SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X]  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1997 or
[ ]  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934 [No Fee Required]
For the transition period from _______________ to ________________

Commission File No. 33-18174


                        SIEMANN EDUCATIONAL SYSTEMS, INC.
                  --------------------------------------------
                 (Name of Small Business Issuer in its Charter)


                 Colorado                                   84-1067172
---------------------------------------------    -------------------------------
(State or other jurisdiction of incorporation    (I.R.S. Employer Identification
or organization)                                 Number)


405 South Platte River Drive
Denver, Colorado                                              80203
----------------------------------------         -------------------------------
(Address of principal executive offices)                    (Zip Code)



Issuer's telephone number:  (303) 733-9673

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

Securities registered pursuant to Section 12(g) of the Act:


                           $.10 Par Value Common Stock
                           ---------------------------
                                (Title of Class)

                                      

<PAGE>



Check  whether  the  Registrant  (1) 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
                                    -----    -----

     As of March 31, 1998,  3,765,000  shares of the  Registrant's  no par value
Common Stock were outstanding.  As of February 28, 1998, the market value of the
Registrant's no par value Common Stock, excluding shares held by affiliates, was
$2,444,750  based upon a closing bid price of $3.85 per share of Common Stock on
the Electronic Bulletin Board ("EBB").

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

     The Registrant's revenues for its most recent fiscal year were $3,110,345.

     The following  documents are incorporated by reference into Part III, Items
9 through 12 hereof: None.



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<PAGE>



                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------

     The following is a summary of certain information  contained in this Report
and is  qualified  in its entirety by the  detailed  information  and  financial
statements that appear elsewhere herein.  Except for the historical  information
contained herein,  the matters set forth in this Report include  forward-looking
statements  within the meaning of the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995. These  forward-looking  statements are
subject  to risks and  uncertainties  that may cause  actual  results  to differ
materially. These risks and uncertainties are detailed throughout the Report and
will be further  discussed from time to time in the Company's  periodic  reports
filed with the Commission. The forward-looking statements included in the Report
speak only as of the date hereof.

Introduction

     Since August 1997 the Company has owned and operated the Denver  Automotive
& Diesel College ("DADC"), a for-profit,  post-secondary education college which
trains its students to be automotive and diesel  mechanics and  technicians.  In
March 1998,  the Company  acquired Data  Processing  Training  Co.,  ("DPT") for
$8,959,564  comprised of $3,869,564 in cash, a promissory  note in the amount of
$4,340,000  bearing  interest at 7% per annum  payable in  installments  through
April 15,  2000,  and the  balance of  $750,000  in Common  Stock of the Company
issued and valued as of March 24, 1999. DPT provides post-secondary education in
computer   programming,   business   computer   applications,   medical   office
administration and English as a second language. Unless otherwise indicated, the
description  of the Company's  business and  operations  throughout  this Report
refers to the combined operations of DADC and DPT.

     The Company provides diversified career-oriented,  post-secondary education
to  approximately  1,280  students  through  DADC  (training  approximately  380
students) and DPT (training  approximately 900 students).  The Company's schools
offer  programs  designed  to provide  students  with the  knowledge  and skills
necessary to qualify them for entry level employment in the fields of automotive
and diesel mechanics,  computer  programming and applications and medical office
administration.

History of the Company

     The  Company  was  incorporated  in the state of Colorado in 1987 under the
name Chartwell Cable Fund, Inc. to acquire, develop and operate cable television
systems.  The Company  conducted an initial public offering of its securities in
January 1988, which resulted in net proceeds of approximately $800,000. In 1994,
after  suffering  continuing  losses  from  operations,  the  Company  sold  its
remaining assets for nominal consideration and ceased operations. In August 1997
the  Company  issued  2,250,000  shares of its Common  Stock to Paul T.  Siemann
("Siemann")  and 500,000 shares to CBAS,  Inc.  ("CBAS") for $.001 per share and


                                        3

<PAGE>


subsequently  issued  an  additional  400,000  shares  to  acquire  all  of  the
outstanding stock of Siemann  Educational  Systems,  Inc. ("SES"),  the owner of
DADC, a company owned and  controlled by Siemann.  In September 1997 the Company
changed  its name to  Siemann  Educational  Systems,  Inc.,  and a new  Board of
Directors  was elected  comprised  of  Siemann,  Joseph R.  Chalupa,  the school
director of DADC,  and Barbara S.  Siemann.  In August and September  1997,  the
Company  sold  an  aggregate  of  100,000  shares  for  $2.00  per  share.   See
"Management."

History of DADC and DPT

     DADC  was  founded  in  1963  as  a  private  vocational  school  providing
instruction in automotive  repair and body, fender and paint. In 1968 it adopted
the Denver  Automotive  and Diesel  College  trade name and  offered  courses in
automotive  and diesel repair,  body,  fender and paint  programs.  In September
1987,  DADC was  approved to offer  Associate  of  Occupational  Studies  Degree
programs for Master Technician,  Automotive Technology and Diesel Technology. In
May 1991 DADC received  certification as a "Master Certified  Automotive School"
by  the  National  Automotive  Technicians  Education  Foundation  ("NATEF"),  a
division of the Automotive Service Excellence ("ASE") organization.  Following a
1992 Chapter 11 bankruptcy  filing,  DADC was  purchased  out of the  bankruptcy
proceedings by SES. In August 1995 the school was approved to offer Associate of
Applied  Science Degree  Programs for Master  Technician,  Automotive and Diesel
Technology.

     DPT was founded in 1987 and trains its  students  in computer  programming,
business computer  applications,  medical office administration and English as a
second  language.  DPT is  licensed by the  Pennsylvania  State Board of Private
Licensed  Schools and is accredited by the  Accrediting  Council for  Continuing
Education and Training.

Industry Overview

     The  Company  believes  the  demand  for  post-secondary,   career-oriented
education  will  increase over the next several years as a result of a number of
recognized  trends,  including  (i) a projected  21% growth in the number of new
high school graduates from approximately 2.5 million in 1993-94 to approximately
3.0 million in 2005-6,  (ii) the increasing  enrollment of students over the age
of 24 in  post-secondary  education  institutions  as they seek to enhance their
skills or retrain for new technologies,  and (iii) the increasing recognition of
the income premium  attributable to higher technical  education  certifications,
with individuals holding such certifications  earning  substantially more income
during their lifetimes than individuals holding only high school diplomas.

     According to the National Center for Education Statistics, education is the
second largest sector of the U.S.  economy,  accounting for  approximately 9% of
gross domestic product in 1994, or over $600 billion.  The Company's schools are
part  of  the  education   management   organization   ("EMO")   sector  of  the
post-secondary  education market, which accounts for approximately  one-third of
the total education sector, or $200 billion annually. Of the approximately 6,000
post-secondary  schools that are  eligible to  participate  in  federally-funded


                                        4

<PAGE>


Title  IV   Programs,   approximately   500  are   proprietary   degree-granting
institutions,  and the balance are certified  technical or  vocational  training
programs such as the Company. The U.S. Department of Education estimates that by
the year 2005 the  number  of  students  enrolled  in  post-secondary  education
institutions will increase by more than 1.5 million to over 16 million students.

     The U.S.  Department of Education estimates that, over the next five years,
initial enrollments in post-secondary  education  institutions by working adults
will  increase  more  rapidly  than  initial  enrollments  of recent high school
graduates.  The  post-secondary  education  industry is also expected to benefit
from  the  public's   increased   recognition   of  the  income   premium  of  a
post-secondary  education.  According  to  The  National  Center  for  Education
Statistics,  the percentage of recent high school  graduates who continued their
education  after  graduation  increased  from  53% in 1983 to 63% in  1993.  The
Company  believes  that the  income  premium  associated  with a  post-secondary
education has been a significant  factor  contributing to this trend. The Census
Bureau has reported that in 1995 a full-time male worker with an associate level
degree earned an average of 37% more per year than a comparable worker with only
a high school diploma,  and a full-time male worker with a bachelor level degree
earned an average of 72% more per year than a comparable worker with only a high
school diploma. In addition,  employment in technical occupations is expected to
increase over the next several years as the demand for technically-skilled labor
increases.

Strategy

     The Company seeks to increase its market share in the expanding  market for
post-secondary  education and improve  profitability by (i) acquiring additional
schools that have  recorded  strong  profits  under  capable  management,  which
management  will agree to remain under  contract to the Company,  (ii) promoting
internal  growth at the Company's  existing and newly acquired  schools  through
improved marketing and the development of new programs within such schools,  and
(iii) enhancing operating efficiencies.  Subject to the availability of adequate
financing (of which there can be no assurance), the Company intends to implement
the following strategies to achieve these goals:

     Acquisition Strategy.  According to the Department of Education, there were
approximately  2,355  accredited,   proprietary   post-secondary   schools  that
participated  in federal  financial  student aid  programs as of June 1996.  The
ownership of these schools is highly-fragmented,  such that the Company believes
no  organization  holds a significant  national market share or owns or operates
more  than 80  schools.  The  Company  believes  that the  fragmentation  of the
post-secondary  education market provides  significant  opportunities to acquire
and  consolidate  existing  independently-owned  schools  and reduce  individual
school overhead through centralizing certain home office functions.  The Company
seeks to acquire  schools which  demonstrate  historical  profitability,  strong
management  in place,  superior  compliance  history  with  respect to federally
guaranteed or funded student loans,  and established  and marketable  curricula.
The Company  intends to  concentrate  its  acquisition  efforts on schools which
satisfy these  acquisition  criteria and which offer  curricula in the fields of
study currently offered at the Company's schools.


                                        5

<PAGE>



     Internal  Growth   Strategy.   The  Company  intends  to  increase  student
enrollment (i) at its existing schools, (ii) at newly added campuses to existing
schools  and (iii) at newly  acquired  schools by  continuing  to enhance  local
marketing  efforts and increasing the number and variety of program offerings at
its schools.  The Company  also  intends to offer its  existing  programs at new
schools  where such  programs  were not  previously  available  and to apply for
licenses and accreditation in order to offer programs leading to the granting of
an associate level degree.

     Operating Strategy. The Company will seek to provide certain administrative
services to all of its schools, which the Company believes can be performed most
efficiently and cost effectively in a centralized location.  Such administrative
services may include marketing  analysis,  accounting,  information  systems and
regulatory  compliance.   However,  the  Company  will  continue  to  operate  a
decentralized management structure in which local school management is empowered
to make most of the  day-to-day  operating  decisions  at each  school and to be
primarily  responsible  for the  profitability  and  growth of that  school  and
compliance with all regulatory requirements.

Programs of Study

     The Company's  programs are intended to provide  students with the specific
knowledge and job skills required to prepare them for entry-level positions in a
chosen career field.  The automotive and diesel programs at DADC are designed to
prepare  students for  occupations  associated  with the  automotive  and diesel
repair  industries.  The computer and medical  programs at DPT train students in
computer  programming and business computer  applications  (such as spreadsheets
and  word  processing)  and  medical  office  administration  (such  as  medical
record-keeping  and billing).  DPT also offers  English as a second  language to
improve  students'  ability to  communicate  in English,  thereby  assisting the
student in  completing  his or her future  course of study at the school.  As of
August 1997,  tuition and fees for an entire program for a new student  entering
one of the DADC or DPT  programs  ranged  from a high of $22,000  for a 30-month
program to a low of $4,500 for a seven and one-half-month program.

     As of December 31, 1997,  approximately  380 students were enrolled at DADC
and  approximately  900  students  were  enrolled at DPT.  All of the  Company's
programs are designed to prepare  graduates to perform  effectively in a variety
of entry-level positions by providing the student with practical experience both
in the classroom and in the field.

     DADC and DPT  schedules  vary  depending  on the  programs  offered by each
school. Generally, programs begin eight times a year with courses offered from 7
AM to 10 PM, five to six and one-half days a week year round.

     The Company  also has applied for licenses  and  accreditation  in order to
offer  programs  leading  to the  granting  of an  associate's  degree.  See " -
Strategy."




                                        6

<PAGE>




Marketing; Student Recruitment

     The Company endeavors to recruit motivated students who have the ability to
complete the programs offered by the Company's schools and to secure entry-level
employment  in the field for which their program is designed to prepare them. To
attract potential students,  the Company engages in several activities to inform
them and their family about the Company's  programs.  Marketing  efforts include
direct mailings to prospective students and to high schools (which often include
videotapes  of the  Company's  schools),  newspaper  advertising,  yellow  pages
advertising and visits by Company personnel to area high schools.  The Company's
advertising is tailored to the national as well as the local market in which the
school  is  located  and  is  intended  to  create  market   interest  and  name
recognition.  Responses to direct mail campaigns are received and followed up at
each  school.  The two  schools  each  employ a director  of  admissions  who is
responsible  for, among other things,  coordinating the efforts of the school to
recruit qualified students,  determining  recruiting policies and procedures and
setting standards for hiring and training admissions representatives.

     Company  representatives  contact potential  students who have indicated an
interest in the schools'  programs and arrange for  interviews  which  generally
take place at the school or at the prospective  student's home. The interview is
designed to establish  the student's  qualifications,  academic  background  and
employment  goals.  Prospective  students are generally given a school catalogue
which describes the school's  programs,  a tour of the school and an explanation
of the  programs  offered and the types of  employment  opportunities  typically
available   to  graduates   of  the  school.   The  Company   employs  two  DADC
representatives based in Denver and six East Coast School  representatives based
at DPT's location. In addition, DADC employs three regional representatives, who
market in North Dakota, South Dakota, Washington and Alaska.

Admission, Retention and Graduate Placement

     In  order  to apply  for  admission  to any of the  Company's  programs,  a
candidate is required to have a high school diploma, a recognized  equivalent or
pass an admissions test specifically approved by the Department of Education. At
December 1997,  substantially  all of the students were high school graduates or
held recognized equivalent certification. Approximately 40% of enrolled students
were under 20 years of age and 70% of the students were men.

     In an attempt to minimize  student  withdrawals  prior to the completion of
their  program,  the schools  provide  staff and other  resources  to assist and
advise students  regarding  academic and financial  matters and employment.  The
schools also provide  tutoring and encourage  help sessions  between  individual
students and instructors when students are experiencing  academic  difficulties.
For those  students  who were  scheduled  to  graduate  in  calendar  year 1996,
approximately  75% completed their course of study.  The Company is obligated to
provide  refunds to those  students who withdraw from school prior to completion
of the program based on formulas required by applicable  accrediting agencies or
by state and federal regulations.


                                        7

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     The  Company's  schools  employ  placement  personnel to provide  placement
assistance  services  to  students  and  graduates  and to  solicit  appropriate
employment  opportunities  from  employers.  During the course of each  program,
students  receive  instruction  on job search and  interviewing  skills and have
available  reference  materials and assistance  with the composition of resumes.
Based on data obtained by the Company from its students and their employers, the
Company believes that  approximately 92% of DADC's and DPT's graduates  obtained
employment in a field related to their program of study.

Faculty

     Faculty members are hired locally in accordance  with criteria  established
by the school,  applicable  accreditation  organizations  and  applicable  state
regulatory  authorities.  Members  of a  school's  faculty  are  hired  based on
academic and vocational training  background,  prior educational  experience and
prior work  experience.  A  significant  portion of the  Company's  faculty were
previously employed in fields related to their area of instruction.  The Company
believes that such faculty  members  provide a "real world"  perspective  to its
students. As of December 31, 1997, DADC and DPT employed approximately 20 and 25
full-time  faculty  members,  respectively  (defined  as those  faculty  members
spending at least 37 hours per week teaching classes at the Company's  schools),
and 0 and 50 part-time faculty members, respectively.

Administration and Employees

     The  Company's  two  schools  are  each  managed  by  a  school   director.
Additionally,  the staff of each  school  includes a director  of  placement,  a
financial aid administrator and a director or assistant  director of admissions.
As of  December  31,  1997,  DADC  and  DPT  employed  approximately  40 and 120
full-time employees,  respectively.  The Company's employees are not represented
by a labor union or subject to a collective  bargaining  agreement.  The Company
has never  experienced a work stoppage and believes that its employee  relations
are satisfactory.

     Each of the  Company's  two schools  handles its  financial  aid  services,
oversees  regulatory  compliance,  assists in the  development  and  addition of
programs to existing  curricula,  conducts  marketing,  implements  and supports
management  information  systems and provides  accounting services and financial
resources.

Competition

     The post-secondary  education market is  highly-fragmented  and competitive
with no private or public  institution  having a significant  market share.  The
Company's  schools compete for students with  not-for-profit  public and private
colleges  and  proprietary  institutions  which offer degree  and/or  non-degree
granting  programs.   Such  proprietary   institutions  include  vocational  and
technical  training  schools,   continuing  education  programs  and  commercial
training  programs.  Competition among educational  institutions is based on the
quality of the program, perceived reputation of the institution, the cost of the
program,  and the  employability  of graduates.  Public and private colleges may


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offer  programs  similar  to those  offered  by the  Company's  schools at lower
tuition  costs  due in part to  government  subsidies,  foundation  grants,  tax
deductible  contributions,   or  other  financial  resources  not  available  to
proprietary  institutions.  Many of the Company's competitors in both the public
and private sector have greater financial and other resources than the Company.

Financial Aid and Regulation; Title IV Student Financial Assistance Programs

     A substantial  majority of the students  attending  the  Company's  schools
finance all or a part of their education  through grants or loans under Title IV
Programs.  Revenues  from  Title IV  funding  provide  most of DADC's  and DPT's
tuition  revenues  (aggregating  approximately  69% of cash  receipts  in fiscal
1996). The maximum amount of a student's  available Title IV program  assistance
is generally  based on the student's  financial  need. The Company  determines a
student's  financial  need based on the national  standard need analysis  system
established by the HEA. If there is a difference  between the amount of Title IV
program  funding a student is entitled to receive  (combined  with other outside
assistance)  and the  student's  tuition,  the  student is  responsible  for the
difference,  which may be  funded  by loans  from the  Company  directly  to the
student.  Such  loans,  if  advanced,  generally  require  the  students to make
payments on the loan commencing when the loan is received.

     Students at the  Company's  two schools may  participate  in the  following
Title IV Programs:

     Pell and FSEOG Grants.  The Federal Pell Grant Program  provides for grants
to help  financially  needy  undergraduate  students  meet  the  costs  of their
post-secondary  education.  The amount of an eligible student's Pell grant award
currently  ranges  from  $400 to $2,470  annually,  depending  on the  student's
financial  need, as determined by a formula set by the HEA and the  Regulations.
The HEA  guarantees  that all of the eligible  students at a school receive Pell
grants in the amounts to which they are  entitled.  In 1997,  the  average  Pell
award per student enrolled in DADC and DPT was approximately $2,204. Pell grants
to students  represented  approximately  $2,184,258,  or 22.5% of the  Company's
revenues in 1997.

     The Federal  Supplemental  Educational  Opportunity Grant program ("FSEOG")
provides for awards to exceptionally needy undergraduate students. The amount of
an  FSEOG  award  currently  ranges  from  $100 to  $4,000,  depending  upon the
student's  financial  need and the  availability  of funds.  In fiscal 1996, the
average FSEOG award to students  enrolled in the Company's two schools receiving
such grants was $400. The Company,  or another  outside  source,  is required to
make a 25% matching  contribution  for FSEOG  program  funds it  disburses.  The
Company made matching  contributions  of  approximately  $42,964 0in 1997. FSEOG
awards made to the Company's students (net of matching  contributions)  amounted
to approximately  $128,802 and represented  approximately  1-3% of the Company's
revenues in 1997.

     Federal  Family  Education  Loans and Federal  Direct  Student  Loans.  The
Federal Family  Education Loan ("FFEL")  programs  include the Federal  Stafford
Loan Program ("Stafford Loan"), and the Federal PLUS Program ("PLUS"),  pursuant
to which private lenders make loans to enable a student or the student's parents
to pay the cost of attendance at a post-secondary school.

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     The FFEL  Program  is  administered  through  state and  private  nonprofit
guarantee  agencies  that insure loans  directly,  collect  defaulted  loans and
provide various services to lenders.  The federal  government  provides interest
subsidies in some cases and reinsurance  payments for borrower  default,  death,
disability and bankruptcy.

     The Federal Direct Student Loan Program ("FDSLP") is substantially the same
as the FFEL  program in  providing  Stafford  and PLUS  loans.  Under the FDSLP,
however,  funds are provided directly by the federal government to the students,
and the loans are  administered  through  the school.  For  schools  electing to
participate, the FDSLP replaces the FFEL program, although loans are made on the
same general terms and conditions.

     Stafford Loan Program. Students may borrow an aggregate of $2,625 for their
first  undergraduate  academic  year and $3,500 for their second  academic  year
under the FFEL  Stafford Loan or FDSLP  Stafford  Loan  program.  If the student
qualifies  for  a  subsidized  loan,  based  on  financial  need,,  the  federal
government  pays interest on the loan while the student is attending  school and
during certain grace and deferment periods.  If the student does not qualify for
a subsidized  Stafford Loan, the interest  accruing on the loans must be paid by
the student.  In addition,  independent  students may qualify for an  additional
$4,000 a year in unsubsidized Stafford loans.

     Plus Loan  Program.  Parents of dependent  students may receive loans under
the FFEL PLUS Program or the FDSLP PLUS Program on an academic  year basis.  The
maximum  amount of any PLUS loan is the total cost of a student's  education for
each  relevant  academic  year less other  financial aid received by the student
attributable  to such year.  PLUS loans carry a maximum  interest rate of 9% and
are repayable  commencing  60 days  following  the last  disbursement  made with
respect to the relevant  academic year, with flexible  payment  schedules over a
ten-year  period.  The FFEL PLUS  loans  are made by  lending  institutions  and
guaranteed by the federal government. The FDSLP PLUS Program provides PLUS loans
by the  federal  government  on the same  general  terms as the FFEL PLUS loans.
There were no FDSLP PLUS or FFEL PLUS loans advanced to students in 1997.

     Perkins  Loans.  Students who  demonstrate  financial need may borrow up to
$3,000 per academic  year under the Federal  Perkins Loan  ("Perkins")  program,
subject to the  availability of Perkins funds at the  institution.  Repayment of
loans under the Perkins program is delayed until nine months after graduation or
the  termination  of studies.  Funding  for the  Perkins  program is made by the
Department of Education into a fund maintained by the  participating  school for
that  purpose.   The  participating  school  is  required  to  make  a  matching
contribution  into the fund of 25% of the total  loans made from the fund and to
deposit all repayments into the fund.

     Federal  Work-Study.  Pursuant to the Federal  Work-Study  ("FWS") program,
federal  funds are made  available to provide  part-time  employment to eligible
students  based on  financial  need.  The  Company's  two  schools may provide a
limited   number  of  on-campus  and  off-campus   jobs  to  eligible   students
participating  in the FWS program.  The Company,  or another outside source,  is
required  to pay  25% of the  gross  earnings  of  each  participant  in the FWS
program.

                                       10

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     Title IV Eligibility.  To obtain and maintain eligibility to participate in
the programs  described above, the Company's  schools must comply with the rules
and  regulations  set  forth  in the  HEA  and the  Regulations  thereunder.  An
institution  must  obtain  certificate  by the  Department  of  Education  as an
"eligible institution" to participate in Title IV Programs.  Certification as an
"eligible  institution"  requires,  among other things,  that the institution be
authorized to offer its educational  programs by the state in which it operates.
It must also be accredited by an accrediting agency recognized by the Department
of Education.

     The HEA provides standards for institutional  eligibility to participate in
the Title IV Programs. The standards are designed,  among other things, to limit
dependence on Title IV funds,  prevent  schools with  unacceptable  student loan
default rates from  participating in Title IV Programs and, in general,  require
institutions  to satisfy certain  criteria  intended to protect the integrity of
the federal programs, including criteria regarding administrative capability and
financial responsibility.

     Generally,  each school (a main  campus and any  additional  locations  for
purposes of the  Regulations)  is considered  separately for compliance with the
Regulations.  A school that has been certified as eligible to participate in the
Title  IV  Programs   continues  to  remain  eligible  for  the  period  of  its
certificate, which is generally four years. A school must apply for a renewal of
its certification  prior to its expiration and must demonstrate  compliance with
the eligibility requirements in its application.

     Under certain circumstances,  the Department of Education may provisionally
certify a school to participate in Title IV programs.  Provisional certification
may be imposed,  when a school is reapplying for  certification or when a school
undergoes a change of  ownership  resulting in a change in control if the school
(i) does not satisfy all of the financial responsibility  standards,  (ii) has a
Cohort  Default Rate of 25% or more in any single  fiscal year of the three most
recent federal  fiscal years for which data is available,  and (iii) under other
circumstances   determined   by  the   Secretary   of   Education.   Provisional
certification may last no longer than three years and differs from certification
in that a provisionally  certified  school may be terminated from eligibility to
participate in the Title IV Programs  without the same opportunity for a hearing
that is afforded to a fully certified  school.  Additionally,  the Department of
Education may impose other conditions on a provisionally certified institution's
eligibility to continue participating in the Title IV Programs.

     Student  Loan  Defaults.  Under  the  HEA,  an  institution  may  lose  its
eligibility to participate in some or all Title IV Programs if student  defaults
on the repayment of federally  guaranteed  student loans exceed specified Cohort
Default  Rates.  Similar rules  regarding  default rates apply to Federal Direct
Loans made  pursuant to the FDSLP,  commencing  with those loans  entering  into
repayment for the first time in the 12-month  period ending  September 30, 1995.
Under  existing  regulations  these rates are based on the repayment  history of
current and former  students for loans  provided under the Stafford Loan program
and the SLS program.  A Cohort  Default Rate is calculated  for each school on a
federal fiscal year basis by determining the rate at which the school's students
entering  repayment  in  that  federal  fiscal  year  default  by the end of the
following  federal fiscal year.  Cohort Default Rates are subject to revision by
the  Department  of Education if new data  becomes  available  and is subject to
appeal by schools  contesting  the  accuracy of the data or the  adequacy of the
servicing of the loans by the loan servicer.

                                       11

<PAGE>




     An institution whose Cohort Default Rate exceeds 40% for any single federal
fiscal year may have its  eligibility  to  participate  in all Title IV Programs
limited,  suspended or terminated. If the Department of Education elects to take
such action due to a single-year Cohort Default rate in excess of the regulatory
level, it must afford the institution a hearing before an independent Department
of Education  hearing  officer and an  opportunity to appeal any decision to the
Secretary of Education before the limitation, suspension or termination may take
effect. Except as indicated below, neither DADC nor DPT has had a Cohort Default
Rate in excess of 40%.

     An institution  whose Cohort Default Rate is 25% or more for the three most
recent  federal fiscal years for which data is available is subject to immediate
loss of eligibility  to  participate in Title IV Programs,  subject to an appeal
(on  the  bases  stated  in the  next  prior  paragraph)  of the  determination,
including an appeal based on a claim of exemption  from the Cohort  Default Fate
requirements  by virtue of  exceptional  mitigating  circumstances.  The loss of
eligibility lasts for the duration of the fiscal year in which the determination
of  ineligibility  is made, plus the two succeeding  fiscal years.  However,  an
institution remains eligible for Title IV funding while the appeal is pending.

     DPT  has  not  had a  Cohort  Default  Rates  of 25%  in  any of the  three
consecutive  federal fiscal years ending 1994. DADC had default rates of 44% (in
1991), 31% (in 1992) and 26% (in 1993), and accordingly,  lost its certification
to participate in the Stafford Loan program. DADC applied for recertification to
participate in the Stafford Loan program and its  application has been approved.
Accordingly,  DADC is now participating in the program.  DADC's published Cohort
Default Rate for 1994 and preliminary published Cohort Default Rate for 1995 are
below  regulatory  requirements.  The Company  believes  that neither of its two
schools is currently vulnerable to any other termination of Title IV eligibility
or programs based on three consecutive years of excess default rates.

     The Regulations  require that any school which experiences a Cohort Default
Rate in excess of 20% must  establish a default  management  plan in  compliance
with the federally mandated plan included in the Regulations. This plan includes
measures to reduce student  withdrawal rates,  improve student  employment rates
and  counseling of students on their  responsibility  to repay their loans.  The
Company has default  reduction  programs in place in its two  schools;  however,
economic and other  factors  outside of the Company's  control  could  adversely
affect default rates.

     The 85/15 Rule. The "85/15" rule, which applies to for-profit  institutions
such as DADC and DPT, became  applicable to the Company's schools beginning with
the fiscal year ending March 31, 1996.  The rule  requires that no more than 85%
of the school's  applicable cash receipts may be derived from Title IV Programs.
A school whose annual certified financial statement or Title IV compliance audit
report to the Department of Education does not reflect compliance with the 85/15
rule is  subject  to  immediate  termination  of its Title IV  eligibility.  The
Company believes that DADC and DPT are in compliance with the 85/15 rule.


                                       12

<PAGE>



     Change in  Control.  Upon a change in  ownership  resulting  in a change in
control  of the  Company  or any  of its  schools  as  defined  in the  HEA  and
Regulations,  either the Company or its schools,  as applicable,  would lose its
eligibility to participate in Title IV Programs for an  indeterminate  period of
time during  which it applies to regain  eligibility.  A change of control  also
could have  significant  regulatory  consequences  for the  Company at the state
level  and  could  affect  the  accreditation  of the  Company's  schools.  If a
corporation is not  publicly-traded,  the  Regulations  provide that a change in
ownership  resulting  in a change of control  occurs  when a  person's  legal or
beneficial  ownership  either rises above or falls below 25% of the voting stock
of the  corporation  and that person gains or loses control of the  corporation.
The  Company's  purchase  of DPT  constituted  a change in control  of DPT,  and
accordingly,  DPT has lost its  eligibility and will be unable to participate in
Title IV Programs until it is recertified.

     The  Department  of  Education's  regulations  provide that after a company
becomes publicly-traded, a change in control occurs when a report on Form 8-K is
required to be filed with the  Securities and Exchange  Commission  disclosing a
change  in  control.   Most  states  and   accrediting   agencies  have  similar
requirements, but they do not provide a uniform definition of change in control.
If the Company were to lose its  eligibility to participate in Title IV Programs
(by  virtue of DPT  purchase  or  otherwise)  for a  significant  period of time
pending an application to retain  eligibility,,  or if it were determined not to
be eligible, its operations would be materially adversely affected. The possible
loss of  Title  IV  eligibility  resulting  from a change  in  control  may also
discourage or impede a tender offer, proxy contest or other similar  transaction
involving control of the Company.

     Administrative   Capability.  The  Regulations  set  certain  standards  of
"administrative  capability"  which a school must satisfy to  participate in the
Title IV Programs.  These criteria require,  among other things, that the school
comply with all  applicable  Title IV  Regulations,  have capable and sufficient
personnel  to  administer  the Title IV  Programs,  have  acceptable  methods of
defining and  measuring  the  satisfactory  academic  progress of its  students,
provide financial aid counseling to its students,  timely submit all reports and
financial  statements required by the Regulations,  and that the school's Cohort
Default Rate not equal or exceed 25% for any single fiscal year.

     Failure to satisfy any of the criteria may lead the Department of Education
to determine that the school lacks the requisite  administrative  capability and
may subject the school to provisional  certification  when it seeks to renew its
certification  as an eligible  institution,  or may subject it to a fine or to a
proceeding for the limitation, suspension or termination of its participation in
Title  IV  Programs.  Proceedings  to  fine,  limit,  suspend  or  terminate  an
institution  are  conducted  before  an  independent   hearing  officer  of  the
Department of Education and are subject to appeal to the Secretary of Education,
prior to any sanction taking effect.  Thereafter,  judicial review may be sought
in the federal courts pursuant to the federal Administrative Procedures Act.

     Financial  Responsibility   Requirements.   The  HEA  and  the  Regulations
prescribe specific standards of financial responsibility which the Department of
Education must consider with respect to qualification  for  participation in the
Title IV Programs ("Financial  Responsibility  Standards").  These standards are


                                       13

<PAGE>


generally  applied on a  consolidated  school  basis.  However,  there can be no
assurance  that the  Department of Education will not apply such standards on an
individual  school basis. If the Department of Education  determines that either
of  the  Company's  schools  fails  to  satisfy  the  Financial   Responsibility
Standards,  the  Department  may require  that such  school post an  irrevocable
letter of credit (a "Financial  Responsibility  Bond") in favor of the Secretary
of Education  in an amount  equal to not less than  one-half of Title IV Program
funds  received  by the school  during the last  complete  award year or, in the
Department  of   Education's   discretion,   require  some  other  less  onerous
demonstration  of  financial   responsibility  (a  "Demonstration  of  Financial
Responsibility").  Pursuant  to the  Regulations,  the  Company  submits  annual
audited consolidated financial statements to the Department of Education.

     Among the principal Financial  Responsibility Standards which a school must
satisfy  are:  (i) an "acid  test"  ratio  (defined as the ratio of the total of
cash, cash equivalents and current accounts  receivable to current  liabilities)
of at least 1-to-1 at the end of the most recent  fiscal  year,  (ii) a positive
tangible net worth, as defined by the applicable Regulations,  at the end of the
most  recent  fiscal  year (the  "Tangible  Net Worth  Standard")  and (iii) net
operating results for the two most recent fiscal years, excluding  extraordinary
losses or losses from  discontinued  operations,  which do not show an aggregate
net loss in excess of 10% of tangible net worth at the beginning of the two year
period. Primarily because a large portion of the Company's assets may consist of
goodwill and other intangibles related to school  acquisitions,  the Company may
have a negative  tangible net worth on a  consolidated  basis in the future.  No
assurance  can be given that the  Department of Education may not make a request
for the  Company to post a Financial  Responsibility  Bond or  otherwise  make a
request for a Demonstration of Financial Responsibility.  If such a request were
to be made,  there is no  assurance  that the Company  could secure the funds to
post the  Financial  Responsibility  Bond which the  Department of Education may
request, or that the Company would be successful in negotiating a more favorable
Demonstration of Financial Responsibility.  If the Company were unable to post a
Financial Responsibility Bond or make a satisfactory  Demonstration of Financial
Responsibility,  it could become  ineligible  to receive Title IV funding in its
schools.  Ineligibility  for Title IV funding  would have an immediate  material
adverse effect on the Company's operations.

     Incentive  Compensation.  Schools  participating  in Title IV Programs  are
prohibited from providing any commission, bonus or other incentive payment based
directly or  indirectly on success in securing  enrollments  or financial aid to
persons engaged in any student recruitment,  admission or financial aid awarding
activity (the "Incentive  Compensation  Rule").  The Department of Education has
not  provided  specific  regulations  with respect to this  requirement.  If the
Department  of  Education  were to  determine  that  the  Company's  methods  of
compensation  do not comply with the Incentive  Compensation  Rule,  the Company
could be required to modify its compensation  system,  repay certain  previously
disbursed  Title  IV  Program  funds,  pay  administrative  fines  or  lose  its
eligibility  to  participate  in Title IV  Programs.  The Company  believes  its
compensation policies do not violate the Incentive Compensation Rule.

     Restrictions  on Adding  Locations and  Educational  Programs.  Proprietary
educational institutions must be in full operation for two years before they can
be certified by the Department of Education to participate in Title IV Programs.


                                       14

<PAGE>


However,  an  institution  that is already  qualified to participate in Title IV
Programs  may  establish,  with  approval of the  Department  of  Education,  an
additional  location  that  immediately  qualifies  for  participation  in  such
programs without satisfying the two-year  requirement if such location satisfies
all other  applicable  requirements  for  institutional  eligibility,  including
approval of the additional location by the applicable accrediting agency and the
relevant state authorizing agency.

     Generally,  if a  school  which  is  eligible  to  participate  in Title IV
Programs  adds an  educational  program,  it must  apply  to the  Department  of
Education to have such program  designated as eligible.  However,  if it adds an
additional degree program or a program which prepares students for employment in
the same or related  occupations as those which have  previously been designated
as  eligible,  it is not  obligated  to obtain  the  Department  of  Education's
approval of such  program.  The Company does not believe that the  Department of
Education  requirements  will  hinder its ability to plan and add new degree and
diploma programs to its schools' curricula.

     State  Authorization  and  Accreditation.  The  Company's  schools  must be
authorized by the  applicable  agency or agencies of the state in which they are
located to operate.  State  authorization  is also required for  eligibility  to
participate  in Title IV Programs.  The Company's two schools are  authorized to
operate in their respective states.

     Both of the Company's  schools are  accredited by at least one  accrediting
body recognized by the Department of Education. Accreditation signifies that the
schools have been reviewed and  determined to meet minimum  criteria in terms of
administration,  faculty, curriculum,  physical plant, facilities and equipment,
and financial stability.  Accreditation by an accrediting body recognized by the
Department of Education is a requirement for participation in Title IV Programs.

ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

     The Company leases 81,500 square feet for its DADC  facilities from Paul T.
Siemann,  its Chief  Executive  Officer  and a  director,  for $13,000 per month
pursuant to a lease which expires in August 2000. The Company  believes that the
terms of the lease are fair,  reasonable and consistent with the terms of leases
which the Company could enter into with nonaffiliated third parties.  DPT leases
an aggregate  of  approximately  23,000  square feet for office space and school
facilities  for $18,630 per month under two leases  which expire in October 1998
and April 2000.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     Not applicable.

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

     Not applicable.


                                       15

<PAGE>





                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------

     The Company's Common Stock trades on the Electronic  Bulletin Board ("EBB")
under the  symbol  "SEDS".  The  following  table  sets  forth for the  quarters
indicated the range of high and low closing prices of the Company's Common Stock
on the EBB but does not include retail markup, markdown or commissions.

                                                               Closing Price
                                                            -------------------
By Quarter Ended:                                           High           Low
-----------------                                           ----           ---

March 31, 1998..............................................$3.85         $3.68
December 31, 1997........................................... 3.82          3.82
September 30, 1997.......................................... None          None
June 30, 1997............................................... None          None

March 31, 1997.............................................. None          None
December 31, 1996........................................... None          None
September 30, 1996.......................................... None          None
June 30, 1996............................................... None          None

     As of March 31,  1998,  the  Company  had  approximately  1,200  record and
beneficial stockholders.

Dividends

     The Company has not paid dividends on its Common Stock since  inception and
does not plan to pay dividends in the foreseeable future. Earnings, if any, will
be retained to finance growth.





                                       16

<PAGE>


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

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

December 31, 1997 as Compared to December 31, 1996
--------------------------------------------------

During  1997,  the  Company's  cash  balance  decreased  $293,156  from the 1996
amounts.  However,  at December 31, 1997 current assets increased  $685,065 over
1996 current  assets,  an increase of 57.4%.  The increase in current  assets is
largely due to an increase in short-term  student accounts and notes receivable.
Compared to prior years, a substantial portion of the student accounts and notes
receivable are institutional and held by the school rather than being government
granted or based.  This change occurred  because the school lost its eligibility
for  government  Title IV funding and grants in 1996 because its previous  owner
failed to comply with certain financial  responsibility  ratios.  These Title IV
funding and grants have been restored in November 1997.  Nevertheless,  the 1997
receivables   increased   $913,560  over  1996.   However,   the  allowance  for
uncollectible  receivables  also  increased by $130,996 and the bad debt expense
increased  from $81,020 in 1996 to $138,353 in 1997.  To insure future cash flow
and hedge  against  uncollectible  student  receivables,  in  addition  to notes
receivable  from a  stockholder,  the  Company  sold a number of  student  notes
receivable  (long-term  portion only) to another  stockholder for $200,000.  The
Company's  President  increased his borrowings from the Company by $156,300 over
1996.  The total amount due from the  President is payable  within one year,  of
which $60,000 was repaid in April 1998.

Property and equipment decreased $164,725 from 1996 due to depreciation  expense
of $176,276  after  purchases of property and equipment of $11,551.  Also during
1997, the Company  initiated the acquisition of another school in  Philadelphia.
Downpayments,  earnest  money and other  direct  acquisition  costs  during 1997
amounted  to  $223,936.  The  acquisition  closed on March 24,  1998.  The total
purchase  price  was  $8,959,564.  The  purchase  of  this  school  is  part  of
management's  long-term  plan to grow its business by  acquisition of profitable
schools which fit the Company's overall  acquisition  strategy.  Overall,  total
assets increased $1,068,101 from 1996, an increase of 50%.


                                       17

<PAGE>

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


During 1997, the Company's  accounts  payable and accrued  liabilities  remained
relatively  constant  compared  to  1996.  However,  total  current  liabilities
increased  $604,570  over 1996  current  liabilities,  an increase  of 53%.  The
increase  in current  liabilities  is largely  due to the  increase  in deferred
tuition income and current maturities of long-term debt. Deferred tuition income
increased  $153,538  over  1996 due to  normal  student  enrollment  and  timing
fluctuations.  Current and long-term  maturities of debt increased $840,507 over
1996 due to reduced cash flow created by loss of the Title IV funding  discussed
above. Notes payable to a stockholder decreased by $36,405. The Company incurred
a total  liability  of  $123,936  in 1997  payable to the owner of the  acquired
Philadelphia  school,  which  consists of $61,968  directly  payable in cash and
$61,968 to repurchase common stock. Finally, student refunds and credit balances
decreased $122,263 from 1996 due to normal fluctuations.

During 1997,  the Company's  current  assets  exceeded  current  liabilities  by
$142,977, giving the Company a current ratio of 1.08:1.

Rent payable, a non-current  liability,  increased $132,902 over 1996 due to the
accrual  of one  year's  rent less a  payment  of  $22,000.  This is based on an
agreement  with the  owner of the  building,  who is also the  President  of the
Company, to defer the payment of rent with interest until the school's cash flow
improves.

Common  Stock  increased  $339,598  over  1996.  This  increase  is  due  to the
reorganization  of the  Company in a reverse  acquisition  and the  issuance  of
additional stock on August 31, 1997.  Additional  paid-in capital decreased from
1996 from  $618,646 to $88,706  because of the  elimination  of the  accumulated
deficit against paid-in capital when the reorganization occurred.

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

1997 Compared to 1996
---------------------

Although,  student  receivable  amounts  increased during 1997 and despite a 12%
increase in tuition for new students in 1997, the tuition  revenue  decreased in
1997 reflecting a 5% decline in the number of students from approximately 335 in
1996 to 320 in 1997. The decline in tuition  revenue and in students in 1997 was


                                       18

<PAGE>


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


also  also a result  of the  unavailability  beginning  in 1996 of  governmental
Stafford  loans.  With the  restoration of Stafford loans in late 1997, and with
the 1997 tuition  increase in place for new  students,  revenues are expected to
increase in 1998.  College supply and cafeteria sales decreased from 1996 due to
a reduction in the number of text books required to be purchased by students and
a decrease in cafeteria  sales.  The related  costs of these sales  decreased as
well by  $26,241.  Contributed  materials  also  decreased  from  1996  since no
materials or vehicles were contributed in 1997.  Other income increased  $55,891
due primarily to increased  interest income from student loans.  Overall,  total
revenues decreased $86,673 from 1996, a decreased of 3%.

Educational services and facilities expense decreased $82,436 from 1996 due to a
greater  focus on  controlling  costs  due to the cash  shortages.  Selling  and
promotion decreased $70,637 from 1996 due to the same reason.  However,  general
and  administrative  expenses  increased  over 1996 by $81,960 due to additional
corporate  costs  of  being a  public  company  after  the  reverse  acquisition
discussed above.  Consequently,  income from operations  decreased  $48,109 from
1996, a decrease of 46%.

Interest expense increased $65,789 due to the significant  increase in borrowing
from banks and from the President of the Company described above.  Overall,  the
Company  sustained  a net loss in 1997 of  $34,716 as opposed to a net income of
$79,182 in 1996.


ITEM 7. FINANCIAL STATEMENTS
----------------------------


                                       19

<PAGE>










                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                        CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                           DECEMBER 31, 1997 AND 1996











<PAGE>





                                TABLE OF CONTENTS
                                -----------------



                                                                       Page
                                                                       ----

Independent Auditors' Report                                             1

Consolidated Balance sheets                                              2

Consolidated Statements of operations                                    3

Consolidated Statements of stockholders' (deficit) equity                4

Consolidated Statements of cash flows                                  5-6

Notes to financial statements                                         7-24





<PAGE>

                          INDEPENDENT AUDITORS' REPORT





         The Board of Directors
          and Stockholders
         Siemann Educational Systems, Inc.
         Denver, Colorado

         We have audited the accompanying  balance sheets of Siemann Educational
         Systems,  Inc. and  Subsidiary as of December 31, 1997 and 1996 and the
         related statements of operations,  stockholders' equity, and cash flows
         for the  years  ended  December  31,  1997 and  1996.  These  financial
         statements  are the  responsibility  of the Company's  management.  Our
         responsibility is to express an opinion on these consolidated financial
         statements based on our audits.

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

         In our opinion,  the  financial  statements  referred to above  present
         fairly,  in all material  respects,  the financial  position of Siemann
         Educational  Systems,  Inc. as of December  31, 1997 and 1996,  and the
         results of operations  and cash flows for the years ended  December 31,
         1997  and  1996  in  conformity  with  generally  accepted   accounting
         principles.




                                                     GORDON, HUGHES & BANKS, LLP

         Englewood, Colorado
         March 25, 1998


                                                                          Page 1

<PAGE>
<TABLE>
<CAPTION>



                                   SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                                              CONSOLIDATED BALANCE SHEETS
                                           AS OF DECEMBER 31, 1997 AND 1996

                                                        Assets

                                                                               1997                   1996
                                                                            -----------           -----------
Current assets:
<S>                                                                         <C>                   <C>        
     Cash                                                                   $    18,830           $   311,986
     Student accounts receivable, less allowance for doubtful
          accounts of $137,213 and $66,760                                      657,814               798,058
     Students notes receivable, less allowance for doubtful
          accounts of $60,543 and $-0-                                          746,693                     0
     Note receivable - stockholder                                              216,300                60,000
     Note receivable - related party                                            200,000                     0
     Inventory                                                                    7,392                23,321
     Prepaid and other                                                           31,401                     0
                                                                            -----------           -----------
               Total current assets                                           1,878,430             1,193,365
     Student accounts and notes receivable, long-term portion,
          less allowance for doubtful accounts of $62,926 and $63,591           718,275               411,164
     Property and equipment, net of accumulated depreciation                    284,774               449,499
     Investment in acquisition of business                                      223,936                     0
     Perkins matching funds                                                      70,000                70,000
     Other                                                                       25,597                 8,883
                                                                            -----------           -----------
     Total assets                                                           $ 3,201,012           $ 2,132,911
                                                                            ===========           ===========

                                    Liabilities and Stockholders' Equity
Current liabilities:
     Accounts payable                                                       $   123,449           $   117,463
     Student refunds payable and credit balances                                 21,061               143,324
     Payable to owner of business to be acquired                                 61,968                     0
     Accrued liabilities                                                        133,321               108,935
     Deferred tuition income                                                    871,537               717,999
     Common stock repurchase commitment                                          61,968                     0
     Current maturities of long-term debt                                       462,149                43,162
                                                                            -----------           -----------
          Total current liabilities                                           1,735,453             1,130,883
Rent payable, related party                                                     132,902                     0
Long-term debt, net of current maturities                                       605,730               184,210
Note payable - stockholder                                                      355,307               391,712
                                                                            -----------           -----------
          Total liabilities                                                   2,829,392             1,706,805
                                                                            -----------           -----------
Stockholders' equity:
     Preferred stock, $.10 par value, 10,000,000 shares
          authorized , none outstanding                                               0                     0
     Common stock, $.10 par value, 100,000,000 shares
          authorized, 3,795,984 (1997) and 400,000 (1996)
          shares issued and outstanding                                         379,598                40,000
     Additional  paid-in capital                                                 88,706               618,646
     Common stock repurchase commitment                                         (61,968)                    0
     Accumulated (deficit)                                                      (34,716)             (232,540)
                                                                            -----------           -----------
               Total stockholders' equity                                       371,620               426,106
                                                                            -----------           -----------
Total liabilities and stockholders' equity                                  $ 3,201,012           $ 2,132,911
                                                                            ===========           ===========


                                                                                                       Page 2

</TABLE>

<PAGE>



                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996



                                                        1997            1996
                                                     -----------    -----------
Revenue:
     Tuition revenue                                 $ 2,806,074    $ 2,831,440
     College supply and cafeteria sales                  164,339        204,384
     Contributed materials                                     0         77,153
     Other                                               139,932         84,041
                                                     -----------    -----------
          Total revenues                               3,110,345      3,197,018
                                                     -----------    -----------

Operating expenses:
     Educational services and facilities               1,118,937      1,201,373
     Cost of college supplies and cafeteria sales        180,679        206,920
     Selling and promotion                               524,756        595,393
     General and administrative                          906,898        824,938
     Depreciation and amortization                       184,347        182,890
     Bad debt expense                                    138,353         81,020
                                                     -----------    -----------
          Total operation expenses                     3,053,970      3,092,534
                                                     -----------    -----------


Income from operations                                    56,375        104,484


Interest (expense)                                       (91,091)       (25,302)
                                                     -----------    -----------


Net (loss) income
                                                     $   (34,716)   $    79,182
                                                     ===========    ===========


     Net (loss) income per common share
                                                     $     (0.02)   $      0.20
                                                     ===========    ===========


     Weighted number of common shares outstanding      2,185,600        400,000
                                                     ===========    ===========




                                                                          Page 3



<PAGE>
<TABLE>
<CAPTION>



                                        SIEMANN EDUCATIONAL SYSTEMS INC. AND SUBSIDIARY
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
                                         FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996




                                                                                              Stock                       Total
                                                         Common Stock                      Repurchase    Accumulated   Stockholders'
                                                     Shares        Amount      Capital     Commitment     (Deficit)       Equity
                                                    ---------    ---------    ---------     ---------     ---------     ---------

<S>                                                  <C>        <C>          <C>           <C>           <C>           <C>      
Balances, December 31, 1995                           400,000    $  40,000    $ 630,972     $       0     $(311,722)    $ 359,250


Net income                                                  0            0            0             0        79,182        79,182
Distribution to owner                                       0            0      (12,326)            0             0       (12,326)
                                                    ---------    ---------    ---------     ---------     ---------     ---------

Balances, December 31, 1996                           400,000       40,000      618,646             0      (232,540)      426,106

Distribution to owner                                       0            0     (216,520)            0             0      (216,520)
Sale of common stock to related party
     ($.001 per share)                              2,250,000      225,000     (222,750)            0             0         2,250
Sale of common stock to related party
     ($.001 per share)                                500,000       50,000      (49,500)            0             0           500
Sale of common stock and warrants
     ($2.00 per share) net commission of
     $5,000                                            50,000        5,000       90,000             0             0        95,000
Reorganization of the Company at
     8/31/97                                          500,000       50,000     (282,540)            0       232,540             0
Sale of common stock and warrants
     ($2.00 per share) net commission of
     $5,000                                            50,000        5,000       90,000             0             0        95,000
Issuance of common stock for services to
     consultant ($.267 per share)                      15,000        1,500        2,500             0             0         4,000
Issuance of common stock ($2.00 per
     share) to acquire business                        30,984        3,098       58,870             0             0        61,968
Common stock repurchase commitment                          0            0            0       (61,968)            0       (61,968)
Net (loss)                                                  0            0            0             0       (34,716)      (34,716)
                                                    ---------    ---------    ---------     ---------     ---------     ---------

Balances, December 31, 1997                         3,795,984    $ 379,598    $  88,706     $ (61,968)    $ (34,716)    $ 371,620
                                                    =========    =========    =========     =========     =========     =========







                                                                                                                           Page 4

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                        SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                         FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996





                                                                     1997                1996
                                                                 -----------         -----------

Cash flows from operating activities:
<S>                                                              <C>                 <C>        
     Net (loss) income                                           $   (34,716)        $    79,182
     Cash provided (used) by operating activities:
          Depreciation and amortization                              184,347             182,890
          Contributed materials                                            0             (77,153)
          Issuance of stock for services                               4,000                   0
     Change in operating assets and liabilities:
          Students accounts and notes receivable                  (1,113,560)            178,813
          Notes receivables from stockholders                       (156,300)                  0
          Inventory                                                   15,929              11,943
          Prepaid expenses and other assets                          (56,186)           (219,556)
          Accounts payable                                             5,986              (2,432)
          Student refunds payable and credit balances               (122,263)             86,126
          Accrued liabilities                                         24,386               7,414
          Rent payable, related party                                132,902                   0
          Deferred tuition income                                    153,538            (265,701)
                                                                 -----------         -----------

               Net cash (used) by operating activities              (961,937)            (18,474)
                                                                 -----------         -----------

Cash flows from investing activities:
     Investment in acquisition of business                          (100,000)                  0
     Purchases of property and equipment                             (11,551)            (35,657)
                                                                 -----------         -----------

               Net cash (used) by investing activities              (111,551)            (35,657)
                                                                 -----------         -----------


                                                                                         
                                    (Continued on next page)

                                                                                          Page 5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                                                                                  
                           SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                            FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
                                              (CONTINUED)




                                                                           1997               1996
                                                                       -----------         -----------

Cash flows from financing activities:
<S>                                                                    <C>                 <C>        
     Sale of common stock                                              $   202,750         $         0
     Commission paid for sale of stock                                     (10,000)                  0
     Proceeds from debt                                                  1,600,404             391,712
     Payments of debt                                                     (759,897)            (19,692)
     Payments of related party debt                                       (252,925)                  0
     Distribution to owner                                                       0             (12,326)
                                                                       -----------         -----------

          Net cash provided by financing activities                        780,332             359,694
                                                                       -----------         -----------

          Net (decrease) increase in cash                                 (293,156)            305,563

Cash, beginning of period                                                  311,986               6,423
                                                                       ===========         ===========

Cash, end of period                                                    $    18,830         $   311,986
                                                                       ===========         ===========

Supplemental disclosure of cash flow information:
     Cash payments for interest                                        $    91,091         $    25,302
                                                                       ===========         ===========

Non-cash transactions:
     Note receivable - related party exchanged for student loans       $   200,000         $         0
                                                                       ===========         ===========
     Investment in acquisition of business exchanged for stock         $    61,968         $         0
                                                                       ===========         ===========
     Reorganization of Company                                         $   282,540         $         0
                                                                       ===========         ===========
     Distribution to owner converted to debt                           $   216,520         $         0
                                                                       ===========         ===========




                                                                                               Page 6

</TABLE>

<PAGE>


                                   
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS

                           
NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          ORGANIZATION AND NATURE OF BUSINESS
          -----------------------------------

          Siemann Educational Systems,  Inc. (the "Company") was incorporated in
          the State of Colorado on September 17, 1987. The Company,  through its
          wholly-owned  subsidiary,  Denver Automotive and Diesel College, Inc.,
          (the "School") (formerly Siemann Educational Systems, Inc.) is engaged
          in the business of operating a proprietary  vocational college located
          in Denver,  Colorado.  The  majority  of  students  are drawn from the
          Denver  metropolitan area, with the remainder drawn from various other
          surrounding states.

          A  significant  portion of the  Company's  revenues  are  provided  by
          students who  participate  in government  financial  aid programs.  Of
          total  tuition  revenue,  revenue  derived from  governmental  aid was
          approximately  $860,000,  or 31% and $2,275,000,  or 81% for the years
          ended  December 31, 1997 and 1996,  respectively.  In connection  with
          this  participation,  the Company is subject to rules and  regulations
          promulgated  by the U.S.  Department of  Education.  Failure to comply
          with the terms and  provisions  of this  participation  could  lead to
          suspension or termination  of the Company's  ability to participate in
          government financial aid programs and,  consequently,  could adversely
          affect the Company's operations.

          On September 12, 1996, the U.S.  Department of Education  notified the
          School that it had lost its eligibility to continue its  participation
          in the Federal Family Education Loan ("FFEL")  Programs  authorized by
          Title IV of the Higher  Education Act of 1965, as amended.  This was a
          result of the School's  cohort  default  rates from each of the fiscal
          years, 1991 to 1993,  exceeding the eligibility  threshold of 25%. The
          School made  application  with the U.S.  Department  of  Education  to
          regain  eligibility  to  participate  in the  FFEL  Programs  and  has
          received  notification  from the U.S.  Department  of Education  that,
          effective October 1, 1997, the School is again eligible to participate
          in the FFEL programs.

          On August 13, 1997,  the School  entered into an Agreement and Plan of
          Reorganization  with  Chartwell  Cable Fund,  Inc.,  ("Chartwell"),  a
          public company.  The  reorganization was completed on August 31, 1997.
          At a special meeting of the shareholders of Chartwell on September 18,
          1997,  Chartwell's  name was changed to Siemann  Educational  Systems,
          Inc.


          CONSOLIDATION
          -------------

          The  accompanying  consolidated  balance  sheet at  December  31, 1997
          includes the accounts of the Company and its wholly-owned  subsidiary,
          Denver   Automotive   and  Diesel   College,   Inc.  All   significant
          intercompany transactions have been eliminated in consolidation.

                                                                          Page 7




<PAGE>

                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          REVENUE RECOGNITION
          -------------------

          Revenue  is  derived  primarily  from  courses  taught at the  School.
          Textbook  sales to students are  recognized  when the  semester/school
          year begins. Cafeteria and other miscellaneous revenues are recognized
          as services are performed. Deferred tuition revenue represents amounts
          billed for the current  educational year,  reduced for tuition revenue
          recognized pro rata during the year. If a student withdraws,  unearned
          revenue is reduced by the amount of lost  revenue  and a refund due to
          the student is recorded.  Refunds are  calculated in  accordance  with
          federal, state and accrediting agency standards.


          ACCOUNTS RECEIVABLE
          -------------------

          Accounts receivable represent outstanding tuition and fee balances due
          from students.  Allowances for doubtful accounts have been established
          to record amounts deemed by management to be uncollectible.


          CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS
          ------------------------------------------------------

          Statement of Financial  Accounting  Standards No. 105,  "Disclosure of
          Information  About Financial  Instruments with Off-Balance  Sheet Risk
          and  Financial   Instruments  with  Concentrations  of  Credit  Risk",
          requires  disclosure  of  significant  concentrations  of credit  risk
          regardless  of the degree of such  risk.  Financial  instruments  with
          significant  credit risk include cash,  accounts and notes receivable.
          The  carrying  amount of assets  reasonably  approximates  their  fair
          value,  as determined by the amount of cash or the  collectibility  of
          receivables.  The carrying  value of the  Company's  debt  obligations
          reasonably  approximates  their fair value as the stated interest rate
          approximates current market interest rates of debt with similar terms.
          As of December 31, 1997,  cash balances did not exceed $100,000 at any
          one bank.  As of  December  31,  1996,  the  Company  maintained  cash
          balances in excess of $100,000 at one bank. The Company's  accounts at
          this bank are insured by the Federal Deposit Insurance  Corporation up
          to $100,000. Accounts and notes receivable from students are unsecured
          and subject to significant credit risk. For many of the student loans,
          the Company employs a loan servicing company.  The Company's policy is
          to  aggressively  pursue the collection of any delinquent  loans.  The
          notes  receivable from  stockholder  are secured by the  stockholder's
          home. The note receivable from the related party is secured by student
          notes  receivable  purchased  by the  related  party and shares of the
          Company's  common  stock.  The fair  market  value of the  receivables
          approximates the amount of the note.

                                                                          Page 8

<PAGE>

                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          ACCOUNTING 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.
          Significant estimates have been made to determine bad debt expense and
          the related allowance for uncollectible accounts and notes receivable.


          INVENTORY
          ---------

          Inventories  consist of books and  automotive  and diesel repair parts
          and supplies which are consumed in the  educational  activities of the
          Company.  Inventories are stated at the lower of cost or market,  cost
          being determined by the first-in, first-out method.


          PROPERTY AND EQUIPMENT
          ----------------------

          Property and  equipment are stated at cost.  Depreciation  is provided
          using the straight-line  method over the estimated useful lives of the
          classes of  property  and  equipment.  Lives  range from three to five
          years.  Depreciation  was  $176,276  and  $172,341 for the years ended
          December 31, 1997 and 1996, respectively.


          PERKINS MATCHING FUNDS
          ----------------------

          The Company and the Federal  Government  together deposit money in the
          U.S.  Department of Education Title IV Perkins Loan Program in a ratio
          of 1 to 9,  respectively.  As loans are repaid,  the amounts collected
          are  re-loaned to new  students.  Should the loan program in which the
          School has  invested  be  terminated,  the  Company  will  receive its
          respective  share of the resulting  cash.  The  Company's  approximate
          share  as  of  December   31,  1997  and  1996  is  presented  in  the
          accompanying balance sheets at $70,000.


                                                                          Page 9

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          PREPAID EXPENSES
          ----------------

          The Company  prepaid a  consulting  firm  $25,000  for  services to be
          rendered  over a  twelve  month  period,  beginning  September,  1997.
          Accordingly,  the Company is amortizing  the  prepayment on a straight
          line basis over a twelve month period. Amortization expense was $4,795
          for the year ended December 31, 1997.


          INTANGIBLE ASSETS
          -----------------

          Intangible assets consist of the Company's  organization  costs, which
          are being amortized over five years.  Amortization  expense was $3,276
          and  $10,549  for  the  years  ended   December  31,  1997  and  1996,
          respectively. The intangible assets are fully amortized as of December
          31, 1997.


          STUDENT REFUNDS PAYABLE AND CREDIT BALANCES
          -------------------------------------------

          Student refunds payable in the  accompanying  balance sheets represent
          refunds due and payable on behalf of  students  who  withdrew in prior
          periods.  Student  credit  balances  represent  the excess of payments
          received over current tuition  billings for active  students.  Student
          refunds and credit balances are combined in the  accompanying  balance
          sheet where the credit  balances  comprise the majority of the amounts
          displayed.  Credit  balances were $16,222 and $138,983 at December 31,
          1997 and 1996, respectively.


          CONTRIBUTED MATERIALS
          ---------------------

          Periodically,  automobile  manufacturers  and automobile local dealers
          contribute tools and vehicles to the School that are restricted solely
          for use in educational activities. These materials are consumed in the
          educational  process and ultimately  scrapped.  Once the materials are
          contributed,  the  School  has no  obligation  to  return  them to the
          manufacturers or dealers.

                                                                         Page 10

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          ADVERTISING COSTS
          -----------------

          Advertising costs are charged to operations when incurred and included
          in selling and promotion  expenses.  Advertising  expense  amounted to
          $149,331 and $133,112 for the years ended  December 31, 1997 and 1996,
          respectively.


          INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
          -----------------------------------------------------------

          Income  (loss)  per share is the  amount of  earnings  (loss)  for the
          period for each common stock share outstanding. Earnings is defined as
          operating income (loss) less preferred stock dividends for the period.
          The number of outstanding  common shares is determined by the weighted
          average of shares outstanding during the period.  Diluted earnings per
          share, if any, is the basic earnings per share for the period adjusted
          for the assumed exercise or conversion of all stock options,  warrants
          or  other  securities  convertible  into  common  stock  provided  the
          resulting  earnings  per share is not  anti-dilutive.  In years of net
          loss, there is no diluted earnings per share since the result would be
          anti-dilutive.

          For  1996,  net  income  per  common  share is  computed  based on the
          weighted  average  number  of common  shares  outstanding  of  400,000
          shares.

          In  February  1997 SFAS No.  128,  "Earnings  Per  Share",  was issued
          effective  for periods  ending after  December  15, 1997.  There is no
          impact on the Company's  1996  financial  statements  from adoption of
          SFAS No. 128. The Company has adopted the  provisions  of SFAS No. 128
          effective for the year ending  December 31, 1997.  Common shares owned
          by the former sole  shareholder  of Siemann prior to the completion of
          the merger with Chartwell are considered  outstanding  for all periods
          presented.  Shares  outstanding  for  Chartwell  prior to merger  with
          Siemann are considered outstanding beginning on August 31, 1997. Stock
          warrants are not  considered in the  calculation of net loss per share
          as their inclusion would be anti-dilutive.  Shares that are subject to
          repurchase are considered outstanding. Excluding the shares subject to
          repurchase  does not affect the loss per share.  The weighted  average
          number of common shares  outstanding  for the year ended  December 31,
          1997 was 2,185,600.


          STATEMENT OF CASH FLOWS
          -----------------------

          For  the  purposes  of the  statements  of  cash  flows,  the  Company
          considers investments and savings instruments with maturities of three
          months or less to be cash equivalents.

                                                                         Page 11

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



          RECLASSIFICATIONS
          -----------------

          Certain  reclassifications  have been made to the  December  31,  1996
          financial statements to conform to the December 31, 1997 presentation.


          New Accounting Standards:

          STOCK-BASED COMPENSATION
          ------------------------

          Statement of Financial  Accounting  Standards No. 123, "Accounting for
          Stock-Based  Compensation"  ("SFAS No.  123"),  was issued in October,
          1995  by the  Financial  Accounting  Standards  Board.  SFAS  No.  123
          provides  an  alternative   method  of  accounting   for   stock-based
          compensation  arrangements,  based on fair  value  of the  stock-based
          compensation  utilizing various  assumptions  regarding the underlying
          attributes of the options and stock,  rather than the existing  method
          of  accounting  for  stock-based  compensation  which is  provided  in
          Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock
          Issued  to  Employees"  ("APB  No.  25").  The  Financial   Accounting
          Standards  Board  encourages  entities to adopt the  fair-value  based
          method but does not require adoption of this method.  The Company will
          continue  its  current  accounting  policy  under  APB No.  25 but has
          adopted the disclosure-only provisions of SFAS No. 123 for any options
          and warrants issued to employees,  directors, or consultants. For 1997
          and 1996 no expense has been recorded.


          CAPITAL STRUCTURE
          -----------------

          In February 1997, the Financial Accounting Standards Board issued SFAS
          No, 129,  "Disclosure of Information  about Capital  Structure" ("SFAS
          No.  129"),   which  requires   companies  to  disclose  all  relevant
          information   regarding   their  capital   structure.   SFAS  No.  129
          presentation  is required for reporting  periods ending after December
          15, 1997. Based on the capital structure  disclosures presented in the
          accompanying  consolidated financial statements and notes thereto, the
          Company does not believe that any additional  disclosures are required
          as a result of adopting this pronouncement.

                                                                         Page 12

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



          SEGMENT REPORTING
          -----------------

          In June 1997, the Financial Accounting Standards Board issued SFAS No.
          131,   "Disclosure   about  Segments  of  an  Enterprise  and  Related
          Information"  ("SFAS No. 131"),  which amends the  requirements  for a
          public  enterprise  to report  financial and  descriptive  information
          about  its  reportable  operating  segments.  Operating  segments,  as
          defined in the  pronouncement,  are components of an enterprise  about
          which  separate  financial   information  is  available  and  that  is
          evaluated  regularly  by the  Company  in  deciding  how  to  allocate
          resources and in assessing  performance.  The financial information is
          required  to be  reported  on the basis  that is used  internally  for
          evaluating segment  performance and deciding how to allocate resources
          to segments.  The  disclosures  required by SFAS No. 131 are effective
          for all fiscal years  beginning  after  December 15, 1997. The Company
          adopted SFAS No. 131 in 1997.  For both years ended  December 31, 1996
          and  1997,  there  is  no  impact  on  the  financial   statements  or
          disclosures.


          COMPREHENSIVE INCOME
          --------------------

          In June 1997, the Financial Accounting Standards Board issued SFAS No.
          130,  "Reporting   Comprehensive   Income"  ("SFAS  No.  130"),  which
          establishes  standards for the reporting of comprehensive income. This
          pronouncement  requires  that all items  recognized  under  accounting
          standards as components  of  comprehensive  income,  as defined in the
          pronouncement,  be reported in a financial statement that is displayed
          with the same prominence as other financial statements.  Comprehensive
          income  includes  all changes in equity  during a period  except those
          resulting from investments by owners and distributions to owners.  The
          financial  statement  presentation  required  under  SFAS  No.  130 is
          effective for all fiscal years  beginning after December 15, 1997. The
          Company has not adopted SFAS No. 130 in 1997 but will do so in 1998.


NOTE 2 -  RECAPITALIZATION AS A RESULT OF REORGANIZATION

          Pursuant to the Agreement and Plan of Reorganization  effective August
          31, 1997,  Chartwell issued 400,000 shares of common stock to the sole
          shareholder  of  Siemann  in  exchange  for  all  of  the  issued  and
          outstanding  common  shares of the Siemann.  In  addition,  on June 4,
          1997,  the former  sole  shareholder  of Siemann  purchased  2,250,000
          common shares of Chartwell,  resulting in a majority  ownership of the
          consolidated Company.


                                                                         Page 13

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



          For legal purposes,  Chartwell has acquired  Siemann and is the parent
          company of Siemann  following  the  merger.  However,  for  accounting
          purposes, Siemann is the acquiring company in a reverse acquisition of
          Chartwell.  As a result,  the financial  statements  presented  herein
          prior to August 31,  1997 are those of  Siemann  except for the equity
          section of the balance sheets,  which utilizes the pre-merger  capital
          structure of Chartwell.  In addition,  the retained deficit of Siemann
          and  Chartwell (a  subchapter S  corporation)  at August 31, 1997 have
          been  eliminated  and  charged to  additional  paid in  capital.  As a
          result, the accumulated  deficit at December 31, 1997 is equivalent to
          the loss  for the year  since  the date of  acquisition.  Prior to the
          acquisition,   Chartwell  had  been  a  shell   corporation   with  no
          operations.

          The  acquisition  has been accounted for as a purchase and the results
          of   operations   of  the  acquired   business  are  included  in  the
          consolidated  financial  statements from the date of acquisition.  The
          following  represents the unaudited pro forma results of operations as
          if the above-noted  business combination had occurred at the beginning
          of the respective year in which the company was acquired as well as at
          the beginning of the immediately preceding year:

                                             1997           1996
                                             ----           ----
             Net sales                   $ 3,112,009    $ 3,000,087
             Net income (loss)           $   (41,541)   $    54,258
             Earnings (loss) per share   $      (.01)   $       .01


NOTE 3 -  NOTE RECEIVABLE - RELATED PARTY

          The note  receivable  of $200,000 at December  31, 1997 from a related
          party bears interest at 6% per annum,  payable  monthly.  Principal is
          due in full on August 28, 1998. The note represents  consideration for
          the sale of certain  student  loans and is secured by those  loans and
          50,000 shares of the common stock in the Company.

                                                                         Page 14

<PAGE>


NOTE 4 -  NOTES RECEIVABLE - STOCKHOLDER

          Notes receivable - stockholder consisted of the following:

                                                           December  31,  
                                                       1997             1996
                                                      ------------------------
          Note  receivable from majority
          stockholder,  interest  at  7%
          per annum  payable  quarterly;
          principal and accrued interest
          due in  full on  December  31,
          1998; secured by Deed of Trust
          on   real   property   of  the
          stockholder.                                $ 60,000        $ 60,000
                                                   


          Note  receivable from majority
          stockholder,  interest  at  7%
          per annum  payable  quarterly;
          principal and accrued interest
          due  in  full  on  August  29,
          1998; secured by Deed of Trust
          on   real   property   of  the
          stockholder.                                  88,300              --

          Note  receivable from majority
          stockholder,  interest  at  7%
          per annum  payable  quarterly;
          principal and accrued interest
          due in  full  on  October  31,
          1998, secured by Deed of Trust
          on   real   property   of  the
          stockholder.                                  20,000              --

          Note  receivable from majority
          stockholder,  interest  at 7 %
          per  annum  payable  quarterly
          principal  and interest due in
          full  on  December  31,  1998;
          secured by real estate.                       48,000              --
                                                      --------        --------
                                                      $216,300        $ 60,000
                                                      ========        ========


NOTE 5 -  PROPERTY AND EQUIPMENT

          A summary of property and equipment is as follows:

                                                    December 31,
                                                 1997        1996
                                              ----------------------
          Furniture, equipment and vehicles   $ 898,569    $ 887,018
          Equipment under capital
             leases                              15,031       15,031
                                              ---------    ---------
                                                913,600      902,049
          Less accumulated depreciation
             and amortization                  (628,826)    (452,550)
                                              ---------    ---------
                                              $ 284,774    $ 449,499
                                              =========    =========


                                                                         Page 15

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          All  furniture,  equipment and vehicles are pledged as collateral  for
          the bank loan, with specific vehicles pledged as collateral to finance
          companies.

          The Company leased instructional equipment under capital leases during
          part of 1996, after which time the Company purchased substantially all
          of the leased equipment.


NOTE 6 -  INVESTMENT IN ACQUISITION OF BUSINESS

          During 1997 the Company  entered into an  agreement  with the owner of
          Data Processing Trainers, Inc. ("DPT") to acquire 100% of the stock of
          DPT. As discussed in Note 14, the Company  acquired DPT  subsequent to
          year end.

          As of December 31, 1997,  the Company's  investment in the purchase of
          DPT of  $223,936  includes  a cash  deposit  of  $100,000,  additional
          accrued costs of $61,968 payable in cash and stock valued at $61,968.


NOTE 7 -  DEBT


          The Company owes the following debt:
                                                           December  31,  
                                                        1997          1996
                                                      -----------------------
          Note payable to bank,  monthly
          principal     and     interest
          payments  of $5,856,  interest
          at 9.5% per annum,  due April,
          2002, cross- collateralized by
          accounts   receivable,   notes
          receivable and equipment.                   $ 251,639     $    --     

          Note payable to bank,  monthly
          principal     and     interest
          payments  of $3,910,  interest
          at  10%,   collateralized   by
          inventory, accounts receivable
          and     equipment.      Entire
          principal and interest paid in
          1997.                                             --        183,406   
               
                                                                         Page 16

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



          Outstanding    principal    on
          $500,000   revolving  line  of
          credit  from a  bank,  monthly
          interest    payments   through
          October    1998;     beginning
          November,     1998     monthly
          principal     and     interest
          payments of $16,049,  interest
          at 9.5% , due November,  2002,
          collateralized    by   student
          loans.                                        387,032          --

          Outstanding    principal    on
          $350,000   revolving  line  of
          credit  from a  bank,  monthly
          interest   payments  at  9.5%,
          remaining     principal    and
          interest   due  April,   1998,
          collateralized by equipment.                  349,669          --

          Note    payable   to   finance
          company, monthly principal and
          interest   payments  of  $465,
          interest   at   7.99%   ,  due
          February, 1999, collateralized
          by   security    interest   in
          Company vehicle.                                6,217        11,301   

          Note    payable   to   finance
          company, monthly principal and
          interest  payments  of $1,358,
          interest  at 8.5% , due April,
          2001, unsecured.                               46,975          --

          Note    payable   to   finance
          company, monthly principal and
          interest   payments  of  $261,
          interest  at 6.0%,  due March,
          1999,     collateralized    by
          security  interest  in Company
          vehicle.                                        3,752         6,584

          Note  payable  to  individual,
          monthly principal and interest
          payments of $266,  interest at
          10.5%,    due    May,    1999,
          unsecured.                                      4,195         7,026

          Note  payable  to  individual,
          interest at 10.5%, due in full
          July, 1998, unsecured.                         10,000        10,000


                                                                         Page 17

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          Capital   lease  with  leasing
          company, monthly principal and
          interest   payments  of  $342,
          interest at 13%, due February,
          2000.                                           8,400         9,055
                                                      ---------     ---------
                                                      1,067,879       227,372
          Less current portion                         (462,149)      (43,162)
                                                      ---------     ---------
                                                      $ 605,730     $ 184,210
                                                      =========     =========

          Aggregate  maturities of long-term  debt at December 31, 1997,  are as
          follows:

          YEAR ENDING DECEMBER 31,
          ------------------------
                  1998                                   $    462,149
                  1999                                        239,779
                  2000                                        256,263
                  2001                                         83,560
                  2002 and thereafter                          26,128
                                                         ------------
                                                         $  1,067,879
                                                         ============


NOTE 8 -  NOTE PAYABLE TO STOCKHOLDER AND RELATED PARTY

          The Company owes its majority  stockholder and president  $355,307 and
          $391,712 in four notes as of December 31, 1997 and 1996, respectively.
          The notes  payable to the  stockholder  bear interest at 7% per annum.
          The balance of  principal  and  interest on the notes are due December
          31, 1999.  No periodic  payments of principal or interest are due. The
          note is unsecured.


NOTE 9 -  STOCKHOLDERS' EQUITY

          The  Company's  Articles of  Incorporation  authorize  the issuance of
          10,000,000  shares  of  preferred  stock  with  $.10  par  value.  The
          preferred stock may be issued from time to time with such designation,
          rights,  preferences  and  limitations  as the Board of Directors  may
          determine  by  resolution.  As of  December  31,  1997,  no  shares of
          preferred stock have been issued.

          In  addition to common  stock  transactions  described  in Note 2, the
          following  transactions  occurred  during  1997.  On August 29,  1997,
          50,000  shares  of stock and a warrant  were sold for  $100,000,  less
          commission  costs of $5,000.  The  warrant  permits  the holder to buy
          50,000  shares  at a price of $4.00 per  share.  The  warrant  expires
          August 29,  1998.  Subsequent  to the  reorganization  of the Company,
          discussed  in Note 2, an  additional  50,000  shares  of  stock  and a
          warrant were sold on September 26, 1997 for $100,000,  less commission
          costs of $5,000.  The warrant  permits the holder to buy 50,000 shares
          at a price of $4.00 per share. The warrant expires September 26, 1998.
          On October 1, 1997,  15,000  shares  valued at $4,000  were issued for
          services  performed by a  consultant.  This  valuation is based on the
          value of the services provided to the Company.


                                                                         Page 18

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          On December 19, 1997 and as discussed in Note 14, the Company  entered
          into an agreement  that  modified the Letter of Intent to acquire Data
          Processing Trainers,  Inc. ("DPT").  Per the agreement,  30,984 shares
          valued at $61,968 (issued and  repurchasable  at $2.00 per share) were
          issued in December to the owner of DPT. As of December 31,  1997,  the
          amount  representing these  repurchasable  shares,  $61,968,  has been
          classified as a current  liability with a  corresponding  reduction of
          stockholders'  equity.  Subsequent  to December 31, 1997,  the Company
          issued 38,580  additional  shares of common stock to the owner of DPT.
          All of these shares were  repurchased by the Company on March 24, 1998
          with the acquisition of DPT.

          In July 1997,  the subsidiary of the Company issued stock options to a
          third party pursuant to an agreement,  which has since been terminated
          and the stock options extinguished.


NOTE 10 - OPERATING LEASE AND OTHER RELATED PARTY TRANSACTIONS

          The Company leases its Denver school facility under an operating lease
          from a company owned by the majority  stockholder of the Company.  The
          net rental  expense  was  $156,000  and  $174,802  for the years ended
          December 31, 1997 and 1996, respectively.  The following is a schedule
          by years of future net  minimum  rental  payments  required  under the
          operating lease which expires September 1, 2000:

          YEAR ENDING DECEMBER 31,
          ------------------------

                  1998                               $    172,652
                  1999                                    169,736
                  2000                                    119,264
                                                     ------------
                                                     $    461,652
                                                     ============

          On  December  31,  1996,  the School  entered  into an  agreement,  as
          amended,  with its  stockholder  providing  for the  deferment of rent
          payments.  Rent deferrals commenced in January 1997, and bear interest
          at 7% per annum payable quarterly, due in full on August 31, 2000.


                                                                         Page 19

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          As discussed in Note 4, the Company  holds notes  receivable  due from
          its president and majority stockholder.

          As discussed in Note 3, the Company holds a note receivable due from a
          related party, who also provided consulting services.

          As  discussed  in Note 8, the Company  owes its  majority  stockholder
          $355,307 and $391,712 at December 31, 1997 and 1996, respectively.

          On April 28,  1997 the  company  entered  management  agreements  with
          related parties. Related consulting fees of $18,930 were paid in 1997.

          A small amount of office space in a building  owned by a company which
          is owned by the majority  stockholder is provided to the Company at no
          cost. Due to the  insignificance  in total square footage,  no cost is
          assigned to the donated space.




NOTE 11 - INCOME TAXES

          The Company's legal acquirer,  Chartwell,  has incurred cumulative net
          operating  losses since  inception and, as a result,  no provision for
          income taxes is necessary for the year ended  December 31, 1997 and no
          deferred  tax  asset  has been  recorded  because  realization  of the
          benefit of the net  operating  losses is not assured.  Prior to August
          31, 1997, the school subsidiary elected,  with the consent of its then
          sole  stockholder,  to be taxed as a  subchapter  S  corporation.  The
          income or loss of an S  corporation  is  included  in the  income  tax
          return of the stockholder.  Accordingly, the Company made no provision
          for income taxes for the years ended  December 31, 1997 and 1996.  For
          periods   subsequent  to  December  31,  1997,  the  Company  and  its
          subsidiary  intend to file  consolidated  federal and state income tax
          returns.


          The net deferred tax asset at December 31, 1997 is as follows:

                                                           1997
                                                        ---------

             Net operating loss benefit carry-forward   $ 675,063
             Valuation allowance for deferred
                   tax assets                            (675,063)
                                                        --------- 

             Net deferred tax asset                     $   --
                                                        ---------


                                                                         Page 20

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          Deferred income taxes are recorded to reflect the tax  consequences on
          future  years of  differences  between  the tax  basis of  assets  and
          liabilities  and their financial  reporting  amounts at each year end.
          Deferred   income  tax  assets  are   recorded   to  reflect  the  tax
          consequences  on future  years of income tax  carry-forward  benefits,
          reduced by benefit amounts not expected to be realized by the Company.


          At December 31, 1997, the Company has approximately  $1,658,603 of net
          operating loss carry-forwards for tax purposes, primarily derived from
          the predecessor  Chartwell,  available to offset future taxable income
          which,  if not utilized to reduce  taxable  income in future  periods,
          expire in the years 2007 to 2011.


NOTE 12 - EMPLOYEE BENEFIT PLAN

          The Company sponsors a defined contribution retirement (401K) plan for
          its employees. All employees with twelve consecutive months of service
          and 1,000 hours of service may  participate.  Eligible  employees  may
          voluntarily  contribute  from 1% to 15%, but not more than the maximum
          allowed by law (currently $9,500),  of their compensation  annually to
          the plan. The Company may, at its election,  make contributions to the
          plan,  which  are  equitably   distributed  to  participant  accounts.
          Participants  are fully vested for amounts that they  contributed  and
          vest over six years in amounts contributed by the Company. The Company
          has not made any  contributions  to the plan during any of the periods
          presented in the accompanying statement of operations.


NOTE 13 - REGULATORY

          The  Company  and its School are subject to  extensive  regulation  by
          federal and state  governmental  agencies and accrediting  bodies.  In
          particular,  the Higher Education Act of 1965, as amended (the "HEA"),
          and the regulations  promulgated  thereunder by the U.S. Department of
          Education  ("DOE")  subject  the  School  to  significant   regulatory
          scrutiny on the basis of numerous  standards that schools must satisfy
          in order to participate in the various  student  financial  assistance
          programs  under Title IV of the HEA (the "Title IV  Programs").  Under
          the  HEA  and  its   implementing   regulations,   certain   financial
          responsibility and other regulatory standards must be complied with in

                                                                         Page 21

<PAGE>

                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          order to qualify to participate  in the Title IV Programs.  Under such
          standards,  an institution must, among other things:  (i) have an acid
          test  ratio  (defined  as the  ratio of cash,  cash  equivalents,  and
          current accounts receivable to current liabilities) of at least 1:1 at
          the end of each fiscal year,  (ii) have a positive  tangible net worth
          at the end of each  fiscal  year,  (iii)  not  have a  cumulative  net
          operating loss during its two most recent fiscal years that results in
          a decline of more than 10% of the institution's  tangible net worth at
          the beginning of that two-year period, (iv) collect 85% or less of its
          education revenues from Title IV Program funds in any fiscal year, and
          (v) not have cohort  default  rates on  federally  funded or federally
          guaranteed  student  loans of 25% or  greater  for  three  consecutive
          federal fiscal years. The DOE may measure the financial responsibility
          standards on a school-by-school  basis or on a corporate  consolidated
          basis. Any regulatory  violation could be the basis for the initiation
          of a suspension,  limitation  or  termination  proceeding  against the
          Company or its institution.

          In  November  1997,  the  DOE  published  new  regulations   regarding
          financial  responsibility to take effect in July 1998. The regulations
          provide a transition year alternative  which will permit  institutions
          to have  their  financial  responsibility  for the  1998  fiscal  year
          measured  on the basis of either the new  regulations  or the  current
          regulations,  whichever are more favorable. Under the new regulations,
          the DOE will calculate three financial ratios for an institution, each
          of which will be scored  separately and which will then be combined to
          determine   the   institution's   financial   responsibility.   If  an
          institution's  composite  score is below the minimum  requirement  for
          unconditional  approval but above a designated  threshold level,  such
          institution  may take  advantage of an  alternative  that allows it to
          continue to participate in the Title IV Programs for up to three years
          under   additional   monitoring  and  reporting   procedures.   If  an
          institution's  composite  score falls below this threshold level or is
          between the minimum for  unconditional  approval and the threshold for
          more than three consecutive years, the institution will be required to
          post a letter  of  credit in favor of the DOE.  The  Company  does not
          believe that these new regulations  will have a material effect on the
          Company's   compliance   with  the  DOE's   financial   responsibility
          standards.

          The process of reauthorizing the HEA by the U.S. Congress, which takes
          place  approximately every five years, has begun and is expected to be
          completed  by 1998.  It is not  possible to predict the outcome of the
          reauthorization process.  Although there is no present indication that
          the Congress will decline to reauthorize the Title IV Programs,  there
          can be no assurance that government  funding for the Title IV Programs
          will continue to be available or maintained at current levels, nor can
          there  be  assurance  that  current   requirements   for  student  and
          institutional   participation   in  the  Title  IV  Programs  will  be
          unchanged. Thus, the reauthorization process could result in revisions
          to the HEA  that  increase  the  compliance  burden  on the  Company's
          institutions.  A  reduction  in  funding  levels for  federal  student
          financial  assistance  programs could impact the Company's  ability to
          attract students.


                                                                         Page 22

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          In order to operate and award degrees,  diplomas and  certificates and
          to participate in the Title IV Programs,  a campus must be licensed or
          authorized  to offer  its  programs  of  instruction  by the  relevant
          agencies of the state in which such campus is located.  The  Company's
          campus is licensed or authorized by the relevant agencies of the state
          in which such campus is located. In addition,  in order to participate
          in the Title IV Programs,  an  institution  must be  accredited  by an
          accrediting agency recognized by the DOE.

          With  each   acquisition  of  an  institution   that  is  eligible  to
          participate  in the Title IV Programs,  that  institution  undergoes a
          change of ownership that results in a change of control, as defined in
          the HEA and applicable  regulations.  In such event,  that institution
          becomes  ineligible  to  participate  in the Title IV Programs and may
          receive and disburse only previously  committed Title IV Program funds
          to its  students  until it has applied for and  received  from the DOE
          recertification under the institution's new ownership.


NOTE 14 - SUBSEQUENT EVENT

          Subsequent to year end, the Company acquired DPT on March 24, 1998 for
          a purchase price of $8,959,564.  DPT, now a wholly-owned subsidiary of
          the Company,  is an accredited school offering a variety of vocational
          and avocational  training programs with two locations in Philadelphia,
          Pennsylvania.  The majority of students are drawn from the surrounding
          metropolitan area.

          The purchase  price is comprised  of:  $3,869,564  in cash  (including
          $119,564 in repurchased common stock),  which was paid, less a deposit
          of $150,000, at the time of closing; a $4,340,000 promissory note; and
          $750,000 in stock. The promissory note, dated March 24, 1998, requires
          quarterly  payments  beginning in June,  1998 of $542,500 in principal
          plus accrued  interest at 7% per annum. The note is due March 24, 2000
          and is secured by a Security Agreement-Stock Pledge and a Guaranty and
          Security Agreement. Under the terms of the agreement, 59,782 shares of
          the Company's  common stock valued at $119,564 were repurchased at the
          time of the closing by the  Company  for cash,  leaving the balance of
          $750,000 to be satisfied  by the Company  issuing on March 24, 1999 an
          undetermined   number  of  shares  of   non-registered   common  stock
          equivalent  to a value  of  $750,000  based  on the  ten day  trailing
          average market price at the time of the transfer.


                                                                         Page 23

<PAGE>
                SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


          In order to fund the purchase price, the Company  borrowed  $2,000,000
          from its president and majority  stockholder  and  $2,900,000  from an
          outside  financing  source.  The debt of  $2,000,000  to the president
          bears 12% interest, interest only payable monthly, and is due on March
          24, 2003.  The president  also received a warrant to purchase  732,360
          shares of the  Company's  common stock for an aggregate  price of $100
          for the period  ending March 24, 2003.  The debt of  $2,900,000 to the
          outside source is payable interest only quarterly, bears 12% interest,
          and is due on March 25,  2003.  This  lender  received  a  warrant  to
          purchase  1,268,486  shares of the Company's  common stock for a total
          price of $100 through March 25, 2003.




                                                                         Page 24

<PAGE>



ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

     None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------------------------------------------------

     The  name,  age and term of office of each of the  executive  officers  and
directors of the Company are set forth below:

                                                                        Officer
                                                                           or
                                                                        Director
Name                    Position Held With the Company         Age       Since
----                    ------------------------------         ---       -----

Paul T. Siemann         President, Chief Executive Officer     46         1997
                        and Director

Joseph R. Chalupa       Vice President and Director            45         1997

Barbara S. Siemann      Director                               41         1997

     Directors  hold office for a period of one year from their  election at the
annual meeting of  shareholders  or until their  successors are duly elected and
qualified.  Officers of the Company are elected by, and serve at the  discretion
of, the Board of Directors.  The Board of Directors has no audit,  nominating or
compensation  committee.  CBAS,  Inc., a principal  stockholder  of the Company,
currently receives a consulting fee of $3,000 per month for, among other things,
providing the consulting services of its principals to the Company.

Background

     The  following is a summary of the business  experience of each officer and
director of the Company:

     Paul  T.  Siemann  has  been  the  Chief  Executive  Officer  and  majority
stockholder of Institutional Financing Services, Inc. ("IFS") since 1977. IFS is
a Denver,  Colorado based company engaged in fund-raising  services for domestic
and  international  schools.  He acquired DADC in 1993 and has been President of
DADC since that date.  DADC is a  wholly-owned  subsidiary  of the Company.  Mr.
Siemann devotes approximately 80% of his time to the Company's affairs.


                                       20

<PAGE>



     Joseph R.  Chalupa  has been  employed  by DADC since 1976 and has been its
school director since 1991.

     Barbara  S.  Siemann  is Mr.  Siemann's  wife and  devotes  such time as is
necessary to the Company's affairs. She has been employed by IFS since 1977.

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

     Mr. Siemann, the Company's President, currently receives a salary of $7,000
per month and also receives rental payments for the Company's  corporate  office
and DADC  facilities  aggregating  $13,000 per month.  CBAS,  Inc.,  a principal
stockholder  of the  Company,  received a monthly  consulting  fee of $3,000 per
month  in  September,   October,  November  and  December  1997.  No  long  term
compensation,   stock  options,  bonuses,   restricted  stock  awards  or  other
compensation has been awarded.

     Compensation of the Company's Chief Executive  Officer for each of the last
two years as set forth below:

                           Summary Compensation Table

                                                Annual Compensation (1)
                                                -----------------------

         (a)                                            (e)            (f)
Name and Principal     (b)         (c)       (d)       Stock       Other Annual
     Position          Year     Salary($)  Bonus($)   Options    Compensation($)
------------------     ----     ---------  --------   -------    ---------------

Paul T. Siemann,       1997      28,000       0          0              0
President              1996      84,000       0          0              0
Joseph Chalupa,        1997      60,000       0          0              0
Vice President         1996      60,000       0          0              0

     The Company's  directors do not receive any cash compensation as directors,
although they are reimbursed for  out-of-pocket  expenses in attending  Board of
Directors' meetings.

Stock Option Plan

     The Company  intends to adopt a stock option plan (the  "Plan")  which will
provide  for the grant of  options  intended  to  qualify  as  "incentive  stock
options" or  "nonqualified  stock options"  within the meaning of Section 422 of
the United States  Internal  Revenue Code of 1986 (the "Code").  Incentive stock
options  will be issuable  only to eligible  officers  and key  employees of the
Company.

     The Company has not reserved any shares of Common Stock for issuance  under
the Plan, which will be administered by its Board of Directors.  Under the Plan,
the Board of Directors will determine which  individuals  shall receive options,
the time period  during which the options may be  partially or fully  exercised,
the number of shares of Common Stock that may be purchased under each option and
the option price.

                                       21

<PAGE>



     The per share  exercise price of the Common Stock will not be less than the
fair market value of the Common Stock on the date the option is granted. Subject
to certain  exceptions,  in the case of incentive  stock options,  the aggregate
fair  market  value  (determined  as of the date the option is  granted)  of the
Common Stock that any person may purchase in any calendar  year  pursuant to the
exercise of  incentive  stock  options will not exceed  $100,000.  No person who
owns, directly or indirectly,  at the time of the granting of an incentive stock
option, more than 10% of the total combined voting power of all classes of stock
of the Company will be eligible to receive  incentive  stock  options  under the
Plan unless the option  price is at least 110% of the fair  market  value of the
Common Stock subject to the option on the date of grant.  The stock options will
be subject  to  anti-dilution  provisions  in the event of stock  splits,  stock
dividends and the like.

     No incentive  stock options will be  transferable by an optionee other than
by will or the laws of descent and  distribution,  and during the lifetime of an
optionee, the option will only be exercisable by the optionee. The exercise date
of an option  granted  under the Plan will not be later  than ten years from the
date of grant.  Any options that expire  unexercised  or that  terminate upon an
optionee's  ceasing to be  employed by the Company  will become  available  once
again for  issuance.  Shares issued upon exercise of an option will rank equally
with other shares then outstanding.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

Principal Stockholders

     The following  table sets forth the holdings of Common Stock by each person
who,  as of March 31,  1997,  holds of record or is known by the Company to hold
beneficially or of record,  more than 5% of the Company's  Common Stock, by each
officer and director,  and by all officers and directors as a group.  All shares
are owned  beneficially  and of record and the address of each person is in care
of the Company.

Name                       Amount of Ownership             Percent of Class
----                       -------------------             ----------------

Paul T. Siemann(1)              2,640,000                        70.1
Joseph R. Chalupa                       0                         0.0
Barbara S. Siemann(1)           2,640,000                        70.1
CBAS, Inc.                        500,000                        13.3
All officers and
 directors as a
 group (3 persons)(1)           2,640,000                        70.1

(1) Paul T.  Siemann and Barbara S. Siemann are husband and wife and hold in the
aggregate 2,640,000 shares.




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<PAGE>






ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     In August 1997 the Company issued  2,250,000  shares of its Common Stock to
Paul T. Siemann  ("Siemann") and 500,000 shares to CBAS, Inc.  ("CBAS")for $.001
per share.  Subsequently,  the Company  issued an additional  400,000  shares to
Siemann to acquire all of the outstanding  capital stock of Siemann  Educational
Systems,  Inc., the owner of DADC and a company owned and controlled by Siemann.
CBAS acts as a  consultant  to the  Company  and  receives a  consulting  fee of
$3,000 per month.

     In July 1997 a subsidiary  of the Company  issued stock  options to a third
party which have since expired.

     The  Company  paid a  consulting  fee of  $3,000  per month to CBAS for the
months  of  September,  October,  November  and  December  1997.  See "Item 10 -
Executive Compensation".

     In March 1998 in connection with the acquisition of DPT, Mr. Siemann loaned
the Company  $2,000,000  evidenced by a promissory note bearing  interest at 12%
per annum due March 25, 2003.  As  additional  compensation  for the loans,  the
Company  issued  to Mr.  Siemann  warrants  to  purchase  732,360  shares of the
Company's  Common Stock for a total of $100 until March 25,  2003.  The warrants
also carry customary piggy back registration rights.

     The Company has advanced  loans to, and received loans from,  Siemann.  See
Notes 3, 4 and 8 to the Company's financial statements.

     The Company leases its office and DADC facilities from Siemann. See "Item 2
- Description of Property."

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

     a.   Exhibits:

          27.01    Financial Data Schedule

     b.   Three  Reports on Form 8-K were filed  during the last  quarter of the
          period covered by this Report. On September 8, 1997 a Report was filed
          listing a change in control of the Company  (Item 1), the execution by
          the Company of an Agreement and Plan of Reorganization (Item 5) and an
          undertaking to deliver the required financial statements in connection
          with the Item 5 transaction  described above (Item 7). On November 10,
          1997 a Report was filed advising of a change in  accountants  (Item 4)
          and a change in fiscal  year (Item 8).  Also on  November  10,  1997 a
          Report  was filed  providing  the  financial  statements  required  in
          connection with Item 5 of the September 8, 1997 Report.


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<PAGE>


                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly  caused  this  Report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized, in Denver, Colorado, on April 10, 1998.


                                             SIEMANN EDUCATIONAL
                                             SYSTEMS, INC.



                                             By
                                               ---------------------------------
                                                       Paul T. Siemann,
                                                          President

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on the dates
indicated.

    Signature                       Title                           Date
    ---------                       -----                           ----


/s/  Paul T. Siemann
-----------------------     President, Chief Executive          April 10, 1998
Paul T. Siemann             Chief Financial Officer
                            (Principal Accounting Officer)
                            and Director
/s/  Joseph R. Chalupa
-----------------------     Vice-President and Director         April 10, 1998
Joseph R. Chalupa

/s/  Barbara S. Siemann
-----------------------     Secretary and Director              April 10, 1998
Barbara S. Siemann













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