SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB40

(Mark One)

/x/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 1999

                                       or

/ / TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from to

                       Commission File Number 33-19048-NY

                         MURRAY UNITED DEVELOPMENT CORP.
                         (Name of Small Business Issuer)

             Delaware                            22-2856171
(State or other jurisdiction of      (I.R.S. employer identification no.)
incorporation or organization)

P.O. Box 224, Landing, New Jersey                    07850
(Address of principal executive offices)           (Zip Code)

Registrant's telephone number, including area code (908) 979-3025

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

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

                                        1

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

The Registrant did not have any revenues during its fiscal year ended July 31,
1999.

As of January 5, 1999, the aggregate market value of the registrant's Common
Stock held by non-affiliates of the registrant as computed by reference to the
average bid and asked price of such stock on that date was approximately
$574,300.

60,953,434 shares of the registrant's Common Stock were outstanding as of
January 5, 1999.

Transitional Small Business Disclosure Format:

Yes                                  No          X

 Documents incorporated by Reference: NONE

                                        2

<PAGE>
                      INDEX TO FORM 10-KSB -- PARTS I - III

Part I                                                                      Page
                                                                            ----
         -  Item 1.                   Description of Business                 4
         -  Item 2.                   Description of Property                11
         -  Item 3.                   Legal Proceedings                      11
         -  Item 4.                   Submission of Matters to a
                                      Vote of Security Holders               11

Part II

         -  Item 5.                   Market for Common Equity and
                                      Related Stockholder Matters            11
         -  Item 6.                   Management's Discussion and
                                      Analysis or Plan of Operation          12
         -  Item 7.                   Financial Statements                   18
         -  Item 8.                   Changes in and Disagreements
                                      With Accountants and Accounting
                                      and Financial Disclosure               18

Part III

         -  Item 9.                   Directors, Executive Officers,
                                      Promoters and Control Persons;
                                      Compliance with Section 16(a)
                                      of the Exchange Act                    18
         -  Item 10.                  Executive Compensation                 20
         -  Item 11.                  Security Ownership of Certain
                                      Beneficial Owners and Management       21
         -  Item 12.                  Certain Relationships and Related
                                      Transactions                           22
         -  Item 13.                  Exhibits List and Reports on
                                      Form 8-K                               23
                                      Signatures                             25
                                      Index to Exhibits                      26

                                        3

<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Background

Murray United Development Corporation (the "Company") is a development stage
corporation founded in October 1987 to exploit commercially an internal
combustion engine (referred to herein as the "Rotorcam Engine") that would run
on fuels other than gasoline, have significantly fewer parts, and would be
lighter and operate more efficiently than conventional internal combustion
engines. Although the Rotorcam Engine is an internal combustion engine, it
differs from existing engines in that its four cylinders lie radially, ninety
degrees apart and rotate around the engine's central axis. The Rotorcam Engine's
cylinders radiate outward from a central axle like the spokes of a wheel with
the heads of the cylinders pointing inward. At the end of each piston arm is a
small wheel which runs along the inside of a large flat ring that encloses the
whole engine. The ring is oval in shape so that, when the cylinders rotate
around the central axle, the pistons are pushed in and out as the wheels roll
from the narrow part of the oval ring to the wide part. As they rotate, a large
port in each cylinder successively passes apertures through which the air-fuel
mixture enters and exhaust gases exit.

In October 1987 the Company acquired from its predecessor, Rotorcam Technology
Corp., an assignment of license under which it obtained the exclusive right and
license to exploit all existing technology relating to the Rotorcam Engine,
which had previously been licensed to Rotorcam Technology Corp. by a former
officer of the Company.

In July l993 the Company filed a lawsuit against two former officers and
directors of the Company (referred to herein as the "Murrays"). On November 18,
1993 the parties entered into a settlement agreement terminating the litigation,
under which the Company agreed to pay to the Murray's $75,000, subject to
certain contingencies, and to deliver a promissory note in the principal amount
of $50,000. In return, the Murray's agreed to tender to the Company an aggregate
of ten million shares of the Company's common stock owned by them and title to
their patents for the Rotorcam Engine.

Subsequently, certain shareholders of the Company brought a class action lawsuit
against the Murrays in the Superior Court of Morris County, New Jersey, alleging
fraud and misrepresentation.

                                        4
<PAGE>
On June 25, 1996 a Stipulation of Settlement was executed by the plaintiff
class, the Murrays, and the Company, and on September 24, 1996 the Court
approved the settlement under which the Company paid the Murrays $26,769 and
received in return, on behalf of the shareholders of the Company, 27,306,100
shares of common stock of the Company previously owned by the Murrays. Of the
27,306,100 shares tendered by the Murrays, 2,548,867 were transferred to the law
firm representing the plaintiff class in partial payment of their legal fees and
disbursements, and the remaining 24,757,233 shares have been cancelled.

The Company believes that pollution and depleting petroleum resources continue
to stimulate commercial interest in engines designed to run on alternative
fuels. Although numerous such alternative engines have been researched and
developed by both the government and the private sectors, none has received
widespread commercial acceptance. The Company has been engaged in the research,
design and development of the Rotorcam Engine technology since the Company's
inception in 1988. Since inception, the Company has spent, cumulatively,
approximately $840,000 on such research and development. However, due
principally to a shortage of opeating funds, the Company incurred only $14,750
for research and development costs during fiscal 1999 and $0 during fiscal 1998
and 1997.

From March 1988 through December 1989 the Company carried out the design and
production of a prototype of the Rotorcam Engine as well as the design and
procurement of a dynamometer test facility. In January 1990 the Company tested
the Rotorcam Engine using gasoline fuel. The Rotorcam Engine achieved
combustion, operated under its own power and maintained a stable speed.
Subsequently to such testing, the Company made certain modifications to the
Rotorcam Engine and resumed testing to obtain additional performance information
and engineering data for further development. Design changes to the prototype
implemented in the latter part of 1992 reduced the availability of the Rotorcam
Engine for demonstration purposes and the gathering of engineering data. The
prototype was subsequently retrofitted with new components, thereby restoring it
to demonstrator status. In September 1995 the engine was successfully converted
to operate on propane and has continued to operate on propane to date.

In March 1997 the Company entered into an agreement with the U.S. Merchant
Marine Academy at Kings Point, New York to house the Rotorcam Engine and related
equipment at the Academy's engineering and teaching facilities. The Company
agreed to pay the academy $200 per month for one year for use of its

                                        5
<PAGE>
facilities. The Academy agreed to assist the Company with its preliminary
analysis of the Rotorcam Engine and to provide a letter of support to assist the
Company in acquiring research grants.

In July 1998 the Company entered into an agreement with the Southwest Research
Institute of San Antonio, Texas ("SRI"). SRI is generally considered to be one
of the country's foremost independent research institutes with approximately
2,500 scientists, engineers and support personnel. SRI conducts an average of
1,500 nationally and internationally sponsored projects each year. Under the
Company's agreement with SRI, SRI agreed to provide an engineering study of the
Rotorcam Engine at a cost of $9,750. Such study included an evaluation of
existing Rotorcam Engine hardware and data, including test data on the current
prototype and design and analytical data obtained by the Company to date. In
addition, SRI agreed to prepare an evaluation report summarizing its findings
and a technical and cost proposal for the next phase of work. In September 1998,
with the agreement and consent of the Merchant Marine Academy, the Rotorcam was
moved from the Academy to SRI's facility in San Antonio, Texas.

In December 1998, SRI issued its report on the results of the testing of the
Rotorcam Engine (the "Report"). In the Report, SRI concluded that there were
three (3) significant advantages of the Rotorcam Engine over conventional
reciprocating engines: higher torque at a specified rpm, a potential of improved
cycle efficiency and energy savings, and the improvement of overall efficiency
and packaging resulting from the ability to eliminate a gear box. However, SRI
also concluded that certain prior perceived advantages of the Rotorcam Engine
were not supported by the evidence that it had gathered during its review. In
particular, SRI concluded that the prototype did not necessarily possess
advantages over conventional reciprocating engines with respect to high
power-to-weight ratio, low manufacturing and maintenance costs, improved
packaging, multi-fuel potential, and variable compression ratio. In addition to
its findings, the Report recommended potential applications for the Rotorcam
Engine, including off-road power equipment, utility equipment and gensets.

In response to the Report, assuming funding becomes available,of which there can
be no assurances, management of the Company has determined to redesign and
rebuild a second generation prototype of the Rotorcam Engine ("Second
Prototype") to address the issues raised by SRI in the Report. Management
estimates that the cost of such Second Prototype will be approximately $350,000
to

                                        6
<PAGE>
$375,000 and will take approximately 15 to 18 months from the time such funding
becomes available to complete. The development work on the Second Prototype will
address substantially all of the technical problems of the first prototype and
be divided into six (6) phases:

Phase I           Cycle simulation analysis to study and optimize the
particular features that make the Rotorcam Engine unique;

Phase II          Redesign of the seals for the engine;

Phase III         Redesign of combustion chambers, pistons and cylinders;

Phase IV          Manufacture of the Second Prototype, which would contain new
components, including a static seal plate, sliding seals and springs, combustion
caps, cylinders,pistons, spark plugs, and ignition timing contacts;

Phase V           Assembling the Second Prototype in preparation for a test
program, the objectives of which would be to evaluate the capability of the
Rotorcam Engine for producing power and torque, engine speed range over which
the engine can be successfully operated, fuel economy and emissions of key
exhaust pollutants; and

Phase VI          Testing the Second Prototype to evaluate key performance
measurements, including engine rotating speed and torque, mass air flow, mass
fuel flow, exhaust temperature, exhaust oxygen concentration and gaseous
emissions; and

If the Second Prototype shows clear advantages of the Rotorcam Engine over
conventional reciprocating engines in a specific market, and if the necessary
funds are then available, the Company plans to commission the development of a
third prototype ("Third Prototype") of the engine. The Third Prototype would be
designed to address the performance, cost, reliability and producibility issues
associated with the chosen market.

Management estimates that the cost to develop such a Third Prototype would be
between $2 million and $3 million and estimates that it would take between 18 to
24 months from the time the Second Prototype is completed and such funding
becomes available to complete. During this phase of development the Company
plans to commission the production of several variations of the Third Prototype
that would be used for different purposes, including performance development,
durability assessment, and demonstrators to be used in application field
testing.

                                        7

<PAGE>
Management is attempting to locate a funding source for the $350,000 to $375,000
amount required to complete the Second Prototype. Since June 1998, Management
has been attempting to obtain Small Business Innovation Research grant money
from the Lewis Research Center of the National Aeronautics and Space
Administration. The evaluation work provided by SRI, as described in its Report,
has made the Company eligible to obtain Phase I and Phase II grants from the
Lewis Research Center. However, there can be no assurances that the Company's
applications for such grants will be approved or, even if approved, that such
grants will provide sufficient funding to complete the Second Prototype. Other
possible sources for such funding include an offering of the Company's equity
securities, borrowing from private sources, and/or exercise of the Company's
15,398,000 outstanding Class B Warrants. The Company intends to attempt to raise
the funds necessary to complete the Second Prototype from such sources but can
provide no assurances that it will be able to do so. If it is unable to raise
such funds, the Company may never be able to further develop the Rotorcam
Engine.

Management believes that if the Second Prototype is successfully completed, the
Company will be able to raise sufficient funds to complete the Third Prototype
from research grants and/or equity financing. However, since a decision to
proceed with a Third Prototype will depend on the results obtained from the
Second Prototype, there can be no assurances that Management will decide to
build a Third Prototype or that the Company will, in fact, be able to obtain
sufficient funds to complete such Third Prototype. Since a Third Prototype is
essential to the Company's ability to market the Rotorcam Engine, the
inadvisability of producing, or financial inability of the Company to produce,
such Third Prototype will have a materially adverse effect on the Company's
ability to successfully market the engine.

In view of the projected time to complete the Second and Third Prototypes, and
assuming that funding becomes available, of which there can be no assurances,
Management of the Company is presently seeking opportunities to diversify the
Company into businesses in addition to the Rotorcam Engine. However, its ability
to do so will depend, primarily, on available financing, and there can be no
assurances that Management will be successful in such attempts to obtain such
financing and diversify the Company.

Marketing

If the Company is able to raise the capital needed to complete the Third
Prototype, then, during the period in which the Third

                                        8
<PAGE>
Prototype is being developed, the Company intends to determine appropriate
markets for the Rotorcam Engine. Based on SRI's Report, Management of the
Company currently believes that a market is available for the Rotorcam Engine in
off-road terrain equipment, such as earth-moving farm equipment, tanks, pony
engines, marine engines, generators, and co-generation systems that are used to
cool, as well as to provide an electrical power source for, home and industry.
Should the Company be successful in its attempts to produce an engine that is
commercially viable, it intends to attempt to enter into licensing or contract
manufacturing arrangements with third parties for production and sale of the
Rotorcam Engine.

Competition

The Company believes that competition in the alternative engine market is
intense and that the Company is competing with other entities that have
financial and other resources far greater than its own. The Company's research
and development efforts are competing directly with major automobile
manufacturers as well as with other commercial and industrial companies that
have established and well financed research and development efforts in
enhancement and improvements to existing engines as well as development of
alternative engines. The Company's limited resources may impede its ability to
compete successfully. Moreover, unless the Company receives substantial
additional financing, it is unlikely that he Company will be able to
commercially exploit the Rotorcam Engine. There can be no assurances that the
Company will receive any additional funding.

If the Company is able to obtain sufficient funds to commercially exploit the
Rotorcam Engine, the Company expects to compete primarily on the basis of
technological advantage, which will permit favorable product cost and
performance differentials. Since engine technology is subject to rapid and
dramatic changes, however, competitors may develop better approaches to such
technology, which would seriously and adversely affect the Company.

Technology

Pursuant to legal settlements signed on November 18, 1993 and June 26, 1996
between the Company and Jerome Murray, the Company obtained title to seven U.S.
patents and four international patents as well as rights to various patents
pending. Of such seven U.S. patents, three remain in effect and four expired due
to lack of funds necessary to maintain such patents. Each of the foreign patents
and the rights to patents pending have also

                                        9
<PAGE>
expired due to a lack of funds necessary to acquire or maintain
such patents.

Employees and Consultants

The Company currently has one employee, Mr. Dwight Foster, who was appointed
President and Chief Executive Officer of the Company in December 1998. Mr.
Foster is not currently receiving cash or other compensation for his services to
the Company. However, the Board of Directors of the Company is considering
granting to Mr. Foster two (2) million shares of restricted stock as
compensation for past and future services to the Company. Mr. Anthony Campo, who
is the Chairman of the Board, Executive Vice- President, Secretary and Treasurer
of the Company, is acting in such capacities without compensation. Mr. Campo
also provides the Company with general administrative services without
compensation and has provided substantial financing to the Company. The Company
has also retained the services of a consultant, who provides engineering
services to the Company from time to time as needed with payment being made on
an hourly basis.

The Board of Directors has determined to issue two (2) million shares of the
Company's Common Stock to Mr. Jay Pesko in consideration of prior consulting and
financing services to the Company.

Government Regulation

If successfully developed, the Rotorcam Engine will be subject to a series of
regulations promulgated by government agencies with respect to safety, fuel
efficiency and pollution. There is no assurance that the Rotorcam Engine will be
able to meet these standards of pollution and safety. In addition, the assembly
and manufacture of products containing the Rotorcam Engine will be subject to
regulations promulgated by various agencies, both State and Federal. The Company
intends to comply with all regulations applicable to its business ; however, the
compliance with such regulations may cause delays and additional expense, which
may adversely affect the commercial viability of the Rotorcam Engine.

Class B Warrants.

Presently, there are 14,898,000 of the Company's Class B Warrants outstanding,
which are exercisable at $.15 per share and 500,000 Underwriter's Class B
Warrants exercisable at $.225 per share. Such Class B Warrants will expire on
March 11, 2000 unless further extended by the Board of Directors. The Company
has not filed a

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<PAGE>
registration statement covering such Warrants due to a lack of funds . Until
such registration statement is filed, the Company is prohibited under federal
and state securities laws from selling and delivering the common stock for which
such Class B Warrants may be exercised. If funds become available to the Company
to permit it to file such registration statement, it will do so as soon as
practicable thereafter. However, there can be no assurances that such funds will
at any time become available and, therefore, holders of the Class B Warrants may
not be able to exercise such warrants at any time.

ITEM 2.  PROPERTIES

The Company does not presently own or lease any properties.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceedings.

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

Not applicable.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

The Company's Common Stock has been quoted on the over-the counter market since
March 24, 1988 but has not been included in the NASDAQ system. The range of high
and low bid quotations as reported by the National Quotation Bureau, Inc.,
without adjustment for retail markup, markdown or commission, for the periods
indicated below are:

                             Year Ended JULY 31
                         1999                 1998
                         ----                 ----
                    High     Low        High         Low
                    ----     ---        ----         ---
1st Quarter         $.07    $.01        .05         $.03
2nd Quarter          .055    .02        .03         .005
3rd Quarter          .05     .01        .01         .005
4th Quarter          .11     .012      .015        .0075

                                       11

<PAGE>
Reporting by the National Quotation Bureau, Inc. of quotations for the Company's
Common Stock does not evidence an established public trading market for the
Company's Common Stock and holders of the Common Stock may not be able to
liquidate their investment at acceptable prices. Moreover, such quotations are
not indicative of actual trading transactions. As of January 5, 2000 there were
865 holders of record of the Company's Common Stock.

Holders of the Company's Common Stock are entitled to receive dividends when and
as declared by the Board of Directors out of funds legally available therefor.
To date, no dividends have been declared or paid, and the Board of Directors has
no present intention of declaring dividends upon the Company's Common Stock in
the foreseeable future. Whether dividends are declared in the future will depend
upon the Company's profitability, its financial condition and other factors
deemed relevant by its Board of Directors.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
        OR PLAN OF OPERATION

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
herein.

Statements in this Form 10-KSB that are not statements of historical or current
fact constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other unknown factors that
could cause the actual results of the Company to be materially different from
the historical results or from any future results expressed or implied by such
forward-looking statements. In addition to statements that explicitly describe
such risks and uncertainties, readers are urged to consider statements labeled
with the terms "believes," "belief," "intends," "anticipates" or "plans" to be
uncertain and forward- looking. The forward-looking statements contained herein
are also subject generally to other risks and uncertainties that are described
from time to time in the Company's reports and registration statements filed
with the Securities and Exchange Commission.

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<PAGE>
General

The Company is a development stage enterprise that commenced operations on
October 13, 1987 and is attempting to exploit commercially certain technology
relating to a rotary internal combustion engine that would have certain
advantages over, and provide an alternative to, the conventional internal
combustion engine. If the Company is able to develop the Rotorcam Engine to
production stage, the Company intends to generate revenues primarily through the
licensing of the engine technology and secondarily through the manufacture and
sale of engines or related components or services.

Results of Operations

The Company has not derived any revenues from operations and has incurred
cumulative losses from inception through July 31, 1999 of $3,405,490. The
Company's revenues from its inception on October 13, 1987 through July 31, 1999,
aggregating $66,465, were derived from interest earned. There was no change in
interest income earned in fiscal 1999, as was the case in fiscal 1998, due to a
continued shortage of funds for such investment purposes. The Company had no
interest income during either 1999 or 1998 as a result of a decrease in the
average amount of funds available for investment.

The cumulative loss from inception includes research and development costs of
$854,653. Research and development costs increased to $14,750 in 1999 from $0 in
1998. The Company did not incur any research and development costs in fiscal
1998 due to a shortage of operating capital.

The cumulative loss from inception includes general and administrative expenses
of $2,262,726. General and administrative expenses increased by 70% to $80,925
in 1999 from $47,426 in 1998 and decreased by 43% during fiscal 1998 from
$82,828 in fiscal 1997. The increase in fiscal 1999 was due principally to
increases in general and administrative expenses, such as legal and accounting
fees, and other expenses.

The cumulative loss from inception also includes past licensing fees of $57,260,
which had accrued and been paid to a former officer of the Company. Such
cumulative loss further includes interest expense of $296,316 on loans payable
to a current and a former officer of the Company. Interest expense increased to
$64,919 in 1999 from $49,474 in 1998, or 31%. Interest expense decreased by 1%
to $46,324 in 1998 from $46,713 in 1997 due to a

                                       13
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decrease in interest costs associated with the amount outstanding
of a promissory note from the Company to Mr. Anthony Campo.

The net loss of $160,594 in 1999 increased by $63,694, or 65%, from 1998 due to
increased research and development costs and general and administrative costs.
The net loss of $96,900 in 1998 decreased by $74,024, or 43%, over the net loss
of $170,924 in 1997. The net loss of $170,924 in 1997 decreased by $104,627, or
37%, from the net loss of $275,551 in 1996.

Liquidity and Capital Resources

At July 31, 1999 the Company had cash and short-term investments totaling $2,038
(compared to liquid assets of $12,675 at July 31, 1998), a working capital
deficiency of $10,637 (compared to working capital of $11,998 at July 31, 1998)
and a total stockholders' deficiency of $1,279,795 (compared to $1,119,202 at
July 31, 1998). Cash balances decreased in 1999 because of the decrease in
accounts payable, whereas the increase in working capital in 1998 was due to an
increase in accounts payable and accrued expenses of $68,225. The stockholders'
deficiency increased by $160,594 due to the net loss incurred in July 31, 1999
as compared to a $96,900 increase in stockholders' deficiency at July 31, 1998.

At July 31, 1999 the Company had current liabilities in excess of current assets
of $385,958. The Company has not been able to commercially utilize its engine
technology to generate any revenues through that date and, as a result, it has
suffered recurring losses from operations from inception that have generated the
net capital deficiencies at July 31, 1999 and 1998 and significant working
capital deficiencies from time to time. Management of the Company does not
expect it to generate any significant revenues or positive cash flows during the
twelve-month period subsequent to July 31, 1999. Cash flows used by operating
activities were $254,603 and $12,479 in 1999 and 1998, respectively. The limited
amount of liquid resources available at July 31, 1999 and the inability to
generate operating revenues and cash flows raise substantial doubts about the
Company's ability to continue as a going concern.

Plan of Operation

In July 1998 the Company entered into an agreement with the Southwest Research
Institute of San Antonio, Texas ("SRI"). Under the Company's agreement with SRI,
SRI agreed to provide an engineering study of the Rotorcam Engine at a cost of
$9,750. Such study included an evaluation of existing Rotorcam Engine

                                       14
<PAGE>
hardware and data, including test data on the current prototype and design and
analytical data obtained by the Company to date.

In December 1998, SRI issued its report on the results of the testing of the
Rotorcam Engine (the "Report"). In the Report, SRI concluded that there were
three (3) significant advantages of the Rotorcam Engine over conventional
reciprocating engines: higher torque at a specified rpm, a potential of improved
cycle efficiency and energy savings, and the improvement of overall efficiency
and packaging resulting from the ability to eliminate a gear box. However, SRI
also concluded that certain prior perceived advantages of the Rotorcam Engine
were not supported by the evidence that it had gathered during its review. In
particular, SRI concluded that the prototype did not necessarily possess
advantages over conventional reciprocating engines with respect to high
power-to-weight ratio, low manufacturing and maintenance costs, improved
packaging, multi-fuel potential, and variable compression ratio. In addition to
its findings, the Report recommended potential applications for the Rotorcam
Engine, including off-road power equipment, utility equipment and gensets.

In response to the Report, assuming funding is available, Management of the
Company has determined to redesign and rebuild a second generation prototype of
the Rotorcam Engine ("Second Prototype") to address the issues raised in the
Report. Management estimates that the cost of such Second Prototype will be
approximately $350,000 to $375,000 and that it will take approximately 15 to 18
months from the date such funding becomes available to complete. The development
work on the Second Prototype would address substantially all of the technical
problems of the first prototype and would be divided into six (6) phases:

Phase I           Cycle simulation analysis to study and optimize the
particular features that make the Rotorcam Engine unique;

Phase II          Redesign of the seals for the engine;

Phase III         Redesign of combustion chambers, pistons and cylinders;

Phase IV          Manufacture of the Second Prototype, which would contain new
components, including a static seal plate, sliding seals and springs, combustion
caps, cylinders, pistons, spark plugs, and ignition timing contacts;

Phase V           Assembling the Second Prototype in preparation for a test
program, the objectives of which would be to evaluate the

                                       15
<PAGE>
capability of the Rotorcam Engine for producing power and torque, engine speed
range over which the engine can be successfully operated, fuel economy and
emissions of key exhaust pollutants; and

Phase VI          Testing the Second Prototype to evaluate key performance
measurements, including engine rotating speed and torque, mass air flow, mass
fuel flow, exhaust temperature, exhaust oxygen concentration and gaseous
emissions; and

If the Second Prototype shows clear advantages of the Rotorcam Engine over
conventional reciprocating engines in a specific market, and if the necessary
funds are then available, the Company plans to commission the development of a
third prototype ("Third Prototype") of the engine. The Third Prototype would be
designed to address the performance, cost, reliability and producibility issues
associated with the chosen market.

Management estimates that the cost to develop such a Third Prototype would be
between $2 million and $3 million and anticipates that it would take between 18
to 24 months from the time such funding becomes available to complete. During
this phase of development the Company plans to commission the production of
several variations of the Third Prototype that would be used for different
purposes, including performance development, durability assessment, and
demonstrators to be used in application field testing.

Management is attempting to locate a funding source for the $350,000 to $375,000
amount required to complete the Second Prototype. Since June 1998, Management
has been attempting to obtain Small Business Innovation Research grant money
from the Lewis Research Center of the National Aeronautics and Space
Administration. The evaluation work provided by SRI, as described in its Report,
has made the Company eligible to obtain Phase I and Phase II grants from the
Lewis Research Center. However, there can be no assurances that the Company's
applications for such grants will be approved or, even if approved, that such
grants will provide sufficient funding to complete the Second Prototype. Other
possible sources for such funding include an offering of the Company's equity
securities, borrowing from private sources, and/or exercise of the Company's
15,398,000 outstanding Class B Warrants. The Company intends to attempt to raise
the funds necessary to complete the Second Prototype from such sources. However,
there can be no assurances that it will be able to do so. If it is unable to do
so, the Company may never be able to further develop the Rotorcam Engine.

                                       16
<PAGE>
Management believes that if the Second Prototype is successfully completed, the
Company will be able to raise sufficient funds to complete the Third Prototype
from research grants and/or equity financing. However, since a decision to
proceed with a Third Prototype will depend on the results obtained from the
Second Prototype, there can be no assurances that Management will decide to
build a Third Prototype or that the Company will, in fact, be able to obtain
sufficient funds to complete such Third Prototype. Since a Third Prototype is
essential to the Company's ability to market the Rotorcam Engine, the
inadvisability of developing, or financial inability of the Company to produce,
such Third Prototype will have a materially adverse effect on the Company's
ability to successfully market the engine.

In view of the projected extended period of timea that Management estimates it
will take to complete the Second and Third Prototypes, assuming that funding
becomes available to complete such prototypes, of which there can be no
assurances, Management of the Company is presently seeking opportunities that
will permit the Company to diversify it into businesses in addition to the
Rotorcam Engine. However, the Company's ability to do so will depend on
available financing, and there can be no assurances that Management will be
successful in such attempts to diversify the Company.

Year 2000

Since the Rotorcam Engine is still in the developmental and testing stages, and
the Company is not presently reliant on information from its own or other
computer systems, the Company does not anticipate its results of operations or
financial position will be adversely affected by the application of dating
systems in the Year 2000.

Due principally to the fact that the Rotorcam Engine is in the prototype stage,
it has not been necessary for the Company to expend any amounts to date to
address Year 2000 remediation issues. Moreover, the Company does not anticipate
expending any significant amounts in the future for remediation of Year 2000
problems.

ITEM 7.  FINANCIAL STATEMENTS

The financial statements required by Item 7 of Form 10-KSB are set forth where
indicated in Item 13(a)1 of this Form 10-KSB.

                                       17
<PAGE>
ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

                                    PART III

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

During fiscal year 1997, Mr. James Cronin, the former President and Chief
Executive Officer of the Company, and Mr. Ralph Werntgen, the former Secretary
of the Company, each resigned for personal reasons. In addition, Mr. Werntgen
resigned as Director of the Company in April 1996, and Mr. James Cronin resigned
as a Director in October 1998. Mr. Frank Pecorella was elected as a Director of
the Company by the remaining members of the Board in December 1998 to fill the
seat vacated by Mr. Cronin. In December 1998, Mr. Anthony Campo resigned as
President and Chief Executive Officer of the Company but remained as Chairman of
the Board, and the Board appointed Mr. Dwight Foster as President and CEO and
Mr. Campo as Executive Vice President, Secretary and Treasurer. The present
executive officers and directors of the Company, their ages and present
positions with the Company, are as follows:

                                                                     First Year
         Name               Age     Position                          Elected
Thomas Caltabiano           38      Director                           1987

Anthony Campo               60      Chairman of the Board,
                                    Executive Vice President,
                                    Secretary and Treasurer            1993

Dwight Foster               51      President and                      1998
                                    Chief Executive Officer

Francis Pecorella           48      Director                           1998

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

                                       18
<PAGE>
the directors and until their successors have been duly elected and qualified.

Thomas Caltabiano

Mr. Thomas Caltabiano has been a Director of the Company since its inception in
1988, with a brief hiatus from May 1992 to March 1993. Beginning in February
1993, he served as Secretary and Vice President of the Company. He resigned as
Secretary on July 28, 1995 and as Vice President in July 1995. From September,
1987 until May 1992, Mr. Caltabiano served as Treasurer of the Company. Mr.
Caltabiano is presently employed as an Executive Story Editor with Home Box
Office/World Wide Parts. Mr. Caltabiano received a B.S. in Finance from New York
University in 1984.

Anthony S. Campo

Mr. Campo has been a Director of the Company since January, 1993. He was elected
Chairman of the Board on July 28 1995 and was appointed Secretary of the Company
in December 1995 and President and Chief Executive Officer in December 1997. In
December 1998, Mr. Campo resigned as President and Chief Executive Officer and
was appointed as Executive Vice President, Secretary and Treasurer of the
Company. Mr. Campo has been a residential contractor since 1963 and is presently
the owner/operator of Archwood Estates, a residential housing development in
Woodbury, NY.

Dwight Foster

Mr. Dwight Foster was elected President and Chief Executive Officer of the
Company in December 1998. Since September 1997, Mr. Foster has been acting as a
liaison between the Company and Southwest Research Institute, a well-known not
for profit research and development organization. From 1983 to the present Mr.
Foster has also been the owner/operator of the National Automobile Dealers
Exchange Services, which represents automobile dealers at premier automobile
auctions. In addition, from 1972 to the present, Mr. Foster has been employed as
a consultant to start-up and emerging companies, advising such companies on
product development, marketing, public relations, and financing.

Francis Pecorella

Mr. Francis Pecorella as appointed as a member of the Board of Directors in
December 1998. From February 1999 to the present, Mr. Pecorella has been
employed by Chase Investment Services as

                                       19
<PAGE>
an investment consultant. From January 1996 to February 1999, Mr. Pecorella was
employed by Citicorp Investment Services as an investment consultant. From
January 1989 through December 1995, Mr. Pecorella was employed by A.J. Michaels
as a stock broker.

Item 10.  EXECUTIVE COMPENSATION

Mr. Dwight Foster, the President and Chief Executive Officer of the Company, did
not receive any cash or other compensation for his services during fiscal 1999.
However, the Board of Directors is considering granting to Mr. Foster two (2)
million shares of restricted stock as compensation for past and future services
to the Company. The Company is also considering issuing restricted stock and
stock options to Mr. Frank Pecorella as compensation for his past and future
services to the Company. Mr. Anthony Campo, the Chairman of the Board, Executive
Vice President, Secretary and Treasurer of the Company, also received no
compensation from the Company during its fiscal years ended July 31, 1999 or
1998. No other individual served as an executive officer of the Company during
the fiscal year ended July 31, 1999, and no director of the Company received any
compensation for serving in such capacity during the Company's fiscal years
ended July 31, 1999 or 1998.

The Company's prior Key Employee Stock Option Plan terminated by its terms in
October 1997. No options that were granted under such plan were exercised during
fiscal years ended 1999 or 1998, and no options granted under such plan are
presently outstanding. The Company has no other option plan or any defined
benefit plan.

The Company does not have any employment agreement with any executive officer of
the Company, nor are there any compensatory plans or arrangements that would
provide compensation to any executive officer upon such officer's resignation,
retirement or other termination of employment, or as a result of a change in
control of the Company or change in such executive officer's responsibilities
following a change in control of the Company.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Set forth below is information at January 5, 2000 concerning the beneficial
ownership of Common Stock by (i) all persons known by the Company to own
beneficially 5% or more of the Company's

                                       20
<PAGE>
Common Stock, (ii) each director and executive officer of the Company, and (iii)
all directors and executives of the Company as a group.

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

Thomas Caltabiano(2)                  2,541,378                       4.2

Anthony S. Campo (3)                126,771,900                      70.2

Dwight Foster (4)                        96,500                        .1

Francis Pecorella                     1,350,000                       2.2

All Directors and
Executive Officers
as a Group (4 persons)              130,759,778                      72.3%


(1) Except as indicated below, all of such persons have sole investment and
voting power over the shares listed as being owned by them.

(2) Includes 5,989 shares that may be acquired by Mr. Caltabiano upon the
exercise of Class B Warrants held by him.

(3) In addition to 3,960,000 owed individually by Mr. Campo, includes (i)
2,150,000 shares held by Mr. Campo's wife, (ii) 922,400 shares held by Mr.
Campo's children, (iii) 1,100,000 shares that may be acquired by Mr. Campo upon
the exercise of Class B Warrants, (iv) 911,100 shares that may be acquired by
the children of Mr. Campo upon exercise of Class B Warrants, and (v) 117,728,400
shares that may be acquired by Mr. Campo as of November 1, 1999 upon the
conversion of his Promissory Note from the Company dated August 1, 1998 (see
"Certain Relationships and Related Transactions".)

(4) Includes 21,500 shares held by Mr. Foster's wife.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                                       21
<PAGE>
On April 20, 1994, in consideration of prior loans made to the Company by Mr.
Anthony Campo, its Chairman, President and Chief Executive Officer, the Company
issued to him a promissory note in the amount of $100,000. On November 15, 1994
the Company issued another promissory note to Mr. Campo for $79,300 in return
for additional loans to the Company made by him. On March 9, 1995 the Company
issued a new note in the amount of $328,000 to Mr. Campo that consolidated the
amounts owing under the previous two notes and an additional $149,200 advanced
by Mr. Campo to the Company between November 15, 1994 and March 9, 1995.

On October 20, 1995 the Company renegotiated the March 9, 1995 promissory note
and issued a new note in the amount of $568,000, which included the former
principal amount of $328,500, accrued interest thereon, additional cash advances
made by Mr. Campo to the Company during fiscal 1995, and the purchase price of
an engineering workstation and software that the Company had purchased from Mr.
Campo. The new note bore interest at 7.5 % per annum and matured on July 1,
1998. The note was convertible, in whole or in part, into common shares of the
Company at the conversion rate one share of common stock of the Company for each
of $.0075 in principal of the note converted. Such conversion feature was
subject to anti-dilution. No payments were made to Mr. Campo under the October
20, 1995 promissory note.

The Company subsequently issued a new promissory note to Mr. Campo, dated August
1, 1998, in the amount of $807,280, which consolidated amounts owed under the
$568,000 note; accrued interest on such note to July 31, 1998 in the amount of $
122,070; cash advances made by Mr. Campo to or on behalf of the Company between
October 20, 1995 and July 31, 1998 in the amount of $60,090; cash advances in
the amount of $42,000 made by Mr. Campo between May 6, 1993 and July 14, 1993
for which he had not previously been credited; and interest on such 1993
advances through July 31, 1993 in the amount of $15,120. The August 1, 1998 note
bears interest at 7.5% per annum and matures on July 3l, 2000. The note may be
converted, in whole or in part, into common shares of the Company at a
conversion rate of one share of common stock of the Company for each $.0075 in
principal of the note converted.

The Company has defaulted on a payment of one-half of the principal amount due
on August 1, 1999 and on its quarterly interest payments due on November 1,1998,
and February 1, May 1, August 1, and November 1, 1999. As of November 1, 1999, a
total of $75,683 in unpaid interest was owed to Mr. Campo under the August 1,
1998 Note. Since the Company does not have any revenues, it is doubtful that the
Company will be able to pay any

                                       22
<PAGE>
interest or principal amounts due under the August 1, 1998 Note until such time
as it has operating revenues, or raises funds from an independent source, both
of which events may not occur at any time. In addition to the right of
converting amounts due under the Note into common stock, as described above, Mr.
Campo has the right at any time to declare amounts due under such note
immediately due and payable.

                                     PART IV

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

(a)      Exhibits and Financial Statements:

         (a)      1. Financial Statements

                            The following documents are included in Part II,

Item 7:

         (i)      Report of Independent Accountants
         (ii)     Balance Sheets as of July 31, 1999 and July 31, 1998
         (iii)    Statements of Income for the fiscal years ended July 31, 1999,
                  1998 and 1997
         (iv)     Statement of Cash Flows for the fiscal years ended July 31,
                  1999, 1998, and 1997
         (v)      Statements of Changes in Stockholders' Equity for the fiscal
                  years ended July 31, 1999, 1998 and 1997
         (vi)     Notes to Financial Statements

         2. The exhibits which are required by Item 601 of regulation S-B are
listed in the Index to Exhibits beginning on page 26 of this Form 10-KSB

(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K for
its fiscal year ended July 31, 1999.

                         MURRAY UNITED DEVELOPMENT CORP.
                              FINANCIAL STATEMENTS
                                      INDEX

                                                                      Page No.
(i)      Report of Independent Accountants                              F-1

                                       23
<PAGE>
(ii)     Balance Sheets as of July 31, 1999 and July 31, 1998           F-2

(iii)    Statements of Operations for the fiscal years ended
         July 31, 1999, 1998 and 1997                                   F-4

(iv)     Statements of Changes in Stockholders' Equity (Deficiency)
         for the fiscal years ended July 31, 1999, 1998 and 1997        F-5

(v)      Statement of Cash Flows for the fiscal years ended
         July 31, 1999, 1998, and 1997                                  F-12

(vi)     Notes to Financial Statements                                  F-13

                                       24


<PAGE>
                          James P. O'Day, C.P.A., P.C.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
Murray United Development Corporation

We have audited the accompanying balance sheets of MURRAY UNITED DEVELOPMENT
CORPORATION D/B/A Combustion Research Associates (A Company in the Development
Stage) as of July 31, 1999 and 1998, the related statements of operations, cash
flows and stockholders' equity (deficiency) for the years ended July 31, 1999,
1998 and 1997 and the cumulative amounts from October 13, 1987 (date of
inception). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 Murray United Development
Corporation as of July 31, 1999 and 1998, and its results of operations and cash
flows for the years ended July 31, 1999, 1998 and 1997 and the cumulative
amounts from October 13, 1987 (date of inception) in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, as of July 31, 1999, the Company had not generated any
operating revenues and had suffered recurring losses from operations from
inception and had a net capital deficiency. These matters raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

                                              James P. O'Day, C.P.A., P.C.

January 24, 2000
Glen Cove, New York

                                       F-1

<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the Development Stage)

                                 BALANCE SHEETS
                             JULY 31, 1999 AND 1998

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>

Current assets                                                            1999        1998
<S>                                                                     <C>        <C>
    Cash & cash equivalents                                             $ 2,038    $ 12,675
    Prepaid expenses                                                          -           -
                                                                        -------    --------
    Total current assets                                                $ 2,038    $ 12,675

Furniture & equipment, at cost, net of accumulated depreciation          88,862     100,880
                                                                        -------    --------
Total Assets                                                            $90,900    $113,555
                                                                        =======    ========
</TABLE>

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

                                       F-2


<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the Development Stage)

                                 BALANCE SHEETS
                             JULY 31, 1999 AND 1998

                                LIABILITIES AND
                            STOCKHOLDERS' DEFICIENCY

Current liabilities:                                    1999            1998
                                                        ----            ----
     Accounts payable and Accrued Expenses         $    387,996     $   425,476
                                                   ------------     -----------
    Total current liabilities                           387,996         425,476

Other liabilities:
     Accrued Interest Payable                            64,919         133,466
     Notes payable-other stockholder                    917,780         673,814
                                                   ------------     -----------
    Total other liabilities                             982,699         807,280
                                                   ------------     -----------
    Total liabilities                                 1,370,695       1,232,756
                                                   ------------     -----------
Stockholders' deficiency:

Common Stock, par value $.0001;
     Authorized 200,000,000 shares;
     issued and outstanding
     60,953,434 and 60,953,434 shares                     6,096           6,096
Additional paid-in capital                            2,119,599       2,119,599
Deficit accumulated in the development stage         (3,405,490)     (3,244,897)
                                                   ------------    ------------
     Total stockholders' deficiency                  (1,279,795)     (1,119,202)
                                                   ------------    ------------
     Total Liabilities and Stockholders' Equity    $     90,900    $    113,554
                                                   ============    ============

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

                                       F-3


<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the development Stage)

                            STATEMENTS OF OPERATIONS
                    YEARS ENDED JULY 31, 1999, 1998 AND 1997
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>
                                                                                                           Cumulative
                                                                                                          Amounts From
                                                        1999          1998         1997 (Restated)         Inception
                                                        ----          ----         ---------------        ------------
<S>                                                <C>           <C>                <C>                   <C>
Income
Interest income                                              -   $         -        $         -           $    66,465
                                                                                                          -----------
Total Income                                                                                                   66,465
Expenses
Research and Development costs                          14,750             -                                  854,653
Licensing fees stockholder and affiliate                     -             -                                   57,260
General and administrative expenses                      80925        47,426            121,061             2,262,726
Interest expense stockholder and affiliate              64,919        49,474             49,863               296,316
                                                   -----------   -----------        -----------           -----------
Total Expenses                                        (160,594)      (96,900)          (170,924)           (3,470,955)
                                                   -----------   -----------        -----------           -----------
Net loss                                           $  (160,594)  $   (96,900)       $  (170,924)          $(3,404,490)
                                                   -----------   -----------        -----------           -----------
Net loss per common share                                        $      (nil)       $      (nil)               (0.056)

Weighted average number of
  common shares outstanding                         60,953,434    73,332,051         85,610,667            60,953,434
                                                   -----------   -----------        -----------           -----------

</TABLE>

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

                                       F-4

<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                  YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND
          CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987 (DATE 0F INCEPTION)

<TABLE>
<CAPTION>
                                                                                   Deficit
                                          Common                                 Accumulated
                                          Stock                  Additional        in the           Stock
                                        Number of                  Paid in      Developmental    Subscriptions
                                         Shares      Amounts       Capital          Stage          Receivable     Total
                                      -----------   --------      --------      -------------    -------------    -----
<S>                                   <C>           <C>           <C>           <C>              <C>              <C>
Issuance in October 1987 to
 Principal Stockholder                49,000,000    $ 4,900      $               $                $ (4,900)     $
Issuance in October 1987
 for Cash                              3,000,000        300        49,800                             (100)        50,000
Issuance through initial public
 offering of 15,000,000 units in
 February 1988 for cash at
 $.05 per unit, net of issuance
 costs of $220,900                    15,000,000      1,500       527,600                                         529,100
Net loss - 1988                                                                  $(156,821)                      (156,821)
Exercise of Class A
Warrants:
 at $.045 per share                      312,588         31        14,035                                          14,066
 at $0.10 per share                       21,000          2         2,098                                           2,100
Costs related to continuing
 registration of warrants                                         (29,532)                                        (29,532)
Reclassification of common
 stock subject to rescission offer      (333,588)       (33)      (16,133)                                        (16,166)
Net Loss - 1989                                                                   (362,922)                      (362,922)
                                     -----------   --------      --------        ---------        --------      ---------
Balance, July 31, 1989                67,000,000   $  6,700      $547,868        $(519,743)       $ (5,000)     $  29,825
                                     -----------   --------      --------        ---------        --------      ---------
</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       F-5

<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                  YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND
          CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987 (DATE 0F INCEPTION)

<TABLE>
<CAPTION>
                                                                                 Deficit
                                                                               Accumulated
                                                                 Additional      in the          Stock
                                        Number of                  Paid in    Developmental    Subscription
                                         Shares      Amounts       Capital        Stage         Receivable     Total
                                      -----------   --------      --------    -------------   -------------    -----
<S>                                   <C>           <C>           <C>         <C>             <C>              <C>
Exercise of Class A warrants:
 At $.045 per share                    5,201,205   $    520      $233,534                                   $ 234,054
 At $0.10 per share                      409,000         41        40,859                                      40,900
Exercise of Class B warrants
 At $0.15 per share                       25,000          3         3,747                                       3,750
Costs related to continuing
 registration and solicitation
 of warrants                                                      (24,588)                                    (24,588)
Cash received for stock
 subscription                                                                                    5,000          5,000
Reclassification of common stock
 subject to rescission offer:         (5,635,205)      (564)     (278,140)                                   (278,704)
Charge for stock bonus                                             40,000                                      40,000
Net Loss- 1990                                                                (422,314)                      (422,314)
                                     -----------   --------    ----------    ---------      ----------     ----------
Balance, July 31, 1990                67,000,000   $  6,700    $  563,310    $(942,057)     $              $  372,047
                                     -----------   --------    ----------    ---------      ----------     ----------
</TABLE>

    The accompanying notes are an integral part of the financial statements

                                       F-6


<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                  YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND
         CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987 (DATE 0F INCEPTION)


<TABLE>
<CAPTION>
                                                                                 Deficit
                                                                               Accumulated
                                         Common                  Additional      in the          Stock
                                        Number of     Stock        Paid in    Developmental   Subscriptions
                                         Shares      Amounts       Capital        Stage         Receivable     Total
                                      -----------   --------      --------    -------------   -------------    -----
<S>                                   <C>           <C>           <C>         <C>             <C>              <C>
Sale of 3,297,000 shares
 through private placement
 @ $0.8 per share and                   3,297,000   $    329    $  244,871                                   $  245,200
Exercise of Class A warrants
 @ $0.10 per share                      3,152,472        315       314,933                                      315,248
Exercise of Class B warrants
 at $0.15 per share                        60,000          6         8,994                                        9,000
Costs related to continuing
 registration of warrants                                          (80,607)                                     (80,607)
Reclassification of common stock
 subject to rescission offer:          (3,212,472)      (321)     (323,927)                                    (324,248)
Net Loss- 1991                                                                 $  (354,727)                  $ (354,727)
                                      -----------   --------    ----------     -----------      ----------   ----------
Balance, July 31, 1991                 70,297,000   $  7,029    $ 727,574      $(1,296,784)     $        -   $ (562,181)
                                      -----------   --------    ----------     -----------      ----------   ----------
</TABLE>


     The accompanying notes are an integral part of the financial statements

                                       F-7


<PAGE>
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
      YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND CUMULATIVE AMOUNTS FROM
                      OCTOBER 13, 1987 (DATE 0F INCEPTION)


<TABLE>
<CAPTION>
                                                                                 Deficit
                                                                               Accumulated
                                         Common                  Additional      in the          Stock
                                        Number of     Stock        Paid in    Developmental   Subscriptions
                                         Shares      Amounts       Capital        Stage         Receivable     Total
                                      -----------   --------      --------    -------------   -------------    -----
<S>                                   <C>           <C>           <C>         <C>             <C>              <C>
Exercise of Class A warrants
 @ $0.10 per share                      3,779,425   $    378    $  377,565                                   $  377,943
Exercise of Class B warrants
 @ $0.15 per share                          4,000          1           599                                          600
Exercise of underwriters warrants          63,000          6         4,719                                        4,725
Costs related to:
Exercise of warrants                                               (33,191)                                     (33,191)
Registration of privately placed
 shares                                                            (55,496)                                     (55,496)
Issuance for: Compensation @ $.065
 per share                                 50,000          5         3,245                                        3,250
Agency fee @ $0.10 per share               25,000          2         2,498                                        2,500
Claim settlement @ $.085 per share          1,000          1            84                                           85
Reclassification of common stock
 subject to possible rescission
 offer:                                 9,181,265        918       618,200                                      619,118
Charge for compensation                                            180,900                                      180,900
Net loss 1992                                                                     (606,508)                    (606,508)
                                      -----------   --------    ----------     -----------      ----------   ----------
Balance, July 31,1992                  83,400,690   $  8,340    $1,826,697     $(1,903,292)     $        -   $  (68,255)
                                      -----------   --------    ----------     -----------      ----------   ----------

</TABLE>

    The accompanying notes are an integral part of the financial statements

                                       F-8


<PAGE>



                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
      YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND CUMULATIVE AMOUNTS FROM
                      OCTOBER 13, 1987 (DATE 0F INCEPTION)
<TABLE>
<CAPTION>
                                                                                 Deficit
                                                                               Accumulated
                                      Common Stock               Additional      in the
                                        Number of                  Paid in     Development
   Issuance For:                         Shares      Amounts       Capital        Stage          Total
   -------------                      -----------   --------      --------    -------------      -----
<S>                                   <C>           <C>           <C>         <C>             <C>
Compensation @$.065 per share             100,000   $     10    $    6,490     $              $    6,500
Exercise of Underwriters warrants
 @ .075 per share                         500,000         50        37,450                        37,500
Exercise of Class B Warrants
 at .15 per Share                          13,000          1         1,949                         1,950
Retirement of 8,970,300
Shares of Stock                        (8,970,300)      (897)                                       (897)
Net loss for 1993                                                       --        (470,621)     (470,621)
                                      -----------   --------    ----------     -----------    ----------
Balance July 31, 1993                  75,043,390   $  7,504    $1,872,586     $(2,373,913)   $ (493,882)
                                      -----------   --------    ----------     -----------    ----------

</TABLE>

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

                                       F-9


<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
      YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND CUMULATIVE AMOUNTS FROM
                      OCTOBER 13, 1987 (DATE 0F INCEPTION)


<TABLE>
<CAPTION>
                                                                             Deficit
                                                                           Accumulated
                                  Common Stock               Additional      in the
                                    Number of                  Paid in     Development
   Issuance For:                     Shares      Amounts       Capital        Stage          Total
   -------------                  -----------   --------      --------    -------------      -----
<S>                               <C>           <C>           <C>         <C>             <C>
Prior period adjustment                                                        369,329       369,329
Net loss for 1994                                                             (342,783)     (342,783)
                                   ----------   --------    ----------     -----------    ----------
Balance July 31,1994               75,043,390   $  7,504    $1,872,586     $(2,347,367)   $ (467,276)
                                   ==========   ========    ==========     ===========    ==========
Issuance for:Compensation
 @.015 per share                    2,000,000        200        29,800                        30,000
Net Loss for 1995                                                             (364,155)     (354,155)
                                   ----------   --------    ----------     -----------    ----------
Balance July 31, 1995              77,043,390   $  7,704    $1,902,386     $(2,701,522)   $ (791,431)
                                   ==========   ========    ==========     ===========    ==========
Issuance for services               2,000,000        200                                      30,000
Issuance for Services                 340,000         34         6,766                         6,800
Private placement                   8,182,833        818                                         818
Retired Shares                     (2,056,566)      (206)      (92,294)                      (95,500)
Net loss for 1996                                                             (275,551)     (275,561)
                                   ----------   --------    ----------     -----------    ----------
Balance July 31, 1996              85,510,667   $  8,551    $2,079,642     $(2,977,073)   $ (888,880)
                                   ==========   ========    ==========     ===========    ==========
</TABLE>


     The accompanying notes are an integral part of the financial statements

                                      F-10


<PAGE>


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)

                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
      YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND CUMULATIVE AMOUNTS FROM
                      OCTOBER 13, 1987 (DATE 0F INCEPTION)

<TABLE>
<CAPTION>
                                                                             Deficit
                                                                           Accumulated
                                  Common Stock               Additional      in the
                                    Number of                  Paid in     Development
   Issuance For:                     Shares      Amounts       Capital        Stage          Total
   -------------                  -----------   --------      --------    -------------      -----
<S>                               <C>           <C>           <C>         <C>             <C>
Video Fee                             200,000         20         1,980                         2,000
Legal Fees                          2,548,867        254        37,979                        38,233
Retirement                         (2,548,867)      (254)                                       (254)
Net Loss for 1997                                                             (170,924)     (170,924)
                                  -----------   --------    ----------     -----------    ----------
Balance July 31,1997               85,710,667      8,571     2,119,601      (3,147,997)   (1,019,825)
                                  ===========   ========    ==========     ===========    ==========
Retired                           (24,757,233)   (2,475)                                      (2,475)
                                  -----------   --------    ----------     -----------    ----------
Net Loss for 1998                                                              (96,900)      (96,900)
                                  -----------   --------    ----------     -----------    ----------
Balance July 31, 1998              60,953,434      6,096     2,119,601      (3,244,897)   (1,119,200)
                                  ===========   ========    ==========     ===========    ==========
Net Loss For 1999                           -          -             -        (160,594)     (160,594)
                                  -----------   --------    ----------     -----------    ----------
Balance July 31, 1999              60,953,434      6,096     2,119,601      (3,405,491)   (1,279,794)
                                  -----------   --------    ----------     -----------    ----------

</TABLE>

     The accompanying notes are an integral part of the financial statements

                                      F-11


<PAGE>


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the Development Stage)

                            STATEMENTS OF CASH FLOWS
                   YEARS ENDED JULY 31, 1999, 1998 AND 1997 AND
                    CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>


                                                                                                  Cumulative
                                                                                                     from
                                                              1999         1998        1997        Inception
                                                           -----------   --------    --------    -------------
<S>                                                        <C>           <C>         <C>         <C>
Operating activities:
Net Loss                                                    (160,594)      (96,900)  $(170,924)    (3,405,491)
Adjustments to reconcile net loss to net cash used
 in operations Depreciation:                                  12,018        14,475      25,197        171,634
Expenses paid through issuance of common stock by:
    Company                                                        -             -      39,978        175,035
    Principal Stockholder                                          -             -           -        220,900
Changes in operating assets and liabilities:
    Security Deposits                                              -             -       2,000              -
    Prepaid expenses                                                         1,721        (638)             -
    Accounts Payable  Accrued Expenses                      (106,027)       68,225     (36,870)       452,915
                                                           ---------     ---------   ---------    -----------
Net cash used in operating activities                       (254,603)      (12,479)   (141,257)    (2,385,007)

Investing Activities:
    Purchase of furniture and  equipment                           -             -           -       (260,497)
                                                           ---------     ---------   ---------    -----------
Net cash provided by (used in) investing activities                -             -            -      (260,497)

Financing activities:
    Note payable to stockholder: Proceeds                    243,966        26,952     123,800        969,447
    Principal payments                                             -             -      (6,695)       (51,667)
    Proceeds from sale of common stock                             -        (2,475)          -      1,729,760
    Expenditures for costs related to continuing
     registration statement                                        -             -           -              -
    Proceeds from stock subscription  receivable                   -             -           -              -
                                                           ---------     ---------   ---------    -----------
Net cash provided by financing activities                    243,966        24,477     117,105      2,647,540
                                                           ---------     ---------   ---------    -----------
Net increase (decrease) in cash and cash equivalents         (10,637)       11,998     (24,152)         2,038
Cash and cash equivalents, beginning of period                12,675           677      24,828              -
                                                           ---------     ---------   ---------    -----------
Cash and cash equivalents, end of period                       2,038        12,675         676          2,038
                                                           =========     =========   =========    ===========
Supplemental disclosure of cash flow data:Interest paid            -             -          89         32,420


</TABLE>

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

                                      F-12


<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (a Company in the Development Stage)

                          NOTES TO FINANCIAL STATEMENTS

Note 1 - Organization and business and basis of presentation:

The Company was incorporated on October 13, 1987 under the laws of the State of
Delaware. It was organized to further develop and exploit commercially certain
technology for a rotary internal combustion engine that would utilize
alternative fuels. The patent and related rights to the use of the technology
have been assigned to the Company.

The Company has been in the development stage since inception. Activities of the
Company have been limited to the acquisition of funds from the sale of its
common stock; the acquisition of the licensing rights for and, subsequently,
title to, the engine technology; research and development related to the
development of an initial fuel-driven prototype of the engine that was
successfully tested on a preliminary basis in January 1990; and the additional
testing and development of the engine prototype to obtain performance data for
the demonstration of the engine to potential licensees. The Company intends to
continue to conduct research and development activities with respect to the
manufacture of a rotary engine during the ensuing twelve month period
principally through Southwest Research Institute, assuming it is able to raise
the funds necessary to conduct such research, of which there can be no
assurances.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, as of July 31, 1999, the
Company had not been able to commercially utilize its engine technology to
generate revenues or cash flows from operating activities. As a result, it has
suffered recurring losses from operations from inception that have generated the
net stockholders' deficiency of $1,279,795 as of July 31, 1999 and have also
generated significant working capital deficiencies from time to time. Management
does not expect the Company to generate any significant revenues or positive
operating cash flows during the twelve-month period subsequent to July 31, 1999
and has also generated significant working capital deficiencies from time to
time. The limited amount of liquid resources available at July 31, 1999, and the
inability to generate operating revenues and cash flows raise substantial doubts
about the Company's ability to continue as a going concern.

                                      F-13


<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (a Company in the Development Stage)

                          NOTES TO FINANCIAL STATEMENTS

Note 1 - Organization and business and basis of presentation (concluded):

The Company plans to continue research and development activities principally
through Southwest Research Institute on at least a limited basis through the
twelve-month period subsequent to July 31, 1999. However, management believes
that the net liquid assets available at July 31, 1999 will not be sufficient to
enable the Company to meet its obligations and to continue as a going concern
during the ensuing twelve-month period even on this limited basis without
limiting research and development and other operating activities more severely
unless it obtains additional debt or equity financing and/or government
sponsored research grants.

Management also believes that continuation of the Company as a going concern
during the twelve-month period subsequent to July 31, 1999 and thereafter will
depend upon the Company's ability to obtain sufficient additional working
capital to fund the building of a second prototype of its engine and such other
research and development activities as are necessary to accumulate sufficient
data for the marketing and licensing of the engine technology; marketing costs;
and the general and administrative expenses to be incurred during the remaining
development period. Potential sources of such working capital include: the
private or public sale of common stock (the Company has historically depended
primarily on the sale of equity securities to finance its operations); the
exercise of a substantial portion of the 15,398,000 outstanding Class B
warrants, 14,898,000 of which are exercisable at $0.15 per share and 500,000 of
which are exercisable at $.225 per share; the deferral, if necessary, of
payments to related parties; government sponsored research grants; and borrowing
additional amounts from related parties or other sources. However, there can be
no assurances that such financing will be available. The accompanying financial
statements do not include any adjustments that might result from the
uncertainties related to the ability of the Company to continue as a going
concern.

                                      F-14


<PAGE>



                     MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the Development Stage)

                          NOTES TO FINANCIAL STATEMENTS

Note 2 - Summary of other significant accounting policies:

Depreciation:

         Depreciation of furniture and equipment is provided over the estimated
useful lives of the related assets using declining balance methods.

Research and development:
         Costs and expenses related to research and development are expensed as
incurred.

Net loss per common share:
         Net loss per common share was computed on the basis of the weighted
         average number of shares of common stock outstanding during each
         period. The effect of assuming the exercise of outstanding warrants was
         antidilutive and, accordingly, not included in the computation of net
         loss per share.

Note 3 - Furniture and equipment:
         Furniture and equipment consists of the following:

                                            July 31
                                       ----------------       Estimated
                                       1999        1998     Useful Lives
                                       ----        ----     ------------
Useful Lives
Furniture                           $   2,098   $   2,098    7 Years
Equipment                             129,541     129,451    5 Years
Leasehold improvements                  3,947       3,947    3 Years
Patent                                125,000     125,000   15 years
                                    ---------   ---------
                                      260,496     260,496
Less accumulated deprecation         (171,634)   (159,616)
                                    ---------   ---------
Totals                              $ 88,862    $ 100,880
                                    ========    =========


                                      F-15

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the Development Stage)

                          NOTES TO FINANCIAL STATEMENTS

Note 4 - Accounts Payable and Accrued expenses:
         Accounts payable and accrued expenses consist of the following:

                                           July 31
                                       ----------------
                                       1999        1998
                                       ----        ----

        Professional fees            $232,832    $264,938
                                     --------    --------
        Payroll                       148,128     148,128
                                     --------    --------
        Other                           7,036      12,410
                                     --------    --------
           Totals                    $387,996    $425,476
                                     ========    ========

Effective April 15, 1994 the Company issued a promissory note, ("the First
Note"), to Mr. Anthony Campo, the Chairman of the Board, Executive Vice
President, Secretary and Treasurer of the Corporation, to evidence cash advances
of $79,300. The First Note provided for an interest rate of 6% on the unpaid
balance and was due in equal installments for one-half of the principal amount
on April 15, 1996 and the remaining one-half on April 20, 1997. The First Note
had warrants attached to purchase 1,666,667 million shares of common stock at an
excise price of $0.06 per common share and expired on April 30, 1997. On
November 15, 1994 the Company issued a second promissory note ("the Second
Note"), to Mr. Campo to evidence additional cash advances to the Company
amounting to $100,000. The Second Note provided for an interest rate of 6% on
the unpaid balance and was due in equal installments for one-half of the
principal amount on April 15, 1997 and the remaining one-half on April 15, 1999.
The Second Note had warrants attached to purchase 7,930,000 million shares of
common stock at an excise price of $0.01 per common share which were scheduled
to expire on April 30, 1999.

Effective March 24, 1995 the Company restructured the obligations under the
First Note and the Second Note by issuing a new note payable to Mr. Campo in the
amount of $328,500. This restructured note, "the Third Note", provided for
interest at a rate of 6% per year on the outstanding principal balance in two
equal quarterly installments of principal beginning March 24, 1995 through April
30, 1999.

                                      F-16


<PAGE>


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the Development Stage)

                          NOTES TO FINANCIAL STATEMENTS

Note 5- This Third Note was issued with warrants attached to acquire 32,850,000
shares of common stock at the excise price of $0.01 per share which were
scheduled to expire on April 30, 1999.

Effective October 20, 1995 the Company re-negotiated the outstanding debt and
interest owed to Mr. Campo under the Third Note . The new note bore interest at
7.5% per year and matured on July 1, 1999. The principal amount of $568,000 plus
interest was convertible into common shares of the Company at $.0075 per share.
It was also agreed that any additional monies loaned to the Company would bear
interest at 7.5% per year. During the year ending July 31, 1999, Mr. Campo
loaned an additional $26,952 to the Company.

Accordingly, the balances of the restructured obligations were classified as
long-term debt at July 31, 1999 and 1998.

Effective, August 1, 1998 the Company consolidated the outstanding principal and
interest owed to Mr. Campo under the Fourth Note with additional cash advances
of $102,090 made by Mr. Campo, with accrued interest thereon at 7.5% per annum.
The new note in the amount of $807,280 bears interest at 7.5% per annum, matures
on August 1, 2000 and carries a conversion feature of one share for each $.0075
of debt converted. As of July 31, 1999, the note balance increased to $917,780.
Additional funds were loaned to the Company by Mr. Campo. The additional funds
accrued interest at 7.5% per annum.

The Company has defaulted on its principal payment due on August 1, 1999 and on
its quarterly interest payments due on November 1, 1998, and February 1, May 1,
August 1, and November 1, 1999. As of November 1, 1999, a total of $75,683.00 in
unpaid interest is owed to Mr. Campo under the August 1, 1998 Note. Since the
Company does not have any revenues, it is doubtful that the Company will be able
to pay any interest or principal amounts due under the August 1, 1998 Note until
such time as it has operating revenues or raises funds from an independent
source, both of which events may not occur at any time. In addition to the right
of converting amounts due under the Note into common stock, as described above,
Mr. Campo has the right at any time to declare amounts due under such note
immediately due and payable.

Note 6 - Stockholders' equity and initial public offering:

         In October 1987, the Company issued 49,000,000 shares of common stock
         to Jerome Murray and 5,989 shares of common stock to another officer in
         consideration for $4,900 and $100, respectively. Payments for the
         shares were received in November 1989.

         In an initial public offering of the Company's common stock on February
         26, 1988, the Company sold 15,000,000 units at a price of $0.05 per
         unit. Each unit consisted of one share of common stock, one Class A
         redeemable common stock purchase warrant and one class B redeemable
         common stock purchase warrant. Proceeds,

                                      F-17



<PAGE>
         net of $220,900 of underwriting discounts and other registration costs,
         amounted to $529,100. Concurrent with the public offering, the Company
         issued warrants (the "underwriter's warrants") to the underwriter for
         nominal consideration to purchase 1,500,000 units consisting of
         1,500,000 shares of common stock and certain other warrants to purchase
         additional shares (the other warrants were not exercised and expired
         prior to July 31, 1991). The underwriter's warrants were exercisable
         through February 1993 at an exercise price of $0.75 per unit. In
         February 1993, the Company received $37,500 from the exercise of
         500,000 underwriter warrants pursuant to which, the Company issued
         500,000 shares of common stock and 500,000 Class B stock purchase
         warrants, whose exercise price is 150% of the Class B warrants, or
         $.225 per share, and expire on the same date as the Class B warrants.

         The Class A warrants were exercisable through October 25, 1992 (as last
         extended on June 25, 1991) at an exercise price of $.10 per share.
         Effective for the 60 day period from June 16, 1989, the Company reduced
         the exercise price of the Class A warrants to $.045 per share. The
         Class B warrants are exercisable at an exercise price of $.15 per
         share. There were 3,779,425, 3,152,472, 409,000 and 21,000 Class A
         warrants exercised in Fiscal year ends 1992, 1991, 1990 and 1989,
         respectively, at $.10 per share and 5,201,205 and 312,588 Class A
         warrants exercised in 1990 and 1989, respectively at $.045 per share.
         The remaining 2,124,310 Class A warrants expired in 1991. There were
         13,000,64,000 and 25,000 Class B warrants exercised in 1993, 1991 and
         1990, respectively, at $0.15 per share and 500,000 underwriter's
         warrants exercised in 1993 at $0.075 per share. Proceeds, net of
         solicitation costs, from exercises of Class A, Class B and
         underwriter's warrants were credited to stockholders' equity.

         As a result of the exercises and expiration of warrants, the Company
         had no Class A warrants, 14,898,000 Class B warrants ,and 500,000
         underwriter's B warrants outstanding as of July 31, 1999. The Class B
         warrants are redeemable at any time at the option of the Company at a
         price of $.0001 per warrant. Holders of the Class B warrants have
         certain rights with respect to the registration of those warrants under
         the Securities Act of 1993 (the "1993 Act").

         During 1991, the Company offered for purchase to qualified investors a
         minimum total of 1,000,000 and a maximum total of 5,000,000 shares of
         common stock at $.08 per share and received $245,200 from the sale of
         3,065,000 shares prior to the closing of the offering on March 31,
         1991. The Company issued an additional 232,000 shares as commissions in
         connection with certain of the sales for a total of 3,297,000 shares
         issued.

                                      F-18
<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A Company in the Development Stage)

                          NOTES TO FINANCIAL STATEMENTS

Note 7 - Income taxes:

         At July 31, 1999, the Company had net operating loss carry forwards of
         approximately $3,063,468 available to reduce future Federal taxable
         income, and tax credits of approximately $59,991 available to offset
         future Federal income tax, that expire from 2003 through 2008.

Note 8 - Commitments:

Registration rights:

The Company is obligated to file and incur the related costs of post-effective
amendments to the registration statement under the 1933 Act for its initial
public offering covering periods in which any of the Class B stock purchase
warrants sold in that offering are exercisable. However, due principally to a
lack of funds, the Company does not have a current post-effective amendment on
file with the Securities and Exchange Commission that would permit the Company
to issue its Common Stock upon exercise of the Class B Warrants, Since the
Company's Common Stock has been trading during at least the last two (2) years
at considerably below the $.15 exercise price of the Class B Warrants, the
Company has not received any notices of exercise of such Class B Warrants.
Should the market price of the stock of the Company increase in value to at
least 80% of the exercise price of the Warrants (ie. $.12 per share), the
Company intends to borrow sufficient funds to pay for the cost of preparation of
a post-effective amendment to permit the exercise of the Class B Warrants.

                                      F-19


<PAGE>
                                List of Exhibits

Exhibit No.                           Exhibit                       Page No.

(3)               Articles of Incorporation and Bylaws*

(10)              Material contracts

         (a)      Key Employee Stock Option Plan*

         (b)      License Agreement between Rotorcam
                  Technology Corp. and Jerome Murray
                  dated October 18, 1992*

         (c)      Assignment of License Agreement*

         (d)      Executive Employment Agreement*
                  by and between Jerome Murray and
                  the registrant**

         (e)      Jecko, Inc. agreement dated August 1, 1989**

         (f)      Renewal of Jecko, Inc. agreement dated
                  November 12, 1989**

         (g)      Amended and Restated Assignment of License
                  Agreement.***

         (h)      Amended and Consolidated Promissory Note
                  in the amount of $108,463 from the registrant
                  to the Rotorcam Technology Corp.***

         (i)      Amended and Consolidated Promissory Note
                  in the amount of $86,619 from the registrant
                  to Jerome Murray.***

         (j)      First Amendment to Executive Employment
                  Agreement between Jerome Murray and the
                  registrant***

         (k)      Lease for 10 Orben Drive, Landing, New Jersey
                  dated July 31, 1991.***

         (l)      Renewals of Jecko, Inc. agreement dated April 16,1990,
                  June 27, 1990, November 12, 1990 January 28, 1991 and
                  August 29, 1991. ***

                                       1
<PAGE>
         (m)      Employment agreement by and between James J.
                  Cronin and the registrant.****

         (n)      Option issued by the registrant to James J.
                  Cronin.****

         (o)      Amended and Consolidated promissory Note
                  in the amount of $108,463 from the registrant
                  to the Rotorcam Technology Corp.****

         (p)      Amended and Consolidated promissory Note in the amount of
                  $86,619 from the registrant to Jerome Murray. ****

         (q)      Amended and Consolidated promissory Note in the amount of
                  $116,399 from the registrant
                  to the Rotorcam Technology Corp.****

         (r)      Amended and Consolidated promissory Note in
                  the amount of $104,268 from the registrant
                  to Jerome Murray.****

         (s)      Executive Employment Agreement by and between
                  James J. Cronin and the registrant.+

         (t)      Agreement by and between Francis Peccoralla
                  and the registrant.+

         (u)      Settlement Agreement between Jerome Murray,
                  Frances Gardiner, Rotorcam Technology
                  Corporation and the registrant.+

         (v)      Proprietary Information and Inventions
                  Agreement by and between Albert J. Richey
                  and the registrant.++

         (w)      Revolving Subordinated Note in the amount of $100,000 between
                  Anthony S. Campo and the registrant.++

         (x)      Revolving Subordinated Note in the amount of $79,300 between
                  Anthony S. Campo and the registrant.

         (y)      Option Agreement between Robert J. Tiernan
                  and the registrant.++

         (z)      Independent Contractor Agreement by and

                                       2
<PAGE>
                  between Joseph 0. Mosca and the registrant.++

         (aa)     Amended & Consolidated Revolving Subordinated
                  Note in the amount of $328,500 between Anthony
                  S.Campo and the registrant.++

         (ab)     Lease agreement for Tuxedo Park, NY office
                  dated 10/5/93++

         (ac)     Lease agreement for Stony Brook, NY office dated
                  6/l/94.++

         (ad)     Note agreement dated 10/20/95 in the principal
                  amount of $568,000.+++

         (ae)     Lease agreement for Islandia, NY laboratory
                  site dated 6/l/94 between Anthony S. Campo
                  and the registrant.+++

         (af)     Lease agreement for Huntington, NY laboratory
                  site dated 10/l/95 between Anthony S. Campo
                  and the registrant.+++

         (ag)     Promissory Note dated August 1, 1998 from++++
                  the Company to Mr. Anthony S. Campo.

*      Filed with the registrant's Registration Statement on Form S-18 dated
       December 9, 1987 (Registration No. 33-19048-NY) and Amendment Nos. 2 and
       3 thereto dated February 17, 1988 and February 22, 1988, respectively,
       and incorporated herein by reference.

**     Filed with the registrant's Amendment Nos. 1, 2 and 3 to Post-Effective
       Amendment No. 2 on Form S-18 (Registration No. 33-19048-NY) dated July
       16, 1990,September 26, 1990 and November 8, 1990, respectively, and
       incorporated herein by reference.

***    Filed with registrant's Annual Report on Form 10-K for the year ended
       July 31, 1991, and incorporated herein by reference.

****   Filed with registrant's Post Effective Amendment No. 3 on Form S-18
       (Registration No-3319048-NY) dated August 6, 1992, and incorporated
       herein by reference.

                                       3

<PAGE>
*****  Filed with registrant's Annual Report on Form 10-K for the year ended
       July 31, 1993, and incorporated herein by reference.

****** Filed with registrant's Annual Report on Form 10-K for the year ended
       July 31, 1994, and incorporated herein by reference.

+      Filed with registrant's Annual Report on Form 10-K for the year ended
       July 31, 1993, and incorporated herein by reference.

++     Filed with registrant's Annual Report on Form 10-K for the year ended
       July 31, 1994, and incorporated herein by reference.

+++    Filed with registrant's Annual Report on Form 10-K for the year ended
       July 31, 1995 and incorporated herein by reference.

++++   Filed with registrant's Annual Report on Form 10-KSB for the year ended
       July 31, 1998 and reincorporated herein by reference.

                                       4
<PAGE>
                                   SIGNATURES

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

                     MURRAY UNITED DEVELOPMENT CORPORATION
                                 (Registrant)

                              By: \s\ DWIGHT FOSTER
                                      Dwight Foster
                                      President and Chief Executive Officer

                              Dated:  January 27, 2000

                              By: \S\ ANTHONY S. CAMPO
                                      Anthony S. Campo, Executive Vice
                                      President
                                      Secretary and Treasurer
                                      Chief Financial Officer

                              Dated:  January 27, 2000

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

                                                     \S\ ANTHONY S. CAMPO
                                                     Anthony S. Campo,
                                                     Chairman of the Board

                                                     \S\ THOMAS CALTABIANO
                                                     Thomas Caltabiano, Director

                                                     \S\ FRANCIS PECORELLA
                                                     Francis Pecorella, Director

                                                     Dated: January 27, 2000
                                       5