SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                  ------------

                                   FORM 10-KSB
                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                                  ------------

For the Fiscal Year Ended May 31, 1999      Commission file number   33-23430-D


                           VIRTUAL ENTERPRISES, INC.,
                        (formerly, The Toen Group, Inc.)
             (Exact name of registrant as specified in its charter)

                                     Nevada
                 (State of other jurisdiction of incorporation
                                or organization)

                                   84-1091272
                      (I.R.S. Employer Identification No.)

        4695 MacArthur Court, Suite 530, Newport Beach, California 92660
                    (Address of Principal Executive Offices)

        Registrant's telephone number, including area code: (949)475-6755

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

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

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

         Check if  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-KSB
or any amendment to this Form 10-KSB.                            [X]

         Issuer's revenues for most recent fiscal year: $382,798.

         State the aggregate  market value of voting stock held by nonaffiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days: As of July 31, 1999, $3,037,647.

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest  practicable date: As of July 31, 1999, there
were 15,919,372 shares of common stock outstanding.

                                       Documents Incorporated by Reference: None

                                                         [VEI\10KSB\53199.10K]-3


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                                TABLE OF CONTENTS

                                                                            Page

                                     PART I

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

Item 2.   Properties.......................................................3

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

Item 4.   Submission of Matters to a Vote of Security Holders..............3

                                     PART II

Item 5.   Market for Company's Common Equity and Related Stockholder
           matters ........................................................4

Item 6.   Management's Discussion and Analysis of Financial Condition
           and Results of Operations ......................................5

Item 7.   Financial Statements.............................................6

Item 8.   Change in and Disagreements With Accountants.....................7

                                    PART III

Item 9.   Directors and Executive Officers.................................7

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

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

Item 12.  Certain Relationships and Related Transactions...................13

                                     PART IV

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


          Index to Consolidated Financial Statements and Schedules.........F-1

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                                     PART I

ITEM 1.           BUSINESS

History

         Virtual  Enterprises,  Inc.,  (formerly,  The Toen  Group,  Inc.)  (the
"Company")  was  incorporated  in the State of Colorado on June 10, 1988 for the
purpose of searching  for,  evaluating  and acquiring an interest in one or more
business  opportunities.  On  December 3, 1989,  the Company  completed a public
offering of its stock  pursuant to a  Registration  Statement on Form S-18 filed
with the  Denver  Regional  Office of the  Securities  and  Exchange  Commission
("SEC"). The Company, through an underwriter,  sold a total of 50,000,000 shares
of the its no par  value  common  stock and  redeemable  common  stock  purchase
warrants   ("Warrants")  which  entitle  the  holders  to  purchase  162,000,000
additional shares of common stock at a later date.

         On March 9, 1990,  the Company  completed  an agreement to exchange its
common  stock for all of the issued  and  outstanding  capital  stock of Sunbelt
Media Group Inc.  ("Sunbelt").  Pursuant to the terms of the agreement  with the
shareholders  of Sunbelt,  the Company issued  278,400,000  shares of its common
stock in  exchange  for all the  outstanding  shares of common  stock of Sunbelt
following  which Sunbelt became a wholly-owned  subsidiary of the Company.  From
March 1990 to October 1992 Sunbelt owned,  operated, and provided programming to
low power television stations and related businesses.  The Company  discontinued
the Sunbelt business in October 1992 and sold all the assets associated with the
operation of Sunbelt to William J. Kitchen  ("Kitchen") in  consideration  of 1)
Kitchen's  forgiveness  of notes and other  obligations  owed to  Kitchen by the
Company; and 2) Kitchen's assumption of miscellaneous debts of Sunbelt. Pursuant
to the sale,  Kitchen also re-conveyed back to the Company  98,795,000 shares of
the its common stock for  cancellation.  Since  October 1992 the Company has not
had any revenues or operations.

         On August 31, 1992 Jeffrey Paul Stroud ("Stroud") acquired  173,995,000
shares of the Company's  common stock,  representing  51% of the then issued and
outstanding  shares,  from  Kitchen.  Stroud also  acquired  the  Warrants  from
Kitchen.  In March 1993  Stroud  sold the  173,995,000  shares of the  Company's
common stock and the Warrants.

         In September 1994, the Company's  shareholders  voted to effect a 1 for
1000 reverse split of the Company's  issued and  outstanding  common stock.  The
split was implemented  through a merger with a newly formed Nevada  corporation.
The  accompanying  financial  statements  have been  retroactively  restated  to
reflect the merger  including  the change from no par value common stock to $.01
par value common stock.  In connection  with the merger and reverse  split,  the
Company's   authorized   number  of  shares  was  reduced  from  785,000,000  to
50,000,000.  There are presently outstanding Warrants to purchase 668,000 shares
of common stock, at $5.00 per share.

         Effective October 8, 1996, the Company's Articles of Incorporation were
amended to change the name of the Company  from The Toen Group,  Inc. to Virtual
Enterprises, Inc.

         On May 5, 1999, the Company  entered into an Asset  Purchase  Agreement
and Plan Of  Reorganization  (the  "Agreement") with Metroplex Web Inc., a Texas
corporation ("Metroplex") whereby the Company acquired certain assets, property,
business  interests and  intellectual  rights owned by Metroplex for  securities
consisting of Ten Million  (10,000,000)  shares of the Company's  $.01 par value
common stock,  causing Metroplex  shareholders to have voting control and become

                                                         [VEI\10KSB\53199.10K]-3

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the principal  stockholders of the Company. As a result of the change in control
of  the  Company,   generally  accepted   accounting   principles  required  the
acquisition to be accounted for as a recapitalization of Metroplex. Accordingly,
the consolidated financial statements reflect the historical assets, liabilities
and operations of Metroplex for the periods presented.  In June 1998,  Metroplex
acquired  Intellesell,  Inc.  ("Intellesell").  Intellesell  operated in the web
development and web hosting business.

         The Company's  day-to-day  business  affairs are handled by the Company
President and management of Metroplex.  As of the filing date of this Report the
Company had 32 employees.  Current  management is pursuing  additional  business
opportunities, but no assurance can be given that the Company will be successful
in acquiring any business opportunities,  or if acquired, what revenues might be
provided from such operations.

         As used herein, the term "Company" refers to Virtual Enterprises, Inc.,
(formerly  The Toen Group  Inc.),  MetroplexWeb,  Inc.,  a wholly  owned  Nevada
corporation  ("MWI") and  successor in interest to the assets of  Metroplex  and
Intercon,  Inc.,  a wholly owned Nevada  Corporation  ("Intercon").  The Company
currently  maintains its executive  offices at 4695 MacArthur Court,  Suite 530,
Newport Beach, California 92660, and its telephone number is (949) 475-6755.

         At the date of acquisition  of its assets,  Metroplex was a provider on
the  Internet  of local city  guides,  local  advertising  and  innovative  edge
e-commerce  applications.  The Company  intends to integrate its local Metroplex
city guides with  distribution  capabilities to offer web site design,  hosting,
e-commerce  merchandise,  electronic coupons and other transactions to a broader
audience of consumers, both domestically and internationally.

         The Metroplex city guides provide up-to-date information regarding arts
and entertainment events, community activities,  recreation, business, shopping,
professional  services and  news/sports/weather  to  consumers  in  metropolitan
areas.  The Company owns and  operates  the city guides on the Internet  thru it
website -  www.metroplexweb.com - through numerous direct links from banners and
event profiles.

         Each local Metroplex city guide primarily  consists of original content
developed and designed  specifically for the Web by the Company.  The service is
typically organized by categories,  such as arts and entertainment,  restaurants
and bars,  community,  shops and  services,  sports  and  outdoors,  hotels  and
tourism, local news and professional services. Within most of the Metroplex city
guides, consumers can search  neighborhood-shopping  areas, obtain maps, contact
community  organizations  and vendors by e-mail,  and shop business  inventories
with a click of the mouse.  The Company  creates  original  and locally  focused
content that can be accessed using targeted,  sophisticated  searches across all
content residing on a Metroplex City site. In contrast,  many search engines and
navigational guides access pre-existing  content from third-party Web sites that
may be incomplete or out of date. In its owned and operated markets, the Company
offers a broad array of updated, local content that is relevant to consumers.

         The  Company  also  designs and  produces  custom-built  Web-sites  and
performs related services for local and regional businesses,  aggregates them in
a local city guide environment and provides these businesses with the ability to
regularly  update and expand  their  sites.  The typical  site offers  local and
regional  businesses  the  opportunity  to  reach  and  interact  with  targeted
consumers.  The Company  builds its city guides  with the  involvement  of local
government,  community and  volunteer  associations,  business and  professional
groups, educational institutions and local media companies. In addition, content
generated by  consumers  through  e-mail  enhances the sense of community in the
Metroplex City sites.

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Operating Strategy

         The  Company's  business  strategy is to develop  and operate  Internet
related  web-hosting,  website  design and  marketing,  and  Internet  telephony
services  through  MWI,   Intercon  or  other   majority-owned  or  wholly-owned
subsidiaries.

         The Company's  strategy also includes the  investment in other Internet
companies,  either directly or by the Company's subsidiaries,  both domestic and
internationally.

         The Company is currently in the process of seeking the  acquisition of,
or  merger  with,  additional  business  entities  in the  internet  related  or
telecommunications fields.

Recent Developments

         Consistent with its operating  strategy,  on July 23, 1999, the Company
entered into a Memorandum  of  Understanding  with  Anyuser.Net  ("Anyuser")  of
Seoul,  Korea,  whereby the Company intends to invest $3 million into Anyuser to
acquire  approximately  47% of the total issued and outstanding  common stock of
Anyuser.   Anyuser  has  developed  proprietary  Internet  and  data/video/voice
switching software for one touch video  communicating  over the Internet.  Under
the agreement,  Anyuser will provide hardware and market video Internet services
in the  Asian  market  and the  Company  will  obtain  exclusive  licensing  for
Anyuser's  products  including the exclusive right to market the Web Video Phone
and services in the North and South American  marketplace.  Anyuser will license
and market the Company's  products in the Asian market,  including the Metroplex
city guides, web design, web hosting and e-commerce  products.  Royalty payments
will be made by the parties for licensed products.


ITEM 2.           PROPERTIES

         The Company's  principal executive offices are located in shared leased
premises of approximately 2,000 square feet in Newport Beach, California.  These
premises are provided to the Company under an Advisory and Management  Agreement
with NuVen Advisors, Inc. ("NuVen"), an affiliate.

The Company  conducts  substantially  all of its  operations in a leased premise
approximating 6,000 square feet in Addison, Texas.


ITEM 3.            LEGAL PROCEEDINGS

         None

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

         None.

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                                     PART II

ITEM 5.           MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

(a)      Market Information

         Following the  completion  of the public  offering on November 30, 1989
and until  September  6,  1990,  the  Company's  common  stock was traded on the
over-the-counter  market until trading ceased on September 6, 1990. On April 26,
1999,  trading  resumed and quotes were  maintained on the bulletin board by the
National Association of Securities Dealers, Inc.

         At July 31, 1999,  the Company's  outstanding  securities  consisted of
15,919,372  shares of $.01 par value common stock and 668,014  redeemable common
stock purchase warrants.

         The  expiration of the Warrants has been extended to December 31, 2000.
Each Warrant currently  entitles the holder to purchase at a price of $5.00, one
share of the Company's  common stock and holders of the Warrants have no voting,
preemptive,  liquidation,  dividend or other rights. The Warrants became subject
to redemption by the Company on September 15, 1989 for $.00001 per Warrant, upon
30 days written notice to the  warrantholders.  The Warrants are redeemable only
in the event of a current effective registration statement.

          The  following  table  sets  forth the range of the high and low sales
reported for the common stock since trading resumed on May 5, 1999:

                                   High      Low
                                   ----      ---

Quarter ended May 31, 1999         3.00      .14

         The above prices were obtained from the Financial Web. The prices shown
in the above table  represent  inter-dealer  quotations  without retail mark-up,
mark-down or commission,  and may not necessarily represent actual transactions.
On May 31, 1999 and currently,  there are  broker-dealers  publishing quotes for
the common stock.

(b)      Holders

         The  approximate  number of  holders  of record of each class of equity
securities of the Company as of July 31, 1999, was as follows:

NUMBER OF
TITLE OF CLASS                     RECORD HOLDERS
---------------------------        --------------
$.01 Par Value Common Stock             38
Warrants                                29

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(c)      Dividends

         The  Company has never  declared or paid a cash  dividend on its common
stock.  The Company  does not intend to pay a cash  dividend in the  foreseeable
future.

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

         Overview

         The  consolidated  financial  statements  presented  herein reflect the
acquisition of Metroplex on May 5, 1999. As the acquisition resulted in a change
of control of the Company,  generally accepted  accounting  principles  required
that the transaction be accounted for as a  recapitalization  of Metroplex.  The
accompanying consolidated financial statements reflect the historical operations
of  Metroplex  for  the  two  years  in the  period  ended  May  31,  1999.  The
accompanying  consolidated  financial  statements  include the operations of the
Company from May 5, 1999, the date of the reverse acquisition. On June 30, 1998,
Metroplex  entered  into  an  asset  purchase  agreement  with  InteleSell.  The
acquisition was accounted for as a purchase.  InteleSell  develops,  designs and
hosts internet web pages. The  accompanying  consolidated  financial  statements
include the operations of Intelesell from July 1, 1998.  Therefore,  the results
of operations presented are substantially those of Metroplex for the years ended
May 31, 1999 and 1998.

         Results of Operations

         Year Ended May 31, 1999 Compared to Year Ended May 31, 1998

         Revenues for the year ended May 31, 1999, were $383,000 versus $247,000
in 1998, a 54.7% increase over the prior year. Revenues increased as the Company
continued  to  expand  its  operations,  as well as  fiscal  1999  included  the
operations of Intellesell  for only eleven months.  The Company's  revenues from
web development  were $326,000 for the current year versus $218,000 in 1998. The
Company's  revenues  from  hosting fees were $57,000 for the current year versus
$29,000 in 1998.  The Company  recognizes  hosting fee revenues over the term of
the contract, usually one year. This increase can be attributed to the customers
obtained from InteleSell and the Company's  emphasis on expanding its operations
during the current year.

         Expenses were  $1,841,000 in fiscal 1999 compared to $734,000 in fiscal
1998,  an  increase of 151%.  The  increase  was  primarily  attributable  to an
increase in marketing and sales efforts  resulting from a full year of city mall
operation, as well as expansion into additional cities.  Increased sales efforts
required  additional  production  and  support  staff  for web page  design  and
support.  Included in the  current  year  expenses is $236,000  for the value of
stock  issued to certain  officers  and  employees  of  Metroplex  for  services
rendered.

         Liquidity and Capital Resources.

         As of May 31, 1999,  the Company had a working  capital  deficiency  of
$387,000,   a  decrease  of  $290,000  from  May  31,  1998.  The  decrease  was
attributable to the continued accrual of professional,  consulting, and advisory
services incurred but not paid during fiscal 1998.

                                                         [VEI\10KSB\53199.10K]-3

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         The Company had no cash balances at May 31, 1999. The limited available
cash  balances  are a direct  result  of the  Company  having  negative  capital
resources and losses from  operations  during both fiscal year 1999 and 1998. On
June 6, 1999, the Company  issued 8% notes payable  totaling  $250,000,  due and
payable June 6, 2000.  As an  inducement  to obtain the  financing,  the Company
issued  200,000  shares of its common stock.  Management  estimates the value of
such shares at $200,000  which will be amortized to interest costs over the next
12 months.

         The  Company's  plan is to seek  additional  sources of capital and new
operating opportunities.  Management believes that $1 to $3 million is needed to
fund sale,  marketing,  and product  development.  In  addition,  the Company is
seeking  the funds  necessary  to acquire  the  interest  in  Anyuser  and other
opportunities.   In  the  interim,  the  Company's  existence  is  dependent  on
continuing financial support from an affiliate. Furthermore, the Company intends
to utilize its common stock for future  financial  support to finance its needs.
There are no  assurances  that the Company will be  successful  in completing an
offering   sufficient  to  meet  its  operating  needs.  Such  conditions  raise
substantial  doubt about the  Company's  ability to continue as a going  concern
unless substantial funds can be raised through debt or equity capital.  As such,
the Company's  independent  accountants have modified their report to include an
explanatory paragraph with respect to the uncertainty.

         The Company has no commitments  for capital  expenditures or additional
equity or debt financing and no assurances can be made that its working  capital
needs can be met.

Impact of Year 2000

         The Year 2000 issue is the result of computer  programs  being  written
using two digits rather than four to define the  applicable  year. If any of the
Company's computer programs that had time-sensitive software were to recognize a
date using "00" as the year 1900 rather than the year 2000, it could result in a
system  failure  or  miscalculations   causing  disruption  of  normal  business
activities.

         Based on a recent and ongoing  assessment,  the Company has  determined
that all of its operating  software and systems are year 2000 compliant.  It has
further  determined  that it will not be  required  to modify  the  software  or
replace  portions  of the  software  that has  been  sold to  customers  so that
customers'  computer systems will function properly with respect to dates in the
year 2000 and thereafter.

         The Company has initiated communications with its significant suppliers
and major  customers and determined  that it will not experience any significant
operational  problems  from any third  party's  failure to remedy their own Year
2000 issues.

         The costs of the  project to become year 2000  compliant  have not been
material to the Company.


ITEM 7.           FINANCIAL STATEMENTS

         Financial Statements are referred to in Item 13(a), listed in the Index
to Financial  Statements  and filed and included  elsewhere  herein as a part of
this Annual Report on Form 10-KSB.

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<PAGE>

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         As previously reported, on May 15, 1999, the auditing practice of Kang,
Yu & Jun, CPA's,  resigned as the Company's independent  accountant.  Kang, Yu &
Jun previously  issued an unqualified  report dated  September 25, 1998, for the
fiscal years ended May 31, 1998 and 1997 assuming the Company will continue as a
going  concern,  which did not  contain  any adverse  opinion or  disclaimer  of
opinion,  or any  qualification  as to  uncertainty,  audit scope or  accounting
principles. Due to the acquisition of Metroplex, the Company reports under a new
basis of accounting  which consists of the historical  assets,  liabilities  and
operations of Metroplex for the periods presented.  Accordingly, the independent
auditors  report  for  1998 of Kang,  Yu & Jun is not  included.  There  were no
disagreements  with Kang,  Yu & Jun on any matter of  accounting  principles  or
practices,  financial statement disclosure or auditing scope or procedure during
the period from March 31, 1995 to the date of their resignation.

         On June 29, 1999,  the auditing  practice of McKennon  Wilson & Morgan,
LLP was engaged to perform the audits of the Company for the years ended May 31,
1999 and 1998 in connection with the new basis of accounting.

         The decision to change  principal  independent  accountants was made by
the Company's Board of Directors.

                                    PART III

ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS

(a)      Identification of Directors and Executive Officers.

         The following table furnishes the information  concerning the directors
and executive  officers of the Company as of May 31, 1999.  The directors of the
Company are elected every year and serve until their  successors are elected and
qualify.


                         Period Served as    Officer        Period Served
Name           Age       Director            Position       as Officer
------------   ---       ------------------  --------       ------------------

Fred G. Luke   52        6-17-93 to Present  President      6-17-93 to Present

(b)      Business Experience.

         The Company has no audit,  compensation  or nominating  committees.  No
family relationships exist between any of the officers or directors.

         The  officers of the Company are chosen by and serve at the pleasure of
the Board of Directors.

                                                         [VEI\10KSB\53199.10K]-3

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<PAGE>

         The following is a brief account of the business  experience during the
past five years of each director and executive officer of the Company, including
principal  occupations  and  employment  during that and the name and  principal
business of any  corporation or other  organization in which such occupation and
employment were carried on.

         Fred G. Luke.  Mr. Luke has been Chairman of the Board and President of
         the Company since June, 1993. Mr. Luke has over twenty-seven (27) years
         of  experience  in  domestic  and   international   financing  and  the
         management of privately and publicly held  companies.  Since 1982,  Mr.
         Luke has provided consulting services and has served, for brief periods
         lasting usually not more than six months,  as Chief  Executive  Officer
         and/or  Chairman of the Board of various  publicly  held and  privately
         held  companies  in  conjunction  with  such  financial  and  corporate
         restructuring  services.  In addition to his position with the Company,
         Mr. Luke currently  serves as Chairman and Chief  Executive  Officer of
         NuOasis Resorts,  Inc.,  (formerly,  Nona Morelli's II, Inc.) ("NuOasis
         Resorts"),  Chairman  and  former  President  of  Group  V  Corporation
         (formerly, NuOasis Gaming, Inc.) ("Group V"), Chairman and President of
         NuVen  Advisors,   Inc.,  formerly  New  World  Capital,  Inc.  ("NuVen
         Advisors"),  Chairman and President of Hart Industries,  Inc. ("Hart"),
         and  Chairman and  President  of  Diversified  Land &  Exploration  Co.
         ("DL&E").  DL&E  is a  publicly  traded  independent  natural  resource
         development  company  engaged  in  domestic  oil and  gas  exploration,
         development  and  production.  Prior  to  1995,  DL&E  was a 90%  owned
         subsidiary of Basic Natural Resources,  Inc. ("BNR"). From 1991 through
         1994,  Mr. Luke served as the President and a Director of BNR. Hart was
         formerly in the environmental services busines, and is a public company
         which was formerly traded on NASDAQ or the OTC Bulletin Board.  Neither
         Hart nor DL&E have  ongoing  operations.  NuOasis is a publicly  traded
         (OTC Bulletin Board)  diversified  holding company with overseas gaming
         and domestic pasta  production  subsidiaries.  NuVen Advisors  provides
         managerial,  acquisition  and  administrative  services  to public  and
         private companies  including the Company,  NuOasis and Hart pursuant to
         independent Advisory and Management Agreements.  NuVen Advisors,  which
         is controlled by Fred G. Luke, as Trustee of the Luke Family Trust,  is
         an affiliate of the Company.  NuVen  Advisors is a stockholder of Hart,
         DL&E and NuOasis,  and beneficial  stockholder of the Company. Mr. Luke
         also served from 1973  through  1985 as  President  of American  Energy
         Corporation,  a  privately  held oil and gas  company  involved  in the
         operation  of domestic oil and gas  properties.  From 1970 through 1985
         Mr. Luke served as an officer and Director of Eurasia,  Inc., a private
         equipment  leasing  company   specializing  in  oil  and  gas  industry
         equipment.  Mr. Luke received a Bachelor of Arts Degree in  Mathematics
         from California State University, San Jose in 1969.

(c)      Identification of Certain Significant Employees.

         There are no  employees  other than the  executive  officers  disclosed
above  who  make or are  expected  to  make,  significant  contributions  to the
business of the Company, the disclosure of which would be material.

(d)      Family Relationships.

         None.

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

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

         Based  solely on review of the  copies of such forms  furnished  to the
Company, or representations  that no Forms 5 were required or filed, the Company
believes  that during fiscal year 1997,  all Section  16(a) filing  requirements
applicable to its officers,  directors,  and greater than ten-percent beneficial
owners were complied with.

ITEM 10.       EXECUTIVE COMPENSATION

(a)     Summary Compensation Table.

        The following summary  compensation table sets forth in summary form the
compensation  received during each of the Company's last three completed  fiscal
years by the Company's President and four most highly compensated  officers (the
"Named  Executive  Officers").   There  were  no  executive  officers  who  were
compensated in excess of $100,000 during fiscal year 1999.

<TABLE>
<CAPTION>

        Name and Principal             Fiscal            Salary               Other Annual               Options
             Position                   Year               ($)               Compensation($)          Granted (#)(2)
--------------------------             ------           ---------           ----------------          --------------
<S>                                    <C>              <C>                 <C>                       <C>

Fred G. Luke                            1999             4,500(1)                   -                       -
 Chairman and President                 1998            54,000(1)                   -                       -
 (6-93 to Present)                      1997            54,000(1)                   -                    750,000

</TABLE>

(1)     The dollar value of base salary (cash and non-cash).

(2)     Except for stock option  plans,  the Company does not have in effect any
        plan that is intended to serve as  incentive  for  performance  to occur
        over a period longer than one fiscal year.

(b)     Stock Options

        There were no options  granted  during fiscal year 1999 to the Company's
Named  Executive  Officers.  The following  table sets forth in summary form the
aggregate  options  exercised during fiscal year 1999 and the May 31, 1999 value
of unexercised options for The Company's Named Executive Officer.

                                                         [VEI\10KSB\53199.10K]-3

                                                         9

<PAGE>

<TABLE>
<CAPTION>

                                                                                                        Value of Unexercised
                                                                       Number of Unexercised                In-the-Money
                                                                      Option/SAR's at Fiscal          Options/SAR's at Fiscal
                                                                           Year-End (#)                     Year-End ($)
                                  Shares
                              Acquired on             Value                Exercisable/                     Exercisable/
            Name               Exercise (#)       Realized ($)            Unexercisable                     Unexercisable
----------------------------  ------------------  ------------     -----------------------------  -----------------------------
<S>                           <C>                 <C>              <C>                            <C>

Fred G. Luke, President
and Director                          -                  -               750,000  Exercisable     $750,000(2)(3)(4) Exercisable

NuVen Advisors, Inc.(1)               -                  -               100,000  Exercisable          -     (3)(5) Exercisable

Steven Dong, former CFO               -                  -               100,000  Exercisable     $ 90,000   (3)(4) Exercisable
</TABLE>

(1)  The Luke  Family  Trust (the  "Luke  Trust")  owns 100% of NuVen  Advisors,
     formerly  New  World.  Fred G.  Luke,  as Co-  Trustee  of the  Luke  Trust
     determines  the voting of such shares  and,  as a result,  may be deemed to
     control the Luke Trust.

(2)  Exercise  price for Mr. Luke's options are 110% of net book value on August
     1, 1995 of the  Company.  Since the  Company  had a negative  book value on
     August 1, 1995,  the  exercise  price is deemed to be $.01 per  share.  Mr.
     Luke's options expire on December 31, 1999 unless extended by the Company.

(3)  The value of unexercised options in the money as of year end was deternined
     based upon the average bid and ask price on May 28, 1999 which was the last
     trading day prior to the year end. Such value used was $1 per share.

(4)  The option to Mr. Luke and Mr. Dong,  expire on December  31, 1999,  unless
     extended by the Company.

(5)  The option to NuVen will expire 60 days after the  termination  date of the
     Advisory and Management  Agreement,  which is June 30, 2001. The expiration
     date of the option will be extended  automatically  upon  extension  of the
     Advisory agreement.

(c)     Long Term Incentive Plans.

        None.

(d)     Compensation of Directors

        The  Company  has  no  standard  arrangement  for  the  compensation  of
directors or their committee participation or special assignments.  There was no
compensation paid to any directors during fiscal year 1999.

(e)     Contracts with Named Executive Officer and other Officers and Directors.

        Effective February 1, 1995, the Company and NuVen,  entered into a three
year Advisory and  Management  Agreement for the  engagement of NuVen to perform
advisory  services on behalf of the  Company.  Pursuant to such  agreement,  the
Company is obligated to pay NuVen $60,000  annually in monthly  installments  of
$5,000.  Under the terms of such  agreement,  the Company  has granted  NuVen an
option to purchase 100,000 shares of the Company's common stock exercisable at a
price of $1.00 per share. The option vested on the date of the agreement.

                                                         [VEI\10KSB\53199.10K]-3

                                                        10

<PAGE>

        Effective  July 1, 1998 the Company  amended its Advisory and Management
Agreement  with NuVen.  The amended terms require the Company to pay NuVen,  for
services rendered,  $10,000 a month for an annual total of $120,000 through June
30, 2001.

        In August 1995,  the Company  entered into an Employment  Agreement with
Fred G. Luke, the Company's Chairman and President.  The terms of the Employment
Agreement  call  for  Mr.  Luke  to  receive   approximately  $54,000  per  year
retroactive to June 1, 1994, for five (5) years as a base salary;  grants him an
option to purchase  750,000 shares of the Company's  common stock at an exercise
price of 110% of the book value per share on August 1, 1995;  and  requires  the
Company to purchase life insurance coverage, reimburse him for vehicle expenses,
and provide  fringe  benefits.  No cash  payments  were made to Mr. Luke but the
Company expensed $54,000 during fiscal 1998 and 1997 and had $199,458 due to Mr.
Luke as of May 31,  1998.  As  discussed  further the  agreement  was  cancelled
effective June 30, 1998; however,  Mr. Luke will provide similar services to the
Company under the amended Advisory and Management Agreement with NuVen.

        Effective June 30, 1998, in connection with the execution of termination
agreements  and  settlement  of amounts  due,  the Company  issued to  officers,
employees and consultants  4,270,000 shares of common stock. Such shares were in
full  settlement  of amounts  due to NuVen,  Luke and others  pursuant  to their
consulting and advisory  agreements.  NuVen and Mr. Luke received  2,000,000 and
900,000 shares, respectively pursuant to such distribution.

(f)     Report on Repricing of Options

        During  fiscal year 1999,  the  Company has not  adjusted or amended the
exercise price of stock options.

(g)     Change in Control.

        On May 5, 1999, the Company entered into an Asset Purchase Agreement and
Plan of  Reorganization  (the  "Agreement")  with  Metroplex  Web Inc.,  a Texas
corporation ("Metroplex") whereby the Company acquired certain assets, property,
business  interests and  intellectual  rights owned by Metroplex for  securities
consisting of Ten Million  (10,000,000)  shares of the Company's  $.01 par value
common stock,  causing Metroplex to have voting control and become the principal
stockholder  of the Company,  owning 63% of the common stock  outstanding at May
31, 1999.

ITEM 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

(a)      Beneficial  owners of five  percent  (5%) or greater  of the  Company's
         Outstanding Voting Securities.

        The  following  sets forth  information  with  respect to  ownership  by
holders of more than five (5%) of the Company's  outstanding  voting  securities
known by the Company.

                                                         [VEI\10KSB\53199.10K]-3

                                                        11

<PAGE>

<TABLE>
<CAPTION>

                                                                            Amount and Nature
                                           Name and Address                   of Beneficial
       Title of Class                     of Beneficial Owner                   Interest           Percent of Class(1)
--------------------------    ---------------------------------------      -------------------     -------------------
<S>                           <C>                                          <C>                     <C>

$.01 par value                MetroplexWeb, Inc.
Common Stock                  15280 Addison Road, Suite 250                     10,000,000           62.8% (1)
                              Addison, Texas 75001

                              NuVen Advisors, Inc.
                              4695 MacArthur Court, 530                          1,921,725           12.1% (1)(2)
                              Newport Beach, Ca. 92660

                              Fred G.  Luke
                              4695 MacArthur Court, Suite 530                      960,000            6.0% (1)(2)
                              Newport Beach, Ca. 92660
</TABLE>

(1)      Based upon 15,919,372 common shares outstanding.

(2)      Does not give effect to unexercised  options  outstanding in the amount
         of 100,000  shares and 750,000 for NuVen  Advisors,  Inc. and Mr. Luke,
         respectively.

         The  following  sets forth  information  with respect to the  Company's
Common  Stock  beneficially  owned  by each  Officer  and  Director,  and by all
Officers and Directors as a group. No Officer or Director personally owns any of
the Company's Redeemable Common Stock Purchase Warrants.

<TABLE>
<CAPTION>

                                                                           Amount and Nature
                                       Name and Address                      of Beneficial
     Title of Class                   of Beneficial Owner                      Interest            Percent of Class(4)
-----------------------   -----------------------------------------        -----------------       -------------------
<S>                       <C>                                              <C>                     <C>

$.01 par value            Fred G.  Luke
Common Stock              4695 MacArthur Court, Suite 530                    1,710,000(1)                10.1 %
                          Newport Beach, CA 92660

                          NuVen Advisors, Inc.(2)
                          4695 MacArthur Court, Suite 530                    2,021,725(3)                12.0 %
                          Newport Beach, CA 92660

                          All Officers and Directories as a group            3,731,725                   22.1%
</TABLE>

(1)      As of the date of this  Report,  960,000  shares are held by Mr.  Luke,
         with 750,000 shares subject to stock options held.

(2)      The Luke Family Trust (the "Luke  Trust")  owns 93% of NuVen  Advisors,
         formerly  New  World.  Fred G. Luke,  as Co-  Trustee of the Luke Trust
         determines the voting of such shares and, as a result, may be deemed to
         control the Luke Trust.

(3)      As of the date of this Report, 1,921,725 shares are held by NuVen, with
         100,000 shares subject to stock options held.

(4)      Number of shares deemed outstanding as of May 31, 1999 includes 950,000
         of  shares  deemed  outstanding  for in the  money or at  market  stock
         options

                                                         [VEI\10KSB\53199.10K]-3

                                                        12

<PAGE>

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a)      Transactions With Management and Affiliates.

         As  noted  in Item  10(e),  effective  June 30,  1998,  the  employment
agreement  with Mr. Fred Luke,  President  of the Company  was  terminated.  The
services of Mr. Luke  subsequent  to June 30, 1998 were  provided to the Company
under the Advisory and Management Agreement with NuVen Advisors,  Inc. Effective
July 1, 1998,  the Company  amended its Advisory and  Management  Agreement with
NuVen Advisors, Inc. increasing the monthly fee from $5,000 per month to $10,000
per month. The amount due NuVen for services in fiscal 1999 was satisfied by the
issuance of additional shares of common stock.

(b)      Certain Business Relationships.

         There are no  employees  other than the  executive  officers  disclosed
above  who make,  or are  expected  to make,  significant  contributions  to the
business of the Company, the disclosure of which would be material.

(c)      Indebtedness of Management.

         None.

                                     PART IV

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

(a)      Financial Statements:

         The Financial  Statements are included elsewhere herein and are indexed
on Page F-1, "Index to Financial Statements."

(b)      8-K Reports:

         During fiscal 1999, the Company filed Form 8-K's as follows:

         1)       On May 21, 1999  reporting  the Asset  Purchase  Agreement and
                  Plan of Reorganization  with  MetroplexWeb,  Inc. and that the
                  client-auditor relationship between Virtual Enterprises,  Inc.
                  and Kang, Yu & Jun had ceased.

         2)       On July 6, 1999 reporting the appointment of the auditing firm
                  of McKennon,  Wilson & Morgan LLP to serve as the  independent
                  auditor for the Company for the 1999 fiscal year.

         3)       On July 8, 1999,  a Form 8-K/A was filed to amend the Form 8-K
                  previously filed on May 21, 1999.

         4)       On  July  20,  1999,  a  Form  8-K/A  presenting  the  audited
                  financial statements of MetroplexWeb, Inc.

                                                         [VEI\10KSB\53199.10K]-3

                                                        13

<PAGE>

(c)      Exhibits:

         Exhibit
         Number                         Description
         -------  -------------------------------------------------------------

         3        Articles of Incorporation and Bylaws  [incorporated  herein by
                  reference  to Exhibit  3.1 and 3.2 of  Company's  Registration
                  Statement on Form S-18 (No. 33-23430-D)].

         4(a)     Warrant   Agreement   and   form   of   Warrant    Certificate
                  [incorporated  herein by reference to Exhibit 4.6 of Company's
                  Registration Statement on Form S-18 (No. 33-23430-D)].

         4(b)     Specimen    Redeemable    Common   Stock   Purchase    Warrant
                  [incorporated  herein by reference to Exhibit 4.2 of Company's
                  Registration Statement on Form S-18 (No. 33-23403-D)].

         10(a)    Advisory and Management  Agreement with NuVen  Advisors,  Inc.
                  [incorporated  herein by  reference  to Exhibit  10(d) to Form
                  10-KSB for fiscal year ended May 31, 1995]

         10(b)    Amended Advisory and Management Agreement with NuVen Advisors,
                  Inc. effective June 30, 1998

         10(c)    Asset Purchase  Agreement and Plan of  Reorganization  between
                  Virtual  Enterprises,  Inc. and Metroplex Web, Inc., dated May
                  5, 1999.

         16(a)    Letter dated May 15, 1999 from the accounting firm of Kang, Yu
                  & Jun confirming that the client-auditor  relationship between
                  Virtual   Enterprises,   Inc.   and   Kang,   Yu  &  Jun   has
                  ceased.[Incorporated  by  reference  to Exhibit  16(a) to Form
                  8-K/A filed July 8, 1999].

         23.(a)   Consent of Independent Accountants

         27       Financial Data Schedule [Exhibit included herein]

                                                         [VEI\10KSB\53199.10K]-3

                                                        14

<PAGE>

                                   SIGNATURES

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

                                        VIRTUAL ENTERPRISES, INC.
                                        (formerly, The Toen Group, Inc.)
                                        (Company)

Date:  August 30, 1999                  By:  /s/  Fred G. Luke
                                             ----------------------------------
                                                  Fred G. Luke,
                                                  Chairman of the Board
                                                  and President

                                                         [VEI\10KSB\53199.10K]-3

                                                        15

<PAGE>

                                  Exhibit 23(a)

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

         We hereby consent to the  incorporation  by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (File No. 333-68615)
of Virtual  Enterprises,  Inc. of our report dated August 19, 1999  appearing on
page F-2 of this Form 10-KSB

/s/  McKennon, Wilson & Morgan, LLP
---------------------------------------
     McKennon, Wilson & Morgan, LLP

Irvine, California

August 25, 1999

                                                         [VEI\10KSB\53199.10K]-3

                                       16

<PAGE>

                                 EXHIBIT 10(b)

      AMENDED ADVISORY AND MANAGEMENT AGREEMENT WITH NUVEN ADVISORS, INC.
                             EFFECTIVE JUNE 30, 1998

                               FIRST AMENDMENT TO
                               ADVISORY AGREEMENT

         This  First  Amendment  (the  "Amendment")  to the  Advisory  Agreement
effective  February 1, 1995 (the  "Advisory  Agreement")  is entered into by and
between NuVen Advisors Inc., a Nevada corporation ("NuVen") and Fred Gordon Luke
("Luke")  in his  individual  capacity  and as the sole  officer,  director  and
shareholder of NuVen  (collectively,  Nuven and Luke shall be referred to herein
as "Advisor") and Virtual Enterprises, Inc. ("Virtual"), a Nevada corporation is
hereby amended  effective to the date of the agreement between the parties which
was on or about July 1, 1998.

         WHEREAS,  pursuant to the  Advisory  Agreement,  Advisor was to perform
certain   Services  (as  defined  in  the  Advisory   Agreement)  which  was  to
automatically terminate on January 31, 1998; provided,  however, that failure of
the parties,  or any one of them to serve notice of  termination,  the agreement
would  continue  on  a  month-to-month   basis,  and  such  agreement  had  been
automatically extended since January 31, 1998; and,

         WHEREAS,  Advisor  provided the Services as required under the Advisory
Agreement  to the  satisfaction  of the  Company,  as  evidenced by the parties'
agreement  on or about July 1998 to amend the  agreement as set forth herein and
by the execution of this Amendment, to extend the term of the Advisory Agreement
and modify the Services and  Compensation  to Advisor,  all in accordance to the
terms of this Amendment.

         NOW, THEREFORE, in consideration of the mutual promises,  covenants and
agreements contained herein, and for other good and valuable consideration,  the
receipt and sufficiency of which is hereby acknowledged, the Company and Advisor
mutually agree as follows:

1.       Notwithstanding  paragraph 3 of the Advisory Agreement, the Termination
         Date of the Advisory Agreement shall be June 30, 2001.

2.       Notwithstanding  paragraph  3 of the  Advisory  Agreement,  the parties
         herein agree that, effective June 30, 1998, all outstanding obligations
         of the Company to Advisor or Luke for Services performed were satisfied
         by the issuance of shares of common stock of the Company.

3.       Notwithstanding  paragraph  4 of the  Advisory  Agreement,  the parties
         herein agree that the monthly compensation to Advisor is herein amended
         to increase from $5,000 per month to $10,000 per month.

4.       Notwithstanding  paragraph  3 of the  Advisory  Agreement,  the parties
         agree that the Option  granted  by the  Company to Advisor to  purchase
         shares of the Company's  common stock at a purchase price of One Dollar
         ($1.00) per share,  is hereby  extended  through  the  revised  date of
         Termination.  And, further,  it is agreed that Advisor may exercise its
         right to purchase  the Option  Shares in the manner  prescribed  in the
         Option  for a  period  of 60  days  subsequent  to  Termination  of the
         Advisory Agreement.

Except as modified by this Amendment or other written amendment, modification or
agreement  signed by both the Company and Advisor,  the terms and  conditions of
the Advisory Agreement not modified herein shall remain in full force and effect
as stated therein.

                                                             [VEI\AGR:NUADVAM]-2

                                       17

<PAGE>

A facsimile,  telecopy or other  reproduction of this instrument may be executed
by one or more  parties  hereto  and  such  executed  copy may be  delivered  by
facsimile or similar  instantaneous  electronic  transmission device pursuant to
which  the  signature  of or on  behalf  of such  party  can be  seen,  and such
execution and delivery shall be considered valid,  binding and effective for all
purposes.  At the request of any party  hereto,  all parties agree to execute an
original  of this  instrument  as  well  as any  facsimile,  telecopy  or  other
reproduction hereof.

NuVen Advisors Inc.

By:  /s/  Fred G. Luke
     ----------------------------------
          Fred G. Luke,
          individually and as President
          of NuVen Advisors, Inc.

Virtual Enterprises, Inc.
a Nevada corporation,

By:  /s/  Fred G. Luke
     ----------------------------------
          Fred G. Luke

                                                             [VEI\AGR:NUADVAM]-2

                                       18

<PAGE>

                                 EXHIBIT 10(c)

          ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
      VIRTUAL ENTERPRISES, INC. AND METROPLEX WEB, INC., DATED MAY 5, 1999

                            ASSET PURCHASE AGREEMENT
                           AND PLAN OF REORGANIZATION



         This  ASSET  PURCHASE   AGREEMENT  AND  PLAN  OF  REORGANIZATION   (the
"Agreement") is made effective this 5th day of May, 1999, by and between Virtual
Enterprises Inc., a Nevada  corporation  ("Purchaser") and Metroplex Web Inc., a
Texas corporation ("Seller").

         WHEREAS,   Purchaser  desires  to  acquire  certain  assets,  property,
business  interests  and  intellectual  rights  owned by  Seller,  as more fully
described in Exhibit "A" attached hereto and incorporated  herein  (collectively
referred  to  as  the  "Assets"),  for  securities  consisting  of  Ten  Million
(10,000,000)  shares  of its $.01  par  value  common  stock  (the  "Purchaser's
Shares"),  causing  Seller to have  voting  control  and  become  the  principal
stockholder of Purchaser; and

         WHEREAS,  Purchaser  and  Seller  desire  to adopt  this  Agreement  to
consummate the proposed  transaction as a tax-free  reorganization and merger in
accordance with the provisions of Section  368(a)(1)(C) of the Internal  Revenue
Code (the "Code"),  all in the manner in compliance with the Code and subject to
the terms and conditions as hereinafter set forth.

         IN CONSIDERATION of the mutual promises  contained herein, the benefits
to be derived by each party hereunder and other good and valuable consideration,
the  receipt  and  sufficiency  of  which  are  hereby  expressly  acknowledged,
Purchaser and Seller agree as follows:

1.       Sale of Assets

         On the basis of the  representations  and warranties  herein contained,
         subject  to the terms and  conditions  set  forth  herein,  and for the
         Purchaser's  Shares (as defined herein),  Purchaser agrees to issue and
         deliver  Purchaser's  Shares  to  Seller  and  Seller  agrees  to sell,
         transfer,  assign, convey and deliver to Purchaser all of the assets of
         Seller  of every  type  and  description,  real,  personal  and  mixed,
         including,  without  limitation,  those  assets  on  Exhibit  "A";  its
         business as a going concern; its good will; the claimed exclusive right
         to use the name "Metroplex Web", and any names so similar thereto as to
         tend to cause  confusion on the part of the public;  trademarks,  trade
         names,  trade  secrets,  plans,  files,   notebooks,   and  development
         activities,   production   data,   shop  rights,   customer  lists  and
         information  related to customers;  real estate and  interests  therein
         (including leaseholds and all other interests); machinery and equipment
         (including  all  of  Seller's  right,  title  and  interest  under  any
         equipment  leases and  contracts  for  purchase  of  equipment);  motor
         vehicles;  supplies; notes and accounts receivable;  books and records;
         work in process, finished products, and supplies; fixtures;  contracts;
         claims  of  every   description,   including  those  for  refund;   any
         restrictive covenants and obligations of former officers and employees,
         including,  without  limitation,  all rights and interests  provided by
         invention   agreements  and   assignments   and  other  contracts  with
         employees;  franchises;  funds of whatever  nature;  past  present,  or
         future,  escrow,  security,  and other deposits,  if any; and all other
         property and rights of every kind and nature,  tangible or  intangible,
         owned by  Seller on the date of  closing  whether  or not  specifically
         referred to in this Agreement.

                                                         [VEIAGR:METPLWEB.AGR]-4

                                       19

<PAGE>

2.       Purchaser's Shares

         The  consideration  for the purchase of the Assets  consists  solely of
         Purchaser's   Shares,   which  shall  be  issued  and  deposited   with
         Escrowholder  (as defined  herein) on behalf of Seller  within five (5)
         business  days of the  date  hereof  in  denominations  of One  Hundred
         Thousand (100,000) shares. In the event Seller is unable to deliver all
         of the Assets,  the number of  Purchaser's  Shares  shall be  decreased
         proportionally  to the  decrease  in the  composition  and value of the
         Assets.

         To induce  Purchaser  to enter into the  Agreement,  and as  additional
         consideration  for the issuance and delivery of  Purchaser's  Shares to
         the Escrowholder as contemplated  herein,  Seller agrees,  warrants and
         covenants  that,  subsequent  to the  Closing,  Seller,  for itself and
         behalf of any  distributees,  will not  restrict,  block or  attempt to
         restrain  or block the sale,  transfer or  assignment  of any shares of
         common or preferred stock of Purchaser presently issued and outstanding
         as of the date of this  Agreement.  Further,  Seller agrees,  and shall
         cause its  distributees to acknowledge  and accept any  distribution of
         Purchaser's Shares subject to such covenant and agreement.

3.       Assets Retained by Seller:  Dissolution of Seller

         Seller shall retain its franchise to be a Texas corporation,  its stock
         transfer books and records,  the record books containing the minutes of
         meetings  of its  directors  and  shareholders,  and such  other of its
         records as have exclusively to do with its organization,  existence, or
         share capitalization.

         Seller  agrees to comply with all  applicable  rules,  regulations  and
         requirements  of  Section  368 of the Code,  including,  if  necessary,
         Seller's dissolution and distribution of Purchaser's Shares to Seller's
         equityholders  within twelve (12) months of the Closing Date, to enable
         Purchaser  and  Seller  to  meet,   if  possible,   the  standards  and
         requirements as a tax-free reorganization.

4.       Effective Date and Closing

         The closing of the transfer and exchange of the Assets for  Purchaser's
         Shares as contemplated  by this Agreement (the  "Closing")  shall occur
         upon the earlier of such date that the  parties  have  satisfied  their
         respective obligations and covenants contained herein, or May 31, 1999,
         but shall have an effective date as of the date set forth above. At the
         Closing,  Purchaser  shall  deliver  Purchaser's  Shares to Seller  and
         Seller shall deliver the Assets to Purchaser,  along with any opinions,
         certificates,  exhibits,  etc. and as stated in this  Agreement  and as
         reasonably requested by the other party.

5.       Escrowholder

         Within ten (10)  business  days of execution  of this  Agreement by the
         parties,   Purchaser  and  Seller  will  agree  upon  an  Escrow  Agent
         ("Escrowholder")   who  will  receive  and   distribute  all  necessary
         documents  and  securities  being  exchanged  under this  Agreement and
         facilitate the Closing.  Purchaser,  Seller and  Escrowholder  mutually
         agree to execute escrow instructions to be mutually agreed and executed
         by the parties within ten (10) business days following the date hereof.

                                       20

<PAGE>

6.       Representations and Warranties of Seller


         Seller  represents  and  warrants to  Purchaser  that it (i) it is duly
         organized  and has the  authority  under  Texas law and the  ability to
         carry out this Agreement;  (ii) it is properly capitalized and Seller's
         Financial Statements (as defined herein) are true and correct; (iii) it
         can continue to lawfully conduct its business; (iv) it has disclosed to
         Purchaser  any and all  litigation  threatened or filed against it, its
         officers,  directors and affiliates (as defined herein) during the last
         five (5) years;  (v) it has properly  filed any and all  necessary  tax
         returns and accounted for any and all paid taxes due and owing; (vi) it
         has  disclosed  any and all  contracts and is not aware of any material
         breaches or defaults;  (vii) it has identified all directors,  officers
         and affiliates for the last five (5) years; (viii) it has disclosed all
         employee and labor matters; (ix) it has disclosed all real property and
         all  encumbrances;  (x) it has  disclosed  all assets and  liabilities,
         intangible  and  tangible,  actual  and  contingent  including  but not
         limited to trademarks, leaseholds, subsidiaries and permits; (xi) it is
         in compliance with all laws,  environmental and occupational health and
         safety  matters;  and,  (xii) it has  disclosed any and all conflict of
         interest  transactions.  Further,  Purchaser  shall  confirm  that such
         representations  and  warranties  are true and correct at and as of the
         date of  closing,  with the same force and effect as though made at and
         as of date hereof, except for changes permitted or contemplated by this
         Agreement,  or waived in writing by the delivery of the  Certificate of
         Representations and Warranties in form and substance similar to Exhibit
         "B" attached  hereto and  incorporated  herein by reference  ("Seller's
         Certificate").

7.       Representations and Warranties of Purchaser

         Purchaser  represents  and  warrants  to  Seller  that  (i) it is  duly
         organized  and has the  authority  under  Nevada law and the ability to
         carry  out  this  Agreement;   (ii)  it  is  properly  capitalized  and
         Purchaser's  Financial  Statements  (as  defined  herein)  are true and
         correct;  (iii) it can continue to lawfully conduct its business;  (iv)
         it has disclosed to Seller any and all  litigation  threatened or filed
         against it, its officers,  directors and affiliates (as defined herein)
         during the last five (5) years;  (v) it has properly  filed any and all
         necessary  tax returns and accounted for any and all paid taxes due and
         owing;  (vi) it has disclosed any and all contracts and is not aware of
         any  material  breaches  or  defaults;  (vii)  it  has  identified  all
         directors,  officers and affiliates for the last five (5) years; (viii)
         it has disclosed all employee and labor matters;  (ix) it has disclosed
         all real property and all encumbrances; (x) it has disclosed all assets
         and  liabilities,   intangible  and  tangible,  actual  and  contingent
         including but not limited to trademarks,  leaseholds,  subsidiaries and
         permits;  (xi) it is in  compliance  with all laws,  environmental  and
         occupational health and safety matters; and, (xii) it has disclosed any
         and all  conflict of interest  transactions.  Seller  shall  confirm at
         Closing such  representations  and  warranties,  as may be amended from
         time to time prior to Closing,  in a Certificate of Representations and
         Warranties,  more fully  described in Exhibit "C"  attached  hereto and
         incorporated herein by reference ("Purchaser's Certificate").

                                       21

<PAGE>

8.       Transactions and Document Exchange at Closing


         At the Closing,  the following  transactions  shall occur and documents
         shall  be   exchanged,   all  of  which   shall  be   deemed  to  occur
         simultaneously:

         Purchaser will deliver, or cause to be delivered to Seller:

         (i)      The  documents  necessary  to issue  and  deliver  Purchaser's
                  Shares  to  Seller,  or  its  designee(s)   pursuant  to  this
                  Agreement, in proper form and substance acceptable to Seller;

         (ii)     Purchaser's Certificate;

         (iii)    Certificate of Good Standing dated at or within 30 days of the
                  date of Closing from the Secretary of State of Nevada;

         (iv)     Purchaser's Financials;

         (v)      The opinion of counsel for Purchaser as required herein; and

         (vi)     Such other documents,  instruments,  and/or  certificates,  if
                  any,  as  are  required  to  be  delivered   pursuant  to  the
                  provisions  of  this   Agreement,   or  which  are  reasonably
                  determined  by the parties to be required  to  effectuate  the
                  transactions  contemplated in this Agreement,  or as otherwise
                  may be reasonably  requested by Seller in  furtherance  of the
                  intent of this Agreement.

         Seller  will  deliver,  or  cause  the  following  to be  delivered  to
Purchaser:

         (i)      Instruments acceptable to Purchaser conveying to Purchaser all
                  of Seller's assets and business,  including but not limited to
                  those as identified in Exhibit "A" hereof;

         (ii)     The Seller's Certificate;

         (iii)    Seller Financials;

         (iv)     A Certificate  of Good Standing  dated at or within 30 days of
                  the date of the Closing from the Secretary of State of Texas;

         (v)      Such other documents,  instruments,  and/or  certificates,  if
                  any,  as  are  required  to  be  delivered   pursuant  to  the
                  provisions  of  this   Agreement,   or  which  are  reasonably
                  determined  by the parties to be required  to  effectuate  the
                  transactions  contemplated in this Agreement,  or as otherwise
                  may be reasonably requested by Purchaser in furtherance of the
                  intent of this Agreement.

                                       22

<PAGE>

9.       Conditions Precedent to Obligations of Seller


         All  obligations  of Seller  under this  Agreement  are  subject to the
         fulfillment,  prior  to or as of  the  Closing  Date,  of  each  of the
         following conditions:

         A.       Representations and Warranties. Purchaser shall deliver to the
                  Escrowholder on the Closing Date Purchaser's  Certificate,  as
                  may be amended from time to time by mutual  agreement  between
                  Purchaser  and  Seller,  confirming  the  representations  and
                  warranties made herein by Purchaser.

         B.       No Breach or  Default.  Purchaser  shall  have  performed  and
                  complied  with  all  covenants,   agreements,  and  conditions
                  required by this Agreement to be performed or complied with by
                  it prior to or at the Closing.

         C.       Issuance  and Delivery of Purchaser  Shares.  Purchaser  shall
                  take all action  necessary to effect the issuance and delivery
                  of Purchaser Shares to the  Escrowholder  prior to the Closing
                  Date.

10.      Conditions Precedent to Obligations of Purchaser

         All  obligations  of Purchaser  under this Agreement are subject to the
         fulfillment,  prior  to or as of  the  Closing  Date,  of  each  of the
         following conditions:

         A.       Action  to  Transfer  Assets.  Seller  shall  have  taken  all
                  corporate and other action  necessary to transfer to Purchaser
                  the Assets and all business rights of Seller,  including those
                  acquired following the date hereof,  free and clear of any and
                  all liens  except as agreed  between  Seller and  Purchaser in
                  writing.

         B.       Approval by  Purchaser  of Value of Assets.  At least  fifteen
                  (15)  business  days prior to the Closing  Date dated not more
                  than ninety (90) days prior to such delivery date, Seller will
                  have   delivered  to  Purchaser   its   financial   statements
                  ("Seller's  Financials").  Seller further agrees to provide to
                  Purchaser income  statements  related to the operations of the
                  Assets and its business up to and including  the Closing,  and
                  any other documents necessary to substantiate the value of the
                  Assets at or greater than Three Million Dollars  ($3,000,000),
                  hereinafter referred to as the "Net Asset Value". Upon receipt
                  and review of the Seller Financials,  Purchaser shall have ten
                  (10) business days to raise objections to Seller's Financials,
                  or information  contained in Seller's Financials,  which shall
                  be  accomplished  by  submission  of a  written  list  of such
                  objections to Seller. If there are objections, or if the value
                  as determined by the Seller's  Financials and other  materials
                  provided  by Seller,  is less than the Net Asset  Value,  then
                  Purchaser  shall have the option to terminate  this  Agreement
                  without  penalty.  Alternatively,  Purchaser may elect, in its
                  sole  discretion,  to proceed with Closing in reliance  upon a
                  warranty  of  title,  guarantee  of value,  or other  mutually
                  acceptable form of assurance to be made by Seller.

                                       23

<PAGE>

         C.       Approval of Other Instruments and Documents by Purchaser.  All
                  instruments and documents  delivered to Purchaser  pursuant to
                  the  provisions of this  Agreement  shall be  satisfactory  to
                  Purchaser  and its legal  counsel.  Seller  shall  provide  to
                  Purchaser prior to Closing evidence  satisfactory to Purchaser
                  that the  representations of Seller herein as to the status of
                  the Agreement, and the Assets are legally created, binding and
                  duly enforceable.

         D.       Opinions,  Affidavits and Declarations by Seller. Seller shall
                  have   delivered  to  Purchaser   evidence   satisfactory   to
                  Purchaser,  and its  counsel  and  auditors,  dated  as at the
                  Closing Date, verifying that:

                  (i)      Seller is duly organized,  validly  existing,  and in
                           good  standing  under the laws of the State of Texas,
                           and  that  Seller  is  not  aware  of any  notice  of
                           termination of its charter or cause for termination;

                  (ii)     Seller has the power to carry on its  business as now
                           being  conducted and is duly qualified to do business
                           in Texas and in any other jurisdiction where required
                           or where the  non-qualification  to do business would
                           have   a    material    adverse    affect    on   the
                           transferability, marketability, operation or value of
                           the Assets.

                  (iii)    All action and  approvals  required in  connection to
                           the  creation and transfer of the Assets to Purchaser
                           have been  properly  taken,  completed or obtained by
                           Seller,   to  the  extent,  if  any,  that  they  are
                           necessary.

                  (iv)     No suit,  action,  investigation,  inquiry,  or other
                           proceeding  by any  governmental  authority  or other
                           person or legal or administrative proceeding shall be
                           pending or threatened which questions the validity or
                           legality of the transactions  contemplated  herein or
                           which could  reasonably  be expected  materially  and
                           adversely to affect the ability of Seller to complete
                           the   transaction,   or  which  could  reasonably  be
                           expected  to  result  in any  material  liability  of
                           Seller or the impairment of the value of the Assets.

                  (vi)     This  Agreement has been duly  authorized,  executed,
                           and  delivered  by Seller and is a valid and  binding
                           obligation of Seller.

                  (vii)    Seller  shall use its best  efforts  to  fulfill  all
                           conditions  of  the  Closing   including  the  timely
                           solicitation  of  affirmative  consent  of all  third
                           parties  necessary  to  effect a Closing  under  this
                           Agreement.

         E.       Agreements  with Key  Personnel.  Prior to  Closing  Purchaser
                  shall  have  concluded  to  its  satisfaction   employment  or
                  consulting  agreements  with all key  personnel of Seller whom
                  Purchaser,  in its sole discretion,  deems necessary to employ
                  or retain in some capacity to continue the business comprising
                  the Assets after the Closing Date.

                                       24

<PAGE>

11.      Availability of Information

         Seller and  Purchaser  represent  that,  by virtue of their  respective
         business  activities and economic  bargaining power or otherwise,  they
         have been able to conduct  their own due  diligence and have had access
         to or have  been  furnished  with,  prior to or  concurrently  with the
         execution hereof, the information which they consider to be adequate to
         make a decision to exchange the Assets for Purchaser's Shares.

12.      Review Period

         From the date of execution of this Agreement until the Closing Date, or
         termination  of the  Agreement,  as provided for herein,  Purchaser and
         Seller will  permit the other's  officers,  employees,  and  authorized
         representatives  to have  immediate  and full  access  to the  offices,
         properties,   books,  and  records  of  the  other,   relevant  to  the
         transaction contemplated by this Agreement, and will cooperate with the
         other in order to provide and prepare the documents and other materials
         necessary  to  the  transaction.  Upon  discovery  of  matters  in  due
         diligence  or  receipt  of  documents  from  the  other  party  to this
         transaction,  each party shall have ten (10)  business days in which to
         raise  objections.  Subject  to  paragraphs  5  and  18  hereof,  if an
         objection  is  raised  and  not  resolved  to  the  objecting   party's
         satisfaction,  such approval to not be unreasonably withheld, the other
         party shall be entitled to terminate without penalty.

13.      Securities Registration

         A.       Exempt  Securities.  Seller  understands  that  the  Purchaser
                  Shares issued and transferred pursuant to this Agreement, have
                  not been or will not be registered under the Securities Act of
                  1933 (the "Act") but are issued  pursuant to  exemptions  from
                  registration  including  but not limited to  Regulation  D and
                  Regulation  S and  Section  4(2)  of  the  Act,  and  Seller's
                  reliance on such  exemptions  in the issuance of the Purchaser
                  Shares is predicated in part on the  representations of Seller
                  set  forth  herein  and in the  Investment  Letter in form and
                  substance  satisfactory to Purchaser (the "Investment Letter")
                  to be executed and delivered to Purchaser at Closing.

         B.       Sophisticated  Investor.  Seller  represents  that it has such
                  knowledge and experience in financial and business matters and
                  that it is capable of  evaluating  the merits and risk of this
                  transaction,  and that it is able to bear the economic risk of
                  the investment in the shares of Purchaser Shares.

         C.       Disclosure Documents. Seller has been furnished with a copy of
                  the  Purchaser's  Financials  which include  Purchaser's  most
                  recent Annual Report on Form 10-K and all reports or documents
                  required to be filed under Sections 13(a), 14(a), and 15(d) of
                  the  Securities  and  Exchange  Act of 1934,  as amended  (the
                  "Exchange  Act"),  including  but  not  limited  to  quarterly
                  reports on Form 10-Q,  current  reports on Form 8-K, and proxy
                  statements.  In  addition,  Seller has been  furnished  with a
                  description of Purchaser's  capital structure and any material
                  changes in Purchaser's  financial  condition that may not have
                  been  disclosed  in the  Purchaser's  Financials  on any prior
                  Exchange Act filings.

                                       25

<PAGE>

         D.       Seller's  Experience.  Seller has had the  opportunity  to ask
                  questions  and receive  answers  concerning  Purchaser  and to
                  obtain any additional information which Purchaser possesses or
                  can acquire without  unreasonable  effort or expense necessary
                  to verify the accuracy of  information  furnished  pursuant to
                  this Agreement. By reason of Seller's knowledge and experience
                  in financial and business matters in general,  and investments
                  in  particular,  Seller  represents  that  it  is  capable  of
                  evaluating  the  merits and risks of this  transaction  and in
                  bearing the economic  risks of an  investment  in  Purchaser's
                  Shares,  and Purchaser in general,  and fully  understands the
                  speculative  nature of the specific  restrictions on resale of
                  such  securities,  and the  possibility of a total loss in the
                  value thereof.

         E.       Restricted Securities.  Seller is fully aware that Purchaser's
                  Shares issued to Seller prior to the filing of a  registration
                  statement will be  "Restricted  Securities" as defined by Rule
                  144 of the  Securities  Act.  Seller is  further  aware of the
                  specific  restrictions on resale of such securities  contained
                  in Rule 144,  and that any and all  certificates  representing
                  Purchaser's Shares issued and any and all securities issued in
                  replacement  thereof or in  exchange  therefore,  prior to the
                  filing of a registration  statement,  shall bear the following
                  legend:

                           "The shares  represented by this certificate have not
                           been registered under the Securities Act of 1933 (the
                           "Act") and are  "restricted  securities" as that term
                           is defined in Rule 144 under the Act.  The shares may
                           not  be  offered  for  sale,   sold,   or   otherwise
                           transferred   except   pursuant   to   an   effective
                           Registration  Statement  under the Act or pursuant to
                           an  exemption  from  registration  under the Act, the
                           availability  of  which is to be  established  to the
                           satisfaction of the Company."

         F.       Registration  Compliance.  Seller  will not sell,  transfer or
                  otherwise  dispose  of any of  Purchaser's  Shares  issued  or
                  reserved for issuance  hereunder prior to registration  except
                  in compliance with the Securities Act.

14.      Contracts to Remain in Full Force and Effect Subsequent to Closing

         Except as disclosed pursuant to this Agreement, there are no contracts,
         actual  or  contingent  obligations,  agreements,  franchises,  license
         agreements,  or other  commitments  between  Purchaser  and other third
         parties which are material to the  business,  financial  condition,  or
         results of operation of  Purchaser,  taken as a whole.  For purposes of
         the preceding sentence, the term "material" refers to any obligation or
         liability which by its terms calls for aggregate  payments of more than
         $10,000; provided,  however, that the following material contracts will
         be valid and binding  obligations of Purchaser with third parties as of
         the Closing Date and will survive the Closing:

         A.       Employment Agreement,  as amended, with Fred G. Luke dated 1st
                  day of August 1999, attached hereto as Exhibit "D"

         B.       Advisory and  Management  Agreement  with NuVen Advisors dated
                  1st day of  February  1995,  as  amended,  attached  hereto as
                  Exhibit "E"

         C.       Warrant Agreement and Form of Certificated  attached hereto as
                  Exhibit "F"

         D.       Consulting  Agreement  dated June 1, 1997  attached  hereto as
                  Exhibit "G"

                                       26

<PAGE>

         E.       Option  Agreement as part of Consulting  Agreement  dated 24th
                  day of April 1996 attached hereto as Exhibit "H"

15.      Stockholder Approval

         At or before  Closing,  Purchaser  and  Seller  shall  each  cause this
         Agreement to be approved by the requisite  shareholder  vote, if and as
         required under their respective charters.

16.      Covenants Not to Compete

         Seller,  together  with  its  directors  and  officers,  employees  and
         entities owned ten percent (10%) or more,  directly or  indirectly,  by
         such  directors,   officers  and  employees   (collectively   "Seller's
         Affiliates") agree, as follows, that:

         A.       Seller's   Affiliates   Shall   not   Compete.    During   the
                  Non-Competition  period (as herein  defined),  other than with
                  Purchaser's  written  consent,  neither  Seller  nor  Seller's
                  Affiliates  will  (i)  directly  or  indirectly  own,  manage,
                  control,   participate   in,  lend  their  names  to,  act  as
                  consultants or advisors to, or render services to (alone or in
                  association with any other persons, firm, corporation or other
                  business  organization)  any person or entity engaged anywhere
                  within the continental  United States, in any business similar
                  to or related in any way to the business  presently  conducted
                  by Seller utilizing the Assets and that when Purchaser intends
                  to  continue,   following  the  Closing  of  the   transaction
                  contemplated  hereby,  (ii)  have  any  interest  directly  or
                  indirectly in any business  engaged in any business similar to
                  or related in any way to the business  (provided  that nothing
                  herein will  prevent  Seller's  Affiliates  from owning in the
                  aggregate  not more than five percent (5%) of the  outstanding
                  stock of any class of a  corporation  engaged in the  business
                  which is publicly traded, so long as Seller's  Affiliates have
                  not  participated  in the management or conduct of business of
                  such corporation), (iii) induce or attempt to induce any other
                  employee of Seller to leave the employ of Purchaser, or in any
                  way interfere with the relationship  between Purchaser and any
                  other  employee  of  Purchaser,  or (iv)  induce or attempt to
                  induce any customer, supplier, franchisee,  licensee, or other
                  business  relation of Purchaser or any  affiliate of Purchaser
                  to cease doing  business  with  Purchaser or any  affiliate of
                  Purchaser,  or in any  way  interfere  with  the  relationship
                  between any customer,  franchisee or other  business  relation
                  and Purchaser or any affiliate of Purchaser, without the prior
                  written  consent  of  Purchaser's  Board  of  Directors.   For
                  purposes of this  Agreement,  "Non-Competition  Period"  shall
                  mean the period  commencing  as of the Closing Date and ending
                  on the second anniversary of such Closing Date.

         B.       Term  of  Covenant.  If,  at the  time of  enforcement  of any
                  provision herein, a court of competent jurisdiction holds that
                  the  restrictions   stated  herein  are   unreasonable   under
                  circumstances then existing, the parties hereto agree that the
                  maximum period or scope  reasonable  under such  circumstances
                  will be substituted for the stated period or scope.

         C.       Survival  of  Covenant.  Purchaser  and Seller  agree that the
                  covenants  made  herein  shall be  construed  as an  agreement
                  independent  of any other  provision  of this  Agreement,  and
                  shall survive the  termination  of this Agreement for a period
                  of two (2) years.

                                       27

<PAGE>

         D.       Soliciting  Customers After Termination of Agreement.  Neither
                  Seller nor Seller's  Affiliates  shall for a period of two (2)
                  years   immediately   following  the   termination   of  their
                  engagement with or employment by Purchaser, either directly or
                  indirectly:

                  (i)      make known to any  person,  firm or  corporation  the
                           names  or  addresses  of  any  of  the  customers  of
                           Purchaser  or any  other  information  pertaining  to
                           them; or,

                  (ii)     call,  solicit,  or take  away,  attempt  to call on,
                           solicit,  or  take  away  any  of  the  customers  of
                           Purchaser  on  whom  Seller  or  Seller's  Affiliates
                           called  on  or  became  acquainted  with  during  its
                           engagement with  Purchaser,  either for themselves or
                           for any other person, firm or corporation.

17.      Additional Covenants

         Between the date hereof and the Closing  Date, or  termination  hereof,
         except with the prior written consent of the other party:

         A.       Conduct of Business.  The business of Seller and the operation
                  of the  Assets  shall  be  conducted  only  in the  usual  and
                  ordinary  course and the character of such business  shall not
                  be changed nor any different business be undertaken.

         B.       No Change in Organization  or Capital of Purchaser.  Purchaser
                  shall not change its Articles of Incorporation  or Bylaws,  or
                  its authorized or issued shares except as contemplated herein.

         C.       No Special  Settlements.  Neither  Seller nor Purchaser  shall
                  discharge or satisfy any lien,  encumbrance  ,  obligation  or
                  liability,  other  than  current  liabilities  shown  on their
                  respective  financial  statements   heretofore  delivered  and
                  current liabilities  incurred since that date, in the ordinary
                  course of their respective businesses nor shall they mortgage,
                  pledge or subject to lien or encumbrance any assets,  tangible
                  or intangible, not in the ordinary course of business.

         D.       No Distribution.  Neither  Purchaser nor Seller shall make any
                  payment or  distribution to their  respective  stockholders or
                  purchase for cash or redeem any shares of their capital stock.

         E.       Best Efforts. Purchaser agrees to use its best efforts and, at
                  its sole  discretion and expense,  following the Closing Date,
                  using  those  assets,   rights  and   relationships   acquired
                  hereunder  to  further  the  business   activities   presently
                  comprising the Assets; provided,  however, that Purchaser may,
                  in its sole discretion,  elect to limit or to cease to conduct
                  such activities if in Purchaser's opinion the economics of the
                  business  activities  acquired hereunder following the Closing
                  Date  do  not  justify   continuing   such  business.   Seller
                  acknowledges  that it will have no control or  influence  over
                  the  Assets or  Purchaser's  use of the Assets  following  the
                  Closing Date.

                                       28

<PAGE>

18.      Termination

         Purchaser  and  Seller  may  terminate  this  Agreement  prior  to  the
         expiration  of the Closing  Date upon mutual  consent.  Failing to have
         mutual  consent,  without  prejudice  to any other  remedy to which the
         terminating  party may be entitled,  if any, either party may terminate
         this  Agreement upon three (3) days written notice on the occurrence of
         any one of the following events:

         A.       By Seller

                  (i)      If  Purchaser  breaches  this  Agreement  or fails to
                           provide information required hereunder; or

                  (ii)     If Purchaser has a receiver  appointed for its assets
                           or property, or otherwise becomes insolvent or unable
                           to timely  satisfy its  obligations  in the  ordinary
                           course of business; or

                  (iii)    If Purchaser  institutes,  makes a general assignment
                           for the benefit of creditors,  has instituted against
                           it any bankruptcy  proceeding for  reorganization for
                           rearrangement  of  its  financial  affairs,  files  a
                           petition in a court of bankruptcy,  or is adjudicated
                           a bankrupt; or

                  (iv)     If any of the  disclosures  made herein or subsequent
                           hereto by  Purchaser to Seller are  determined  to be
                           materially false or misleading.

         B.       By Purchaser

                  (i)      If  during  the  term  of this  Agreement,  Purchaser
                           determines  as a result  of its due  diligence,  that
                           Seller is unable to deliver  the Assets and  business
                           interests as contemplated by this Agreement; or

                  (ii)     If Seller  willfully  breaches or neglects the duties
                           required to be performed hereunder; or

                  (iii)    If Seller has a receiver  appointed for its assets or
                           property, or otherwise becomes insolvent or is unable
                           to timely  satisfy its  obligations  in the  ordinary
                           course  of  business,  institutes,  makes  a  general
                           assignment   for  the  benefit  of   creditors,   has
                           instituted  against it any bankruptcy  proceeding for
                           reorganization  for  rearrangement  of its  financial
                           affairs,  files a petition in a court of  bankruptcy,
                           or is adjudicated a bankrupt; or

                  (iv)     If any of the  disclosures  made herein or subsequent
                           hereto by  Seller  to  Purchaser  are  determined  by
                           Purchaser to be materially false or misleading.

19.      Miscellaneous

         A.       Authority. The officers of Purchaser and Seller executing this
                  Agreement  are duly  authorized  to do so and each  party  has
                  taken all action  required by law or otherwise to properly and
                  legally execute this Agreement.

                                       29

<PAGE>

         B.       Notices.  Any notice under this  Agreement  shall be deemed to
                  have  been  sufficiently   given  if  sent  by  registered  or
                  certified mail, postage prepaid, addressed as follows:


                           To Seller:       Metroplex Web Inc.
                                            14215 Proton Road
                                            Dallas, Texas 75244
                                            Telephone:        (888) 638-7693
                                            Facsimile:        (972) 503-8960

                           To Purchaser:    Virtual Enterprises Inc.
                                            4001 S. Decatur, Suite 37, Box 130
                                            Las Vegas, Nevada 89103-5800

                           With copy to:    NuVen Advisors Inc.
                                            6337 So. Highland Drive, #319
                                            Salt Lake City, Utah 84121
                                            Telephone:        (801) 277-8755
                                            Facsimile:        (801) 277-8755

                  or to any other  address  which may hereafter be designated by
                  either party by notice given in such manner. All notices shall
                  be deemed to have been given as of the date of receipt.

         C.       Entire  Agreement.   This  Agreement  sets  forth  the  entire
                  understanding  between the  parties  hereto and no other prior
                  written or oral statement or agreement  shall be recognized or
                  enforced.

         D.       Severability.  If a court of competent jurisdiction determines
                  that any clause or  provision  of this  Agreement  is invalid,
                  illegal or unenforceable,  the other clauses and provisions of
                  the  Agreement  shall  remain in full force and effect and the
                  clauses and provision which are determined to be void, illegal
                  or unenforceable shall be limited so that they shall remain in
                  effect to the extent permissible by law.

         E.       Assignment.  Neither party may assign this  Agreement  without
                  the  express  written  consent  of the  other  party  and  any
                  approved  assignment  shall  be  binding  on and  inure to the
                  benefit  of such  successor  or,  in the  event  of  death  or
                  incapacity, on assignor's heirs, executors, administrators and
                  successors.

         F.       Applicable  Law.   Notwithstanding  that  this  Agreement  was
                  negotiated  and is being  contracted  for in Utah, it shall be
                  governed   by  the  laws  of   Nevada,   notwithstanding   any
                  conflict-of-law provision to the contrary.

         G.       Attorneys'  Fees. If any legal action or other  preceding (not
                  including arbitration) is brought for the enforcement of or to
                  declare any right or obligation  under this  Agreement or as a
                  result of a breach, default or misrepresentation in connection
                  with any of the  provisions  of this  Agreement,  or otherwise
                  because of a dispute among the parties hereto,  the prevailing
                  party will be  entitled  to  recover  actual  attorney's  fees
                  (including  for appeals  and  collection)  and other  expenses
                  incurred  in such  action or  proceeding,  in  addition to any
                  other relief to which such party may be entitled.

                                       30

<PAGE>

         H.       No  Third  Party  Beneficiary.   Nothing  in  this  Agreement,
                  expressed or implied, is intended to confer upon any entity or
                  person,  other than the parties  hereto and their  successors,
                  any rights or remedies  under or by reason of this  Agreement,
                  unless this Agreement specifically states such intent.


         I.       Facsimile  Counterparts.   A  facsimile,   telecopy  or  other
                  reproduction  of this Agreement may be executed by one or more
                  parties  hereto and such  executed  copy may be  delivered  by
                  facsimile  or similar  instantaneous  electronic  transmission
                  device pursuant to which the signature of or on behalf of such
                  party can be seen,  and such  execution and delivery  shall be
                  considered valid,  binding and effective for all purposes.  At
                  the request of any party hereto,  all parties agree to execute
                  an  original  of this  Agreement  as  well  as any  facsimile,
                  telecopy or other reproduction hereof.

         J.       Further  Assurances.  At any time, and from time to time after
                  the  Closing,   each  party  will   execute  such   additional
                  instruments   and  take  such  action  as  may  be  reasonably
                  requested  by the other  party to confirm or perfect  title to
                  the Assets and Purchaser's Shares to be transferred hereunder,
                  or  otherwise  to carry out the  intent and  purposes  of this
                  Agreement.

         K.       Broker's  or  Finder's  Fee:  Expenses.  Seller and  Purchaser
                  warrant  that  neither  party  has  incurred  any   liability,
                  contingent  or  otherwise,  for  brokers' or finders'  fees or
                  commissions  relating  to this  Agreement  for which the other
                  party shall have responsibility.  Except as otherwise provided
                  herein,  all fees, costs and expenses incurred by either party
                  relating  to  this  Agreement  shall  be  paid  by  the  party
                  incurring same.

         L.       Confidentiality.  Except as may be required by Purchaser under
                  applicable  Federal or State securities rules and regulations,
                  neither party shall disclose the contents of this Agreement to
                  any person or entity, including, but not limited to the public
                  or the media; provided, however: (i) that Seller may make such
                  disclosures  of this  Agreement  to persons  whose third party
                  consents   are   necessary   for   purposes  of  closing  this
                  transaction,  and  (ii)  that  the  Purchaser  may  make  such
                  disclosures of this  Agreement to any federal,  state or local
                  agency  which  Purchaser,   in  its  sole  discretion,   deems
                  necessary to know of any or all of the terms of this Agreement
                  and to any persons  whose third party  consents are  necessary
                  for purposes of closing this transaction.

         M.       Amendment or Waiver.  Every right and remedy  provided  herein
                  shall be cumulative with every other right and remedy, whether
                  conferred  herein,  at law, or in equity,  and may be enforced
                  concurrently  herewith,  and no  waiver  by any  party  of the
                  performance  of any obligation by the other shall be construed
                  as  a  waiver  of  the  same  or  any  other   default   then,
                  theretofore,  or thereafter occurring or existing. At any time
                  prior to Closing,  this  Agreement may be amended by a writing
                  signed by all parties hereto.

                                       31

<PAGE>

         N.       Headings.   The  section  and  subsection   headings  in  this
                  Agreement  are  inserted  for  convenience  only and shall not
                  affect  in any  way  the  meaning  or  interpretation  of this
                  Agreement.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.

                                        "Seller"
                                        Metroplex Web Inc., a Texas corporation

                                        By:  /s/       Mark Lindberg
                                             ----------------------------------
                                             Name:     Mark Lindberg
                                             Title:    CEO

                                        "Purchaser"
                                        Virtual Enterprises Inc.,
                                        a Nevada corporation

                                        By:  /s/       Fred G. Luke
                                             ----------------------------------
                                             Name:     Fred G. Luke
                                             Title:    President

                                       32

<PAGE>

                            VIRTUAL ENTERPRISES, INC.

                   Index to Consolidated Financial Statements

Description                                                                Page

Independent Auditors' Report ..............................................F-2

Consolidated Balance Sheet as of May 31, 1999..............................F-3

Consolidated Statements of Operations for the years ended May 31, 1999
 and 1998 .................................................................F-4

Consolidated Statements of Stockholders' Equity for the years ended
 May 31, 1999 and 1998 ....................................................F-5

Consolidated Statements of Cash Flows for the years ended May 31, 1999
 and 1998 .................................................................F-6

Notes to Consolidated Financial Statements.................................F-7

                                                            [VEI\FIN:53199FS]-7a

                                                        F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT



Board of Directors VIRTUAL ENTERPRISES, INC.

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Virtual
Enterprises,  Inc.  (the  "Company")  as  of  May  31,  1999,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the years in the two-year period ended May 31, 1999. These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company as of May 31, 1999, and the  consolidated  results of its operations and
its cash flows for each of the years in the two-year  period ended May 31, 1999,
in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated  financial  statements,  the  Company  has  sustained  losses  from
operations since its inception.  The Company requires  substantial  financing to
meet its obligations as they become due. These factors raise  substantial  doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these  matters  are also  described  in Note 2.  The  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

                                        /s/  McKennon, Wilson & Morgan LLP
                                        ---------------------------------------
                                             McKennon, Wilson & Morgan LLP

Irvine, California
August 19, 1999

                                                            [VEI\FIN:53199FS]-7a

                                                        F-2

<PAGE>

<TABLE>
<CAPTION>

                            VIRTUAL ENTERPRISES, INC.
                           Consolidated Balance Sheet
                                  May 31, 1999

<S>                                                                   <C>

ASSETS

Current assets                                                         $                -
Property and equipment, net of accumulated
  depreciation of $106,574                                                        230,474
Goodwill, net of accumulated amortization
  of $115,519                                                                     766,623
Client lists, net of accumulated amortization
  of $46,383                                                                      206,617
Deposits                                                                            9,692

   Total assets                                                        $        1,213,406
                                                                       ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and bank overdraft                                    $           65,433
Accrued compensation to officers                                                   28,000
Accrued consulting fees                                                           158,000
Other accrued liabilities                                                          65,576
Deferred revenue                                                                   69,605
                                                                       ------------------

   Total current liabilities                                                      386,614

Notes payable to officers                                                         287,133

   Total liabilities                                                              673,747

Commitments and contingencies (Note 5)

Stockholders' equity:
  Common stock, par value $0.01; 50,000,000 shares
   authorized, 15,919,372 shares issued and outstanding                           159,194
  Additional paid in capital
  Accumulated deficit                                                           2,486,345
                                                                               (2,105,880)

   Total stockholders' equity                                                     539,659

   Total liabilities and stockholders' equity                          $        1,213,406
                                                                       ==================

</TABLE>

          See accompanying notes to consolidated financial statements.

                                                            [VEI\FIN:53199FS]-7a

                                                        F-3

<PAGE>

<TABLE>
<CAPTION>

                            VIRTUAL ENTERPRISES, INC.
                      Consolidated Statements of Operations
                    For The Years Ended May 31, 1999 and 1998

                                                                  1999                   1998
                                                          --------------------- ---------------------
<S>                                                       <C>                   <C>

Net revenues                                              $            382,798  $             247,421
                                                           --------------------  --------------------

Expenses:
  Salaries and wages                                                   181,065                258,470
  Consulting fees and commissions                                       691,866               185,512
  Common stock issued to employees for
     services rendered                                                 235,805                      -
  Other operating expenses                                             731,787                289,812
                                                          --------------------- ---------------------
         Total expenses                                              1,840,523                733,794
                                                          --------------------- ---------------------

Operating loss                                                      (1,457,725)              (486,373)

Interest expense                                                       118,986                 15,571

Other income                                                              (862)                     -
                                                          --------------------- ---------------------

Loss before income taxes                                            (1,575,849)              (501,944)

Income taxes                                                                  -                     -
                                                          --------------------- ---------------------


Net loss                                                  $         (1,575,849) $            (501,944)
                                                          ===================== ======================

Basic and diluted earnings per share                      $              (1.07) $               (2.15)
                                                          ===================== ======================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                            [VEI\FIN:53199FS]-7a

                                                        F-4

<PAGE>

<TABLE>
<CAPTION>

                            VIRTUAL ENTERPRISES, INC.
                 Consolidated Statements of Stockholders' Equity
                    For The Years Ended May 31, 1999 and 1998

                                             Common Stock               Additional
                                                                          Paid-In           Accumulated
                                                                          Capital             Deficit            Total
                                        Shares          Amount
                                    ---------------  ------------- --------------------  -----------------  ---------------
<S>                                 <C>              <C>           <C>                   <C>                <C>

Balances, May 31, 1997                       5,962   $         60  $               440   $        (28,087)  $      (27,587)
Shares deemed issued for
equity participation interests of
   Metroplex                               503,336          5,033              298,061                  -          303,094
Net loss for year                                -              -                    -           (501,944)        (501,944)
                                    ---------------  ------------- --------------------  -----------------  ---------------
Balances, May 31, 1998                     509,298          5,093              298,501           (530,031)        (226,437)
Shares issued for acquisition of
   InteleSell                                1,049             10              135,132                  -          135,142
Conversion of Metroplex note
   payable to InteleSell                 7,154,989         71,550            1,209,450                  -        1,281,000
Shares issued for services
   rendered to Metroplex                 1,406,000         14,060              221,745                  -          235,805
Shares deemed issued in
   satisfaction of preferred
   stock of Metroplex                      332,000          3,320              327,385                  -          330,705
Shares deemed issued for
   equity participation interests
   of Metroplex                            596,664          5,967              353,326                  -          359,293
Shares retained by VTUE
   shareholders in
   recapitalization                      5,919,372         59,194              (59,194)                 -                -
Net loss for year                                -              -                    -         (1,575,849)      (1,575,849)
                                    ---------------  ------------- --------------------  -----------------  ---------------
Balances, May 31, 1999                  15,919,372   $    159,194  $         2,486,345   $     (2,105,880)  $      539,659
                                    ===============  ============= ====================  =================  ===============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                            [VEI\FIN:53199FS]-7a

                                                        F-5

<PAGE>

<TABLE>
<CAPTION>

                            VIRTUAL ENTERPRISES, INC.
                      Consolidated Statement of Cash Flows
                    For The Years Ended May 31, 1999 and 1998

                                                                                  1999                   1998
                                                                          --------------------- ----------------------
<S>                                                                       <C>                   <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                                  $         (1,575,849) $            (501,944)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
      Depreciation                                                                      90,273                 13,387
      Amortization                                                                     161,902                      -
      Issuance of common stock for services rendered by employees                      235,805                      -
      Issuance of common stock for interest                                             81,000                      -
 Change in operating assets and liabilities:
     Increase in accounts payable                                                       13,014                 52,419
      Increase in accrued compensation to officers                                      28,000                      -
      Increase in accrued consulting fees                                              158,000                      -
      Increase in other accrued liabilities                                             53,662                  8,782
      Increase in deferred revenue                                                      37,271                 32,334
                                                                          --------------------- ----------------------

Net cash used in operating activities                                                 (716,922)              (395,022)
                                                                          --------------------- ----------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures                                                                   (60,288)               (57,322)
                                                                          --------------------- ----------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of notes payable to officers                                                   82,412                149,250
Issuance of common stock for preferred stock of Metroplex                              330,705                      -
Issuance of common stock for equity participation interests of                         364,093                303,094
                                                                          --------------------- ----------------------
Metroplex

Net cash provided by financing activities                                              777,210                452,344
                                                                          --------------------- ----------------------

Net increase in cash                                                      $                  -  $                   -
                                                                          ===================== ======================

Cash paid for:
   Interest                                                               $             18,849  $               9,184
                                                                          ===================== ======================

NON CASH FINANCING ACTIVITIES
 Common stock issued for assets of InteleSell                             $            135,142  $                   -
 Note payable issued for acquisition of InteleSell                        $          1,200,000  $                   -
 Conversion of Metroplex note payable to InteleSell, plus accrued
interest into common stock                                                $          1,281,000  $                   -
</TABLE>

         See accompanying notes to consolidated financial statements.

                                                            [VEI\FIN:53199FS]-7a

                                                        F-6

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
                   Notes to Consolidated Financial Statements

Note 1 - Organization and History

Virtual  Enterprises,  Inc.  ("VTUE")  was  formed in June,  1989 as a  Colorado
corporation  under the name The Toen Group,  Inc. VTUE was primarily  engaged in
the  acquisition,  maintenance  and operation of television  stations in various
states  through  1992.  From 1992 through May 5, 1999,  VTUE had no  operations.
Effective  October 8, 1996,  VTUE's  Articles of  Incorporation  were amended to
change the name from The Toen Group, Inc. to Virtual Enterprises, Inc.

In  September  1994,  VTUE's  shareholders  voted to effect a 1 for 1000 reverse
split of its issued and  outstanding  common  stock.  The split was  implemented
through a merger with a newly formed Nevada  corporation and included the change
from no par value  common stock to $.01 par value common  stock.  In  connection
with the  merger  and  reverse  split,  VTUE's  authorized  number of shares was
reduced from 785,000,000 to 50,000,000.

On May 5, 1999,  VTUE  acquired the assets and assumed  certain  liabilities  of
MetroplexWeb,  Inc.  ("Metroplex") for 10,000,000 shares of common stock, valued
at $3,000,000.  Metroplex, a Texas corporation was formed on September 12, 1996.
Metroplex is engaged primarily in the development,  design,  hosting and support
of Internet web pages. Metroplex also creates,  designs and administers Internet
malls,  where users can search for products  and services in their  geographical
area known as "virtual cities." Metroplex's  operations are primarily located in
Dallas/Forth Worth, Texas and are expanding into other metropolitan  cities. The
acquisition  of Metroplex is accounted  for as a reverse  merger as if Metroplex
was recapitalized by VTUE.

On June 30,  1998,  Metroplex  entered  into an asset  purchase  agreement  with
InteleSell,  Inc.  ("InteleSell").  In connection  therewith,  Metroplex  issued
common stock and notes  aggregating  $1,335,142  to acquire  these  assets.  The
acquisition was accounted for as a purchase.  InteleSell  develops,  designs and
hosts Internet web pages. See Note 3 for further discussion of this acquisition.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying  consolidated financial statements at May 31, 1999, include the
accounts of VTUE, Metroplex and InteleSell  (collectively,  the "Company").  All
intercompany accounts have been eliminated in consolidation.

The  accompanying  consolidated  financial  statements  reflect  the  historical
operations of Metroplex for all periods presented. The accompanying consolidated
financial  statements  include the  operations of InteleSell  beginning  July 1,
1998. The accompanying  consolidated financial statements include the operations
of VTUE from May 5, 1999.

Liquidity

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. Since inception,  the Company
has  generated  cash  flows  from  financing  activities  to  fund  losses  from
operations.  The Company,  through  VTUE,  expects to raise  equity  and/or debt
financing through a private placement of securities.  The Company expects to use
the financing to fund losses from operations for the foreseeable future.  Losses
from  operations  are  expected  to  increase  due to  management's  belief that
expanded  marketing and sales efforts is required to significantly  increase the
Company's  revenues.  There are no  assurances  that VTUE will be  successful in
obtaining additional funding on terms satisfactory to the Company. These factors

                                                            [VEI\FIN:53199FS]-7a

                                                        F-7

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
             Notes to Consolidated Financial Statements (Continued)

raise  substantial  doubt about its ability to continue as a going concern.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

Property and Equipment

Property and equipment are depreciated  over their estimated  useful lives using
the  straight-line  method  ranging  from  three to five  years.  Additions  and
betterments are  capitalized.  The cost of maintenance and repairs is charged to
expense as incurred.  When depreciable property is retired or otherwise disposed
of, the related cost and accumulated  depreciation  and amortization are removed
from  the  accounts  and  any  gain or loss  is  reflected  in the  consolidated
statements of operations.

The Company  periodically  reviews the value of its property and  equipment  for
impairment  whenever events or changes in  circumstances  indicate that the book
value of an asset may not be recoverable. An impairment loss would be recognized
whenever the review  demonstrates  that the future  undiscounted  net cash flows
expected to be generated by an asset from its use and eventual  disposition  are
less than the  carrying  amount of the asset.  Management  believes no permanent
impairment has occurred.

Property and equipment are stated at cost, net of accumulated depreciation,  and
are comprised of the following at May 31, 1999:

Property and equipment                $         297,007
Furniture and fixtures                           37,694
Leasehold improvements                            2,847
                                      -----------------
                                                337,048
Less accumulated depreciation                  (106,574)
                                      $         230,474

Intangible Assets

Customer lists represent the value of customers acquired from InteleSell on June
30, 1998.  The Company  assigned the value based on comparable  acquisitions  of
customer lists in the Company's industry.  Management assigned a value of $1,000
per customer acquired,  or $253,000.  The Company amortizes these costs over its
expected benefit period from the customer. In management's opinion, the expected
benefit period of it's customers  acquired is approximately  five (5) years, and
accordingly, customer lists are amortized over five (5) years using the straight
line basis. In the event  circumstances  affecting  customer  retention  change,
management  will adjust the period to be  benefitted  prospectively.  During the
year ended May 31, 1999, amortization of customer lists amounted to $46,383.

Goodwill  represents the excess of purchase price over the fair value of the net
assets of acquired businesses.  Goodwill is stated at cost and is amortized on a
straight-line   basis  over  seven  (7)  years.   The   Company   assesses   the
recoverability  of this intangible asset quarterly,  by determining  whether the
amortization  of the goodwill  balance over its remaining  life can be recovered
through projected undiscounted cash flows. The amount of goodwill impairment, if
any, is measured  based on projected  undiscounted  cash flows and is charged to
operations  in  the  period  in  which  goodwill  impairment  is  determined  by
management.  To date,  management has not identified any impairment of goodwill.
During  the year  ended May 31,  1999,  amortization  of  goodwill  amounted  to
$115,519.

                                                            [VEI\FIN:53199FS]-7a

                                                        F-8

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
             Notes to Consolidated Financial Statements (Continued)

Revenue Recognition / Deferred Revenue

Revenue is recognized when earned.  The Company's revenue  recognition  policies
are in  compliance  with  American  Institute of Certified  Public  Accountants,
Statements of Position 97-2 and 98-4,  "Software Revenue  Recognition".  Revenue
from web site  development  is  recorded  when  the web  site is  completed  and
operational.  Web site hosting  revenue is recognized  ratably over the contract
period. Provisions for losses are recorded for bad debts for credit customers.

The Company  generally  enters into contracts to host customer web sites for one
year or more.  At May 31,  1999 and  1998,  the  Company  deferred  $69,605  and
$32,335, respectively of such revenue.

Research and Development

Research and development costs are expensed as incurred.  Statement of Financial
Accounting Standards ("SFAS") 86, "Accounting for the Costs of Computer Software
to Be Sold,  Leased,  or Otherwise  Marketed",  does not  materially  affect the
Company.

Advertising Costs

The Company expenses the costs of advertising as incurred.

Provision for Income Taxes

The Company  accounts for its income taxes under an asset and  liability  method
whereby  deferred tax assets and liabilities  are determined  based on temporary
differences  between bases used for financial reporting and income tax reporting
purposes.  Income taxes are provided based on the enacted tax rates in effect at
the time such  temporary  differences  are  expected  to  reverse.  A  valuation
allowance is provided for certain  deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations.

The Company's net deferred tax assets of approximately $441,000 at May 31, 1999,
consist  of  net  operating  loss   carryforwards   amounting  to  approximately
$1,193,000 for federal income tax reporting purposes,  as well as cwertain state
net  operating  loss  carryforwards.  At May 31,  1999,  the Company  provided a
valuation  allowance for deferred tax asset totaling $441,000.  During the years
ended  May 31,  1999 and  1998,  the  Company's  valuation  allowance  increased
$117,000 and 54,000, respectively.

Loss Per Share

In February 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 128,  "Earnings Per Share" ("EPS").  SFAS No. 128 requires dual presentation
of basic EPS and diluted EPS on the face of all income  statements  issued after
December 15, 1997 for all entities with complex capital structures. Basic EPS is
computed as net income  divided by the weighted  average number of common shares
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could occur from common  shares  issuable  through stock  options,  warrants and
other convertible  securities.  The effect of stock options and warrants granted
but not exercised has been excluded in the accompanying  consolidated statements
of  operations  as the  effect  would  have  been  antidilutive.  See Note 6 for
discussion of these stock options and warrants which are antidilutive.

                                                            [VEI\FIN:53199FS]-7a

                                                       F-9

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
             Notes to Consolidated Financial Statements (Continued)

Estimates

The  preparation  of  consolidated   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 consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

Financial Instruments

At May 31, 1999,  the Company has no assets  considered  financial  instruments.
Financial  liabilities  with carrying  values  approximating  fair value include
accounts payable and accrued liabilities.  Notes payable to related parties have
no  readily  ascertainable  fair  value  since  there  exists no market for such
instruments.

Reporting Comprehensive Income

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income".
This   statement   establishes   standards  for  reporting  the   components  of
comprehensive  income  and  requires  that all  items  that are  required  to be
recognized under accounting  standards as components of comprehensive  income be
included in a financial  statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income, as well as
certain  non-shareholder  items  that are  reported  directly  within a separate
component of stockholders' equity and bypass net income. The Company had adopted
the provisions of this statement  during the current fiscal year, with no impact
on the accompanying consolidated financial statements.

Disclosures about Segments of an Enterprise and Related Information

The Company adopted SFAS No. 131,  "Disclosures  about Segments of an Enterprise
and Related Information" in fiscal year 1999. SFAS No. 131 establishes standards
for reporting information about operating segments and related disclosures about
products,  geographic information and major customers.  The Company's operations
have been classified into two operating  segments:  (i) Web Site Development the
Company contracts the design,  development and  implementation of Internet sites
on the World Wide Web;  and (ii) Web Site  hosting - the  Company  provides  web
hosting and support services.

The Company's operating segments are differentiated by service type.  Summarized
financial information by operating segment is as follows:


                                              1999                 1998
                                       ------------------- --------------------
Net revenues:
         Web Site Development          $           326,000 $            218,000
         Web Site Hosting                           57,000               29,000
                                       ------------------- --------------------
                                       $           383,000 $            247,000
                                       =================== ====================

                                                            [VEI\FIN:53199FS]-7a

                                                       F-10

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
             Notes to Consolidated Financial Statements (Continued)

Stock-based Compensation

The FASB issued SFAS No. 123,  "Accounting for Stock-Based  Compensation," which
defines a fair value based method of accounting  for  stock-based  compensation.
However,  SFAS 123 allows an entity to  continue  to measure  compensation  cost
related  to stock and stock  options  issued to  employees  using the  intrinsic
method of accounting  prescribed by Accounting  Principles  Board Opinion No. 25
("APB 25"),  "Accounting  for Stock Issued to Employees".  Entities  electing to
remain with the accounting  method of APB 25 must make pro forma  disclosures of
net income and  earnings per share,  as if the fair value  method of  accounting
defined in SFAS 123 had been applied.  Through May 31, 1999,  the Company had no
employee stock options outstanding.

Note 3 - Acquisitions

As  discussed  in Note 1, on June  30,  1998,  Metroplex  entered  into an asset
purchase  agreement  with  InteleSell  to  acquire  all of the  assets  owned by
InteleSell.  In  connection  therewith,  Metroplex  issued  1,049 shares of it's
common stock valued at $135,142 and a note payable of $1,200,000. The $1,335,142
purchase price has been allocated approximately $200,000 to certain property and
equipment,  and $253,000 to customer lists based on their  estimated fair value.
Metroplex allocated the remaining purchase price of $882,142 to goodwill.

As  discussed in Note 1, on May 5, 1999,  VTUE  acquired the assets of Metroplex
for 10,000,000  shares of common stock valued at $3,000,000.  The acquisition of
Metroplex  is  accounted  for  as  a  reverse   merger,   as  if  Metroplex  was
recapitalized by VTUE.

The unaudited pro forma statement of operations data for the years ended May 31,
1999 and 1998,  assuming the  acquisition of Metroplex and  InteleSell  occurred
June 1, 1997, are as follows:


                               1999                1998
                       -------------------- ------------------
Revenues               $           387,788  $         270,871
                       ==================== ==================
Net loss               $        (1,810,420) $      (1,082,968)
                       ==================== ==================

The above unaudited pro forma amounts are not necessarily indicative of what the
actual results might have been if the  acquisitions had occurred as of the dates
indicated.

Note 4 - Notes Payable

In connection  with the  acquisition  of  InteleSell,  the Company issued a note
payable of $1,200,000,  interest at 8% per annum, due in annual  installments of
$96,000,  with remaining principal,  plus accrued interest due on June 30, 2001.
Interest  expense  included  in  operations   during  fiscal  1999  amounted  to
approximately  $81,000.  On or about  May 4,  1999,  the  noteholders  agreed to
convert principal,  plus accrued interest into 7,154,989 shares of the Company's
common stock.

                                                            [VEI\FIN:53199FS]-7a

                                                       F-11

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
             Notes to Consolidated Financial Statements (Continued)

Note 5 - Commitments and Contingencies

Operating Leases

The Company is obligated under certain  facility lease agreements to make future
annual  minimum rental  payments,  excluding  taxes and common area  maintenance
costs, for the years ending May 31 as follows:

    Year Ending
      May 31,
    -----------
       2000          $           113,000
       2001                      119,000
       2002                       71,000
                     -------------------
       Total         $           303,000
                     ===================

The lease on the Company's headquarters expires in December 2001.

Rent expense for the years ended May 31, 1999 and 1998 was $97,682, and $25,543,
respectively.

Consulting Agreements

On November 1, 1998,  Metroplex  red into certain  agreements  for marketing and
sales  assistance,  as  well  as  certain  financial  advisory  services.  These
agreements expire on June 30, 1999. Total consulting fees incurred in connection
with these agreements amounted to $196,000,  of which $186,000 is accrued in the
accompanying consolidated balance sheet for amounts unpaid.

Through June 30, 1998, VTUE had outstanding  consulting  agreements with certain
officers,  directors and  consultants  which were terminated on that date. On or
about  December 18, 1998,  VTUE issued  4,270,000  shares of its common stock to
satisfy these agreements and certain trade liabilities totaling $504,161 or $.11
per share.

On July 1, 1998 VTUE entered an agreement with NuVen Advisors,Inc. ("NuVen") for
financial advisory services at the rate of $10,000 per month. In connection with
this  agreement on April 30, 1999 VTUE issued  850,000 shares of common stock in
settlement  of services  rendered  through  April 30, 1999 valued at $100,000 or
$.12 per share.

Note 6 - Stockholders' Equity

Common Stock

In connection with  Metroplex's  acquisition of the assets of InteleSell on June
30,  1998,  the  Company  issued  1,049  shares of it's common  stock  valued at
$135,142  (see Notes 1 and 3). The Board of  Directors  valued this common stock
based on the  Company's  peer  group  historical  revenues  and  1999  projected
revenues.  The value placed on these  shares of common  stock was  approximately
$129 per share.

On May 3, 1999,  Metroplex's  Board of Directors and  shareholders  approved the
conversion of the InteleSell  notes payable  totaling  $1,200,000,  plus accrued
interest of $81,000 into  7,154,989  shares of the Company's  common stock.  The
parties  agreed to a value per share of the  Company's  common stock of $.18 per
share; however, no credit was provided for accrued interest.  The notes plus the
accrued interest were converted on May 4, 1999.

                                                            [VEI\FIN:53199FS]-7a

                                                       F-12

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
             Notes to Consolidated Financial Statements (Continued)

On May 3, 1999,  Metroplex's  Board of Directors and  shareholders  approved the
issuance of 1,406,000  shares of common stock to certain  officers and employees
for prior  services  rendered to the  Company.  The shares  issued for  services
rendered were valued by the Board of Directors at $.17 per share.  The valuation
was primarily  based on the negotiated  conversion of the InteleSell  notes into
the Company's common stock.

During fiscal 1999,  Metroplex issued 332 shares of convertible  preferred stock
at $1,000 per share. Each preferred share was converted into 1,000 shares of the
Company's common stock. Through May 31, 1999, Metroplex received net proceeds of
$330,705;  no  convertible  preferred  shares were issued  subsequent to May 31,
1999.

From  July  1997  through  May  31,  1999   Metroplex   authorized   and  issued
participating equity instruments, which enabled the holder to participate in the
profits and benefit from a sale or an initial public offering of Metroplex. Such
interests  were  converted  into  shares  of  common  stock  subsequent  to  the
acquisition  of Metroplex's  assets.  On May 31, 1999 the  participants  will be
issued  1,100,000  shares of common stock in  satisfaction  of $662,387 of these
equity  participation  interests.  Shares were deemed  issued  retroactively  to
effect the date of issuance of the  participation  interest;  503,336  shares in
fiscal 1998 and 596,664 shares in fiscal 1999.

Stock Options

In  connection  with a  management  agreement,  the  Company  issued  options to
purchase  750,000  shares  at $0.01 per share on or about  August 1,  1995.  The
options are fully vested and are  exercisable  at any time prior to December 31,
1999. In addition, in connection with certain consulting agreements, the Company
issued  options to purchase  100,000  shares of common  stock,  each, to two (2)
individuals,  exercisable at $1.00 per share,  expiring on December 31, 1999 and
June 30, 2001,  respectively.  These stock options were fully vested at the date
of issuance.

Warrants

As of May 31,  1999,  warrants to purchase  668,000  shares of common stock were
outstanding  at  an  exercise  price  of  $5.00  per  share.  The  warrants  are
exercisable at the option of the holders on or before December 31, 2000.


Note 7 - Related Party Transactions

Metroplex has made payments of $4,581 in fiscal year 1999 to a computer retailer
of which an employee of the Company is an owner.

The  Company  has a note  payable  due to an  officer  of the  Company  totaling
$248,436 at May 31, 1999 for advances to the Company through charges for Company
expenses on his personal  credit card.  The note bears interest at 17% per annum
and is due on  demand.  Management  expects  to repay the note in  fiscal  2000.
Payments for interest  charges under this note were $18,849 and $9,184 in fiscal
1999 and 1998, respectively.

The Company has a note payable due to a former  officer of the Company  totaling
$38,596 at May 31, 1999 for advances to the Company  through charges for Company
expenses on his personal  credit card.  The note bears interest at 17% per annum
and is due on demand. Management expects to repay the note in fiscal 2000.
No interest payments have been made on this note to date.

                                                            [VEI\FIN:53199FS]-7a

                                                       F-13

<PAGE>

                            VIRTUAL ENTERPRISES, INC.
             Notes to Consolidated Financial Statements (Continued)

Note 8 - Subsequent Events

On June 6, 1999, the Company issued 8% notes payable amounting to $250,000.  The
note matures on June 6, 2000.  The Company issued 200,000 shares of common stock
valued at  $200,000.  These  shares of common stock will be held in escrow until
maturity or an event of default,  at which time these shares will be released to
the noteholder free of liens or  encumbrances.  The value of these common shares
of $200,000  will be included in debt issue costs to be amortized to  operations
using the effective interest method, through maturity.

                                                            [VEI\FIN:53199FS]-7a

                                                       F-14