FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the fiscal year                                            Commission file
ended June 30, 1998.                                            No. 33-17679-D
      --------------                                                -----------

                           PIERCE INTERNATIONAL, INC.
              ---------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Colorado                                          84-1067694
 ------------------------------                          --------------------
(State or other jurisdiction of                         (I.R.S. Employer ID.)
incorporation or organization)

            6746 South Revere Parkway, Suite 130, Englewood, CO 80112
            ---------------------------------------------------------
               (address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code  (303)-792-0719
                                                    --------------

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

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during the  proceeding  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
                                              -----      -----

     As of June 30, 1998,  7,225,703  shares were  outstanding and the aggregate
market  value of stock held by  non-affiliates  of the  Registrant  computed  by
reference to the average bid and asked price was $0.

     Documents incorporated by reference: NONE.

     This Form 10-K consists of 28 pages.

     Exhibits are indexed on page 12.



                                       1
<PAGE>


                                     PART I
Item 1. Business.
-----------------

History and Organization
------------------------

     Pierce International,  Inc. (The "Company") was organized under the laws of
the State of Colorado on July 22, 1987,  for the purpose of creating a corporate
vehicle to acquire business opportunities.

     In February,  1988 the Company  completed a public  offering of  40,000,000
shares of its no par value common stock at an offering  price of $.01 per share.
The net proceeds to the Company  from the initial  offering  were  approximately
$332,900.

     Currently, the Company is concentrating its business efforts in two areas:

                           1.       Natural Resources
                           2.       Industrial Development

Natural Resources
-----------------

     The Company  owns an interest in the Como  Property  through its 100% owned
subsidiary,  Como,  Inc.  Como  consists of gold and gravel  mining  leases on a
property  situated  approximately 50 miles southwest of Denver,  Colorado,  near
Como, Colorado in Park County. The Company had sold the property to a subsidiary
under a stock  purchase  agreement,  however,  the  subsidiary  defaulted on the
agreement  and the  Company  reclaimed  the  property as of June 11,  1996.  The
Company  continues to carry $200,000 in debt related to the original purchase of
the Como Leases.  This $200,000  will be paid from the net profits  generated by
the property.  Further, a shareholder is entitled to 10% of net profits received
by the Company on this project.

Industrial Development
----------------------

     Easiwall (Strawboard)
     ---------------------

     On May 23, 1994, the Company agreed to purchase a used  strawboard  factory
for  $50,000.  A payment of $10,000  was paid at  execution,  and the balance of
$40,000  was paid in a series of  payments,  with the final  payment  being made
September  30,  1994.  This  equipment  was part of an  operation  in Yuba City,
California. The Company has an agreement with Stramit Industries Ltd. of Yaxley,
England,  who will refurbish the equipment and supervise the proper installation
of the equipment at a site yet to be determined.  The equipment has an estimated
market value of $1,300,000.

     The machine produces a product known  internationally as "strawboard".  The
Company's  trade marked names for its products are  "Easiboard"  and "Easiwall".
The product has a history of more than 40 years use by the building industry.  A
number of the plants are currently  operating  worldwide.  However,  there is no
such operating manufacturing plant in the United States. The technology includes
the use of wheatstraw in a compressed state to produce building panels.

                                       2

<PAGE>


     The Company is engaged in marketing  factories,  technical  expertise,  and
exclusive sales of the product.  Although no deals have yet been completed,  the
Company has had serious  negotiations  with several  rural  communities  who are
interested in financing a factory in their area.

Easiboard is a solid,  versatile domestic  partitioning system ideally suited to
the needs of today's  contractor.  The system is simple to install and  replaces
the use of timber and studwork in residential  and commercial  applications.  It
offers  cost  benefits  and  provides  excellent  sound and  thermal  insulation
properties in all types of dwellings. It is also a fire retardant.  According to
building  contractors and building specialty products  professionals,  Easiboard
may very well replace drywall,  wood studs and in some instances,  plywood. More
importantly,  Easiboard's primary component is straw, an ever-renewing,  largely
wasted agricultural by-product.

     The Company is also entering into a  relationship  with Stramit  Industries
Ltd. to introduce  even more  technological  applications  for  Easiboard and to
provide for  technological  changes in the  equipment.  Details  regarding  this
agreement will be forthcoming.

Employees
---------

     The Company and its  subsidiaries do not currently have any employees.  All
services are provided by various individuals on a consulting basis.

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

     The Company and its subsidiaries  compete against many significantly larger
enterprises with respect to their business activities.  Nearly all such entities
have  significantly   greater  financial  resources,   technical  expertise  and
managerial   capabilities   than  the   Company  and  its   subsidiaries,   and,
consequently,   the  Company  and  its   subsidiaries   are  at  a   competitive
disadvantage.

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

     The Company  leases its office space which  consists of  approximately  600
square  feet from a  non-affiliated  party.  The office is located at 6746 South
Revere Parkway, Suite 130, Englewood,  Colorado, USA. The lease is for two years
beginning June, 1998. Current rent is $832.50 per month.


                                       3
<PAGE>


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

     The Company is not engaged in any material pending legal proceedings.

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

     No matter was submitted during the forth quarter of the fiscal year covered
by this report to a vote of security holders.



                                       4
<PAGE>



                                     PART II

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

     (a) Principal  Market or Markets.  The Company's stock is traded on the OTC
bulletin board under the symbol PRCI.  Trading resumed  September 18, 1997. High
and low bid prices for the last  three  quarters  are as  follows:  

                                                         BID  
           Quarter Ended:                        High            Low
           -------------                         ----            ---
          December 30, 1997                     $0.03           $0.01 
          March 31, 1998                        $0.12           $0.08 
          June 30, 1998                         $0.22           $0.12

     (b) Approximate Number of Holders of Common Stock. The number of beneficial
holders  of the  Company's  no par  value  common  stock  at June  30,  1998 was
approximately 317.

     (c)  Dividends.  Holders  of common  stock are  entitled  to  receive  such
dividends as may be declared by the Company's  Board of Directors.  No dividends
have been paid with respect to the  Company's  common stock and no dividends are
anticipated to be paid in the foreseeable future.

Item 6. Selected Financial Data.
--------------------------------

     The following table sets forth certain selected financial data with respect
to the Company.
<TABLE>
<CAPTION>

     Balance Sheet Data: At June 30,
     -------------------------------

                                 1998          1997          1996          1995           1994
                                 ----          ----          ----          ----           ----

<S>                             <C>           <C>           <C>           <C>           <C>    
    Total Assets                506,504       564,849       570,562       584,041       599,737
    Long Term Debt              200,000       200,000       200,000       200,000       200,000
    Working Capital            (337,684)     (315,755)     (217,311)     (220,578)     (171,729)
    Total Liabilities           550,128       527,130       446,429       453,130       594,441
    Stockholder's Equity        (43,624)       37,719       124,133       130,911      (298,017)
    Deferred Revenue                  0             0             0             0        66,187

     Statement of Operations Data: For the year ended June 30,
     ---------------------------------------------------------

                                1998           1997          1996           1995         1994
                                ----           ----          ----           ----         ----

    Revenues                   134,865        135,410       245,947       210,357      271,366
    Net Earnings (Loss)       (101,283)      (106,414)       (6,778)       52,465      167,322
    Net Earnings (Loss)
      Per Common Share          (0.015)        (0.017)       (0.001)        0.009        0.012


</TABLE>


                                       5

<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operation of the Year Ended June 30, 1998.

Introduction
------------

     The Company is concentrating on its two major industries, natural resources
and industrial development.  The Company is making a concentrated effort to sell
strawboard equipment, and to presell strawboard.

Liquidity
---------

     At June 30, 1998, the Company has cash of $286. For the year ended June 30,
1998,  the  Company  used  cash  of  $10,560,  resulting  from a use of  cash in
operating activities of $33,096 offset by advances from officers of $22,532.

     The  Company's  future  liquidity  needs are  dependent  upon the Company's
ability to generate  positive cash flow from  operations,  to borrow funds or to
complete additional equity offerings or a combination of the above. There can be
no assurance that financing will be available to the Company or that the Company
will otherwise find sources to meet its cashflow requirements.

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

     For the years  ended June 30,  1998 and 1997,  the  Company  sustained  net
losses of $101,283 and $106,414 , respectively.  The Company's  revenues related
to the sale of  strawboard  equipment  were  $43,211 for the year ended June 30,
1998 and $115,000 for the year ended June 30, 1997. Management is confident that
future marketing will have a positive impact on revenues.

Year 2000
---------

     At its  current  level of  operations,  the Company is not  dependent  upon
computer  programs  as the  Company  employs  outside  vendors  to  process  its
accounting  information.  The Company will take the necessary steps to engage an
outside  vendor whose  computer  programs are year 2000  compliant.  The Company
expects that costs to comply will be born  substantially  by the outside vendors
and that its costs will not be significant, if any.


Item 8. Financial Statements and Supplemental Data.
---------------------------------------------------

     The Financial  statements  and schedules are set forth on pages F-1 through
F-13 hereto.

                                       6

<PAGE>


Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
--------------------------------------------------------------------------------

     On August 26, 1997, the Company dismissed its independent accountant, Doran
Peck, C.P.A. P.C., and engaged independent  accountant,  Spicer,  Jeffries & Co.
The former accountant issued a report that was modified as to uncertainty (Going
Concern).  The decision to change  independent  accountants  was approved by the
board of directors. There was not any disagreement with the former accountant on
any  matter  of  accounting   principles  or  practices,   financial   statement
disclosure, or auditing scope or procedures.







                                       7
<PAGE>
                                    PART III

Item 10. Directors and Executive Officer of the Registrant.
-----------------------------------------------------------

     The Directors and Officers of the Company are as follows:

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

         Pierce D. Parker       71      Director, Chairman of the Board, and
                                         President

         Nancy A. Cooper        39      Director, Vice President and Secretary

         Mark S. Cooper         39      Director

     Dr. Parker should be considered a "parent and organizer" of the Company (as
such term is defined by Rule 405 under the Securities  Act of 1933),  in as much
as he has taken  significant  initiative in founding and organizing the business
of the Company and because of his control  position in the Company.  Dr.  Parker
devotes full time to the  operations of the Company.  Ms. Cooper  devotes only a
limited amount of time to the Company on an as-needed basis.

     There is no family  relationship  between any director or executive officer
except:  Ms.  Cooper is the  daughter of Pierce D. Parker and the spouse of Mark
Cooper.

Pierce D. Parker
----------------

     Dr. Parker has served as the President,  Treasurer and as a Director of the
Company since its inception on August 10, 1987. Dr. Parker became Vice-President
and  Chairman of the Board on August 15,  1988.  He continues as Chairman of the
Board and has been President of the Company since April 1, 1990. In addition, he
has served as President  and Director of Pierce  International  Discovery,  Inc.
since its inception  April,  1989.  From October,  1988 until March,  1992,  Dr.
Parker was  President,  Treasurer and a Director of Pierce  International  Gold,
Inc., a publicly-held  company which was a  majority-owned  subsidiary of Pierce
International,  Inc., and held certain gold and silver mineral rights. Since his
retirement  in May,  1986 as  President  of AMAX  Exploration,  Inc.  and  Chief
Geologist  of AMAX,  Inc.,  Dr.  Parker  has  been  consulting  for the  natural
resources  industry  under  the  name  Parker  Consulting  Services,   Inc.  His
consulting  clients  include  AMAX,  Inc. and several small mining  groups.  Dr.
Parker was employed by AMAX, Inc. for over 26 years prior to his retirement. His
first 13 years with AMAX, Inc. included positions as Geologist, Project Manager,
Regional Manager, and Manager of Technical and Coordinating Services.  From 1972
until 1978, he served as Chief Geologist, AMAX Exploration, Inc. From 1978 until
1982,  he served as Senior Vice  President,  AMAX  Exploration,  Inc.  and Chief
Geologist,  AMAX, Inc. From 1982 until May, 1986, he served as President of AMAX
Exploration,  Inc.  and Chief  Geologist  of AMAX,  Inc.  As  President  of AMAX
Exploration, Inc., he was in charge of evaluations and recommendations for major


                                       8

<PAGE>


mining  projects,  and was responsible for monitoring and approving ore reserves
throughout  the world.  Dr.  Parker  received a Bachelor of Science  Degree with
Honors in Geological  Engineering  and Mining  Engineering  in 1951 from Montana
College of Mineral  Science and  Technology,  Butte,  Montana.  He received  his
Masters of Science  Degree  (Magna Cum Laude) in Geology from the  University of
Wisconsin  in 1956 and his PH.D.  (Magna Cum  Laude) in  Geology  from that same
university in 1960. Dr. Parker has authored several  technical  publications and
given  numerous  talks  and  seminars  in the  natural  resources  and  minerals
economics area.

Mark S. Cooper
--------------

     Mr.  Cooper has served as Vice  President and Director of the Company since
January,  1990. He obtained his real estate  license in the state of Colorado in
1993. Currently, he is President of an unrelated real estate company. Mr. Cooper
was a professional  football  player in the National  Football  League from 1983
through  the 1989  season.  From  1987 to 1989,  he  played  for the  Tampa  Bay
Buccaneers.  From 1983 to 1987 he played for the Denver  Broncos.  He received a
Bachelor of Science  Degree in  Communications  from the  University of Miami in
1983.

Nancy A. Cooper
---------------

     Ms.  Cooper began  working for Pierce  Financial  (then MRG  Financial)  in
November of 1987.  Ms.  Cooper was a full time  employee  of the  company  until
August 15,  1991.  She is  currently  employed as a Regional  Sales  Manager for
Health Script.  Ms. Cooper  oversees the sales and marketing of Health  Script's
product lines in the midwest and central regions of the U.S. Ms. Cooper received
her Bachelor of Science  degree with a major in Human  Resources  from  Colorado
State  University.  She is  available  to work for the  Company on a  consulting
basis.

     All directors of the Company will hold office until the next annual meeting
of the shareholders and until their successors have been elected and qualified.

     The  Officers of the Company are elected by the Board of  Directors  at the
first meeting  after each annual  meeting of the  shareholders,  and hold office
until their death, or until they shall resign or have been removed from office.


Item 11. Executive Compensation
-------------------------------

Remuneration
------------

     None of the Company's  Officers and Directors  currently  receives a salary
from the Company or its subsidiaries. They may receive fees for consulting work;
however, none have received fees in excess of $60,000 per year.

                                       9


<PAGE>


     Although  Directors  do not  receive  compensation  for their  services  as
Directors,  they may be  reimbursed  for expenses  incurred in  attending  Board
meetings.

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

     On August 10, 1987, the Company adopted an Incentive Stock Option Plan (the
"Plan") under which options granted are intended to qualify as "incentive  stock
options"  under  Section 422A of the Internal  Revenue code of 1954,  as amended
(the "Code").  Pursuant to the Plan, options to purchase up to 400,000 shares of
the Company's Common Stock may be granted to employees of the Company.  The Plan
is  administered  by the Board of Directors  which is empowered to determine the
terms and conditions of each option, subject to the limitation that the exercise
price  cannot be less than the market  value of the Common  Stock on date of the
grant  (110% of the market  value in the case of options  granted to an employee
who owns 10% or more of the  Company's  outstanding  Common Stock) and no option
can have a term in excess of 10 years (5 years in the case of options granted to
employees who own 10% or more of the company's Common Stock).

     As of the date of this  report,  no options  have been  granted  under this
Plan.



                                       10

<PAGE>


Item 12.  Security Ownership of Certain Beneficial Owners and Management.
-------------------------------------------------------------------------

     The following table sets forth, as of June 30, 1998, the stock ownership of
each person known by the Company to be the  beneficial  owner of five percent or
more of the Company's Common Stock, each director individually and all Directors
and  Officers  of the  Company  as a group.  Each  person  has sole  voting  and
investment power with respect to the shares shown.

                                                                Percent of Class
Name and Address                    Amount of                       Currently
of Beneficial Owner              Beneficial Ownership              Outstanding
-------------------              --------------------           ----------------
                                                                   

Pierce D. Parker                    2,146,400 (1)                    29.70%
13041 N. Travois Trail
Parker, Co 80134

Nancy A. Cooper                       397,550 (2)                     5.50%
19754 E. Euclid Dr.
Aurora, CO  80016

Mark S. Cooper                        195,550 (3)                     2.71%
19754 E. Euclid Dr.
Aurora, CO 80016

Progressive Media Group               400,000                         5.53%
6746 S. Revere Parkway, #130
Englewood, CO  80012

All Directors and Officers as
a Group (3 Persons)                  2,739,500 (1)(2)(3)             37.91%

1)   Includes  1,520,000 shares owned directly by Dr. Parker, and 626,400 shares
     owned  by  Parker   Consulting   Services   (Dr.   Parker  is  the  primary
     shareholder).

2)   Includes  57,550 shares owned directly by Nancy A. Cooper and 340,000 owned
     by Nancy Cooper As Custodian for Michael Parker Cooper.

3)   Includes 15,550 shares owned by Cooper International Consulting (Mr. Cooper
     is the primary shareholder).


                                       11



<PAGE>



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

     The Company continues to owe Pierce D. Parker/Parker  Consulting  Services,
an officer and  director,  $264,612 from advances made over a period of time. In
addition, the Company owes $200,000 to Parker Consulting Services Profit Sharing
Plan for  amounts  directly  related  to the  Como  property.  See the  business
description under the heading, "Natural Resources".

Item 14. Exhibits, Financial Statement Schedules, and Reports, on Form 8-K.
---------------------------------------------------------------------------

(a)1. The financial statements filed as a part of this 10-K are as follows:
---------------------------------------------------------------------------

                                                                         Page

Independent Auditor's Report                                           F-1, F-2

Balance Sheets, June 30, 1998 and 1997.                                   F-3

Statements of Operations, for the years ended June 30, 1998,
1997, and 1996.                                                           F-4

Statements of Changes in Stockholders' Equity (Deficit), for the
years ended June 30, 1998, 1997, and 1996.                                F-5

Statements of Cash Flows, for the years ended June 30, 1998,
1997 and 1996.                                                       F-6 to F-7

Notes to Financial Statements                                        F-8 to F-11

(a)2.  Financial Statement Schedules:

Independent Auditor's Report on Additional Information                    F-12
Schedule V - Property and Equipment                                       F-13
Schedule VI - Accumulated Depreciation on Property and Equipment          F-14

All other  schedules  have  been  omitted  because  they are  inapplicable,  not
required or the information is included elsewhere in the financial statements or
notes thereto.

(a)3.  The exhibits required by Item 601 of Regulation S-K are as follows:

                  Description                                 Location
                  -----------                                 --------

     (3) Articles of Incorporation  and  Bylaws--incorporated  by reference from
Form S-18  effective  with the  Commission  on  January  20,  1988 (SEC File No.
33-17679-D).

     (11) Statement Re: computation of per share earnings

     (16) Letter regarding change in certifying accountants

                                       12


<PAGE>



Supplemental  Information to be Furnished With Reports filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
--------------------------------------------------------------------------------

     No annual report or proxy  material has been sent to security  holders.  If
any annual report or proxy material is furnished to security holders  subsequent
to this filing, copies of such material will be furnished to the commission when
they are sent to shareholders.






                                       13


<PAGE>



                                   SIGNATURES

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

                                                   Pierce International, Inc.

Dated:  November 20, 1998                          BY: /s/  Pierce D. Parker
                                                       -------------------------
                                                     Pierce D. Parker, President

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

         Signature                              Capacity
         ---------                              --------


/s/  Pierce D. Parker
----------------------------        Chairman of the Board, President and
Pierce D. Parker                    Director (Chief Executive Officer, and
                                    Principal Financial and Accounting Officer)
November 20, 1998
------------------
Date

/s/  Nancy A. Cooper
----------------------------        Vice President, Secretary and Director
Nancy A. Cooper

November 20, 1998
------------------
Date

/s/  Mark S. Cooper
----------------------------        Vice President and Director
Mark S. Cooper

November 20, 1998
------------------
Date



                                       14
<PAGE>



                           PIERCE INTERNATIONAL, INC.

                                    CONTENTS
                                    --------



                                                                      Page

Independent Auditors' Reports                                       F-1 - F-2

Balance Sheets, June 30, 1998 and 1997                                 F-3

Statements of Operations - Years ende
         June 30, 1998, 1997 and 1996                                  F-4

Statements of Changes in Stockholders' Equity (Deficit) -
         Years ended June 30, 1998, 1997 and 1996                      F-5

Statements of Cash Flows - Years ended June 30, 1998,
         1997 and 1996                                               F-6 - F-7

Notes to Financial Statements                                        F-8 - F-11

Independent Auditors' Report on Supplemental Information               F-12

Schedule V - Property and Equipment                                    F-13

Schedule VI - Accumulated Depreciation and
         Amortization of Property and Equipment                        F-14




All other  schedules  have  been  omitted  because  they are  inapplicable,  not
required or the information is included elsewhere in the financial statements or
notes thereto.



<PAGE>

                          INDEPENDENT AUDITORS' REPORT




To the Stockholders and Directors
Pierce International, Inc.


We have audited the balance sheets of Pierce International,  Inc. as of June 30,
1998 and 1997, and the statements of operations, changes in stockholders' equity
(deficit) and cash flows of Pierce International, Inc. for the years then ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Pierce International,  Inc. as
of June 30, 1998 and 1997,  and the results of its operations and cash flows for
the  years  then  ended  in  conformity  with  generally   accepted   accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
that raise  substantial  doubt about its ability to continue as a going concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

                                                         SPICER, JEFFRIES & CO.




Denver, Colorado
September 25, 1998


                                                                             F-1

<PAGE>



                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------




To the Stockholders and Directors
Pierce International, Inc.

We have audited the statement of operations, changes in stockholders' equity and
cash flows of Pierce International, Inc. for the year ended June 30, 1996. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the results of the  operations and cash flows of Pierce
International,  Inc.  for the  year  ended  June  30,  1996 in  conformity  with
generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
that raise  substantial  doubt about its ability to continue as a going concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.

                                                  DORAN PECK, C.P.A., P.C.




Denver, Colorado
October 12, 1996


                                                                             F-2

<PAGE>
                           PIERCE INTERNATIONAL, INC.

                                 BALANCE SHEETS
                                                                June 30,
                                                          --------------------
                                     ASSETS                  1998       1997
CURRENT ASSETS:                      ------               --------    --------
   Cash                                                   $    286    $ 10 846
   Investments                                                 158         162
   Other                                                    12 000         367
                                                          --------    --------

         Total current assets                               12 444      11,375
                                                          --------    --------
PROPERTY AND EQUIPMENT (Note 1):
   Undeveloped mineral property (Note 2)                   434 918     434 918
   Furniture and equipment                                   7 705       7 705
   Strawboard equipment (Note 3)                            57 120      57 120
                                                          --------    --------
                                                           499 743     499 743
     Less accumulated depreciation and amortization         (6 557)     (5 674)
                                                          --------    --------

         Net property and equipment                        493 186     494 069
                                                          --------    --------

OTHER ASSETS                                                   874      59 405
                                                          --------    --------

                                                          $506 504    $564 849
                                                          ========    ========

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

CURRENT LIABILITIES:
   Accounts payable                                       $ 85 516    $ 85 050
   Advances and accrued expenses from
      officers/directors/stockholders (Note 4)             264 612     242 080
                                                          --------    --------

         Total current liabilities                         350 128     327 130
                                                          --------    --------

NOTE PAYABLE (Note 6)                                      200 000     200 000
                                                          --------    --------

COMMITMENTS (Note 5)

STOCKHOLDERS' EQUITY (DEFICIT) (Notes 7 and 8):
   Preferred stock, no par value; 400,000
      shares authorized; 80,000 shares
      issued and outstanding                                20 000      20 000
   Common stock, no par value; 30,000,000
      shares authorized; 7,225,703 and
      6,380,703 shares issued and outstanding
      as of June 30, 1998 and June 30, 1997,
      respectively                                         864 482     844 542
   Accumulated deficit                                    (928 106)   (826 823)
                                                          --------    --------

          Total stockholders' equity (deficit)             (43 624)     37 719
                                                          --------    --------

                                                          $506 504    $564 849
                                                          ========    ========


The accompanying notes are an integral part of these statements.
                                                                             F-3

<PAGE>

                           PIERCE INTERNATIONAL, INC.
                            STATEMENTS OF OPERATIONS

                                                   Year ended June 30,
                                             1998         1997           1996
                                          ----------    ----------    ---------
REVENUE:
   Sales                                  $   43 211    $  115 000    $ 205 144
   Cost of goods sold                          3 332        70 121       64 685
                                          ----------    ----------    ---------

GROSS MARGIN                                  39 879        44 879      140 459
                                          ----------    ----------    ---------

EXPENSES:
   Administrative                             43 776        22 859       58 654
   Bad debt reserve                             --          81 702      162 200
   Outside services                             --          12 050       36 300
   Advertising and promotion                   5 326           300        4 310
   Professional fees                         126 368        39 106         --
   Occupancy and equipment costs              13 261        11 208         --
   Lease rental                               11 205          --           --
                                          ----------    ----------    ---------

      Total expenses                         199 936       167 225      261 464
                                          ----------    ----------    ---------

NET OPERATING LOSS                          (160 057)     (122 346)    (121 005)

   Other income (Note 4)                      91 411        20 410       40 803
   Foreign exchange gain (loss)                  243          --           (184)
   Loss on investment                           --            --       (381 695
   Gain on asset claim (Note 2)                 --            --        434 918
   Gain on disposition of assets                --            --         20 385
   Other expenses                            (32 880)       (4 478)        --
                                          ----------    ----------    ---------

NET (LOSS)                                $ (101 283)   $ (106 414)   $  (6 778)
                                          ==========    ==========    =========

NET (LOSS) PER COMMON SHARE               $    (.015)   $   (0.017)   $  (0.001)
                                          ==========    ==========    =========

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING                         6 861 120     6 319 165    5 980 703
                                          ==========    ==========    =========




The accompanying notes are an integral part of these statements.
                                                                             F-4
                                                                        

<PAGE>
<TABLE>
<CAPTION>



                                            PIERCE INTERNATIONAL, INC.
                            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                    YEARS ENDED JUNE 30, 1998, 1997 AND 1996


                                             Preferred Stock                   Common Stock
                                             ---------------                   ------------                 Accumulated
                                         Shares         Amount             Shares           Amount             Deficit
                                         ------         ------             ------           ------             -------

<S>                                     <C>             <C>              <C>                 <C>             <C>
BALANCES, JUNE 30, 1995                      --          $  --           149 517 572        $844 542         $(713 631)

  25 for 1 Reverse split
    March 13, 1996                           --             --          (143 536 869)           --                --

  Net loss                                   --             --                  --              --              (6 778)
                                           ------        -------        ------------        --------        ----------


BALANCES, JUNE 30, 1996                      --             --             5 980 703         844 542          (720 409)

  Issuance of 80,000 shares of
   preferred stock                         80 000         20 000                --              --                --


  Issuance of 400,000 shares of
   common stock in lieu of services          --             --               400 000            --                --

  Net loss                                   --             --                   --             --            (106 414)
                                           ------        -------        ------------        --------        ----------

BALANCES, JUNE 30, 1997                    80 000         20 000           6 380 703         844 542          (826 823)

  Issuance of 845,000 shares of
   common stock in lieu of services          --             --               845 000          19 940              --

  Net loss                                   --             --                   --              --           (101 283)
                                           ------        -------        ------------        --------        ----------

BALANCES, JUNE 30, 1998                    80 000        $20 000           7 225 703        $864 482        $ (928 106)
                                           ======        =======        ============        ========        ==========


The accompanying notes are an integral part of these statements.


                                                                                                                    F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                          PIERCE INTERNATIONAL, INC.
                                          STATEMENTS OF CASH FLOWS

                                                                      FOR THE YEAR ENDED JUNE 30,
                                                           1998                   1997                1996
                                                        ---------              ---------            --------
CASH FLOWS FROM
   OPERATING ACTIVITIES:
<S>                                                     <C>                     <C>                  <C> 
 Net loss                                               $(101 283)             $(106 414)            $(6 778)
 Adjustments to reconcile net loss
   to cash used in operating activities:
   Depreciation and amortization                              883                    883                 883
   Issuance of common stock in lieu of services             7 940                   --                  --
 Changes in operating assets and liabilities:
   Decrease (increase) in accounts receivable
    and other assets                                       58 898                (12 913)            (20 199)
   Decrease (increase) in related party
    receivable                                               --                     --               110 002
   (Decrease) increase in accounts payable
    and accrued expenses                                      466                 69 270              10 242
   Gain on sale of investments                               --                     --              (455 303)
                                                        ---------             ----------            --------

   Net cash used in operating activities                  (33 096)               (49,174)           (361 153)
                                                        ---------             ----------            --------
CASH FLOWS FROM
  INVESTING ACTIVITIES:
 Increase in investments                                        4                 15 585             391 417
 Investment in Strawboard                                    --                    --                 (1 125)
                                                        ---------             ----------            --------

   Net cash provided by investing
     activities                                                 4                 15 585             390 292
                                                        ---------             ----------            --------
CASH FLOWS FROM
  FINANCING ACTIVITIES:
 Advances (payments) from (to)
   officers/directors/stockholders                         22 532                 11 431             (16 943)
 Issuance of preferred stock                                 --                   20 000                --
                                                        ---------             ----------            --------

   Net cash provided by (used in)
     financing activities                                  22 532                 31 431             (16 943)
                                                        ---------             ----------            --------

NET (DECREASE) INCREASE
  IN CASH                                                 (10 560)                (2 158)             12 196

CASH, at beginning of year                                 10 846                 13 004                 808
                                                        ---------             ----------            --------

CASH, at end of year                                    $     286             $   10 846            $ 13 004
                                                        =========             ==========            ========

                                                                                                         F-6
</TABLE>
 
<PAGE>



                           PIERCE INTERNATIONAL, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Concluded)


                                            FOR THE YEAR ENDED JUNE 30,
                                          1998          1997        1996
                                        -------       -------     -------
SUPPLEMENTAL DISCLOSURE
  OF CASH-FLOW INFORMATION:
   Cash paid for interest               $ 5 142       $   --      $  --
                                        =======       =======     =======
SUPPLEMENTAL DISCLOSURE OF
  NON-CASH INVESTING AND
  FINANCING ACTIVITIES:
   Issuance of common stock for
   future services                      $12 000       $   --      $  --
                                        =======       =======     =======




The accompanying notes are an integral part of these statements.


                                                                             F-7
                                                                

<PAGE>



                           PIERCE INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------


NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company was incorporated under the laws of the State of Colorado on July 22,
1987,  for the  purpose  of  obtaining  capital to seek  potentially  profitable
business opportunities.  Currently, Pierce International, Inc. (PI) has business
interest in two industries, natural resources and industrial development.

Net income (loss) per common share is computed  based upon the weighted  average
number of shares  outstanding  during the period.  Common stock equivalents were
not considered (for losses only), as their effect would be antidilutive.

The  Company  states  property  and  equipment  at cost.  Depreciation  is being
provided by the  straight-line  method over  estimated  useful lives of three to
five years. All costs related to the acquisition (including associated legal and
other costs) of the mineral  properties have been capitalized.  These costs will
be  amortized  by  the  units-of-production  method  of  accounting  based  upon
estimated recoverable reserves.

The Company adopted the provisions of SFAS 121, Accounting for the Impairment of
Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of, in its financial
statements  for the year ended June 30,  1997.  The  adoption of SFAS 121 had no
material effect on the Company's financial  statements.  The Company reviews its
long-lived  assets for  impairment  to determine  if the carrying  amount of the
asset is recoverable.

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

The  accompanying  financial  statements  have been  prepared on a going concern
basis, which contemplates continuity of operations and realization of assets and
satisfaction of liabilities in the normal course of business.  The  continuation
of the  Company  as a going  concern  is  dependent  upon  the  company  raising
additional capital,  and attaining and maintaining  profitable  operations.  The
Company has suffered  recurring  losses from operations  that raise  substantial
doubt about its ability to continue as a going concern.

Cash and cash  equivalents for purposes of the statements of cash flows includes
highly liquid investments with a maturity of three months or less at the date of
acquisition.


NOTE 2 -  UNDEVELOPED MINERAL PROPERTY

On June 11, 1996,  PI reclaimed the "Como"  property  from Pierce  International
Discovery,  Inc. (PIDI). PIDI, a 17.24% owned subsidiary,  failed to comply with
the stock purchase agreement.  Como consists of gold and gravel mining leases on
property  situated  approximately 50 miles southwest of Denver,  Colorado,  near
Como, Colorado in Park County.



                                                                             F-8

<PAGE>



                           PIERCE INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                   (continued)


NOTE 3 -  STRAWBOARD EQUIPMENT

The Company purchased strawboard  equipment for $57,120.  This equipment is seen
as an investment and the Company intends to resell the equipment.


NOTE 4 -  RELATED PARTY TRANSACTIONS

As of June 30, 1998, advances include $201,612 due Pierce D. Parker, officer and
director,  or his company  Parker  Consulting  Services,  and $63,000 is accrued
consulting  fees due Pierce D. Parker.  For the year ended June 30, 1998,  other
income includes $72,000 in management fees from Pierce International  Discovery,
Inc.


NOTE 5 - COMMITMENTS

The Company leases office space from an unrelated  party under a  noncancellable
operating lease expiring in 2001.

At June  30,  1998,  aggregate  minimum  future  rental  commitments  under  the
Company's  leases with initial or  remaining  terms in excess of one year are as
follows:

                          June 30,                      Amount
                          --------                      ------
                            1999                       $10 073
                            2000                        10 573
                            2001                         9 158
                                                       -------
                               Total                   $29 804
                                                       =======

Total rent expense for the years ended June 30, 1998 and 1997 was  approximately
$9,900 and $10,089 respectively.


NOTE 6 -  NOTE PAYABLE

As of June 30, 1998, PI had the following long term note payable:

          PCS Profit Sharing Plan    $200,000

PI is obligated to pay $200,000 to Parker  Consulting  Services  Profit  Sharing
Plan,  owned by Pierce D.  Parker,  for funds it  advanced  for the  purpose  of
funding the Como project.  This debt is to be paid from net profits generated by
the Como property.



                                                                         
                                                                             F-9
<PAGE>



                           PIERCE INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                   (continued)


NOTE 7 -  STOCKHOLDERS' EQUITY (DEFICIT)

As of June 30, 1998,  PI had 7,225,703  common  shares  issued and  outstanding.
There are 30,000,000 shares  authorized.  A reverse split of 1 for 25 shares was
approved on March 13, 1996.

The Company issued 80,000 shares of Series I convertible  preferred  stock.  The
stock  was  issued in  conjunction  with a private  placement  conducted  by the
Company.  There are 400,000  shares of  preferred  stock  authorized  and may be
determined  by the Board of  Directors  as to dividend  rights,  dividend  rate,
conversion  rights,  voting  rights,  redemption  rights and terms,  liquidation
preferences, the number of shares constituting the series and the designation of
each series.

The Series I Convertible  Preferred  stockholders are entitled to dividends when
and as declared by the Company's Board of Directors from funds which are legally
available.  The  Series I  Preferred  Stock is  convertible  at any time into an
identical number shares of the Company's  Common Stock.  Holders of the Series I
Convertible  Preferred  Stock are  entitled to one vote per share on all matters
submitted  to a  vote  of  the  Company's  stockholders.  Series  I  Convertible
preferred stock does not have preemptive rights and it is not redeemable.


NOTE 8 -  INCENTIVE STOCK OPTION PLAN

On August 10,  1987,  the Company  adopted an  Incentive  Stock Option Plan (the
"Plan") under which options granted are intended to qualify as "incentive  stock
options"  under  Section 422A of the Internal  Revenue Code of 1954,  as amended
(the "code").  Pursuant to the Plan, options to purchase up to 400,000 shares of
the Company's Common Stock may be granted to employees of the Company.  The Plan
is  administered  by the Board of Directors  which is empowered to determine the
terms and conditions of each option, subject to the limitation that the exercise
price  cannot be less than the market  value of the Common  Stock on the date of
the  grant  (110%  of the  market  value in the case of  options  granted  to an
employee who owns 10% or more of the Company's  outstanding Common Stock) and no
option  can have a term in  excess  of 10 years (5 years in the case of  options
granted to employees who own 10% or more of the Company's Common Stock).

As of the date of this report, no options have been granted under this Plan.




                                                                            F-10

<PAGE>




                           PIERCE INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                          -----------------------------
                                   (concluded)


NOTE 9 -  INCOME TAXES

At June 30, 1998, the Company has available to reduce future taxable  income,  a
net operating loss  carryforward of approximately  $760,000 which expires in the
years 2003 through 2013.

This net operating loss  carryforward  may result in future income tax benefits;
however,  because  realization is uncertain at this time, a valuation reserve in
the same amount has been  established.  Significant  components of the Company's
deferred tax liabilities and assets as of June 30, 1998 and 1997 are as follows:

                                                   1998             1997
                                                -----------      ----------
   Deferred tax liabilities                     $     -          $      -
                                                ===========      ==========
   Deferred tax assets
     Net operating loss carry forwards              283 500         247 500
     Valuation allowance for
       deferred tax assets                         (283 500)       (247 500)
                                                -----------      ----------
                                                $     -          $      -
                                                ===========      ==========

NOTE 10 -  FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS 107 requires  disclosure of the fair value of financial  instruments,  both
assets  and  liabilities  recognized  and not  recognized  in the  statement  of
financial  position,  for which it is  practicable  to estimate fair value.  The
carrying  amounts of current  assets and current  liabilities  approximate  fair
value.


                                                                            F-11

<PAGE>


                          INDEPENDENT AUDITORS' REPORT
                           ON SUPPLEMENTAL INFORMATION





To the Stockholders and Directors
Pierce International, Inc.

Our  report  on  our  audit  of  the  basic   financial   statements  of  Pierce
International,  Inc.  for the years ended June 30, 1998 and 1997 appears on Page
F-1.  The audit was made for the  purpose  of  forming  an  opinion on the basic
financial statements, taken as a whole. The accompanying supplementary schedules
are presented for purposes of additional analysis and are not a required part of
the basic financial statements taken as a whole.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the  Company's  ability  to  continue  in  existence  is
dependent  upon  their  obtaining   additional  equity  capital  and  ultimately
attaining  and  maintaining  profitable  operations.  The Company  has  suffered
recurring losses from operations that raise  substantial doubt about its ability
to continue as a going  concern.  The  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.


                                                    SPICER, JEFFRIES & CO.




Denver, Colorado
September 25, 1998



                                                                            F-12

<PAGE>
<TABLE>
<CAPTION>

                                                                                                                         SCHEDULE V


                                       PIERCE INTERNATIONAL, INC.
                                        PROPERTY AND EQUIPMENT
                                        ----------------------


                                     Beginning           Additions                           Other changes add
      Classification                  balances            at cost          Retirements       (deduct)-describe       Ending balances
      --------------                  --------            -------          ----------        -----------------       ---------------
<S>                                 <C>                 <C>                <C>               <C>                      <C> 
Year Ended June 30, 1998

  Mineral properties                 $  434 918          $    --           $    --               $    --               $  434 918
  Furniture and equipment                 7 705               --                --                    --                    7 705
  Strawboard equipment                   57 120               --                --                    --                   57 120
  Leased equipment                          --           $    --           $    --               $    --               $     --
                                     ----------          ---------         ---------             ---------             ----------

                                     $  499 743          $    --           $    --               $    --               $  499 743
                                     ==========          =========         =========             =========             ==========

Year ended June 30, 1997

  Mineral properties                 $  434 918          $    --           $    --               $    --               $  434 918
  Furniture and equipment                 7 705               --                --                    --                    7 705
  Strawboard equipment                   57 120               --                --                    --                   57 120
  Leased equipment                          --                --                --                    --                     --
                                     ----------          ---------         ---------             ---------             ----------

                                     $  499,743          $    --           $    --               $    --               $  499 743
                                     ==========          =========         =========             =========             ==========

                                                                                                                                F-13




                                                           
<PAGE>

                                                                                                                         SCHEDULE VI


                                                PIERCE INTERNATIONAL, INC.
                                        ACCUMULATED DEPRECIATION AND AMORTIZATION
                                                 OF PROPERTY AND EQUIPMENT
                                                 -------------------------


                                  Beginning           Additions                           Other changes add
      Classification               balances            at cost          Retirements        (deduct)-describe       Ending balances
      --------------               --------            -------          -----------        -----------------       ---------------

Year ended June 30, 1998

  Mineral properties              $    --             $    --           $    --                $    --                $    --  
  Furniture and equipment            5 674                 883               --                     --                   6 557
  Leased equipment                     --                  --                --                     --                     --
                                  --------            --------          --------               --------               --------

                                  $  5 674            $    883          $    --                $    --                $  6 557
                                  ========            ========          ========               ========               ========

Year Ended June 30, 1997

  Mineral properties              $    --             $    --           $    --                $    --                $    --
  Furniture and equipment            4 791                 883               --                     --                   5 674 
  Leased equipment                     --                  --                --                     --                     --
                                  --------            --------          --------               --------               --------

                                  $  4 791            $    883          $    --                $    --                $  5 674
                                  ========            ========          ========               ========               ========


                                                                                                                            F-14

</TABLE>