UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

          QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the Quarterly period ended June 30, 2000

                         Commission File Number 0-30573

                            SPECTRE INDUSTRIES, INC.

             NEVADA                                     91-2041523231612
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation of organization)

                              #6 - 260 E. Esplanade
                               North Vancouver, BC
                                     V7L 1A3

                               Tel: (604) 984-0400
                               Fax: (604) 990-0927

          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                         DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 113 0r 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes |_|  No |_|

Not applicable

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 20,655,860

Transitional Small Business Format: Yes |X|  No |_|


                                                                               1
<PAGE>

                         PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

See Exhibit A

Item 2. Management's Discussion and Analysis or Plan of Operation.

Overview

As noted in the Company's Report of Independent Certified Public Accountants
included in the Company's Form 10-SB for the year ended December 31, 1999, the
Company has experienced significant operating losses and an accumulated deficit
that raise doubt about the Company's ability to continue as a going concern. The
Company incurred additional net losses of $125,058 for the three-month period
ended June 30, 2000 and $355,090 for the six months ended June 30, 2000. The
Company had an accumulated deficit of $8,943,232 at June 30, 2000. The Company
is continuing its efforts to increase its sales volume and attain a profitable
level of operations. However, there is no assurance that the Company's efforts
will be successful. There can be no assurance that future operations will be
profitable or will satisfy future cash flow requirements.

Results of Operations-Six Months Ending June 30, 2000

During the three months ended June 30, 2000, total revenues amounted to $341,452
($616,487 for the six-month period ended June 30, 2000) versus no revenue in the
comparable prior year periods. The company acquired its principal operating
subsidiary, Grant Automotive Group, Inc. ("GAG"), an Ontario (Canada)
corporation, January 1, 2000. GAG is a manufacturers representative in the
Automotive aftermarket. GAG was acquired from Grant Brothers Sales, Ltd.,
("GBS") an Ontario (Canada) Corporation for a cash consideration of US $500,000,
effective January 1, 2000. As part of this transaction, the Company entered into
a Management Services Agreement with GBS to provide managerial, sales and office
support services to GAG for a term of five years.

Pursuant to this Management Services Agreement, GBS agreed to operate GAG's
business in exchange for a share of the net cash flow generated thereby and the
issuance of 450,000 shares of Common Stock by the Company. GBS agreed to pay GAG
the first US $50,000 of net cash flow generated each year in excess of GBS's
direct expenses incurred in managing GAG. During the years 2000 and 2001, GBS
has agreed to prepay and guarantee such amount in two installments of US $25,000
each, on June 30 and December 31 of the foregoing years. GBS will then be
entitled to the next US $100,000 of net cash flow. Thereafter, any net cash flow
remaining will be distributed 47.5% to GAG and 52.5% to GBS.

In the event that GAG pays to GBS the "Net Cash Flow Increase Payment" on or
prior to January 1, 2005, GAG's share of the remaining net cash flow will be
increased to 95% and GBS's management fee will decrease to 5%. The "Net Cash
Flow Increase Payment" is $423,058.


                                                                               2
<PAGE>

The Company's revenue is primarily derived from commissions earned by GAG on the
sales of its principals' automotive and truck products to wholesale buyers such
as Uni-Select and NAPA in Canada.

The Company also acquired a 51% interest in Bigoni Stiner, Inc. ("Bigoni
Stiner") effective January 1, 2000. This is a small manufacturer's
representative agency operating in the States of Washington and Oregon. The
Company acquired its interest for 2 promissory notes each in the aggregate
amount of $50,000, payable 20% per year commencing December 31, 2000, bearing no
interest and subject to pro rata adjustment calculated annually in the event the
sales of Bigoni Stiner are other than an aggregate of $200,000 in any given
year.

The Company generated a gross margin of $96,568 for the three months and $93,345
for the six months ended June 30, 2000. The company had no margin in the
comparable prior year period. The gross margin percentage is 28% of revenue for
the three month period and 15% for the six month period. Based on the previous
experience of GAG, the company believes that this trend will be maintained for
the balance of the fiscal year.

For the six month period ended June 30, 2000, the Company reported $616,487 in
revenues, primarily from commissions earned by its operating subsidiary on sales
of its principals' automotive and heavy-duty parts products in the North
American automotive aftermarket. The Company had no revenues in the comparable
prior year period.

Net loss for the six month period ending June 30, 2000 was $355,090 or $.02 per
share. This compares to a net loss of $1,090,653 or $.09 per share for the same
period in the prior year.

During the six month period ending June 30, 2000, the Company incurred interest
expense of $78,646 pursuant to convertible debentures in the aggregate principal
amount of $1,521,100. Effective September 1, 2000, the Company converted all of
its convertible debentures into common stock of the Company's shares. This will
eliminate $152,100 in recurring annual interest expense.

Liquidity and Sources of Capital

During the three months ended June 30, 2000, the Company's net cash provided by
financing activities was $816,004, for the six month period ended June 30, it
was $876,004. Net Cash Used by Operating Activities was $42,673 for the three
month period ending June 30, 2000 and $27,649 for the six month period ended
that date. See Consolidated Statements of Cash Flows.

The ability of the Company to satisfy its obligations depends in part on its
ability to reach a profitable level of operations and secure long-term financing
for the development and expansion of its main business. The Company currently
has available cash to meet its needs for the next 12 months, assuming the same
level of corporate expenditure. The Company will depend on cash receipts from
commission revenues generated from its subsidiary operations. The Company has no
reason to believe that its principal operating


                                                                               3
<PAGE>

subsidiary will fail to generate at least the same level of commission revenues
as in the past. There can be no assurance, however, that the Company will be
successful in obtaining any additional financing through equity or debt
offering, if and when needed.

As a result of the operations of GAG and the conversion of its outstanding
convertible debentures into shares of common stock in September of 2000, the
Company has no current need to raise additional capital in the near term to
survive as a going concern and to implement its business plan. Through GAG, the
Company intends to acquire small independent agents in the North American auto
parts industry. It is not anticipated that these acquisitions, should any occur,
would require substantial additional capital either in the acquisition phase or
in a later operating phase.

The Management Services Agreement between the Company and GBS provides an option
for the Company to increase its Net Cash Flow by payment of an additional
$423,058. This option doesn't expire until December 31, 2004. At that time the
Company may not have sufficient funds to cover this expense and, therefore,
substantial additional funds may be then required should the Company determine
to exercise this option. There is no certainty that the Company will be able to
raise sufficient capital in a timely manner or on terms it deems reasonable.

In light of the Company's limited resources and the competitive environment in
which it operates, any inability to obtain additional financing may cause the
Company to be forced to discontinue its proposed acquisition strategies. Debt
financing increases expenses and must be paid regardless of operating results.
Equity financing could involve dilution to the interests of the Company's
then-existing stockholders.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 2. Changes in Securities

On January 1, 2000, the Company issued 450,000 shares of Common Stock to GBS for
the purchase of GAG valued at $112,500, or $0.25 per share. These shares were
exempt from the registration requirements under the Securities Act in reliance
on Section 4(2) of the Securities Act.

On January 14, 2000, the Company issued in aggregate a total of 1,210,000 shares
of Common Stock to three individuals for services valued at $340,010, or $0.281
per share. 1,200,000 shares were issued in reliance on the exemption from the
registration requirements under the Securities Act provided by Regulation S
under the Securities Act. The remaining 10,000 shares were issued in reliance on
the exemption from the registration requirements under the Securities Act
provided by Regulation D under the Securities Act.

On January 14, 2000, the Company issued 300,000 shares of Common Stock to
European investors for a total subscription price of $60,000, or $0.20 per
share. These shares were issued


                                                                               4
<PAGE>

in reliance on the exemption from the registration requirements under the
Securities Act provided by Regulation S under the Securities Act.

On August 29, 2000 and September 26, 2000 the Company issued 660,000 shares of
Common Stock to European investors for a total subscription price of 330,000 or
$0.50 per share. These shares were issued in reliance on the exemption from the
registration requirements under the Securities Act provided by Regulation S
under the Securities Act.

On September 11, 2000 the Company issued an aggregate of 3,802,500 shares of its
common stock in connection with the conversion of all of its outstanding
Convertible debentures. These were converted at $.40 per share. This was
approximately 20% less than the conversion rate that would have been required
under the terms of the debenture. In addition, an aggregate of 145,310 shares
were issued on the same terms and conditions in connection with the accrued
interest owing on certain of the debentures. The remaining accrued interest was
paid in cash. The Company made this offer to its debenture holders in order to
eliminate all its outstanding long-term indebtedness prior to maturity. These
shares were issued in reliance on the exemption from the registration
requirements under the Securities Act provided by Regulation S under the
Securities Act.

Item 3. Defaults Upon Senior Securities

None

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

None

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K.

None.


                                                                               5
<PAGE>


                         SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on behalf by the undersigned, thereunto duly
aurhorized.

                                     Spectre Indestries, Inc.
                                     (Registrant)


Date: June 26, 2001                             /s/ Ian S. Grant
                                     -------------------------------------------
                                     Ian S. Grant, President and Chief Executive
                                     Officer*

*Print the name and title of each signing officer under his signature.


                                                                               6
<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)

                        CONSOLIDATED FINANCIAL STATEMENTS

                       June 30, 2000 and December 31, 1999

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                           Consolidated Balance Sheets

                                     ASSETS

                                                      June 30,     December 31,
                                                        2000           1999
                                                    ------------   ------------
                                                     (Unaudited)

CURRENT ASSETS

  Cash                                               $  292,921     $   44,566
  Accounts receivable, net (Note 2)                      44,947             --
  Term deposit                                          553,048             --
                                                     ----------     ----------

    Total Current Assets                                890,916         44,566
                                                     ----------     ----------

OTHER ASSETS

  Goodwill, net (Note 12)                               436,015             --
  Deposit on subsidiary acquisition (Note 8)                 --        450,000
  Note and interest receivable (net) (Note 5)                --             --
                                                     ----------     ----------

    Total Other Assets                                  436,015        450,000
                                                     ----------     ----------

    TOTAL ASSETS                                     $1,326,931     $  494,566
                                                     ==========     ==========

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                     Consolidated Balance Sheets (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

                                                       June 30,     December 31,
                                                         2000           1999
                                                     ------------   ------------
                                                     (Unaudited)

CURRENT LIABILITIES

  Accounts payable                                   $   153,018    $        --
  Accounts payable - related party (Note 11)                  --        337,200
  Accrued expenses                                        52,383        102,960
  Convertible debentures (Note 3)                      1,521,000      1,521,000
  Notes payable (Note 13)                                  5,676             --
                                                     -----------    -----------

    Total Current Liabilities                          1,732,077      1,961,160
                                                     -----------    -----------

LONG-TERM DEBT

  Notes payable (Note 13)                                 62,943             --
                                                     -----------    -----------

    Total Long-Term Debt                                  62,943             --
                                                     -----------    -----------

    Total Liabilities                                  1,795,020      1,961,160
                                                     -----------    -----------

STOCKHOLDERS' EQUITY (DEFICIT)

  Common stock, $0.001 par value, 100,000,000
   shares authorized, 15,846,450 and 12,106,450
   shares issued and outstanding, respectively            15,846         12,106
  Additional paid-in capital                           8,461,050      7,109,442
  Other comprehensive income (loss)                       (1,753)            --
  Deficit accumulated during the development stage    (8,943,232)    (8,588,142)
                                                     -----------    -----------

    Total Stockholders' Equity (Deficit)                (468,089)    (1,466,594)
                                                     -----------    -----------

    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY (DEFICIT)                                $ 1,326,931    $   494,566
                                                     ===========    ===========

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                          From
                                                    For the                      For the              Inception on
                                               Three Months Ended            Six Months Ended           April 26,
                                                    June 30,                     June 30,             1995 Through
                                          ---------------------------   ---------------------------     June 30,
                                              2000           1999           2000           1999           2000
                                          ------------   ------------   ------------   ------------   ------------
<S>                                       <C>            <C>            <C>            <C>            <C>
REVENUES                                  $   341,452    $        --    $   616,487    $        --    $   616,487

COST OF SALES                                 244,884             --        523,142             --        523,142
                                          -----------    -----------    -----------    -----------    -----------

  Gross Margin                                 96,568             --         93,345             --         93,345
                                          -----------    -----------    -----------    -----------    -----------

EXPENSES

  Discount induced debenture conversion            --             --             --        121,390        259,370
  Bad debt expense                                 --         15,125          4,387         30,250        572,928
  General and administrative                  134,368        420,408        179,646        745,038      3,787,931
  Amortization expense                         24,223             --         48,446             --         48,446
  Consulting expense                           25,358             --        140,358             --        140,358
                                          -----------    -----------    -----------    -----------    -----------

    Total Expenses                            183,949        435,533        372,837        896,678      4,809,033
                                          -----------    -----------    -----------    -----------    -----------

    Loss from Operations                      (87,381)      (435,533)      (279,492)     (896,678)     (4,715,688)
                                          -----------    -----------    -----------    -----------    -----------

OTHER INCOME (EXPENSE)

  Interest income                               3,048            436          3,048          1,340         64,262
  Interest expense                            (40,725)       (38,650)       (78,646)            --       (511,310)
  Loss from equity subsidiary                      --             --             --             --       (375,001)
                                          -----------    -----------    -----------    -----------    -----------

    Total Other Income (Expense)              (37,677)       (38,214)       (75,598)      (193,975)      (822,049)
                                          -----------    -----------    -----------    -----------    -----------

LOSS BEFORE EXTRAORDINARY
 ITEMS AND LOSS FROM
 DISCONTINUED OPERATIONS                     (125,058)      (473,747)      (355,090)    (1,090,653)    (5,537,737)
                                          -----------    -----------    -----------    -----------    -----------

EXTRAORDINARY ITEM

  Loss on extinguishment of debt                   --             --             --             --     (1,216,250)
                                          -----------    -----------    -----------    -----------    -----------

    Total Extraordinary Item                       --             --             --             --     (1,216,250)
                                          -----------    -----------    -----------    -----------    -----------

LOSS FROM DISCONTINUED OPERATIONS
   NET OF ZERO TAX BENEFIT                         --             --             --             --     (2,189,245)
                                          -----------    -----------    -----------    -----------    -----------

NET LOSS                                  $  (125,058)   $  (473,747)   $  (355,090)   $(1,090,653)   $(8,943,232)
                                          ===========    ===========    ===========    ===========    ===========
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                Consolidated Statements of Operations (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                         From
                                             For the                         For the                 Inception on
                                        Three Months Ended               Six Months Ended              April 26,
                                             June 30,                        June 30,                1995 Through
                                 --------------------------------  -------------------------------     June 30,
                                       2000             1999           2000             1999             2000
                                 ---------------  ---------------  -------------   ---------------   -------------
<S>                              <C>              <C>              <C>             <C>               <C>
OTHER COMPREHENSIVE INCOME
 (LOSS)

  Foreign currency translation
   adjustments                   $       (1,530)  $           --   $     (1,753)   $           --    $     (1,753)
                                 --------------   --------------   ------------    --------------    ------------

    Total Other Comprehensive
     Income (Loss)                       (1,530)              --         (1,753)               --          (1,753)
                                 --------------   --------------   ------------    --------------    ------------

TOTAL OTHER COMPREHENSIVE
 INCOME (LOSS)                   $     (126,588)  $     (473,747)  $   (356,843)   $   (1,090,653)   $ (8,944,985)
                                 ==============   ==============   ============    ==============    ============

BASIC LOSS PER SHARE

 Continuing operations           $        (0.01)  $        (0.05)  $      (0.02)   $        (0.09)
 Extraordinary item                          --               --             --                --
                                 --------------   --------------   ------------    --------------

    Total                        $        (0.01)  $        (0.05)  $      (0.02)   $        (0.09)
                                 ==============   ==============   ============    ==============

WEIGHTED AVERAGE NUMBER OF
 SHARES OUTSTANDING                  14,079,912        9,881,000     14,079,912        11,340,149
                                 ==============   ==============   ============    ==============
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
            Consolidated Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                              Deficit
                                                                                            Accumulated
                                          Common Stock        Additional       Currency      During the
                                  -------------------------     Paid-in      Translation    Development
                                     Shares        Amount       Capital       Adjustment       Stage
                                  -----------   -----------   -----------    -----------    -----------
<S>                                   <C>       <C>           <C>            <C>            <C>
Balance, at inception                      --   $        --   $        --    $        --    $        --

Common stock issued for
 Spectre Motor Sports Ltd.
  recorded at predecessor cost        630,000           630          (630)            --             --

Common stock issued for cash
 at $11.25 per share                   51,000            51       573,699             --             --

Stock offering costs                       --            --       (57,375)            --             --

Currency translation adjustment            --            --            --            367             --

Net loss from inception
 through December 31, 1995                 --            --            --             --       (503,384)
                                  -----------   -----------   -----------    -----------    -----------

Balance, December 31, 1995            681,000           681       515,694            367       (503,384)

Common stock issued
  for cash at $11.25 per share         51,889            52       583,698             --             --

Common stock issued for
  cash at $13.75 per share             72,727            73       999,927             --             --

Common stock issued for cash
  at $10.00 per share                  25,076            25       250,731             --             --

Stock offering costs                       --            --      (192,025)            --             --

Additional shares issued under
 recapitalization                       8,511             8            (8)            --             --

Currency translation adjustment            --            --            --         (5,976)            --

Net loss for the year
  ended December 31, 1996                  --            --            --             --     (1,732,866)
                                  -----------   -----------   -----------    -----------    -----------

Balance, December 31, 1996            839,203   $       839   $ 2,158,017    $    (5,609)   $(2,236,250)
                                  -----------   -----------   -----------    -----------    -----------
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
      Consolidated Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>
                                                                                                      Deficit
                                                                                                    Accumulated
                                                 Common Stock         Additional     Currency       During the
                                         -------------------------     Paid-in      Translation     Development
                                            Shares        Amount       Capital       Adjustment        Stage
                                         -----------   -----------   ------------   ------------   ------------
<S>                                        <C>         <C>           <C>            <C>            <C>
Balance, December 31, 1996                   839,203   $       839   $ 2,158,017    $    (5,609)   $(2,236,250)

Currency translation adjustment                   --            --            --          5,609             --

Common stock issued for debt
 at $0.17 per share                        1,800,000         1,800       298,200             --             --

Additional shares issued under
 recapitalization                             16,003            16           (16)            --             --

Contribution of capital by shareholder            --            --       158,264             --             --

Common stock issued for services
 valued at $0.17 per share                    42,800            43         7,083             --             --

Net loss for the year ended
 December 31, 1997                                --            --            --             --       (308,211)
                                         -----------   -----------   -----------    -----------    -----------

Balance, December 31, 1997                 2,698,006         2,698     2,621,548             --     (2,544,461)

Common stock issued for debt
 and interest at $1.37 per share           1,390,000         1,390     1,909,860             --             --

Common stock issued for services
 valued at $1.37 per share                 1,200,000         1,200     1,648,800             --             --

Common stock issued for cash
 and services valued at $0.001
 per share                                 4,444,444         4,444            --             --             --

Common stock issued for services
 valued at $1.06 per share                    24,000            24        25,464             --             --

Discount on debentures issued
 below fair market value (Note 3)                 --            --       137,980             --             --

Net loss for the year ended
 December 31, 1998                                --            --            --             --     (4,744,800)
                                         -----------   -----------   -----------    -----------    -----------

Balance, December 31, 1998                 9,756,450   $     9,756   $ 6,343,652    $        --    $(7,289,261)
                                         -----------   -----------   -----------    -----------    -----------
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
      Consolidated Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>
                                                                                                Deficit
                                                                                              Accumulated
                                           Common Stock          Additional     Currency       During the
                                    -------------------------     Paid-in      Translation    Development
                                      Shares        Amount        Capital       Adjustment       Stage
                                    -----------   -----------   ------------   ------------   ------------
<S>                                  <C>          <C>           <C>            <C>            <C>
Balance, December 31, 1998            9,756,450   $     9,756   $ 6,343,652    $        --    $(7,289,261)

Common stock issued for cash
 and services valued at $0.80
 per share                              200,000           200       159,800             --             --

Common stock issued for
 services at $1.19 per share            250,000           250       296,500             --             --

Common stock issued for cash
and services at $0.10 per share       1,900,000         1,900       188,100             --             --

Discount on debentures issued
 below fair market value (Note 3)            --            --       121,390             --             --

Net loss for the year ended
 December 31, 1999                           --            --            --             --     (1,298,881)
                                    -----------   -----------   -----------    -----------    -----------

Balance, December 31, 1999           12,106,450        12,106     7,109,442             --     (8,588,142)

Common stock issued for services
 at $0.25 per share (unaudited)         450,000           450       112,050             --             --

Common stock issued for debt
 at $0.28 per share (unaudited)       1,210,000         1,210       338,800             --             --

Common stock issued for cash
 at $0.20 per share (unaudited)         300,000           300        59,700             --             --

Common stock issued for interest
 expense at $0.28 per share
 (unaudited)                            100,000           100        19,538             --             --

Common stock issued for cash at
 $0.50 per share (unaudited)          1,680,000         1,680       838,320             --             --

Stock offering costs (unaudited)             --            --       (16,800)            --             --

Currency translation adjustment
 (unaudited)                                 --            --            --         (1,753)            --

Net loss for the six months
 ended June 30, 2000 (unaudited)             --            --            --             --       (355,090)
                                    -----------   -----------   -----------    -----------    -----------

Balance, June 30, 2000
 (unaudited)                         15,846,450   $    15,846   $ 8,461,050    $    (1,753)   $(8,943,232)
                                    ===========   ===========   ===========    ===========    ===========
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                 From
                                                           For the                       For the             Inception on
                                                      Three Months Ended             Six Months Ended          April 26,
                                                           June 30,                      June 30,            1995 Through
                                                 ---------------------------   ---------------------------     June 30,
                                                     2000           1999           2000           1999           2000
                                                 ------------   ------------   ------------   ------------   ------------
<S>                                              <C>            <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES

  Net loss                                       $  (125,058)   $  (473,747)   $  (355,090)   $(1,090,653)   $(8,943,232)
  Adjustments to reconcile net loss to net
   cash used by operating activities:
    Gain (loss) from discontinued operations              --             --             --             --        (22,205)
    Loss from equity subsidiary                           --             --             --             --        375,001
    Gain on investments                               (3,048)            --         (3,048)            --         (3,048)
    Common stock issued for services and
      interest                                            --        160,000        112,500        456,750      3,399,933
    Bad debt expense                                     (37)        15,125          4,334         30,250        527,500
    Issuance of debenture at less than fair
      market value                                        --             --             --        121,390        259,370
    Amortization expense                              24,223             --         48,446             --         48,446
    Currency translation adjustment                   (1,530)            --         (1,753)            --         (1,753)
  Changes in operating assets and liabilities:
    (Increase) decrease in accounts
     receivable                                       22,771             --         40,740             --         40,740
    Increase in interest receivable                       --        (15,125)            --        (30,250)       (13,166)
    Increase (decrease) in accrued expenses           (7,080)        35,475        (26,797)        70,450         76,164
    Increase (decrease) in accounts payable           47,086             --        153,019             --        153,019
    Increase (decrease) in accounts payable
     - related party                                      --         84,300             --        168,600        337,200
                                                 -----------    -----------    -----------    -----------    -----------

      Net Cash Provided (Used) by Operating
       Activities                                    (42,673)      (193,972)       (27,649)      (273,463)    (3,766,031)
                                                 -----------    -----------    -----------    -----------    -----------

CASH FLOWS FROM INVESTING
 ACTIVITIES

  Payments for purchase of subsidiary                     --             --        (50,000)      (150,000)      (500,000)
  Payments to equity investee                             --             --             --             --       (508,132)
  Increase in notes receivable                            --             --             --             --       (510,000)
  Purchase of investments                           (550,000)            --       (550,000)            --       (550,000)
                                                 -----------    -----------    -----------    -----------    -----------

      Net Cash Used by Investing Activities         (550,000)            --       (600,000)      (150,000)    (2,068,132)
                                                 -----------    -----------    -----------    -----------    -----------

CASH FLOWS FROM FINANCING
 ACTIVITIES

  Proceeds from convertible debentures                    --             --             --        220,000      1,521,000
  Proceeds from issuance of stock                    823,200        190,000        883,200        190,000      3,304,680
  Repayment of payable                                (7,196)            --         (7,196)            --        (81,751)
  Proceeds from payable - related party                   --             --             --             --      1,383,155
                                                 -----------    -----------    -----------    -----------    -----------

      Net Cash Provided by Financing
       Activities                                $   816,004    $   190,000    $   876,004    $   410,000    $ 6,127,084
                                                 -----------    -----------    -----------    -----------    -----------
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                Consolidated Statements of Cash Flows (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                 From
                                                For the                    For the           Inception on
                                           Three Months Ended           Six Months Ended       April 26,
                                                June 30,                   June 30,          1995 Through
                                        ------------------------   ------------------------    June 30,
                                           2000         1999          2000         1999          2000
                                        ----------   -----------   ----------   -----------  ------------
<S>                                     <C>          <C>           <C>          <C>           <C>
NET INCREASE (DECREASE) IN CASH         $  223,331   $   (3,972)   $  248,355   $  (13,463)   $  292,921

CASH AT BEGINNING OF PERIOD                 69,590      116,061        44,566      125,552            --
                                        ----------   ----------    ----------   ----------    ----------

CASH AT END OF PERIOD                   $  292,921   $  112,089    $  292,921   $  112,089    $  292,921
                                        ==========   ==========    ==========   ==========    ==========

CASH PAID DURING THE PERIOD FOR:

  Interest                              $   47,804   $       --    $   58,804   $       --    $  179,919
  Income taxes                          $       --   $       --    $       --   $       --    $       --

SCHEDULE OF NON-CASH FINANCING
 AND INVESTING ACTIVITIES:

  Common stock issued for debt          $       --   $       --    $  340,010   $       --    $1,335,010
  Common stock issued for services      $       --   $  160,000    $  112,500   $  456,750    $2,183,684
  Convertible debentures issued below
    fair market value                   $       --   $       --    $       --   $  121,390    $  259,370
  Common stock issued for interest
   expense                              $       --   $       --    $   19,638   $       --    $1,235,888
  Notes payable issued to acquire
   subsidiary                           $       --   $       --    $   75,815   $       --    $   75,815
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

      The consolidated financial statements include those of Spectre Industries,
      Inc. (Spectre) and its wholly-owned subsidiary, Grant Automotive Group,
      Inc. (GAG), and its 51% owned subsidiary Bigoni-Stiner & Associates, Inc.
      (Bigoni). Collectively, they are referred to herein as "the Company".

      Spectre was organized under the laws of the State of Nevada on May 13,
      1986. Spectre acquired its wholly-owned subsidiaries Spectre Supersports,
      Ltd. and Spectre Cars UK, Ltd. (the Subsidiaries) on April 26, 1995. The
      former shareholders of the Subsidiaries controlled Spectre after the
      acquisition. Accordingly, the transaction was accounted for as a
      recapitalization of the Subsidiaries. The subsidiaries were put into
      liquidation in 1997. The Company plans to concentrate on the development
      of sales of automotive aftermarket supplies.

      GAG was incorporated under the laws of Ontario, Canada on December 16,
      1998 for the purpose of being a representative for manufacturers of
      aftermarket automotive parts and accessories. On January 1, 2000, GAG
      commenced operations as a wholesale automotive business group.

      Bigoni was incorporated under the laws of the State of Washington on
      August 16, 1989 under the name of Stiner-Solomon & Associates, Inc. On
      March 6, 1990, the Company changed its name to Bigoni-Stiner & Associates,
      Inc. Bigoni was incorporated to engage in the business of the sale of
      automobile parts, accessories and hardware.

      On January 1, 2000, Spectre acquired 100% of the issued and outstanding
      shares of GAG and 51% of the issued and outstanding shares of Bigoni,
      respectively, in a business combination (see Note 12).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a. Accounting Method

      The Company's consolidated financial statements are prepared using the
      accrual method of accounting. The Company has elected a December 31 year
      end.

      b. Basic Loss Per Share - Continuing Operations

<TABLE>
<CAPTION>
                For the Six Months Ended                  For the Six Months Ended
                     June 30, 2000                             June 30, 1999
        ---------------------------------------   --------------------------------------
           Loss          Shares       Per share      Loss          Shares      Per Share
        (Numerator)   (Denominator)     Amount    (Numerator)    Denominator     Amount
        -----------   -------------   ---------   ------------   -----------   ---------

<S>                    <C>             <C>        <C>            <C>            <C>
        $(355,090)     14,079,912      $(0.02)    $(1,090,653)   11,340,149     $(0.09)
</TABLE>

      The computation of basic loss per share of common stock is based on the
      weighted average number of shares outstanding during the period of the
      consolidated financial statements. Fully diluted loss per share
      calculations are not presented as any stock equivalents are antidilutive
      in nature.

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      c. Provision for Taxes

      As of June 30, 2000, the Company had net operating loss carryforwards of
      approximately $8,900,000 which will expire by 2019. No tax benefit has
      been reported in the consolidated financial statements because the
      potential tax benefits of the loss carryforwards are offset by a valuation
      allowance of the same amounts.

      d. Cash Equivalents

      The Company considers all highly liquid investments with a maturity of
      three months or less when purchased to be cash equivalents.

      e. Reverse Stock Split

      On November 6, 1997, the Company effected a 1-for-5 stock split. All
      references to common stock have been reflected retroactively back to
      inception.

      f. Use of Estimates

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

      g. Concentrations of Risk

      Cash

      At times the Company's funds exceed depository insurance limits in the
      United States.

      Notes Receivable

      Credit losses have been provided for in the consolidated financial
      statements and are based on management's expectations (Note 5).

      h. Recent Accounting Pronouncements

      In June 1998 the FASB issued SFAS No. 133, Accounting for Derivative
      Instruments and Hedging Activities which requires companies to record
      derivatives as assets or liabilities, measured at fair market value. Gains
      or losses resulting from changes in the values those derivatives would be
      accounted for depending on the use of the derivative and whether it
      qualifies for hedge accounting. The key criterion for hedge accounting is
      that the hedging relationship must be highly effective in achieving
      offsetting changes in fair value or cash flows. SFAS No. 133 is effective
      for all fiscal quarters of fiscal years beginning after June15, 1999.
      management believes the adoption of this statement will have no material
      impact on the Company's consolidated financial statements.

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      i. Revenue Recognition

      Under the terms of an agreement, the Company provides sales and service
      support in specified territories. The Company receives a commission based
      on the net sales, less returns and adjustments, of merchandise sold by the
      manufacturer to its customers operating in specified territories. The
      commission revenue is recognized on an accrual basis in the period to
      which the manufacturers' sales relate.

      j. Expenses

      The Company utilizes the personnel, including management, sales and
      service, and office facilities, including space, systems and supplies, of
      Grant Brothers Sales, Limited, to service its customers and reimburses
      Grant Brothers Sales for all direct costs attributed to those customers.

      k. Presentation

      All amounts are reported in United States Dollars.

      l. Accounts Receivable

      Accounts receivable are recorded net of the allowance for doubtful
      accounts of $4,387 and $-0- at June 30, 2000 and December 31, 1999,
      respectively.

      m. Principles of Consolidation

      The consolidated financial statement include those of Spectre Industries,
      Inc. (Spectre) and its wholly-owned subsidiary, Grant Automotive Group,
      Inc. (GAG) and its 51% owned subsidiary, Bigoni-Stiner & Associates, Inc.
      (Bigoni). All significant intercompany accounts and transactions have been
      eliminated.

      For the Company's foreign subsidiary, GAG, the functional currency has
      been determined to be the Canadian dollar. Accordingly, assets and
      liabilities are translated at period end exchange rates prevailing during
      the period. The resultant cumulative translation adjustments to the assets
      and liabilities are recorded as a separate component of stockholders'
      equity. Exchange adjustments resulting from foreign currency transactions
      are included in the determination of net income (loss). Such amounts are
      immaterial for all years presented.

      In accordance with Statement of Financial Accounting Standards No. 95,
      "Statements of Cash Flows," cash flows from the Company's foreign
      subsidiaries are calculated based upon the local currencies. As a result,
      amounts related to assets and liabilities reported on the statements of
      cash flows will not necessarily agree with changes in the corresponding
      balances on the balance sheets.

      n. Unaudited Consolidated Financial Statement

      The accompanying unaudited consolidated financial statements include all
      of the adjustments which, in the opinion of management, are necessary for
      a fair presentation. Such adjustments are of a normal recurring nature.

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 3 - CONVERTIBLE DEBENTURES

      At June 30, 2000 and December 31, 1999, the Company had the following
      convertible debentures:

<TABLE>
<CAPTION>
                                                                                June 30,     December 31,
                                                                                  2000           1999
                                                                              ------------   ------------
                                                                               (Unaudited)
<S>                                                                            <C>            <C>
      Ten (10) convertible debentures dated October 15, 1998, of amounts
       from $30,000 to $340,000, bearing interest at 10% requiring
       quarterly interest payments, due on October 15, 2001, convertible
       into common stock at $0.80 per share and unsecured.                     $   980,000    $   980,000

      Convertible debenture dated December 1, 1998, bearing interest at 10%
       requiring quarterly interest payments, due on December 1, 2000,
       convertible into common stock at $0.80 per share and unsecured.             321,000        321,000

      Six (6) convertible debentures dated January 29, 1999 for amounts
       from $10,000 to $70,000, bearing interest at 10% requiring quarterly
       interest payments, due on January 29, 2001. Convertible into common
       stock at $0.80 per share and unsecured.                                     170,000        170,000

      Convertible debenture dated February 25, 1999 bearing interest at 10%
       requiring quarterly interest payments, due on February 25, 2001,
       convertible into common stock at $0.80 per share and unsecured.              50,000         50,000
                                                                               -----------    -----------
                                                                                 1,521,000      1,521,000

      Less current portion                                                      (1,521,000)    (1,521,000)
                                                                               -----------    -----------

      Total Long-Term Convertible Debentures                                   $        --    $        --
                                                                               ===========    ===========
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 3 - CONVERTIBLE DEBENTURES (Continued)

      The Company has convertible debentures outstanding in the aggregate
      principal amount of $1,521,000. In general, these convertible debentures
      bear interest at the rate of 10% per annum and have maturity dates within
      less than three years. The Company has the right to force conversion into
      the Company's common stock upon giving the holder 30 days prior notice in
      writing if the closing price of the common stock has been at least $1.25
      for 20 consecutive trading days during the three month period immediately
      preceding such notice. $321,000 of these convertible debentures will
      become due on December 1, 2000. That particular convertible debenture may
      be repaid in shares of common stock of the Company. However, $1,030,000 of
      the remaining $1,200,000 convertible debentures require the payment in
      cash of the unpaid principal at maturity. Should the trading market for
      the Company's shares of common stock fail to sustain the above trading
      level, this obligation will become due and payable. Because the Company
      stock has not sustained the trading level, all convertible debentures are
      classified as current.

      The Company recognized interest expense of $77,761 and $271,372 for the
      six months ended June 30, 2000 and for the year ended December 31, 1999,
      respectively. Of the $271,372 recognized as interest expense for December
      31, 1999, $121,390 was recognized to reflect the discount on debentures
      issued below fair market value.

NOTE 4 - COMMON STOCK TRANSACTIONS

      On June 22, 2000, the Company issued 1,680,000 shares of common stock at
      $0.50 per share for $840,000 cash consideration.

      On March 16, 2000, the Company issued 100,000 shares of common stock at
      $0.20 per share for interest expense of $19,638.

      On January 14, 2000, the Company issued 300,000 shares of common stock at
      $0.20 per share for cash consideration of $60,000.

      On January 14, 2000, the Company issued 1,210,000 shares of common stock
      at $0.28 per share in conversion of $340,010 of debt.

      On January 1, 2000, the Company issued 450,000 shares of common stock at
      $0.25 per share for services valued at $112,500.

      On May 10, 1999, the Company issued 1,900,000 shares of common stock at
      $0.10 per share for cash consideration of $190,000.

      On April 6, 1999, the Company issued 200,000 shares of common stock at
      $0.80 per share for the consideration of cash and services valued at
      $160,000.

      On February 23, 1999, the Company issued 250,000 shares of common stock
      for services valued at the trading price of $1.187 per share.

      On December 16, 1998, the Company issued 24,000 shares of common stock for
      services valued at the trading price of $1.06 per share.

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 4 - COMMON STOCK TRANSACTIONS (Continued)

      On September 3, 1998, the Company issued 1,200,000 shares of common stock
      for services valued at the trading price of $1.375 per share. The shares
      were issued to a company controlled by a major shareholder of the Company.

      On September 3, 1998, the Company issued 1,390,000 shares of common stock
      for the conversion of $695,000 of debt. The Company recognized additional
      interest expense of $1,216,250 to reflect the discount from the trading
      price of $1.375 per share. These shares were issued to a major shareholder
      of the Company.

      On January 7, 1998, the Company issued 4,444,444 shares of common stock to
      ten (10) shareholders for $4,444 of cash.

NOTE 5 - NOTE AND INTEREST RECEIVABLE

      The Company had the following notes receivable:

<TABLE>
<CAPTION>
                                                               June 30,   December 31,
                                                                 2000         1999
                                                             -----------  ------------
                                                             (Unaudited)
<S>                                                           <C>          <C>
      Note receivable from DTI Technology, Inc. (DTI) dated
      July 21, 1998, bearing interest at 9.00%, due on July
      31, 1999, secured by assets of DTI.                     $ 300,000    $ 300,000

      Note receivable from Dega Technology, Inc. (DEGA),
      dated December 9, 1998, bearing interest at prime
      plus 1% (8.75% at December 31, 1998), due on June
      30, 1999, secured by assets of Dega.                      210,000      210,000
                                                              ---------    ---------

      Total notes receivable                                    510,000      510,000

      Less: allowance for bad debts                            (510,000)    (510,000)
                                                              ---------    ---------

                                                              $      --    $      --
                                                              =========    =========
</TABLE>

      The Company accrued interest of $-0- and $45,375 on these notes during the
      six months ended June 30, 2000 and the year ended December 31, 1999,
      respectively, accordingly, the total interest receivable due from these
      notes at June 30, 2000 and December 31, 1999 was $58,541 and $58,541,
      respectively.

      On November 30, 1999, the Company filed a petition with the United States
      Bankruptcy Court - Central District of California to force DEGA, dba DTI,
      into Chapter 7 bankruptcy. Because of the doubtful nature of the
      collection, the Company has established an allowance for the full amount
      of the notes and interest receivable of $568,541.

      The Company had loaned the $510,000 to DEGA with the expectation that the
      money would be used for a computer based information product which could
      be used by the Company. The Company and DEGA were also contemplating a
      merger. The Company had no relationship with DEGA prior to the merger
      negotiations and cash advances.

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 6 - GOING CONCERN

      The Company's consolidated financial statements are prepared using
      generally accepted accounting principles applicable to a going concern
      which contemplates the realization of assets and liquidation of
      liabilities in the normal course of business. The Company has incurred
      significant losses from its inception through June 30, 2000. It has not
      established a source of revenues to cover its operating costs and to allow
      it to continue as a going concern. In January 2000, the Company completed
      the purchase of Grant Automotive Group (GAG) and Bigoni-Stiner &
      Associates, Inc. (Bigoni). The acquisition of GAG and Bigoni will enable
      the Company to have additional avenues of cash flow which did not exist
      prior to the acquisition. However, there can be no assurance that
      significant cash flows will result from the acquisition of GAG and Bigoni.

NOTE 7 - INVESTMENT IN EQUITY SUBSIDIARY

      In 1997, the Company received a 25% interest in Spectre Holdings Limited
      (SHL), a Channel Islands company. SHL owns 100% of Spectre Cars Limited, a
      Channel Islands company. The Company received the interest for
      transferring its knowledge and expertise in the automobile industry to
      SHL. The investment is accounted for using the equity method of
      accounting. In 1998, the investment was deemed to have no value because of
      the recurring losses SHL and the inability to sell the SHL shares.
      Accordingly, the Company has recognized a loss from the equity subsidiary
      of $-0- and $120,935 for the six months ended June 30, 2000 and for the
      year ended December 31, 1999.

NOTE 8 - DEPOSIT ON SUBSIDIARY ACQUISITION

      At December 31, 1999, the Company had advanced $450,000 to Grant Brother
      Sales, Limited (GBS) in connection with the purchase of Grant Automotive
      Group, Inc. (GAG). This agreement became effective on January 1, 2000 (see
      Note 12).

NOTE 9 - WARRANTS

      On September 30, 1998, the Company issued 200,000 warrants to a
      corporation controlled by a related party which were exercisable at $1.50
      per share. At the date of issue, the trading price of the Company's stock
      was $1.375. Accordingly, no expense was recorded for the issuance of the
      warrants. On December 31, 1999, these warrants expired unexercised.

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 10 - LOSS FROM DISCONTINUED OPERATIONS

      In early 1997, the former operating subsidiaries of Spectre Supersports,
      Ltd. and Spectre Cars UK, Ltd. were put into liquidation. Accordingly, all
      of the Company activity prior to then has been reclassified as
      discontinued operations. The following is a summary of the discontinued
      operations as required by APB 30.

<TABLE>
<CAPTION>
                                                                  From
                                                            Inception of the
                                                               Development
                                                                Stage on
                                                             April 26, 1995
                                                                 Through
                                                              December 31,
                                                                  1997
                                                            ----------------
<S>                                                           <C>
      SALES                                                   $ 1,089,559

      COST OF SALES                                             1,285,137
                                                              -----------

       Gross Margin                                              (195,578)
                                                              -----------

      EXPENSES

       Depreciation                                                41,977
       Research and development                                   186,389
       General and administrative                               1,814,651
                                                              -----------

         Total Expenses                                         2,043,017
                                                              -----------

         Loss from Operations                                  (2,238,595)
                                                              -----------

      OTHER INCOME

       Interest income                                              2,345
                                                              -----------

         Total Other Income                                         2,345
                                                              -----------

      LOSS BEFORE INCOME TAXES AND
       EXTRAORDINARY INCOME                                   $(2,236,250)
                                                              -----------
</TABLE>

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 10 - LOSS FROM DISCONTINUED OPERATIONS (Continued)

<TABLE>
<CAPTION>
                                                                  From
                                                           Inception of the
                                                              Development
                                                                Stage on
                                                             April 26, 1995
                                                                Through
                                                              December 31,
                                                                  1997
                                                           ----------------
<S>                                                           <C>
      EXTRAORDINARY INCOME

       Gain on forgiveness of debt                            $    47,005
                                                              -----------

         Total Extraordinary Income                                47,005
                                                              -----------

      INCOME TAX EXPENSE                                               --
                                                              -----------

      NET INCOME (LOSS)                                       $(2,189,245)
                                                              ===========
</TABLE>

      No income tax benefit has been attributed to the loss from discontinued
      operations.

NOTE 11 - ACCOUNTS PAYABLE - RELATED PARTIES

      In 1999, a related party performed services which were valued at $337,200.
      The Company issued 1,200,000 shares of common stock on January 14, 2000
      for the conversion of this amount.

NOTE 12 - BUSINESS COMBINATIONS

      On January 1, 2000, the Company entered into a share purchase agreement
      with Grant Brothers Sales, Limited (GBS) to acquire 100% of the issued and
      outstanding shares of GBS's wholly-owned subsidiary Grant Automotive
      Group, Inc. (GAG). GAG is a wholesale automotive business group organized
      under the laws of Ontario, Canada. The Company gave $500,000 cash
      consideration in connection with the agreement. The excess of the total
      acquisition cost over the fair value of the net assets acquired of $88,739
      is being amortized over 5 years using the straight-line method. In
      connection with the purchase of GAG, the Company issued 450,000 shares
      valued at $112,500 for management services.

      The acquisition has been accounted for as a purchase and results of
      operations of Grant Automotive Group, Inc. since the date of acquisition
      are included in the consolidated financial statements.

      The proforma financial statements required by APB No. 16 are not presented
      for the year ended December 31, 1999 because GAG was completely inactive
      prior to the acquisition.

      In conjunction with the purchase of GAG on January 1, 2000, the Company
      also entered into a management services agreement with GBS. This agreement
      dictates that GBS is to manage the operations of GAG by providing
      personnel, office space, accounting services and other similar services so
      that GAG can continue to operate the business and maximize its benefits
      from operations. In consideration for these services, GAG agrees to
      reimburse GBS for all of its costs associated directly with its services
      provided under the agreement, as well as provide GBS with a proportioned
      distribution of its net cash flows.

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 12 - BUSINESS COMBINATIONS (Continued)

      The distribution of the net cash flow of GAG between GAG and GBS has been
      agreed upon as follows: The first $50,000 of the net cash flow of GAG for
      any fiscal year is to be distributed to GAG. The second $100,000 of the
      net cash flow of GAG is to be distributed to GBS. Any net cash flow of GAG
      in excess of these yearly distributions is to be distributed 47.5% to GAG
      and 52.5% to GBS, respectively.

      In connection with this net cash flow distribution, GAG also holds the
      option to purchase from GBS an increase in their net cash flow
      distribution by paying GBS $423,058. This option must be exercised before
      January 1, 2005. If the option is exercised, the net cash flow
      distribution (after the initial distributions of $50,000 and $100,000,
      respectively) will change to 95% to GAG and 5% to GBS and will become
      effective in the calendar year immediately following the year in which the
      payment is made to GBS.

      This management service agreement became effective on January 1, 2000 and
      will continue for five years. At the expiration of five years, the
      agreement will automatically be renewed for successive one year periods
      unless it is terminated by either GAG or GBS.

      If GAG fails to exercise its option to increase its net cash flow by
      failing to make the "net cash flow increase payment", GBS will be entitled
      to purchase all of GAG's assets conveyed in connection with this
      transaction.

      In addition, on January 1, 2000, the Company acquired 51% of the
      outstanding shares of Bigoni-Stiner & Associates, Inc., a distributor of
      automobile parts and accessories. The total acquisition cost was $75,815
      (the present value of $100,000 to be paid over 5 years). The excess of the
      total acquisition cost over the fair value of the net assets acquired of
      $2,615 is being amortized over 5 years by the straight-line method.

      The acquisition has been accounted for as a purchase and results of
      operations of Bigoni-Stiner & Associates, Inc., since the date of
      acquisition, are included in the consolidated financial statements.

      Proforma financial information as if the acquisition had occurred on
      January 1, 1999 is as follows:

            Revenue                                     $ 1,183,534
            Net loss                                    $  (102,915)
            Loss per share                              $     (0.11)

NOTE 13 - NOTES PAYABLE

      In connection with the purchase of its 51% interest in Bigoni-Stiner &
      Associates, Inc., the Company issued non-interest bearing notes payable
      with a face value of $100,000 to be paid over 5 years. These notes payable
      were recorded at their present value of $75,815 using a standard discount
      rate of 10%. At June 30, 2000, notes payable consisted of the following:

            Total notes payable                            $ 68,619
            Less: current maturities                         (5,676)
                                                           --------

            Non-current notes payable                      $ 62,943
                                                           ========

<PAGE>

                            SPECTRE INDUSTRIES, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                       June 30, 2000 and December 31, 1999

NOTE 13 - NOTES PAYABLE (Continued)

      Maturities of long-term debt are as follows:

             Year Ending
             December 31,
             ------------

                 2000                                        $ 5,676
                 2001                                         13,706
                 2002                                         15,075
                 2003                                         16,584
                 2004                                         17,578
                 2005 and thereafter                              --
                                                             -------

            Total                                            $68,619
                                                             =======

NOTE 14 - SUBSEQUENT EVENTS

      On September 26, 2000, the Company issued 660,000 shares of common stock
      at $0.50 per share for $330,000 cash consideration.

      On September 9, 2000, the Company issued 145,310 shares of common stock
      for $0.40 per share for interest expense valued at $58,124.

      On September 11, 2000, the Company issued 3,802,500 shares of common stock
      at $0.40 per share for the conversion of $1,521,000 in convertible
      debentures.

      On August 28, 2000, the Company issued 201,600 shares of common stock at
      $0.50 per share for $100,000 cash consideration.


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