<PAGE>

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


                                  FORM 10-KSB


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

For the fiscal year ended  December 31, 1997

                                       OR

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

For the transition period from ___________________ to ______________________

Commission file number 0-21635


                         Global Diamond Resources, Inc.
                 (Name of Small Business Issuer in its charter)


                 Nevada                            33-0213535
 ----------------------------------------      -------------------
     (State or other jurisdiction of           (I.R.S. Employer
      incorporation or organization)           Identification No.)


      836 Prospect Street, Suite 2B
         La Jolla, California                          92037
 ----------------------------------------      --------------------
 (Address of principal executive offices)            (Zip Code)



         Issuer's telephone number, including area code  (619) 459-1928
                                                         --------------

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

     Title of each class                        Name of each exchange on which
     to be so registered                        each class is to be registered


     None                                               N/A
 ----------------------------------------      --------------------


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

                         Common Stock, $.0005 par value

--------------------------------------------------------------------------------
                                (Title of class)
<PAGE>

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

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

The market value of the voting stock held by non-affiliates of the registrant as
of March 23, 1998 was approximately $7,036,472.

The number of shares of the Common Stock outstanding as of March 23, 1998 was
24,075,890.

                  Documents incorporated by reference:   None.
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Part I

Item 1.  Description of Business.


Business Development
--------------------

     Certain mining and geological terms used below are defined in the section
"Glossary," below. The Company has entered into certain financial commitments
payable in Rand, the unit of currency of the Republic of South Africa. All Rand
based amounts are designated by the symbol R.  As of March 23, 1998, the Rand-
Dollar exchange rate was 4.979 Rand to one U.S. Dollar.  Unless otherwise
indicated, all share information contained in this report has been adjusted to
give effect for a two for one split of the outstanding shares of Common Stock
effected on December 19, 1997.


     Global Diamond Resources, Inc., a Nevada corporation ("Company"), was
formed under the laws of the State of Nevada on January 7, 1987 under the name
Lohengrin, Inc. for the purpose of conducting an unspecified offering of its
securities and then applying the net proceeds towards the acquisition of one or
more businesses.  In March and April 1987, the Company conducted a public
offering of 69,334 shares of its Common Stock pursuant to an offering statement
on Form 1-A filed with the Securities and Exchange Commission.  In that public
offering, the Company sold 48,534 shares at an offering price of $1.44 per
share.  From April 1987 to March 1988, the Company's operations consisted solely
of the investigation of acquisition candidates.

     In March 1988, the Company entered into an Agreement of Merger and Plan of
Reorganization ("Western Capital Agreement") pursuant to which it acquired all
of the outstanding common shares of capital stock of Western Capital Leasing
Corporation, a California corporation engaged in the business of equipment
financing.  At that time, the Company changed its corporate name to Western
Capital Financial Corporation.  Pursuant to the Western Capital Agreement, the
Company issued to the stockholders of Western Capital Leasing Corporation
182,626 shares of the Common Stock of the Company.  Between March 1988 and March
1992, the Company acted as a holding corporation for its wholly-owned
subsidiary, Western Capital Leasing Corporation.  However, as a result of
declining interest rates and an economic recession, Western Capital Leasing
Corporation's business became less profitable to the point that in 1992 Western
Capital Leasing Corporation discontinued active business operations.  Between
March 1992 and July 1995, the Company and Western Capital Leasing Corporation
were both inactive.

     In July 1995, the Company acquired all of the outstanding shares of common
stock of Global Diamond Resources Inc. ("Global Diamond-BC"), a British Columbia
corporation.  At the time, Global Diamond-BC served as a holding company for its
South African operations.  Pursuant to a Securities Purchase Agreement and Plan
of Reorganization dated July 17, 1995, the Company acquired from the
shareholders of Global Diamond-BC all of the issued and outstanding capital
shares of that corporation in exchange for the Company's issuance of 8,830,000
shares of Common Stock of the Company (representing 95% of the issued and
outstanding shares of the Common Stock after giving effect to the
reorganization) and warrants to purchase 1,100,000 shares of Common Stock, at
Canadian $.375 per share, expiring on December 31, 1997.  The terms of the
reorganization were the result of arm's-length negotiations between management
of the Company and management of Global Diamond-BC.  Prior to the consummation
of the reorganization, the Company divested itself of its interest in Western
Capital Leasing Corporation by selling all of the issued and outstanding shares
of the common stock of Western Capital Leasing Corporation to its founder,
Weston J. Coolidge, for $1.00.  At the time of the divestiture, Western Capital
Leasing Corporation was a dormant corporation without assets or operations of
any kind.  Subsequent to the reorganization, the Company changed its corporate
name to Global Diamond Resources, Inc.

     On December 5, 1997, the Company entered into a Securities Purchase
Agreement with International PCM Holdings Limited ("PCM") pursuant to which PCM
has invested $4,600,000 in the Company with a commitment to advance an
additional $1,400,000 subject to the fulfillment of certain conditions.  Under
the terms of the Agreement, PCM purchased 7,050,482 shares of Common Stock for
the purchase price of $3,000,000.  In addition, PCM agreed to lend the Company
up to $3,000,000 pursuant to a Secured Convertible Promissory Note in the
original principal amount of $3,000,000 issued by a wholly-owned offshore
subsidiary of the Company.  To date, PCM has advanced $1,600,000 under the Note
to the Company's subsidiary and has agreed to advance the balance

                                       1
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of $1,400,000 at such time as the Company acquires government approval of the
mineral lease for the Caerwinning Deposit. See "Business of the Issuer - The
Caerwinning Deposit." The Note issued to PCM is secured by 100% of the stock of
the Company's South African subsidiary, Global Diamond Resources (SA) (Pty)
Limited, which holds all of the Company's mining properties, plant and
equipment.

     Under the terms of the Note, the outstanding principal accrues interest at
a rate of 15% per year, payable in arrears in bi-annual installments, with all
principal and interest due within five years from the date of the Note.  The
principal and interest under the Note is convertible in to a maximum of
1,807,816 shares of Common Stock of the Company at the rate of $.425 per share.
The Note does not contain any penalties for prepayment, however the Note does
include certain negative and affirmative financial and operational covenants on
the part of the Company.  In addition to the foregoing, PCM received warrants to
purchase up to 807,852 shares of Common Stock at prices ranging from $.25 to
$.375.  On March 11, 1998, PCM exercised warrants to purchase 172,286 shares
of Common Stock at an exercise price of Cdn$.375 per share.  The Company will
use the proceeds from the PCM financing to further its mining operations in
South Africa.

     The Company has agreed to expand its Board of Directors to nine members and
appoint three nominees of PCM to the Board.

     In December 1997, the Board of Directors approved a two for one split of
the outstanding shares of Common Stock of the Company and a change in its
authorized Common Stock from 25 million shares of $.001 par value Common Stock
to 50 million shares of $.0005 par value Common Stock.  The effective date of
the split was December 19, 1997.

     Unless the context otherwise requires, all references to the Company
include its wholly-owned subsidiaries, Global Diamond Resources Inc., a British
Columbia corporation, Global Diamond Resources (SA) (Pty) Limited, a South
African corporation, Global Diamond Resources International Limited, a British
Virgin Islands corporation, and Nabas Diamonds (Pty) Limited, a South African
corporation.  The Company's executive offices are located at 836 Prospect
Street, Suite 2B, La Jolla, California  92037; Telephone (619) 459-1928.

                                       2
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Business of the Issuer
----------------------

     General

     The Company is engaged in diamond exploration and mining.  The Company has
acquired one mining property (the Grasdrif Deposit), exercised an option to
acquire a second mining property (the Caerwinning Deposit), and acquired an
option to purchase a third mining property (the Montrose Kimberlite Pipe), all
of which are located in the Republic of South Africa.  The Company's current
mine projects include:

     The Grasdrif Deposit.  The property is an alluvial deposit on the inner
bank of the Orange River in the Northern Cape Province.  Based on previous
exploration, the deposit is estimated to contain 80.43 million tonnes of in situ
diamondiferous gravel.  Between 1973 and 1984, a previous producer recovered in
excess of 700,000 carats of high quality large gemstones from some 19 million
tonnes of gravel from properties in the area.  The Company owns the rights to
this property.  The Company has commenced site establishment, including the
development of roads, power, housing and water, and expects to commence full
scale mining operation at the Grasdrif Deposit in the second quarter of 1998.

     The Caerwinning Deposit.  The property is an alluvial deposit downstream of
the confluence of the Vaal and Harts Rivers in the Griqualand West area of the
Northern Cape Province.  The property is estimated to include 38.3 million
tonnes of in situ diamondiferous gravel.  During the period February 1989 to
October 1994, 3,685 carats of high quality large gemstones with an average value
of $488 per carat were recovered from this property.  The Company has exercised
an option to acquire the Caerwinning Deposit in June 1996 and completed a bulk
sample in September 1996 in which it recovered 60 diamonds with a combined
weight of 111.05 carats and a value of $642 per carat.  The Company intends to
commence full scale mining operations at the Caerwinning Deposit in the second
quarter of 1998.

     The Montrose Kimberlite Pipe.  The property is located 30 kilometers east
of Pretoria in the Gauteng Province, and is part of the Pretoria Group
geological formation which includes the Premier Diamond Mine.  Geological
testing and drilling evidences a diamondiferous kimberlite pipe with a surface
dimension of 4.25 hectares and a depth of 400 meters, which indicates a
geological resource in excess of 9 million tonnes.  The Company has acquired an
option to purchase the Montrose Pipe which expires on October 10, 1998 and has
commenced an extensive drilling program at the site in March 1998.

     The Company believes that historical mining data and the results of past
prospecting at its three mining properties to date suggest significant reserves
exist throughout the mine properties.  However, as of the date of this report,
the Company has not conducted sufficient drilling or bulk sampling at any of the
three mines for the purpose of establishing proven reserves.  Any estimate of
reserves is necessarily imprecise and would depend on statistical inferences
drawn from limited drilling or bulk sampling, which can prove unreliable.
Consequently, the Company is unable to estimate with any degree of assurance the
amount of reserves at any of its mine properties.

     The Company intends to conduct exploration and acquisitions of additional
diamond pipes and alluvial deposits and is continuously evaluating potential
property acquisitions.

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     Diamond Mining - Generally

     Diamonds are chemically inert crystals formed by the subjection of carbon
to extraordinary heat and pressure.  Diamonds are believed to have been formed
more than 90 million years ago at a depth of 400 km below the surface of the
earth and then transported to the earth's surface by the movement of molten
rock.  The solidified rock is known as kimberlite pipes or fissures, and it is
from these kimberlite pipes or fissures that diamonds are generally mined.  Some
of the pipes and fissures have eroded over time, and the diamonds once contained
in such formations have been transported and deposited in ancient or existing
river beds, seas and beaches.  The Company's present projects include the mining
of kimberlite pipes and alluvial deposits.

     Diamond exploration typically begins with surface sampling and magnetic
surveys for purposes of locating kimberlite or geographical anomalies which may
indicate the presence of kimberlite.  In the event a pipe is located, follow-up
prospecting, trenching or drilling is conducted to determine if it is
diamondiferous.  If the pipe is determined to be diamondiferous, bulk sampling
is conducted to evaluate the grade of the prospect and, thereby, establish
proven or probable reserves.  The exploration and evaluation of an alluvial
diamond deposit is typically more complex and less conclusive because of scarce
and irregular distribution of diamonds.

     Kimberlite pipes are mined through a combination of open pit excavation and
underground mining.  The mining of a kimberlite pipe typically commences with an
open pit mine to a shallow depth, generally 30 meters.  Initially, a mining zone
is designed and then dozers are used to remove the topsoil which is set aside
for reclamation.  Dozers are then employed to excavate an open pit.  As the
mining operations expand, the open pit is enlarged by digging benches into the
pit wall.  Since kimberlite pipes are relatively narrow bodies, it becomes
impractical at a certain depth, approximately 30 to 50 meters, to continue
mining operations through open pit excavation.  At this point, shafts are sunk
away from and parallel to the ore body, and from these shafts adits to the ore
body are developed at various levels.  The kimberlite ore is hoisted to the
surface and hauled to a recovery plant by front-end loaders and trucks.

     Mining Operations

     The Company intends to construct at each mining deposit a state-of-the-art
recovery plant for purposes of processing ore or gravel.  Each recovery plant
will consist of a wash plant and associated screens, tables and separators that
will employ water, agitation, gravity and centrifugal force to separate the
heavier diamondiferous material from the lighter gravel.  In the case of ore
from a kimberlite pipe, the ore will be delivered to the plant in large chunks
and those chunks will initially be subjected to a primary crusher that will mill
the ore into smaller blocks five inches thick.  This crushed ore will be passed
through a high capacity electronic sorting machine.  The electronic sorting
machine beams an X-Ray over the ore, which will cause any diamonds to fluoresce.
When a light sensor identifies the fluorescent diamonds, the electronic sorting
machine activates a trap door and the diamonds drop into a secured recovery
chamber.  The crushed ore is passed through a secondary crusher that will mill
the ore into smaller blocks two inches thick. In the case of gravel from an
alluvial deposit, the gravel is initially passed over a grizzly that catches and
rejects all rocks six inches or greater in size.  From this point, the recovery
process is virtually the same in the case of pipe or alluvial ore.  The ore then
passes though screens which further reduces the size.  At this point water will
be introduced, turning the ore into a slurry.  The slurry passes through the pan
plant in which centrifugal force is used to separate the heavier diamondiferous
ore from the lighter ore.  The heavier ore then passes through an electronic
sorting machine which recovers diamonds as described above.

     The lighter ore recovered from the pan plants described above is passed
through a dense medium separation process through which centrifugal force is
used to again separate the heavier diamondiferous ore from the lighter ore.
This heavier ore is also passed through the electronic sorting machine as
described above. A grease table will also be used where the climatic conditions
favor its use.  From the electronic sorting machine the slurry is run over a
grease table.  Because water does not adhere to diamonds, any freed diamonds
will stick to the grease table whereas the remainder of the slurry will slide
over the grease.  The ore from the grease table is sent through a ball mill and
the ore is reduced to pulp.  The ore from the bail mill is sifted through small
mesh screens to recover any remaining diamonds, and the residue is sent to the
tailing pile.

     The Company intends to sell its diamonds directly to private diamond
dealers and manufacturers.  There are no formal rules by which the price of
diamonds are determined.  Sale prices are usually set by the diamond's weight,
color and clarity, and the evaluation process is generally subjective.  The
Company expects that its sale of

                                       4
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diamonds will be transacted in U.S. dollars on a cash basis. The Company has
engaged Weir International Limited ("Weir") to market the Company's diamond
production. In exchange for Weir's services, the Company shall pay Weir five
percent (5%) of the gross amount of all diamond sales. Weir is a stockholder of
the Company and certain members of management, including the Company's Chief
Executive Officer, have a beneficial interest in Weir. See "Part III, Item 12.
Certain Relationships and Related Transactions."

     The Grasdrif Deposit

     Property Rights.  The Grasdrif Deposit is an alluvial diamond deposit
located on the inner bank of the Orange River in the Northern Cape Province. The
rights to the deposit are owned by Nabas Diamonds (Pty) Limited, a wholly-owned
subsidiary of the Company. Nabas Diamonds has acquired exclusive rights to
prospect the deposit from appropriate governmental agencies, subject to Nabas
Diamonds' payment of a royalty to the state in the amount of 5% of the gross
selling price of the production from the deposit.

     Pursuant to a Shareholder Agreement, dated March 24, 1995, between Global
Diamond Resources (SA) (Pty) Limited and the promoters of Nabas Holdings (Pty)
Limited ("Nabas Holdings"), an unaffiliated South African corporation, the
parties formed Nabas Diamonds and owned the company on a 50/50 basis.  Nabas
Holdings assigned the rights to the Grasdrif Deposit to Nabas Diamonds.
Pursuant to an Agreement between the parties dated November 22, 1997, Nabas
Holdings sold its 50% interest in Nabas Diamonds to the Company for R800,000
(US$164,000), 1,000,000 shares of Common Stock and a common stock purchase
warrant to purchase 500,000 shares of Common Stock, at a price of $.375 per
share, expiring December 1, 1998.  In addition, the Company agreed to appoint to
its Board of Directors one nominee of Nabas Holdings.  Nabas Holdings has
nominated Mr. Charles MacDonald to the Company's board.

     Geology.  The Grasdrif Deposit is an alluvial gravel deposit situated on a
bedrock of Dwyka Tillites. The gravels of the Grasdrif Deposit have been
preserved in three distinct elevations, all of which seem to have been deposited
on the inner bank of the paleo and present Orange River.  The upper terrace
(elevation 215 meters above sea level) seems to have been deposited as a point
bar of a channel incising to the west, while all other terraces are associated
with a gradual migration of channels towards its present situation in the east.

     Ingress to and egress from the Grasdrif Deposit is available by way of
public paved and gravel roads.  At the present time, power is supplied to the
property by Company-owned generators.  Prior to commencement of full scale
mining, the Company intends to connect the Grasdrif Deposit to the state
electric utility.

     Reserves.  Based on previous exploration and production activity by Namex
(Pty) Limited ("Namex"), a South African mining company, the Company estimates
that the deposit contains approximately 80.43 million tonnes of in situ
diamondiferous gravel.  The management of Namex at the time of such production
included several individuals who presently serve as senior management of the
Company, including Johann de Villiers.

     Historical Production.  The Grasdrif Deposit was prospected for the first
time by Namex.  Between 1973 and 1984, Namex produced 706,607 carats from
19,613,759 tonnes of ore, for an average grade of 3.6 carats per 100 tonnes from
properties in the area.

     Mining Plan.  The Company has commenced site establishment at the Grasdrif
Deposit, including the development of roads, power, housing and water, and
expects to commence full scale mining operations at the Grasdrif Deposit in the
second quarter of 1998.  The Company intends to conduct all mining and recovery
activities directly.  However, in the event the Company encounters calcified
deposits that require blasting, it intends to engage contractors for this
purpose.  The Company estimates that it will incur up to R14 million ($2,810,000
as of March 23, 1998) in expenses in developing and mining the Grasdrif Deposit
before it will commence the recovery of diamonds.

                                       5
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     The Caerwinning Deposit

     Property Rights.  The Company has acquired the exclusive rights to conduct
mining operations at the Caerwinning Deposit, a 2,333 hectare alluvial deposit
located in the Northern Cape Province.  The Caerwinning Deposit lies on
"alienated State land" pursuant to the Precious Stones Act of 1964 and,
therefore, the Republic of South Africa owns all rights to the precious stones
on the property.  In 1978, Lama Minerals CC acquired from the Minister of Mines
the necessary approvals to mine the surface and subsurface of the deposit.  In
June 1996, the Company exercised its option to acquire the mineral lease to the
alluvial deposit from Lama Minerals CC for R1.14 million ($229,000 as of March
23, 1998).  However, if kimberlite pipes or fissures are found on the property
during prospecting or mining of the alluvial deposit, the Company will be
required to pay an additional R8 million ($1,607,000 as of March 23, 1998) to
Lama Minerals CC prior to the Company's mining of the pipes or fissures.  The
Company's acquisition of the mineral lease is subject to government approval
which is expected in the second quarter of 1998.  The Company believes that as a
condition to the governmental approval it will be required to pay the government
5 percent of the gross selling price of the monthly production from the deposit,
with a minimum payment of R50,000 ($10,000 as of March 23, 1998) per year.

     Pursuant to the mineral lease, the Company has an initial ten year right to
mine the Caerwinning Deposit (with a ten year renewal option), subject to Lama
Minerals CC's right to terminate the mineral lease based on the Company's
default thereunder.  The Company's principal obligations to Lama Minerals CC
under the lease are to comply with all South African mining regulations, restore
disturbed land to the satisfaction of Lama Minerals CC and to compensate Lama
Minerals CC for lost farming profits to the extent any mining operations disturb
cultivated land.

     Geography. The Caerwinning Deposit is situated in the Griqualand area of
the Northern Cape province, approximately 70 kilometers west of Kimberley. It
borders to the east along the Vaal River, approximately 20 kilometers downstream
of the confluence of the Vaal and Hart Rivers. Ingress to and egress from the
Caerwinning property is available by way of public paved and gravel roads. The
property is serviced by the state electric utility.

     Geology.  The gravels of the Caerwinning Deposit are underlain by quartzite
and shale of the Schmidtsdrift formation of the Transvaal Sequence, as well as
carboniferous shale and tillite of the Dwyka Formation of the Karoo Sequence.
Rock types of both sequences found on the deposit are horizontally or near
horizontally bedded, and are not conducive to pothole formation.  Outcrops of
rocks of the Transvaal Sequence occur along the western and southern boundaries
of the deposit.  Rock types belonging to the Dwyka formation do not outcrop and
were only found in boreholes and excavations.

     The gravels occur in three distinct terraces of which the oldest is the
furthest removed from the present river bed.  Secondary calcification is rather
extensive in the oldest terraces but negligible in the later and recent
deposits.  The gravels mainly consist of cobble and pebble sized casts in a
sandy matrix.  Boulder sized particles are extremely rare except where local
tributaries have introduced large more or less angular boulders into the
mainstream deposits.

     Reserves.  Based on past exploration drilling and bulk sampling and recent
mining activities, the Company believes that the Caerwinning Deposit has 38.3
million tonnes of in situ diamondiferous gravel.

     Historical Production.  The Caerwinning Deposit has been mined sporadically
since 1969.  Over the years, various producers have recovered 4,539 carats. Over
the last six years, the most recent contractor, Mr. Pieter van Wyk, recovered
3,685 carats from 344,400 tonnes of ore, for an average grade of 1.07 carats per
100 tonnes.  A review of available production records indicates that 90 to 95%
of the diamonds recovered were of gem quality, and that the average price
received during the last six years of production was $488 per carat.  Mr. van
Wyk has served as Chief Consulting Geologist for the Company from July 1994 to
February 1998.  In February 1998, Mr. van Wyk was appointed to serve as Director
of Exploration and Mining of the Company and was also appointed to serve on the
Company's Board of Directors.  In September 1996, the Company conducted a bulk
sampling of the property in which it recovered 60 diamonds with a combined
weight of 111.05 carats and with an average value of $642 per carat.

     Mining Plan.  The Company intends to commence full scale production at the
Caerwinning Deposit in the second quarter of 1998.  The Company intends to
conduct directly all mining and recovery activities at the

                                       6
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Caerwinning Deposit. However, in the event the Company encounters calcified
deposits that require blasting, it intends to engage contractors for this
purpose.

     The Montrose Kimberlite Pipe

     Property Rights.  The Company has acquired exclusive prospecting rights and
an option to purchase a farm in the Gauteng Province, which includes a mining
prospect known as the Montrose No. 3 (referred to herein as the "Montrose
Pipe").  Pursuant to a Notarial Prospecting Contract between Maria Anna Gobey
and Global Diamond Resources (SA) (Pty) Limited, the Company has acquired the
exclusive rights to prospect on the property until October 10, 1998 in
consideration of the Company's payment of R54,000 (US$11,000) and 10% of the
value of all minerals recovered by the Company during the prospecting period.
The Company also has the exclusive option until October 10, 1998 to purchase the
farm for R2.8 million ($562,000 as of March 23, 1998).  The Company holds a
prospecting permit from the government which expires October 10, 1998 and is
renewable annually, subject to government approval.

     Geography.  The Montrose Pipe lies 500 meters north of Rayton and 30 km
east of Pretoria in the Gauteng Province.  The area forms part of the temperate
eastern plateau and has an average elevation of 1,500 meters, with warm summers
and cool winters.  Annual rainfall during the summer months averages 785
millimeters and year-round mining is undertaken in the vicinity.

     The region is accessible by the N4 Freeway and the Transnet Railway.
Ingress to and egress from the Montrose property is available by way of public
paved and gravel roads.  The property is serviced by the state electric utility
and water for mining purposes is available by pipeline from the Bronkhorstspruit
Dam, 20 kilometers to the east.

     Geology.  The area of the Montrose Pipe is part of the Rayton Formation,
Pretoria Group.  The area is underlain by a north-east succession of quartzite,
shale and subgraywacke of Precambrian time, and overlain by sandstone and
sandstone-shale  The Pretoria Group has been intruded by a number of kimberlite
pipes and to a lesser extent by kimberlite fissures, the latter striking mainly
east-west.  A total of ten kimberlite bodies are known to exist around Rayton,
six of which, the Montrose No.1, Montrose No.2, Montrose No. 3, Schuller-
Kaalfontein, National and Annex, have been prospected and exploited to a limited
extent.

     In November 1994, Geo Hydro Technologies ("Geo Hydro"), an independent
geological engineering  firm located in Pretoria, was commissioned by the
Company to conduct a geophysical survey of the Montrose Pipe for purposes of
detecting and delineating the kimberlite pipe.  Geo Hydro's written report
stated that it was able to map the position of the kimberlite through
electromagnetic profiling.  Geo Hydro estimated that the kimberlite had a
surface dimension of 4.25 hectares based on electromagnetic profiling; however,
the magnetic profiling suggested the presence of a fissure on the southeastern
boundary of the kimberlite, which, if present, would reduce the surface area of
the pipe to a minimum size of 1.25 hectares with the remaining area comprising
fissure material.

     Reserves.  Drilling to date together with surface sampling and geological
mapping indicate a kimberlite resource with a surface area of 4.25 hectares and
a depth of at least 50 meters.  For purpose of estimating the total ore body,
the Company has assumed the pipe has a depth of at least 400 meters based on the
results of the drilling program interpreted by Steffen, Robertson & Kirsten.
Based on a depth of 400 meters and a surface area of 4.25 hectares, the Company
estimates that the pipe contains in excess of 9 million tonnes of ore.

     Historical Production.  In the early part of this century a prospecting
shaft was sunk alongside the Montrose Pipe to a depth of 30 meters and two
exploratory adits excavated, one at nine meters and the other at 30 meters.
While production records are incomplete, it is known that surface and shallow
underground mining of the Montrose Pipe produced 6,952 carats between 1910 and
1925.  During this period average recovery grades varied from 3.19 carats per
100 tonnes from surface material to 15.08 carats per 100 tonnes from underground
ore.  In 1989, an unaffiliated mining company acquired prospecting rights to the
Montrose Pipe and between April and July 1990 the company recovered 24.52 carats
from 367 tonnes of surface ore, which were sold for $123 per carat.

     Mining Plan.  The Company commenced an extensive drilling program at the
Montrose Pipe in March 1998.  If the results from the drilling program are
successful, the Company will conduct an extensive underground bulk sample in the
latter half of 1998 and first quarter of 1999.  If the results from the
underground bulk sampling

                                       7
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program are successful, the Company will conduct open pit mining to a depth of
30 meters commencing in 1999. While final pit design will depend on exploration
results, the Company presently plans to excavate 10 meter benches at a pit slope
angle of 55 degrees. Based on a surface area of 4.25 hectares, the Company
estimates that open pit mining will result in the recovery of 1.06 million
tonnes of ore and an estimated life of the open pit of 1.77 years. Based on the
high estimated capital cost of open pit mining at the Montrose Pipe, the Company
intends to engage mine operators on a contract basis in order to take advantage
of the economies offered by a larger mine operator.

     The Company will commence underground mining activity upon the completion
of open-pit mining.  During the initial phase of underground mining, the
existing shaft will be refurbished and enlarged to a depth of 100 meters.  A
second shaft for ventilation purposes will be developed to a depth of 100
meters.  Next, the Company intends to excavate adits at the 33 meter level in
order to carry out bulk sampling.  The Company  presently estimates that R14.1
million ($2,832,000 as of March 23, 1998) in capital expenditures and two years
of development will be required in order to commence underground mining
operations.

     Competition

     The diamond mining industry is intensely competitive. The principle areas
of competition are the exploration and acquisition of mineral properties. A
large number of companies are engaged in the exploration and development of
diamond properties, many of which have substantially greater technical and
financial resources than the Company. Competition among the members of the
diamond mining industry also affect the marketing of the diamonds produced by
the members, including the price of cut and uncut diamonds.

     Regulation

     The Company's mining and milling operations in the Republic of South Africa
and elsewhere are subject to various government regulations governing the
protection of the environment, prospecting, production, labor standards and mine
safety. Failure to comply with applicable laws and regulations may result in
orders being issued that may cause operations to cease or be curtailed, require
the installation of additional equipment and possibly the loss of mining rights.
Existing and future legislation and regulations could also cause restrictions
and delays in the development of the Company's properties and additional expense
and capital expenditures. The Company believes it is in substantial compliance
with all material laws and regulations applicable to it and its operations.

     The Company's mining operations are also subject to governmental
regulations regarding environmental considerations, including regulations
relating to air quality standards, pollution of stream and fresh water sources
and reclamation. The Company may be required to prepare and present to
governmental authorities data pertaining to the effect or impact that any
proposed exploration or mining may have upon the environment. As well, the
Company will be responsible for reclamation costs. Reclamation requirements may
vary depending on the location and the nature of the mining operations, however,
they are similar in that they aim to minimize long term effects of exploration
and mining disturbance by requiring the operating company to control possible
deleterious effluents and to re-establish to some degree predisturbance
landforms and vegetation. The environmental regulations of the Republic of South
Africa are not considered by the Company to be as stringent as the environmental
laws adopted in the U.S., and the Company does not consider the existing
environmental regulations in the Republic of South Africa to represent a
material cost or burden on the Company's proposed mining operations. However,
future legislation may significantly emphasize the protection of the environment
and, as a consequence, more closely regulate the Company's mining operations.
Any such legislation, as well as future interpretation of existing laws, may
require substantial increases in equipment and operating costs to the Company
and delays, interruptions, or a termination of operations, the extent of which
cannot be predicted.

     Mining rights in the Republic of South Africa are governed by the Minerals
Act No. 50 of 1991. Pursuant to the Minerals Act, the right to prospect or mine
is dealt with in terms of the common law, which entitles the holder of the right
to the minerals on his land to prospect and mine. This common law right is,
however, made subject to the provisions of the Minerals Act, which state that no
common law right to prospect or mine minerals may be exercised unless the
prescribed statutory authorization has been obtained in the form of a permit to
prospect or an authorization to mine. A prerequisite for the granting of the
authorization is that the applicant must be the holder of the common law right
to the minerals. Pursuant to assignments from the holders of the common law
mineral rights, the Company has obtained government authorization to prospect
the Grasdrif Deposit and the Montrose Kimberlite Pipe and government
authorization to prospect and mine the Caerwinning Deposit. The

                                       8
<PAGE>

Company expects to acquire the common law mineral rights and direct government
authorization to prospect and mine the Caerwinning Deposit by mid-1998. The
Company believes it will be granted the necessary authorization to mine the
Grasdrif Deposit and the Montrose Kimberlite Pipe in a timely manner.

Employees

     The Company employs 52 persons, including three management level employees
in the U.S. and seven managers and 42 laborers in the Republic of South Africa.
None of the Company's employees are unionized or otherwise subject to a
collective bargaining agreement and the Company believes that its relationship
with its employees is excellent.

Glossary

     Set forth below are definitions of certain mining and geological terms used
in this report.

Adit                  A horizontal tunnel from a shaft to a kimberlite pipe
----                  through which the pipe is mined and the ore is excavated.

Alluvial Deposit      A deposit of alluvium (deposits made by water) made by a
----------------      stream where it runs out onto a level plain or meets a
                      slower stream.

Bedrock               The solid rock underlying mineral-bearing gravel, sand,
-------               clay, etc.  and upon which alluvial diamond rests.

Bench Cuts            The excavation of a flat bench or dirt on a slope to
----------            stabilize the slope or to remove material of value in
                      open pit mining.

Bulk Sampling         Acquiring a large (often several thousand tons) sample of
-------------         rock obtained by mining, excavation, digging or drilling
                      large diameter holes.  Bulk sampling is necessary to
                      determine the grade and value of diamonds contained in a
                      property.

Carat                 A small unit of weight for precious stones equal to 200
-----                 milligrams or 0.2 grams.

Diamondiferous        Containing diamonds.
--------------

Geophysical Surveys   Measuring and recording any geophysical properties over a
-------------------   specific area, e.g., gravity, magnetics, electrical
                      conductivity, acoustical velocities, etc., utilizing
                      instruments on land, water or airborne.

Grade                 The number of carats (weight) in a physical unit of ore,
-----                 normally in carats per 100 tonnes.

Gravel                A comprehensive term applied to the water-worn mass of
------                broken down rocks making up an alluvial.  Alluvial
                      gravels are sometimes arbitrarily described in terms of
                      size as "pebble" gravel, "cobble" gravel or "boulder"
                      gravel.

Hectare               Unit of measurement of surface area.  One hectare
-------               approximates 2.47 acres.

Kimberlite            One of two primary types of diamond-bearing rock and the
----------            most common, often characterized by a carrot-shaped
                      structure referred to as a kimberlite "pipe."

Magnetic Surveys      Measuring the magnetic variations in the Earth's crustal
----------------      rocks over a specified area by installing a magnetometer
                      within, or by towing a

                                       9
<PAGE>

                    magnetometer behind an aircraft and recording the
                    variation in the Earth's magnetic field. Useful in
                    detecting kimberlite and ilmenite bodies due to the
                    presence of magnetite in kimberlite.

Minerology          The science dealing with inorganic, solid, homogeneous
----------          crystalline, chemical elements or compounds (minerals),
                    their crystallography, physical and chemical properties,
                    classifications and distinguishing characteristics.

Mining              The making of any excavation for the purpose of
------              recovering diamonds in commercial quantities. Of primary
                    importance in the Republic of South Africa where mining
                    laws draw a distinction between "mining" and "prospecting."
                    See "Prospecting."

Ore                 A mineral deposit containing one or more metals that can
---                 be mined or treated commercially.  See "Reserves."

Petrology           The science that deals with the origin, history,
---------           occurrence, structure, chemical and mineralogical
                    composition and classification of rocks.

Probable Reserves   Reserves for which quantity and grade and/or quality are
-----------------   computed from information similar to that used for proven
                    reserves, but the sites for inspection, sampling, and
                    measurement are farther apart or are otherwise less
                    adequately spaced.  The degree of assurance, although lower
                    than that for proven reserves, is high enough to assume
                    continuity between points of observation.  See "Reserves"
                    and "Proven Reserves."

Prospecting         Searching for diamonds by any means and the recovery of
-----------         diamonds through searching, but does not include "mining"
                    (i.e., excavation for purposes of recovering diamonds in
                    commercial amounts).  See "Mining."

Proven Reserves     Reserves for which (a) quantity is computed from dimensions
---------------     revealed in outcrops, trenches, workings or drill holes,
                    grades and/or quality are computed from the results of
                    detailed sampling, and (b) the sites for inspection,
                    sampling and measurement are spaced so closely and the
                    geologic character is so well defined that size, shape,
                    depth and mineral content of reserves are well-established.
                    See "Reserves" and "Probable Reserves."

Reserves            That part of a mineral deposit that can be economically
--------            and legally extracted or produced at the time of the
                    reserve determination.  Reserves are customarily
                    stated in terms of "ore" when dealing with diamonds and
                    other metalliferous minerals.

Tailings            The washed material that issues from a recovery plant
--------            after the concentrate has been removed.


Item 2.  Description of Property.

         The Company's executive offices are located in La Jolla, California and
consist of approximately 485 square feet of leased premises.  The Company's
lease for these premises expires on March 31, 1999 and provides for monthly rent
of $1,067.  The Company also leases approximately 260 square feet in the SA
Diamond Center in Johannesburg, South Africa.  The lease, which is effective
from March 1, 1998, provides for monthly rental of R736 ($148 as of March 23,
1998) and expires on February 28, 2003.  See "Item 1. Business and Properties -
The Caerwinning Deposit; The Montrose Kimberlite Pipe; and The Grasdrif Deposit"
for a description of the Company's mining properties.

                                       10
<PAGE>

Item 3.  Legal Proceedings.

     From time-to-time, the Company is subject to certain litigation in the
ordinary course of business. At the present time, the Company is not party to
any pending legal proceedings that it believes will have a material adverse
effect on its financial position, results of operations or liquidity.


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

     There were no matters submitted to the security holders of the Company
during the fourth quarter of fiscal year 1997.


Part II

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

     The Company's Common Stock has been listed on the OTC Bulletin Board under
the symbol "GDRS" since August 12, 1996.  During the twelve months ended
December 31, 1997, the high and low closing sale prices (as adjusted for the two
for one split effected in December 1997) were $.95 and $.18, respectively.  The
Company considers its Common Stock to be thinly traded and that any reported bid
or sale prices may not be a true market-based valuation of the Common Stock.  As
of March 23, 1998, there were approximately 138 record holders and 470
beneficial holders of the Company's Common Stock.

     The Company has not paid any cash dividends since its inception and does
not contemplate paying dividends in the foreseeable future.  It is anticipated
that earnings, if any, will be retained for the operation of the Company's
business.

     During the fiscal year ended December 31, 1997, the Company sold
unregistered shares of its Common Stock in the following transactions:

     A.  In March 1997, the Company entered into separate agreements with three
parties pursuant to which those parties purchased 865,544 shares of Common Stock
for a total of $808,486.  The offering was conducted pursuant to Regulation S
under the Securities Act of 1933 (the "Act").  In connection with this offering,
the Company issued to a finder unaffiliated with the Company 64,680 shares of
Common Stock and a common stock purchase warrant entitling the holder to
purchase 808,486 shares of Common Stock at an exercise price of $.25 per share
expiring March 31, 2000.  The securities were issued to the finder pursuant to
Regulation S under the Act.

     B.  In June, October and November 1997, the Company issued 1,310,000 shares
of Common Stock in consideration of services rendered to seven consultants.  The
securities were issued pursuant to Regulation S under the Act.  There were no
underwriters involved in the transaction.

     C.  In August and October 1997, the Company granted to five directors of
the Company options to purchase an aggregate of 500,000 shares of Common Stock,
at an exercise price of $.75 per share.  The options are immediately exercisable
and expire on December 31, 2000.  The securities were issued pursuant to Section
4(2) under the Act.  There were no underwriters involved in the transaction.

     D.  In August 1997, the Company granted to a shareholder of the Company
options to purchase 200,000 shares of Common Stock, at an exercise price of $.75
per share.  The options are immediately exercisable and expire on December 30,
1998.  The securities were issued pursuant to Regulation S under the Act.  There
were no underwriters involved in the transaction.

     E.  In September 1997, for the purpose of inducing the holders of
outstanding warrants, which entitled the holders to purchase shares of Common
Stock at an exercise price of Cdn $.375 per share, to exercise such warrants by
September 30, 1997, the Company offered to the warrantholders an additional
warrant to purchase one

                                       11
<PAGE>

share of Common Stock for every four shares of Common Stock purchased under the
outstanding warrants. In September 1997, the holders of the outstanding warrants
exercised such warrants for 698,000 shares of Common Stock for the gross
proceeds of Cdn $261,750 (US $187,169) and were granted additional warrants to
purchase an aggregate of 174,500 shares of Common Stock, at an exercise price of
$.25 per share. The warrants are immediately exercisable and expire on December
31, 1998. The securities were issued pursuant to Regulation S under the Act.
There were no underwriters involved in the transaction.

     F.  In October 1997, the Company issued 1,230,770 shares of Common Stock as
partial consideration for the Company's acquisition of mining and earth moving
equipment.  The securities were issued pursuant to Regulation S under the Act.
There were no underwriters involved in the transaction.

     G.  In November 1997, the Company granted to officers, employees and a
director of the Company options to purchase an aggregate of 2,800,000 shares of
Common Stock, at an exercise price of $.525 per share.  The options are
immediately exercisable and expire on November 26, 2002.  The securities were
issued pursuant to Section 4(2) under the Act.  There were no underwriters
involved in the transaction.

     H.  In December 1997, as partial consideration for its acquisition of a 50%
interest in the Grasdrif Deposit, the Company issued 1,000,000 shares of Common
Stock and common stock purchase warrants entitling their holders to purchase
500,000 shares of Common Stock, at an exercise price of $.375 per share.  The
warrants are immediately exercisable and expire on December 1, 1998.  The
securities were issued pursuant to Regulation S under the Act.  There were no
underwriters involved in the transaction.

     I.  In December 1997, the Company sold 7,050,482 shares of Common Stock, a
Secured Convertible Promissory Note in the principal amount of $3,000,000 and
common stock purchase warrants to purchase up to 807,852 shares of Common Stock
at exercise prices ranging from $.25 to $.375.  See "Part I, Item 1 -
Description of Business" for a summary of the terms and conditions of the
investment.  The securities were issued pursuant to Section 4(2) under the Act.
In connection with that transaction, the Company issued to finders involved in
the financing an aggregate of 282,020 shares of Common Stock pursuant to
Regulation S under the Act, a payment of $315,000 and common stock purchase
warrants entitling the holders to purchase 70,000 shares of Common Stock, at an
exercise price of $.85 per share.  The warrants are immediately exercisable and
expire on March 6, 2001.

     J.  In December 1997, holders of outstanding warrants exercised their
rights to purchase 402,000 shares of Common Stock at an exercise price of Cdn
$.375 for the gross proceeds of Cdn $150,750 (US $105,960).  The securities were
issued pursuant to Regulation S under the Act.  There were no underwriters
involved in the transaction.


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

     The Company is engaged in diamond exploration and mining.  The Company has
acquired one mining property (the Grasdrif Deposit), exercised an option to
acquire a second mining property (the Caerwinning Deposit), and acquired an
option to purchase a third mining property (the Montrose Kimberlite Pipe), all
of which are located in the Republic of South Africa.  The Company intends to
conduct exploration and acquisitions of additional diamond pipes and alluvial
deposits and is continuously evaluating potential property acquisitions.  See
"Part I, Item 1. Description of Business" for a further description of the
Company's mining properties.

     The Company has entered into certain financial commitments payable in Rand,
the unit of currency of the Republic of South Africa.  All Rand based amounts
are designated by the symbol R.  As of March 23, 1998, the Rand-Dollar exchange
rate was 4.979 Rand to one U.S. Dollar.

     To date, the Company's activities have included the investigation and
acquisition of mining property interests and limited exploratory work and site
establishment.  The Company has financed its activities to date through the sale
of its equity and debt securities.  See "Item 1. Description of Business" for a
summary of the terms of the $6 million financing agreements between the Company
and International PCM Holdings Limited ("PCM") completed in December 1997 and
"Item 7. Financial Statements" for a summary of the Company's financings over

                                       12
<PAGE>

the last three years.  The Company's plan of operations for the next 12 months
include the completion of exploratory work and site establishment and the
commencement of full scale operations at two of its present mining properties.
See "Item 1 Description of Business - Business of the Issuer" for a summary of
the Company's mining plans for each of its three mining properties.

     The Company believes that it has sufficient working capital to satisfy its
working capital requirements for the remainder of fiscal 1998, including the
capital required to commence full scale operations at two of its mining
properties, the Grasdrif and Caerwinning Deposits.  Commencement of production
at the Caerwinning Deposit assumes, however, the payment of the remaining
$1,400,000 to be advanced by PCM upon the Company's receipt of government
approval of the mineral lease.  The Company's beliefs concerning the sufficiency
of its working capital are based on certain assumptions concerning, among other
things, the estimated grade of the processed ore, average price per diamond
carat and cost of production.  If any of these assumptions prove incorrect, the
Company may require additional capital.  Any such additional financing might
involve a pledge or mortgage of the Company's properties and of any production
therefrom.  There is, of course, no assurance that satisfactory financing, if
necessary, could be obtained therefor.  In addition to borrowings to finance
individual development projects, the Company may also borrow funds from time to
time for working capital and other general corporate purposes.

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130").  SFAS 130 established standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements.  This statement is
effective for fiscal years beginning after December 15, 1997.  Reclassification
of financial statements for earlier periods provided for comparative purposes is
required.  At this time, the Company does not expect that this statement will
have a significant impact on the Company's financial statement disclosures.

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131").  SFAS 131 established
standards regarding how public companies report information about operating
segments in annual financial statements and requires that selected information
about operating segments be reported in interim financial reports to
stockholders.  This statement is effective for fiscal years beginning after
December 15, 1997.  In the initial year of adoption, comparative information for
earlier years must be restated.  The Company does not expect that this statement
will have a significant impact on the Company's financial statement disclosures
for the year ending December 31, 1998.

     The Company considers its hardware and software to be Year 2000 compliant
and does not expect to incur material costs in connection with Year 2000 issues.

     This report contains various forward-looking statements that are based on
the Company's beliefs as well as assumptions made by and information currently
available to the Company.  When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements.  Such statements are subject to certain
risks, uncertainties and assumptions, including, without limitation, that as of
this date the Company has not commenced mining operations at any of its three
mines; the lack of proven reserves at any of the Company's three mines; mining
risks generally; political risks associated with the Company's operations in the
Republic of South Africa; general economic conditions; currency fluctuations;
and estimates of costs of production.  Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, or
projected.  The Company cautions potential investors not to place undue reliance
on any such forward-looking statements all of which speak only as of the date
made.

                                       13
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

                         INDEX TO FINANCIAL STATEMENTS
<TABLE>
          <S>                                                             <C>
          Independent Auditors' Report................................... 15
          Consolidated Balance Sheets at December 31, 1997 and 1996...... 16
          Consolidated Statements of Operations for the years
            ended December 31, 1997, 1996 and 1995....................... 17
          Consolidated Statements of Stockholders' Equity
             for the years ended December 31, 1997, 1996 and 1995........ 18
          Consolidated Statements of Cash Flows for the years ended
            December 31, 1997, 1996 and 1995............................. 19
          Notes to Consolidated Financial Statements..................... 21
</TABLE>

                                       14
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Global Diamond Resources, Inc.:

We have audited the accompanying consolidated balance sheets of Global Diamond
Resources, Inc. and subsidiaries (the "Company") as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global Diamond
Resources, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.



                                                           KPMG Peat Marwick LLP
San Diego, California
March 24, 1998

                                       15
<PAGE>

                GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES

                          Consolidated Balance Sheets

                          December 31, 1997 and 1996

<TABLE>
<CAPTION>
                                Assets                                               1997                      1996
                                                                             -------------------       -------------------
Current assets:
<S>                                                                          <C>                       <C>
  Cash and cash equivalents                                                  $         4,096,141                   334,387
  Accounts receivable:
    Trade                                                                                 63,929                     6,538
    Officer                                                                               25,000                    25,000
  Inventory                                                                                   --                    64,208
  Prepaid expenses                                                                        11,069                    24,115
                                                                             -------------------       -------------------

                                                                                       4,196,139                   454,248

Fixed assets, net                                                                      1,572,442                   271,739
Deposits on equipment                                                                    284,438                        --
                                                                             -------------------       -------------------

                                                                             $         6,053,019                   725,987
                                                                             ===================       ===================

                               Liabilities

Current liabilities:
  Accounts payable and accrued liabilities                                   $            63,890                    86,258
  Current portion of long-term debt                                                      237,500                        --
                                                                             -------------------       -------------------

                                                                                         301,390                    86,258
                                                                             -------------------       -------------------

Long-term debt, less current portion                                                   1,662,500                        --
                                                                             -------------------       -------------------

                         Stockholders' Equity

Stockholders' equity:
  Preferred stock, $0.001 par value, 10,000,000 shares authorized,
    no shares issued and outstanding                                                          --                        --
  Common stock, $0.0005 par value, 50,000,000 shares authorized,
    23,903,604 and 11,000,108 shares issued and outstanding,
    respectively                                                                          11,952                     5,500
  Additional paid-in capital                                                           6,955,639                 2,199,234
  Accumulated deficit                                                                 (2,837,791)               (1,547,612)
  Cumulative translation adjustment                                                      (40,671)                  (17,393)
                                                                             -------------------       -------------------

                                                                                       4,089,129                   639,729
                                                                             -------------------       -------------------
Commitments and contingencies (Notes 8 and 9)
                                                                             $         6,053,019                   725,987
                                                                             ===================       ===================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       16
<PAGE>

                GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES

                     Consolidated Statements of Operations

              For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                                   1997                      1996                      1995
                                                          -------------------       -------------------       -------------------
<S>                                                       <C>                       <C>                       <C>
Other Income:
  Interest income                                         $            17,990                    10,017                    15,242
  Fee income                                                               --                    35,950                        --
                                                          -------------------       -------------------       -------------------

                                                                       17,990                    45,967                    15,242
Expenses:
  Business development                                                 64,529                    84,085                    82,758
  Site investigation, option costs and
    project costs written off                                          11,234                   100,031                   117,218
  Consulting fees                                                     444,248                    26,078                    15,504
  Depreciation                                                         43,013                     6,024                     4,913
  Foreign exchange transaction (gain) loss                                 --                    (6,862)                    2,228
  Interest                                                             15,333                        --                        --
  Legal and accounting                                                135,340                   134,891                   181,165
  Management fees                                                          --                        --                    38,855
  Office and miscellaneous                                             73,666                    65,678                    36,458
  Office rent                                                          14,272                    14,134                    20,062
  Printing and graphics                                                37,905                    14,897                    16,384
  Salaries and benefits                                               332,259                   149,431                    27,881
  Telephone                                                            25,706                    18,111                    16,716
  Travel                                                              108,884                   113,997                    80,072
                                                          -------------------       -------------------       -------------------

                                                                    1,306,389                   720,495                   640,214

Operating loss                                                     (1,288,399)                 (674,528)                 (624,972)

Income taxes                                                            1,780                     1,624                        --
                                                          -------------------       -------------------       -------------------

    Net loss                                              $        (1,290,179)                 (676,152)                 (624,972)
                                                          ===================       ===================       ===================

    Basic and diluted loss per share                      $             (0.11)                    (0.06)                    (0.07)
                                                          ===================       ===================       ===================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       17
<PAGE>

                GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

              For the years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                 Preferred
                                   Stock         Common Stock      Additional                 Receivable  Cumulative     Total
                               -------------  ------------------    Paid-in     Accumulated   From Stock  Translation Stockholders'
                               Shares Amount    Shares*  Amount     Capital       Deficit       Sales     Adjustment    Equity
                               ------ ------  ---------- -------   ----------  -----------   ----------  ----------- ------------
<S>                            <C>    <C>     <C>        <C>       <C>         <C>           <C>         <C>         <C>
Balance at December 31, 1994      --  $  --    8,830,000 $ 4,415     869,758     (246,488)    (299,401)    (17,311)      310,973
Receipt of payment for
  receivable from stock sales     --     --           --      --          --           --      299,401          --
Net effect of issuance of
  common stock to account for
  reverse acquisition             --     --      500,108     250        (250)          --           --          --
Issue of shares for cash          --     --      870,000     435     329,565           --           --          --       330,000
Translation adjustment            --     --           --      --          --           --           --      15,933        15,933
Net loss                          --     --           --      --          --     (624,972)          --          --      (624,972)
                               ------ ------  ---------- -------   ----------  -----------   ----------  ----------- ------------

Balance at December 31, 1995      --     --   10,200,108   5,100   1,199,073     (871,460)          --      (1,378)      331,335
Issue of shares for cash, net
  of issuance costs of $51,439    --     --      800,000     400     948,161           --           --          --
Issuance of stock warrants
  to nonemployees                 --     --           --      --      52,000           --           --          --
Translation adjustment            --     --           --      --          --           --           --     (16,015)      (16,015)
Net loss                          --     --           --      --          --     (676,152)          --          --      (676,152)
                               ------ ------  ---------- -------   ----------  -----------   ----------  ----------- ------------

Balance at December 31, 1996      --     --   11,000,108   5,500   2,199,234   (1,547,612)          --     (17,393)      639,729
Issue of shares for cash, net
  of issuance costs of $517,760   --     --    8,262,726   4,131   3,408,805           --           --          --     3,412,936
Issue of shares for warrants
  exercised                       --     --    1,100,000     550     292,579           --           --          --
Issue of shares for services      --     --    1,310,000     655     417,387           --           --          --       418,042
Issue of shares for equipment     --     --    1,230,770     616     249,384           --           --          --       250,000
Issue of shares and warrants
  for mining rights               --     --    1,000,000     500     388,250           --           --          --
Translation adjustment            --     --           --      --          --           --           --     (23,278)     (23,278)
Net loss                          --     --           --      --          --   (1,290,179)          --          --   (1,290,179)
                               ------ ------  ---------- -------   ----------  -----------   ----------  ----------- ------------

Balance at December 31, 1997      --  $  --   23,903,604 $11,952   6,955,639   (2,837,791)          --     (40,671)   4,089,129
                               ====== ======  ========== =======   ==========  ===========   ==========  =========== ============
</TABLE>
_______________
* Adjusted for two-for-one stock split (Note 10)
See accompanying notes to consolidated financial statements.

                                       18
<PAGE>

                GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows

             For the years ended December 31, 1997, 1996 and 1995


<TABLE>
<CAPTION>
                                                             1997              1996              1995
                                                         ------------      ------------      ------------
<S>                                                      <C>               <C>               <C>
Cash flows from operating activities:
  Net loss                                               $(1,290,179)        (676,152)         (624,972)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
   Depreciation                                               43,013            6,024             4,913
   Shares issued in consideration for services               418,042               --                --
   Issuance of warrants to nonemployees                           --           52,000                --
   Increase in accounts receivable - trade                   (57,391)          (3,497)          (26,164)
   Decrease (increase) in inventory                           64,208          (64,208)               --
   Decrease (increase) in prepaid expenses                    13,046          (17,238)           (6,877)
   Increase (decrease) in accounts payable
    and accrued liabilities                                  (22,368)          65,741            11,513
                                                         ------------      ------------      ------------

  Net cash used in operating activities                     (831,629)        (637,330)         (641,587)
                                                         ------------      ------------      ------------

Cash flows from investing activities:
Purchase of equipment, net                                    (7,277)         (19,978)           (6,149)
Mining properties and equipment                             (697,689)        (247,957)               --
Deposits on equipment                                       (284,438)              --                --
                                                         ------------      ------------      ------------

  Net cash used in investing activities                     (989,404)        (267,935)           (6,149)
                                                         ------------      ------------      ------------

Cash flows from financing activities:
Net proceeds from issuance of common shares                3,706,065          948,561           330,000
Proceeds from long-term debt                               1,900,000               --                --
Subscriptions received (refunded)                                 --          (83,333)           83,333
Receipt of payment for receivable from stock
  sales                                                           --               --           299,401
                                                         ------------      ------------      ------------

  Net cash provided by financing activities                5,606,065          865,228           712,734
                                                         ------------      ------------      ------------

Effects of exchange rates on cash                            (23,278)         (16,015)           15,933
                                                         ------------      ------------      ------------

Net increase (decrease) in cash and
  cash equivalents                                         3,761,754          (56,052)           80,931

Cash and cash equivalents, beginning of year                 334,387          390,439           309,508
                                                         ------------      ------------      ------------

Cash and cash equivalents, end of year                   $ 4,096,141          334,387           390,439
                                                         ============      ============      ============
</TABLE>

                                                                       Continued

                                       19
<PAGE>

                GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES

               Consolidated Statements of Cash Flows (Continued)

             For the years ended December 31, 1997, 1996 and 1995


Supplemental disclosure of noncash investing and financing transactions:

During the year ended December 31, 1997, the Company issued 1,310,000 common
shares to seven unaffiliated parties.  The shares were issued in consideration
of consulting services rendered by each party.  The Company purchased plant and
equipment for $350,000. The Company paid $100,000 in cash and issued 1,230,770
common shares for the balance, being the number of shares based on the market
value on the date of purchase.  The Company purchased the 50% interest in the
Grasdrif Property not already owned by it for 800,000 Rand (US $164,000) in cash
and by the issue of 1,000,000 common shares and 500,000 common stock purchase
warrants. The Company also issued 346,700 common shares to three unaffiliated
parties.  The shares were issued in consideration for the raising of equity
capital.



See accompanying notes to consolidated financial statements.

                                       20
<PAGE>

                GLOBAL DIAMOND RESOURCES, INC. AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements

             As of December 31, 1997 and 1996, and for each of the
            years in the three-year period ended December 31, 1997


(1)  Summary of Significant Accounting Policies and Practices

 Description of Business

 Global Diamond Resources, Inc. (the "Company") was incorporated on January 7,
 1987 and commenced operations during 1994.  Operations prior to January 1, 1994
 were not significant.  The Company's operations have been directed primarily
 towards raising capital, developing business strategies, developing diamond
 mining opportunities, carrying  out mining surveys, drilling, bulk sampling,
 acquiring mining interests, commencing mine site establishment, purchasing
 mining equipment  and recruiting personnel.

 Principles of Consolidation

 The consolidated financial statements include the financial statements of
 Global Diamond Resources, Inc. and its wholly-owned subsidiaries, Global
 Diamond Resources Inc., a Canadian corporation ("Global BC"), Global Diamond
 Resources International Limited, a British Virgin Islands corporation ("Global
 BVI") and Global BVI's wholly-owned subsidiary, Global Diamond Resources (SA)
 (Pty) Limited ("Global SA"), a South African corporation.  Prior to a
 reorganization in July 1995, the accompanying consolidated financial statements
 reflect only the accounts of Global BC and Global SA.  All amounts are in U.S.
 dollars unless otherwise indicated.  All significant intercompany balances and
 transactions have been eliminated in consolidation.

 Cash Equivalents

 Cash equivalents include all highly liquid investments with an original
 maturity of three months or less.

 Foreign Exchange Translation

 The financial position and results of operations of the Company's foreign
 subsidiaries are measured using local currency as the functional currency.
 Assets and liabilities of the subsidiaries are translated at the exchange rate
 in effect at each year-end.  Income statement accounts are translated at the
 average rate of exchange prevailing during the year.   Translation adjustments
 arising from differences in exchange rates from period to period are included
 in the cumulative translation adjustment account in stockholders' equity.

 Inventory

 Inventory consists of diamonds ready for sale and are valued at the lower of
 cost or estimated net realizable value.  Diamonds are ready for sale when they
 have been separated from the alluvials or broken ore, processed and are in a
 deliverable form.  No value is ascribed to diamonds in the alluvials or in the
 broken ore.

 Fixed Assets

 Fixed assets consist of mining properties under development, mining equipment
 and office equipment (primarily computers) recorded at cost.  Depreciation is
 provided for mining equipment and office equipment using the straight-line
 method over the estimated useful lives of 3-5 years and 3 years, respectively,
 of such assets.  Value of diamonds recovered from bulk sampling and drilling
 activities are offset against mine development costs.

 Mining Operations

 Initial exploration and evaluation costs are expensed as incurred.  Initial
 option payments and costs of acquiring options or other mineral or mining
 rights to properties, when not expected to be significant, are also expensed as
 incurred.

                                       21
<PAGE>

 The decision to develop or mine a property is based on an assessment of the
 viability of the property and the availability of financing.  Once the decision
 to proceed with development is made, development and other expenditures
 relating to such property will be deferred and carried at cost with the
 intention of depleting such costs over the related reserves from such mining
 properties.

 Stock Options and Warrants

 Prior to January 1, 1996, the Company accounted for its stock options and
 warrants in accordance with the provisions of Accounting Principles Board
 ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
 interpretations.  As such, compensation expense was recorded on the date of
 grant only if the current market price of the underlying stock exceeded the
 exercise price.  On January 1, 1996, the Company adopted Statement of Financial
 Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation,
 which permits entities to recognize as expense over the vesting period the fair
 value of all stock-based awards on the date of grant.  Alternatively, SFAS No.
 123 allows entities to continue to apply the provisions of APB Opinion No. 25
 and provide pro forma net income and pro forma earnings per share disclosures
 for employee stock option and warrant grants made in 1995 and future years as
 if the fair-value-based method defined in SFAS No. 123 had been applied.  The
 Company has elected to continue to apply the provisions of APB Opinion No. 25
 and provide the pro forma disclosure of SFAS No. 123.

 Income Taxes

 Income taxes are accounted for under the asset and liability method.  Deferred
 tax assets and liabilities are recognized for the future tax consequences
 attributable to differences between the financial statement carrying amounts of
 existing assets and liabilities and their respective tax bases and operating
 losses.  Deferred tax assets and liabilities are measured using enacted tax
 rates expected to apply to taxable income in the years in which those temporary
 differences are expected to be recovered or settled.  The effect on deferred
 tax assets and liabilities of a change in tax rates is recognized in income in
 the period that includes the enactment date.

 Fair Value of Financial Instruments

 SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires
 that fair values be disclosed for the Company's financial instruments.  The
 carrying amounts of cash and cash equivalents, accounts receivable - trade,
 inventory, deposits on equipment and accounts payable and accrued liabilities
 approximate fair values due to the short-term nature of these instruments.
 Estimation of the fair value of the account receivable-officer is not
 considered practicable due to its related party nature.  The carrying amount of
 the long term debt approximates fair value because the terms are comparable to
 the current market.

 Loss Per Common Share

 In December 1997, the Company adopted the provisions of SFAS No. 128 Earnings
 per Share.  SFAS No. 128 supersedes APB Opinion No. 15 and replaces "primary"
 and "fully diluted" earnings per share ("EPS") under APB Opinion No. 15 with
 "basic"and "diluted" EPS. Unlike primary EPS, basic EPS excludes the dilutive
 effects of securities options, warrants and other convertible securities.
 Dilutive EPS reflects the potential dilution of securities that could share in
 the earnings of the Company.  Common equivalent shares from convertible debt,
 stock options and warrants are excluded from the computation because their
 effect is anti-dilutive for all periods presented.  All current and prior
 period information presented conforms to the provisions of SFAS No. 128.

 Net loss per share for each period is computed based on the weighted-average
 number of common shares outstanding.  The weighted-average shares outstanding
 for the years ended December 31, 1997, 1996 and 1995 were 12,241,298,
 10,420,108 and 9,424,632 respectively.

 Use of Estimates

 Management of the Company has made a number of estimates and assumptions
 relating to the reporting of assets and liabilities and disclosure of
 contingent assets and liabilities at the date of the consolidated financial
 statements and the reported amounts of revenue and expenses to prepare these
 consolidated financial statements in conformity with generally accepted
 accounting principles.  Actual results could differ from those estimates.

                                       22
<PAGE>

 Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of

 The Company adopted the provisions of SFAS No. 121, Accounting for the
 Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
 January 1, 1996.  This Statement requires that long-lived assets and certain
 identifiable intangibles be reviewed for impairment whenever events or changes
 in circumstances indicate that the carrying amount of an asset may not be
 recoverable.  Recoverability of assets to be held and used is measured by a
 comparison of the carrying amount of an asset to future net cash flows expected
 to be generated by the asset.  If such assets are considered to be impaired,
 the impairment to be recognized is measured by the amount by which the carrying
 amount of the assets exceed the fair value of the assets.  Assets to be
 disposed of are reported at the lower of the carrying amount or fair value less
 costs to sell.  Adoption of this Statement did not have a material impact on
 the Company's financial position, results of operations, or liquidity.


(2) Fixed Assets

<TABLE>
<CAPTION>
                                          December 31,     December 31,
                                              1997            1996
                                          ------------     ------------
<S>                                       <C>              <C>
Mining properties under development:
  Caerwinning deposit                      $  374,403         209,553
  Grasdrif deposit                            819,724              --
                                          ------------     ------------

                                            1,194,127         209,553
                                          ------------     ------------

Mining equipment, at cost                     393,601          42,398
Less accumulated depreciation                 (31,932)             --
                                          ------------     ------------

                                              361,669          42,398
                                          ------------     ------------
Office equipment, at cost                      37,603          30,326
Less accumulated depreciation                 (20,957)        (10,538)
                                          -----------      ------------

                                               16,646          19,788
                                          -----------      ------------
                                          $ 1,572,442         271,739
                                          ===========      ============
</TABLE>

                                       23
<PAGE>

(3) Long-term Debt

<TABLE>
<CAPTION>
                                           December 31,       December 31,
                                               1997              1996
                                           ------------       ------------
<S>                                        <C>                <C>
15% Secured note payable, due 2002          $1,600,000                --
Other                                          300,000                --
                                           ------------       ------------
                                             1,900,000                --
Less current portion                          (237,500)               --
                                           ------------       ------------
                                            $1,662,500                --
                                           ============       ============
</TABLE>

 The 15% secured note payable has a prepayment requirement that if on December
 31, 2000 or 2001, the Company has in excess of $2,000,000 in cash and cash
 equivalents on hand, that excess must be paid as a prepayment on the note.  The
 note does not contain any penalties for prepayment.  The interest is payable
 every six months in arrears and the note is secured by the pledge of 100% of
 the stock of Global SA,which holds all of the Company's mining properties,
 plant and equipment.  The agreement related to the note restricts the payment
 of dividends by the Company.  The principal and interest under the note is
 convertible in to a maximum of 1,807,816 common shares of the Company at the
 rate of $0.425 per share.  The principal amount of the secured note payable is
 $3,000,000.  The remaining $1,400,000 is to be advanced at such time as the
 Company receives government approval of the mineral lease, which is expected to
 be received by the second quarter of 1998.

 The other long-term debt is unsecured and is payable without interest at the
 rate of $20,834 per month starting April 30, 1998. An initial payment of
 $50,000 was made in March 1998.

(4)  Income Taxes

 The Company has no significant taxable temporary differences which would
 require recognition of deferred tax liabilities, and due to the uncertainty of
 future realizability, has not recognized any deferred tax assets for deductible
 temporary differences and tax operating loss carryforwards.

 At December 31, 1997, the Company had available net operating loss
 carryforwards of approximately $1,452,000 for federal income tax reporting
 purposes which begin to expire in 2010.  The net operating loss carryforwards
 for state purposes, which begin to expire in 2000, approximate the federal
 amounts.  The net operating loss carryforwards are subject to certain
 limitations under Section 382 of the Internal Revenue Code.

(5)  Foreign Operations

 The Company's wholly-owned subsidiary, Global SA, operates in the Republic of
 South Africa.  During the year ended December 31, 1997, Global SA's revenue
 represented 8% of consolidated revenue, while Global SA's expenses represented
 6% of consolidated expenses.  At December 31, 1997, Global SA's total assets
 (primarily cash, mining properties under development and equipment) represented
 20% of consolidated total assets.  The Republic of South Africa has experienced
 and continues to experience political and economic instability.  While current
 indications are such that instability appears to be diminishing, there can be
 no assurance that the Company's business or interests in mining properties and
 related options will not be materially adversely affected by local political or
 economic developments.

(6)  Related Party Transactions

 The Company has engaged Weir International Limited ("Weir") to market and sell
 the Company's diamond production.  The Company shall be responsible for all
 direct costs relating to the sale of the diamonds, such as insurance, freight,
 import and export duties, and all applicable taxes and levies.  Weir shall be
 responsible for all sales and marketing expenses.  In consideration of its
 services, the Company shall pay Weir a commission of five percent (5%) of the
 gross sale amount.  Weir is a stockholder of the Company and certain members of
 the Company's management, including the Company's Chairman and Chief Executive
 Officer have a beneficial interest in Weir.

 As of December 31, 1997 and 1996, the Company had a $25,000 account receivable
 from the Chairman and Chief Executive Officer of the Company.  The receivable
 is unsecured, is due on demand and bears no interest.

                                       24
<PAGE>

(7)  Stock Options and Warrants

   In July 1995, the Company granted its Chairman and Chief Executive Officer
   performance based options to purchase up to 2,000,000 shares of common stock
   at $2.40 per share. In June 1996, the Company cancelled the options and
   reissued them with an exercise price of $1.50 per share and removed the
   performance based vesting conditions. In August 1997, the Company cancelled
   the options and reissued them with an exercise price of $.75 per share. The
   options expire on July 25, 2000 and are exercisable at any time.

   In conjunction with the reorganization with Global BC in July 1995, the
   Company issued 1,100,000 common stock purchase warrants to certain
   stockholders of Global BC. The warrants were issued as part of the securities
   exchange under the securities exchange agreement and plan of reorganization
   in consideration of the recipient's cancellation of warrants of like number
   and terms previously granted to it by Global BC in 1994. The warrants were
   exercisable at Canadian $.375 per share and expired on December 31, 1997. All
   of the warrants were exercised prior to December 31, 1997.

   In September 1995, the Company granted the Chairman and Chief Executive
   Officer 200,000 common stock options exercisable at $1.50 per share,
   exercisable at any time until they expire on September 7, 1998. In August
   1997, the Company cancelled the options and reissued them with an exercise
   price of $.75 per share.

   In December 1995, the Company issued to certain shareholder 200,000 common
   stock purchase warrants at $1.50 per share, exercisable at any time until
   they expire on December 30, 1998. In August 1997, the Company cancelled the
   warrants and reissued them with an exercise price of $.75 per share.

   In October 1996, the Company granted 500,000 common stock options to the
   Chief Financial Officer of the Company and 200,000 common stock options to
   another employee of the Company. The options are exercisable at $1.25 per
   share and are exercisable at any time until they expire on October 2, 2001.
   In August 1997, the Company cancelled the options and reissued them with an
   exercise price of $.75 per share.

   In December 1996, the Company issued to a mining financial and consulting
   firm located in London, England, 200,000 common stock purchase warrants at
   $1.25 per share, exercisable at any time until they expire on December 31,
   2000.

   In August 1997, the Company issued to each of the four directors 100,000
   common stock purchase warrants, exercisable at $.75 per share, exercisable at
   any time until they expire on December 31, 2000. In October 1997, the Company
   granted a new director 100,000 common stock purchase warrant exercisable at
   $.75 per share, exercisable at any time until they expire on December 31,
   2000.

   In August 1997, the Company issued to a certain shareholder 200,000 common
   stock purchase warrants at $.75 per share, exercisable at any time until they
   expire on December 30, 1998.

   In September 1997, the Company offered to the holders of the Canadian $.375
   common stock purchase warrants, which expired on December 31, 1997, an
   incentive of 1 new warrant for every 4 exercised by the end of September
   1997. In October 1997, the Company granted 174,500 warrants to the qualifying
   holders, exercisable at $.25 per share, exercisable at any time until they
   expire on December 31, 1998.

   In October 1997, the Company issued to a certain shareholder 808,486 common
   stock purchase warrants, exercisable at $.25 per share, for assisting with
   the raising of equity financing. The warrants are exercisable at any time
   until they expire on March 31, 2000.

   In November 1997, the Company granted 1,200,000 common stock options to the
   Chairman and Chief Executive Officer of the Company, 600,000 common stock
   options to the Chief Financial Officer of the Company, 200,000 to one of the
   directors of the Company and 800,000 common stock options to two other
   employees of the Company. The options are exercisable at $.525 per share and
   are exercisable at any time until they expire on November 26, 2002.

   In December 1997, the Company issued 500,000 common stock purchase warrants
   at $.375 per share as part of the purchase price for the 50% interest in the
   Grasdrif Property not already owned by the Company. The warrants are
   exercisable at any time until they expire on December 1, 1998.

   In December 1997, the Company issued common stock purchase warrants as part
   of an equity financing agreement. The 346,494, 74,786, 214,286 and 172,286
   warrants are exercisable at $.25, $.25, $.375 and Canadian $.375 per share
   respectively, exercisable at any time until they expire on March 31, 2000,

                                       25
<PAGE>

   December 31, 1998, December 1, 1998 and March 14, 1998, respectively. The
   warrants expiring on March 14, 1998 were exercised in March 1998.

   In December 1997, the Company issued to a mining financial and consulting
   firm located in London, England, 70,000 common stock purchase warrants,
   exercisable at $.85 per share, at any time until they expire on March 6,
   2001.

   The per share weighted-average fair value of stock options and warrants
   granted to directors, officers and employees during 1997, 1996 and 1995 was
   $.46, $.66 and $1.21, respectively, on the date of grant using the Black
   Scholes option-pricing model with the following weighted-average assumptions;
   1997 - expected dividend yield 0%, risk-free interest rate of 6%, expected
   life of 3 years and an expected volatility of the stock over the expected
   life of the options and warrants of 70%; 1996 - expected dividend yield 0%,
   risk-free interest rate of 6.54%, expected life of 3.5 years, and an expected
   volatility of the stock over the expected life of the options and warrants of
   40%; 1995 - expected dividend yield 0%, risk-free interest rate of 6.08%,
   expected life of 3.8 years, and an expected volatility of the stock over the
   expected life of the options and warrants of 40%.

   The Company applies APB Opinion No. 25 in accounting for its stock options
   and warrants granted to directors, officers and employees. No compensation
   cost has been recognized for its stock options and warrants issued to
   employees or directors of the Company in the consolidated financial
   statements. Had the Company determined compensation cost based on the fair
   value at the grant date for its stock options and warrants under SFAS No.
   123, the Company's net loss and net loss per share would have been increased
   to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                          1997                            1996                        1995
                                             ---------------------------       ----------------------       ---------------------
 <S>                                         <C>                               <C>                          <C>
     Net loss, as reported                                   $(1,290,179)                    (676,152)                   (624,972)
     Net loss, pro forma                                      (1,849,099)                    (921,152)                 (2,017,972)

     Basic and diluted loss per
       share, as reported                                           (.11)                        (.06)                       (.07)
     Basic and diluted loss per
       share, pro forma                                             (.15)                        (.09)                       (.21)
</TABLE>

 Stock option and warrant activity during the periods indicated is as follows:


<TABLE>
<CAPTION>
                                                                                                                Weighted-
                                                                                   Number of                     Average
                                                                                    Shares                    Exercise Price
                                                                          -----------------------        ---------------------
 <S>                                                                      <C>                            <C>
     Balance at December 31, 1994                                                       1,100,000        $                0.28
       Granted                                                                          2,400,000                         2.25
                                                                          -----------------------        ---------------------

     Balance at December 31, 1995                                                       3,500,000                         1.63
       Granted                                                                            900,000                         1.25
       Canceled                                                                        (2,000,000)                        2.40
       Reissued                                                                         2,000,000                         1.50
                                                                          -----------------------        ---------------------

     Balance at December 31, 1996                                                       4,400,000                         1.14
       Granted                                                                          5,860,838                         0.46
       Exercised                                                                       (1,100,000)                        0.26
       Canceled                                                                        (3,100,000)                        1.43
       Reissued                                                                         3,100,000                         0.75
                                                                          -----------------------        ---------------------

     Balance at December 31, 1997                                                       9,160,838        $                0.57
                                                                          =======================        =====================
</TABLE>

   At December 31, 1997, the range of exercise prices and the weighted-average
   remaining contractual life of outstanding options and warrants were $.25 to
   $1.25 and 3.1 years, respectively.

                                       26
<PAGE>

   At December 31, 1997, 1996 and 1995, the number of options and warrants
   exercisable was 9,160,838, 4,400,000 and 3,500,000, respectively, and the
   weighted-average exercise price of those options and warrants was $.57, $1.14
   and $1.63, respectively.

(8)  Properties

   Caerwinning Deposit and Montrose Kimberlite Pipe

   The Company, through its wholly-owned subsidiary, Global SA, owns options to
   acquire two mining properties (the Caerwinning Deposit and the Montrose
   Kimberlite Pipe) in South Africa and a 100% interest in a third South African
   property (the Grasdrif Deposit, see Grasdrif Deposit below). The Caerwinning
   option allows for the transfer of the mineral lease to Global SA with
   governmental consent and provides for the right to mine alluvial deposits for
   1,140,000 Rand (US $234,000 at December 31, 1997) and the right to mine the
   pipes or fissures that may be discovered for 8,000,000 Rand (US $1,644,000 at
   December 31, 1997). This amount is payable only if and when such pipes or
   fissures are discovered and if management deems this deposit to be
   economically exploitable. The right to mine pipes or fissures discovered on
   the property could be granted to a third party if the option is not
   exercised. The Company exercised the alluvial deposit option for the
   Caerwinning Deposit in June 1996 and is waiting governmental consent for
   transfer of the mineral lease. Approval is expected in the second quarter of
   1998 (See Caerwinning Option below). The mineral lease and mining
   authorization for the Caerwinning Deposit also requires that the government
   receive approximately 5 percent of gross proceeds from mining. The mineral
   lease for the Caerwinning Deposit has an initial ten year term with a ten
   year renewal option, subject to Lama Minerals CC's right to terminate the
   mineral lease based on the Company's default thereunder. It may be terminated
   by the Company with 30 days notice. The Company is required to meet certain
   requirements to maintain good standing with the lessor. The option for the
   Montrose Kimberlite Pipe expires on October 10, 1998. The contract for the
   Montrose Kimberlite Pipe provides that the Company must pay the owner 10
   percent of the recovery value of any minerals prospected and recovered,
   during the option period. The option on the Montrose Kimberlite Pipe property
   includes the exclusive option to purchase the related land and mineral rights
   for 2,800,000 Rand (US $575,000 at December 31, 1997). A prospecting permit
   is required for the Montrose Kimberlite Pipe from the local government and is
   renewable annually subject to government approval. The Company presently
   holds such a permit for the Montrose Kimberlite Pipe, which expires on
   October 10, 1998. The Company has expensed all option payments, with the
   exception of the option payments on the Caerwinning Deposit from July 1,
   1996, because of uncertainty regarding recoverability or future benefit.

   Grasdrif Deposit

   The Company had entered into a joint venture for purposes of mining the
   Grasdrif Deposit. In December 1997, the Company purchased the 50 percent of
   the joint venture not already owned by it for 800,000 Rand (US $164,000),
   1,000,000 common shares and 500,000 common stock purchase warrants. The
   Company owns the exclusive mining rights to the Grasdrif Deposit. A royalty
   of 5 percent is payable to the surface owner. A prospecting permit is
   required from the local government and is renewable annually subject to
   government approval. The Company presently holds such a permit, which expires
   August 4, 1998.

   Caerwinning Option

   As discussed above, in June 1996, the Company exercised the option for the
   mineral lease for the alluvial deposits. The mineral lease is issued upon
   governmental approval, which is expected in the second quarter of 1998. The
   Company will pay the 1,140,000 Rand (US $234,000 at December 31, 1997) for
   the option upon governmental approval of the mineral lease.

(9)  Commitments and Contingencies

   Lease Agreement

   As of December 31, 1997, the Company had a noncancelable operating lease
   commitment for the Company's corporate office expiring in March 1999. The
   monthly rent payment on this operating lease is $1,067. Additionally, the
   Company rents office space in South Africa on a month-to-month basis. Rent
   expense for the years ended December 31, 1997, 1996 and 1995 was $14,272,
   $14,134 and $20,062, respectively.

                                       27
<PAGE>

   Legal Matters

   From time-to-time, the Company is subject to certain litigation in the
   ordinary course of business. At the present time, the Company is not party to
   any pending legal proceedings that it believes will have a material adverse
   effect on its financial position, results of operations or liquidity.

(10) Common Stock Split

   In December 1997, the Company's Board of Directors declared a two-for-one
   stock split in the Company's common stock. In addition, they declared that
   the par value of the common stock be adjusted from $.001 per common share to
   $.0005 per common share. The stock split and adjustment to par value were
   effective December 19, 1997. All share and per share data, including stock
   options and warrants, included in these financial statements have been
   restated to reflect this stock split.

                                       28
<PAGE>

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

   Inapplicable.


Part III

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

Directors and Executive Officers
--------------------------------

  Set forth below are the directors and officers of the Company and its South
African subsidiary, Global Diamond Resources (SA)(Pty) Limited ("Global
Diamond-SA"). Unless otherwise indicated, each person holds the stated positions
with both companies.

<TABLE>
<CAPTION>
Name                              Age           Position
----                              ---           --------
<S>                               <C>           <C>
Johann de Villiers                 45           Chairman of the Board and Chief Executive Officer

Mervyn McCulloch                   54           Chief Financial Officer,
                                                Secretary and Director of the Company

Pieter van Wyk                     46           Director of Exploration and Mining and Director
                                                of the Company

John Tyson                         50           Director of the Company

Charles MacDonald                  44           Director of the Company

Abu Bakr Bin Ali Al-Akhdar Mood    41           Director of the Company

Said H. Ghachem                    56           Director of the Company

Gasem S. Al-Shaikh                 44           Director of the Company

Andries Janzen                     54           Managing Director of Global Diamond-SA and
                                                Director of the Company

Derek Williams                     35           Chief Financial Officer and Director of Global
                                                Diamond-SA
</TABLE>
  Mr. de Villiers founded the business of the Company in 1993 and has served as
Chairman and Chief Executive Officer since inception.  From 1984 to 1990, Mr. de
Villiers served as Chief Executive Officer of Kensington Finance Corp., an
options trading firm and member of the American Stock Exchange.  From 1990 to
1994, Mr. de Villiers acted as investment advisor to the Monitrend Gold Mutual
Fund.  From 1976 to 1984, Mr. de Villiers was the managing director of the Octha
Group, a South Africa based international diamond mining, polishing and trading
company.

  Mr. McCulloch has served as Chief Financial Officer and Secretary of the
Company since March 1995 and as a director of the Company since October 1997.
Mr. McCulloch is a Certified Public Accountant and was a partner of Deloitte,
Haskins & Sells in South Africa from 1972 to 1984 and a partner in Deloitte &
Touche in the United States from 1985 to 1990.  From 1990 to 1995, Mr. McCulloch
was Executive Vice President and Chief Financial Officer of Armor All Products
Corporation, a NASDAQ/NMS public corporation located in California.

  Mr. van Wyk has served as Chief Consulting Geologist of Global Diamond-SA from
July 1994 to February 1998.  In February 1998, Mr. van Wyk was appointed to
serve as Director of Exploration and Mining of the Company and as member of the
Company's Board of Directors.  Mr. van Wyk holds a M.Sc. (Geology) and has
lectured in Sedimentology at the University of Pretoria and in Economic Geology
at the Rand Afrikaans University.  He was the Senior Field Geologist for Rand
Mines before operating his own diamond mining and exploration concern with

                                       29
<PAGE>

interests in southern Namibia (alluvials), south of Kimberley (kimberlite
fissures), and west of Kimberley along the Vaal River (alluvials) at
Caerwinning.  He is the published author of a number of articles.

  Mr. Tyson has served as director of the Company since 1994.  Since 1990, Mr.
Tyson has served as President of Tyson & Associates, an international consulting
firm headquartered in Washington, D.C. specializing in providing investment,
business development and promotional services to African countries.

  Mr. MacDonald has served as a director of the Company since July 1995.  Since
1990, Mr. MacDonald has been engaged in the practice of law in Cape Town, South
Africa.

  Eng. Abu Bakr Bin Ali Al-Akhdar Mood has served as a director of the Company
since December 1997.  He has also served as the Managing  Director of the
Petroleum Chemicals and Mining Division and an Executive Board Member of the
Saudi Binladin Group, headquartered in Jeddah, Kingdom of Saudi Arabia, since
1994.  The Saudi Binladin Group is a diversified international conglomerate
specializing in the construction of major infrastructure projects worldwide.
Eng. Abu Bakr Bin Ali Al-Akhdar Mood serves on the Board of Directors of the
Company as the nominee of International PCM Holdings Limited.

  Mr. Said H. Ghachem has served as a director of the Company since December
1997.  He has also served as the Vice President of International Business
Development of the Saudi Binladin Group since 1994.  Mr. Ghachem serves on the
Board of Directors of the Company as the nominee of International PCM Holdings
Limited.

  Eng. Gasem S. Al-Shaikh as served as a director of the Company since December
1997.  He has also served as the Deputy Managing Director of the Petroleum
Chemicals and Mining Division and an Executive Board Member of the Saudi
Binladin Group since 1994.  Eng. Gasem S. Al-Shaikh serves on the Board of
Directors of the Company as the nominee of International PCM Holdings Limited.

  Mr. Janzen has served as Managing Director of Global Diamond-SA since July
1994 and a director of the Company since February 1998.  Mr. Janzen is a
qualified engineer with a degree in commerce, and a shareholder and general
manager of Elite Diamond Cutting Works (Pty) Ltd., a South African based diamond
cutting and trading company.  He was the general manager of the Octha Group,
having established its Johannesburg and Taiwan diamond cutting factories.  In
this position he was responsible for the operations of five producing diamond
mines, an active mine exploration program, two diamond polishing factories, as
well as the marketing organization of the group that extended to Belgium,
Switzerland and the United States.

  Mr. Williams has served as Chief Financial Officer of Global Diamond-SA since
March 1998.  Mr. Williams previously served as Chief Financial Officer of
Thompson Publishing SA (Pty) Ltd. from June 1995 to February 1998; Financial and
Administrative Manager of VIVO African Breweries (Pty) Ltd. from July 1994 to
April 1995; and Financial Manager of ZIMCO Industries from July 1991 to June
1994.  All of the foregoing companies are based in South Africa.  Mr. Williams
is a Chartered Accountant in South Africa.

                                       30
<PAGE>

Item 10.  Executive Compensation.

  Cash Compensation of Executive Officers.  The following table sets forth the
cash compensation paid by the Company to its executive officers for services
rendered during the fiscal years ended December 31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>                                                                     Long-Term
                                          Annual Compensation                Compensation
                                ---------------------------------------- -----------------------
                                                                                        Common
                                                                         Restricted   Underlying
                                                              Other         Stock      Options
                                                              Annual        Awards     Granted       All Other
   Name and Position            Year     Salary     Bonus   Compensation     ($)      (# Shares)   Compensation
-------------------------       ----     ------     -----   ------------ ----------   ----------   ------------
<S>                             <C>      <C>        <C>     <C>          <C>          <C>          <C>

Johann de Villiers, CEO(1)      1997    $127,500    12,500       -0-         -0-      1,300,000(2)      -0-
                                1996      60,000     5,000       -0-         -0-          -0-           -0-
                                1995      40,000      -0-        -0-         -0-      2,200,000(3)      -0-

Mervyn McCulloch, CFO(4)        1997    $121,000    10,000       -0-         -0-        700,000(5)      -0-
                                1996      42,000     3,000       -0-         -0-        500,000(6)      -0-
                                1995       -0-        -0-        -0-         -0-          -0-           -0-
</TABLE>
_______________

(1)  The Company has entered into a five year employment agreement with Mr. de
     Villiers effective as of February 4, 1998.  Pursuant to the agreement, Mr.
     de Villiers receives a monthly salary of $20,833 and a monthly car
     allowance of $750.  In addition, Mr. de Villiers is entitled to participate
     in a senior management bonus pool in the amount of 10% of the Company's
     annual after tax earnings.

(2)  On August 11, 1997, the Company granted Mr. de Villiers a Nonqualified
     Stock Option which allows Mr. de Villiers to purchase up to 100,000 shares
     of Common Stock at $.75 per share.  The option is fully vested and may be
     exercised at any time, or from time to time, until December 31, 2000.  On
     November 26, 1997, the Company granted to Mr. de Villiers a Nonqualified
     Stock Option which allows Mr. de Villiers to purchase up to 1,200,000
     shares of Common Stock at $.75 per share.  The option is fully vested and
     may be exercised at any time, or from time to time, until November 26,
     2002.

(3)  On July 25, 1995, the Company granted to Mr. de Villiers a Nonqualified
     Stock Option which, as amended, allows Mr. de Villiers to purchase up to
     2,000,000 shares of Common Stock at $1.50 per share.  The option is fully
     vested and may be exercised at any time, or from time to time, until July
     25, 2000.  On September 7, 1995, the Company granted to Mr. de Villiers a
     Nonqualified Stock Option to purchase 200,000 shares of Common Stock at any
     exercise price of $1.50 per share.  The option is fully vested, and
     immediately exercisable and expires on September 7, 1998.  On August 11,
     1997 the exercise price on both options was adjusted to $.75 per share.

(4)  The Company has entered into a five year employment agreement with Mr.
     McCulloch effective as of February 4, 1998.  Pursuant to the agreement, Mr.
     McCulloch receives a monthly salary of $15,000 and a car allowance of $500.
     In addition, Mr. McCulloch is entitled to participate in a senior
     management bonus pool in the aggregate amount of 10% of the Company's
     annual after tax earnings.

(5)  On October 10, 1997, the Company granted to Mr. McCulloch a Nonqualified
     Stock Option which allows Mr. McCulloch to purchase up to 100,000 shares of
     Common Stock at $.75 per share.  The option is fully vested and may be
     exercised at any time, or from time to time, until December 31, 2000.  On
     November 26, 1997, the Company granted to Mr. McCulloch a Nonqualified
     Stock Option which allows Mr. McCulloch to purchase up to 600,000 shares of
     Common Stock at $.75 per share.  The option is fully vested and may be
     exercised at any time, or from time to time, until November 26, 2002.

(6)  On October 2, 1996, the Company granted to Mr. McCulloch a Nonqualified
     Stock Option to purchase 500,000 shares of Common Stock at an exercise
     price of $1.50 per share.  The option is fully vested and immediately
     exercisable and expires on October 2, 2001.  On August 11, 1997 the
     exercise price was adjusted to $.75 per share.

                                       31
<PAGE>

Option/SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                                          Individual Grants
 ------------------------------------------------------------------------------------------------------------------------
                           Number of Securities         % of Total Options/SARs
                          Underlying Options/SARs    Granted to Employees in Fiscal   Exercise or Base
      Name                      Granted (#)                      Year                    Price ($/Sh)     Expiration Date
-------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                        <C>                              <C>                 <C>
Johann de Villiers                100,000                          3%                       $.75             12/31/00
Johann de Villiers              1,200,000                         36%                       $.75             11/26/02
Mervyn McCulloch                  100,000                          3%                       $.75             12/31/00
Mervyn McCulloch                  600,000                         18%                       $.75             11/26/02
</TABLE>



  Compensation of Directors.  All non-officer directors receive an attendance
fee of $1,000 per meeting of the Board of Directors.  All directors receive
reimbursement for out-of-pocket expenses in attending Board of Directors
meetings.  From time to time the Company may engage certain members of the Board
of Directors to perform services on behalf of the Company.  The Company will
compensate the members for their services at rates no more favorable than could
be obtained from unaffiliated parties.

                                       32
<PAGE>

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

  The following table sets forth certain information regarding the beneficial
ownership of the shares of Common Stock as of March 23, 1998 by (i) each person
who is known by the Company to be the beneficial owner of more than five percent
(5%) of the issued and outstanding shares of Common Stock, (ii) each of the
Company's directors and executive officers and (iii) all directors and executive
officers as a group.


<TABLE>
<CAPTION>
            Name and Address              Number of Shares     Percentage Owned
                                          ----------------     ----------------
<S>                                       <C>                  <C>
Johann de Villiers(1)(2)                     1,642,668               6.4%
Mervyn McCulloch(1)(3)                       1,345,500               5.3%
Pieter van Wyk(1)(4)                           600,000               2.4%
John Tyson(1)(5)                               393,920               1.6%
Charles MacDonald(1)(6)                        225,000               (7)
Abu Bakr Bin Ali Al-Akhdar Mood(1)                (8)                --
Said H. Ghachem(1)                                (8)                --
Gasem S. Al-Shaikh(1)                             (8)                --
Andries Janzen(1)                                   --               --
International PCM Holdings Limited(9)        9,711,525              37.5%
All officers and directors                   4,207,088              15.1%
as a group
_______________
</TABLE>

(1)  Address is 836 Prospect, Suite 2B, La Jolla, California 92037.

(2)  Includes 1,542,668 shares of Common Stock underlying immediately
     exercisable options held by Mr. de Villiers.

(3)  Includes 1,200,000 shares of Common Stock underlying immediately
     exercisable options held by Mr. McCulloch.

(4)  Represents 600,000 shares of Common Stock underlying immediately
     exercisable options.

(5)  Includes 300,000 shares of Common Stock underlying immediately
     exercisable options.

(6)  Includes 100,000 shares of Common Stock underlying immediately
     exercisable options.

(7)  Less than one percent.

(8)  Serves on the Board of Directors of the Company as the nominee of
     International PCM Holdings Limited.

(9)  Includes 1,807,816 shares of Common Stock issuable upon conversion of a
     Secured Convertible Promissory Note. Does not include 635,566 shares of
     Common Stock underlying warrants not immediately exercisable.

                                       33
<PAGE>

Item 12.  Certain Relationships and Related Transactions.

  The Company has engaged Weir International Limited ("Weir") to market and sell
the Company's diamond production.  The Company shall be responsible for all
direct costs relating to the sale of the diamonds, such as insurance, freight,
import and export duties, and all applicable taxes and levies.  Weir shall be
responsible for all sales and marketing expenses.  In consideration of its
services, the Company shall pay Weir a commission of five percent (5%) of the
gross sale amount.  In June 1997, the Company paid Weir a fee of $16,000 in
consideration of consulting services rendered.  Weir is a stockholder of the
Company and the Company's Chief Executive Officer, Johann de Villiers, has a
beneficial interest in Weir.  The Company believes that the terms of its
transactions with Weir are no less favorable than could be obtained from an
unaffiliated party.

  In December 1997, the Company entered into a consulting agreement with a
director of the Company, John Tyson.  The Agreement provides for consulting fees
of $5,000 per month to Mr. Tyson and is terminable by either party effective
upon written notice.  Mr. Tyson provides advice and assistance to the Company
with respect to its relationships with the Republic of South Africa and other
possible mining prospects in the rest of Africa.  The Company believes that the
terms of its agreement with Mr. Tyson are no less favorable than could be
obtained from an unaffiliated party.


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

(a)  2.1*  Securities Purchase Agreement and Plan of Reorganization dated July
           17, 1995 between Western Capital Financial Corporation and Global
           Diamond Resources, Inc.

     3.1*  Articles of Incorporation of the Company

     3.2*  Bylaws of the Company

     4.1*  Specimen of Common Stock Certificate

    10.1*  Notarial Prospecting Contract dated March 22, 1995 between Global
           Diamond Resources (SA)(Pty) Limited and Maria Anna Gobey (Montrose
           Kimberlite Pipe).

    10.2*  Deed of Assignment between Lama Minerals CC and Global Diamond
           Resources (SA)(Pty) Limited (Caerwinning Deposit).

    10.3*  Deed of Assignment dated March 25, 1995 between Global Diamond
           Resources (SA)(Pty) Limited and Nabas Holdings (Pty) Limited
           (Grasdrif Deposit).

    10.4   Securities Purchase Agreement dated December 5, 1997 between the
           Company and International PCM Holdings Limited.

    21.1   The Company's subsidiaries are Global Diamond Resources, Inc., a
           British Columbia corporation, and Global Diamond Resources (SA)(Pty)
           Limited, a South African corporation, Global Diamonds Resources
           International Limited, a British Virgin Islands corporation, and
           Nabas Diamonds (Pty) Ltd., a South African corporation

    27.1   Financial Data Schedule.

_______________

*Previously filed as part of registration statement on Form 10-SB (SEC File No.
0-21635) filed with the Securities and Exchange Commission on October 29, 1996.


(b)  Reports on Form 8-K.

  During the fourth quarter of the fiscal year ended December 31, 1997, the
Company filed a Current Report on Form 8-K to report the terms of the investment
by International PCM Holdings Limited.

                                       34
<PAGE>

                                  Signatures


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                              GLOBAL DIAMOND RESOURCES, INC.


Date:  March 26, 1998         By: /s/ JOHANN DE VILLIERS
                                 -------------------------------------------
                                 Johann de Villiers, Chief Executive Officer


     In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
Signature                                  Title                               Date
---------                                  -----                               ----
<S>                                      <C>                                 <C>
/s/ JOHANN DE VILLIERS
-----------------------------------      Chairman of the Board               March 26, 1998
JOHANN DE VILLIERS                       and Chief Executive Officer

/s/ MERVYN MCCULLOCH
-----------------------------------      Chief Financial Officer             March 26, 1998
MERVYN MCCULLOCH                         and Principal Accounting Office r

/s/ PIETER VAN WYK
-----------------------------------      Director                            March 26, 1998
PIETER VAN WYK

/s/ JOHN TYSON
-----------------------------------      Director                            March 26, 1998
JOHN TYSON

/s/ CHARLES MACDONALD
-----------------------------------      Director                            March 26, 1998
CHARLES MACDONALD

/s/ ABU BAKR BIN ALI AL-AKHDAR MOOD
-----------------------------------      Director                            March 26, 1998
ABU BAKR BIN ALI AL-AKHDAR MOOD

/s/ SAID H. GHACHEM
-----------------------------------      Director                            March 26, 1998
SAID H. GHACHEM

/s/ GASEM S. AL-SHAIKH
-----------------------------------      Director                            March 26, 1998
GASEM S. AL-SHAIKH

/s/ ANDRIES JANZEN
-----------------------------------      Director                            March 26, 1998
ANDRIES JANZEN
</TABLE>

                                       35