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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
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                                    FORM 10-K
(Mark One)

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

For the fiscal year ended June 30, 1997

                                       OR

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

For the transition period from _____________ to ____________

                         Commission file number 0-22191

                        CONSERVER CORPORATION OF AMERICA
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

               Delaware                               65-0675901
    -------------------------------               -------------------
    (State or Other Jurisdiction of                (I.R.S. Employer
     Incorporation or Organization)               Identification No.)

                           3250 Mary Street, Suite 405
                             Coconut Grove, FL 33133
                    ----------------------------------------
                    (Address of Principal Executive Offices)

                                  305-444-3888
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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

                                                    Name of Each Exchange
          Title of Each Class                        on Which Registered
  ----------------------------------           -------------------------------
    Common Stock, $0.001 par value                  Nasdaq SmallCap Market

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

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

         Indicate by Check Mark if there is disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K. / /

The aggregate market value of voting stock held by non-affiliates as of
September 30, 1997 was $40,411,833.

The number of shares of Common Stock, $0.001 par value, outstanding as of
September 30, 1997 was 6,793,404.

               DOCUMENTS INCORPORATED BY REFERENCE: Not Applicable

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                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----

Item 1.  Business.........................................................   1
          The Company.....................................................   1
          Conserver 21[TM]................................................   2
          Proposed New Line Of Business and New Business Opportunities....   7
          Insurance.......................................................  11
          Employees.......................................................  11

Item 2.  Properties.......................................................  12

Item 3.  Legal Proceedings................................................  12

Item 4.  Submission of Matters to a Vote of Securities Holders............  12

Item 5.  Market for Common Equity and Related Stockholder Matters.........  13

Item 6.  Selected Financial Data..........................................  14

Item 7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations...........................................  14
          Overview........................................................  14
          Change in Fiscal Year...........................................  16
          Results of Operations...........................................  17
          Liquidity and Capital Resources.................................  19
          Accounting Pronouncements.......................................  22
          Subsequent Events...............................................  23
          Factors That Could Affect Operating Results.....................  28

Item 8.  Financial Statements.............................................  32

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.............................................  33

Item 10. Directors and Executive Officers of the Registrant...............  33
         Compliance with Section 16(A) Of The Securities Exchange
         Act Of 1934......................................................  35

Item 11. Executive Compensation...........................................  36
         Summary Compensation Table.......................................  36
         Employment Agreement.............................................  36
         Option Grants For the Ten Months Ended June 30, 1997.............  37

Item 12. Security Ownership of Certain Beneficial Owners and Management...  37


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                                                                           Page
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Item 13.  Certain Relationships and Related Transactions..................  40

Item 14.  Exhibits, Financial Statement & Schedules, and Reports on
          Form 8-K........................................................  42

SIGNATURES................................................................  45

Report of Independent Auditors............................................ F-2

Financial Statements...................................................... F-3


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This Annual Report on Form 10-K contains forward-looking statements. Additional
written and oral forward-looking statements may be made by the Company from time
to time in Securities and Exchange Commission ("SEC") filings and otherwise. The
Company cautions readers that results predicted by forward-looking statements,
including, without limitation, those relating to the Company's future business
prospects, revenues, working capital, liquidity, capital needs, interest costs,
and income are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward-looking
statements due to risks and factors identified from time to time in the
Company's filings with the SEC including those discussed in this Report.


                                     PART I

Item 1.  Business

The Company

         Conserver Corporation of America (the "Company") is a development stage
company incorporated under the laws of the State of Delaware on March 6, 1996.

         The Company holds the exclusive right to promote, import, distribute,
market, sell and otherwise commercially exploit Conserver 21[TM], a non-toxic
product which can be used to retard spoilage and decay in food and flowers, in
the United States and Canada. The Company also holds an option and a right of
first refusal to exercise such rights throughout the world.

         As a development stage company, the Company's activities since its
inception have been primarily focused on raising both debt and equity financing
(public and private), recruiting management personnel, testing, developing and
exploiting Conserver 21[TM] and negotiating distribution and other arrangements.
The Company has incurred losses since its inception, and, as of June 30, 1997,
the Company had yet to derive any revenues from its operations. Its accumulated
deficit at June 30, 1997 was $9,949,138, which included $5,902,307 of non-cash
compensation charges related to the value attributed to stock options and
warrants issued by the Company.

         From March 1996 through November 1996, the Company raised capital
necessary for its business development through debt and equity private
placements. In June 1997, the Company completed an initial underwritten public
offering (the "Offering") in which it received net proceeds of approximately
$8,900,000 from the sale of 2,200,000 shares of its common stock, $0.001 par
value (the "Common Stock"), at a per share price of $5.00. In July 1997, the
Company's underwriter exercised its over-allotment option to purchase an
aggregate of 330,000 shares of Common Stock at $5.00 per share resulting in the
Company receiving additional net proceeds of $1,448,000. Aggregate net proceeds
to the Company from the Offering amounted to $10,348,000. Also in connection
with the Offering, the Company sold to the underwriters, for nominal
consideration, Underwriters' Warrants to purchase 220,000 shares of Common Stock
exercisable for a period of four years at $8.25 per share.


<PAGE>


         Subsequent to the Company's fiscal year end, the Company announced in
August 1997 that it was considering diversifying beyond its sole line of
business of marketing, distributing and otherwise commercially exploiting
Conserver 21[TM] (the "Principal Line of Business") and was exploring a possible
new line of business in the hotel and casino industry (the "New Line of
Business"). In connection with the New Line of Business, and subject to the
receipt of requisite approval by the Company's stockholders, the Company has (i)
entered into an agreement to acquire certain rights to develop a hotel and
casino project in Yuzhno-Sakhalinsk on the Sakhalin Island of the Russian
Federation (the "Sakhalin Project"), located 20 minutes by air from Sapporo,
Japan, (ii) entered into an agreement with Dato' David Chiu to provide certain
development services with respect to the Sakhalin Project, (iii) reached an
agreement to manage certain hotels of Dorsett Hotels and Resorts International,
including hotels presently operating or being developed in the United States,
Bali, Australia, Canada, Cambodia, Malaysia and Thailand, and (iv) entered into
several other related agreements (collectively, the "New Business
Opportunities"). The agreements, if approved by the Company's stockholders,
provide for the issuance by the Company, under certain circumstances and subject
to the completion of certain terms and obligations thereunder, of up to
5,500,000 million shares of Common Stock and options to purchase 600,000 shares
of Common Stock. In addition to the direct issuance of shares of the Company's
Common Stock in connection with the proposed transactions, the Company
anticipates funding the cash portion of the initial capital required for the
proposed New Line of Business and New Business Opportunities with the proceeds
from the sale of additional Common Stock and/or other securities of the Company
in private offerings. Both the proposed New Line of Business and New Business
Opportunities are subject to receipt of requisite stockholder approval. (See
"Item 1. Proposed New Line of Business and New Business Opportunities".)

Conserver 21[TM]

         The Product. Conserver 21[TM] is a non-toxic product composed of
sepiolite and mineral salt which can be used to retard spoilage and decay in
food and flowers. When placed in a storage or transport area with fresh fruit,
vegetables and flowers, it adsorbs gases, most notably ethylene, detrimental to
the preservation of food and also stimulates the creation of carbon dioxide and
water vapors. This combination of ethylene removal, which helps delay the food
maturation process, and the increase in carbon dioxide and water vapors, which
enhances the produce's natural ability to remain vital, produces a beneficial
environment for post-harvest life extension. Conserver 21[TM] is not applied
directly to the fruits, vegetables or flowers or into the environment.

         Conserver 21[TM] is manufactured in the form of cylindrical granules
and is currently available in two packaged forms: filters and packets. The
packaging criteria for Conserver 21[TM] is critical to the effectiveness of the
product. Conserver 21[TM] packets are designed to be placed in boxes or crates
containing the produce or flowers being stored or shipped. The granules within
the packets are activated by the gases emitted by the ripening produce or
flowers. Conserver 21[TM] filters are designed to be placed in front of the
vents of air conditioning or ventilation systems of storage areas and transport
vehicles so that the gases emitted by fruits, vegetables and flowers can be
adsorbed. Each filter provides the effective coverage for the volume equivalent
of a 20 foot container, or approximately 30 cubic meters. Generally, filters may
be attached to air vents through the use of a universal bracket, and do not
require any change to the existing air conditioning or ventilation equipment.


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         Based on the Company's testing, properly packaged Conserver 21[TM]
products may be stored for up to 12 months in their original sealed packaging,
and once opened, the products retain their effectiveness for up to 30 days,
depending on the particular environment in which the products are being used.

         Marketing Strategy and Efforts. The Company believes that there are
significant opportunities to provide technologies and services which can retard
spoilage and decay in fruits, vegetables and flowers during the course of
storage and transportation from point of packing through retail sale, provided
that the product is competitively priced and properly packaged. The Company is
currently marketing Conserver 21[TM] products to selected supermarkets,
restaurants and other retailers, distributors and growers. Marketing efforts to
date have focused primarily on the sale of the Conserver 21[TM] packets. As part
of the Company's marketing strategy, technical representatives will oversee the
proper use of Conserver 21[TM] in the packaging and transportation of clients'
produce and flowers.

         Initial marketing efforts of the Conserver 21[TM] packets in the United
States have indicated that the Company needs to renegotiate the terms of its
Distribution Agreement (as defined herein) with Agrotech 2000 S.L., a Spanish
company ("Agrotech") that manufactures and packages Conserver 21[TM] and whose
principal stockholder is the developer of Conserver 21[TM], and to improve the
packaging of the Conserver 21[TM] packets. The Company is currently in
discussions with Agrotech with a view to reduce the pricing arrangements
regarding the Conserver 21[TM] packets and to modify the manufacturing
arrangements so that all packaging is done in the United States. Management of
the Company is currently in discussions with a U.S.-based company which
specializes in packaging products comparable to Conserver 21[TM], and has
identified other U.S.-based packaging plants capable of packaging Conserver
21[TM]. Estimated packaging costs provided by these entities indicate that the
Company would be able to reduce the wholesale costs of the Conserver 21[TM]
packets if the product were packaged in the United States. Management believes
that this cost reduction even if partially offset by an increase in the royalty
percentage to be paid to Agrotech would enable the Company to competitively
price the packets at a level that would be profitable to the Company. There can
be no assurance, however, that the Company will be able to successfully
renegotiate the Distribution Agreement on more favorable terms or enter into a
packaging arrangement with a third party to its satisfaction. Under such
circumstances the Company would have to shift its initial marketing efforts and
focus on the sale of the Conserver 21[TM] filters. There can be no assurance
that the Company would be able to successfully implement this revised marketing
strategy. Any sustained impairment of the Company's ability to market Conserver
21[TM] could significantly delay or materially impair the Company's ability to
commercialize Conserver 21[TM].

         Conserver 21[TM] Distribution Agreement. The Company's distribution and
marketing rights for Conserver 21[TM] are derived from a distribution agreement
entered into in March 1997 (the "Distribution Agreement") with Agrotech.
Agrotech holds the patent rights to Conserver 21[TM]. The Company's rights under
the Distribution Agreement specifically cover the United States and Canada and
include an option and a right of first refusal for any other territory
throughout the world. The Company has reached an agreement in principle to form
a joint venture, whereby the Company would hold a 51% interest, to market
Conserver 21[TM] in Canada. The Company has also begun initial market and
product testing in Canada. In addition to marketing Conserver 21[TM] in the
United States and Canada, the Company is also exploring opportunities


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to market and distribute Conserver 21[TM] in Japan and Israel. (See "Potential
International Markets" below.)

         The Distribution Agreement automatically extends through March 2022 and
is renewable for subsequent annual periods and may be terminated by either party
by written notice 90 days prior to the end of any term. The Distribution
Agreement (i) will be terminated automatically in case of the insolvency or
bankruptcy of one of the parties; or (ii) may be terminated by either party for
the substantial breach of any material provision by the other party if the
breaching party has not cured such breach within 30 days of written notice
thereof. Under the terms of the Distribution Agreement, the Company will be
deemed to have accepted without reservation, all Conserver 21[TM] products
delivered by Agrotech, unless claims for alleged shortages or defects are made
in writing by the Company and delivered to Agrotech as soon as discovered, and
in any event not later than 15 days in the case of shortages, and 30 days in the
case of defects, after the date of delivery to the Company.

         The Distribution Agreement requires the Company to purchase a minimum
of $2,000,000 of Conserver 21[TM] products by April 1998 (the "Initial Volume
Commitment") and thereafter to continue to meet mutually agreed upon minimum
annual purchase goals. The purchase by the Company of the Conserver 21[TM]
packets and filters from Agrotech is at a fixed per-unit price. The Company is
also required to pay Agrotech a 4% royalty on net revenues derived from the
Company's sales of Conserver 21[TM]. Should the Company fail to meet the minimum
annual volume commitments established for any period, Agrotech may sell
Conserver 21[TM] to other customers in the United States and Canada after 90
days' written notice to the Company.

         The Distribution Agreement requires the Company to make loans to
Agrotech of up to $1,500,000 for the enhancement of Agrotech's manufacturing
capacity. Interest for the loan would be based on the one-year interest rate for
Spanish Pesetas published in the Financial Times on the nearest business day
following each anniversary date of the Distribution Agreement. Under the terms
of the Distribution Agreement, the first $1,000,000 of such loan is repayable
over a three-year period as an offset against Conserver 21[TM] purchases by the
Company in excess of $2,000,000 annually and the balance of any such loan is
payable out of royalties which may be due Agrotech from such sales over a three-
to four-year period. As of June 30, 1997, the Company had advanced Agrotech
$1,000,000 (the "Agrotech Loan") under the terms of the Distribution Agreement.
Delivery of the initial $500,000 of the Agrotech Loan was advanced on behalf of
the Company by Mr. James V. Stanton, Vice-Chairman and director of the Company,
in May 1997 at an interest rate of 10% per annum. In June 1997, the Company
repaid the $500,000, together with accrued interest of $5,600, from the proceeds
of the Offering.

         Due to the current uncertainty as to the outcome of the renegotiation
of the Distribution Agreement with Agrotech and recent limitations with
Agrotech's current packaging of the Conserver 21[TM] product, management of the
Company believes that exceeding the Initial Volume Commitment necessary to
offset the Company's purchases from Agrotech against the Agrotech Loan is
remote. Accordingly, for the ten months ended June 30, 1997, the Company
established a reserve equal to the Agrotech Loan. Under the terms of the
Distribution Agreement, the Company may be obligated to extend an additional
loan of $500,000 to Agrotech. Due to the


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current renegotiations, the Company cannot determine at the present time whether
any additional loans, under the terms of the Distribution Agreement, will be
made or whether any offsets under the Distribution Agreement will be available.

         Potential International Markets. As part of the Company's effort to
exploit international markets, it is developing strategic alliances primarily to
market and distribute Conserver 21[TM] outside the United States.

         The Company has commenced market and product testing of Conserver
21[TM] in Canada. The Company has reached an agreement in principle with Thomas
Smyth and Robert D. Morrison to form a Canadian joint venture to market
Conserver 21[TM] in Canada, whereby the Company would hold a 51% interest. The
Company intends to grant the Canadian joint venture a license to market, sell
and otherwise commercially exploit Conserver 21[TM] in Canada and in the states
of Washington and Alaska. The Company has begun its initial market and product
testing in Canada.

         As of August 20, 1997, the Company entered into a memorandum of
understanding with an individual to develop a joint venture to sell Conserver
21[TM] products in Israel, pursuant to which the Company would hold a 50%
interest in the joint venture. The Company is also in preliminary discussions
with a Japanese entity regarding a distribution arrangement in Japan.

         The foregoing agreements represent agreements in principle and are not
binding. There can be no assurance that the Company will successfully negotiate
definitive agreements relating to any joint ventures, or if definitive
agreements are executed, whether the Company's joint venture partners will be
successful in distributing the Conserver 21[TM] product in each of their
respective markets.

         Risk of Loss of Exclusivity Arrangement, Dependency on a Single
Supplier. Should the Company fail to meet its obligations including the Initial
Purchase Commitment or subsequent purchase commitments under the Distribution
Agreement, the Company could lose its exclusive right to sell Conserver 21[TM]
in the United States and Canada, which would materially adversely impact the
development of the Company's business for Conserver 21[TM]. If the Distribution
Agreement were to terminate as a result of a material breach by either party to
the agreement, the Company would not be able to distribute Conserver 21[TM]
products, and accordingly, the Company could be without its current principal
line of business of distributing Conserver 21[TM] products and its results of
operations could be materially adversely impacted.

         Currently, the Company is dependent on Agrotech as the sole supplier of
Conserver 21[TM] for the manufacture, supply and quality of the Conserver 21[TM]
products. The Company experienced some limitations in the variety and quality of
the packaging available from Agrotech. If the Company is unable to renegotiate
the terms of the Distribution Agreement with Agrotech, there can be no assurance
that Agrotech will be able to supply the necessary packaging of Conserver 21[TM]
in order for the Company to properly market the Conserver 21[TM] packets in the
United States and Canada.

         Competition. Many of the Company's competitors have substantially
greater financial, personnel and other resources than the Company as well as
more experience in the marketing and selling of post-harvest life extension
products. There can be no assurance that Conserver 21[TM] will gain commercial
acceptance or establish any meaningful market share. Furthermore,


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any such market share, if and when achieved, could be lost or reduced by
enhanced competition or the emergence of new and more effective preservation
technologies.

         There are several methods used today to extend the post-harvest life of
fruits, vegetables and flowers. The most commonly used are ethylene "adsorbers,"
modified atmosphere packaging, controlled atmosphere systems and gamma
irradiation. In addition, ultraviolet lamps are sometimes used to control
bacteria and mold in refrigerated storage.

         Ethylene adsorbers reduce the amount of ethylene in the atmosphere
surrounding produce, by adsorbing the ethylene being released by the produce.
These products adsorb or "scrub" ethylene until they reach their point of
saturation.

         Modified atmosphere packaging involves changing the mixture of gases
(usually nitrogen and carbon dioxide) in the atmosphere in which fruits,
vegetables and flowers are stored or shipped to prevent the growth and spread of
mold. In a typical modified atmosphere system, gases are introduced to control
the enzyme systems that cause tissue respiration.

         Controlled atmosphere systems maintain a pre-defined mixture of
poisonous gases in the atmosphere surrounding fruits or vegetables, by
constantly measuring and replenishing the component gases as needed.

         Gamma irradiation in carefully controlled dosages can be effective in
controlling decay and insect infestations on such produce as papayas, mangos,
bananas, pineapples and grapefruits. Commercial application of gamma irradiation
is limited due to the cost and size of the equipment required for the treatment,
as well as public reluctance to purchase and consume irradiated foods.

         Regulatory Requirements. The Company's intended utilization of
Conserver 21[TM] to adsorb gases in storage or transport containers filled with
fruits, vegetables and flowers will result in the natural production of carbon
dioxide, which will have the effect of retarding the growth of microorganisms
and fungi also present in such containers. The Company's believes that its
proposed use of Conserver 21[TM] does not currently subject it to any material
federal, state, or local regulatory approvals.

         Based on its review of other applicable regulations, the Company
believes that Conserver 21[TM] is not subject to United States Department of
Transportation hazardous materials requirements which regulate the transport of
certain hazardous substances, nor is it subject to United States Food and Drug
Administration requirements. In addition, based upon written confirmation from
the United States Environmental Protection Agency that Conserver 21[TM]
is not deemed a "pesticide," the Company is not subject to the rules and
regulations of the EPA nor the provisions of the Federal Insecticide Fungicide
and Rodenticide Act.

         There can be no assurance, however, that future regulatory approvals
will not be required in the United States, leading to unanticipated expenses and
delays inherent in the regulatory process.


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         The Company has not undertaken any investigation as to the applicable
requirements that may be imposed by regulatory agencies in other jurisdictions
in which the Company plans to conduct business, including Canada, Japan and
Israel. There can be no guarantee that applicable regulatory requirements and
legal restrictions will not cause a delay in the Company's ability to
commercially exploit Conserver 21[TM] in such other jurisdictions.

Proposed New Line Of Business and New Business Opportunities

         At a Special Meeting of Stockholders, which the Company anticipates to
be held during December 1997, the Company's stockholders will be asked to
consider and vote on a proposal which would result in the Company diversifying
beyond its Principal Line of Business and entering into the New Line of Business
in the hotel and casino industry, specifically involving the New Business
Opportunities to acquire an interest in, and to develop and manage, the Sakhalin
Project and to provide management services for other hotels.

         Sakhalin Agreement. In connection with the Sakhalin Project, the
Company entered into an agreement dated as of August 12, 1997, and amended
September 9, 1997 (as amended, the "Sakhalin Agreement"), subject to receipt of
requisite approval by the Company's stockholders, with Sakhalin Trading and
Investments Limited ("SGTI") and Sovereign Gaming and Leisure Limited
("Sovereign"), each a limited liability company organized under the laws of
Cyprus, pursuant to which the Company would acquire: (i) all of the share
capital of SGTI, which includes (a) all of SGTI's rights and interest in a
project to develop the Sakhalin Project, and (b) SGTI's ownership interest in
50% of the shares of Sakhalin City Centre Limited ("SCC"), a closed joint stock
company incorporated under the laws of the Russian Federation, which, in turn,
holds certain rights, including a guarantee by the city of Yuzhno-Sakhalinsk to
issue a gaming license to SCC and (ii) all rights and interest to or in the
Sakhalin Project held by Sovereign, including certain operating and project
management agreements with respect to the Project (collectively, the "Shares and
Rights").

         In consideration of the Shares and Rights, the Company is required
under the terms of the Sakhalin Agreement, as amended, to pay to SGTI and its
stockholders (i) an initial payment of $500,000, which has been paid, (ii)
$1,000,000 payable by October 15, 1997, (iii) $1,500,000 payable by October 31,
1997 and (iv) an aggregate of 1,538,462 shares of the Company's Common Stock
(valued for the purpose of the Sakhalin Agreement at an aggregate of $10,000,000
or $6.50 per share) (collectively, the "Purchase Price"). The Company's Common
Stock was trading at $6.125 per share on the date of execution of the Sakhalin
Agreement. Upon completion of the Company's due diligence, should the Company
conclude for any reason that it does not wish to proceed with the Sakhalin
Project and the transactions contemplated under the Sakhalin Agreement, the
Company has the right to convert any cash portion of the Purchase Price then
delivered to SGTI into shares of SGTI at a conversion rate of one ordinary share
of SGTI for each $30.00 so delivered (SGTI currently has 230,000 shares
outstanding). An investment in SGTI will likely be illiquid and there can be no
assurance that the Company will recoup any cash paid under the Sakhalin
Agreement. The Sakhalin Agreement further provides that, upon request of the
Company, Sovereign agrees to become project manager during the construction
phase of the Sakhalin Project, subject to agreement on 


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reasonable compensation for such services, which shall not exceed 5% of the
construction cost of the Project or $5,000,000, whichever is less.

         In connection with the execution of the Sakhalin Agreement and with the
Company's approval, SGTI acquired 15% of the share capital of SCC from certain
shareholders resulting in SGTI owning 65% of the share capital of SCC. In
consideration for this exchange, the Purchase Price payable by the Company for
the shares of SGTI under the Sakhalin Agreement will increase by 461,538 shares
of the Company's Common Stock. Including this transaction, aggregate total
consideration for the Shares and Rights payable by the Company to SGTI and its
shareholders will be $3,000,000 and 2,000,000 shares of the Company's Common
Stock. Furthermore, it is the Company's understanding that the $3,000,000 cash
portion of the Purchase Price paid to SGTI will be used by SGTI as a loan to SCC
(in which SGTI holds a 65% interest) for the initial development and costs for
the Sakhlain Project.

         Development Services Agreement. On October 2, 1997, the Company has
entered into an agreement (the "Development Services Agreement") with Dato'
David Chiu ("Chiu"), pursuant to which the Company, subject to approval by its
stockholders and subject to the Company acquiring all of the shares of SGTI
(which would result in the Company owning 65% of the share capital of SCC),
would as described below transfer to Chiu 38.46% of the share capital of SGTI
and would issue to Chiu a share of convertible preferred stock which would
convert, under certain specified conditions and circumstances, into 1,500,000
shares of Common Stock. The Development Services Agreement provides that Chiu
will provide certain development services to the Company in connection with the
Sakhalin Project, including using his best efforts to procure or secure the
necessary debt financing and guarantees (on behalf of the Company and its
subsidiaries and affiliates) for the complete turnkey construction of the
Sakhalin Project which financing is to be on mutually acceptable terms.
Construction of the Sakhalin Project is currently estimated at US$100 million.
The shares of Common Stock and the shares of SGTI to be issued to Chiu in
consideration for his services will be issued on the date of mutual execution by
the Company or its nominated affiliate of a legally enforceable and binding
agreement from a lender, the terms of which are acceptable to the Company, SGTI
and SCC, to provide the financing. If the financing is not realized as
contemplated pursuant to the Development Services Agreement, the Company and the
other investors in the Sakhalin Project would be required to obtain additional
financing on behalf of SCC from a variety of sources, including borrowings under
bank credit facilities, sales of securities and placement of term debt, to
construct the hotel and casino.

         Chiu has also agreed that he shall not for a period of three years from
the date of issuance or transfer, as applicable, of the shares received under
the Development Services Agreement, voluntarily or involuntarily, directly or
indirectly, sell, contract to sell, grant a right to purchase, exchange,
mortgage, pledge, hypothecate, give, bequeath, transfer, assign, encumber,
alienate or in any other way whatsoever dispose of (hereinafter collectively
called "transfer") any of such shares, including any options and warrants with
respect to such shares, received by way of dividend or upon an increase,
reduction, substitution or reclassification or combination of stock of the
Company or upon any reorganization of the Company, as applicable.
Notwithstanding any of the foregoing, Chiu may transfer the shares to any
affiliate, subject to the Company's consent, which consent shall not be
unreasonably withheld. Chiu also agreed that until three years from the issuance
date of such shares to give the Company an irrevocable proxy, with full power of
substitution, to vote on all matters as the Company deems appropriate, with
respect to the shares at all meetings of the stockholders of the Company and by
means of any written consent of stockholders with respect to all matters. The
Company has designated Charles H. Stein, the Chairman, President and Chief
Executive Officer of the Company as the authorized person to exercise the
aforementioned voting rights on behalf of the Company, until such time as the
Mr. Stein is incapacitated to act. Furthermore, the Development Services


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Agreement provides that, in the event that Chiu wishes to sell all or any part
of the shares after the three year period described above, the Company shall
have the first option to purchase all or any part of the shares from Chiu. Chiu
agreed to give the Company written notice thereof of its intent to sell any or
all of the shares. The Company has a right to purchase said shares at a price
equal to the (i) closing price per share as reported on the Nasdaq (as reported
in the Wall Street Journal) on the date written notice is given to the Company
or (ii) the price offered to Chiu by an unaffiliated third party (not a
competitor of the Company) in an irrevocable and unconditional bona fide written
offer (the "Bona Fide Offer"), as applicable. The Company has the right to
purchase all or a portion of the shares by giving Chiu written notice no later
than 10 business days after written notice is provided to the Company. In the
event that the Company fails to exercise its option, Chiu has the right to sell
the shares to such third party at the price offered to the Company without any
further obligations to sell the shares to the Company. If, however, any or all
of the shares are not sold pursuant to the Bona Fide Offer within 30 days from
the receipt by the Company of Chiu's notice of intent to sell, the unsold shares
shall remain subject to the terms of the Development Services Agreement.

         Consummation of Sakhalin Agreement and Development Services Agreement.
Assuming consummation of each of the transactions contemplated above, the
Company and Chiu would own through their respective shares in SGTI, a 40% and
25% interest in SCC, respectively, and the remaining 35% of the interests would
continue to be held 20% by the City of Yuzhno-Sakhalinsk and 15% by the Sakhalin
Oblast (the regional government).

         Proposed Pledge Agreement. In connection with the transactions
contemplated by the Sakhalin Agreement, Brian J. Bryce (through the Jasmine
Trustee Ltd.), Jay M. Haft and James V. Stanton, directors of the Company, have
agreed to enter into a pledge agreement with the Company that in the event the
proposal relating to the New Line of Business and New Business Opportunities is
not approved by the stockholders of the Company at the Special Meeting of
Stockholders, the Company would transfer all of its rights and obligations under
the Sakhalin Agreement to such directors, subject to the directors reimbursing
the Company for certain costs and expenses incurred by the Company relating to
the Sakhalin Project, including the $500,000 initial payment under the Sakhalin
Agreement. These obligations would be secured by a specified amount of shares of
Common Stock of the Company owned, either directly or beneficially, by such
directors. This matter was approved by the Board of Directors at its meeting
held on September 10, 1997.

         Sakhalin Casino Consulting Agreement. Effective as of August 14, 1997,
the Company entered into an agreement (the "Casino Consulting Agreement"),
subject to the receipt of the requisite approval from the Company's stockholders
(the "Commencement Date"), with Star Casinos Limited, a limited liability
company organized under the laws of Cyprus (the "Consultant"), whereby the
Consultant has agreed to provide consulting and technical services to the
Company and any affiliated entities for a period of two years from the
Commencement Date with respect to the development and ongoing operations of the
Sakhalin Project casino. Under the terms of the Consulting Agreement, the
Consultant has agreed to make available the services of David Hartley
("Hartley"). As of the Commencement Date, the Consultant will receive (i) a fee
of $21,000 per month plus reimbursement of reasonable expenses for the term of
the agreement, adjusted pro rata for any partial month of service and (ii)
options to purchase

                                       9

<PAGE>


100,000 shares of the Company's Common Stock, at $6.50 per share, with 50% of
the options becoming exercisable on each of the first and second anniversary
dates of the Commencement Date and expiring on the third anniversary date. At
the end of the term of the agreement, provided that the Consultant is not in
breach of the Consulting Agreement, the Consultant will also be entitled to
receive a $250,000 bonus. From the period between October 1, 1997 through the
Commencement Date, the Consultant will be paid by the Company a fee of $21,000 a
month, adjusted pro rata for any partial month of service, plus reimbursement of
reasonable expenses. The Company may terminate the Casino Consulting Agreement
for "cause," which includes (i) a material breach of the agreement, (ii) the
unavailability of Hartley, (iii) material misconduct injurious to the Company by
the Consultant or Hartley or (iv) the conviction of an act of fraud or
conviction of a crime by the Consultant or Hartley. The agreement also binds the
Consultant and Hartley to a two year non-compete, non-solicitation provision.

         Hotel Management Services. On October 2, 1997, the Company entered an
agreement (the "Hotel Management Agreement") with Dorsett Hotels and Resorts
International, Ltd. ("Dorsett"), a company controlled by Chiu, pursuant to which
the Company, directly or through a subsidiary, would act as exclusive operator
and manager of certain hotels owned by Dorsett. In consideration for Dorsett
entering into the Hotel Management Agreement, the Company, subject to requisite
approval of the Company's stockholders, would (i) issue to Dorsett up to an
aggregate 2,000,000 shares of Conserver Common Stock, upon specified conditions
being satisfied, and (ii) pay Dorsett $3,000,000. The Hotel Management Agreement
provides for twenty year exclusive operating agreements with respect to the
management of the Dallas Grand Hotel, Dallas, Texas, Dorsett Regency Bali,
Indonesia, and Rockman's Regency Melbourne, Australia, as well as operating
agreements on substantially similar terms for five other hotels scheduled to
open within the next two years. The Company, pursuant to the terms of an
operating agreement for each hotel managed, would be entitled to management fees
equal to three percent of gross revenues plus ten percent of gross operating
profits. In addition, the Company will receive service fees equal to four
percent of gross revenues for marketing, promotion and advertising expenses as
well as an additional one-half of one percent of gross revenues for training
costs which will be used in turn to fund such expenses. Each operating agreement
would further provide that in the event Dorsett terminates the agreement for any
reason other than for a material breach by the Company, the Company would be
entitled to a termination fee. The termination fee shall be calculated based on
the formula which is the remaining number of years under the Agreement
mulitiplied by a factor which is (i) in the event the Company is terminated
during the first five years of the Agreement, the factor shall be the sum of the
actual fees paid or payable to the Company based on revenues generated to date
plus fees payable to the Company based on projected revenues for the rest of the
year, (ii) in the event of a termination after the first five years, the factor
shall be the average of the fees paid or payable to the Company for the
preceding two years, or (iii) in the event of a termination after the first ten
years, the factor shall be the average of the fees paid or payable to the
Company for the preceding three years. If the Hotel Management Agreement is
consummated, subject to requisite stockholder approval, the Company plans to add
a management team with experience at major international hotel chains in the
operation and management of hotels and leisure time activities worldwide.

         Dorsett agreed that it shall not for a period of three years from the
date of issuance or transfer, as applicable, of the shares received under the
Hotel Management Agreement, voluntarily or involuntarily, directly or
indirectly, sell, contract to sell, grant a right to purchase, exchange,
mortgage, pledge, hypothecate, give, bequeath, transfer, assign, encumber,
alienate or in any other way whatsoever dispose of (hereinafter collectively
called "transfer") any of such shares, including any options and warrants with
respect to such shares, received by way of dividend or upon an increase,
reduction, substitution or reclassification or combination of stock of the
Company or upon any reorganization of the Company, as applicable.
Notwithstanding

                                       10

<PAGE>

any of the foregoing, Dorsett may transfer the shares to any subsidiary or
affiliate of Dorsett, subject to the Company's consent, which consent shall not
be unreasonably withheld. Dorsett also agreed that until three years from the
issuance date of the shares to give the Company an irrevocable proxy, with full
power of substitution, to vote on all matters as the Company deems appropriate,
with respect to the shares at all meetings of the stockholders of the Company
and by means of any written consent of stockholders with respect to all matters.
The Company has designated Charles H. Stein, the Chairman, President and Chief
Executive Officer of the Company as the authorized person to exercise the
aforementioned voting rights on behalf of the Company, until such time as Mr.
Stein is incapacitated to act. Furthermore, the Hotel Management Agreement
provides that, in the event that Dorsett wishes to sell all or any part of the
shares after the three year period described above, the Company shall have the
first option to purchase all or any part of the shares from Dorsett. Dorsett
agreed to give the Company written notice thereof of its intent to sell any or
all of the shares. The Company has a right to purchase said shares at a price
equal to the (i) closing price per share as reported on the Nasdaq (as reported
in The Wall Street Journal) on the date written notice is given to the Company
or (ii) the price offered to Dorsett by an unaffiliated third party (not a
competitor of the Company) in an irrevocable and unconditional bona fide written
offer (the "Bona Fide Offer"), as applicable. The Company has the right to
purchase all or a portion of the shares by giving Dorsett written notice no
later than 10 business days after written notice is provided to the Company. In
the event that the Company fails to exercise its option, Dorsett has the right
to sell the shares to such third party at the price offered to the Company
without any further obligations to sell the shares to the Company. If, however,
any or all of the shares are not sold pursuant to the Bona Fide Offer within 30
days from the receipt by the Company of Dorsett's notice of intent to sell, the
unsold shares shall remain subject to the terms of the Hotel Management
Agreement.

         Funding New Line of Business and New Business Opportunities. In
addition to the direct issuance of shares of the Company's Common Stock in
connection with the foregoing transactions, the Company anticipates funding the
cash portion of the initial capital required for the proposed New Line of
Business and New Business Opportunities with the proceeds from the sale of
additional Common Stock and/or other securities of the Company in private
offerings.

         Other. As of October 3, 1997, the Company entered into an agreement in
principle with Parbhoe Handelmij NV, a Surinamese limited liability, to create a
joint venture company to develop a casino project in Paramaribo, the capital
city of Surinam (the former Dutch Guyana). Pursuant to the agreement, the joint
venture company will also enter into an operating agreement with the Company to
manage the casino.

         In connection with the Company entering into the New Line of Business
and the New Business Opportunities, the Board of Directors has adopted
resolutions to issue to Brian J. Bryce and Jay M. Haft, respectively, options to
purchase 300,000 and 200,000 shares of Common Stock at an exercise price equal
to $6.125 per share. The issuance of the options to Messrs. Bryce and Haft, who
are directors of the Company, is subject to receipt of requisite shareholders'
approval for the Company to enter into the New Line of Business and to the New
Business Opportunities.

Insurance

         The Company currently maintains comprehensive general liability and
property insurance with coverage of $1,000,000 per occurrence and umbrella
insurance of $4,000,000 per occurrence. There can be no assurance that the
Company's coverage will be adequate to protect the Company from all potential
losses.

Employees

         As of June 30, 1997, the Company had eight employees, including its
five executive officers.

                                       11

<PAGE>


         Should the Company commence sales of Conserver 21[TM] and/or if the New
Line of Business or the New Business Opportunities are approved by its
stockholders, management of the Company would anticipate a significant increase
in the number of its employees and consultants during the fiscal year ended June
30, 1998. Such possible increase in the number of employees and consultants
cannot be estimated at this time.

Item 2.  Properties

         Effective October 1, 1997, the Company moved its principal executive
offices to 3250 Mary Street, Suite 405, Coconut Grove, Florida 33133. This new
office space will occupy approximately 4,300 square feet, and is subject to a
5-year lease at a monthly rental of approximately $7,800. Effective September
30, 1997, the Company terminated its month-to-month lease for its 1,000 square
foot headquarters in an executive office suite in Coral Gables, Florida, at a
rental of approximately $6,000 per month.

         The Company also maintains an office in New York City at a cost of
approximately $3,845 per month. In July 1997, the Company entered a 6-month
lease for additional office space in New York City at a monthly rental of $1,800
per month.

         The Company believes its existing facilities are adequate to meet
current needs and it does not anticipate any difficulty in negotiating renewals
as leases expire or in finding other satisfactory space if existing facilities
become unavailable or if additional space is needed.

Item 3.  Legal Proceedings

         There are no material pending legal proceedings to which the Company,
its officers and directors, or its property are a party.

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

         The following actions were approved by a majority of shares of the
Company entitled to vote thereon by written consents in lieu of a special
meeting of shareholders, dated as of April 23, 1997:

         1. Of the 4,210,404 shares entitled to vote, written consents
representing 2,130,000 shares were received approving and adopting the following
actions, with the balance of the shares entitled to vote thereon abstaining:

                  (i) an amendment to the Company's 1996 Stock Option Plan
         increasing from 600,000 to 1,300,000 the aggregate number of shares
         issuable upon exercise of options thereunder;

                  (ii) a classified Board of Directors divided into three
         classes, consisting of two Class A directors, two Class B directors and
         one Class C director, with the term of office of the Class A directors
         expiring at the Company's annual meeting in 1998, with the term of
         office for the Class B directors expiring at the Company's annual
         meeting in 


                                       12

<PAGE>

         1999 and with the term of office for the Class C director expiring at
         the Company's annual meeting in 2000;

                  (iii) a reverse stock split at the rate of 1-for-2.269793
         shares of Common Stock outstanding and

                  (iv) the form of Certificate of Amendment to the Company's
         Certificate of Incorporation amending the Certificate of Incorporation
         to adopt a classified Board of Directors and effect the reverse stock
         split.

         The following action was approved by a majority of shares of the
Company entitled to vote thereon by written consents in lieu of a special
meeting of shareholders, dated as of April 24, 1997:

         1. Of the 4,210,404 shares entitled to vote, written consents
representing 2,340,000 shares were received (i) electing to the Board of
Directors Jay M. Haft, Michael Jay Scharf, Brian J. Bryce, James V. Stanton and
Charles H. Stein and (ii) ratifying the designation of Jay M. Haft and Michael
Jay Scharf as Class A directors, James V. Stanton and Brian J. Bryce as Class B
directors and Charles H. Stein as the Class C director. The balance of the
shares entitled to vote thereon abstained.

         No other matters were submitted by the Company to a vote of
shareholders, through the solicitation of proxies or otherwise, during the three
months ended June 30, 1997.


                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         Price Range of Common Stock. Since June 6, 1997, the date the Common
Stock shares first traded, the Common Stock has been quoted on the Nasdaq
SmallCap Market under the symbols "RIPE". Prior to June 6, 1997, there was no
market for the Company's Common Stock shares.

         The following sets forth, for the period indicated, high and low per
share bid information for the Common Stock reported on the Nasdaq SmallCap
Market:

                      For the period beginning June 6, 1997
                            and ending June 30, 1997

  ----------------------------------------------------------------------
                 High                              Low
  ----------------------------------------------------------------------

               $5.8125                            $5.00

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

                                       13

<PAGE>


         Approximate Number of Security Holders. As of September 15, 1997, the
Company had approximately 87 registered holders of record of its Common Stock.

         Sale of Unregistered Securities; Uses of Proceeds from Registered
Securities. Information required by Item 701 of Regulation S-K was previously
reported in the Company's Report on Form 10-Q for the quarterly period ended May
31, 1997. Reference is also made to "Management's Discussion and Analysis of
Finanical Condition and Results of Operations - Liquidity and Capital Resources"
hereof which is incorporated herein by reference.


Item 6. Selected Financial Data

         The following summary financial data have been derived from the
financial statements of the Company. The statement of operations data set forth
below with respect to the period from March 6, 1996 (date of incorporation) to
August 31, 1996, for the ten months ended June 30, 1997 and the period from
March 6, 1996 (date of incorporation) to June 30, 1997 and the balance sheet at
August 31, 1996 and June 30, 1997 are derived from, and are qualified by
reference to, the Financial Statements included herein. The following table
should be read in conjunction with Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the Company's Financial
Statements and the Notes to Financial Statements included herein.


<TABLE>
<CAPTION>
                                           March 6, 1996                         March 6, 1996
                                             (Date of                              (Date of
                                           Incorporation       Ten Months        Incorporation
STATEMENT OF                                  Through             Ended             Through
OPERATIONS DATA                           August 31, 1996    June 30, 1997(1)    June 30, 1997
                                          ---------------    ----------------    -------------
<S>                                          <C>             <C>                 <C>
Revenues                                     $        -       $         -         $         -
Operating expenses:
     Marketing and sales                              -           115,576             115,576
     Research and development                         -            52,247              52,247
     Compensation charges in                 
       connection with issuance of
       stock options and warrants               907,201         4,995,106           5,902,307
     General and administrative                 
       expenses                                 458,611         1,687,172           2,145,783
     Write down of inventory                                      355,800             355,800
     Provision for bad debt                                     1,000,000           1,000,000
                                            -----------       -----------         -----------
Operating loss                              $(1,365,812)      $(8,205,901)        $(9,571,713)
                                            
Other expenses:
     Interest expense, net of $8,741
       and $51,180 of interest
       income in August and June,
       respectively                              21,259           356,166             377,425
                                            -----------       -----------         -----------
Net Loss                                    $(1,387,071)      $(8,562,067)        $(9,949,138)
                                            -----------       -----------         -----------
Net loss per share of common stock                $(.32)           $(1.58)
                                            -----------       -----------
Weighted average number of common             
     shares outstanding                       4,390,767         5,409,990
                                            -----------       -----------
</TABLE>


----------------
(1) The Company was incorporated on March 6, 1996 and initially adopted a fiscal
    year ending August 31. During the current calendar year, the Company elected
    to change its fiscal year end to June 30.


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

         The following discussion and analysis of significant factors affecting
the Company's operating results and liquidity and capital resources should be
read in conjunction with the accompanying financial statements and related
notes.

                                       14

<PAGE>

Overview

         The Company, which was organized in March 1996, is in the development
stage and its activities since the date of incorporation have been primarily
focused on raising both debt and equity financing (public and private),
recruiting management personnel, testing, developing and exploiting Conserver
21[TM] and negotiating distribution and other arrangements.

         The Company's operations are subject to all of the risks inherent in
the establishment of a new business enterprise, including the need to obtain
financing, lack of revenues, reliability of sources of supply and the
uncertainty of market acceptance of its business. The Company has incurred
losses since inception and has yet to derive any revenues from operations. Its
accumulated deficit at June 30, 1997 was $9,949,138, which included $5,902,307
of non-compensation charges related to the value attributed to stock options
and warrants issued by the Company.

         From March 1996 to November 1996, the Company raised the capital
necessary for its business development through debt and equity private
placements. In June 1997, the Company completed an initial underwritten public
offering (the "Offering") in which it received net proceeds of approximately
$8,900,000 from the sale of 2,200,000 shares of its Common Stock at a per share
price of $5.00. In July 1997, the Company's underwriter exercised its
over-allotment option to purchase an aggregate of 330,000 shares of Common Stock
at $5.00 per share resulting in the Company receiving additional net proceeds of
$1,450,000. Aggregate net proceeds to the Company from the Offering amounted to
$10,350,000. Also in connection with the Offering, the Company sold to the
underwriters, for nominal consideration, Underwriters' Warrants to purchase
220,000 shares of Common Stock exercisable for a period of four years at $8.25
per share. As at June 30, 1997, approximately $2,130,000 of the proceeds from
the Offering were used for general business purposes, including $1,000,000
delivered under the Agrotech Loan and the repayment of the $1,000,000
convertible debenture held by the SES Family Trust, together with the accrued
interest thereon. The Company anticipates that the balance of the proceeds from
the Offering will be used for working capital and general business purposes
primarily in connection with its Conserver 21[TM] business.

         Subsequent to the Company's fiscal year end, the Company announced in
August 1997 that it was considering diversifying beyond its Principal Line of
Business of marketing and distributing Conserver 21[TM] and was exploring a
possible New Line of Business in the hotel and casino industry. The Company has
entered into certain agreements regarding the proposed New Business
Opportunities. The New Line of Business and the New Business Opportunities
(including the issuance of securities of the Company in connection therewith)
are subject to receipt of requisite approval by the Company's stockholders. (See
"Subsequent Events" and "Liquidity and Capital Resources" in this section and
Note K to the Notes to Financial Statements.)

         The Company holds the exclusive license to import, promote, distribute,
market, sell and otherwise commercially exploit Conserver 21[TM] in the United
States and Canada, and holds an option and right of first refusal to exercise
such rights throughout the world.

         Conserver 21[TM] is a non-toxic product which can be used to retard
spoilage and decay in food and flowers. The Company does not own the patent to
Conserver 21[TM] but has been granted the exclusive right in the United States
and Canada and a right of first refusal and option in other countries to license
and market the product by Agrotech 2000 S.L., a Spanish company which holds the
patent for Conserver 21[TM] and manufacturers and packages the product. The
Company has no right to manufacture or package Conserver 21[TM]. Initial
geographic marketing efforts by the Company have focused primarily on the United
States and Canada.

                                       15

<PAGE>


         The marketing and sale of Conserver 21[TM] currently constitutes the
Company's sole line of business and will account for substantially all of the
Company's revenues, if any, for the foreseeable future and until the Company's
New Line of Business and New Business Opportunities, if approved by
stockholders, result in a viable operation. There are several methods of food
preservation commercially available that compete directly or indirectly with the
Company's Conserver 21[TM]. In order to market and sell Conserver 21[TM], the
Company will need to maintain a sales force with technical expertise in the food
preservation and food transportation industries. The success of the Company's
Principal Line of Business will depend on its ability to demonstrate the
commercial viability and effectiveness of Conserver 21[TM]. The Company
currently has no orders for Conserver 21[TM] and there can be no assurance that
potential customers will be willing to incur the costs of Conserver 21[TM].

         Initial marketing efforts of the Conserver 21[TM] packets in the United
States have indicated that the Company needs to renegotiate the terms of its
Distribution Agreement with Agrotech and to improve the packaging of the
Conserver 21[TM] packets. The Company is currently in discussions with Agrotech
with a view to reduce the pricing arrangements regarding the Conserver 21[TM]
packets and to modify the manufacturing arrangements so that all packaging is
done in the United States. Management of the Company is currently in discussions
with a U.S.-based company which specializes in packaging products comparable to
Conserver 21[TM], and has identified other U.S.-based packaging plants capable
of packaging Conserver 21[TM]. Estimated packaging costs provided by these
entities indicate that the Company would be able to reduce the wholesale costs
of the Conserver 21[TM] packets if the product were packaged in the United
States. Management believes that this cost reduction even if partially offset by
an increase in the royalty percentage to be paid to Agrotech would enable the
Company to competitively price the packets at a level that would be profitable
to the Company. There can be no assurance, however, that the Company will be
able to successfully renegotiate the Distribution Agreement on more favorable
terms or enter into a packaging arrangement with a third party to its
satisfaction. Under such circumstances the Company would have to shift its
initial marketing efforts and focus on the sale of the Conserver 21[TM] filters.
There can be no assurance that the Company would be able to successfully
implement this revised marketing strategy. Any sustained impairment of the
Company's ability to market Conserver 21[TM] could significantly delay or
materially impair the Company's ability to commercialize Conserver 21[TM].

Change in Fiscal Year

         The Company initially adopted a fiscal year ending August 31 when it
was incorporated on March 6, 1996. During the current calendar year, the Company
elected to change its fiscal year end to June 30. Accordingly, the following
discussion addresses the Company's financial results for the period March 6,
1996 through August 31, 1996 and the ten months ended June 30, 1997.


                                       16

<PAGE>

Results of Operations

         The Company has a limited operating history upon which an evaluation of
its performance and prospects can be made. During the period from March 6, 1996
to June 30, 1997, the Company's activities were primarily limited to
organizational efforts and raising public and private capital to defray its
organizational expenses and the development and initial implementation of its
business plan for its Principal Line of Business. During such period the Company
had no revenues. Since July 1997, the Company has also been involved in the
development of its proposed New Line of Business and New Business Opportunities.

           Results of Operations for the period March 6, 1996 (date of
                        incorporation) to August 31, 1996

         Net Loss. Net loss for the period March 6, 1996 to August 31, 1996 was
$1,387,071, or $0.32 per share. Included in the net loss for this period were
(i) general and administrative expenses of $458,611 and (ii) non-cash
compensation charges of $907,201 in connection with the value attributed stock
options and warrants issued by the Company.

         General and Administrative Expense. For the period March 6, 1996 to
August 31, 1996, general and administrative expenses were $458,611 and primarily
included expenditures of travel expenses, salaries and professional and
consulting fees. Of such expenses, $65,000 represented non-cash compensation
charges for services contributed by Mr. Charles H. Stein, the Company's
Chairman, President and Chief Executive Officer.

         Compensation Charges. For the period March 6, 1996 to August 31, 1996,
non-cash compensation charges were $907,201 for the issuance of stock options to
purchase 100,000 shares of Common Stock and warrants to purchase 325,000 shares
of the Company's Common Stock.

         Interest Expense. For the period March 6, 1996 to August 31, 1996,
interest expense was $21,259, net of interest income of $8,741.

         Income Taxes. During the period March 6, 1996 to August 31, 1996, the
Company, for tax purposes, did not have any operations, or net operating losses.
The Company's expenses are preoperating and therefore, will be capitalized and
amortized when operations commence.

          Results of Operations for the Ten Months Ended June 30, 1997

         Net Loss. Net loss for the ten months ended June 30, 1997 was
$8,562,067, or $1.58 per share. Included in the net loss for the period were (i)
non-cash compensation charges of $4,995,106 recorded in connection with the
value attributed to stock options and warrants issued by the Company, (ii)
general and administrative expenses of $1,687,172, (iii) a $1,000,000 charge for
provision of bad debt, (iv) interest expense of $356,166 (net of interest
income), (v) a $355,800 writedown of Conserver 21[TM] inventory, (vi) marketing
and sales expenses of $115,576 and (vii) research and development costs of
$52,247.

                                       17

<PAGE>


         Compensation Charges. During the ten months ended June 30, 1997,
non-cash compensation charges were $4,995,106 for the issuance of stock options
to purchase 2,050,000 shares of Common Stock and warrants to purchase 550,000
shares of Common Stock.

         General and Administrative Expense. For the ten months ended June 30,
1997, general and administrative expenses were $1,687,172 and included
expenditures consisting primarily of travel expenses, salaries and professional
and consulting fees. Of such expenses, $105,000 and $60,000 represented non-cash
compensation charges for services contributed by Mr. Stein and for certain legal
services provided without charge, respectively.

         Marketing and Sales. During the ten months ended June 30, 1997, the
Company incurred $115,576 in marketing and sales expenses in connection with its
preliminary marketing and sales expenses for Conserver 21[TM].

         Research and Development. During the ten months ended June 30, 1997,
the Company incurred $52,247 in research and development expenses for Conserver
21[TM] which consisted primarily of product testing for the Conserver 21[TM]
products.

         Writedown of Inventory. Initial purchases of Conserver 21[TM] packets
by the Company have indicated certain manufacturing limitations in the packaging
process of the Conserver 21[TM] packets, which management of the Company
believes can be ultimately rectified. In light of these limitations and the
unmarketability of the inventory purchased, the Company wrote down $355,800 of
its Conserver 21[TM] inventory during the ten months ended June 30, 1997.

         Provision for Bad Debt. Under the terms of the Distribution Agreement,
the Company advanced $1,000,000 to Agrotech as of June 30, 1997 which is
repayable over a three-year period as an offset against Conserver 21[TM]
purchases by the Company in excess of the purchase a minimum of $2,000,000 of
Conserver 21[TM] products by April 1998 (the "Initial Volume Commitment"). The
Company is currently renegotiating the Distribution Agreement with a view to
reduce the pricing arrangements regarding the Conserver 21[TM] packets and
modify the manufacturing arrangements so that all packaging is done in the
United States. Due to the current uncertainty as to the outcome of the
renegotiation of the Distribution Agreement, the Company's ability to exceed the
Initial Volume Commitment for Conserver 21[TM] products based on the current
pricing level and the anticipated renegotiated lower pricing level, and the
recent manufacturing difficulties, management of the Company believes that
achieving the Initial Volume Commitment necessary to offset the Company's
purchases from Agrotech against the Agrotech Loan is remote. Accordingly, for
the ten months ended June 30, 1997, the Company established a reserve equal to
the Agrotech Loan.

         Interest Expense. For ten months ended June 30, 1997, interest expense
was $356,166, net interest income $51,180, resulting from interest accrued on
the Company's convertible debentures and non-cash charges related to the
amortization of $252,000 on debt discount recorded for the value of Common Stock
shares issued to convertible debentureholders.

         Income Taxes. For the ten months ended June 30, 1997, the Company, for
tax purposes, did not have any operations, or net operating losses. The
Company's expenses are preoperating and therefore, will be capitalized and
amortized when operations commence.

                                       18

<PAGE>


Liquidity and Capital Resources

         Since its date of incorporation through November 1996, the Company has
relied primarily upon privately raised debt and equity financing to fund its
operations. In connection with the organization of the Company, 1,666,667 shares
of Common Stock were subscribed to by Conserver Investments, S.A., an
unaffiliated third party. The Company, in a series of negotiated transactions in
September, October and November 1996 repurchased 1,366,667 shares of such common
stock for an aggregate sum of $1,800,000. The remaining 300,000 shares of Common
Stock were transferred in November 1996 to two unaffiliated individuals. (See
Note A to Notes to Financial Statements.)

         In September, October and November of 1996 the Company completed a
private placement and issued 303,000 shares of Common Stock at $5.00 per share
for an aggregate at $1,515,000.

         In May 1996, the Company issued a convertible debenture to the SES
Family Trading and Investment Partnership, L.P. ("SES") in the aggregate
principal amount of $1,000,000. Pursuant to the terms of such debenture, as
amended, interest accrued at the rate of 12% per annum, with principal and
interest paid from the net proceeds of the Offering. The Company and SES agreed
to amend the terms of the debenture to eliminate the conversion rights contained
therein which the Company estimates would have entitled such holder to receive
in excess of 2,000,000 shares of Common Stock upon conversion. Instead, SES and
its affiliate received warrants to purchase 550,000 shares of Common Stock at an
exercise price of $2.00 per share, exercisable for a period of six years
commencing one year from the date of issuance. The warrants were valued at
approximately $2,040,000 and were charged to expense at the completion of the
Offering. At the time the warrants were issued, 20,000 shares of previously
issued Common Stock were surrendered to the Company. (See Note E to Notes to
Financial Statements.)

         In September and November 1996, the Company issued convertible
debentures in the aggregate principal amounts of $600,000 and $150,000,
respectively. Principal and accrued interest at a rate of 10% per annum, is
payable on the one year anniversary of the date of issuance. The holders of the
debentures may elect to convert, at any time, all unpaid principal and accrued
interest into shares of Common Stock at a rate of $5.00 per share. Subsequent to
the fiscal year ended June 30, 1997, the debentures aggregating $150,000 issued
in November 1996 were repaid in full from the proceeds of the Offering, and of
the debentures aggregating $600,000 issued in September 1996, $365,000 of such
debentures were converted into Common Stock at $5.00 per share and $235,000 were
repaid. (See Note D to Notes to Financial Statements.)

         In connection with the sale of the debentures, the Company issued
62,504 shares of its Common Stock valued at $312,500 which is being accounted
for as debt discount to be charged to expense over the term of the note.
Amortization of the discount for the ten months ended June 30, 1997 was
approximately $252,172.

                                       19

<PAGE>

         In August 1996, the Company issued to non-employee directors and
consultants of the Company three-year warrants to purchase 325,000 shares of the
Company's Common Stock at $5.00 per share. The warrants were valued at $457,201
and were charged to operations for the period ended August 31, 1996.

         In June 1997, the Company issued to consultants, warrants to purchase
350,000 shares of Common Stock at $5.75 per share. The warrants were valued at
approximately $705,000 and were charged to operations for the ten months ended
June 30, 1997.

         The Company's 1996 Stock Option Plan (the "Plan") was adopted in
November 1996, and amended in December 1996 and April 1997. Under the Plan,
which authorizes the granting of incentive stock options or nonincentive stock
options, the maximum number of shares of common stock for which options may be
granted is 1,300,000 shares. As at June 30, 1997, options to purchase 1,055,000
shares of Common Stock had been granted under the Plan. Subsequent to the
Company's fiscal year end, the Company issued under the Plan to employees stock
options to purchase an aggregate of 40,000 shares of Common Stock and to
consultants stock options to purchase 137,500 shares of Common Stock. In
addition, the Company issued to a consultant 5,000 shares of Common Stock.

         In August 1997, the Company made a $210,000 loan to D & M Investments,
Inc., an unaffiliated party due September 24, 1997 and bearing interest at 10%
per annum. At June 30, 1997, D & M Investments held a $210,000 convertible
debenture issued by the Company. In connection with the loan, D & M pledged to
the Company the rights to the convertible debenture. On September 24, 1997, in
lieu of demanding payment on the loan, the Company elected to deduct amounts due
under the loan from the amounts payable by the Company under the debenture. In
connection with the above transaction, D & M Investments signed a lockup
agreement with respect to any securities of the Company that it holds.

         The Distribution Agreement requires the Company to make loans to
Agrotech of up to $1,500,000 for the enhancement of Agrotech's manufacturing
capacity. Interest for the loan would be based on the one-year interest rate for
Spanish Pesetas published in the Financial Times on the nearest business day
following each anniversary date of the Distribution Agreement. Under the terms
of the Distribution Agreement, the first $1,000,000 of such loan is repayable
over a three-year period as an offset against Conserver 21[TM] purchases by the
Company in excess of $2,000,000 annually and the balance of any such loan is
payable out of royalties which may be due Agrotech from such sales over a three-
to four-year period. As of June 30, 1997, the Company advanced Agrotech
$1,000,000 under the terms of the Distribution Agreement. In May 1997, delivery
of the initial $500,000 of the Loan Amount was advanced on behalf of the Company
by Mr. James V. Stanton, a director and Vice-Chairman of the Company, at an
interest rate of 10% per annum. In June 1997, the Company repaid the $500,000
loan, together with accrued interest of $5,600, from the proceeds of the
Offering. During the ten months ended June 30, 1997, the Company established a
reserve equal to the Agrotech Loan. (See Notes A and I to Notes to Financial 
Statements.)

         Under the terms of the Distribution Agreement, the Company may be
obligated to extend an additional loan of $500,000 to Agrotech. Due to the
current renegotiations, the Company cannot determine at the present time whether
any additional loans, under the terms of the Distribution Agreement, will be
made or whether any offsets under the Distribution Agreement will be available.

         During the ten months ended June 30, 1997, the Company incurred
$115,576 and $52,247 in marketing and sales expenses and research and
development costs for Conserver 21[TM], respectively. Although the Company has
completed some initial testing of Conserver 21[TM], the Company has not
completed all of its own comprehensive independent tests and to date, has relied
primarily on the tests performed or commissioned by Agrotech, its predecessor in
interest and entities with which it had contracted. Thus, it is possible that
Conserver 21[TM] may require further research, development, design and testing,
as well as regulatory clearances, prior to larger-scale commercialization.
During the fiscal year ending June 1998, the Company anticipates a significant
increase in marketing and sale costs and research and development costs

                                       20


<PAGE>

for Conserver 21[TM], particularly if the Distribution Agreement is renegotiated
to the Company's satisfaction.

         In June 1997, the Company completed an initial underwritten public
offering in which it received net proceeds of approximately $8,900,000 through
the sale of 2,200,000 shares of its Common Stock at a price of $5.00 per share.
Additional net proceeds of $1,448,000 were received by the Company in July 1997
as a result of the underwriter's exercise of its over-allotment option to
purchase an aggregate of 330,000 shares of Common Stock at $5.00 per share.

         As at June 30, 1997, approximately $2,130,000 of the proceeds from the
Offering were used for general business purposes, including the $1,000,000
delivered under the Agrotech Loan and the repayment of the $1,000,000
convertible debenture held by the SES Family Trust, together with accrued
interest thereon. The Company anticipates that the balance of the proceeds from
the Offering will be used for working capital and general business purposes and
general business purposes primarily in connection with its Conserver 21[TM]
business. At June 30, 1997, the Company had available cash and cash equivalents
of $7,715,460.

         The Company is in the development stage and its operations are subject
to all of the risks inherent in the establishment of a new business enterprise,
including the need to obtain financing, lack of revenues and the uncertainty of
market acceptance of its business. The Company has not as yet derived any
revenues from operations and has incurred losses since inception. Its
accumulated deficit at June 30, 1997 was $9,929,138. No operating revenues are
anticipated until such time, if ever, as the Company can demonstrate the
commercial viability of Conserver 21[TM]. The Company currently has no orders
for Conserver 21[TM] and there can be no assurance that potential customers will
be willing to incur the costs of Conserver 21[TM]. There can be no assurance
regarding whether or when the Company will successfully implement its business
plan or operate profitably.

         The Company anticipates, particularly if the Distribution Agreement is
renegotiated to its satisfaction, that during the 1998 fiscal year it will enter
the operating stage for its Conserver 21[TM] Principal Line of Business and as a
result will incur additional costs in connection with inventory purchases,
warehousing and shipping, and hiring additional employees and consultants. The
Company currently estimates that its available cash reserves will be sufficient
to meet the Company's liquidity and working capital requirements for its
Principal Line of Business, including additional expenditures for inventory
purchase, leasing new office space, hiring additional employees, consultants and
warehouse space through June 1999. The continued expansion and operation of the
Company's Principal Line of Business beyond such period may be dependent on its
ability to obtain additional financing.

         The Company currently has eight employees. Should the Company commence
sales of Conserver 21[TM] and/or if the New Line of Business or the New Business
Opportunities are approved by its stockholders, management of the Company would
anticipate a significant increase in the number of employees and consultants
during the fiscal year ended June 30, 1998. Such possible increase in the number
of employees and consultants and the attendant costs cannot be estimated at this
time. Management does not anticipate, however, such workforce increases until
such time the Company's Principal Line of Business and/or proposed New Line of
Business have the potential to generate sufficient revenues to offset such
costs.

                                       21

<PAGE>


         In the event the Company proceeds with its New Line of Business and the
New Business Opportunities, the Company would not utilize current cash reserves.
In addition to the direct issuance of shares of the Company's Common Stock, the
Company anticipates funding the cash portion of the initial capital required for
the proposed New Line of Business and New Business Opportunities with the
proceeds from the private sale of additional Common Stock and/or other
securities of the Company. Issuances of securities would be dilutive to
stockholders and any other types of financing would likely constrain the
Company's financial and operating flexibility. In the event the Company proceeds
with its New Line of Business and the New Business Opportunities, the Company
would be obligated to pay an aggregate of approximately $6.75 million under the
Sakhalin Agreement, the Hotel Management Agreement, the Development Services
Agreement and the Casino Consulting Agreement. In addition, under such
agreements the Company would be required to issue, under certain circumstances
and subject to the completion of certain terms and obligations thereunder, up to
5,550,000 shares of Common Stock and options to purchase 600,000 shares of
Common Stock. The Company's stockholders will experience significant dilution in
their percentage ownership interest in the Company upon the issuance of the
shares of Common Stock as contemplated under the agreements related to the New
Line of Business and the New Business opportunities.

         In the event the Company's plans change, its assumptions prove to be
inaccurate or its available cash reserves together with the privately raised
funds prove to be insufficient to fund its operations (as a result of future
changes in the industry, general economic conditions, unanticipated increases in
expenses or other factors), the Company may be required to seek additional
financing. Any additional equity financing may be dilutive to stockholders and
debt financing, if available, will likely include restrictive covenants,
including financial maintenance covenants restricting the Company's ability to
incur additional indebtedness and to pay dividends. Except as disclosed herein
with respect to the New Line of Business and the New Business Opportunities, the
Company has no current arrangement with respect to, or sources of, additional
financing and there can be no assurance that any needed financing would be
available to the Company on acceptable terms, or at all. The Company's ability
to obtain additional financing will depend upon, among other things, the
willingness of financial organizations to participate in the funding and the
Company's financial condition and results of operations.

         The Company's future performance will be subject to a number of
business and other factors, including the successful renegotiation of the
Distribution Agreement and many factors beyond the Company's control, such as
economic downturns and changes in the marketplace, as well as the level of
competition and the ability of the Company to successfully implement its
business strategy and effectively monitor and control its costs. There can be no
assurance that the Company will be able to generate significant revenues or
achieve profitable operations.

Accounting Pronouncements

         Pursuant to the choice afforded it in Financial Accounting Standard No.
123 "Accounting for Stock-Based Compensation," the Company has elected to report
under the basis of Accounting Principles Board Opinion No. 25. Disclosures
required by the Company's election may be found in Note E of the financial
statements for the Company's fiscal year ended June 30, 1997.

         In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 established new standards for computing and presenting earnings
per share. SFAS 128 is effective for periods ending after December 15, 1997.
Once effective, per share data for all prior periods is required to be restated.
The Company has not yet qualified what effect, if any, the adoption of SFAS 128
will have on its net earnings per share of Common Stock.

                                       22

<PAGE>


         The Financial Accounting Standards Board has recently issued statements
of Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure," and No. 130, "Reporting Comprehensive Income." These two
pronouncements are not expected to significantly change the disclosure of
information presented in the Company's financial statements.

Subsequent Events

         Subsequent to the Company's fiscal year end, the Company announced in
August 1997 that it was considering diversifying beyond its sole line of
business of marketing, distributing and otherwise commercially exploiting
Conserver 21[TM] (the "Principal Line of Business") and was exploring a possible
new line of business in the hotel and casino industry (the "New Line of
Business"). In connection with the New Line of Business, and subject to the
receipt of requisite approval by the Company's stockholders, the Company has (i)
entered into an agreement to acquire certain rights to develop a hotel and
casino project in Yuzhno-Sakhalinsk on the Sakhalin Island of the Russian
Federation (the "Sakhalin Project"), located 20 minutes by air from Sapporo,
Japan, (ii) entered into an agreement with Dato' David Chiu to provide certain
development services with respect to the Sakhalin Project, (iii) reached an
agreement to manage certain hotels of Dorsett Hotels and Resorts International,
including hotels presently operating or being developed in the United States,
Bali, Australia, Canada, Cambodia, Malaysia and Thailand, and (iv) entered into
several other related agreements (collectively, the "New Business
Opportunities"). In addition to the direct issuance of shares of the Company's
Common Stock in connection with the proposed transactions, the Company
anticipates funding the cash portion of the initial capital required for the
proposed New Line of Business and New Business Opportunities with the
proceeds from the private sale of additional Common Stock and/or other
securities of the Company in private offerings. Both the proposed New Line of
Business and New Business Opportunities are subject to receipt of requisite
stockholder approval. (See "Item 1. Proposed New Line of Business and New
Business Opportunities".)

         At a Special Meeting of Stockholders, which the Company anticipates to
be held during December 1997, the Company's stockholders will be asked to
consider and vote on a proposal which would result in the Company diversifying
beyond its Principal Line of Business and entering into a the New Line of
Business in the hotel and casino industry, specifically involving the New
Business Opportunities to acquire an interest in, and to develop and manage, the
Sakhalin Project and to provide management services for other hotels.

         Sakhalin Agreement. In connection with the Sakhalin Project, the
Company entered into an agreement dated as of August 12, 1997, and amended
September 9, 1997 (as amended, the "Sakhalin Agreement"), subject to receipt of
requisite approval by the Company's stockholders, with Sakhalin Trading and
Investments Limited ("SGTI") and Sovereign Gaming and Leisure Limited
("Sovereign"), each a limited liability company organized under the laws of
Cyprus, pursuant to which the Company would acquire: (i) all of the share
capital of SGTI, which includes (a) all of SGTI's rights and interest in a
project to develop the Sakhalin Project, and (b) SGTI's ownership interest in
50% of the shares of Sakhalin City Centre Limited ("SCC"), a closed joint stock
company incorporated under the laws of the Russian Federation, which, in turn,
holds certain rights, including a guarantee by the city of Yuzhno-Sakhalinsk to
issue a gaming license to SCC and (ii) all rights and interest to or in the
Sakhalin Project held by


                                       23

<PAGE>

Sovereign, including certain operating and project management agreements with
respect to the Project (collectively, the "Shares and Rights").

         In consideration of the Shares and Rights, the Company is required
under the terms of the Sakhalin Agreement, as amended, to pay to SGTI and its
stockholders (i) an initial payment of $500,000, which has been paid, (ii)
$1,000,000 payable by October 15, 1997, (iii) $1,500,000 payable by October 31,
1997 and (iv) an aggregate of 1,538,462 shares of the Company's Common Stock
(valued for the purpose of the Sakhalin Agreement at an aggregate of $10,000,000
or $6.50 per share) (collectively, the "Purchase Price"). The Company's Common
Stock was trading at $6.125 per share on the date of execution of the Sakhalin
Agreement. Upon completion of the Company's due diligence, should the Company
conclude for any reason that it does not wish to proceed with the Sakhalin
Project and the transactions contemplated under the Sakhalin Agreement, the
Company has the right to convert any cash portion of the Purchase Price then
delivered to SGTI into shares of SGTI at a conversion rate of one ordinary share
of SGTI for each $30.00 so delivered (SGTI currently has 230,000 shares
outstanding). An investment in SGTI will likely be illiquid and there can be no
assurance that the Company will recoup any cash paid under the Sakhalin
Agreement. The Sakhalin Agreement further provides that, upon request of the
Company, Sovereign agrees to become project manager during the construction
phase of the Sakhalin Project, subject to agreement on reasonable compensation
for such services, which shall not exceed 5% of the construction cost of the
Project or $5,000,000, whichever is less.

         In connection with the execution of the Sakhalin Agreement and with the
Company's approval, SGTI acquired 15% of the share capital of SCC from certain
shareholders resulting in SGTI owning 65% of the share capital of SCC. In
consideration for this exchange, the Purchase Price payable by the Company for
the shares of SGTI under the Sakhalin Agreement will increase by 461,538 shares
of the Company's Common Stock. Including this transaction, aggregate total
consideration for the Shares and Rights payable by the Company to SGTI and its
shareholders will be $3,000,000 and 2,000,000 shares of the Company's Common
Stock. Furthermore, it is the Company's understanding that the $3,000,000 cash
portion of the Purchase Price paid to SGTI will be used by SGTI as a loan to SCC
(in which SGTI hold a 65% interest) for the initial development and costs for
the Sakhlain Project.

         Development Services Agreement. On October 2, 1997, the Company has
entered into an agreement (the "Development Services Agreement") with Dato'
David Chiu ("Chiu"), pursuant to which the Company, subject to approval by its
stockholders and subject to the Company acquiring all of the shares of SGTI
(which would result in the Company owning 65% of the share capital of SCC),
would as described below transfer to Chiu 38.46% of the share capital of SGTI
and would issue to Chiu a share of convertible preferred stock which would
convert, under specified conditions and certain circumstances, into 1,500,000
shares of Common Stock. The Development Services Agreement provides that Chiu
will provide certain development services to the Company in connection with the
Sakhalin Project, including using his best efforts to procure or secure the
necessary debt financing and guarantees (on behalf of the Company and its
subsidiaries and affiliates) for the complete turnkey construction of the
Sakhalin Project which financing is to be on mutually acceptable terms.
Construction of the Sakhalin Project is currently estimated at $100 million. The
shares of Common Stock and the shares of SGTI to be issued to Chiu in
consideration for his services will be issued on the date of mutual execution by
the Company or its nominated affiliate of a legally enforceable and binding
agreement from a lender, the terms of which are acceptable to the Company, SGTI
and SCC, to provide the financing. If the financing is not realized as
contemplated pursuant to the Development Services Agreement, the Company and the
other investors in the Sakhalin Project would be required to obtain additional
financing

                                       24

<PAGE>

on behalf of SCC from a variety of sources, including borrowings under bank
credit facilities, sales of securities and placement of term debt, to construct
the hotel and casino.

         Chiu has also agreed that he shall not for a period of three years from
the date of issuance or transfer, as applicable, of the shares received under
the Development Services Agreement, voluntarily or involuntarily, directly or
indirectly, sell, contract to sell, grant a right to purchase, exchange,
mortgage, pledge, hypothecate, give, bequeath, transfer, assign, encumber,
alienate or in any other way whatsoever dispose of (hereinafter collectively
called "transfer") any of such shares, including any options and warrants with
respect to such shares, received by way of dividend or upon an increase,
reduction, substitution or reclassification or combination of stock of the
Company or upon any reorganization of the Company, as applicable.
Notwithstanding any of the foregoing, Chiu may transfer the shares to any
affiliate, subject to the Company's consent, which consent shall not be
unreasonably withheld. Chiu also agreed that until three years from the issuance
date of the shares to give the Company an irrevocable proxy, with full power of
substitution, to vote on all matters as the Company deems appropriate, with
respect to such shares at all meetings of the stockholders of the Company and by
means of any written consent of stockholders with respect to all matters. The
Company has designated Charles H. Stein, the Chairman, President and Chief
Executive Officer of the Company as the authorized person to exercise the
aforementioned voting rights on behalf of the Company, until such time as the
Mr. Stein is incapacitated to act. Furthermore, the Development Services
Agreement provides that, in the event that Chiu wishes to sell all or any part
of the shares after the three year period described above, the Company shall
have the first option to purchase all or any part of the shares from Chiu. Chiu
agreed to give the Company written notice thereof of its intent to sell any or
all of the shares. The Company has a right to purchase said shares at a price
equal to the (i) closing price per share as reported on the Nasdaq (as reported
in the Wall Street Journal) on the date written notice is given to the Company
or (ii) the price offered to Chiu by an unaffiliated third party (not a
competitor of the Company) in an irrevocable and unconditional bona fide written
offer (the "Bona Fide Offer"), as applicable. The Company has the right to
purchase all or a portion of the shares by giving Chiu written notice no later
than 10 business days after written notice is provided to the Company. In the
event that the Company fails to exercise its option, Chiu has the right to sell
the shares to such third party at the price offered to the Company without any
further obligations to sell the shares to the Company. If, however, any or all
of the shares are not sold pursuant to the Bona Fide Offer within 30 days from
the receipt by the Company of Chiu's notice of intent to sell, the unsold shares
shall remain subject to the terms of the Development Services Agreement.

         Consummation of Sakhalin Agreement and Development Services Agreement.
Assuming consummation of each of the transactions contemplated above, the
Company and Chiu would own through their respective shares in SGTI, a 40% and
25% interest in SCC, respectively, and the remaining 35% of the interests would
continue to be held 20% by the City of Yuzhno-Sakhalinsk and 15% by the Sakhalin
Oblast (the regional government).

         Proposed Pledge Agreement. In connection with the transactions
contemplated by the Sakhalin Agreement, Brian J. Bryce (through the Jasmine
Trustees Ltd.), Jay M. Haft and James V. Stanton, directors of the Company, have
agreed to enter into a pledge agreement with the Company that in the event the
proposal relating to the New Line of Business and New Business Opportunities



                                       25

<PAGE>

is not approved by the stockholders of the Company at the Special Meeting of
Stockholders, the Company would transfer all of its rights and obligations under
the Sakhalin Agreement to such directors, subject to the directors reimbursing
the Company for certain costs and expenses incurred by the Company relating to
the Sakhalin Project, including the $500,000 initial payment under the Sakhalin
Agreement. These obligations would be secured by a specified amount of shares of
Common Stock of the Company owned, either directly or beneficially, by such
directors. This matter was approved by the Board of Directors at its meeting
held on September 10, 1997.

         Sakhalin Casino Consulting Agreement. Effective as of August 14, 1997,
the Company entered into an agreement (the "Casino Consulting Agreement"),
subject to the receipt of the requisite approval from the Company's stockholders
(the "Commencement Date"), with Star Casinos Limited, a limited liability
company organized under the laws of Cyprus (the "Consultant"), whereby the
Consultant has agreed to provide consulting and technical services to the
Company and any affiliated entities for a period of two years from the
Commencement Date with respect to the development and ongoing operations of the
Sakhalin Project casino. Under the terms of the Consulting Agreement, the
Consultant has agreed to make available the services of David Hartley
("Hartley"). As of the Commencement Date, the Consultant will receive (i) a fee
of $21,000 per month plus reimbursement of reasonable expenses for the term of
the agreement, adjusted pro rata for any partial month of service and (ii)
options to purchase 100,000 shares of the Company's Common Stock, at $6.50 per
share, with 50% of the options becoming exercisable on each of the first and
second anniversary dates of the Commencement Date and expiring on the third
anniversary date. At the end of the term of the agreement, provided that the
Consultant is not in breach of the Consulting Agreement, the Consultant will
also be entitled to receive a $250,000 bonus. From the period between October 1,
1997 through the Commencement Date, the Consultant will be paid by the Company a
fee of $21,000 a month, adjusted pro rata for any partial month of service, plus
reimbursement of reasonable expenses. The Company may terminate the agreement
for "cause," which includes (i) material breach of the agreement, (ii)
unavailability of Hartley, (iii) material misconduct injurious to the Company by
the Consultant or Hartley or (iv) conviction of act of fraud or conviction of a
crime by the Consultant or Hartley. The agreement also binds the Consultant and
Hartley to a two year non-compete, non-solicitation provision.

         Hotel Management Services. On October 2, 1997, the Company entered an
agreement (the "Hotel Management Agreement") with Dorsett Hotels and Resorts
International, Ltd. ("Dorsett"), a company controlled by Chiu, pursuant to which
the Company, directly or through a subsidiary, would act as exclusive operator
and manager of certain hotels owned by Dorsett. In consideration for Dorsett
entering into the Hotel Management Agreement, the Company, subject to requisite
approval of the Company's stockholders, would (i) issue to Dorsett up to an
aggregate 2,000,000 shares of Conserver Common Stock, upon specified conditions
being satisfied, and (ii) pay Dorsett $3,000,000. The Hotel Management Agreement
provides for twenty year exclusive operating agreements with respect to the
management of the Dallas Grand Hotel, Dallas, Texas, Dorsett Regency Bali,
Indonesia, and Rockman's Regency Melbourne, Australia, as well as operating
agreements on substantially similar terms for five other hotels scheduled to
open within the next two years. The Company, pursuant to the terms of an
operating agreement for each hotel managed, would be entitled to management fees
equal to


                                       26

<PAGE>


three percent of gross revenues plus ten percent of gross operating profits. In
addition, the Company will receive service fees equal to four percent of gross
revenues for marketing, promotion and advertising expenses as well as an
additional one-half of one percent of gross revenues for training costs which
will be used in turn to fund such expenses. Each operating agreement would
further provide that in the event Dorset terminate's the agreement for any
reason other than for a material breach by the Company, the Company would be
entitled to a termination fee. The termination fee shall be calculated based on
the formula which is the remaining number of years under the Agreement
mulitiplied by a factor which is (i) if the Company is terminated during the
first five years of the Agreement, the factor shall be the sum of the actual
fees paid or payable to the Company based on revenues generated to date plus
fees payable to the Company based on projected revenues for the rest of the
year, (ii) in the event of a termination after the first five years, the factor
shall be the average of the fees paid or payable to the Company for the
preceding two years, or (iii) in the event of a termination after the first ten
years, the factor shall be the average of the fees paid or payable to the
Company for the preceding three years. If the Hotel Management Agreement is
consummated, subject to requisite stockholder approval, the Company plans to add
a management team with experience with major international hotel chains in the
operation and management of hotels and leisure time activities worldwide.

         Dorsett agreed that it shall not for a period of three years from the
date of issuance or transfer, as applicable, of the shares received under the
Hotel Management Agreement, voluntarily or involuntarily, directly or
indirectly, sell, contract to sell, grant a right to purchase, exchange,
mortgage, pledge, hypothecate, give, bequeath, transfer, assign, encumber,
alienate or in any other way whatsoever dispose of (hereinafter collectively
called "transfer") any of such shares, including any options and warrants with
respect to such shares, received by way of dividend or upon an increase,
reduction, substitution or reclassification or combination of stock of the
Company or upon any reorganization of the Company, as applicable.
Notwithstanding any of the foregoing, Dorsett may transfer the shares to any
subsidiary or affiliate of Dorsett, subject to the Company's consent, which
consent shall not be unreasonably withheld. Dorsett also agreed that until three
years from the issuance date of the shares to give the Company an irrevocable
proxy, with full power of substitution, to vote on all matters as the Company
deems appropriate, with respect to the shares at all meetings of the
stockholders of the Company and by means of any written consent of stockholders
with respect to all matters. The Company has designated Charles H. Stein, the
Chairman, President and Chief Executive Officer of the Company as the authorized
person to exercise the aforementioned voting rights on behalf of the Company,
until such time as Mr. Stein is incapacitated to act. Furthermore, the Hotel
Management Agreement provides that, in the event that Dorsett wishes to sell all
or any part of the shares after the three year period described above, the
Company shall have the first option to purchase all or any part of the shares
from Dorsett. Dorsett agreed to give Conserver written notice thereof of its
intent to sell any or all of the shares. The Company has a right to purchase
said shares at a price equal to the (i) closing price per share as reported on
the Nasdaq (as reported in The Wall Street Journal) on the date written notice
is given to the Company or (ii) the price offered to Dorsett by an unaffiliated
third party (not a competitor of the Company) in an irrevocable and
unconditional bona fide written offer (the "Bona Fide Offer"), as applicable.
The Company has the right to purchase all or a portion of the shares by giving
Dorsett written notice no later than 10 business days after written notice is
provided to the Company. In the event that the Company fails to exercise its
option, Dorsett has the right to sell the shares to such third party at the
price offered to the Company without any further obligations to sell the shares
to the Company. If, however, any or all of the shares are not sold pursuant to
the Bona Fide Offer within 30 days from the receipt by the Company of Dorsett's
notice of intent to sell, the unsold shares shall remain subject to the terms of
the Hotel Management Agreement.

                                       27

<PAGE>


         Funding New Line of Business and New Business Opportunities. In
addition to the direct issuance of shares of the Company's Common Stock in
connection with the foregoing transactions, the Company anticipates funding the
cash portion of the initial capital required for the proposed New Line of
Business and New Business Opportunities with the proceeds from the private sale
of its securities.

         Other. As of October 3, 1997, the Company entered into an agreement in
principle with Parbhoe Handelmij NV, a Surinamese limited liability, to create a
joint venture company to develop a casino project in Paramaribo, the capital
city of Surinam (the former Dutch Guyana). Pursuant to the agreement, the joint
venture company will also enter into an operating agreement with the Company to
manage the casino.

         In connection with the Company entering into the New Line of Business
and the New Business Opportunities, the Board of Directors has adopted
resolutions to issue to Brian J. Bryce and Jay M. Haft, respectively, options to
purchase 300,000 and 200,000 shares of Common Stock at an exercise price equal
to $6.125 per share. The issuance of the options to Messrs. Bryce and Haft, who
are directors of the Company, is subject to receipt of requisite shareholders'
approval for the Company to enter into the New Line of Business and the New
Business Opportunities.

Factors That Could Affect Operating Results

         This Annual Report on Form 10-K contains forward-looking statements.
Additional written and oral forward-looking statements may be made by the
Company from time to time in Securities and Exchange Commission ("SEC") filings
and otherwise. The Company cautions readers that results predicted by
forward-looking statements, including, without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, and income are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward-looking statements, due to the following factors, among
other risks and factors identified from time to time in the Company's filings
with the SEC:

         o The Company is in the development stage and its operations are
subject to all of the risks inherent in the establishment of a new business
enterprise, including the need to obtain financing, lack of revenues,
reliability of sources of supply and the uncertainty of market acceptance of its
business. The Company has not as yet derived any revenues from operations and
has incurred losses since inception.

         o No operating revenues are anticipated until such time, if ever, as
the Company can demonstrate the commercial viability of Conserver 21[TM], and
until the Company's New Line of Business, if approved by its stockholders,
becomes a viable operation. There can be no assurance regarding whether or when
the Company will successfully implement its business plan or operate profitably.

         o The Company is wholly dependant upon the Distribution Agreement with
Agrotech, a Spanish corporation which owns the rights to Conserver 21[TM] and
manufactures and distributes the product. If the Distribution Agreement were to
terminate for any reason, the Company may not be able to purchase or distribute
Conserver 21[TM] products.

         o Initial marketing efforts of the Conserver 21[TM] packets in the
United States have indicated that the Company needs to renegotiate the terms of
its Distribution Agreement with Agrotech, and improve the packaging of the
Conserver 21[TM] product. The Company is currently in discussions with Agrotech
with a view to reduce the pricing arrangements regarding the Conserver 21[TM]
product and to modify the manufacturing arrangements so that all packaging is
done in the United States. Management of the Company is currently in discussions
with a U.S.-based company which specializes in packaging products comparable to
Conserver 21[TM], and has identified other U.S.-based packaging plants capable
of packaging Conserver 21[TM]. Estimated packaging costs provided by these
entities indicate that the Company would be able to reduce the wholesale costs
of the Conserver 21[TM] packets if the product were packaged in the United
States. Management believes that this cost reduction even if partially offset by
an increase in the royalty percentage to be paid to Agrotech would enable


                                       28

<PAGE>

the Company to competitively price the packets at a level that would be
profitable to the Company. There can be no assurance, however, that the Company
will be able to successfully renegotiate the Distribution Agreement on more
favorable terms or enter into a packaging arrangement with a third party to its
satisfaction. Under such circumstances the Company would have to shift its
initial marketing efforts and focus on the sale of the Conserver 21[TM] filters.
There can be no assurance that the Company would be able to successfully
implement this revised marketing strategy. Any sustained impairment of the
Company's ability to market Conserver 21[TM] could significantly delay or
materially impair the Company's ability to commercialize Conserver 21[TM].

         o The Distribution Agreement requires the Company to make loans to
Agrotech of up to $1,500,000 for the enhancement of Agrotech's manufacturing
capacity. As of June 30, 1997, the Company had advanced Agrotech $1,000,000.
Under the terms of the Distribution Agreement, the Company may be obligated to
extend an additional loan of $500,000 to Agrotech. Due to the current
renegotiations, the Company cannot determine at the present time whether any
additional loans, under the terms of the Distribution Agreement, will be made or
whether any offsets under the Distribution Agreement will be available.

         o Agrotech currently operates a manufacturing facility near Madrid.
Currently, the Company is dependent on Agrotech as the sole supplier of
Conserver 21[TM] for the manufacture, supply and quality of the Conserver 21[TM]
products. The Company experienced some limitations in the variety and quality of
the packaging available from Agrotech. If the Company is unable to renegotiate
the terms of the Distribution Agreement with Agrotech, there can be no assurance
that the Company will be able to properly market the Conserver 21[TM] packets.

         o Should the Company fail to meet its obligations under the
Distribution Agreement, including the Initial Purchase Commitment or subsequent
purchase commitments, the Company could lose its exclusive right to sell
Conserver 21[TM] in the United States and Canada, which would materially
adversely impact the development of the Company's business. If the Distribution
Agreement were to terminate as a result of a material breach by either party to
the agreement, the Company would not be able to distribute Conserver 21[TM]
products, and accordingly, the Company could be without its current Principal
Line of Business involving Conserver 21[TM] and its results of operations could
be materially, adversely impacted.

         o Any sustained impairment of the Company's ability to acquire or
market Conserver 21[TM] for any reason, including, without limitation, the
cancellation of the Distribution Agreement, manufacturing or packaging
difficulties, or a cessation of production by Agrotech may significantly delay
or seriously impair the Company's ability to commercialize Conserver 21[TM].

         o The Company believes that its proposed use of Conserver 21[TM] does
not currently subject it to any material federal, state, or local regulatory
approvals. There can be no assurance, however, that future regulatory approvals
will not be required in the United States, leading to unanticipated expenses and
delays inherent in the regulatory process.

                                       29

<PAGE>


         o The Company has not undertaken any investigation as to the applicable
requirements that may be imposed by regulatory agencies outside the United
States. There can be no guaranty that such legal restrictions in jurisdictions
outside the United States will not result in a delay in the Company's ability to
commercially develop the Conserver 21[TM] in those jurisdictions.

         o The Company currently has no orders for Conserver 21[TM] products,
and there can be no assurance that potential customers will be willing to incur
the costs of Conserver 21[TM], that the Conserver 21[TM] will be contracted for
by any supermarkets or other retailers, distributors or growers or, even if
accepted by any such entities, that it will prove profitable or attractive to
potential customers. In addition, there can be no assurance that other competing
products will not be more economical or attractive to the Company's potential
customers.

         o The marketing and sale of Conserver 21[TM] currently is the Company's
sole line of business and will account for substantially all of the Company's
revenues, if any, for the foreseeable future and until the Company's New Line of
Business and New Business Opportunities, if approved by stockholders, result in
a viable operation. The success of the Company's Principal Line of Business will
depend on its ability to demonstrate the commercial viability and effectiveness
of Conserver 21[TM] and its success in competing against other products or
technologies aimed at the same market.

         o Conserver 21[TM] has not been commercially used outside of Spain and
there can be no assurance that the Company can establish a market for the
Conserver 21[TM] in the United States, Canada or in other territories which it
may have distribution rights. If Conserver 21[TM] cannot be successfully
commercialized, or if Conserver 21[TM] cannot be marketed on a stand-alone
basis, it is likely there would be a material adverse effect on the Company's
business, financial condition and results of operations.

         o As part of the Company's effort to exploit international markets, it
is currently developing strategic alliances primarily to market and distribute
Conserver 21[TM] in Canada, Israel and Japan. There can be no assurance that any
of the proposed transactions will result in definitive agreements for the
Company, or if such definitive agreements are effectuated, that the introduction
of Conserver 21[TM] into the geographic areas identified would be commercially
accepted or profitable. In addition, if such agreements are effectuated, the
Company's Conserver 21[TM] operations will be subject to risks inherent in
international operations.

         o The Company has never utilized Conserver 21[TM] under the conditions
and in the volumes that will be required to make the Conserver 21[TM] profitable
and cannot predict all of the difficulties that may arise in connection
therewith. Although the Company has completed some initial testing of Conserver
21[TM], the Company has not completed all of its own comprehensive independent
tests and to date, has relied primarily on the tests performed or commissioned
by Agrotech, its predecessor in interest and entities with which it had
contracted. Thus, it is possible that Conserver 21[TM] may require further
research, development, design and testing, as well as regulatory clearances,
prior to larger-scale commercialization.

                                       30

<PAGE>


         o The Company's ability to operate its Conserver 21[TM] business
successfully will depend on a variety of factors, many of which are outside the
Company's control, including competition, cost and availability of the product
and changes in regulatory requirements.

         o The Company's initial marketing activities will be performed by its
executive officers and advisors. To varying degrees, such persons have had prior
experience in the food industry and marketing food products and services.
However, none have had any experience with Conserver 21[TM] or in marketing the
product. In order to market and sell Conserver 21[TM], the Company will need to
maintain a sales force with technical expertise in the food preservation and
food transportation industries. There can be no assurance that the Company will
be able to gain such expertise or that such marketing efforts will be
successful.

         o There are several methods of food preservation commercially available
that compete directly or indirectly with the Company's Conserver 21[TM]
products. Many of the Company's competitors have substantially greater
financial, human and other resources than the Company as well as more experience
in the marketing and selling of post-harvest life extension products. There can
be no assurance that Conserver 21[TM] will gain commercial acceptance or
establish any meaningful market share. Furthermore, any such market share, if
and when achieved, could be lost or reduced by enhanced competition or the
emergence of new and more effective preservation technologies.

         o The Company had formerly contracted for the exclusive rights to
distribute Conserver 21[TM] in the United States and Canada with Groupe
Conserver, the group of affiliated entities which, collectively, held the
exclusive worldwide rights to distribute and market Conserver 21[TM] from
Conserver XXI, S.A., Agrotech's predecessor in interest ("Conserver XXI"). Due
to the instigation of insolvency proceedings involving Conserver Investments
S.A., the controlling entity of the Groupe Conserver affiliates ("Conserver
Investments"), and other alleged breaches, including Groupe Conserver's loss of
its rights from Conserver XXI, the Company has terminated its former
distribution agreement with Groupe Conserver and has taken steps to preserve its
right to assert claims in the Conserver Investments insolvency proceedings.
There can be no assurance that the Company's claims will be successful or that
Groupe Conserver or anyone acting on its behalf will not attempt to enjoin the
Company from exercising its rights derived from Agrotech or otherwise make
claims against the Company and that such efforts will not successfully prevent
the commercialization of Conserver 21[TM] temporarily. The Company does not
believe, however, that there is any basis for such claims.

               New Line of Business and New Business Opportunities

         o With regard to the New Line of Business and the New Business
Opportunities, there is no guarantee that the Company will receive the requisite
approval of its stockholders, or if approved, whether the Company can
successfully implement its business plan or operate profitably. The Company's
stockholders will experience significant dilution in their percentage ownership
interest in the Company upon the issuance of the shares of Common Stock as
contemplated under the agreements related to the New Line of Business and the
New Business Opportunities.

                                       31

<PAGE>


         o The Company's current and future business plans with respect to the
New Line of Business and the New Business Opportunities are dependent, in large
part, on changes in conditions which may adversely impact investments in gaming
enterprises. These conditions and other factors beyond the Company's control
include: (i) ability of the Company to operate any hotels and casinos; (ii)
competition from other hospitality and entertainment properties; (iii) changes
in regional and local population and disposable income composition; (iv)
unanticipated increases in operating costs; (v) legal restrictions as to the use
of advertising typically utilized in marketing gaming operations; (vi)
restrictive changes in zoning and similar land use laws and regulations or in
health, safety and environmental laws, rules and regulations; (vii) the
inability to secure property and liability insurance to fully protect against
all losses, or to obtain such insurance at reasonable costs; (viii) the exercise
of the power of eminent domain; (ix) seasonality; and (x) changes in travel
patterns or preferences which may be affected by increases in gasoline prices,
changes in airline schedules and fare, strikes, weather patterns and/or
relocation or reconstruction of highways, among other factors. Given the rapid
developments and changes in the industry, it is impossible to accurately predict
future trends or changes in the gaming industry or their effect on the Company.
In particular, the success of the Company's proposed projects is largely
dependent on tourism from the active gaming populations of Japan, Korea and
China and the Russian Federation. Although the economic viability of any of the
Company's proposed projects is at least in part based upon tourist incentives
which would streamline the process of tourists entering the regions in which the
Company plans to operate for gambling in such regions, there can be no assurance
that restrictions will not be imposed on gambling generally in the regions in
which the Company plans to operate and/or on tourists entering such regions for
gambling, which may adversely impact the Company's results of operations.

         o The collection of the casino receivables with respect to the projects
from international customers could be adversely affected by future business or
economic trends or significant events in the countries in which such customers
reside. There can be no assurance that operating cash flows and results of
operations will not be adversely impacted by any inability to collect
receivables from high-end players. In addition, gaming debts may not be legally
enforced in certain foreign jurisdictions or in certain jurisdictions within the
United States on grounds that they are against public policy. Such
unenforceability may have an adverse impact on the collectability of such
receivables.

         o As a result of the Company's proposed expansion into the hospitality
and gaming industries internationally, the Company's operations with respect to
the proposed projects will be subject to greater risks inherent in international
operations such as the possibility of the loss of revenue, property or equipment
due to expropriation, nationalization, war, insurrection, terrorism or civil
disturbance, the instability of foreign economies, currency fluctuations and
devaluations, adverse tax policies and governmental activities that may limit or
disrupt markets, restrict payments or the movement of funds or result in the
deprivation of contract rights. The Company is subject to taxation in a number
of jurisdictions, and the final determination of its tax liabilities involves
the interpretation of the statutes and requirements of various domestic and
foreign taxing authorities. Foreign income tax returns of foreign subsidiaries,
unconsolidated affiliates and related entities are routinely examined by foreign
tax authorities.


                                       32

<PAGE>

There can be no assurance that any of these risks will not have an adverse
effect on the Company's results of operations.

Item 8.  Financial Statements and Supplementary Data

         The consolidated financial statements of the Company are filed as part
of this Form 10-K are set forth on pages F-2 to F-22. The report of Richard A.
Eisner & Company, LLP, independent auditors, dated August 28, 1997 and September
24, 1994, respect to Notes D and K(8), October 2, 1997 with respect to Notes
K(2) and (6) and October 3, 1997 with respect to Note K(10) is set forth on page
F-1 of this Form 10-K.

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

         Not Applicable


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

Identification of Directors

         Pursuant to an Amendment to the Company's Certificate of Incorporation,
the Board of Directors is divided into three classes, the terms of which expire
successively over a three-year period. At each annual meeting of stockholders,
successors to directors whose terms expire at that meeting shall be elected for
three-year terms. The term of office for each class of director expires as
follows: Class A, at the 1998 annual meeting of stockholders; Class B at the
1999 annual meeting of stockholders; and Class C at the 2000 annual meeting of
stockholders. The current directors of the Company are as follows:

                                Class A Directors

         JAY M. HAFT, 61, has served as a director of the Company since October
1996. A practicing attorney for over 25 years, Mr. Haft also serves as Chairman
of Noise Cancellation Technologies, Inc., Extech, Inc., Jenna Lane, Inc. as well
as director of five other public companies whose respective securities are
traded on The Nasdaq Market. He is a Managing General Partner of Venture Capital
Associates, Ltd. and of Gen Am "1" Venture Fund, a domestic and an international
venture capital fund, respectively. From 1989 until 1994, he was a partner at
Parker Duryee Rosoff & Haft, counsel to the Company for its initial public
offering, in New York, New York. He is currently of counsel to such firm. He is
a member of the Florida State Commission for Government Accountability to the
People.

         MICHAEL JAY SCHARF, 54, has been a director of the Company since
September 1996. Mr. Scharf has been Chairman, President and Chief Executive
Officer of Niagara Corporation (formerly International Metals Acquisition
Corporation), a publicly held specialty steel and metal Company, since 1993.
From 1989 until 1993, Mr. Scharf was a private investor. From 1983 until 1989,
he was Chairman and Chief Executive Officer of Edgecomb Corporation,


                                       33

<PAGE>

a leading independent metals distribution Company which was sold in 1989 to the
Blackstone Group. Mr. Scharf is also a director of Financial Services
Acquisition Corp., a publicly held Company.

                                Class B Directors

         JAMES V. STANTON, 65, has been Vice Chairman and a director of the
Company since its inception in March 1996. From 1981 to 1988 he served as
Executive Vice President of the Delaware North Company, one of the largest
privately held food companies in the Unites States. Mr. Stanton, has been an
attorney and a registered lobbyist in Washington, D.C. since 1988, and
represented the 20th Congressional District of Ohio in the United in the United
States House of Representatives from 1971 to 1977, where he served on the Select
Committee on Intelligence, the Government Operations Committee, and the Public
Works and Transportation Committee.

         BRIAN J. BRYCE, 62, has been a director of the Company since July 1996.
Since 1988, Mr. Bryce has been the sole principal and a director of Bryce &
Company, Limited, a consulting firm engaged in project finance. Mr. Bryce was
employed by Hyatt International Corporation from 1969 until 1988, initially as a
Vice President and ultimately becoming Vice Chairman in 1981.

                                Class C Director

         CHARLES H. STEIN, 65, has been Chairman, President and Chief Executive
Officer of the Company since its inception in March 1996. From June 1994 until
March 1996, Mr. Stein was a private investor and consultant. From October 1993
until June 1994, Mr. Stein was Chairman of HMI International Ltd., a Florida
based wholesaler and retailer of resale products. From 1985 to 1987, he was
President and Chief Executive Officer of Night Hawk Resources, Ltd. (Vancouver
Stock Exchange) which was engaged in oil and gas exploration in Texas and
Alaska. Prior thereto and from 1987, Mr. Stein was a private investor. Early in
his career, Mr. Stein pioneered the concept of packaging fresh orange juice in
"milk-type" cartons, which concept was sold to Kraft Foods, Inc. From December
1968 to October 1983, Mr. Stein was Chairman and Chief Executive Officer of
Hardwicke Companies Inc. (Nasdaq), which built, developed, or operated more than
50 restaurants (including Tavern on the Green, Maxwell's Plum, and Benihana),
health spas, theme parks in North America, Europe and Asia (including Great
Adventure in New Jersey), and duty-free shops. Prior to 1968, he was President
and Chief Executive Officer of Kitchens of Sara Lee, the world's largest bakery,
as well as a director, member of the Executive Committee, and a Vice President
of Consolidated Foods Corporation (NYSE), the parent Company of Sara Lee.

Identification of Executive Officers

         In addition to Messrs. Stein and Stanton, who are listed above, the
following persons are executive officers of the Company:

         JEFFREY H. BERG, PH.D., 53, was appointed Vice President of Research
and Development in January 1997. Dr. Berg, who has agreed to devote
approximately 50% of his


                                       34

<PAGE>

working time to Company affairs, will also seek new business opportunities for
the Company that are compatible with its current or future business. Since 1987
Dr. Berg has worked in the financial community as an analyst covering the health
care industry, including as a part-time employee of M. H. Meyerson & Co., Inc.,
a financial services firm, since September 1995. From 1981 to 1987 Dr. Berg
worked at PA Technology, an international consulting agency where he counseled
clients in the food industry and the health care industry. From 1974 to 1981 he
led product development laboratories at Johnson & Johnson's Patient Care
Division, and subsequently for the Consumer Products Division of Ortho
Pharmaceutical Corporation. Dr. Berg received a Ph.D in organic chemistry from
New York University in 1969 and subsequently spent four years at General Foods
in research.

         GERALD M. BRESLAUER, 60, has been Vice President -- Administration and
Secretary of the Company since its inception. From 1991 until he joined the
Company in March 1996, Mr. Breslauer was an agent of The Equitable Life
Assurance Society of the United States and the Equitable Variable Life Insurance
Company and was a registered representative of Equico Securities, Inc. Mr.
Breslauer is licensed to practice law in the State of New York.

         MILES R. GREENBERG, 40, was appointed Vice President and Chief
Financial Officer of the Company in September 1996 and appointed Senior Vice
President on January 18, 1997. From 1994 until joining the Company, Mr.
Greenberg served as Vice President and Chief Financial Officer of F3 Software
Corporation ("F3"), a developer and marketer of electronic forms composition and
automation software. From 1992 until assuming his positions at F3, he served as
Controller of BLOC Development Corporation (former parent company of F3), a
publicly held entity primarily engaged in the development, publishing and direct
marketing of computer software and hardware products. From 1985 to 1992, Mr.
Greenberg served as Vice President and Chief Financial Officer of The Levenshon
Companies, Inc. and its affiliates, a diversified financial services company.
Mr. Greenberg is a Certified Public Accountant formerly with KPMG Peat Marwick.

         DOUGLAS C. RICE, 53, was appointed Vice President -- Corporate
Development of the Company in May 1996 and appointed Executive Vice President
and Chief Operating Officer in April 1997. Prior to joining the Company and from
1986, Mr. Rice was an independent food technologies consultant, during which
time he provided advice and guidance for six years to the Charoen Pokphand
Group, one of Asia's largest food producers, on the operation, financing,
management and distribution aspects of businesses specializing in shrimp, fish,
and chicken products.

         MICHAEL STANTON, 23, was appointed Vice President -- Special Projects
in April 1997. Mr. Stanton is the son of James Stanton, Vice Chairman and
Director of the Company and is a graduate of the College of the Holy Cross in
1996. Mr. Stanton shall serve the Company in identifying and developing new
business opportunities and special project applications for Conserver 21[TM].


                                       35

<PAGE>


                          Compliance with Section 16(a)
                     of the Securities Exchange Act of 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of any registered class of the Company's equity securities, to file with
the Securities and Exchange Commission (the "SEC") and the Nasdaq Stock Market
reports of ownership of the Common Stock of the Company. Reporting persons are
required by SEC regulation to furnish the Company with copies of all such
reports that they file. To the best of the Company's knowledge, during the
period March 6, 1996 to August 31, 1996 and the ten months ended June 30, 1997,
the initial reports and any amendments thereto of each of the Company's
executive officers and directors were timely filed.

Item 11.  Executive Compensation

         The following table sets forth the compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer during the period March 6, 1996
to August 31, 1996 and the ten months ended June 30, 1997. No other executive
officer of the Company serving as an executive officer received a total salary
and bonus of $100,000 for the periods specified. Accordingly, no information is
reported for such persons.

                           Summary Compensation Table

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                              Annual Compensation                       Long Term Compensation
                                                    -----------------------------------------------------------------------------
                                                                                                       Awards          Payouts
                                                                                                 --------------------------------
                                                                                        Other        Securities
                                                                                        Annual       Underlying       All Other
                                      Fiscal                                         Compensation      Options      Compensation
  Name and Principal Position        Period(1)      Salary($)(2)    Bonus($)(2)           ($)            (#)             ($)
---------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>                 <C>             <C>              <C>             <C>            <C>

Charles H. Stein                 3/6/96 - 8/31/96        0               0                0               0               0
  Chairman, Chief Executive
  Officer, President and                                 0               0                0               0               0
  Director                       9/1/96 - 6/30/97
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

----------------
(1) The Company was incorporated on March 6, 1996 and initially adopted a fiscal
    year ending August 31. During the current calendar year, the Company elected
    to change its fiscal year end to June 30.

(2) For the period March 6, 1996 to June 30, 1997, Mr. Stein waived his right to
    an annual salary and, as of the date of this report, has continued to waive
    this right. The Board of Directors has accepted Mr. Stein's waiver, but has
    reserved the right to award Mr. Stein, in its sole discretion, the amounts
    so waived. During this period March 6, 1996 to August 31, 1996 and the ten
    months ended June 30, 1997, the Company recorded non-cash compensation
    charges of $65,000 and $105,000, respectively, for services contributed by
    Mr. Stein.

Employment Agreement

         Effective as of June 13, 1997 the Company entered into an employment
agreement with Charles H. Stein, President and Chief Executive Officer of the
Company. The agreement has a three-year term which renews for an additional year
on each anniversary of the agreement, and provides for an annual base
compensation of $125,000 together with such additional increases as the
Company's Board of Directors, in its sole discretion, from time to time
determines are appropriate. The agreement also provides for certain employee
benefits including medical


                                       36

<PAGE>

insurance, vacation and a car allowance, and also contains a non-competition
provision covering the term of the agreement as well as for 36 months following
termination. For the period March 6, 1996 to August 30, 1996 and the ten months
ended June 30, 1997, Mr. Stein waived his right to an annual salary and the
Company recorded non-cash compensation charges of $65,000 and $105,000 for the
respective periods. As of the date of this report, Mr. Stein has continued to
waive this right. The Board of Directors has accepted Mr. Stein's waiver, but
has reserved the right to award Mr. Stein, in its sole discretion, the amounts
so waived.

         The following table provides certain information regarding the stock
options granted during the period March 6, 1996 to August 31, 1996 and the ten
months ended June 30, 1997 to the only executive officer named in the Summary
Compensation Table.

          Option Grants For the Period March 6, 1996 to August 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                   Number of         % of total                   
                                   Securities      Options Granted     Exercise of 
                               Underlying Options    to Employees       Base Price     Expiration
           Name                   Granted(#)(1)    in Fiscal Period      $/Share          Date
--------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>             <C>             <C>    
Charles H. Stein                        0                 0                 --             --

--------------------------------------------------------------------------------------------------
</TABLE>

----------------
(1) The Company was incorporated on March 6, 1996 and initially adopted a fiscal
    year ending August 31. During the current calendar year, the Company elected
    to change its fiscal year end to June 30.

            Option Grants For the Ten Months Ended June 30, 1997(1)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                   Number of         % of total                   
                                   Securities      Options Granted     Exercise of 
                               Underlying Options    to Employees       Base Price     Expiration
           Name                   Granted(#)(1)    in Fiscal Period      $/Share          Date
--------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>             <C>             <C>    
Charles H. Stein                        0                 0                 --             --

--------------------------------------------------------------------------------------------------
</TABLE>

----------------
(1) The Company was incorporated on March 6, 1996 and initially adopted a fiscal
    year ending August 31. During the current calendar year, the Company elected
    to change its fiscal year end to June 30.


Directors Compensation

         Non-employee directors receive $1,000 for each meeting a director
attends. Directors who are employees of the Company receive no additional
compensation for their services rendered as directors. All directors are
reimbursed for reasonable expenses incurred in connection with their services
rendered as directors.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth information, to the best of the
Company's knowledge, with respect to each person (including any "group" as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) known to the Company to be the beneficial owner
(defined below) of more than 5% of the Company's Common Stock. The percentage of
shares outstanding is based on the Company's Common Stock shares outstanding as
of September 30, 1997.

                                       37


<PAGE>


--------------------------------------------------------------------------------
                                               Number of Shares    Percentage of
                                                 Beneficially       Total Voting
   Name and Address of Stockholder                   Owned             Shares
--------------------------------------------------------------------------------
Charles Stein Inter Vivos Trust(1)
c/o Conserver Corporation of America
3250 Mary Street, Suite 405
Coconut Grove, FL 33133                           1,000,000             14.7%
--------------------------------------------------------------------------------
James V. Stanton(2)
c/o Conserver Corporation of America
3250 Mary Street, Suite 405
Coconut Grove, FL 33133                             653,644              8.9%
--------------------------------------------------------------------------------
Jasmine Trustees Ltd.(3)                            500,000              7.4%
P.O. Box 675
St. Helier, Jersey Channel Islands
--------------------------------------------------------------------------------
The SES Family Investment Partnership, L.P.(4)      500,000              6.9%
2859 Queens Courtyard Drive
Las Vegas, Nevada 89109
--------------------------------------------------------------------------------

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

(1) Represents shares held by the Charles Stein Intervivos Trust for benefit of
    Mr. Charles H. Stein's spouse and children. Mr. Stein, Chairman, President
    and Chief Executive Officer of the Company, disclaims voting and investment
    power with respect to the shares.

(2) Includes 20,000 shares of Common Stock which are held by Mr. Stanton, a
    director of the Company, as joint tenant with his wife, Margaret M. Stanton,
    currently exercisable warrants to purchase 150,000 shares of Common
    Stock at a price equal to $5.00 per share and currently exercisable options
    to purchase 400,000 shares and 23,644 shares of Common Stock at $5.00 and
    $2.00 per share, respectively.

(3) Represents shares held by the Jasmine Trustees Ltd. for the benefit of Mr.
    Brian J. Bryce, a director of the Company, and his children. Mr. Bryce does
    not have voting or dispositive power with respect to such shares.

(4) Represents currently exercisable warrants to purchase 500,000 shares of
    Common Stock at an exercise price of $2.00 per share and expiring in June
    2003.

         The following table sets forth information, to the best of the
Company's knowledge, with respect to the Company's Common Stock, (i) the
ownership of Common Stock by each current director and nominee, (ii) the
ownership of Common Stock by the Executive Officers named in the "Summary
Compensation Table," and (iii) the ownership of Common Stock by all current
directors and executive officers of the Company as a group. Except as otherwise
provided in the footnotes to the table, the beneficial owners (defined below)
have sole voting and investment power as to all securities. The percentage of
shares outstanding is based on the Company's Common Stock shares outstanding as
of September 30, 1997.


                                       38

<PAGE>


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                           Number of Shares        Percentage of
                                                              Beneficially          Total Voting
Name                                                             Owned                 Shares
-------------------------------------------------------------------------------------------------------
<S>                                                            <C>                       <C>
Charles H. Stein - Chairman, President and Chief Executive     
    Officer(1)                                                 1,000,000                 14.7%
-------------------------------------------------------------------------------------------------------
James V. Stanton - Vice Chairman and Director(2)                 653,644                  8.9%
-------------------------------------------------------------------------------------------------------
Douglas C. Rice - Executive Vice President and Chief              
    Operating Officer(3)                                          25,000                     *
-------------------------------------------------------------------------------------------------------
Miles R. Greenberg - Senior Vice President - Finance,             
    Treasurer and Chief Financial Officer(4)                      30,000                     *
-------------------------------------------------------------------------------------------------------
Jeffrey H. Berg - Vice President - Research and Development           --                    --
-------------------------------------------------------------------------------------------------------
Gerald M. Breslauer - Vice President - Administration and         
    Secretary                                                     50,000                     *
-------------------------------------------------------------------------------------------------------
Michael J. Stanton - Vice President - Special Project(5)          50,155                     *
-------------------------------------------------------------------------------------------------------
Brian J. Bryce, Director(6)                                      500,000                  7.4%
-------------------------------------------------------------------------------------------------------
Jay M. Haft - Director(7)                                        350,000                  4.9%
-------------------------------------------------------------------------------------------------------
Michael Jay Scharf - Director(8)                                 200,000                  2.9%
-------------------------------------------------------------------------------------------------------
All executive officers and directors as a group (10 persons)   2,858,799                 36.9%
-------------------------------------------------------------------------------------------------------
</TABLE>

-----------------------
*   Represents beneficial ownership of less than 1% of the Common Stock.

(1) Represents shares held by Charles Stein Inter Vivos Trust for benefit of Mr.
    Stein's spouse and children. Mr. Stein disclaims voting and investment power
    with respect to the shares.

(2) Includes 20,000 shares of Common Stock which are held as joint tenants with
    Mr. Stanton's wife, Margaret M. Stanton, currently exercisable warrants
    to purchase 150,000 shares of common stock at a price equal to $5.00 per
    share, and currently exercisable options to purchase 400,000 shares and
    23,644 shares of Common Stock at $5.00 and $2.00 per share, respectively.
    Does not include 30,000 shares of Common Stock issued to Mr. Stanton's
    adult children.

(3) Represents currently exercisable options to purchase 25,000 shares of Common
    Stock at $.50 per share.

(4) Represents currently exercisable options to purchase 30,000 shares of Common
    Stock at $5.00 per share.

                                       39

<PAGE>


(5) Includes currently exercisable options to purchase 11,822 shares of Common
    Stock at $2.00 per share and 23,333 shares at $5.00 per share.

(6) Represents shares held by Jasmine Trustees Ltd., a trust established for the
    benefit of Mr. Bryce and his children. Mr. Bryce does not have voting or
    dispositive power with respect to such shares.

(7) Includes warrants to purchase 150,000 shares of Common Stock at a price
    equal to $5.00 per share and options to purchase 150,000 shares of Common
    Stock at $5.00 per share.

(8) Represents 200,000 shares held by the Scharf Family 1989 Trust for the
    benefit of Mr. Scharf and his family. Mr. Scharf does have voting or
    dispositive power with respect to such shares.

         As used in the tables above "beneficial ownership" means the sole or
shared power to vote or direct the voting or to dispose or direct the
disposition of any security. A person is deemed to have "beneficial ownership"
of any security that such person has a right to acquire within 60 days of the
date of this report. Any security that any person named above has the right to
acquire within 60 days is deemed to be outstanding for purposes of calculating
the ownership of such person but is not deemed to be outstanding for purposes of
calculating the ownership percentage of any other person. Unless otherwise
noted, each person listed has the sole power to vote, or direct the voting of,
and power to dispose, or direct the disposition of, all such shares.

Item 13.  Certain Relationships and Related Transactions

         Following the Company's incorporation in March 1996, the Company issued
an aggregate of 4,880,167 shares of Common Stock to 24 persons, including
Messrs. Stein (through the Charles Stein Inter Vivos Trust), Stanton, Bryce
(through the Jasmine Trustees Ltd.), Breslauer, Haft and Scharf (through the
Scharf Family 1989 Trust) and Conserver Investments, SA, at a price of $.001 per
share.

         During the period from April 1996 through November 1996, the Company
issued an aggregate of 634,400 shares of Common Stock to 49 persons at a price
of $5.00 per share, including two persons who had previously acquired shares of
Common Stock at $.001 per share and 30,000 shares to two adult children of James
V. Stanton, a director of the Company. Subsequently in April 1997, options to
purchase 500,000 shares of Common Stock were granted to these 49 persons on a
pro rata basis at an exercise price of $2.00 per share.

         In March 1996, options to purchase 75,000 shares of Common Stock at an
exercise price of $.50 per share were granted to Douglas Rice, Vice President --
Corporate Development. The Company recorded compensation charges of $337,500 in
connection with the issuance of such options. In August 1996 warrants to
purchase 150,000 shares of Common Stock at a purchase price of $5.00 per share
were granted to each of Messrs. Haft and Stanton. In April 1997, options to
purchase 150,000 shares of Common Stock at a purchase price of $5.00 per share
were granted to each of Messrs. Haft and Stanton and options to purchase a total
of 70,000 shares of Common Stock at an exercise price of $5.00 per share were
granted to Michael Stanton, Vice President of the Company and James Stanton's
son. In September 1996 and April


                                       40

<PAGE>

1997, options to purchase a total of 90,000 shares of Common Stock at an
exercise price of $5.00 per share were granted to Miles R. Greenberg, Senior
Vice President and Chief Financial Officer.

         In October and November 1996, the Company repurchased, for an aggregate
repurchase price of $1,800,000, 1,366,667 of the 1,666,667 shares of Common
Stock originally acquired by Conserver Investments, SA (an affiliate of Groupe
Conserver) ("CI") in March 1996 in connection with the Groupe Conserver
Distribution Agreement. The remaining 300,000 shares of Common Stock were
transferred in November to two persons designated by the Company, each of whom
are non-affiliates of both the Company and Groupe Conserver or any of their
directors, officers or employees.

         Pursuant to a Stockholder Agreement dated March 7, 1996 by and among
Charles Stein, Bruce Denis Allet on behalf of CI and a non-affiliate
stockholder, Mr. Allet has served on the Board of Directors as a designee of CI.
This agreement terminated effective upon the disposition by CI of its remaining
shares of Common Stock in November 1996, and Mr. Allet subsequently resigned as
a director of the Company.

         Since October 1996, the Company has paid rent of $3,845 per month plus
utilities to Charles H. Stein for the use of his Manhattan suite as office space
for the Company.

         In April 1997, James Stanton advanced $500,000 to Agrotech on behalf of
the Company in fulfillment of a Company obligation under the distribution
agreement between the Company and Agrotech. In June 1997, the Company repaid Mr.
Stanton in full, together with $5,600 in accrued interest thereon from the
proceeds of the Offering. In consideration of his advance of $500,000 to
Agrotech in fulfillment of a Company obligation under the Distribution Agreement
between the Company and Agrotech, the Company issued to Mr. Stanton options to
purchase 250,000 shares of Common Stock at an exercise price of $5.50 per share.

         Jay M. Haft, a director of the Company is Of Counsel to the law firm
Parker Duryee Rosoff & Haft. The Company incurred approximately $75,000 and
$149,000 in legal fees to a related party from March 6, 1996 (date of
incorporation) through August 31, 1996 and the ten months ended June 30, 1997,
respectively, including free legal services amounting to $60,000 in the ten
months ended June 30, 1997 which was recorded as additional paid-in capital.

         On August 12, 1997, the Board of Directors has adopted resolutions to
issue to Brian J. Bryce and Jay M. Haft, respectively, options to purchase
300,000 and 200,000 shares of Common Stock at an exercise price equal to
$6.125 per share, such options to be effective upon shareholders' approval of
the proposal for the Company to enter into the New Line of Business and the
New Business Opportunities.

         In connection with the transactions contemplated by the Sakhalin
Agreement, Brian J. Bryce (through the Jasmine Trustees Ltd.), Jay M. Haft and
James V. Stanton, directors of the Company, have agreed to enter into a pledge
agreement with the Company that in the event the proposal relating to the New
Line of Business and New Business Opportunities is not approved by the
stockholders of the Company at the Special Meeting of Stockholders, the Company
would transfer all of its rights and obligations under the Sakhalin Agreement to
such directors, subject to the directors reimbursing the Company for certain
costs and expenses incurred by the Company relating to the Sakhalin Project,
including the $500,000 initial payment under the Sakhalin Agreement. These
obligations would be secured by a specified amount of shares of Common Stock of
the Company owned, either directly or beneficially, by such directors. This
matter was approved by the Board of Directors at its meeting held on September
10, 1997.


                                       41

<PAGE>

Item 14.  Exhibits, Financial Statement & Schedules, and Reports on Form 8-K

         (a)(1)   Financial Statements


Document                                                                   Page
--------                                                                   ----

Report of Independent Auditors.                                             F-2

Balance Sheet as at June 30, 1997.                                          F-3

Statements of Operations for the period from March 6, 1996 (date of
incorporation) through August 31, 1996, for the ten months ended June
30, 1997 and for the period from March 6, 1996 (date of incorporation)
through June 30, 1997.                                                      F-4

Statements of Changes in Stockholders Equity for the period from March
6, 1996 (date of incorporation) through August 31, 1996 and for the
ten months ended June 30, 1997.                                             F-5

Statements of Cash flows for the period from March 6, 1996 (date of
incorporation) through August 31, 1996, for the ten months ended June
30, 1997 and for the period from March 6, 1996 (date of incorporation)
through June 30, 1997.                                                      F-6

Notes to Financial Statements.                                              F-7

(a)(2)   Exhibits

Exhibit
Number      Description of Exhibits
------      -----------------------

3.1         Certificate of Incorporation and amendments thereto (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571)).
3.2         Amendment to Company's Certificate of Incorporation (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571), Amendment No. 5).
3.3         By-laws of Company (incorporated herein by reference to the
            Company's Registration Statement on Form S-1 (File No. 333-16571)).
4.2         Form of certificate evidencing shares of Common Stock (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571), Amendment No. 2).
4.3         Form of Underwriter's Warrant Agreement between Company and the
            Underwriter (including form of Underwriter's arrant) (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571), Amendment No. 5).

                                       42

<PAGE>

Exhibit
Number      Description of Exhibits
------      -----------------------

4.5         Amendatory Agreement dated November 6, 1996 between the Company and
            The SES Family Investment and Trading Partnership, L.P.
            (incorporated herein by reference to the Company's Registration
            Statement on Form S-1 (File No. 333-16571)).
4.6         Form of 10% Debenture dated September 1996 (incorporated herein by
            reference to the Company's Registration Statement on Form S-1 (File
            No. 333-16571)).
4.7         Form of 10% Convertible Debenture dated November 1996 (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571)).
10.1        1996 Stock Option Plan, as amended and restated (incorporated herein
            by reference to the Company's Registration Statement on Form S-1
            (File No. 333-16571)).
10.2        Form of Stock Option Agreement (incorporated herein by reference to
            the Company's Registration Statement on Form S-1 (File No.
            333-16571)).
10.3        Distribution Agreement dated October 9, 1996 between Company and
            Agrotech 2000, S.L. (incorporated herein by reference to the
            Company's Registration Statement on Form S-1 (File No. 333-16571),
            Amendment No. 4).
10.4        Employment Agreement between Charles H. Stein and the Company,
            effective as of June 13, 1997.
10.5        Form of $5.00 Warrant Agreement dated August 1996 (incorporated
            herein by reference to the Company's Registration Statement on Form
            S-1 (File No. 333-16571)).
10.6        Loan Agreement dated October 9, 1996 between Company and Conserver
            Purchasing Corporation ("CPU"), as amended by Letter Agreement dated
            December 31, 1996 between Company and CPC (incorporated herein by
            reference to the Company's Registration Statement on Form S-1 (File
            No. 333-16571), Amendment No. 2).
10.7        Form of Financial Consulting Agreement between Company and
            Underwriter (incorporated herein by reference to the Company's
            Registration Statement on Form S-1 (File No. 333-16571), Amendment
            No. 5).
10.8        Agreement dated as of August 12, 1997 by and among the Company,
            Sakhalin Trading and Investments Limited ("SGTI") and Sovereign
            Gaming and Leisure Limited ("Sovereign").
10.9        Amendment dated September 9, 1997, to August 12, 1997 Agreement by
            and among the Company, SGTI and Sovereign.
10.10       Development Services Agreement dated as of October 2, 1997 between
            the Company and Dato' David Chiu.
10.11       Consulting Agreement effective as of August 14, 1997 between the
            Company and Star Casino Limited.
10.12       Proposed form of Pledge Agreement by and among the Company, Brian J.
            Bryce (through the Jasmine Trustees Ltd.), Jay M. Haft and James V.
            Shelton.
10.13       Hotel Management Agreement dated as of October 2, 1997 between
            the Company and Dorsett Hotels and Resorts International Ltd.
10.14       Memorandum of Understanding dated August 20, 1997 between the
            Company and Arlene Streilitz.
10.15       Heads of Agreement dated October 3, 1997 between the Company and
            Parbhoe's Handelmij N.V.



                                       43

<PAGE>

Exhibit
Number      Description of Exhibits
------      -----------------------

27.1        Financial Data Schedule.

(b)         Reports on Form 8-K

         No reports on Form 8-K were filed during the fourth quarter ended June
30, 1997.

                                       44

<PAGE>


                                   SIGNATURES

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

                                    CONSERVER CORPORATION OF AMERICA


Date: October 14, 1997              By: /s/ Charles H. Stein
                                        --------------------------------------
                                        Charles H. Stein
                                        Chairman of the Board, Chief Executive
                                        Officer and President

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

<TABLE>
<CAPTION>
            Signature                                  Title                             Date
            ---------                                  -----                             ----
<S>                                       <C>                                        <C>
     /s/ Charles H. Stein
----------------------------------        Chairman of the Board, Chief Executive     October 14, 1997
         Charles H. Stein                 Officer and President                 
                                          (Principal Executive Officer)         

    /s/ Miles R. Greenberg
----------------------------------        Chief Financial Officer                    October 14, 1997
        Miles R. Greenberg                (Principal Financial Officer and Chief
                                          Accounting Officer)

     /s/ James V. Stanton
----------------------------------        Vice Chairman and Director                 October 14, 1997
         James V. Stanton

      /s/ Brian J. Bryce
----------------------------------        Director                                   October 14, 1997
          Brian J. Bryce

        /s/ Jay M. Haft
----------------------------------        Director                                   October 14, 1997
            Jay M. Haft


----------------------------------        Director
        Michael Jay Scharf
</TABLE>



                                       45

<PAGE>


CONSERVER CORPORATION OF AMERICA
(a development stage company)

                                   -I N D E X-

                                                                          Page

REPORT OF INDEPENDENT AUDITORS                                             F-2

BALANCE SHEET AS AT  JUNE 30, 1997                                         F-3

STATEMENTS OF OPERATIONS FOR THE PERIOD FROM MARCH 6, 1996
(DATE OF INCORPORATION) THROUGH AUGUST 31, 1996, FOR THE TEN
MONTHS ENDED JUNE 30, 1997 AND FOR THE PERIOD FROM MARCH 6,
1996 (DATE OF INCORPORATION) THROUGH JUNE 30, 1997                         F-4

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD
FROM MARCH 6, 1996 (DATE OF INCORPORATION) THROUGH AUGUST
31, 1996 AND FOR THE TEN MONTHS ENDED JUNE 30, 1997                        F-5

STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM MARCH 6, 1996
(DATE OF INCORPORATION) THROUGH AUGUST 31, 1996, FOR THE TEN
MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 6,
1996 (DATE OF INCORPORATION) THROUGH JUNE 30, 1997                         F-6

NOTES TO FINANCIAL STATEMENTS                                              F-7










                                                                           F-1
<PAGE>


REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Conserver Corporation of America
Coral Gables, Florida


We have audited the accompanying balance sheet of Conserver Corporation of
America (a development stage company) as at June 30, 1997, and the related
statements of operations, changes in stockholders' equity and cash flows for the
period from March 6, 1996 (date of incorporation) through August 31, 1996, for
the ten months ended June 30, 1997 and for the period from March 6, 1996 (date
of incorporation) through June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements enumerated above present fairly, in all
material respects, the financial position of Conserver Corporation of America at
June 30, 1997 and the results of its operations and its cash flows for the
period from March 6, 1996 (date of incorporation) through August 31, 1996, for
the ten months ended June 30, 1997 and for the period from March 6, 1996 (date
of incorporation) through June 30, 1997, in conformity with generally accepted
accounting principles.

As discussed in Notes I and J the Company is currently renegotiating the
Distribution Agreement with a view to reduce the pricing arrangements regarding
its cost of purchasing the Conserver 21(TM) packets and to modify the
manufacturing arrangements. Should a favorable outcome of such negotiation not
be achieved or the agreement were to terminate as a result of a material breach,
the Company could be without its current line of business of marketing Conserver
21 and its results of operations would be adversely affected.



New York, New York
August 28, 1997

With respect to Note D
September 24, 1997

With respect to Notes K[2] and [5]
October 2,  1997

With respect to Notes K[10]
October 3, 1997

                                                                           F-2


<PAGE>


CONSERVER CORPORATION OF AMERICA
(a development stage company)

Balance Sheet
June 30, 1997


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

ASSETS
   Current assets:
      Cash and cash equivalents                                     $ 7,715,460
      Loan receivable (Note A[4])                                     1,000,000
      Bad debt reserve (Note I)                                      (1,000,000)
      Advances to officers and employees                                 26,965
      Inventory (Notes B[7] and J)                                       20,000
      Prepaid expenses and other current assets                         166,783
--------------------------------------------------------------------------------
        Total current assets                                          7,929,208
--------------------------------------------------------------------------------
   Fixed assets, net (Notes B[2] and C)                                  21,986
--------------------------------------------------------------------------------
                                                                    $ 7,951,194
--------------------------------------------------------------------------------

LIABILITIES
   Current liabilities:
      Accounts payable                                              $   292,524
      Accrued expenses                                                  173,400
      Due to officers and employees                                      10,678
      Convertible debentures (net of $60,328 discount) (Note D)         689,672
      Accrued interest                                                   55,000
--------------------------------------------------------------------------------
        Total current liabilities                                     1,221,274
--------------------------------------------------------------------------------
   Commitments and other matters (Note G)

STOCKHOLDERS' EQUITY (Notes A, D and E):
   Preferred stock, par value $.01, 5,000 shares authorized,
    none issued Common stock, par value $.001, 30,000,000 shares
    authorized, 6,385,404 shares issued and outstanding                   6,386
   Additional paid-in capital                                        16,672,672
   Deficit accumulated during the development stage                  (9,949,138)
--------------------------------------------------------------------------------
        Total stockholders' equity                                    6,729,920
--------------------------------------------------------------------------------
                                                                    $ 7,951,194
--------------------------------------------------------------------------------




See notes to financial statements                                          F-3



<PAGE>


CONSERVER CORPORATION OF AMERICA
(a development stage company)

Statements of Operations


<TABLE>
<CAPTION>
                                                      March 6, 1996                               March 6, 1996
                                                        (Date of                                     (Date of
                                                     Incorporation)           Ten Months          Incorporation)
                                                         Through                 Ended               Through
                                                       August 31,              June 30,              June 30,
                                                          1996                   1997                  1997
----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                      <C>                <C>
Operating expenses:
   Marketing and sales                                                        $    115,576       $     115,576
   Research and development                                                         52,247              52,247
   Compensation charges in connection with
      issuance of options and warrants
      (Notes E[1] and [2])                            $   907,201                4,995,106           5,902,307
   General and administrative expenses                    458,611                1,687,172           2,145,783
   Write-down of inventory (Note J)                                                355,800             355,800
   Provision for bad debt (Note I )                                              1,000,000           1,000,000
----------------------------------------------------------------------------------------------------------------
Operating loss                                         (1,365,812)              (8,205,901)         (9,571,713)
Other expenses:
   Interest expense, net of $8,741 and $51,180 of
      interest income in August and June,
      respectively                                         21,259                  356,166             377,425
----------------------------------------------------------------------------------------------------------------
Net loss                                              $(1,387,071)             $(8,562,067)        $(9,949,138)
----------------------------------------------------------------------------------------------------------------

Net loss per share of common stock (Note B[3])              $(.32)                  $(1.58)
----------------------------------------------------------------------------------------------------------------

Weighted average number of common shares
   outstanding                                          4,390,767                5,409,990
----------------------------------------------------------------------------------------------------------------
</TABLE>



See notes to financial statements                                          F-4


<PAGE>


CONSERVER CORPORATION OF AMERICA
(a development stage company)

Statements of Changes in Stockholders' Equity
(Note E)


<TABLE>
<CAPTION>
                                                                                                            Deficit
                                                                                                          Accumulated
                                                Common Stock                              Additional      During the
                                               Par Value $.001         Subscriptions       Paid-in        Development
                                             Shares         Amount       Receivable        Capital           Stage           Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>            <C>             <C>               <C>          <C>
Issuance of common stock for
   cash of $ 2,140 and
   subscriptions in March 1996             4,880,167      $ 4,881           $(2,741)                                  $       2,140
Issuance of common stock for cash
   from April through August 1996
   ($5.00 per share)                         331,400          331                        $ 1,656,679                      1,657,010
Compensation charges in connection
    with issuance of options
   (Note E[1])                                                                               450,000                        450,000
Compensation charges in connection
    with issuance of warrants
   (Note E[2])                                                                               457,201                        457,201
Compensation charge in connection
   with officer's salary                                                                      65,000                         65,000
Net loss for the period from
   March 6, 1996 (date of
   incorporation) through
   August 31, 1996                                                                                       $(1,387,071)    (1,387,071)
------------------------------------------------------------------------------------------------------------------------------------
Balance - August 31, 1996                  5,211,567        5,212            (2,741)       2,628,880      (1,387,071)     1,244,280
Repurchase and cancellation of
   shares originally issued (Note A[2])   (1,366,667)      (1,367)            1,367       (1,800,000)                    (1,800,000)
Shares issued and treated as debt
   discount                                   62,504           63                            312,437                        312,500
Sale of common stock ($5.00 per
   share) from September 1, 1996
   to November 7, 1996                       303,000          303                          1,514,697                      1,515,000
Legal services provided by
   stockholder without charge                                                                 60,000                         60,000
Collection of subscriptions receivable                                        1,374                                           1,374
Compensation charges in connection
   with issuance of options and
   warrants                                                                                4,995,106                      4,995,106
Compensation charges in connection
   with officer's salary                                                                     105,000                        105,000
Net proceeds from issuance of
   common stock in initial public
   offering                                2,200,000        2,200                          8,856,527                      8,858,727
Common stock contributed to
   treasury and cancelled including
   an adjustment of 5,000 shares
   (Note E[2])                               (25,000)         (25)                                25
Net loss for the period from
   September 1, 1996 through
   June 30, 1997                                                                                          (8,562,067)    (8,562,067)
------------------------------------------------------------------------------------------------------------------------------------
Balance - June 30,  1997                   6,385,404      $ 6,386                        $16,672,672     $(9,949,138)   $ 6,729,920
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>





See notes to financial statements                                          F-5


<PAGE>


CONSERVER CORPORATION OF AMERICA
(a development stage company)

Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                              March 6, 1996                         March 6, 1996
                                                                                (Date of                              (Date of
                                                                             Incorporation)       Ten Months        Incorporation)
                                                                                 Through             Ended             Through
                                                                                August 31,          June 30,           June 30,
                                                                                   1996               1997               1997
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>               <C>                 <C>
Cash flows from operating activities:
   Net loss                                                                    $(1,387,071)      $(8,562,067)        $(9,949,138)
   Adjustments:
      Impairment of inventory                                                                        355,800             355,800
      Provision for bad debt                                                                       1,000,000           1,000,000
      Depreciation and amortization                                                    487           253,849             254,336
      Compensation expense relating to officer's salary                             65,000           105,000             170,000
      Compensation expense relating to stock options and warrants                  907,201         4,995,106           5,902,307
      Legal services provided by shareholder without charge                                           60,000              60,000
      Changes in:
        Advances to officers and employees                                         (14,129)           (2,158)            (16,288)
        Prepaid expenses and other  current assets                                 (17,502)         (149,281)           (166,783)
        Accrued expenses and other liabilities                                     105,317           415,607             520,925
-----------------------------------------------------------------------------------------------------------------------------------
           Net cash used in operating activities                                  (340,697)       (1,528,144)         (1,868,841)
-----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
   Acquisition of fixed assets                                                      (4,865)          (19,285)            (24,150)
   Notes receivable                                                                               (1,375,800)         (1,375,800)
-----------------------------------------------------------------------------------------------------------------------------------
           Net cash used in investing activities                                    (4,865)       (1,395,085)         (1,399,950)
-----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
   Collection of subscriptions receivable                                                              1,374               1,374
   Repurchase of shares of common stock                                                           (1,800,000)         (1,800,000)
   Net proceeds from public offering                                                               8,858,727           8,858,727
   Proceeds from sale of common stock                                            1,659,150         1,515,000           3,174,150
   Proceeds from notes payable                                                   1,000,000         1,250,000           2,250,000
   Repayments of notes payable                                                                    (1,500,000)         (1,500,000)
   Return of subscription funds                                                     90,000           (90,000)
-----------------------------------------------------------------------------------------------------------------------------------
           Net cash provided by financing activities                             2,749,150         8,235,101          10,984,251
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash                                                             2,403,588         5,311,872           7,715,460
   Cash and cash equivalents - beginning of period                                                 2,403,588
-----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents  - end of period                                     $ 2,403,588      $  7,715,460        $  7,715,460
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
   Cash paid during the period for interest                                    $     - 0 -      $    129,864        $    129,864
-----------------------------------------------------------------------------------------------------------------------------------
   Noncash transactions:
      Issuance of common stock in connection with convertible debt                              $    312,500        $    312,500
-----------------------------------------------------------------------------------------------------------------------------------
      Common stock contributed to treasury and cancelled
        (includes a $5 adjustment)                                                              $         25        $         25
-----------------------------------------------------------------------------------------------------------------------------------
      Cancellation of loan receivable in exchange for inventory                                 $    375,800        $    375,800
-----------------------------------------------------------------------------------------------------------------------------------
      Cancellation of subscription receivable in exchange for shares
        of common stock                                                                         $      1,367        $      1,367
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



See notes to financial statements                                          F-6


<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note A. The Company

[1]   Conserver Corporation of America (the "Company") is a development stage
      company that has the rights for the exclusive distribution of a product
      which can be used to retard spoilage and decay in food and flowers for
      commercial use in the United States and Canada. The Company was
      incorporated in Delaware on March 6, 1996 and initially adopted a fiscal
      year ending August 31. During the current year, the Company elected to
      change the fiscal year end to June 30. As a development stage company, the
      Company's activities since its inception have been primarily focused on
      testing, developing and exploiting the Conserver 21(TM)product and
      negotiating distribution and other arrangements, raising both debt and
      equity financing (public and private), and recruiting management personnel
      with respect to the Conserver 21(TM) product.

[2]   In connection with the organization of the Company, 1,666,667 shares of
      common stock were subscribed to by Conserver Investments, S.A., which
      together with certain of its affiliates are referred to hereinafter as the
      "Groupe Conserver".

      The Company, in a series of negotiated transactions repurchased 1,366,667
      shares of such common stock for an aggregate sum of $1,800,000. The
      remaining 300,000 shares of common stock were transferred in November to
      two persons designated by the Company, each of whom are nonaffiliates of
      both the Company and Groupe Conserver or any of their directors, officers
      or employees.

[3]   In March 1996 the Company entered into a distribution agreement with
      certain of the Groupe Conserver entities for the exclusive marketing and
      distribution rights to Conserver 21(TM) products in the United States and
      Canada. Conserver 21(TM) products are designed to preserve foodstuffs and
      flowers. Groupe Conserver had obtained such rights from Conserver XXI (see
      Note A[4] below) in May 1995. The agreement was amended in October 1996.
      Upon learning of a dispute between Conserver XXI and Groupe Conserver,
      which threatened the Company's supply of Conserver 21(TM), the Company
      entered into an agreement with Conserver Purchasing Corporation
      ("Purchasing") an unaffiliated Delaware corporation, whereby the Company,
      through Purchasing would have been able to acquire substantially identical
      marketing and distribution rights from Conserver XXI in the event Groupe
      Conserver XXI could not deliver the product. Pursuant to the agreement
      between the Company and Purchasing dated October 9, 1996, and subsequently
      amended on December 31, 1996, the Company lent Purchasing up to $375,000
      for the purpose of enabling Purchasing to acquire an inventory of
      Conserver 21(TM). These loans, which were payable on demand, bearing
      interest at a rate of 8% per annum were collateralized by a lien on
      Purchasing's inventory of Conserver 21(TM). In June of 1997 the Company
      accepted inventory as full payment on the loans. Due to the establishment
      of insolvency proceedings in Brussels regarding Conserver Investments,
      S.A., the controlling entity of the Groupe Conserver affiliates and Groupe
      Conserver's loss of its rights from Conserver XXI, the Company terminated
      its distribution agreement with Groupe Conserver in March of 1997.

[4]   In March 1997 the Company entered into the Distribution Agreement with
      Agrotech 2000, S.L., ("Agrotech"), a company whose principal shareholder
      controlled Conserver XXI, establishing the Company as the exclusive
      licensee of the right to import, promote, distribute, market and otherwise
      commercially exploit Conserver 21(TM) products in the United States and
      Canada through March 2022, subject to extension. The Company also holds
      the option and a right of first refusal to exercise such exclusive rights
      throughout the world. Pursuant to the terms of the Distribution Agreement,
      if the Company fails to purchase a minimum of $2,000,000 of Conserver
      21(TM) products between April 1997 and April 1998, or fails to meet the
      minimum annual purchase goals, when established, Agrotech may sell
      Conserver 21(TM) to other customers in the United States and Canada. Such
      loss of exclusivity to sell Conserver 21(TM) products may negatively
      impact the development of the Company business.



                                                                           F-7

<PAGE>


CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note A. The Company  (continued)

[4]   (continued)

      The Distribution Agreement automatically extends through March 2022 and is
      renewable for subsequent annual periods. The Distribution Agreement may be
      terminated by either party by written notice 90 days prior to the end of
      any term. The Distribution Agreement (i) will be terminated automatically
      in case of the insolvency or bankruptcy of one of the parties; or (ii) may
      be terminated by either party for the substantial breach of any material
      provision by the other party if the breaching party has not cured such
      breach within 30 days of written notice thereof.

      Pursuant to the Distribution Agreement, Agrotech has the right to borrow
      up to $1,000,000 from the Company as of May 1, 1997 and up to an
      additional $500,000 commencing ninety days after the initial public
      offering. In connection with such rights, a director of the Company
      advanced $500,000 to Agrotech on behalf of the Company in May of 1997. The
      Company repaid the advance and interest thereon at 10%, out of the
      proceeds from the public offering. An additional $500,000 was advanced
      from the Company in June of 1997, resulting in a $1,000,000 loan balance
      at June 30, 1997. The Company has provided a full reserve against the
      receivable balance. Under the terms of the Distribution Agreement the
      Company may be obligated to extend an additional loan of $500,000 to
      Agrotech. Due to the current renegotiations, the Company cannot determine
      at the present time whether any additional loans will be made or whether
      any offsets will be available. Under the terms of the Distribution
      Agreement, the first $1,000,000 is repayable over a three-year period as
      an offset against Conserver 21(TM) purchases by the Company in excess of
      $2,000,000 annually and the balance of any such loan is payable out of
      royalties which may be due to Agrotech from such sales over a three to
      four year period. Should the Company fail to meet the Initial Purchase
      Commitment or subsequent purchase commitments under the Distribution
      Agreement, the Company could lose its exclusive right to sell Conserver
      21(TM) in the United States and Canada, which would materially adversely
      impact the development of the Company's business. If the Distribution
      Agreement were to terminate as a result of a material breach, the Company
      would not be able to distribute Conserver 21(TM) products, and
      accordingly, the Company could be without its current line of business of
      marketing Conserver 21.

[5]   Initial marketing efforts of the Conserver 21(TM) packets in the United
      States have indicated that the Company needs to renegotiate the terms of
      the distribution agreement with Agrotech and to improve the packaging of
      the Conserver 21 packets. The Company is currently in discussions with
      Agrotech with a view to reduce the pricing arrangements regarding the
      Conserver 21(TM) packets and to modify the manufacturing arrangements so
      that all packaging is done in the United States. Management of the Company
      is currently in discussions with a U.S.-based company which specializes in
      packaging products comparable to Conserver 21(TM), and has identified
      other U.S.-based packaging plants capable of packaging Conserver 21.
      Estimated packaging costs provided by these entities indicate that the
      Company would be able to reduce the wholesale costs of the Conserver
      21(TM) packets if the product were packaged in the United States.
      Management believes that this cost reduction even if partially offset by
      an increase in the royalty percentage to be paid to Agrotech would enable
      the Company to competitively price the packets at a level that would be
      profitable to the Company.

      No assurance can be given, however, that the Company will be able to
      successfully renegotiate the Distribution Agreement or enter into a
      packaging arrangement with a third party to its satisfaction. Under such
      circumstances the Company would have to shift its initial marketing
      efforts and focus on the sale of the Conserver 21(TM) filters. There can
      be no assurance that the Company would be able to successfully implement
      this revised marketing strategy. Any sustained impairment of the Company's
      ability to market Conserver 21(TM) could significantly delay or materially
      impair the Company's ability to commercialize Conserver 21(TM).


                                                                           F-8

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note A. The Company  (continued)

[6]   In November 1996, the Board of Directors approved a 2.128874 for 1 stock
      split. In December 1996, the Board of Directors approved a 1.066194 for 1
      stock split. Subsequently in April 1997, the Board of Directors approved a
      reverse stock split to cancel the effect of the aforementioned two stock
      splits. All of the above splits have been retroactively reflected in the
      financial statements.


Note B. Summary of Significant Accounting Policies

[1]   Use of estimates in the preparation of financial statements:

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

[2]   Fixed assets:

      Office equipment is carried at cost. Depreciation is provided using the
      straight-line method over 5 years, the useful lives of the assets.

[3]   Loss per share of common stock:

      Net loss per share of common stock is calculated by dividing net loss
      applicable to common stock by the weighted average shares of common stock
      outstanding during the period. Common shares issued and options and
      warrants granted by the Company at prices less than the offering price
      during the twelve months preceding the date of the initial public offering
      have been included in the calculation of common shares outstanding as if
      they were outstanding since inception using the treasury stock method and
      the initial public offering price of $5.00 per share.

[4]   Income taxes:

      The Company, for tax purposes, does not have any operations, or net
      operating loss, as its expenses are preoperating and accordingly will be
      capitalized and amortized when operations commence.

[5]   Stock based compensation:

      The Company accounts for employee stock based compensation including stock
      options pursuant to Accounting Principles Board ("APB") Opinion No. 25.
      Disclosures required by Statement of Financial Accounting Standards No.
      123 are to be found in Note E[1] to the financial statements.

[6]   Fair value of financial instruments:

      The carrying value of cash, and accounts and notes payable approximates
      fair value because of the short-term maturity of those instruments.

[7]   Inventory:

      Inventory is stated at the lower of cost (determined on a first-in,
      first-out basis) or market value.


                                                                           F-9

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note B. Summary of Significant Accounting Policies (continued)

[8]   Cash and cash equivalents:

      The Company considers all money market accounts and investments with
      original maturities of three months or less at the time of purchase to be
      cash equivalents. At times, cash balances in the Company's accounts may
      exceed federally insured limits.

[9]   In February 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
      ("SFAS 128"). SFAS 128 established new standards for computing and
      presenting earnings per share. SFAS 128 is effective for periods ending
      after December 15, 1997. Once effective per share data for all prior
      periods is required to be restated. The Company has not yet qualified what
      effect, if any, the adoption of SFAS 128 will have on its net earnings per
      share of common stock.

      The Financial Accounting Standards Board has recently issued statements of
      Financial Accounting Standards No. 129, "Disclosure of Information about
      Capital Structure," and No. 130, "Reporting Comprehensive Income". These
      two pronouncements are not expected to significantly change the disclosure
      of information presented in the Company's financial statements.


Note C. Fixed Assets

Fixed assets as of June 30, 1997 are summarized as follows:


---------------------------------------------------------------------------
Office equipment                                                    $24,150
Less accumulated depreciation                                        (2,164)
---------------------------------------------------------------------------
                                                                    $21,986
---------------------------------------------------------------------------


Note D. Convertible Debentures

In September and November 1996, the Company issued one-year 10% convertible
subordinated debentures in the aggregate amount of $750,000. The debentures and
accrued interest are convertible into common shares at $5.00 per share.
Subsequent to year end the holders of $175,000 of debentures were repaid,
$210,000 of debentures were cancelled against a loan receivable (Note K[3]) and
holders of $365,000 of the remaining debentures elected to convert their notes
to shares of common stock.

In connection with the sale of the debentures, the Company issued 62,504 shares
of its common stock valued at $312,500 which is being accounted for as debt
discount to be charged to expense over the term of the note. Amortization of the
discount for the ten months ended June 30, 1997 was approximately $252,172.


Note E. Stockholders' Equity

[1]   Stock options:

      The Company applies APB Opinion 25 and related interpretations in
      accounting for its employee stock option and purchase plans. In October,
      1995, Statement of Financial Accounting Standards No. 123 ("SFAS 123") was
      issued and requires the Company to elect either expense recognition or
      disclosure-only alternative for stock based employee compensation. The
      expense recognition provision encouraged by SFAS 123 would require fair-
      value based financial accounting to recognize compensation expense for the
      employee stock compensation plans. The Company has elected the
      disclosure-only alternative.


                                                                          F-10

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note E. Stockholders' Equity  (continued)

[1]   Stock options:  (continued)

      The Company has computed the pro forma disclosures required under SFAS 123
      for employee stock options granted as of August 31, 1996 and June 30, 1997
      using the Black Scholes option pricing model prescribed by SFAS 123. The
      weighted average fair value at date of grant for options granted during
      the period ended August 31, 1996 and June 30, 1997, is $3.75 and $1.30 per
      option, respectively.

      In estimating the value of options pursuant to the accounting provisions
      of Financial Accounting Standards No. SFAS 123, the Company used the
      following assumptions:


                                                  August 31,         June 30,
                                                     1996              1997
--------------------------------------------------------------------------------
Risk free interest rate                                   6%                7%
Expected life                                        3 years       4 - 6 years
Expected Volatility                                       .3                .3
Dividend Yield                                           0.0               0.0
--------------------------------------------------------------------------------

      If compensation cost was measured using the fair value provisions of SFAS
      123 then the Company's net loss and net loss per share would have been
      $1,395,993 and $.32 respectively for the period ended August 31, 1996 and
      $8,599,495 and $1.59, respectively for the ten months ended June 30, 1997.

      In November, 1996 and as later amended in December 1996 and April 1997 the
      Company adopted a stock option plan. Under the plan, which authorizes the
      granting of incentive stock options or nonincentive stock options, the
      maximum number of shares of common stock for which options may be granted
      is 1,300,000 shares. As of June 30, 1997, 1,055,000 shares have been
      granted under the stock option plan.

      Stock option activity for both inside and outside the Plan for the period
      from March 6, 1996 (date of incorporation) through August 31, 1996 and for
      the ten months ended June 30, 1997 is summarized as follows:


<TABLE>
<CAPTION>
                                                 Period Ended                       Period Ended
                                                  August 31,                          June 30,
                                                     1996                               1997
                                         ----------------------------------------------------------------
                                                          Weighted                            Weighted
                                                          Average                              Average
                                                          Exercise                            Exercise
                                            Shares         Price            Shares              Price
---------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>             <C>                 <C>  
Outstanding at beginning of year                                             135,000            $1.67
Granted                                       135,000      $1.67           1,835,000            $4.18
---------------------------------------------------------------------------------------------------------
Outstanding at end of year                    135,000      $1.67           1,970,000            $4.02
---------------------------------------------------------------------------------------------------------
Options exercisable at year-end                                            1,408,333            $3.92
---------------------------------------------------------------------------------------------------------
</TABLE>



                                                                          F-11

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note E. Stockholders' Equity  (continued)

[1]   Stock options:  (continued)

      The following table presents information relating to stock options
outstanding at June 30, 1997:


<TABLE>
<CAPTION>
                                      Options Outstanding                        Options Exercisable
                      ------------------------------------------------------------------------------------
                                          Weighted
                                          Weighted          Average                            Weighted
                                          Average          Remaining                           Average
      Range of                            Exercise          Life in                            Exercise
   Exercise Price            Shares        Price             Years                Shares        Price
----------------------------------------------------------------------------------------------------------
<S>                         <C>            <C>                <C>                  <C>          <C>  
    $.50 - $2.00              625,000      $1.70              3.65                 533,333      $1.91
      $5 - $5.50            1,345,000      $5.09              3.78                 875,000      $5.14
----------------------------------------------------------------------------------------------------------
                            1,970,000      $4.02              3.74               1,408,333      $3.92
----------------------------------------------------------------------------------------------------------
</TABLE>

      As of June 30, 1997, 245,000 options are available for future grant under
the Plan.

[2]   Warrants:

      a.   In August 1996, the Company issued to Directors and consultants
           three-year warrants to purchase 325,000 shares of the Company's
           common stock at $5.00 per share. The warrants were valued at $457,201
           and were charged to operations for the period ended August 31, 1996.

      b.   In connection with a $1,000,000 note which was subsequently repaid,
           the Company issued warrants to the debt holder and an affiliate for
           the purchase of 550,000 shares of common stock at $2 per share. The
           warrants were valued at approximately $2,040,000 and were charged to
           expense at the completion of the public offering. At the time the
           warrants were issued, 20,000 shares of previously issued common stock
           were surrendered to the Company.

       c.  In June 1997, the Company issued to consultants warrants to purchase
           350,000 shares of common stock at $5.75 per share. The Warrants were
           valued at approximately $705,000 and were charged to operations for
           the ten months ended June 30 , 1997.

[3]   Common stock:

      The Company has reserved 3,565,000 shares of common stock for exercise of
options and warrants.

[4]   Initial public offering:

      In June 1997, the Company completed its initial public offering and issued
      2,200,000 shares of common stock at a price of $5 per share. As a result
      of the offering the Company received net proceeds of approximately
      $8,859,000.

      In July 1997, the Company realized proceeds of approximately $1,448,000
      and issued 330,000 shares of common stock in connection with an
      overallotment provision of its underwriting agreement.

      In connection with the offering, the Company granted to the underwriter
      warrants to purchase 220,000 shares of common stock exercisable over a
      four year period at $8.25 per share.

[5]   Private placement:

      In September, October and November of 1996 the Company completed a private
      placement and issued 303,000 shares of common stock at $5 per share for an
      aggregate of $1,515,000.


                                                                          F-12

<PAGE>


CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note F. Related Party Transactions

The Company incurred approximately $75,000 and $149,000 in legal fees to a
related party from March 6, 1996 (date of incorporation) through August 31, 1996
and the ten months ended June 30, 1997, respectively, including free legal
services amounting to $60,000 in the ten months ended June 30, 1997 which was
recorded as additional paid-in capital.


Note G. Commitments and Other Matters

[1]   Employment contract:

      The Company entered into a three-year employment contract with Charles H.
      Stein, President and Chief Executive Officer of the Company which took
      effect upon the consummation of the Company's public offering of
      securities. Mr. Stein is also a member of the Board of Directors. The
      contract provides for an annual salary of an amount not less than $125,000
      and a three-year noncompete clause upon termination.

      During the periods ended August 31, 1996 and June 30, 1997 Mr. Stein did
      not receive a salary. Accordingly, the Company recorded compensation
      charges in those periods for an amount based upon his employment agreement
      of $125,000 per year, and as contribution to capital. Salary expense
      recorded for the period from March 6, 1996 (date of incorporation) through
      August 31, 1996 and for the ten months ended June 30, 1997, was $65,000
      and $105,000 respectively.

      As of the date of this filing the Chief Executive Officer has continued to
      waive his right to take salary. The Board of Directors has accepted Mr.
      Stein's waiver, but has reserved the right to award Mr. Stein, in its sole
      discretion, the amounts so waived.

[2]   Return of subscription funds:

      Based on the Company's review of investors subscription documents prior to
      the acceptance and issuance of shares to such investors, certain
      individuals who had subscribed to shares of the Company's common stock
      were found not to be "Qualified Investors" within the meaning of rules
      promulgated under the Securities Act of 1933, as amended. Accordingly,
      subsequent to August 31, 1996, the Company returned all $90,000 of such
      subscription amounts.


Note H.  Income Taxes

The Company, for tax purposes, does not have any operations or net operating
loss, as its expenses are pre-operating, and accordingly will be capitalized and
amortized when operations commence.


Note I. Agrotech Distribution Agreement

Pursuant to a Distribution Agreement with Agrotech (Note A[4]) the Company is
required to purchase a minimum of $2,000,000 of Conserver 21(TM) by April 1998
and pay royalties of 4% of net revenues generated from the commercial use of the
product. If the Company fails to meet the required minimum, the Company could
lose exclusivity to sell Conserver 21(TM) products.


                                                                          F-13

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note I. Agrotech Distribution Agreement  (continued)

The distribution agreement also requires the Company to make loans to Agrotech
up to $1,500,000. Under the terms of the distribution agreement, the first
$1,000,000 of such loan is repayable over a three year period as an offset
against Conserver 21(TM) purchases in excess of $2,000,000 annually and the
balance of any such loan is payable out of royalties which may be due Agrotech
from such sales over a three-to-four year period. In connectin with such rights,
a director on behalf of the Company advanced $500,000 to Agrotech in May of
1997. The Company repaid the Director and interest thereon at 10% out of the
proceeds from the public offering. An additional $500,000 was advanced by the
Company in June of 1997, resulting in a $1,000,000 loan balance due from
Agrotech at June 30, 1997. Under the terms of the Distribution Agreement, the
Company may be obligated to extend an additional loan of $500,000 to Agrotech.
Due to the current renegotiations, the Company cannot determine at the present
time whether any additional loans will be made or whether any offsets will be
available. Should the Company fail to meet the Initial Purchase Commitment or
subsequent purchase commitments under the Distribution Agreement, the Company
could lose its exclusive right to sell Conserver 21(TM) in the United States and
Canada, which would materially adversely impact the development of the Company's
business. If the Distribution Agreement were to terminate as a result of a
material breach, the Company would not be able to distribute Conserver 21(TM)
products, and accordingly, the Company could be without its current line of
business of marketing Conserver 21.

Initial marketing efforts of the Conserver 21(TM) packets in the United States
have indicated that the Company needs to renegotiate the terms of the
distribution agreement with Agrotech and to improve the packaging of the
Conserver 21 packets. The Company is currently in discussions with Agrotech with
a view to reduce the pricing arrangements regarding the Conserver 21(TM) packets
and to modify the manufacturing arrangements so that all packaging is done in
the United States. Management of the Company is currently in discussions with a
U.S.-based company which specializes in packaging products comparable to
Conserver 21(TM), and has identified other U.S.-based packaging plants capable
of packaging Conserver 21. Estimated packaging costs provided by these entities
indicate that the Company would be able to reduce the wholesale costs of the
Conserver 21(TM) packets if the product were packaged in the United States.
Management believes that this cost reduction even if partially offset by an
increase in the royalty percentage to be paid to Agrotech would enable the
Company to competitively price the packets at a level that would be profitable
to the Company.

As a result of the manufacturing difficulties and the status of the
renegotiations, management believes that exceeding the initial volume commitment
necessary to offset the Company's purchases from Agrotech against the Loan
Amount is remote. Accordingly, the Company has established a reserve equal to
the Loan Amount.


Note J. Writedown of Inventory

Initial purchases of Conserver 21(TM) by the Company have indicated certain
manufacturing limitations in the packaging process of the product. In light of
these limitations and the unmarketability of certain of the inventory purchased,
the Company wrotedown $355,000 of its Conserver 21(TM) inventory as of June 30,
1997.


                                                                          F-14

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note K. Subsequent Events

Subsequent to June 30, 1997, the Company entered into the following
transactions:

[1]   Office lease:

      In August 1997, the Company entered into a five-year operating lease for
      office space in Florida, which is expected to commence on October 1, 1997
      upon move in.

      Future minimum rental payments pursuant thereto are as follows:


   Year Ending
    June 30,                                                    Amount
   --------------------------------------------------------------------
      1998                                                     $ 66,006
      1999                                                       88,007
      2000                                                       88,007
      2001                                                       88,007
      2002                                                       88,007
      Thereafter                                                 22,002
   --------------------------------------------------------------------
                                                               $440,036
   --------------------------------------------------------------------

      Rent expense for the period from March 6, 1997 (Date of Incorporation)
      through August 31, 1996 and for the ten months ended June 30, 1997, was
      $9,552 and $127,574, respectively.

[2]   New business opportunities:

      In August 1997, the Company announced that it was considering diversifying
      beyond its sole line of business of marketing and otherwise commercially
      exploiting Conserver 21(TM) (the "Principal Line of Business") and was
      exploring a possible new line of business in the hotel and casino industry
      (the "New Line of Business"). In connection with the New Line of Business,
      and subject to requisite stockholder approval, the Company has (i) entered
      into an agreement to acquire certain rights to develop a hotel and casino
      project in Yuzhno-Sakhalinsk on the Sakhalin Island of the Russian
      Federation (the "Sakhalin Project"), located 20 minutes by air from
      Sapporo, Japan (ii) entered into an agreement with Dato David Chiu to
      provide certain development services with respect to the Sakhalin Project,
      and (iii) reached an agreement to manage certain hotels of Dorsett Hotels
      and Resorts International, including hotels presently operating or being
      developed in the United States, Bali, Australia, Canada, Cambodia,
      Malaysia and Thailand, and (iv) entered into several other related
      agreements (collectively, the "New Business Opportunities"). The
      agreements if approved by the Company's Stockholders provide for the
      issuance by the Company, under certain circumstances and subject to the
      completion of certain terms and obligations thereunder, of up to 5,500,000
      shares of common stock and options to purchase 600,000 shares of common
      stock. The Company anticipates that initial capital required for the
      proposed New Business Opportunities would be provided by proceeds from the
      sale of additional common stock and/or other securities of the Company in
      private offerings.

<PAGE>

      At a Special Meeting of Stockholders which the Company anticipated to be
      held in December 1997, the Company's stockholders will be asked to
      consider and vote on a series of proposals which would result in the
      Company diversifying beyond its sole line of business of promoting,
      marketing, distributing, selling and otherwise exploiting Conserver 21(TM)
      and entering into the New Line of Business and the New Business
      Opportunities. The proposed New Line of Business and New Business
      Opportunities are subject to requisite stockholder approval.

      The Company has entered into an agreement dated August 12, 1997 (the
      "Sakhalin Agreement"), and amended as of September 9, 1997, subject to
      receipt of requisite approval by the Company's stockholders with Sakhalin
      General Trading and Investments ("SGTI") and Sovereign Gaming and Leisure
      Limited ("Sovereign"), each a limited liability company organized under
      the laws of Cyprus pursuant to which the Company has right to acquire: (i)
      all of the share capital of SGTI, which includes (a) all of SGTI's rights
      and interest in a project to develop the Sakhalin Project, and (b) SGTI's
      ownership interest in 50% of the shares of Sakhalin City Centre Limited
      ("SCC"), a closed joint stock company incorporated under the laws of the
      Russian Federation, which, in turn, holds certain rights, including a
      guarantee by the city of Yuzhno-Sakhalinsk to issue a gaming license to
      SCC and (ii) all rights and interest to or in the Sakhalin Project held by
      Sovereign, including certain operating and project management agreements
      with respect to the Project (collectively, the "Shares and Rights").


                                                                          F-15

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note K. Subsequent Events (continued)

[2]   New business opportunities: (continued)

      In consideration for the Shares and Rights, the Company is required to
      deliver to SGTI and its stockholders an initial payment of $500,000, which
      was paid, and additional payments of $1,000,000 by October 15, 1997 and
      $1,500,000 by October 31, 1997 as well as 1,538,462 shares of the
      Company's common stock issuable upon receipt of requisite stockholder
      approval. Upon completion of the Company's due diligence, should the
      Company conclude for any reason that it does not wish to proceed with the
      Sakhalin Project and the transactions contemplated under the Sakhalin
      Agreement, the Company has the right to convert any cash portion of the
      Purchase Price then delivered to SGTI into shares in SGTI at the
      conversion rate of one ordinary share of SGTI for each $30 so delivered
      (the Company currently has 230,000 shares outstanding). An investment in
      SGTI will likely be illiquid and there can be no assurance that the
      Company will recoup any cash paid under the Sakhalin Agreement. The
      Sakhalin Agreement further provides that, upon request of the Company,
      Sovereign would become project manager during the construction phase of
      the Sakhalin Project, subject to agreement on reasonable compensation for
      such services, which shall not exceed 5% of the construction cost of the
      Project or $5,000,000, whichever is less.

      In connection with the execution of the Sakhalin Agreement and with the
      Company's approval, SGTI acquired 15% of the share capital of SCC from
      certain shareholders resulting in SGTI owning 65% of the share capital of
      SCC. In consideration for this exchange, the Purchase Price payable by the
      Company for the shares of SGTI under the Sakhalin Agreement will increase
      by 461,538 shares of the Company's Common Stock. Including this
      transaction, aggregate total consideration for the Shares and Rights
      payable by the Company to SGTI and its shareholders will be $3,000,000 and
      2,000,000 shares of the Company's Common Stock. Furthermore, it is the
      Company's understanding that the $3,000,000 cash portion of the Purchase
      Price paid to SGTI will be used by SGTI as a loan to SCC (in which SGTI
      holds a 65% interest) for the initial development and costs for the
      Sakhalin Project.

      On October 2, 1997, the Company has entered into an agreement (the
      "Development Services Agreement") with Dat[omicron] David Chiu ("Chiu"),
      pursuant to which the Company, subject to approval by its stockholders and
      subject to the Company acquiring all of the shares of SGTI (which would
      result in the Company owning 65% of the share capital of SCC), would as
      described below transfer to Chiu 38.46% of the share capital of SGTI and
      would issue to Chiu a share of convertible preferred stock which would
      convert, under certain specified conditions and circumstances, into
      1,500,000 shares of common stock. The Development Services Agreement
      provides that Chiu will provide certain development services to the
      Company in connection with the Sakhalin Project, including using his best
      efforts to procure or secure the necessary debt financing and guarantees
      (on behalf of the Company and its subsidiaries and affiliates) for the
      complete turnkey construction of the Sakhalin Project which financing is
      to be on mutually acceptable terms. The Sakhalin Project is currently
      estimated at US$100 million. The shares of common stock and the shares of
      SGTI to be issued to Chiu in consideration for his services will be issued
      on the date of mutual execution by the Company or its nominated affiliate
      of a legally enforceable and binding agreement from a lender, the terms of
      which are acceptable to the Company, SGTI and SCC, to provide the
      financing. If the financing is not realized as contemplated pursuant to
      the Development Services Agreement, the Company and the other investors in
      the Sakhalin Project would be required to obtain additional financing on
      behalf of SCC from a variety of sources, including borrowings under bank
      credit facilities, sales of securities and placement of term debt, to
      construct the hotel and casino.

<PAGE>

      Chiu has also agreed that he shall not for a period of three years from
      the date of issuance or transfer, as applicable, of the shares received
      under the Development Services Agreement, voluntarily or involuntarily,
      directly or indirectly, sell, contract to sell, grant a right to purchase,
      exchange, mortgage, pledge, hypothecate, give, bequeath, transfer, assign,
      encumber, alienate or in any other way whatsoever dispose of (hereinafter
      collectively called "transfer") any of such shares, including any options
      and warrants with respect to such shares, received by way of dividend or
      upon an increase, reduction, substitution or reclassification or
      combination of stock of the Company or upon any reorganization of the
      Company, as applicable. Notwithstanding any of the foregoing, Chiu may
      transfer the shares to any affiliate, subject to the Company's consent,
      which consent shall not be unreasonably withheld. Chiu also agreed that
      until three years from the issuance date of such shares, to give the
      Company an irrevocable proxy, with full power of substitution, to vote on
      all matters as the Company deems appropriate, with respect to the shares
      at all meetings of the stockholders of the Company and by means of any
      written consent of stockholders with respect to all matters. The Company
      has designated Charles H. Stein, the Chairman, President and Chief
      Executive Officer of the Company as the authorized person to exercise the
      aforementioned voting rights on behalf of the Company, until such time as
      Mr. Stein is incapacitated to act. Furthermore, the Development Services
      Agreement provides that, in the event that Chiu wishes to sell all or any
      part of the shares after the three year period described above, the
      Company shall have the first option to purchase all or any part of the
      shares from Chiu. Chiu agreed to give the Company written notice thereof
      of its intent


                                                                          F-16

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note K. Subsequent Events (continued)

[2]   New business opportunities: (continued)

      to sell any or all of the shares. The Company has a right to purchase said
      shares at a price equal to the (i) closing price per share as reported on
      the Nasdaq (as reported in The Wall Street Journal) on the date written
      notice is given to the Company or (ii) the price offered to Chiu by an
      unaffiliated third party (not a competitor of the Company) in an
      irrevocable and unconditional bona fide written offer (the "Bona Fide
      Offer"), as applicable. The Company has the right to purchase all or a
      portion of the shares by giving Chiu written notice no later than 10
      business days after written notice is provided to the Company. In the
      event that the Company fails to exercise its option, Chiu has the right to
      sell the shares to such third party at the price offered to the Company
      without any further obligations to sell the shares to the Company. If,
      however, any or all of the shares are not sold pursuant to the Bona Fide
      Offer within 30 days from the receipt by the Company of Chiu's notice of
      intent to sell, the unsold shares shall remain subject to the terms of the
      Development Services Agreement.

      Assuming consummation of each of the transactions contemplated above, the
      Company and Chiu would own through their respective interests in SGTI, 40%
      and 25% interest in SCC, respectively, and the remaining 35% of the
      interests would continue to be held 20% by the city of Yuzhno-Sakhalinsk
      and 15% by the Sakhalin Oblast (the regional government).

      On October 2, 1997, the Company entered an agreement (the "Hotel
      Management Agreement") with Dorsett Hotels and Resorts International, Ltd.
      ("Dorsett"), a company controlled by Chiu, pursuant to which the Company,
      directly or through a subsidiary, would act as exclusive operator and
      manager of certain hotels owned by Dorsett. In consideration for Dorsett
      entering into the Hotel Management Agreement, the Company, subject to
      requisite approval of the Company's stockholders would, (i) issue to
      Dorsett up to an aggregate 2,000,000 shares of Conserver common stock,
      upon specified conditions being satisfied, and (ii) pay Dorsett
      $3,000,000. The Hotel Management Agreement provides for twenty year
      exclusive operating agreements with respect to the management of the
      Dallas Grand Hotel, Dallas, Texas, Dorsett Regency Bali, Indonesia, and
      Rockman's Regency Melbourne, Australia, as well as operating agreements on
      substantially similar terms for five other hotels scheduled to open within
      the next two years. The Company, pursuant to the terms of an operating
      agreement for each hotel managed, would be entitled to management fees
      equal to three percent of gross revenues plus ten percent of gross
      operating profits. In addition the Company will receive service fees equal
      to four percent of gross revenues for marketing, promotion and advertising
      expenses as well as an additional one-half of one percent of gross
      revenues for training costs all of which will be used in turn to fund such
      expenses. Each operating agreement would further provide that in the event
      Dorsett terminates the agreement for any reason other than for a material
      breach by the Company, the Company would be entitled to a termination fee.
      The termination fee shall be calculated based on the formula which is the
      remaining number of years under the Agreement multiplied by a factor which
      is: (i) in the event the Company is terminated during the first five years
      of the Agreement, the factor shall be the sum of the actual fees paid or
      payable to the Company based on revenues generated to date plus fees
      payable to the Company based on projected revenues for the rest of the
      year, (ii) in the event of a termination after the first five years, the
      factor shall be the average of the fees paid or payable to the Company for
      the preceding two years, or (iii) in the event of a termination after the
      first ten years, the factor shall be the average of the fees paid or
      payable to the Company for the preceding three years. If the Hotel
      Management Agreement is consummated, subject to requisite stockholder
      approval, the Company plans to add a management team with experience at
      major international hotel chains in the operation and management of hotels
      and leisure time activities worldwide.


                                                                          F-17

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note K. Subsequent Events (continued)

[2]   New business opportunities: (continued)

      Dorsett agreed that it shall not for a period of three years from the date
      of issuance or transfer, as applicable, of the shares received under the
      Hotel Management Agreement, voluntarily or involuntarily, directly or
      indirectly, sell, contract to sell, grant a right to purchase, exchange,
      mortgage, pledge, hypothecate, give, bequeath, transfer, assign, encumber,
      alienate or in any other way whatsoever dispose of (hereinafter
      collectively called "transfer") any of such shares, including any options
      and warrants with respect to such shares, received by way of dividend or
      upon an increase, reduction, substitution or reclassification or
      combination of stock of the Company or upon any reorganization of the
      Company, as applicable. Notwithstanding any of the foregoing, Dorsett may
      transfer the shares to any subsidiary or affiliate of Dorsett , subject to
      the Company's consent, which consent shall not be unreasonably withheld.
      Dorsett also agreed that until three years from the issuance date of the
      shares, Dorsett agrees to give the Company an irrevocable proxy, with full
      power of substitution, to vote on all matters as the Company deems
      appropriate, with respect to the shares at all meetings of the
      stockholders of the Company and by means of any written consent of
      stockholders with respect to all matters. The Company designated Charles
      H. Stein, the Chairman, President and Chief Executive Officer of the
      Company as the authorized person to exercise the aforementioned voting
      rights on behalf of the Company, until such time as Mr. Stein is
      incapacitated to act. Furthermore, the Hotel Management Agreement provides
      that, in the event that Dorsett wishes to sell all or any part of the
      shares after the three year period described above, the Company shall have
      the first option to purchase all or any part of the shares from Dorsett.
      Dorsett agreed to give the Company written notice thereof of its intent to
      sell any or all of the shares. The Company has a right to purchase said
      shares at a price equal to the (i) closing price per share as reported on
      the Nasdaq (as reported in the Wall Street Journal) on the date written
      notice is given to the Company or (ii) the price offered to Dorsett by an
      unaffiliated third party (not a competitor of the Company) in an
      irrevocable and unconditional bona fide written offer (the "Bona Fide
      Offer"), as applicable. The Company has the right to purchase all or a
      portion of the shares by giving Dorsett written notice no later than 10
      business days after written notice is provided to the Company. In the
      event that the Company fails to exercise its option, Dorsett has the right
      to sell the shares to such third party at the price offered to Company
      without any further obligations to sell the shares to the Company. If,
      however, any or all of the shares are not sold pursuant to the Bona Fide
      Offer within 30 days from the receipt by the Company of Dorsett's notice
      of intent to sell, the unsold shares shall remain subject to the terms of
      the Hotel Management Agreement.

      In addition to the direct issuance of shares of the Company's common stock
      in connection with the foregoing transactions, the Company anticipates
      funding for the cash portion of the initial capital required for the
      proposed new line of business and New Business Opportunities will be
      provided by proceeds from the private sale of additional common stock
      and/or other securities of the Company in private offerings.
      _____________________.

[3]   Loan to D & M Investments:

      In August 1997, the Company made a $210,000 loan to D& M Investments, Inc.
      due September 24, 1997 and bearing interest at 10% per annum. At June 30,
      1997 D & M Investments was a $210,000 convertible debenture holder. In
      connection with the loan, D & M pledged to Conserver the rights to the
      convertible debt. On September 24, 1997, in lieu of demanding payment on
      the loan, Conserver elected to deduct amounts due under the loan from the
      amounts payable by Conserver under the debenture.

      In connection with the above transaction, D & M Investments signed a
      lockup agreement, with respect to any securities of Conserver that it
      holds.


                                                                          F-18

<PAGE>



CONSERVER CORPORATION OF AMERICA
(a development stage company)

Notes to Financial Statements

Note K. Subsequent Events (continued)

[4]   Options granted:

      In July 1997, the Company issued four year options in accordance with the
      stock option plan to purchase 37,500 shares of its common stock at $5.50
      per share. The options vest immediately.

      In August 1997, the Company issued four year options to employees to
      purchase 40,000 shares of common stock at $6.13 per share.

      Also, in August 1997, the Company committed itself to issue four year
      options to two directors to purchase an aggregate of 500,000 shares of
      common stock at $6.13 per share, contingent upon approval by the
      shareholders of the Company to enter into the New Line of Business and New
      Business Opportunities.

[5]   Consulting agreement:

      On August 14, 1997 the Company entered into agreement with Star Casinos
      Limited, to act as its casino consultant, commencing on the date the
      stockholders approve the agreements with respect to the Sakhalin Project
      ("the Commencement Date"). From the period October 1, 1997 through the
      Commencement Date, the consultant will be paid by the Company a fee of
      $21,000 a month plus reimbursement of reasonable expenses. On the
      Commencement Date, the consultant will be paid annual compensation of
      $250,000 a year for two years and will be granted a three year option to
      buy 100,000 shares of the Company's stock at $6.50 per share, vesting 50%
      on each anniversary of the Commencement Date. The consultant will also be
      paid a bonus of $250,000 at the end of its two year commitment.

[6]   Private placement:

      The officers of the Company have been authorized by the Board of Directors
      to proceed with a private placement to raise up to $9,000,000 either
      through the issuance of treasury shares or convertible debt. The final
      terms of the private placement shall be approved by the Board.

[7]   International marketing efforts:

      The Company is engaged in negotiating various license and joint venture
      agreements with companies in Israel, Japan and Canada in an effort to
      market Conserver 21(TM) in territories outside of the continental United
      States. The Company has signed a memorandum understanding with an Israeli
      company. The foregoing represent agreements in principle and are not
      binding.

[8]   Stock issuance:

      The Company issued 5,000 shares of its common stock in July 1997 to a
      consultant for services in connection with providing business
      introductions to prospective customers and general corporate advice.

[9]   Warrants granted:

      In August 1997, the Company issued four year warrants for the purchase of
      100,000 shares of common stock at $6.50 per share. The options vest
      immediately.

[10]  Other:

      As of October 3, 1997, the Company entered into an agreement in principle
      with Parbhoe Handelmij NV, a Surinamese limited liability company, to
      create a joint venture company to develop a casino project in Paramaribo,
      the capital city of Surinam (the former Dutch Guyana). Pursuant to the
      agreement, the joint venture company will also enter into an operating
      agreement with the Company to manage the casino.


                                                                          F-19


<PAGE>


                                  EXHIBIT INDEX

Exhibit                                                                         
Number       Description of Exhibits                                            
--------------------------------------------------------------------------------
10.4         Employment Agreement Between Charles H. Stein and the Company,     
             effective as of June 13, 1997

10.8         Agreement dated as of August 12, 1997 by and among the Company,    
             Sakhalin Trading and Investments Limited ("SGTI") and Sovereign
             Gaming and Leisure Limited ("Sovereign").

10.9         Amendment dated September 9, 1997, to August 12, 1997 Agreement    
             by and among the Company, SGTI and Sovereign.

10.10        Development Services Agreement dated as of October 2, 1997         
             between the Company and Dato' David Chiu.

10.11        Consulting Agreement effective as of August 14, 1997 between       
             the Company and Star Casino Limited.

10.12        Proposed form of Pledge Agreement by and among the Company, Brian
             J. Bryce (through the Jasmine Trustees Ltd.), Jay M. Haft and James
             V. Shelton.

10.13        Hotel Management Agreement effective as of October 2, 1997         
             between the Company and Dorsett Hotels and Resorts
             International Ltd.

10.14        Memorandum of Understanding dated August 20, 1997 between the
             Company and Arlene Streilitz.

10.15        Heads of Agreement dated October 3, 1997 between the Company and
             Parbhoe's Handelmij N.V.

27.1         Financial Data Schedule