U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
   
                                   FORM 10-KSB/A-1
    

[ X ]   Annual report under Section 13 or 15(d) of the Securities Exchange Act 
        of 1934 [Fee Required] for the fiscal year ended:  May 31, 1997
                                                          --------------

[   ]   Transition report under Section 13 or 15(d) of the Securities Exchange
        Act of 1934 [No Fee Required] for the transition period from 
                   to 
        ---------     ----------


Commission file number:  33-23693
                         --------

                           VANDEN CAPITAL GROUP, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter) 


           Colorado                                               84-1090424
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                         1775 Sherman Street, Suite 1001
                             Denver, Colorado            80203
               -------------------------------------------------
              (Address of principal executive offices) (Zip Code)

                   Issuer's telephone number: (303) 894-0234

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

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

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

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

Issuer's revenues for its most recent fiscal year:    $15,085
                                                      ---------

Aggregate market value of voting stock held by  non-affiliates  as of August 31,
1997:  $-0- (There is currently no trading market for the Issuer's  securities.)
Shares of common  stock,  $.0001 par value,  outstanding  as of August 31, 1997:
90,015,200
----------
Documents incorporated by reference:  Yes
                                      ----
Transitional Small Business Disclosure Format (Check one):  Yes ; No  X
                                                            ----     ----


<PAGE>



                           VANDEN CAPITAL GROUP, INC.

                                   FORM 10-KSB

                                     PART I

Item 1.  Description of Business.
         -----------------------

     (a) Business Development.

     Vanden Capital Group,  Inc. (the "Company") was organized under the laws of
the State of Colorado in June 1988, and commenced  operations after it completed
its  initial  public  offering  of  securities  in  December  1988.  The Company
initially  was engaged in providing  business  management  consulting  services,
however,  during the last several years, the Company has been engaged  primarily
in  attempting  to locate a business to acquire or with which it would  combine.
The Company has provided  advice and  assistance in evaluating  and  structuring
methods of financing,  preparing  business  plans,  and in developing  operating
strategies  and  corporate  goals  for  several  clients.  From time to time the
Company has assisted clients by providing equity and debt financing or assisting
its clients in obtaining  financing  from third  parties.  From time to time the
Company has  accepted  equity  positions  rather than cash as payment or partial
payment of fees for its consulting  services.  Decisions as to the acceptability
of such payment, in lieu of cash, are at the discretion of management.

     The consulting  services  offered by the Company have included  analysis of
prospective  merger or acquisition  candidates,  development of financial plans,
operating  strategies  and  corporate  goals,  and  assistance  with  management
recruitment,  product planning,  marketing and advertising. The Company has also
assisted  clients in establishing  relationships  with commercial and investment
bankers  and  other  professionals,  including  legal  counsel  and  independent
accountants.

     Through the present,  the Company has acquired  interests in three separate
businesses,  QuikByte  Software,  Inc.,  Buyer's Resource,  Inc. and Se Tevo, in
partial payment for consulting services provided by the Company.

     Subsequent  to the end of the 1992 fiscal year,  management  determined  to
modify the Company's  business plan to include the identification and evaluation
of  business  opportunities  which might be  available  for  acquisition  by the
Company. Such opportunities were to include other companies which were available
for a business combination with the Company through merger or otherwise. To date
the Company has not consummated any such acquisition or combination.

     There is currently no market for the  securities of the Company and, to the
best of the  Company's  knowledge,  there has been no active market since August
31, 1989.

                                       -2-

<PAGE>



     (b) Business of Issuer.

Current Operations
------------------

     The Company  currently  maintains an office and keeps its financial and SEC
reports  current.  Management  is  presently  attempting  to  locate a  business
opportunity  to enter into a  combination  with the Company and will most likely
not continue to solicit consulting services clients.

Consulting and Related Services
-------------------------------

     To date,  the  Company  has  entered  into  consulting  contracts  with two
development  stage  companies,  and,  through a  subsidiary,  co-managed a joint
venture (now  inactive) to which it  contributed  its  consulting  expertise and
capital to develop and implement a marketing plan.

                             QuikByte Software, Inc.

     Effective  April 1, 1989, the Company  entered into a consulting  agreement
with and acquired an equity interest in QuikByte Software, Inc. ("QuikByte"),  a
company  formed to develop  and market a computer  "compiler,"  a software  tool
which is used to design computer programs. QuikByte completed its initial public
offering of  securities  in October  1989 and  utilized the proceeds to continue
research and development  efforts,  but to date has not  successfully  commenced
commercial  sales of its products.  The consulting  agreement was for a two year
term commencing  January 1, 1990 at a fee of $1,500 per month. An initial fee of
$15,000, payable upon execution of the agreement, was paid to the Company in the
form of 3,000,000  shares of QuikByte  common stock.  The Company also purchased
7,000,000  shares of common stock of QuikByte for $35,000.  In February 1991 the
10,000,000  shares of  Common  Stock of  QuikByte  Software,  Inc.  owned by the
Company were registered for public sale;  however,  the Company did not sell any
of the  QuikByte  shares.  In April 1992 the  broker-dealer  which served as the
principal  market maker for securities of QuikByte  ceased  operations and there
has been no market for the shares of  QuikByte  since that time.  The  company's
equity in QuikByte  Common Stock was recognized as a loss and written off of the
Company's  balance  sheet  during the fiscal  year  ended May 31,  1992.  At the
present  time,  the Company has been  advised  that  QuikByte is inactive but is
attempting to sell its computer program to third parties.

                             Buyer's Resource, Inc.

     In August 1989 the Company entered into a consulting agreement with Buyer's
Resource,  Inc.  (formerly  known as The Buyer's  Market,  Ltd.), a closely held
Colorado  corporation.  Buyer's  Resource,  Inc. is engaged in franchising buyer
broker real estate offices and conducting seminars and other marketing campaigns
to promote  the  concept of "buyer  brokerage."  The buyer  broker is engaged to
represent  the real estate  purchaser;  traditionally,  residential  real estate
agents and brokers  represented only the sellers.  Buyer's Resource has received
national media attention (U.S. News and  World Report, Money Magazine,  Reader's



                                       -3-

<PAGE>



Digest,  USA Today,  etc.).  At the time of formation of Buyer's  Resource,  the
Company  purchased  shares of Series A Preferred Stock  representing  36% of the
outstanding  equity  in  exchange  for  $60,000  in cash  and  providing  a loan
guarantee of $90,000.  As of May 31, 1995,  Buyer's Resource was indebted to the
bank in the amount of $60,000, which remains subject to the Company's guarantee.

     On March 30, 1990,  the Company  made a $50,000  loan to Buyer's  Resource,
represented  by a Promissory  Note (the "Note")  payable on March 15, 1992.  The
Note,  together with accrued  interest of $1,875,  was converted  into an equity
interest in Buyer's Resource in May 1993, as further described below.

     In March 1992, a  significant  ownership  interest in Buyer's  Resource was
acquired  by  a  privately  held  venture   capital  company  which  focuses  on
investments in specialty retail and consumer direct  companies.  This investment
provided  approximately  $800,000  of capital to Buyer's  Resource  through  the
issuance by Buyer's  Resource of 800,000  shares of a newly  authorized  Class A
Cumulative  Convertible  Preferred  Stock (the  "Class A Preferred  Stock").  In
anticipation of the venture capital  investment,  in March 1992 Buyer's Resource
effected  a  recapitalization   in  which  cumulative   dividends  on  its  then
outstanding  Series A Preferred  Stock  (owned by the  Company)  were  satisfied
through the  issuance of shares of common  stock and all  outstanding  shares of
common and preferred stock (including the original Series A Preferred Stock then
owned by the  Company)  were  converted to shares of a newly  authorized  single
class of common stock.  The Company  received a total of 47,055 shares of common
stock and warrants to purchase an additional  10,195 shares of common stock at a
per share price of $5.68 per share, which expired unexercised on March 23, 1994.

     In May  1993,  the  private  venture  capital  company  made an  additional
investment in Buyer's Resource of $300,000 through the purchase of an additional
300,000 shares of Class A Cumulative Convertible Preferred Stock. In conjunction
with this investment the Company agreed to convert the $50,000 Note plus accrued
interest into 51,875 shares of Class A Preferred  Stock (the same class as those
owned by the venture  capital firm).  This Class A Preferred  Stock is currently
convertible  into common stock at the rate of 2.4231  shares of Common Stock per
share of Series A Preferred Stock.

     The venture  capital  company has continued to make  investments in Buyer's
Resource.  In July  1993,  it  converted  a  $250,000  promissory  note  into an
additional  250,000 shares of Series A Preferred Stock and in May 1994 purchased
an additional  420,000  shares of Series A Preferred  Stock for $230,000 in cash
and conversion of $190,000 in short term notes. In addition, $50,000 of cash was
paid for 50,000 shares of Series A Preferred  Stock by a third party investor in
May 1994.

     On a fully diluted basis (taking into account all outstanding  common stock
and securities of Buyer's Resource  convertible into common stock),  the Company
owns an  interest  in  Buyer's  Resource  equal  to  approximately  6.2% of that
company. Buyer's Resource has never operated profitably.


                                       -4-

<PAGE>




Competition
-----------

     The Company has a limited  operating  history and  therefore  has been at a
competitive  disadvantage to numerous consulting firms which are larger,  better
established,  have greater finan cial and other resources,  more employees,  and
more extensive  facilities  than the Company.  This  competitive  posture can be
expected  to  continue  in the event  the  Company  elects  to resume  providing
consulting services in the future.

     As the Company  pursues its  additional  objective  of  acquiring  business
opportunities  through a combination with an operating company or otherwise,  it
will face  intense  competition  from a  substantial  number of  businesses  and
individuals,  many of which will be in a much stronger position than the Company
to attract business opportunities.

Government Regulation
---------------------

     Investment  Company  Act of  1940.  Since  the  Company's  activities  have
included  the purchase of equity  interests in its clients,  the Company must be
careful to avoid falling within the definition of an "investment company" as set
forth in the Investment Company Act of 1940. In general, in order to avoid being
classified as an "investment  company" the Company must be and remain  primarily
engaged in a business other than that of investing, reinvesting, owning, holding
or trading in securities.  The Company has engaged  primarily in the business of
providing  consulting  services and anticipates that its equity investments will
not be the primary focus of its operations.  In the event the Company's business
emphasis  shifts to the point where it is  primarily  engaged in the business of
investing  in or owning  securities,  the  Company  may need to take  additional
precautions  to avoid  being  classified  as an  "investment  company" or may be
forced to register  under the  Investment  Company Act. In summary,  the Company
must avoid purchasing  investment securities having a value exceeding 40% of the
Company's total assets, exclusive of government securities and cash items, on an
unconsolidated basis. These limitations could prevent the Company from acquiring
securities at times when such acquisitions  would otherwise be advantageous,  or
force the Company to dispose of securities held by it at times when it would not
be  advantageous  to do so. If the  Company  were  deemed  to be an  "investment
company," its  activities  would be regulated by the  Investment  Company Act of
1940 which would severely  restrict and could adversely affect the activities of
the Company.

     Federal and State  Securities  Regulations.  In addition to the  Investment
Company  Act of 1940,  there are a number  of other  provisions  of the  federal
securities  laws  which will  affect  the  Company's  proposed  operations.  For
example,  prospective investors should be aware that restrictions imposed by the
federal  securities laws, in addition to possible  contractual  provisions,  may
adversely  affect the  ability of the  Company to sell or  otherwise  distribute
securities acquired by it.

                                       -5-

<PAGE>



     Most, if not all, of the securities which the Company might acquire will be
"restricted  securities"  within the meaning of the  Securities  Act of 1933, as
amended  (the  "Securities  Act")  and  therefore  may not be  resold  unless  a
registration  statement  has been  declared  effective  by the  Commission  with
respect to such  securities or the Company is able to rely on an exemption  from
such  registration  requirements.  The  registration of securities  owned by the
Company is likely to be an expensive and time-consuming process, and the Company
will bear the risk that it will be unable to resell such securities,  or that it
will not be able to obtain an attractive  price for the securities.  The Company
intends to bargain for registration rights when possible. If such rights are not
granted, the Company may sell or distribute securities pursuant to an exemption.
The 10,000,000  shares of QuikByte  Software held by the Company were registered
for public sale in February 1991;  however, a strong enough market never existed
to allow the Company to sell those shares even though they were registered.

     The most likely  exemption  available to the Company is Section 4(1) of the
Securities  Act,  which in effect  exempts sales of  securities  not involving a
distribution  of the  securities.  This exemption would permit a private sale of
securities  held  by the  Company,  and in  some  cases a  public  sale,  if the
provisions  of Rule 144 under the  Securities  Act are  satisfied.  Among  other
things,  Rule 144 requires that public  information be available on the company,
that the  securities  be sold in  "brokers'  transactions,"  requires a one-year
holding period prior to the sale of the restricted  securities,  and establishes
volume  limitations  on the amount of  restricted  securities  which can be sold
within  certain  defined  time  periods.  Rule  144  also  permits  the  sale of
securities  by a party who is not an affiliate of the issuer of the  securities,
and  who  has  satisfied  a  two-year  holding  period,   without  any  quantity
limitations.

     Other Governmental  Regulation.  Should the Company complete an acquisition
or  business  combination,  its  activities  could  become  subject to  numerous
governmental  regulations,  depending upon the nature of the business then being
conducted by the Company.

Employees and Consultants
-------------------------

     The Company's officers and directors  presently serve on an as needed basis
and are not paid  salaries.  The  Company  believes  that  this  arrangement  is
adequate to meet its needs in its current mode of operations. See "Management."


Item 2.  Description of Property.
         -----------------------

     The Company  currently  maintains its offices in the business office of two
of its directors,  at 1775 Sherman Street,  Suite 1001,  Denver,  Colorado,  for
which the Company pays $500 per month for office space, bookkeeping and clerical
services. See "Certain  Transactions." The office facilities are provided to the
Company pursuant to an oral agreement. Management believes that this arrangement
is suitable for the current operations of the Company.


                                       -6-

<PAGE>



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

     The Company is not a party to any legal proceedings and no such proceedings
are known to be contemplated.

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

     During the fourth quarter of the most recently  completed  fiscal year, the
Company did not submit any matter to a vote of its shareholders.


                                       -7-

<PAGE>



                                     PART II

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

     (a) Market Information.

     The Company's securities are not eligible for listing on the NASDAQ system,
and trading, if any, is limited to the over-the-counter market. The Common Stock
has  been  quoted  from  time to time in the  "Pink  Sheets"  maintained  by the
National  Quotation Bureau,  Inc. Since August 31, 1989, no established  trading
market has existed for the Company's securities.

     (b) Holders.

     The  approximate  number of record  holders of the Company's  Common Stock,
$.0001 par value,  as of August 31, 1997,  was 195. This figure does not reflect
an  indeterminate  number of  shareholders  whose  shares are held by brokers in
"street name."

     (c) Dividends.

     The Company has not paid a cash  dividend  with respect to its common stock
and does not intend to pay a cash dividend in the foreseeable future.

Item 6.  Management's Discussion and Analysis.
         ------------------------------------

Possible Business Combinations
------------------------------

     Management  believes  that the Company  would be attractive to an operating
business which is currently private and which desires to become public through a
reverse  acquisition  or other  transaction.  The Company has adequate  funds to
carry out its current plan of operations for the foreseeable future.

Liquidity and Capital Resources
-------------------------------

     At May 31, 1997, the Company had assets of $391,708 and working  capital of
$388,010 all of which was in liquid (cash or cash equivalent) assets. A total of
$65,000 of the Company's cash is pledged as collateral under an agreement with a
bank  pursuant to which the Company  guaranteed  a loan from the bank to Buyer's
Resource,  Inc.,  a company in which the Company  owns an equity  interest.  The
balance owing under that loan as of May 31, 1997, was $60,000. .

                                       -8-

<PAGE>



Results of Operations
---------------------

     During the year ended May 31,  1997,  the Company had a net loss of $25,006
on total  income of  $15,085,  all of which was  interest  income.  The net loss
resulted  primarily  from  expenses  of  $40,091  incurred  by  the  Company  in
connection  with legal,  accounting,  rent and clerical  expenses.  For the 1996
fiscal  year,  the Company had a net loss of $19,909 on total income of $15,498,
all of which was interest income.

     Because  the  Company did not become  profitable  as a business  consulting
company over the years since  inception,  management  determined in 1992 that it
should devote its primary efforts to locating an attractive business opportunity
for the Company.  Management  has actively  devoted time to this end and has not
committed resources to efforts to solicit additional  consulting clients for the
Company. As a result, the Company has received  essentially no consulting income
during  1995,1996  and 1997.  At the same time,  interest  income has  decreased
(primarily due to lower interest rates and secondarily as a result of lower cash
balances on deposit).

     Management  is not aware of any known  trends  or  uncertainties  which are
likely to have a material  impact  upon the  Company's  short-term  or long term
liquidity, capital commitments,  net revenues or business prospects.  Management
is  attempting  to conserve the cash assets of the Company so as to maximize the
attractiveness of the Company to potential business combination candidates.

Item 7.  Financial Statements.
         --------------------

     The Company's  audited  financial  statements  follow the signature page of
this report.

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

     Since inception,  the Company's independent  accountants have not resigned,
been dismissed or declined to stand for reelection.


                                       -9-

<PAGE>



                                    PART III


Item 9.  Directors, Executive Officers, Promoters and Control Persons; 
         Compliance With Section 16(a) of the Exchange Act
         -------------------------------------------------------------
(a)(b)   Identification of Directors, Executive Officers and Significant 
         Employees.

     The officers, directors and significant employees of the Company are listed
below.  The  directors  of the Company are elected to hold office until the next
annual meeting of shareholders and until their  respective  successors have been
elected  and  qualified.  Officers  of the  Company  are elected by the Board of
Directors and hold office until their successors are elected and qualified.

Name                         Age              Position
----                         ---              --------

A. Thomas Tenenbaum          45               Director, President and Treasurer

Albert Brenman               71               Director and Secretary

Janice V. Budzen             39               Director

-----------

Business Experience of Officers, Directors and Significant Employees.
--------------------------------------------------------------------

     A.  Thomas  Tenenbaum  has served as a director  of the  Company  since its
formation in June 1988 and as President and Treasurer  since  November  1989. He
served as Vice  President  and  Secretary  of the  Company  from June 1988 until
November 1989.  From 1976 to 1979, Mr.  Tenenbaum  served with the United States
Securities and Exchange  Commission in the Division of  Corporation  Finance and
the Division of  Enforcement  in the New York Regional  Office.  Since 1980, Mr.
Tenenbaum has been in private law practice.  He is a director and shareholder in
the firm of Brenman Bromberg & Tenenbaum, P.C. Mr. Tenenbaum's legal practice is
focused primarily on securities law with emphasis on  corporate and  partnership
finance.  Mr. Tenenbaum  received his B.A. degree (Magna Cum Laude) from Fordham
University in 1973 and graduated from Fordham  University School of Law in 1976.
Mr.  Tenenbaum  devotes  as much of his time as is  necessary  to the  Company's
business.

     Albert  Brenman has been  Secretary  and a director  of the  Company  since
November  21,  1989.  Mr.  Brenman  has been a  practicing  attorney  in Denver,
Colorado  since his admission to the bar in 1953.  Mr. Brenman is a director and
shareholder in the law firm of Brenman Bromberg & Tenenbaum,  P.C. and practices
primarily  in the areas of  corporate,  partnership  and  securities  law.  From
September 1986 until its acquisition of Hughes Wood Products,  Inc. in 1991, Mr.
Brenman  served as  president  and a director  of Firma,  Inc.  a publicly  held
company, continuing as a director of Hughes until 1994. Mr. Brenman received his

                                      -10-

<PAGE>



B.S.B.A.  degree from the University of Denver in 1950 and his LL.B. degree from
the  University of Denver College of Law in 1953. He is a member of the Colorado
and  Denver  Bar  Associations.  Mr.  Brenman  devotes as much of his time as is
necessary to the Company's business.

     Janice V.  Budzen has been a director of the Company  since  October  1988,
also serving as Treasurer from October 1988 until November 1989.  Since February
1987 Ms. Budzen has been the president of Genoa, Inc., a privately-held ski-wear
manufacturing  company  located  in  Winter  Park,  Colorado.  From  May 1986 to
February 1987, Ms. Budzen was a loan administrator with the Bank of Winter Park,
Winter Park,  Colorado  responsible for loan compliance with FDIC  requirements.
Ms.  Budzen  received a Bachelor of Arts degree in  hotel/restaurant  management
from Michigan State  University  located in East Lansing,  Michigan in 1981. Ms.
Budzen  devotes  so  much of her  time as is  necessary  to the  affairs  of the
Company.

(c) Family Relationships.

     There are no family  relationships  among any of the Company's officers and
directors.

(d) Involvement in Certain Legal Proceedings.

     No officer, director,  significant employee,  promoter or control person of
the Company has been involved in any event of the type  described in Item 401(d)
of Regulation S-B during the past five years.

Item 10.  Executive Compensation.
          ----------------------

(a) General.

     Executive Officers. No officer has received any compensation for serving in
such capacity for the Company during the fiscal year ended May 31, 1997.

     Bonuses and  Deferred  Compensation.  No  executive  officer of the Company
received any bonus or deferred compensation during the fiscal year ended May 31,
1997.

     Proposed  Compensation.  No  officer  and/or  director  of the  Company  is
currently  receiving  any  compensation  for  serving in such  capacity  for the
Company  and no  arrangements  or  agreements  exist  pursuant to which any such
person is to be  compensated  for  services  as an  officer or  director  of the
Company.

Stock Option Plan
-----------------

     The Company has adopted a stock option plan (the "Plan") for key  employees
reserving  a total of  20,000,000  shares of Common  Stock  (to be  adjusted  in
accordance  with subsequent changes in the capital structure of the Company) for

                                      -11-

<PAGE>



issuance  pursuant to the exercise of stock options (the "Options") which may be
granted to employees  (including  officers),  consultants  and  directors of the
Company. The maximum number of shares which may be subject to Options granted to
officers  and  directors  as a group  shall not exceed  10,000,000.  The plan is
administered  by the Board of Directors,  or at its discretion by a stock option
committee (the "Committee") consisting of not less than three directors. Members
of the  Committee  are eligible to  participate  in the Plan.  The Committee may
determine which Options may be options intended to qualify for special treatment
under the Internal Revenue Code of 1986, as amended  ("Incentive Stock Options")
or non-qualified options  ("Non-Qualified Stock Options") which are not intended
to so  qualify.  Options  may be  granted  to  employees  (including  officers),
consultants and directors  (ehether or not they are employees) of the Company or
its  subsidiaries.  The  Committee  may take into  account the duties of persons
selected,  their  present  and  potential  contributions  to the  success of the
Company and such other  considerations  as the Committee  deems  relevant to the
purposes of the Plan.  Incentive Stock Options may not be granted to consultants
and  directors  who are not also  employees.  The Board is empowered to make all
other determinations deemed necessary or advisable for the administration of the
Plan.

     The Committee  has broad  discretion to determine the number of shares with
respect to which Options may be granted to participants.  The maximum  aggregate
fair market value (determined as of the date of grant) of the shares as to which
the Incentive  Stock Options  become  exercisable  for the first time during any
calendar year may not exceed $100,000.

     The Plan  provides  that the  purchase  price per share for each  Incentive
Stock  Option on the date of grant may not be less than 100% of the fair  market
value of the  Common  Stock on the date of grant.  In  addition,  in the case of
Non-Qualified Stock Options,  the Option price of such Options shall be not less
than 80% of the fair market  value of the shares of Common  Stock of the Company
on the date of grant of the Option,  however,  any option granted under the Plan
to a person owning more than ten percent of the Common Stock shall be at a price
of at least 110% of such fair market value.

     If an optionee  ceases to be employed by or be a director of or  consultant
to the Company or its divisions or subsidiaries for any reason other than death,
disability,  retirement or termination for cause,  the optionee may exercise all
Options within three months  following such cessation to the extent  exercisable
on the date of cessation. If an optionee's employment or consulting relationship
is terminated  or a director is removed for cause,  all Options held by him will
terminate immediately. If an optionee dies while a director of or while employed
by, or a consultant to the Company,  or during the three-month  period following
termination   of  the   optionee's   employment,   directorship   or  consulting
relationship  (other  than for  cause) or if the  optionee  retires  or  becomes
disabled,  the  optionee's  Options,   unless  previously  terminated,   may  be
exercised,  whether or not otherwise  exercisable,  by the optionee or his legal
representative  or the person who acquires the Options by bequest or inheritance
at any  time  within  one  year  following  the  date of  death,  disability  or



                                      -12-

<PAGE>

retirement of the optionee. An Option granted under the Plan is not transferable
by the optionee  other than by will or by the laws of descent and dis  tribution
and, during the lifetime of the Optionee, may be exercised only by the optionee,
his guardian or legal representative.

     As of August 31, 1997 no options have been granted under the Plan.

Stock Bonus Plan
----------------

     As an incentive to attract and keep  personnel  of  experience  and ability
with the Company, the Board of Directors,  with shareholder approval,  adopted a
Stock  Bonus  Plan,  whereby  all  salaried  employees  of the  Company  and its
subsidiaries,  other than non-salaried  directors  ("eligible  employees"),  are
eligible to  periodically  receive  shares of the Common  Stock of the  Company.
Eligible  employees shall not be eligible to receive shares until they have been
employed by the Company for at least one year.  The aggregate  fair market value
of shares  which may be  allocated to an employee in any year may not exceed 20%
of his salary. The value of the shares allocated each year shall be based on the
bid price of the Company's  stock on the date of  allocation  or, if there is no
bid price  quotation on that date, on the most recent bid  quotation  within the
prior 90 days, and, if no bid quotation has been given in that period, the Stock
Bonus Plan Committee (the  "Committee")  shall determine the value of the shares
on the book value of the stock on the date of allocation.  A bonus share reserve
of  20,000,000  shares  of  Common  Stock  of the  Company  (to be  adjusted  in
accordance with subsequent  changes in the capital  structure of the Company and
at other  times  within  the  discretion  of the  Board of  Directors)  has been
established  from which the  distributions  may be made at the discretion of the
Committee.  The  Committee is to be  appointed by the Board of Directors  and to
consist  of at least  three  members.  The Board of  Directors  shall act as the
Committee if no appointments are made.

     Pursuant to the plan, bonus shares may be allocated to an eligible employee
at any time,  but  delivery  of the shares to the  employee  does not take place
until the employee has completed  two full years of employment  with the Company
commencing from the date of allocation.  During the two-year period, the Company
serves  as  custodian  for  the  shares  allocated  and  the  shares  may not be
transferred,  sold, assigned or pledged (as collateral for a loan or as security
for the performance of an option or for any other purpose).  In addition, if the
employee leaves the employ of the Company for any reason (including  termination
of operations of the Company) during the two-year  period,  the shares allocated
are forfeited.

     As of August 31, 1997,  no share  bonuses had been granted  under the Bonus
Plan.

(b) Summary Compensation Table.

     No summary compensation table is included in this report as no compensation
was paid that is required to be disclosed in such a table.


                                      -13-

<PAGE>



(c) Option/SAR Grants Table.

     Not applicable.

(d) Aggregated Option/SAR Exercise and Fiscal Year-End Option/SAR Value Table.

     Not applicable.

(e) Long-Term Incentive Plan ("LTIP") Awards Table.

     Not applicable.

(f) Compensation of Directors.

     Standard Arrangements.  The Company does not pay its employee directors for
their  services  in that  capacity;  however,  officers  and  directors  receive
reimbursement for out-of-pocket expenses incurred by them in connection with the
business of the Company.  Currently, the Company does not pay any directors fees
for attendance at board meetings.

     Other Arrangements. The Company has no other arrangements pursuant to which
any director of the Company was compensated  during the year ended May 31, 1997,
for services as a director.

(g) Employment Contracts and Termination of Employment and Change-in-Control
    Arrangements.

     None.

(h) Reporting on Repricing of Options/SARs.

     Not Applicable.


                                      -14-

<PAGE>



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

(a) Security Ownership of Certain Beneficial Owners.

     The following table sets forth information as of August 31, 1997, as to the
beneficial  ownership of shares of the Company's Common Stock (the only class of
stock  outstanding)  by each person who, to the knowledge of the Company at that
date, was a beneficial  owner of 5% or more of the outstanding  shares of Common
Stock.

Title of         Name and Address of           Amount and Nature         Percent
  Class            Beneficial Owner          Beneficial Owner  (1)      of Class
--------         --------------------       ----------------------      --------

Common          A. Thomas Tenenbaum               28,163,800             31.3%
Stock            1775 Sherman Street
                     Suite 1001
                  Denver, CO 80203
   
Common             Albert Brenman                  9,207,500             10.2%
Stock            1775 Sherman Street
                     Suite 1001
                  Denver, CO  80203
    
----------------------

(1)  Calculated  pursuant to Rule  13d-3(d) of the  Securities  Exchange  Act of
     1934.  Unless otherwise stated below,  each such person has sole voting and
     investment  power with  respect to all such  shares.  Under Rule  13d-3(d),
     shares not outstanding  which are subject to options,  warrants,  rights or
     conversion privileges exercisable within 60 days are deemed outstanding for
     the purpose of calculating the number and percentage  owned by such person,
     but  are  not  deemed  outstanding  for  the  purpose  of  calculating  the
     percentage owned by each other person listed.





                                      -15-

<PAGE>



(b) Security Ownership of Management.

The  following  table sets forth  information  as of August 31, 1997,  as to the
beneficial  ownership of shares of the Company's Common Stock (the only class of
stock  outstanding)  by each  person who is an officer  and/or  director  of the
Company.

Title of        Name and Address of           Amount and Nature         Percent
  Class           Beneficial Owner           Beneficial Owner (1)      of Class
--------        --------------------        ---------------------      --------

Common          A. Thomas Tenenbaum              28,163,800              31.3%
Stock           1775 Sherman Street
                    Suite 1001
                 Denver, CO  80203
   
Common            Albert Brenman                  9,207,500              10.2%
Stock           1775 Sherman Street
                    Suite 1001
                 Denver, CO  80203
    
Common             Janice Budzen                  1,000,000               1.1%
Stock           6411 East Radcliff
               Englewood, CO  80111
   
Common             Officers and                  38,371,300              42.6%
Stock                Directors
                    as a Group
                  (Three persons)
    
------------------------

(1)  Calculated  pursuant to Rule  13d-3(d) of the  Securities  Exchange  Act of
     1934.  Unless otherwise stated below,  each such person has sole voting and
     investment  power with  respect to all such  shares.  Under Rule  13d-3(d),
     shares not outstanding  which are subject to options,  warrants,  rights or
     conversion privileges exercisable within 60 days are deemed outstanding for
     the purpose of calculating the number and percentage  owned by such person,
     but  are  not  deemed  outstanding  for  the  purpose  of  calculating  the
     percentage owned by each other person listed.





                                      -16-

<PAGE>



(c) Changes in Control.

     No  understandings.  arrangements  or agreements are known by management at
this time which would result in a change in control of the Company.


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

(a)(b) Transactions with Management and Others.

Legal Representation
--------------------

     The Company  currently is represented by the law firm of Brenman Bromberg &
Tenenbaum, P.C. and has been so represented since March of 1994. Albert Brenman,
an officer and director of the Company,  is a director  and  shareholder  in the
firm. A. Thomas Tenenbaum, an officer and director of the Company, is a director
and shareholder in the firm. Representation of the Company by Brenman Bromberg &
Tenenbaum  has been at the firm's  standard  hourly fees for services  involving
general corporate and securities law matters.

Agreement to Provide Office Space and Services
----------------------------------------------

     The Company had an oral agreement with A. Thomas  Tenenbaum,  P.C. pursuant
to which the Company was provided with office space, telephone,  secretarial and
clerical  services  for $500 per  month.  This  arrangement  was  terminated  in
February 1994. The Company began  receiving  these services from the law firm of
Brenman Bromberg & Tenenbaum,  P.C. for $500 per month commencing in March 1994.
Management  believes  that  the  terms  of  this  arrangement  are at  least  as
advantageous as those which could be obtained from an unaffiliated party.

(c) Parents of the Company.

     Other than the persons named under Item 11, the Company has no "parents."

(d) Transactions with Promoters.

     Not applicable.


                                      -17-

<PAGE>



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

     (a) The  following  documents  are  filed  as a part of  this  Form  10-KSB
immediately following the signature page:

     1. Consolidated  Financial  Statements - the following financial statements
are filed herewith:

          Report of Certified Public Accountants

          Consolidated Balance Sheet - May 31, 1997

          Consolidated  Statements  of Operations - Years Ended May 31, 1996 and
          1997

          Statements  of Changes in  Shareholders'  Equity - Years ended May 31,
          1996 and 1997.

          Consolidated  Statements  of Cash Flows - Years ended May 31, 1996 and
          1997

          Notes to Consolidated Financial Statements - May 31, 1996 and 1997

     2. Financial  statement  schedules  have been omitted  because they are not
required or the  information  is included in the financial  statements and notes
thereto.

     3.  Exhibits  required  to be filed are  listed  below  and,  except  where
incorporated by reference, immediately follow the Financial Statements.

Number             Description
------             -----------

3.1                Articles of Incorporation (1)

3.2                Bylaws (1)

4.1(a)             Specimen Common Stock Certificate (1)

10.1               Stock Option Plan (1)

10.2               Stock Bonus Plan (1)

22.1               Subsidiaries of the Registrant (2)


                                      -18-

<PAGE>



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

(1)  Incorporated  by reference  from the like numbered  exhibits filed with the
     Registrant's  Registration  Statement on Form S-1, No.  33-23693  effective
     October 21, 1989.

(2)  Incorporated  by reference  from the like  numbered  exhibit filed with the
     Registrant's Annual report on Form 10-KSB for the fiscal year ended May 31,
     1993.

     (b) During  the last  quarter  of the  period  covered  by this  report the
Company filed no reports on Form 8-K.

     (c) Required  exhibits are attached  hereto and are listed in Item 13(a)(3)
of this Report.

     (d) Required  financial  statement  schedules  are attached  hereto and are
listed in Item 13(a)(2) of this Report.

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

     SUPPLEMENTAL  INFORMATION  TO BE FURNISHED  WITH REPORTS FILED  PURSUANT TO
SECTION 15(d) OF THE ACT BY  REGISTRANTS  WHICH HAVE NOT  REGISTERED  SECURITIES
PURSUANT TO SECTION 12 OF THE ACT:

     The  Registrant  has not sent to its security  holders any annual report or
proxy  material.  If such  report or proxy  material  is  furnished  to security
holders  subsequent  to the filing of this Form  10-KSB,  the  Registrant  shall
furnish  copies of such material to the  Commission  when it is sent to security
holders.


                                      -19-

<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.
   
Date:  December 10, 1997             VANDEN CAPITAL GROUP, INC.
    
                                     By  /s/  A. Thomas Tenenbaum
                                       -----------------------------------------
                                       A. Thomas Tenenbaum,
                                       President


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


   
Date:  December 10, 1997                 /s/  A. Thomas Tenenbaum
                                       -----------------------------------------
                                       A. Thomas Tenenbaum, President, Principal
                                       Executive Officer, Principal Accounting
                                       Officer, Principal Financial Officer and
                                       Director



Date:  December 10, 1997                 /s/ Albert Brenman
                                       -----------------------------------------
                                       Albert Brenman, Secretary and Director



Date:  December 10, 1997 
                                       -----------------------------------------
                                       Janice V. Budzen, Director
    










                                      -20-

<PAGE>









                          INDEX TO FINANCIAL STATEMENTS

            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
            --------------------------------------------------------

                              FINANCIAL STATEMENTS

                                      with

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                          May 31, 1996 and May 31, 1997



  Report of Independent Certified Public Accountants                   F-2

  Consolidated Financial Statements:

           Consolidated Balance Sheet                                  F-3

           Consolidated Statements of Operations                       F-4

           Consolidated Statements of Changes in                       F-5
             Stockholders' Equity

           Consolidated Statements of Cash Flows                       F-6

           Notes to Consolidated Financial Statements                  F-7



                                       F-1

<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------



The Board of Directors
Vanden Capital Group, Inc.
Denver, CO  80202


We have audited the  accompanying  consolidated  balance sheet of Vanden Capital
Group,  Inc. and  Consolidated  Subsidiaries as of May 31, 1997, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  two  years  ended  May  31,  1997.  These  financial   statements  are  the
responsibility of the company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our  opinion,  the  consolidated  financial  statements,  referred  to above,
present  fairly,  in all material  respects,  the  financial  position of Vanden
Capital Group,  Inc. and  Consolidated  Subsidiaries as of May 31, 1997, and the
results  of its  operations,  changes in its  stockholders'  equity and its cash
flows for the two  years  ended  May 31,  1997,  in  conformity  with  generally
accepted accounting principles.


                                              /s/  Schumacher & Associates, Inc.
                                              ----------------------------------
                                                   SCHUMACHER & ASSOCIATES, INC.
                                                   Certified Public Accountants
                                                   12835 E. Arapahoe Road
                                                   Tower II, Suite 110
                                                   Englewood, Colorado 80012


August 22, 1997


                                       F-2

<PAGE>



            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
            --------------------------------------------------------

                           CONSOLIDATED BALANCE SHEET

                                     ASSETS
                                     ------

                                  May 31, 1997

Current Assets:
         Cash (Note 5)                                                $ 383,043
         Accrued interest receivable                                      8,665
                                                                      ---------
           Total Current Assets                                         391,708
                                                                      ---------

         TOTAL ASSETS                                                 $ 391,708
                                                                      =========




                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities                                                   $   3,698
                                                                      ---------

Contingency and commitment (Note 5)                                        --

Stockholders' Equity (Notes 2 and 3):
         Preferred stock, $.0001 par value,
              100,000,000 shares authorized,
              none issued and outstanding                                  --
         Common stock $.0001 par value
              300,000,000 shares authorized
              90,015,200 shares issued and
              outstanding                                                 9,002
         Additional paid-in capital                                     687,469
         Accumulated deficit                                           (308,461)
                                                                      ---------
TOTAL STOCKHOLDERS' EQUITY                                              388,010
                                                                      ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $ 391,708
                                                                      =========




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



                                       F-3

<PAGE>



            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                        Years Ended
                                                May 31               May 31
                                                 1996                 1997
                                              ----------           ----------

Revenue                                       $        -           $        -
                                              ----------           ----------

Expenses:
         Legal and accounting (Note 4)            25,984               22,354
         Rent and clerical expense (Note 4)        6,000                6,000
         Other expenses                            3,423               11,737
                                              ----------           ----------
                                                  35,407               40,091
                                              ----------           ----------

Net loss from operations                         (35,407)             (40,091)

Other income (expense):
         Interest income                          15,498               15,085
                                              ----------           ----------

Net (Loss)                                    $  (19,909)          $  (25,006)
                                              ==========           ==========

Per Share                                     $      nil           $      nil
                                              ==========           ==========

Weighted Average Shares Outstanding           90,015,200           90,015,200
                                              ==========           ==========






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



                                       F-4

<PAGE>


<TABLE>
<CAPTION>


                               VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
                               --------------------------------------------------------

                           CONSOLIDATED   STATEMENTS   OF  CHANGES  IN SHAREHOLDERS' EQUITY
                                      For the years ended May 31, 1996 and 1997



                                                                     Additional        Retained
                                 Number of           Common           Paid-in          Earnings
                                   Shares            Stock            Capital          (Deficit)           Total
                                   ------            -----            -------          ---------           -----
<S>                             <C>               <C>               <C>               <C>               <C>       
Balance, May 31, 1995           90,015,200        $    9,002        $  687,469        $(263,546)        $  432,925
Net loss for the year
  ended May 31, 1996                  --                --                --            (19,909)           (19,909)
                                ----------        ----------        ----------        ---------         ----------
Balance, May 31, 1996           90,015,200             9,002           687,469         (283,455)           413,016
Net loss for the year
  ended May 31, 1997                  --                --                --            (25,006)           (25,006)
                                ----------        ----------        ----------        ---------         ----------
Balance, May 31, 1997           90,015,200        $    9,002        $  687,469        $(308,461)        $  388,010
                                ==========        ==========        ==========        =========         ==========




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

</TABLE>


                                                            F-5

<PAGE>



            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
            --------------------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                             Years Ended
                                                        May 31           May 31
                                                         1996             1997
                                                      ---------        ---------
Cash Flows Operating Activities:
         Net (Loss)                                   $ (19,909)      $ (25,006)
  Adjustments to reconcile net
   (loss) to net cash (used in)
   operating activities:
         Increase (decrease) in
          accounts payable                                2,835            (342)
         (Increase) decrease in accrued
          interest                                        4,536          (4,425)
                                                      ---------       ---------
      Net Cash (used in) Operating
       Activities                                       (12,538)        (29,773)
                                                      ---------       ---------

Cash Flows from Investing Activities                       --              --
                                                      ---------       ---------

Cash Flows from Financing Activities                       --              --
                                                      ---------       ---------

(Decrease) in Cash                                      (12,538)        (29,773)

Cash, Beginning of Period                               425,354         412,816
                                                      ---------       ---------

Cash, End of Period                                   $ 412,816       $ 383,043
                                                      =========       =========





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



                                       F-6

<PAGE>



            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
            --------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          May 31, 1996 and May 31, 1997

(1)  Summary of Accounting Policies
     ------------------------------

     A summary of the significant  accounting policies  consistently  applied in
     the preparation of the accompanying financial statements follows:

     General
     -------

     Vanden Capital Group, Inc. (The Company),  was incorporated  under the laws
     of  Colorado  on June 21,  1988.  The Company was formed for the purpose of
     engaging in any lawful business,  but has been in the business of providing
     management  consulting services.  On November 14, 1990 the Company formed a
     wholly-owned  subsidiary  with the name of VCG Holding Corp.  (VCG). On May
     16,  1989 the Company  formed  Vanden  Ventures  I, Inc.,  (VVI) a Colorado
     Corporation. The consolidated financial statements include the accounts and
     balances of the Company since its inception on June 21, 1988,  the accounts
     of VCG since  inception  on November 14, 1990 and the accounts of VVI since
     inception on May 16, 1989. All intercompany accounts and balances have been
     eliminated. The Company has selected May 31, as its fiscal year end.

     Use of Estimates in the Preparation of Financial Statements
     -----------------------------------------------------------

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

(2)  Stockholders' Equity
     --------------------

     The  Company  was  originally  capitalized  by the  issuance  of a total of
     39,200,000 shares of $.0001 par value common shares to three individuals in
     exchange for $39,200.  The Company subsequently issued 12,000,000 shares of
     $.0001  par  value  common  shares  for  $24,000.  See Note 3,  related  to
     successful completion of public securities offering.


                                       F-7

<PAGE>



            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
            --------------------------------------------------------

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                          May 31, 1996 and May 31, 1997

(3)  Securities Offering
     -------------------

     During December,  1988 the Company successfully completed a public offering
     of 38,815,000 units at the price of $.02 per unit. Each unit consisted of 1
     share of the  Company's  $.0001 par value  common  stock and 3 common stock
     purchase warrants, which have expired.

     The  underwriting  included  the sale to the  underwriter  of common  stock
     purchase  warrants  entitling the  underwriter to purchase one share of the
     Company  common stock for each ten units sold in the public  offering.  The
     underwriter acquired the warrants at a total price of $100.

(4)  Related Party Transactions
     --------------------------

     The Company has  retained  the law firm of Brenman,  Bromberg &  Tenenbaum,
     P.C. Mr. Albert Brenman, an owner of the law firm, is an officer,  director
     and stockholder of the Company.  Mr. A. Thomas  Tenenbaum,  who has been an
     officer,  director and  stockholder of the Company since its formation,  is
     counsel to the law firm. The Company has paid legal fees to this firm.

     The Company has entered into an oral  agreement  with the law firm pursuant
     to which the  Company  uses office  space  provided by the firm at $500 per
     month on a month to month basis.  Certain clerical and bookkeeping services
     are included at no additional cost.

(5)  Securities of Other Companies
     -----------------------------

     During March, 1989 the Company purchased $35,000 in restricted common stock
     of QuikByte Software, Inc. (QuikByte), a development-stage  enterprise, and
     provided  consulting  services valued at $15,000 to this new enterprise for
     an  additional  3,000,000  shares of  restricted  common  stock.  Effective
     October 11,  1989,  QuikByte  successfully  completed  a public  securities
     offering.  The  Company's 7% ownership  interest in QuikByte was carried at
     its cost of  $50,000  at May 31,  1991,  which was the lower of its cost or
     estimated  market.  During April,  1992 the market maker for  securities of
     QuikByte  ceased  operations and there has been no market for the shares of
     QuikByte  since that time.  Therefore  the  carrying  value of the QuikByte
     securities has been reduced to zero.


                                       F-8

<PAGE>



            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
            --------------------------------------------------------

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                          May 31, 1996 and May 31, 1997


(5)  Securities of Other Companies, Continued 
     ----------------------------------------

     The  Company  also  purchased  $60,000  of  equity  securities  of  Buyer's
     Resource. Inc. (Buyer's), which resulted in a 36% ownership of Buyer's. The
     Company's  equity  interest  in Buyer's is carried on the equity  method of
     accounting.  The Company's  shares of Buyer's net losses since  acquisition
     have been  recorded as an expense in the  statement of  operations  and the
     carrying  value of an asset has been  reduced  by such  losses.  At May 31,
     1995,  the Company's  investment in Buyer's is carried at zero. On December
     21, 1989 the Company signed a pledge agreement  guaranteeing a $90,000 loan
     from a bank to  Buyer's.  The  Company  pledged a $100,000  certificate  of
     deposit as security for this loan.  In June of 1992,  Buyer's paid down the
     principal balance of the loan to $60,000 and the Company obtained a release
     of $35,000 of the  collateral it had pledged to secure the loan,  resulting
     in the collateral currently pledged by the Company as security for the loan
     to be $65,000. A contingency exists with respect to this loan guarantee and
     collateral  agreement.  The amount of loss, if any,  related to this matter
     cannot  presently be  determined.  During April,  1990,  the Company loaned
     $50,000  to  Buyer's  with a  maturity  date of March  15,  1992.  The note
     required  quarterly  interest only  payments at 9.5% per annum.  At May 31,
     1991 the Company had not  collected  any  interest or principal on the note
     and the Company  provided an allowance for write down of this note, for the
     total $50,000. The principal of the note was convertible at any time at the
     Company's  option into shares of Buyer's Series A 12% Cumulative  Preferred
     Stock. During the years ended May 31, 1993 Buyer's made an interest payment
     to the Company in the amount of $6,125.  Effective May 21, 1993 the $50,000
     note plus accrued  interest of $1,875 were  converted into 51,875 shares of
     preferred  stock.  The Class A Preferred  Stock is convertible  into common
     stock and on a fully  diluted  basis  (taking into account all  outstanding
     common stock and  securities of Buyer's  Resource  convertible  into common
     stock,   the  Company  owns  an  interest  in  Buyer's  Resource  equal  to
     approximately 6.2% of that company.)

                                       F-9

<PAGE>


            VANDEN CAPITAL GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
            --------------------------------------------------------

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                          May 31, 1996 and May 31, 1997

(6)  Income Taxes
     ------------

     As of May 31, 1997 loss carryforwards of approximately $193,000 that expire
     in 2003  through  2012 are  available to offset  future  income.  Change in
     ownership of 50% of the Company may result in the  inability of the Company
     to utilize the carryovers.

     As of  May  31,  1997,  the  Company  has  total  deferred  tax  assets  of
     approximately $46,000 due to operating loss carryforwards. However, because
     of the  uncertainty  of  potential  realization  of these tax  assets,  the
     Company has provided a valuation allowance for the entire $46,000. Thus, no
     tax assets have been  recorded in the  financial  statements  as of May 31,
     1997.

(7)  Concentration of Credit Risk
     ----------------------------

     Financial   instruments   that   potentially   subject   the   Company   to
     concentrations of credit risk consist  primarily of cash  investments.  The
     Company places its cash investments with financial institutions.  As of May
     31, 1997 the Company had a  concentration  of credit risk since it had cash
     investments in bank accounts totalling  approximately  $49,000 in excess of
     the FDIC insured amounts.


                                      F-10