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, 1994      Commission file number   33-23430-D

                              THE TOEN GROUP, INC.
             (Exact name of registrant as specified in its charter)

                                     Nevada
         (State of other jurisdiction of incorporation or organization)

                                   84-1091271
                      (I.R.S. Employer Identification No.)

                   2 Park Plaza, Suite 470, Irvine, California
                    (Address of Principal Executive Offices)

                                      92614
                                    Zip Code

       Registrant's telephone number, including area code: (714) 833-2091

           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         No  X

         At July 31, 1996,  799,372 shares of  Registrant's  no par value common
stock issued and outstanding.  There were also outstanding  warrants to purchase
up to 668,000 shares of the Registrant's  common stock. There has been no bid or
asked  prices  of the  Registrant's  common  stock  quoted in any  market  since
September 6, 1990.

                      Documents Incorporated by Reference:
                                      None

                                                 Total Pages including cover: 40

                                                         [TOEN\10K\53194.10K]-10

<PAGE>



                                TABLE OF CONTENTS

                                                                            Page

                                     PART I

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

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

Item 3.   Legal Proceedings................................................2

Item 4.   Submission of Matters to a Vote of Security Holders..............2

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder
           matters ........................................................3

Item 6    Management's Discussion and Analysis of Financial Condition
           and Results of Operations ......................................4

Item 7.   Financial Statements and Supplementary Data......................5

Item 8.   Change in and Disagreements With Accountants.....................5

                                    PART III

Item 9.   Directors and Executive Officers.................................6

Item 10.  Management Remuneration and Transactions.........................8

Item 11.  Security Ownership of Certain Beneficial Owners and Management...10

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

                                     PART IV

Item 13.  Exhibits, Financial Statement Schedules and Reports on Form 8-K..11

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

                                                         [TOEN\10K\53194.10K]-10

<PAGE>

                                     PART I

ITEM 1.           BUSINESS

         The  Toen  Group,   Inc.  (the   Registrant"   or  the  "Company")  was
incorporated  in the  State of  Colorado  on June 10,  1988 for the  purpose  of
searching  for,  evaluating  and  organizing  an  interest  in 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.  The Company,
through an  underwriter,  sold a total of 50,000,000  shares of the Company's no
par value  common  stock and  5,000,000  warrants  for the purchase of 5,000,000
shares of common stock.

         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 and
Sunbelt  became a  wholly-owned  subsidiary  of the Company.  From March 1990 to
October  1992  Sunbelt  owned and  operated  low power  television  stations and
related  businesses,  and provided  programming to those  stations.  The Company
discontinued  the  Sunbelt  business  in  October  1992 and sold all the  assets
associated  with the  operation of Sunbelt,  including  all  contracts and lease
agreements  necessary for its  operations to William J. Kitchen  ("Kitchen")  in
consideration of 1) Kitchen's forgiveness of notes and other obligations owed to
Kitchen by the Registrant; and 2) Kitchen's assumption of miscellaneous debts of
Sunbelt.  Pursuant to the sale, Kitchen also delivered  98,795,000 shares of the
Registrant's common stock to the Registrant for cancellation. Since October 1992
the Company has not had any revenues or operations.

         Accordingly,  Toen is  currently  in the process of seeking a merger or
acquisition with a business entity or entities expected to be private companies,
partnerships  or sole  proprietorships.  Management  believes the Registrant can
offer owners of potential  merger or acquisition  candidates the  opportunity to
acquire a controlling  interest in a public company at  substantially  less cost
than is required to conduct an initial public offering.

         On August 31, 1992 Jeffrey Paul Stroud ("Stroud") acquired  173,995,000
shares of the Registrant's common stock, representing 51% of the then issued and
outstanding shares, from Kitchen.  Stroud also acquired from Kitchen 162,000,000
warrants to acquire  162,000,000  shares of the  Registrant's  common stock.  On
March 31, 1993 Stroud  entered into a Stock  Purchase  Agreement  with New World
Capital Markets, Ltd. under which he sold 173,995,000 shares of the Registrant's
common  stock and  162,000,000  warrants  to acquire an  additional  162,000,000
shares of common stock.

         On June 17, 1993 the  Registrant's  then  existing  Board of  Directors
resigned  and Fred G.  Luke and Jon L.  Lawver  were  appointed  as  replacement
Directors.  The  outgoing  Board also  elected  Fred G. Luke as President of the
Registrant  and Jon L.  Lawver  as  Secretary,  Treasurer  and  Chief  Financial
Officer.

         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

                                                         [TOEN\10K\53194.10K]-10

                                                         1

<PAGE>



shares  was  reduced  from  785,000,000  to  50,000,000.   There  are  presently
outstanding  warrants to purchase  668,000 shares of common stock.  The warrants
are exercisable at $5.00 per share.

         The  Registrant's  day-to-day  business  affairs  are  handled by three
directors and two officers.  No executive  compensation has been paid to them or
to any other officers or directors during the fiscal year ended May 31, 1994. As
of the  filing  date of this  Report  the  Registrant  had no  employees  and no
operations.  Current  management  is  pursuing  business  opportunities,  but no
assurance can be given that the  Registrant  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" or the  "Registrant"  refers to The
Toen Group Inc. The Registrant  currently  maintains its executive  offices at 2
Park Plaza, Suite 470, Irvine, California 92614.
The telephone number is (714)833-2094.

         Effective  October 8, 1996, the Board of Directors  authorized a change
in the Company's name from the Toen Group, Inc. to Virtual Enterprises, Inc.


ITEM 2.           PROPERTIES

         The  Registrant's  principal  executive  offices  are located in leased
premises  of  approximately  3,000  square  feet in  Irvine,  California.  These
premises  are  occupied  by the  Registrant  under an  Advisory  and  Management
Agreement with NuVen Advisors, Inc. ("NuVen"), an affiliate.


ITEM 3.            LEGAL PROCEEDINGS

         As of the date of this report there are no legal  proceedings  to which
the Registrant is a party, or of which any of the Registrant's properties is the
subject.


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

         On September  28, 1994 the Annual  Meeting of the  stockholders  of the
Registrant  was held.  Fred G.  Luke,  Jon L.  Lawver and John D.  Desbrow  were
elected as directors for the 1995 fiscal year.

         The  matters  voted upon and the  number of votes cast for,  against or
withheld, as well as the number of abstentions were as follows:

                                                         [TOEN\10K\53194.10K]-10

                                                         2

<PAGE>

<TABLE>
<CAPTION>

                                                                                        Votes
                                                                      Votes       Abstaining/Broker
                                                    Votes For        Against          Non-Votes
                                                  ---------------  -----------    -----------------
<S>                                               <C>              <C>            <C>

I.       Election of Fred G. Luke, Jon L.
         Lawver and John D. Desbrow                  184,930,000       0                  0

II.      Approval and Adoption of an
         Agreement of Merger with a newly
         formed Nevada corporation                   184,930,000       0                  0

III.     Approval and Adoption of a 1994
         Non-Qualified Stock Compensation            183,330,000   1,600,000              0
         Plan

</TABLE>

         All of the above  matters were approved by a majority of the issued and
outstanding shares.


                                     PART II


ITEM 5.           MARKET FOR REGISTRANT'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 and  reported  by the  National  Quotation  Bureau Pink
Sheets.  Trading  ceased on  September  6, 1990.  The  Registrant's  outstanding
securities,  consist of no par value  common stock and  Redeemable  Common Stock
Purchase  Warrants  ("Warrants").   The  Registrant's  Board  of  Directors  and
shareholders  approved a 1:1000  reverse  split of its common stock on September
28,  1994  decreasing  the number of issued and  outstanding  common  stock from
249,371,667 to 249,372.  The Registrant's  board of directors,  shareholders and
warrantholders  approved a 1:250  reverse split of the Warrants  decreasing  the
number of issued and  outstanding  Warrants  from  167,000,000  to  668,000  and
increasing  the  exercise  price  from $.02 per  Warrant  to $5.00 per  Warrant.
Additionally,  the expiration  date of the Warrants was extended to December 31,
1996.  Each  Warrant  entitles  the holder to purchase at a price of $5.00,  one
share of the Company's common stock.

         There  has been no  market  for the  Registrant's  Common  Stock  since
September  6,  1991.  Prior to such date the  closing  bid and ask price for the
Company's  common  stock,  giving  effect  to the  1:1000  revenue  split of the
outstanding common shares which became effective  September 28, 1994 reported by
the National Quotation Bureau Inc., is follows:


          BID PRICE OF
          COMMON STOCK
    ----------------------
     HIGH              LOW
    ------          ------
    $10.00          $10.00

(b)      Holders

         The  approximate  number of  holders  of record of each class of equity
securities of the Registrant as of May 31, 1994, was as follows:


                                                               NUMBER OF
                   TITLE OF CLASS                           RECORD HOLDERS
-----------------------------------------                   --------------
Common Stock No Par Value                                         39
Redeemable Common Stock Purchase Warrants                         29

(c)      Dividends

         The Registrant has never declared or paid a cash dividend on its common
stock.  The Registrant 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

         Results of Operations

         Year Ended May 31, 1994 Compared to Year Ended May 31, 1993

         There were no  operations  during fiscal 1994 and as such there were no
         revenues or cost of revenues recorded during fiscal 1994.

         General and  administrative  expenses  increased  to $170,751 in fiscal
         1994  compared  to  $57,448  in  fiscal  1993 due to the  Advisory  and
         Management  Agreement  and other  consulting  agreements  entered  into
         during fiscal 1994.

         Liquidity and Capital Resources.

         As of May 31,  1994 the  Registrant  had a working  capital  deficit of
         $170,011,  an  increase  of  $155,726  from fiscal year 1993 due to the
         continued accrual of professional,  consulting and advisory fees during
         fiscal 1994 that were incurred but not paid.

         The  Registrant  had cash balances of  approximately  $4,989 at May 31,
         1994.  The limited cash balances are a direct result of the  Registrant
         having no operations during fiscal year 1994.

         The  Registrant's  plan is to keep searching for additional  sources of
         capital  and  new  operating   opportunities.   In  the  interim,   the
         Registrant's  existence is dependent on  continuing  financial  support
         from an affiliate which is estimated to be  approximately  $337,000 for
         the next fiscal year based upon current  agreements and obligations the
         Company has at May 31, 1994.  Furthermore,  the  Registrant may have to
         utilize its common  stock for future  financial  support to finance its
         needs.  Such conditions raise  substantial doubt about the Registrant's
         ability to continue as a

                                                         [TOEN\10K\53194.10K]-10

                                                         3

<PAGE>



         going concern. As such, the Registrant's  independent  accountants have
         modified their report to include an explanatory  paragraph with respect
         to the uncertainty.

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

         Additionally,  as of May 31, 1994,  the  Registrant had no employees or
         operations.


ITEM 7.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following  financial  statements are filed as a part of this Annual
Report on Form 10-KSB and are included immediately following the signature page.

                          INDEX TO FINANCIAL STATEMENTS
                                                                          Page

         Report of Independent Certified Public Accountants ...............F-2
         Balance Sheet for May 31, 1994....................................F-3
         Statements of Operations for the years ended May 31, 1994
           and 1993 .......................................................F-4
         Statements of Stockholders' Deficiency for the years ended
           May 31, 1994 and 1993 ..........................................F-5
         Statements of Cash Flows for the years ended May 31, 1994
           and 1993 .......................................................F-6
         Notes to Financial Statements.....................................F-7


ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         Following  May  31,  1990,  Jerome  W.  Karsh  & Co.  resigned  as  the
Registrant's  principal  accountants.  In April,  1993, the Registrant  notified
O'Neal & White of its  appointment  as the  Registrant's  principal  independent
accountants.  On July 19, 1995, C. Williams & Associates replaced O'Neal & White
as the Registrant's principal accountants.  On April 24, 1996, Spurgeon,  Kang &
Associates  replaced C.  Williams &  Associates  as the  Registrant's  principal
accountants.

         Mr.  Charles R. Williams,  one of the  principals of C.  Williams,  was
advised by the Texas State Board of Public Accountancy in a letter dated January
29, 1996,  addressed  to the Chief  Accountant  of the  Division of  Corporation
Finance of the Securities and Exchange Commission (the  "Commission"),  that his
certificate as a Certified Public Accountant was revoked effective as of May 18,
1995,  which was  subsequently  revised to provide for a  revocation  date as of
March 2, 1995.  The Chief  Accountant  of the  Division of  Corporation  Finance
advised Mr.  Williams  by means of a letter  dated  February  7, 1996,  that the
Commission does not recognize any person as a certified public accountant who is
not duly  registered and in good standing as such under the laws of the place of
his  residence  or  principal  office as of March 2,  1995.  No  opinion  on the
Registrant's financial statements was ever issued by C.
Williams & Associates.

         In  connection  with the audit for the fiscal year ended May 31,  1990,
and  for  the  period  from  June  10,  1988,  to May 31,  1990,  there  were no
disagreements  between the Registrant and Jerome W. Karsh & Co. on any matter of
accounting  principles or practices,  financial statement disclosure or auditing

                                                         [TOEN\10K\53194.10K]-10

                                                         4

<PAGE>



scope or procedures, which disagreements, if not resolved to the satisfaction of
Jerome W. Karsh & Co. would have caused it to make reference in connection  with
its report.

         None of the  reports  of  Jerome  W.  Karsh & Co.  on the  Registrant's
financial  statements contained an adverse opinion or a disclaimer of opinion or
was qualified as to uncertainty,  audit scope, or accounting  principles  except
that the opinion was  qualified  by the  assumption  that the  Registrant  would
continue as a going concern.

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

                                    PART III

ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS

(a)      Identification of Directors.

         The following table furnishes the information  concerning the directors
and those persons  nominated and chosen to become directors of the Registrant as
of September 28, 1994.  The directors of the  Registrant  are elected every year
and serve until their successors are elected and qualify.


                                           Period Served as
           Name                Age             Director
------------------------       ---      -------------------
Fred G. Luke                   50       6-17-93 to Present
Jon L. Lawver                  58       6-17-93 to Present
John D. Desbrow                41       9-28-94 to Present

(b)      Identification of Executive Officers.

         The officers of the  Registrant are chosen by and serve at the pleasure
of the Board of Directors.  The following table furnishes information concerning
executive  officers and all persons chosen to become  executive  officers of the
Registrant. The officers of the Registrant serve at the pleasure of the Board of
Directors.


                      Positions and Office
Name           Age    with Company                     Period Served as Officer
-------------  ---    -----------------------------    ------------------------
Fred G. Luke   50     Chairman and President           June, 1993 to Present
Jon L. Lawver  58     Secretary and Chief Financial    June, 1993 to April 24,
                      Officer                          1996

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

                                                         [TOEN\10K\53194.10K]-10

                                                         5

<PAGE>



         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  which is  retroactive  to June 1, 1994 call for Mr.  Luke to  receive
approximately  $54,000 per year 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 by the Company  during fiscal 1994.  The Company  expensed $0 during fiscal
1994 and had no amounts due as of May 31, 1994.

         Effective  April  24,  1996,  the  Company  entered  into a  consulting
agreement  with Mr.  Steven H. Dong,  pursuant  to which Mr.  Dong is to perform
accounting  services and to hold the office of Chief  Financial  Officer through
June 30,  1996.  Pursuant to the  agreement  the Company  agreed to pay Mr. Dong
$5,000 in cash or in the  Company's  common  stock and  granted him an option to
purchase  100,000  shares of the Company's  common stock at an exercise price of
$.10 per share.  No cash  payments  were made to Mr. Dong by the Company  during
fiscal 1994.  The Company  expensed $0 during fiscal 1994 and had no amounts due
as of May 31, 1994.

         In July  1996,  the  Company  memorialized  a prior  verbal  consulting
agreement entered into in September 1994 with Mr. Desbrow, to hold the office of
Director through December 31, 1996. Pursuant to the agreement the Company agreed
to pay Mr. Desbrow  $1,000 per month.  No cash payments were made to Mr. Desbrow
by the Company  during fiscal 1994.  The Company  expensed $0 during fiscal 1994
and had no amounts due as of May 31, 1994.

(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 Registrant, the disclosure of which would be material.

(d)      Family Relationships.

         None.

(e)      Business Experience.

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

         Fred G. Luke, has been Chairman and President of the  Registrant  since
         June,  1993. Mr. Luke has over  twenty-four (24) years of experience in
         domestic and international  financing and the management of private and
         publicly-held  companies. In addition to his position with the Company,
         Mr. Luke currently  serves as Chairman and Chief  Executive  Officer of
         Nona  Morelli's II Inc.,  Diversified  Land &  Exploration  Co. and New
         World Capital Inc. Since 1982 Mr. Luke has provided consulting services
         and has served, for brief periods usually lasting not more than

                                                         [TOEN\10K\53194.10K]-10

                                                         6

<PAGE>



         six months,  as Chief Executive Officer and/or Chairman Of The Board of
         various public and  privately-held  companies in conjunction  with such
         financial and corporate  restructuring  services.  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.

         Jon L.  Lawver,  has been  Secretary  and a Director of the  Registrant
         since  June,  1993 and was Chief  Financial  Officer  from June 1993 to
         April 24, 1996. Mr. Lawver has  twenty-two  (22) years of experience in
         the area of bank financing  where he has assisted medium size companies
         ($5 million to $15  million) by providing  expertise  in  documentation
         preparation  and locating  financing  for expansion  requirements.  Mr.
         Lawver  was  with  Bank of  America  from  1961  to  1970,  ending  his
         employment as Vice  President and Manager of one of its branches.  From
         1970 to Present Mr.  Lawver has served as  President  and a Director of
         J.L. Lawver Corp., a financial  consulting  firm. Since 1988 Mr. Lawver
         has served as President  and a Director of Eurasia,  a private  finance
         equipment  leasing  company   specializing  in  oil  and  gas  industry
         equipment.

         John D.  Desbrow,  has served as a  Director  of the  Registrant  since
         September 28, 1994. Mr. Desbrow is also a Director of Hart  Industries,
         Inc. and holds the office of Secretary of Nona  Morelli's  II, Inc. and
         NuOasis  Gaming,  Inc. Mr.  Desbrow is a member in good standing of the
         State Bar of California  and has been since 1980.  Prior to joining the
         Company Mr.  Desbrow was in the private  practice of law.  Mr.  Desbrow
         received his Bachelor of Science degree in Business Administration from
         the University of Southern California in 1977, his Juris Doctorate from
         the  University  of  Southern  California  Law Center in 1980,  and his
         Master of  Business  Taxation  degree from the  University  of Southern
         California Graduate School of Accounting.

         Steven H. Dong.  Mr. Dong,  a Certified  Public  Accountant,  and as an
         independent  Consultant  serves  as  Chief  Financial  Officer  of  the
         Registrant.  Mr.  Dong  replaced  Jon L.  Lawver  who  resigned  as the
         Registrants'  Chief Financial Officer and as a Director effective April
         24,  1996.  Prior to joining the  Registrant,  Mr. Dong worked with the
         international  accounting  firm of Coopers & Lybrand  since 1988. As an
         Assurance  Manager  with  Coopers  &  Lybrand,  Mr.  Dong's  experience
         consisted of providing financial  accounting and consulting services to
         privately and publicly held companies. In addition to his position with
         the Registrant, Mr. Dong currently serves as Chief Financial Officer of
         Nona,  NuOasis  Gaming and Hart.  Mr.  Dong  received  his  Bachelor of
         Science  degree in  Accounting  from  Babson  College  in 1988 and is a
         member in good standing with the California Society of Certified Public
         Accountants and American Institute of Certified Public Accountants.

ITEM 10.       MANAGEMENT REMUNERATION AND TRANSACTIONS

(a)     Cash Compensation.

         None  of  the  Registrant's   executive   officers  received  any  cash
compensation  during the fiscal year ended May 31, 1994. On March 31, 1995, Fred
G. Luke,  Fred Graves Luke,  J.L.  Lawver  Corp.,  John D. Desbrow and Structure
America, Inc. each were issued 60,000 shares of restricted common stock.

                                                         [TOEN\10K\53194.10K]-10

                                                         7

<PAGE>



(b)     Stock Options

        During fiscal year 1994 there were no individual grants of stock options
made to the Company's Chief Executive  Officer or to any of the four most highly
compensated executive officers other than the Chief Executive Officer.

(c)     Aggregated Option Exercises

        During the fiscal year ended May 31,  1994,  there were no  exercises of
stock  options by the Chief  Executive  Officer  or any of the four most  highly
compensated executive officers other than the Chief Executive Officer.

(d)     Long-Term Incentive Plans

        During the fiscal year ended May 31,  1994,  there were no awards  under
any Long Term Incentive Plan to the Chief  Executive  Officer or any of the four
most  highly  compensated  executive  officers  other  than the Chief  Executive
Officer.

(e)     Compensation of Directors

        The  Company  has  no  standard  arrangement  for  the  compensation  of
directors or their committee participation or special assignments.

(f)     Employment Contracts and Change of Control

        On March 31, 1995 Fred G. Luke,  J.L.  Lawver Corp.  and John D. Desbrow
were each issued 60,000 shares of restricted  common stock for services rendered
to the Company as officers and directors or legal counsel  through May 31, 1994.
The Company also issued  60,000  shares of  restricted  common stock each to two
consultants  for merger and  acquisition  services in fiscal  1994.  The Company
recorded an expense of $30,000 related to such share issuances in fiscal 1994.

(g)     Report on Repricing of Options

        During fiscal year 1994,  the Registrant has not adjusted or amended the
exercise price of stock options.

(h)     Termination of Employment and Change of Control Arrangements.

        On March 31, 1993  Jeffrey  Paul Stroud  entered  into a Stock  Purchase
Agreement  with New World Capital  Markets,  Ltd. under which Stroud sold to New
World Capital Markets  173,995,000  shares of the Registrant's  common stock and
162,000,000  warrants  to acquire  an  additional  162,000,000  shares of common
stock, all of which Stroud had acquired from William J. Kitchen.  At the closing
of the  Agreement,  on June 17, 1993 the  Registrant's  then  existing  Board of
Directors  resigned  and  Fred G.  Luke  and Jon L.  Lawver  were  appointed  as
replacement Directors. The outgoing Board also elected Fred G. Luke as President
of the Registrant and Jon L. Lawver as Secretary,  Treasurer and Chief Financial
Officer.

                                                         [TOEN\10K\53194.10K]-10

                                                         8

<PAGE>



ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT AS OF MAY 31, 1994

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

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

<TABLE>
<CAPTION>

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

No par value                  
Common Stock                  New World Capital Markets, Ltd.                       173,995               31.67%
                              Companies House
                              Tower Street
                              Ramsey, Isle of Man

                              Cede & Co.                                             16,147                2.93%
                              Box 222
                              Bowling Green, New York  10274

Redeemable Common Stock       
Purchase Warrants             New World Capital Markets, Ltd.                       648,000               97.00%
                              Companies House
                              Tower Street
                              Ramsey, Isle of Man

                              Cede & Co.                                             13,278                2.00%
                              Box 222
                              Bowling Green, New York  10274

Combined no par value         
Common Stock and              New World Capital Markets, Ltd.                       821,995                67.50%
Redeemable Common Stock       Companies House
Purchase Warrants             Tower Street
                              Ramsey, Isle of Man

                              Cede & Co.                                             29,425                 2.41%
                              Box 222
                              Bowling Green, New York  10274

</TABLE>

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a)      Transactions With Management and Others.

         During fiscal 1994 there were no transactions with related parties that
exceeded $60,000 other than the following:

         On March 31, 1993 Stroud entered into a Stock  Purchase  Agreement with
New World Capital Markets,  Ltd. under which he sold  173,995,000  shares of the
Registrant's  common  stock and  162,000,000  warrants to acquire an  additional
162,000,000 shares of common stock. As discussed above,  Stroud had acquired the
173,995,000 shares and 162,000,000 warrants from Kitchen. At the

                                                         [TOEN\10K\53194.10K]-10

                                                         9

<PAGE>



closing of the Agreement,  on June 17, 1993 the Registrant's then existing Board
of  Directors  resigned  and Fred G. Luke and Jon L.  Lawver were  appointed  as
replacement Directors. The outgoing Board also elected Fred G. Luke as President
of the Registrant and Jon L. Lawver as Secretary,  Treasurer and Chief Financial
Officer.

         The Luke Family  Trust (the  "Trust") and J.L.  Lawver Corp.  (the "JLL
Corp.") owns 93% and 7%,  respectively,  of the common stock of NuVen  Advisors,
Inc.  ("NuVen").  Fred G. Luke, as the trustee of the Trust,  controls the Trust
and Jon L.  Lawver is the  majority  stockholder  of JLL Corp.  Mr. Luke and Mr.
Lawver are also officers and directors of the Company.

         Effective  April 1,  1993,  the  Company  and  NuVen,  entered  into an
Advisory  and  Management  Agreement  for the  engagement  of NuVen  to  perform
advisory  services on behalf of the Company for a 3 year term.  Pursuant to such
agreement  the Company is  obligated to pay NuVen  $120,000  annually in monthly
installments  of  $10,000.  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.

         Effective  February  1,  1995 the  Company  amended  its  Advisory  and
Management  Agreement  with NuVen.  The amended terms require the Company to pay
NuVen,  for  services  rendered,  $5,000 a month for an annual  total of $60,000
through January 31, 1998.

(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 Registrant, the disclosure of which would be material.

(c)      Indebtedness of Management.

         None.


                                     PART IV


ITEM 13.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES 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:

         On October 9, 1992 the  Registrant  filed a Current  Report on Form 8-K
dated  September  25,  1992  reporting  the sale to  William  J.  Kitchen by the
Registrant of all assets owned by the Registrant  associated  with the operation
of Sunbelt,  including  all  contracts  and lease  agreements  necessary for its
operations (the "Sunbelt  Assets").  In return for the Sunbelt  Assets,  Kitchen
forgave all notes and other  obligations of the Registrant to Kitchen and/or all
entities owned or controlled by Kitchen, as well as Kitchen's

                                                         [TOEN\10K\53194.10K]-10

                                                        10

<PAGE>



assumption of other miscellaneous debts of Sunbelt. Kitchen also returned to the
Registrant  of  98,795,000  shares of the  Registrant's  common stock as partial
consideration  for the sale by the  Registrant of the Sunbelt assets to Kitchen.
The  consideration  offered and accepted by the  Registrant  and Kitchen was the
result of arms length negotiations.  The amounts were arbitrarily  determined by
the parties and bore no relationship  to assets,  shareholders'  equity,  or any
other recognized criteria of value.

         The sale of the trade name "Sunbelt  Media Group" and all of the assets
owned by the Registrant  associated with its Sunbelt  operation  constituted the
sale of substantially all of the Registrant's assets.

         In the same Report on Form 8-K the Registrant reported that pursuant to
an  Agreement  to  Purchase  Stock  dated as of August  31,  1992 (the  "Sunbelt
Agreement"), Jeffrey Paul Stroud acquired 173,995,000 shares of the Registrant's
common stock (the "Stroud Shares")  representing  fifty-one percent (51%) of the
issued  and  outstanding  shares  of stock of the  Registrant  from  Kitchen,  a
shareholder of the Registrant who, prior to closing the Sunbelt Agreement, owned
272,790,000  shares of common stock of the  Registrant  (the "Kitchen  Shares"),
said shares  representing  eighty  percent  (80%) of the issued and  outstanding
shares of the Registrant at the time as set forth above.  Under the terms of the
Agreement,  Stroud also acquired from Kitchen, all other equity rights, options,
warrants and the like in and to the Registrant's shares owned by Kitchen,  which
rights  included  Warrants  representing  the  right to  acquire  an  additional
162,000,000 shares of common stock of the Registrant.  As partial  consideration
for the sale of the Warrants and the Stroud Shares to Stroud by Kitchen,  Stroud
agreed to release  Kitchen  from any and all  claims  which  Stroud had  against
Kitchen as a result of Stroud's  investment in the registered  securities of the
Registrant prior to closing the Sunbelt Agreement.

         At closing of the Agreement,  the  Registrant's  then existing Board of
Directors  systematically  resigned  and were  replaced by Jeffrey  Paul Stroud,
Gregory  Skufca  and  Patricia  Schoenbaum.  The  newly  reconstituted  Board of
Directors  then  elected  Stroud to serve as President  of the  Registrant,  and
Gregory Skufca to serve as Secretary/Treasurer.

(c)      Exhibits:

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

         3        Articles of Incorporation and Bylaws  [incorporated  herein by
                  reference to Exhibit 3.1 and 3.2 of Registrant'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
                  Registrant'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
                  Registrant's   Registration   Statement   on  Form  S-18  (No.
                  33-23403-D)].

         10(a)    Underwriting  Agreement  with  Tri-Bradley  Investment,   Inc.
                  [incorporated  herein by reference as Exhibit 1.1 to Amendment
                  No. 5 to Form S-18  Registration  Statement  on Form S-18 (No.
                  33-23430-D)].

                                                         [TOEN\10K\53194.10K]-10

                                                        11

<PAGE>



         10(b)    Agreement to Purchase  Stock dated August 31, 1992 between The
                  Toen  Group,  Inc.,  Jeffrey  Stroud and  William  J.  Kitchen
                  [incorporated  herein by  reference to Exhibit "A" to Form 8-K
                  dated September 25, 1992, and filed October 9, 1992].

         10(c)    Stock  Purchase  Agreement  dated March 31,  1993  between New
                  World   Capital   Markets,   Ltd.  and  Jeffrey  Paul  Stroud.
                  [Incorporated  by reference to Exhibit 10.c to Form 10-KSB for
                  the fiscal years ended May 31, 1992 and 1993].

         10(d)    Advisory and Management Agreement with NuVen Advisors, Inc.

                                                         [TOEN\10K\53194.10K]-10

                                                        12

<PAGE>



                                   SIGNATURES

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

                                        THE TOEN GROUP, INC.
                                        (Registrant)



Date:    January 15, 1997               By:  /s/  Fred G. Luke
                                             ----------------------------------
                                                  Fred G. Luke, Chairman
                                                  of the Board and President



Date:    January 15, 1997               By:  /s/  Jon L. Lawver
                                             ----------------------------------
                                                  Jon L. Lawver,
                                                  Secretary and Director



Date:    January 15, 1997               By:  /s/  John D. Desbrow
                                             ----------------------------------
                                                  John D. Desbrow, Director



Date:    January 15, 1997               By:  /s/  Steven H. Dong
                                             ----------------------------------
                                                  Steven H. Dong,
                                                  Chief Financial Officer

                                                         [TOEN\10K\53194.10K]-10

                                                        14

<PAGE>



                              THE TOEN GROUP, INC.

                          INDEX TO FINANCIAL STATEMENTS


Financial Statements, Fiscal Year 1994                                    Page

         Reports of Independent Public Accountants                         F-2

         Balance  heet as of May 31, 1994................................. F-3

         Statements of Operations for the years ended May 31, 1994
           and 1993 .......................................................F-4

         Statements of Stockholders' Deficiency for the years Ended
           May 31, 1994 and 1993 ..........................................F-5

         Statements of Cash Flows for the Years Ended May 31, 1994
           and 1993 .......................................................F-6

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

                                                         [TOEN\10K\53194.10K]-10

                                                        F-1

<PAGE>



                           Spurgeon, Kang & Associates
                             Accountancy Corporation
                          Certified Public Accountants
                               9831 Belmont Street
                      Belmont Street, Bellflower, CA. 90706
                                  (310)251-2161

                      INDEPENDENT AUDITOR'S REPORT FYE 1994



Board of Directors and Stockholders THE TOEN GROUP, INC.
2 Park Plaza, Suite 470
Irvine, CA  92714

We have audited the accompanying balance sheet of The Toen Group, Inc. as of May
31, 1994 and the related statements of income,  retained earnings, and cash flow
for the years ended May 31, 1994 and 1993.  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of The Toen Group, Inc. as of May
31,  1994 and the results of its  operations  and cash flows for the years ended
May  31,  1994  and  1993  in  conformity  with  generally  accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as going concern.  As discussed in Note 1 to the financial
statements,  the Company has incurred net losses and  possesses  limited  liquid
resources and negative  working capital as of May 31, 1994.  Management's  plans
regarding those matters are described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Spurgeon, Kang & Associates
Bellflower, CA

November 4, 1996

                                                         [TOEN\10K\53194.10K]-10

                                                        F-2

<PAGE>



                              THE TOEN GROUP, INC.
                                  Balance Sheet
                               As of May 31, 1994



Assets
  Cash                                                $       4,989
                                                      --------------
         Total Assets                                 $       4,989
                                                      ==============
Liabilities and Stockholders' Equity
Current Liabilities:
  Due to affiliates                                   $     175,000
                                                      --------------
         Total Current Liabilities                    $     175,000
                                                      --------------
Commitments and Contingencies:                                    -
Stockholders' Deficiency
  Common stock, $.01 par value, 50,000,000 shares
   authorized; 249,372 shares issued and outstanding        408,442
   Additional paid-in capital                                     -
   Accumulated deficit                                     (553,608)
   Treasury stock (98,795 Shares, at Cost)                  (24,845)
                                                      ---------------
         Total Stockholders' Deficiency                    (170,011)
         Total Liabilities and Stockholders'
           Deficiency                                 $       4,989
                                                      ===============

                                                         [TOEN\10K\53194.10K]-10

    The accompanying notes are an integral part of these financial statements

                                                   F-3

<PAGE>

<TABLE>
<CAPTION>

                              THE TOEN GROUP, INC.
                            Statements of Operations
                           For the Years Ended May 31,

                                                           1994                 1993
                                                   -------------------- -------------------
<S>                                                <C>                  <C>

Revenues                                           $                 -  $                 -
Cost of Revenues                                                     -                    -
                                                   -------------------- -------------------
  Gross Profit                                                       -                    -
                                                   -------------------- -------------------
General and Administrative Expenses:
  Consulting services                                          170,000                    -
  Depreciation                                                       -               25,399
  Other                                                            751               32,049
                                                   -------------------- -------------------

    Total                                                      170,751               57,448
                                                   -------------------- -------------------
Operating Loss                                                (170,751)             (57,448)
Other Income (Expense):
  Interest Expense, Net                                              -                 (344)
                                                   -------------------- --------------------
Net Loss Before Discontinued Operations                       (170,751)             (57,792)
Income From Discontinued
  Operations                                                    14,286               29,889
                                                   -------------------- -------------------
Net Loss                                           $          (156,465) $           (27,903)
                                                   ==================== ====================
Net Income (Loss) Per Share:
  Loss From Continuing Operations                  $            (.6847) $            (.0002)
                                                   ==================== ====================
  Income from Discontinued
    Operations                                     $             .0573  $             .0001
                                                   ==================== ===================
  Net Loss per Share                               $            (.6274) $            (.0001)
                                                   ==================== ====================
  Weighted Average Number of Shares
    Outstanding                                                249,372          298,769,167
                                                   ==================== ===================

</TABLE>

                                                         [TOEN\10K\53194.10K]-10

    The accompanying notes are an integral part of these financial statements

                                                   F-4

<PAGE>

<TABLE>
<CAPTION>

                              THE TOEN GROUP, INC.
                     Statements of Stockholders' Deficiency
                    For The Years Ended May 31, 1994 and 1993

                                                                                                                    TOTAL
                                     COMMON                                                                        STOCK-
                                     SHARES              COMMON         TREASURY          ACCUMULATED             HOLDERS'
                                  OUTSTANDING             STOCK           STOCK             DEFICIT              DEFICIENCY
                             ----------------------  --------------  --------------- ---------------------  ---------------------
<S>                          <C>                     <C>             <C>             <C>

Balances at June 1, 1992               348,166,667   $     408,442                -  $           (369,240)  $             39,202
Exchange of assets and
 liabilities for common
 stock                                 (98,795,000)              -          (24,845)                    -                (24,845)
Net Loss                                         -               -                -               (27,903)               (27,903)
                             ----------------------  --------------  --------------- ---------------------  ---------------------
Balances at May 31, 1993               249,371,667   $     408,442   $      (24,845) $           (397,143)  $            (13,546)
Effect of reverse stock
split                                 (249,122,295)              -                -                     -                      -

Net Loss                                         -               -                -              (156,465)              (156,465)
                             ----------------------  --------------  --------------- ---------------------  ---------------------
Balances at May 31, 1994                   249,372   $     408,442   $      (24,845) $           (553,608)  $           (170,011)
                             ======================  ==============  =============== =====================  =====================

</TABLE>

                                                         [TOEN\10K\53194.10K]-10

    The accompanying notes are an integral part of these financial statements

                                                   F-5

<PAGE>

<TABLE>
<CAPTION>

                              THE TOEN GROUP, INC.
                            Statements of Cash Flows
                           For the Years Ended May 31,

                                                                            1994                  1993
                                                                    --------------------- --------------------
<S>                                                                 <C>                   <C>

Cash Flows From Operating Activities:
  Net loss                                                          $           (156,465) $           (27,903)
Adjustments to Reconcile Net Loss to Net Cash Provided
(Used) by Operating Activities:
  Depreciation                                                                        -                25,399
  Expiration of construction permits                                                  -                 8,000
  Amortization                                                                      739                     -
Change in Assets and Liabilities:
(Increase) Decrease in Assets:
   Inventory                                                                          -                 3,408
   Other assets                                                                       -                 1,856
Increase (Decrease) in Liabilities:
   Accounts payable                                                               (14,285)             (3,400)
   Due to Affiliates                                                             175,000                    -
                                                                    --------------------- -------------------
Net cash provided (used) by operating activities                                   4,989                7,360
                                                                    --------------------- -------------------
Cash Flows From Investing Activities:
   Sale (purchase) of equipment                                                        -                6,354
                                                                    --------------------- -------------------
Net cash provided (used) by investing activities                                       -                6,354
                                                                    --------------------- -------------------
Cash Flows From Financing Activities:
   Repayment on notes payable and capital leases                                       -              (13,747)
                                                                    --------------------- --------------------
Net cash provided (used) by financing activities                                       -              (13,747)
                                                                    --------------------- --------------------
Increase (decrease) in cash and cash equivalents                                   4,989                  (33)
Beginning Balance, Cash and Cash Equivalents                                           -                   33
                                                                    --------------------- --------------------
Ending Balance, Cash and Cash Equivalents                           $              4,989  $                 -
                                                                    ===================== ====================
Supplemental Disclosure of Cash Flow Information:
   Cash payments for income taxes                                   $                  -  $                 -
   Cash payments for interest                                       $                  -  $                 -
                                                                    ===================== ===================
Supplemental Disclosure of Non-Cash Investing
 and Financing Activities:
   Common stock issued for services                                 $                  -  $                 -
                                                                    ===================== ===================
   Retirement of common stock for assets and liabilities            $                  -  $            24,845
                                                                    ===================== ===================

</TABLE>

                                                         [TOEN\10K\53194.10K]-10

    The accompanying notes are an integral part of these financial statements

                                                   F-6

<PAGE>



                              THE TOEN GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                  May 31, 1994

Note 1.  Summary of Significant Accounting Policies

Business and Organization

The  Company  was  incorporated  in June,  1989 as a Colorado  corporation.  The
Company was primarily  engaged in the acquisition,  maintenance and operation of
television stations in various states through 1992.

In August 1992, the Company sold its Sunbelt Media Group  ("Sunbelt")  division,
operating the television stations, to a majority stockholder of the Company.

Since  August  1992  through  the date of this  report,  the  Company has had no
operations  and  management  is  seeking  a merger  and/or  sale of  controlling
interest in its stock.

Principals of Management Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.

Property and Equipment

Property  and  equipment  are stated at cost.  Depreciation  is  computed  using
accelerated  methods over the estimated  useful lives of the assets ranging from
3-15  years.  The company  provides  tax  depreciation  in  conformity  with the
provisions of applicable tax law. Cost and  accumulated  depreciation  of assets
sold or  retired  are  removed  form  the  accounts  and the net gain or loss is
recorded in operations in the year of the transaction.

Income Taxes

The Company accounts for income taxes using the liability  method.  Income taxes
are provided on all revenue and expense items, regardless of the period in which
such items are recognized for tax purposes,  except for those items representing
a permanent  difference  between pre-tax income and taxable income.  A valuation
allowance is recorded  when it is more likely than not that  benefits  resulting
from deferred tax assets will not be realized.

                                                         [TOEN\10K\53194.10K]-10

                                                   F-7

<PAGE>


                              THE TOEN GROUP, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)
                                  May 31, 1994


Earnings (Loss) Per Common Share

Net income  (loss) per common share is  calculated by dividing net income (loss)
by the weighted average number of shares  outstanding  during each year. All per
share amounts are reported as adjusted  after the merger and  resulting  reverse
stock split.  Common stock equivalents were not considered in the loss per share
calculations as the effect would have been anti dilutive.

Issuance of Stock for Services

Shares of the  Company's  common  stock  issued for  services  are  recorded  in
accordance  with APB16 at the fair market  value of the stock issued or the fair
market of the services  provided,  whichever value is the more clearly  evident.
The value of the services are typically stipulated by contract.

Reclassification of Prior Year Amounts

To  enhance  comparability,  the  fiscal  1993  financial  statements  have been
reclassified,  where  appropriate,  to  conform  with  the  financial  statement
presentation used in fiscal 1994.

Note 2.  Going Concern

The Company has experienced  recurring net losses, has limited liquid resources,
negative  working  capital and its primary  operating  subsidiary was liquidated
during  the fiscal  year  1993.  Management's  intent is to keep  searching  for
additional sources of capital and new operating  opportunities.  In the interim,
the Company will keep  operating  with minimal  overhead and key  administrative
functions will be provided by NuVen Advisors,  Inc., an affiliate ("NuVen").  It
is  estimated  that NuVen will have to  contribute  approximately  $337,000  for
future  financial  support for the  Company to exist for the next  fiscal  year.
Accordingly,  the  accompanying  consolidated  financial  statements  have  been
presented under the assumption the Company would continue as a going Concern.

Note 3.  Discontinued Operations

In August,  1992, the Company  executed an agreement with an 80%  shareholder of
the  Company,  whereby the Sunbelt  Media Group  ("Sunbelt")  trade name and all
assets and debt  related to Sunbelt,  were sold to the majority  shareholder.  A
note due to the majority stockholder in the amount of $24,500 was outstanding at
the date of the  agreement,  and was forgiven as part of the payment  price.  In
exchange,  the majority  shareholder  returned  98,795,000  shares of its common
stock  holdings  in  the  Company.  No  gain  or  loss  was  recognized  on  the
transaction,  as the resulting value of assets sold over liabilities assumed was
assigned as the cost of the treasury stock acquired.

                                                         [TOEN\10K\53194.10K]-10

                                                   F-8

<PAGE>


                              THE TOEN GROUP, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)
                                  May 31, 1994


Note 4.           Related Party Transactions

The Luke Family Trust (the "Trust") and J.L. Lawver Corp. (the "JLL Corp.") owns
93% and 7%,  respectively,  of the common stock of NuVen.  Fred G. Luke,  as the
trustee  of the  Trust,  controls  the Trust and Jon L.  Lawver is the  majority
stockholder of JLL Corp. Mr. Luke and Mr. Lawver are also officers and directors
of the Company.

Effective  April 1, 1993,  the Company and NuVen,  entered  into an Advisory and
Management Agreement for the engagement of NuVen to perform advisory services on
behalf of the Company for a 3 year term.  Pursuant to such agreement the Company
is obligated to pay NuVen $120,000 annually in monthly  installments of $10,000.
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.

NuVen's  advisory  services  include  the payment on behalf of the  Company,  of
monthly office rent,  telephone  expenses,  monthly accounting  expenses and the
costs  associated  with the  preparation of annual state and federal  regulatory
filings, and franchise and federal tax returns.

Note 5.  Subsequent Events

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.
The warrants are exercisable at $5.00 per share.

Effective  February 1, 1995 the  Company  amended its  Advisory  and  Management
Agreement  with NuVen  (Note 4). The  Amended  terms  require the Company to pay
NuVen,  for  services  rendered,  $5,000 a month for an annual  total of $60,000
through January 31, 1998.

On March 31, 1995 Fred G. Luke,  J.L. Lawver Corp. and John D. Desbrow were each
issued  60,000 shares of  restricted  common stock for services  rendered to the
Company as officers,  directors,  or legal  counsel  through May 31,  1994,  the
Company  also  issued  60,000  shares of  restricted  common  stock  each to two
consultants  for merger and  acquisition  services in fiscal  1994.  The Company
recorded an expense of $30,000 related to such share issuances.

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  which is  retroactive  to June 1, 1994 call for Mr.  Luke to  receive
approximately  $54,000 per year 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,

                                                         [TOEN\10K\53194.10K]-10

                                                   F-9

<PAGE>


                              THE TOEN GROUP, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)
                                  May 31, 1994


and  provide  fringe  benefits.  No cash  payments  were made to Mr. Luke by the
Company during fiscal 1994.  The Company  expensed $0 during fiscal 1994 and had
no amounts due as of May 31, 1994.

Effective April 24, 1996, the Company  entered into a consulting  agreement with
Mr. Steven H. Dong, pursuant to which Mr. Dong is to perform accounting services
and to hold the  office  of  Chief  Financial  Officer  through  June 30,  1996.
Pursuant to the agreement  the Company  agreed to pay Mr. Dong $5,000 in cash or
in the  Company's  common  stock and granted  him an option to purchase  100,000
shares of the Company's  common stock at an exercise price of $.10 per share. No
cash  payments  were made to Mr. Dong by the Company  during  fiscal  1994.  The
Company  expensed  $0 during  fiscal  1994 and had no amounts  due as of May 31,
1994.

In July 1996,  the Company  memorialized  a prior  verbal  consulting  agreement
entered into in September 1994 with Mr. Desbrow,  to hold the office of Director
through  December 31, 1996.  Pursuant to the agreement the Company agreed to pay
Mr. Desbrow  $1,000 per month.  No cash payments were made to Mr. Desbrow by the
Company during fiscal 1994.  The Company  expensed $0 during fiscal 1994 and had
no amounts due as of May 31, 1994.

Effective  October 8, 1996,  the Board of  Directors  authorized a change in the
Company's name from The Toen Group, Inc. to Virtual Enterprises, Inc.

                                                         [TOEN\10K\53194.10K]-10

                                                   F-10