                                        1998         1997        Stage
                                                     ---------    ---------    ---------
<S>                                                  <C>          <C>          <C>
Cash Flows from Operating Activities:
  Cash paid to suppliers and employees ...........   $    --      $    --      $    --
                                                     ---------    ---------    ---------
      Net cash used by operating activities before
        reorganization items .....................        --           --           --
                                                     ---------    ---------    ---------
  Reorganization Items:
    Chapter 11 administrative fees ...............        --         (7,000)      (7,000)
                                                     ---------    ---------    ---------
      Net cash used in operating activities ......        --         (7,000)      (7,000)
                                                     ---------    ---------    ---------

Cash Flows from Investing Activities: ............        --           --           --
                                                     ---------    ---------    ---------

Cash Flows from Financing Activities:
  Proceeds from common stock .....................        --          2,000        2,000
  Issuance of notes payable-stockholders .........        --          5,000        5,000
                                                     ---------    ---------    ---------
      Net cash provided by financing activities ..        --          7,000        7,000
                                                     ---------    ---------    ---------

Net change in cash and cash equivalents ..........        --           --           --
Cash and cash equivalents at beginning of year ...        --           --           --
                                                     ---------    ---------    ---------

Cash and cash equivalents at end of year .........   $    --      $    --      $    --
                                                     =========    =========    =========

Reconciliation of Net Loss to Net Cash
 Used in Operating Activities:
Net loss .........................................   $ (15,431)   $ (61,855)   $ (77,286)
Adjustments used to reconcile net loss to Net
cash used in operating activities:
Common stock issued for expenses .................       6,187      108,039      114,226
Increase in accounts payable .....................      11,523         --         11,523
Increase accrued expenses ........................       2,721        4,854        7,575
Decrease in notes payable - stockholders .........      (5,000)        --         (5,000)
Decrease in liabilities not subject to
compromise:
    Administrative fees ..........................        --        (52,181)     (52,181)
Decrease in liabilities subject to compromise:
    Priority claims ..............................        --         (4,277)      (4,277)
    Unsecured non-priority claims ................        --         (1,580)      (1,580)
                                                     ---------    ---------    ---------

Net cash used in operating activities ............   $    --      $  (7,000)   $  (7,000)
                                                     =========    =========    =========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F - 5

<PAGE>



                            PENN PACIFIC CORPORATION
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1998 AND 1997


NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES

     This  summary  of  accounting  policies  for Penn  Pacific  Corporation  is
presented to assist in  understanding  the Company'  financial  statements.  The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.

Organization and Basis of Presentation

     The Company was incorporated under the laws of the state of Delaware on May
18,  1971.  From  1979 to 1991 the  primary  business  of Penn  Pacific  and its
subsidiaries  was the  acquisition,  exploration,  development,  production  and
operation of oil and gas properties.  Penn Pacific has been inactive since 1991.
The Company filed a voluntary petition of reorganization under Chapter 11 of the
United  States  Bankruptcy  Code on January 27, 1994.  On January 13, 1997,  the
Company emerged from bankruptcy  pursuant to a final decree of the United States
Bankruptcy  Court for the Northern  District of Oklahoma.  The Company is in the
development stage since January 13, 1997 and has not commenced planned principal
operations.

Nature of Business

     The Company intends to acquire interests in various business opportunities,
which in the opinion of management will provide a profit to the Company.

Cash Equivalents

     For the purpose of reporting cash flows,  the Company  considers all highly
liquid debt  instruments  purchased  with maturity of three months or less to be
cash  equivalents  to the  extent  the funds are not being  held for  investment
purposes.

Net Loss per Common Share

     In 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 128,
"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary and
fully diluted EPS with basic and diluted EPS.






                                      F - 6

<PAGE>



                            PENN PACIFIC CORPORATION
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1998 AND 1997
                                   (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (continued)

     The effect of outstanding  common stock  equivalents are  antidilutive  for
1998 and 1997 and are thus not considered.

     The  reconciliations  of the numerators and  denominators  of the basic EPS
computations are as follows:

<TABLE>
<CAPTION>

                                1998                                  1997
                 ----------------------------------    ----------------------------------
                               Number       Loss                     Number       Loss
                                 of          Per                       of          Per
                    Loss       Shares       Share        Loss        Shares       Share
                (numerator) (denominator)             (numerator) (denominator)
                 ---------   -----------   --------    ---------   -----------   --------
<S>              <C>           <C>         <C>         <C>           <C>         <C>
Loss to Common
Shareholders     $ (15,431)    1,032,619   $  (0.01)   $ (61,855)    1,000,759   $  (0.06)
                 =========   ===========   ========    =========   ===========   ========

</TABLE>

Pervasiveness of Estimates

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


NOTE 2 - INCOME TAXES

     The Company has accumulated tax losses estimated at $16,000,000 expiring in
years 1999 through 2012.  Current tax laws limit the amount of loss available to
be offset against  future taxable income when a substantial  change in ownership
occurs. The amount of net operating loss carryforward available to offset future
taxable income will be limited if there is a substantial change in ownership.






                                      F - 7

<PAGE>


                            PENN PACIFIC CORPORATION
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1998 AND 1997
                                   (Continued)


NOTE 3 - DEVELOPMENT STAGE

     The  Company  has not begun  principal  operations  and as is common with a
development  stage  company,  the Company has had  recurring  losses  during its
development stage.


NOTE 4 - COMMITMENTS

     As of September  30, 1998 and 1997 all  activities of the Company have been
conducted by  corporate  officers  from either their homes or business  offices.
Currently,  there are no  outstanding  debts owed by the  company for the use of
these facilities and there are no commitments for future use of the facilities.

NOTE 5 - 1 FOR 20 STOCK SPLIT

     On  February  23, 1998 the Board of  Directors  approved a 1 for 20 reverse
stock  split.  The  financial  statements  have been  retroactively  adjusted to
reflect the stock split as if it had happened  effective on the earliest  period
presented.

NOTE 6 - PETITION FOR RELIEF UNDER CHAPTER 11

     On January 27, 1994, Penn Pacific  Corporation (the Debtor) filed petitions
for relief under Chapter 11 of the federal  bankruptcy laws in the United States
Federal  Bankruptcy Court for the Northern  District of Oklahoma.  Under Chapter
11, certain  claims  against the Debtor in existence  prior to the filing of the
petitions  for relief  under the federal  bankruptcy  laws are stayed  while the
Debtor continues business operations as  Debtor-in-possession.  These claims are
reflected  in the  September  30, 1998 and 1997 balance  sheets as  "liabilities
subject to compromise."  Additional claims  (liabilities  subject to compromise)
may arise  subsequent to the filing date  resulting  from rejection of executory
contracts,  including leases, and from the determination by the court (or agreed
to by  parties  in  interest)  of allowed  claims  for  contingencies  and other
disputed amounts.  Claims secured against the Debtor's assets ("secured claims")
also are stayed,  although the holders of such claims have the right to move the
court for relief from the stay. Secured claims are secured primarily by liens on
the Debtor's  property,  plant, and equipment.  On January 13, 1997, the Company
emerged  from  bankruptcy  pursuant  to a  final  decree  of the  United  States
Bankruptcy Court for the Northern District of Oklahoma.


                                      F - 8