SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   ----------


                                  FORM 10-Q/SB


     |X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                For the Quarterly Period Ended December 31, 1998

                                       OR

     |_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

       For the Transition Period from _______________ to _________________


                             Commission file number

                      GLOBUS INTERNATIONAL RESOURCES CORP.
             (Exact name of registrant as specified in its charter)


               Delaware                                     88-0203697
    (State of other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                      Identification No.)

    Two World Trade Center
    Suite 2400
    New York, N. Y.                                      10048
    (Address of principal executive office)              (zip code)


        Registrant's telephone number, including area code: 212-839-8000


                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _X_  No___


              7,771,616 shares, $.001 par value, as of May 28, 1999
(Indicate the number of shares  outstanding  of each of the issuer's  classes of
common stock, as of the latest practicable date)

                                  Page 1 of 13

<PAGE>



              GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES

                                DECEMBER 31, 1998
                                   (Unaudited)







                                    I N D E X




                                                                        Page No.
                                                                        --------



Part I -  Financial Information:

      Item 1.      Consolidated Financial Statements (Unaudited):

                   Balance Sheets
                   At December 31, 1998 and September 31, 1998 ........    3


                   Statements of Operations
                   For the Three Months Ended
                   December 31, 1998 and 1997 .........................    4

                   Statements of Cash Flows
                   For the Three Months Ended
                   December 31, 1998 and 1997 .........................    5

                   Notes to Consolidated Financial Statements .........   6-13


      Item 2.      Management's Discussion and Analysis of
                   Financial Condition and Results of Operations ......



                                  Page 2 of 13

<PAGE>



              GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             December 31,  September 30,
                                                                1998           1998
                                                             -----------    -----------
<S>                                                          <C>            <C>
                                   A S S E T S

Current assets:
   Cash and cash equivalents                                 $   239,923    $   132,234
   Cash - restricted                                             578,570        597,412
   Accounts receivable                                         3,298,653      3,489,982
   Inventories                                                 1,584,742      1,583,196
   Income tax refunds receivable                                  40,000         40,000
                                                             -----------    -----------
            Total current assets                               5,741,888      5,842,824
                                                             -----------    -----------

Property assets - at cost,
   net of accumulated depreciation                                45,660         51,827
                                                             -----------    -----------

Other assets:
   Deferred financing costs                                         --            6,044
   Deferred consulting costs                                     102,814        124,376
   Goodwill net of accumulated amortization                      113,177        115,367
   Organization costs                                              2,411          2,927
   Security deposits                                              26,000         26,000
                                                             -----------    -----------
            Total other assets                                   244,402        274,714
                                                             -----------    -----------

                                                             $ 6,031,950    $ 6,169,365
                                                             ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Bank lines of credit payable                              $ 1,632,530    $ 1,893,955
   Notes payable - related parties                               145,000        145,000
   Convertible note payable                                         --          130,000
   Accounts and acceptances payable                              630,031        446,472
   Accrued expenses and other current
      liabilities - related parties                              143,026        251,074
   Accrued expenses and other current liabilities                213,272        290,193
   Income taxes payable                                            4,000          4,000
                                                             -----------    -----------
            Total current liabilities                          2,767,859      3,160,694
                                                             -----------    -----------

Commitments and contingencies                                       --             --

Stockholders' equity:
   Common stock, $.001 par value, authorized -
      50,000,000 shares, issued and outstanding -
      7,771,616 and 5,049,497, respectively                        7,772          5,050
   Additional paid-in capital                                  5,066,869      4,762,522
   Deficit                                                    (1,810,550)    (1,758,901)
                                                             -----------    -----------
            Total stockholders' equity                         3,264,091      3,008,671
                                                             -----------    -----------

                                                             $ 6,031,950    $ 6,169,365
                                                             ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                  Page 3 of 13

<PAGE>



              GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)




                                                            For the Three
                                                            Months Ended
                                                             December 31,
                                                     --------------------------
                                                        1998           1997
                                                     -----------    -----------


Net sales                                            $ 2,768,294    $ 4,984,003

Cost of goods sold                                     2,623,553      4,560,067
                                                     -----------    -----------

Gross profit                                             144,741        423,936
                                                     -----------    -----------

Operating expenses:
   Selling                                                50,874        120,674
   General and administrative                             72,708        136,398
   Depreciation and amortization                          30,435         46,176
                                                     -----------    -----------
Total operating expenses                                 154,017        303,248
                                                     -----------    -----------

Income (loss) from operations                             (9,276)       120,688
                                                     -----------    -----------

Other income (expense):
   Interest income                                         6,636         12,158
   Interest expense                                      (49,009)       (12,664)
                                                     -----------    -----------
Total other income (expense)                             (42,373)          (506)
                                                     -----------    -----------

Income (loss) before income taxes                        (51,649)       120,182

Provision for income taxes                                  --           50,064
                                                     -----------    -----------

Net income (loss)                                    ($   51,649)   $    70,118
                                                     ===========    ===========


Net income per common share                          ($     0.01)   $      0.02
                                                     ===========    ===========

Weighted average number of shares outstanding          5,560,366      4,548,860
                                                     ===========    ===========


          See accompanying notes to consolidated financial statements.

                                  Page 4 of 13

<PAGE>



              GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   For the Three
                                                                                   Months Ended
                                                                                    December 31,
                                                                           --------------------------
                                                                               1998           1997
                                                                           -----------    -----------
<S>                                                                        <C>            <C>
Cash flows from operating activities:
   Net income (loss)                                                       ($   51,649)   $    70,118
                                                                           -----------    -----------
   Adjustments to reconcile net income (loss)
         to net cash provided by (used in)
         operating activities:
      Depreciation and amortization                                             30,435         46,076
      Deferred income taxes                                                       --           (3,000)
      Interest charge on conversion of debt                                     15,113           --
      Increase (decrease) in cash flows as
          a result of changes in asset and liability account balances:
         Accounts receivable                                                   191,329     (1,212,551)
         Inventories                                                            (1,546)      (109,357)
         Accounts and acceptances payable                                      183,559       (306,494)
         Accrued expenses and other current liabilities:
            Related parties                                                     12,538          8,288
            Other                                                              (29,507)       (36,524)
         Income taxes                                                             --           10,630
                                                                           -----------    -----------
   Total adjustments                                                           401,921     (1,602,932)
                                                                           -----------    -----------

Net cash provided by (used in) operating activities                            350,272     (1,532,814)
                                                                           -----------    -----------

Cash flows from investing activities:
   Acquisition of property assets                                                 --          (16,759)
   Restricted cash                                                              18,845           --
                                                                           -----------    -----------
Net cash provided by (used in) investing activities                             18,845        (16,759)
                                                                           -----------    -----------

Cash flows from financing activities:
   (Payments of) proceeds from lines of credit                                (261,425)     1,598,197
   Proceeds from convertible note payable                                         --          500,000
   Deferred financing cost                                                        --          (45,000)
                                                                           -----------    -----------
Net cash provided by (used in) financing activities                           (261,425)     2,053,197
                                                                           -----------    -----------

Net increase in cash and cash equivalents                                      107,692        503,624

Cash and cash equivalents at beginning of year                                 132,234        965,410
                                                                           -----------    -----------

Cash and cash equivalents at end of year                                   $   239,926    $ 1,469,034
                                                                           ===========    ===========

Supplemental Schedules of Non-Cash Operating
      and Financing Activities:
   Common stock issued in conversion of debt                               $   139,069    $      --
                                                                           ===========    ===========

Supplemental Disclosures of Cash Flow Information:
   Interest paid                                                           $    46,071    $     1,293
                                                                           ===========    ===========
   Taxes paid                                                              $     1,541    $    42,370
                                                                           ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                  Page 5 of 13

<PAGE>



              GLOBUS INTERNATIONAL RESOURCES CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   AT DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
                                   (Unaudited)


NOTE 1 - BASIS OF PRESENTATION.

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the statements contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the financial position as of December 31, 1998. The results of operations
and cash flows for the three months ended December 31, 1998 and 1997 are not
necessarily indicative of the results to be expected for the full year.

     The September 30, 1998 consolidated balance sheet has been derived from the
audited consolidated financial statements at that date included in the Company's
annual report on Form 10-K. These unaudited financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report on.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

     (a)  Business:

     Globus is a full service export distributor of food and paint products from
manufacturers in the United States and Europe primarily to the Russian and CIS
States marketplaces.

     Shuttle is engaged in the distribution and exportation of non-food products
such as auto parts and clothing primarily to Russia and the CIS states or,
generally, the same geographic areas involved with the Company's food business.
Shuttle also has an International Seminars Department which provides directors,
and management of large and medium size Russian companies with western banking,
financial systems and accounting seminars at the World Trade Center Institute in
New York City.

     Previously Shuttle, in cooperation with a Canadian modular housing
manufacturer, had built modern cottages in an exclusive Moscow suburb. All
houses were pre-built in Canada and shipped in sea containers.

     Both Globus' and Shuttle's business rely upon their established trade
relationships in Russia and the CIS states.


                                  Page 6 of 13

<PAGE>



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)

     (b) Principles of Consolidation:

     The accompanying consolidated financial statements as at December 31, 1998
and September 30, 1998 and for the three months ended December 31, 1998 and 1997
include the accounts of Globus International Resources Corp. and its
subsidiaries, Shuttle International, Ltd. and Globus Foods International, Inc.
All material intercompany transactions and balances have been eliminated in
consolidation.

     (c) Revenue Recognition:

     The Company recognizes revenues in accordance with generally accepted
accounting principles in the period in which its products are shipped to its
customers. The Company records expenses in the period in which they are
incurred, in accordance with generally accepted accounting principles.

     (d) Use of Estimates:

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

     (e) Cash and Cash Equivalents:

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

     (f) Concentrations of Credit Risk:

     Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and trade accounts
receivable. The Company places its cash with high credit quality financial
institutions which at times may be in excess of the FDIC insurance limit.
Concentrations of credit risk with respect to trade accounts receivable are
generally limited due to the Company's requiring the prepayment from
approximately 30% of its customers of up to 50% of each sale prior to shipment.
Additionally, the accompanying financial statements reflect an allowance for
doubtful accounts of $420,000 at December 31, 1998 and September 30, 1998.

     (g) Inventories:

     Inventories, consisting principally of finished goods, are valued at the
lower of cost (first-in, first-out method) or market. The accompanying financial
statements as at December 31, 1998 and September 30, 1998 reflect an allowance
for the disposal of inventory of $500,000.


                                  Page 7 of 13

<PAGE>



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)

     (h) Property and Equipment:

     The cost of property and equipment is depreciated over the estimated useful
lives of the related assets of 5 to 7 years. The cost of leasehold improvements
is amortized over the lesser of the length of the related leases or the
estimated useful lives of the assets. Depreciation is computed on the
straight-line method for financial reporting purposes. Repairs and maintenance
expenditures which do not extend original asset lives are charged to income as
incurred.

     (i) Goodwill:

     In December 1996, the Company acquired all of the outstanding capital stock
of Shuttle which was owned 90% by officer/directors of the Company. The
remaining 10% was owned by an unaffiliated individual who received 250,000
shares of the Company's common stock for his minority interest which aggregated
$18,571. The Company's common stock had a fair value of $0.60 per share at the
time of acquisition for a aggregate value of $150,000. The difference between
the fair value of the Company's common stock and the minority interest at the
date of acquisition aggregating $131,429 has been attributed to good-will and is
being amortized over fifteen (15) years. Amortization charged to operations was
$2,190 for the three months ended December 31, 1998 and 1997.

     (j) Intangibles:

     Organization costs are being amortized over a sixty month period.
Amortization charged to operations was $516 for the three months ended December
31, 1998 and 1997 was $21,562.

     Deferred financing costs are legal, accounting and other costs associated
with the placement of a $500,000 convertible note in November 1997. Amortization
charged to operations for the three months ended December 31, 1998 was $15,000.
In 1999, $6,044 of deferred financing costs were charged to additional paid-in
capital upon conversion of $130,000 of the convertible note and accrued interest
into 1,322,119 share of Company's common stock. During fiscal 1998, $43,264 of
deferred financing costs were charged to additional paid-in capital upon the
conversion of $350,000 of the convertible note and accrued interest thereon into
500,637 shares of the Company's common stock.

     (k) Per Share Data:

     Net income (loss) per share was computed by the weighted average number of
shares outstanding during each period. The issuance of all common shares in
connection with all stock splits, the Merger and the acquisition of Shuttle have
been retroactively reflected in the computation as if they had occurred as at
October 1, 1996.


                                  Page 8 of 13

<PAGE>



NOTE 3 - PROPERTY ASSETS:

     Property assets consist of:

                                                 December 31,    September 30,
                                                    1998             1998
                                                  --------         --------
                                                 (Unaudited)

     Data processing and office equipment         $ 59,243         $ 59,243
     Furniture and fixtures                         21,283           21,283
     Automobiles and trucks                         43,687           43,687
                                                  --------         --------
                                                   124,213          124,213
     Less:  Accumulated depreciation                78,553           72,386
                                                  --------         --------

                                                  $ 45,660         $ 51,827
                                                  ========         ========


     Depreciation expense charged to operations for the three months ended
December 31, 1998 and 1997 was $6,167 and $3,997, respectively.

NOTE 4 - RELATED PARTY TRANSACTIONS.

     (a) Notes Payable:

     A stockholder and the Company entered into a loan agreement in April 1996
whereby the stockholder acquired the Company's 7% interest bearing note $125,000
at par. The note was originally payable in full plus accrued interest on March
31, 1997. On April 30, 1997, the note was amended and the due date was extended
to April 30, 1998. As a condition of the extension of the above note, the
Company's 7% interest bearing note payable (which was originally payable in full
plus accrued interest on July 16, 1997) to a professional corporation owned by
this stockholder's spouse in the amount of $75,000 was prepaid in March 1997.
Interest charged to operations for the three months ended December 31, 1998 and
1997 was $2,188. Accrued interest payable on these loans aggregated $26,622 and
$24,504 at December 31, 1998 and September 31, 1998, respectively, and is
included in accrued expenses. In May 1997, the stockholder agreed to subordinate
his loan to a bank which had granted the Company a $2,000,000 line of credit.
Although this stockholder has extended the due date to April 30, 1999, the
stockholder was verbally agreed not to demand payment of the debt as long as any
portion of the line of credit is outstanding.

     On August 26, 1996, the parents of the Company's President purchased
Shuttle's 15% interest bearing $20,000 note at par. The note, as amended, is
repayable in full on August 22, 1999 with accrued interest. Interest charged to
operations was $750 for the three months ended December 31, 1998 and 1997.
Accrued interest payable to these individuals of $7,000 and $6,250 is included
in accrued expenses at December 31, 1998 and September 30, 1998, respectively.
These creditors have agreed to subordinate this indebtedness to a bank which had
granted the Company a $2,000,000 line of credit in May 1997 and also have
verbally agreed not to demand payment of the debt as long as any portion of the
line of credit is outstanding.


                                  Page 9 of 13

<PAGE>



NOTE 4 - RELATED PARTY TRANSACTIONS. (Continued)

     (b) Rent Payable:

     Globus and Shuttle lease warehouse space from an entity controlled by three
of the Company's officer/directors. Rent charged to operations in the three
months ended December 31, 1998 and 1997 was $7,500 of which $59,575 and $52,075
was unpaid and included in accrued expenses - related parties at December 31,
1998 and September 30, 1998, respectively. The leases which expire in 1999
require aggregate monthly rentals of $2,500. Each lease has option for renewal
of five years at aggregate monthly rentals of $3,000.

     (c) Officers' Compensation:

     In August 1997, the Board of Directors authorized compensation of $90,000
per year for each of the Company's President, CEO and Vice-President commencing
October 1, 1996. The Board's resolution also provided for these officers annual
compensation to increase to $150,000 commencing January 1, 1998. The officers
have agreed to defer payment of their compensation until cash flow permits. One
of the officers has verbally agreed to reduce his compensation to $75,000 per
year in December 1998.

NOTE 5 - CONVERTIBLE NOTE.

     Convertible Note:

     On November 2, 1997, the Company sold at par its 10% interest bearing note
in the amount of $500,000 to a foreign corporation. The note is due and payable
on November 2, 1998. In connection with the sale of the note, the Company
incurred $95,000 of financing costs which are being amortized over the life of
the note. The note principal and accrued interest, at the holder's option is
convertible in whole or part into (i) shares of the Company's common stock at
the lesser of $2.50 per share or 75% of the average bid and ask of the Company's
common stock for the five (5) trading days immediately proceeding the
noteholder's notice to convert and (ii) an equal number of warrants to acquire
the same number of shares in (i) at $3.625 per share. If the Company is not
successful in registering the underlying common shares as freely trading stock,
when and if such note or any portion thereof is converted, by January 2, 1998,
then the conversion price is adjusted to the lesser of $2.50 per share or 65% of
the average bid and asked of the Company's common stock for the five proceeding
trading days. As required by generally accepted accounting principles a
financing expense of $224,103 was charged to operations for the discount between
the amount paid for the note and the fair value of the common shares into which
it can be converted with a corresponding increase in additional paid-in capital.
On January 5, 1998, $223,857 of principal and interest was converted into
201,673 shares of common stock and warrants to acquire 201,673 shares of common
stock at $3.625 per share. On May 15, 1998, an additional $150,000 in the note's
principal plus $7,890 in interest was converted into 298,964 shares of the
Company's common stock. In December 1998, the note-holder converted $87,783 of
the note principal and accrued interest of $9,912 into 1,100,000 of the
Company's common shares. On February 9, 1999, principal of $41,000 and interest
of $5,201 was converted into 221,119 shares of the Company's common stock.


                                  Page 10 of 13

<PAGE>


NOTE 6 - MAJOR RELATIONSHIPS AND SEGMENT INFORMATION.

     The Company is comprised of two business segments. The distribution of food
products and the distribution of auto paint and parts and clothing. Clothing
sales commenced in July 1996. No sales of clothing were made in the three months
ended December 31, 1998. Set forth below are sales, operating income, capital
expenditures, depreciation and identifiable assets of the segments.

                                                                For the Three
                                                                 Months Ended
                                                              December 31, 1998
                                                              -----------------

     Net sales (000's):
       Food products                                               $ 2,597
       Other                                                           171
                                                                   -------

                                                                   $ 2,768
                                                                   =======

     Operating income (loss) (000's):
       Food products                                               ($   29)
       Other                                                            20
                                                                   -------

                                                                   ($    9)
                                                                   =======

     Depreciation (000's):
       Food products                                               $    27
       Other                                                             3
                                                                   -------

                                                                   $    30
                                                                   =======

     Identifiable assets (000's):
       Food products                                               $ 5,327
       Other                                                           705
                                                                   -------

                                                                   $ 6,032
                                                                   =======


     The food products segment has had only nine (9) customers since it started
shipments in August 1995. One customer accounted for 88.4% and 38.1% of the food
products segment's sales for the three months ended December 31, 1998 and 1997,
respectively. Sales of this segment's products for another customer were 7.1%
and 31.7% for the same periods.

     The other segments' sales were to six (6) customers of which one customer
accounted for 53.8% of sales for the three months ended December 31, 1998.


                                  Page 11 of 13

<PAGE>


NOTE 7 - COMMITMENTS AND CONTINGENCIES.

     (a) Letters of Credit:

     The Company is contingently liable for approximately $63,000 in letters of
credit outstanding at December 31, 1998.


     (b) Consulting Agreement:

          (i)  In July 1996, the Company entered into a financial consulting
               agreement with an individual who will advise the Company on
               certain financial matters. The agreement provides for the
               consultant to receive $2,000 a month for his services commencing
               in August 1996. The agreement may be terminated by either party
               upon two weeks notice.


          (ii) The Company entered into a four year consulting services
               agreement with Crabbe Capital Group Ltd. under which the
               consultant shall (i) introduce the Company to the consultant's
               network of domestic and international commercial banking sources,
               (ii) advise and assist the Company in identifying, studying, and
               evaluating interest and exchange rate fluctuations, and (iii)
               assist the Company in securing letters of credit and review
               commercial banking alliances and strategies. The Company issued
               to the consultant 325,000 shares of its common stock as
               compensation for its services. The fair value of the 325,000
               shares of common stock issued of $195,000 is being amortized and
               charged to operations over the life of the consulting agreement.


         (iii) The Company has another financial consulting agreement under
               which the consultant for two years will advise the Company's
               management in regards to strategic corporate planning, long-term
               investment policies and potential mergers and acquisitions. The
               consultant was issued 125,000 shares of the Company's stock as
               payment for its services to be rendered. The fair value of the
               issued shares of $75,000 is being charged over the life of the
               agreement.

     (c) Employment Contract:

     The Company's President, CFO and Vice President of sales were verbally
authorized compensation in aggregate of $127,000 per year through September 30,
1996. The Board of Directors' authorized an annual salary of $90,000 for each of
these officers, who also are members of the Board of Directors for fiscal 1997
and $150,000 for calendar 1998. The officers have agreed to defer payment of
their compensation until the Company's cash flow permits. At September 30, 1998
and 1997 these officers were owned $155,659 and $65,000, respectively. Such
liabilities are included in accrued expenses and other current liabilities -
related parties.

     Additionally in October 1995, the Company entered into three year
employments contracts with two employees the aggregate annual compensation under
these contracts is approximately $120,000.


                                  Page 12 of 13

<PAGE>


NOTE 7 - COMMITMENTS AND CONTINGENCIES. (Continued)

     (e) Convertible Debt:

     In November 1997, the Company issued, at par, its 10% interest bearing
$500,000 convertible debt security to a foreign corporation. The amount of the
note's principal and/or unpaid interest at 10% can be converted into the
Company's common shares at the noteholder's option throughout the term of the
note. The note is convertible into common shares at the lesser of $2.50 per
share of 75% of the average bid and ask of the Company's common stock for the
five (5) trading days immediately proceeding the noteholder's exercise of the
conversion option and into an equal number of warrants to acquire the same
number of shares at $3.625 per share. As required by generally accepted
accounting principles, a financing charge of $166,667 was charged to operations
in November 1997 for the discount between the amount paid for the note and the
fair value of common shares into which it can be converted.

     On January 5, 1998, the noteholder converted $220,000 of debt and $3,857 of
accrued interest into 201,693 shares of the Company's common stock and warrants
to acquire another 201,673 common shares at $3.625 per share. The note agreement
requires the Company to register the common shares which are issued under any
conversion of the debt to common stock by the noteholder. On May 14, 1998, the
noteholder converted an additional $157,890 in principal and interest into
298,964 shares of common stock and warrants to acquire 298,964 common shares at
$3.625 per share.

     In December 1998, the noteholders converted $87,783 in principal and
accrued interest of $9,912 into 1,100,000 common shares. In February 1999,
another $41,000 in principal and $5,201 in accrued interest was converted in
222,119 common shares.

     (f) Year 2000:

     The Company recognizes the need to ensure its operations will not be
adversely affected by year 2000 software failures. The Company is communicating
with suppliers, customers and others with which it does business to coordinate
year 2000 conversion. The cost of achieving compliance is estimated to be a
minor increase over the cost of normal software upgrades and replacements.


                                  Page 13 of 13