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

                                    FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999
-----------------------------------------------------------------------
                                       or

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

For the transition period from            to
                               ---------     ---------------------------
Commission File Number:              33-85864-LA
------------------------------------------------------------------------
                              CLS FINANCIAL SERVICES, INC
------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)
 WASHINGTON                                                 91-1478196
------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
 4720 200th St SW, Suite 200, Lynnwood, WA 98036
------------------------------------------------------------------------------
(Address of principal executive offices)          (Zip Code)
         (425) 744-0386
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               (Registrant's telephone number, including area code)
------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.                /X/Yes  / /No


      Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K (X)





<PAGE>
                     CLS FINANCIAL SERVICES, INC.
       ANNUAL REPORT OF FORM 10-K FOR THE FISCAL YEAR ENDED
                        DECEMBER 31, 1999

                        TABLE OF CONTENTS
                                                                    PAGE

PART I
     Item 1:    Description of Business                               4

     Item 2:    Description of Property                               5

     Item 3:    Legal Proceedings                                     5

     Item 4:    Submission of Matters to Security Holders             6

PART II
     Item 5:   Market for Common Equity & Related Stockholders        6
               Matters

     Item 6:   Selected Financial Data                                6

     Item 7:   Management Discussion & Analysis                       6

     Item 8:   Financial Statements                                   9

     Item 9:   Changes in & Disagreements with Accountants on        21
               Accounting & Financial Disclosure

PART III
     Item 10:  Directors & Executive Officers                        21

     Item 11:  Executive Compensation                                22

     Item 12:  Security Ownership of Certain Beneficial Owners and   22
               Management

     Item 13:  Certain Relationships and Related Transactions        23

     Item 14:  Exhibits and Reports on 8-K                           24

<PAGE>
<PAGE>
                              PART I

ITEM 1    DESCRIPTION OF BUSINESS

Business Development and Description
CLS Financial Services, Inc. , is a Washington State Corporation (referred to
as the "company") incorporated March of 1990.  The company's primary business
is to engage in the brokerage of loans and the purchase and sale of real
estate contracts, mortgages, and deeds of trust ("loans"). The company has
continued its registration with the State of Washington to sell in whole or in
part loans pursuant to its Mortgage Broker Dealer license. The company also
buys and sells real estate.  In 1999, the company started a new division for
real estate brokerage.

The company originates loans by lending money directly to borrowers.  These
loans may be held in the company's inventory or resold to investors with all
servicing rights and servicing fees retained by the company.  The company also
acts as a broker retained by the borrower to find a suitable lender.  The
initial sale of debenture investments, principal reductions and the reselling
of loans to investors provided the source of funds needed to invest in new
loans receivable.  Likewise, the purchase and sale of real estate as an
investment opportunity to investors provides an additional source of funds.

The company has originated loans as set forth below:
-----------------------------------------------------------------------------
YEAR TOTAL LOAN ORIGINATIONS  LOANS BROKERED & SOLD    COMPANY LOAN PORTFOLIO
-----------------------------------------------------------------------------
1994    $22,919,838.00          $20,374,002.00            $2,545,836.00
1995    $19,868,765.00          $16,202,907.00            $3,665,858.00
1996    $20,962,033.00          $17,969,295.00            $2,992,738.00
1997    $15,253,345.00          $12,766,411.00            $2,486,934.00
1998    $31,718,132.00          $27,965,691.00            $3,752,441.00
1999    $29,511,957.00          $27,590,809.00            $1,921,148.00

The company has generated revenue as set forth below:
-----------------------------------------------------------------------------
                       1997              1998                 1999
-----------------------------------------------------------------------------
GROSS REVENUE     $1,730,865.00     $2,206,821.00       $1,757,334.00
OPERATING EXPENSE $1,001,622.00     $2,086,107.00       $1,248,744.00
SALARY EXPENSE      $698,294.00       $738,214.00         $491,922.00
NET INCOME/(Loss)   $ 30,949.00      ($617,500.00)         $16,698.00


Security
As of December 31, 1999 and December 31, 1998, 86% and 87%, respectively, of
the loans in the portfolio were secured by first liens on real property.
Management expects this trend to continue.  See Note 5, Notes to Financial
Statements.
        
<PAGE>
<PAGE>
Borrowers and Competition
The company is a full service mortgage company.  The company advertises in the
local media, accepts referrals and employs loan officers.  The company brokers
Class A and B loans to established lenders.  Some of the primary competitors
are Beneficial Financial Services and Quality Mortgage.  The company also
services more difficult to place Class C loans. The company investment
criteria for Class C loans places more emphasis on the value of the collateral
and to a lesser extent the borrower's credit worthiness. The company
underwrites these loans conservatively, with an average loan to appraised
value of 65% or loan to tax assessed value of 50%.  The company used the
proceeds of the debenture securities offering to originate Class C loans.  The
market for Class C loans is competitive with lenders such as Lornty Investors,
and Pacific Coast as direct competitors.  The company believes it will remain
competitive based upon its history and the economic and real estate market
growth in the Snohomish, King and Pierce County areas.

ITEM 2    DESCRIPTION OF PROPERTY

The company's principle investment objective is to acquire a portfolio of real
estate collateralized loans at 2-4% over the cost of capital.  In order to do
so the company must acquire loans in which the borrowers are considered a
higher risk than Class A borrowers who have higher credit ratings. These loans
are secured by a first lien position on real estate located in the Western
Washington area.  The majority of the loans are in the $50,000-$100,000 range
bearing interest between 12% to 18%. Types of real property securing loans
(including related party loans) as of December 31, 1999 are set forth below:
SINGLE FAMILY RESIDENCES      $1,370,784.00
COMMERCIAL PROPERTY           $  638,760.00
RAW LAND                      $1,852,474.00
OTHER                            $15,130.00
TOTAL LOAN RECEIVABLE         $3,877,148.00

ITEM 3    LEGAL PROCEEDINGS

In 1998, the company was involved in a lawsuit that initially began as a
foreclosure action.  The borrower defaulted and subsequently filed a petition
in the Bankruptcy Court in the Western District of Washington (Cause #A98-
01561). The debtor initiated an adversary action against CLS and the investors
(Cause #A98-01561) claiming that the Defendants had violated the Washington
Consumer Protection Act and proceeded on multiple legal liability theories and
damage claims. The Court agreed with the Plaintiff's that the loan essentially
masked the intent of the Defendants, which was to own the property for
substantial gain.  The company disagreed, however, based on the potential
adverse ruling from the Court and the limited resources of CLS, the parties
entered into a settlement agreement, which resulted in the loss set forth in
the audited financial statements in 1998.  See Note 3, Loss on Legal
Settlement.

As a result of the lawsuit, CLS was compelled to restructure its debt,
primarily to debenture holders.  The company proposes to investors, mainly the
debenture holders, that the interest rate would be reduced by 50% and the term
increased by 5 years.  In early 1999, CLS circulated the proposal to the
investors. At least one investor complained to the State of Washington

<PAGE>

Securities Director of the Department of Financial Institutions.  The
complaint, the adverse court ruling and following settlement resulted in a
Consent Order (SDO 99-10) entered into by CLS with the State of Washington
Securities Division. CLS had previously discontinued the offering of
debentures and formally notified the State of Washington and the SEC.  Two
investors promptly filed a lawsuit, captioned, Evergreen et.al. vs. CLS in the
Western District of Washington Federal Court, cause number C99-0309L.  That
case was settled out of court, on terms favorable to CLS and the remaining
debenture holders, primarily due to the unique secured position of the
plaintiffs in property that was sold, in which one of the plaintiff's was in a
first lien position.

Also during 1998, CLS was one of the many subjects of a nationwide Federal
Trade Commission investigation.  Based on a series of relatively minor FTC
violations, CLS agreed to settle the matter on terms financially favorable to
the company. In so doing, CLS deposited $60,000 in an escrow account to pay
redress to borrowers, who never did complain to CLS directly.  The amount was
deposited in 1999 in an escrow account and is reflected in the audited
financial statements as Note 2, FTC Regulations.

CLS did circulate the consent order and initial 1998 financial statements.
The 1998 audited statements were prepared late because the original auditor
did not complete the 1998 engagement, requiring CLS to hire another CPA firm
to audit the 1998 records.  CLS held a meeting with investors in April of 1999
and several times during the year, particularly when the compiled 1999
quarterly financial statements were available.  Investor participation in the
meetings steadily declined, to a level of approximately ten investors each
quarter.  The company circulated continuing questions and answers from each
meeting to all investors.  The company plans to continue this communication
process in 2000.

At year end 1999, the company circulated amended debenture agreements and
certificates to the debenture holders, seeking their written agreement and
affirmation of the restructuring.  The company has received an overwhelming
acceptance by the debenture holders.  Nearly 90% of the investors in number
and dollars have agreed and have forwarded or agreed to forward their written
acknowledgment.  One debenture holder has disagreed and has indicated the
potential likelihood of litigating the matter.  At present, if the company
were forced to liquidate its assets in an auction scenario, investors in
debentures will most likely lose a substantial portion of their principal,
since the value of the property is represented in the market equity of the
real estate. Property sold at auction or distress sale prices would yield
substantially less than book value, because much of the secured investment in
real estate is in developing property (property under development or projects
under construction) that the company intends to sell at market prices, not
bargain prices. This represents the last impediment in the successful
restructuring of the company.

In the event that any debenture holder refuses to accept the terms of the
financial restructuring, there is no legal basis to impose the restructuring
terms on the debenture holders under state or federal law, excepting an
approved reorganization under Chapter 11 of the Bankruptcy Code.  This

<PAGE>

liquidation scenario represents the major risk to investors, and the company
is presently developing plans to protect all debenture holders, with a special
emphasis of insuring that debenture holders who agreed to the
restructuring are not unfairly prejudiced by debenture holders who hold out.
Beginning in the first quarter of 2000, based on the improved financial
condition of the company, the interest rate of return to the debenture holders
was increased.  The company plans to increase the return during the third and
fourth quarters of 2000, as the financial condition permits.

At present, the company is not involved in any adverse litigation against it,
other than routine collection activities. CLS continues to address potential
securities issues related to the restructuring of the company and is
cooperating fully with the Securities Division of the Department of Financial
Institutions for the State of Washington.

Item 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None


                             PART II

ITEM 5     MARKET FOR COMMON EQUITY & RELATED MATTERS

Market Information
There is no public market for the company's investment debentures, nor is one
likely to develop.  The investment debentures are not expected to be listed on
any formal exchange.

ITEM 6    SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR           1995          1996        1997        1998       1999
<C>            <C>           <C>         <C>         <C>        <C>
REVENUE        $1,778,366    $1,652,870  $1,730,865  $2,206,821 $1,757,334
INCOME (LOSS)
OPERATIONS     $  114,691    $   88,805  $   31,188  ($ 617,500)$   16,698
TOTAL ASSETS   $4,607,563    $4,016,609  $7,905,735  $10,640,650$11163,177
LONG TERM
OBLIGATIONS    $1,369,822    $1,111,168  $5,115,992  $7,981,976 $7,979,131
</TABLE>

ITEM 7     MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS
          OF OPERATION
Plan of Operation & Liquidity
Principal payments and the reselling of loans to investors provided the source
of funds to invest in loans receivable. Available liquidity will dictate the
volume of loan purchases that may be acquired by the company. Management has
established a policy of conservative collateral lending.  As a result,
defaulted loans generally create additional profit centers as the collateral
value has been sufficient to sustain the increased yield created by the
company servicing the debt on behalf of the borrower but retaining the
increased default rate when the borrower cures the loan.  The company manages

<PAGE>

cash by reselling the loans to other investors in order to recapture original
debenture investments which is to fund other loans. The company relies on its
ability to resell loan receivable or real estate in sufficient amounts to
generate funds needed to pay off maturing debentures
under the restructuring plan. The external sources of liquidity include a line
of credit, sale of debentures, payoff on loan receivables, the sale of loan
receivables, and sale of real estate.

Capital Resources
Interest received on loans funded and servicing fees provide the funds for
expenses and interest due to debenture investors.  Principle payoffs on loans
receivable due will provides the funds to repay the debenture principle. The
loan receivables are tied specifically to these debenture payables with
similar maturity over the next five years.  There are no other significant
commitments for capital expenditures as of December 31, 1999.

Results of Operations
In 1999, 1998, 1997, 1996 and 1995 the company originated 29.5, 31.7, 15.3,
20.9, 19.9 million dollars in loans respectively.  The company's revenues from
operations were 1.76, 2.2, 1.7, 1.7, 1.8, million dollars in 1999, 1998,
1997, 1996 and 1995 respectively.  Expenses from operations decreased to
$1,771,632 from $2,824,321 in 1998. This reduction in expense was largely due
to the decrease in salary expenses directly related to the decrease in
executive compensation and the restructuring of the interest expense.

Property Value Trends
There are no known or predicted property value downward trends.  Management
expects that property values will continue to increase in the Puget Sound
area.  Management bases this prediction on industry reports that indicate the
value of property in the western Washington area has increased in 2000 and
shows no downward trends.

Obligations
In order to protect the debenture holder's principle, in early 1999 the
company reduced the interest rate by 50% and thereafter and the maturity was
extended by 5 years. In the first quarter of 2000, the interest rates on the
debenture accounts were increased based on the financial success of the
restructuring.  In the future, management plans to increase the interest rate
paid to debenture holders in the third and fourth quarters of 2000, based on
the financial condition of the company.  In 1999, the company met its
obligations under the restructuring plan to all investors.  The company's
principle performance objective is to meet all restructuring obligations and
to provide an annual increase in retained earnings.  The company receives
interest payments from loans receivable sufficient to pay debenture investor
interest.  The company relies on its ability to sell loans receivable to
generate the necessary cash to pay principle to the investor.  The company is
in the process of developing a five year plan to schedule loan maturity dates
and real estate marketing efforts to correspond with the restructured maturity
dates of the debentures.



<PAGE>
Return on Asset, Equity, and Equity to Assets Ratio
The following net returns were realized during the years ended December 31,
1999 and 1998.
Year Ended December 31,                                 1999        1998
Return on Assets (net income/avg total assets)           .15%       (.15%)
Return on Equity (net income/avg equity)                2.04%      (2.84%)
Equity to Assets (avg equity/avg total assets)          7.50%        .05%

Plan of Operation
The company is committed to offer real estate and loan receivables for sale to
investors for the foreseeable future.  Management expects loan growth to
remain steady, with little change from 1999. More effort has been placed on
the loan department to obtain A & B type loans to sell to brokers which will
generate more income based on the increased volume.

The company has also opened a new division in 1999 for real estate brokerage
in order to satisfy the demand to assist buyers in finding and purchasing a
home.  Currently, the company employs four real estate salespersons.  The
company expects this to be important to its long term success.  The company
expects this effort to be synergistic to its core business and to actually be
a profit center.  This division establishes the company as the premier one
stop real estate company by not only helping the home buyer finance the home
purchase, but actually helping the buyer find a home to purchase.

The company's cash management goal is to invest all available funds through
loan receivables or real estate. Market demand for the company services remain
strong as there has been no shortage of investment options that meet the
company's investment criteria. The company expects to be able to continue to
acquire similar loans in the future.  Loan purchases will be limited by
available liquidity as previously discussed.

The company actively pursues delinquent accounts. As a result, nonearning
receivables are minimal and generally fully collected within thirty to sixty
days.  Management's strategy and policy has been to underwrite conservatively.
This strategy will continue with a loan to value ratio average of 65%.  Every
effort is made to assure profitability even in the event of a foreclosure
sale.

The company forecasts a stable demand for its services in the foreseeable
future, evidenced by the daily loan inquiries, portfolio performance, external
predications and subsequent loans funded after December 31, 1999.

Uncertainties
The restructuring plan has been accepted by the clear majority of the
debenture investors.  However, there is no guarantee that the company will be
able to reorganize if all of the investors do not agree.  In the case a
debenture holder, with investments in an amount material in relation to the
company's net worth, proceeds with litigation, the company will be forced to
litigate to protect investors who agreed to the restructuring.  In the
alternative, and in a worst case scenario, the company could be forced to
liquidate or perhaps file for a formal reorganization under Chapter 11 of the
Bankruptcy Code.  Management believes that after the investors study the
audited financial statements, the information contained in this 10K, reviews

<PAGE>

the real estate portfolio and loan portfolio and reviews the industry
predictions, that they will agree that it is their collective best interests
to support the restructuring plan initiated by management.  The savings of
administration costs, court hearings, and compliance with the Bankruptcy Code,
rules and United States Trustee directives, will ultimately inure to the
investors, rather than counsel, accountants and the Trustee office.

<PAGE>
<PAGE>

ITEM 8      FINANCIAL STATEMENTS

            Index to Financial Statements as of December 31, 1999

                                                                   Page
Independent Auditors Statement                                      9

Balance Sheet                                                      11

Statement of Income and Retained Earnings                          12

Statement of Cash Flows                                            13

Notes to Financial Statements                                   14-18

<PAGE>
<PAGE>

                                (LETTERHEAD)

                         INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
CLS Financial Services, Inc
Lynnwood, Washington


We have audited the accompanying balance sheets of CLS Financial Services,
Inc. as of December 31, 1999 and 1998, and the related statements of
operations and retained earnings (deficit), and cash flows for the years then
ended.  These  financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the 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 CLS Financial
Services, Inc. as of December 31, 1999 and 1998 and the results of operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ Peterson Sullivan PLLC

February 25, 2000
<PAGE>
<PAGE>
                         CLS FINANCIAL SERVICES, INC.
                                BALANCE SHEETS
                        December 31, 1999 AND 1998

<TABLE>
<S>                                              <C>            <C>
                                                        1999           1998
ASSETS                                                --------      ---------
Cash                                                  $ 73,436       $ 42,367
Cash - trust account                                    14,556         31,218
Loans Receivable from related party                  3,904,309      3,888,322
Loans Receivable                                       680,186        320,362
Receivables                                            223,048        164,267
Real estate owned                                    6,134,167      6,070,756
Property and equipment, at cost, less
accumulated depreciation of $189,692
in 1999 and $161,477 in 1998                            78,838        104,886
Other                                                   54,637         18,472
                                                      ---------     ---------
     Total Assets                                  $11,163,177    $10,640,650
                                                    ==========     ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses                  102,095        109,456
Trust account payable                                   14,556         31,218
Loans payable                                        9,520,600      9,475,105
Notes payable                                          699,357        215,000
                                                      --------      ---------
     Total Liabilities                              10,336,608      9,830,779
                                                     ---------      ---------
STOCKHOLDERS' EQUITY
Common stock, Class one, no par value, 500 shares       10,000         10,000
authorized, issued and outstanding
Common stock, Class Two, $1000 par value              1,000,000      1,000,000
2,500 shares authorized, 1000 issued and
outstanding at December 31, 1999 and 1998
Retained earnings (deficit)                           (183,431)      (200,129)
                                                      ---------       --------
     Total Stockholders' Equity                        826,569        809,871
                                                     ----------      ---------
     Total Liabilities & Stockholders' Equity      $11,163,177    $10,640,650
                                                    ===========    ===========
</TABLE>
See Notes to Financial Statements











<PAGE>
                         CLS FINANCIAL SERVICES, INC.
                  STATEMENTS OF INCOME AND RETAINED EARNINGS
                    Years Ended December 31, 1999 AND 1998
<TABLE>
<S>                                              <C>            <C>
                                                     1999           1998
REVENUES                                             ----           ----
Loan fees                                          $879,657        $980,701
Interest on loans                                   739,867         801,408
Loan servicing and application fees                 101,650         424,225
Other income                                          9,766             487
Real Estate Sales (net of costs of real estate of
                   $231,606)                         26,394               -
                                                    -------         -------
      Total Revenues                              1,757,334       2,206,821

OPERATING EXPENSES
Wage and payroll taxes                              491,922        738,214
Commissions and referrals                           411,487        318,238
Interest expense                                    491,368        714,807
Advertising                                          16,786         98,662
Rent                                                 78,683         79,043
Office and utilities                                161,536        138,539
Professional fees                                    91,635         63,876
Depreciation and amortization                        28,215         27,794
Loss on legal settlement                                  -        645,151
                                                    -------        -------
     Total expenses                               1,771,632      2,824,321
                                                  ---------      ----------
     Income (loss) before provision for income tax  (14,298)      (617,500)

Income tax benefit                                   30,996              -
                                                    -------       --------
Net income (loss)                                    16,698       (617,500)

RETAINED EARNINGS, beginning of year               (200,129)       417,371
                                                    --------       --------
RETAINED EARNINGS (deficit),ending                ($183,431)     ($200,129)
                                                    =======        =======

</TABLE>
See Notes to Financial Statements












<PAGE>
                          CLS FINANCIAL SERVICES, INC.
                            STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 1999 AND 1998
<TABLE>
<S>                                               <C>                <C>
                                                     1999           1998
                                                     ----           ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (loss)                                 $ 16,698      ($617,500)
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization                       28,215         27,791
Loss on legal settlement                                 -        645,151
Gain on Sale of Real Estate                        (26,394)             -
Change in Operating assets and liabilities
  Receivables, other than loan receivable          (58,781)         5,838
  Accounts payable and accrued expenses             (7,361)       (23,891)
  Other                                            (36,165)        19,217
Proceeds from real estate held for sale            258,000              -
Purchase of real estate held for sale             (295,017)             -
                                               -----------       ---------
NET CASH PROVIDED (USED) BY OPERATIONS            (120,805)        56,606

CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment                  (2,167)       (46,699)
Change in related party loans                      (15,987)    (2,513,831)
Change in loans receivable related party          (359,824)     1,251,447
                                                  ---------     ---------

NET CASH FROM INVESTING ACTIVITIES                (377,978)    (1,309,083)
                                                ----------        --------
CASH FLOW FROM FINANCING ACTIVITIES:
Change in loans payable                             45,495      1,040,340
Borrowings (payments) on line of credit            484,357        215,000
                                                ----------      ----------
NET CASH FROM FINANCING ACTIVITIES                 529,852      1,255,340
                                                ----------      ----------

NET INCREASE (DECREASE) IN CASH                     31,069          2,863

CASH BALANCE - BEGINNING OF PERIOD                  42,367         39,504
                                                   --------       -------

CASH BALANCE - END OF PERIOD                      $ 73,436        $42,367
                                                   =======         =======
Interest paid on a cash basis                     $491,368        $765,071
                                                  ========        ========
Income taxes paid on a cash basis                 $      -         $ 6,300
                                                  ========        ========
</TABLE>

 See Notes to Financial Statements



<PAGE>
                             CLS FINANCIAL SERVICES
                         NOTES TO FINANCIAL STATEMENTS
                                   AUDITED
                               December 31, 1999
NOTE 1 - SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
CLS FINANCIAL SERVICES, INC. ("CLS") earns fees from the origination of real
estate loans, commissions from the sale of real estate to home buyers, and
purchases and sells real estate contracts, mortgages and deeds of trust.  As
such, CLS is subject to regulations in the state of Washington with respect to
mortgage broker dealers. CLS also buys and sells real estate.

CLS is related to a series of other companies that provide services to CLS
customers as follows:

Puget Sound Investment Group, Inc. (PSIG). PSIG owns and manages real estate,
and develops real estate for sale.  PSIG borrows funds in its own name,
acquires property in its own name and has, in the past, borrowed funds from
investors on loans that were brokered by CLS. PSIG has, in the past, acquired
title to properties through the foreclosure process on loans originated by
CLS.  In 1998, when a real estate loan was made by CLS went into foreclosure,
PSIG assumed the payment obligation on the loan.  Foreclosed loans which had
been assumed by PSIG amounted to $430,284 at December 31, 1998, and were
included in loans receivable from related party.  Any gain or loss recognized
as part of the foreclosure and eventual dispositin of the collateral was
recorded by PSIG.  This activity did not take place in 1999.

In addition, CLS earned management fees from PSIG of $346,000 in 1998 for
oversight of certain PSIG operations. Finally, during 1998, PSIG transferred
real property to CLS with a book value of $6,070,756.  Related mortgages on
these properties of $3,554,051 were also transferred to CLS.  These transfers
were made pursuant to regulations of the State of Washington.  PSIG originally
acquired there properties with cash advances made by CLS.

Puget Sound Appraisal Group, Inc. (PSAG). PSAG provides appraisal services for
loans originated by CLS. PSAG charges CLS customers directly for these
services. As of September 15, 1999, management has decided to close this
corporation and use outside appraisal companies.

Puget Sound Real Estate Services Group, Inc. (PSRESG). PSRESG provides real
estate closing services for loans originated by CLS .  PSRESG charges CLS
customers directly for these services.

Puget Sound Construction of Washington, Inc. (PSCW).  PSCW provides
residential repair services to properties owned by PSIG and CLS.  PSCW charges
CLS directly for these services.

The Class One stockholders of CLS are the stockholders in the companies listed
above.

CLS and its affiliated companies allocate rent based on space used, management
and labor costs based on time, telephone expenses based on number of
employees, computers and equipment based on usage and other overhead costs
based on reasonable estimates of use.

<PAGE>
                             CLS FINANCIAL SERVICES
                           NOTES TO FINANCIAL STATEMENTS
                                     AUDITED
                               December 31, 1999

NOTE 1 - (continued)

Loan interest

Generally, interest on loans is recognized on loans using the interest method.
Interest on loans are not recognized when loans become ninety days delinquent.
Thereafter, no interest is taken into income unless received in cash or until
such time as the borrower demonstrates the ability to resume payments.
Interest previously accrued but not collected is charged against income at the
time the loan becomes ninety days delinquent.

Sales of real estate

Real estate held for sale is stated at the lower of cost (specific
identification) or market.  Sales of real estate generally are accounted for
under the full accrual method.  Under that method, a gain is not recognized
until collectibility of the sales price is reasonably assured and the earnings
process is virtually complete.  When a sale does not meet the requirements for
income recognition, gain is deferred until those requirements are met.

Loan origination and servicing fees

Loan origination fees and direct loan origination costs are recognized when
the loans are sold by CLS.

Loan servicing fees are charged at a rate of $20 per month over the servicing
of the loan.  Loan servicing fees are paid by the borrower and are recognized
as revenue as the services are provided.

Cash

For purposes of the statement of cash flow, CLS considers all highly
liquid investments with an original maturity of three months or less to be
cash. From time to time, CLS has cash balances in excess of federally insured
limits.

Trust Accounts

CLS holds money in trust for real estate transactions in process.  The amount
held is shown as an asset and a liability on the balance sheet.

Depreciation

Property and equipment are depreciated using the straight line method over the
estimated useful life of the assets.




<PAGE>
                              CLS FINANCIAL SERVICES
                          NOTES TO FINANCIAL STATEMENTS
                                 DECEMBER 31, 1999
                                     Audited

NOTE 1 - (continued)

Income Taxes

CLS accounts for income taxes under the assets and liability approach that
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
CLS financial statements or income tax returns.  The income tax benefit of
$30,996 results from a refund received by carrying back prior year tax losses
to years when income tax was paid.  This refund had not been recognized as a
receivable at December 31, 1998. At December 31, 1999, CLS has a deferred tax
asset that primarily results from net operating loss carryforwards.  These
carryforwards amount to $595,000 and expire in 2019.  The resulting asset of
$213,000 has been fully reserved.

Advertising

Advertising costs are expended as incurred.

Use of estimates

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

Note 2. FTC Regulations

CLS is subject to various Federal Trade Commission ("FTC") regulations.  Based
on a series of relatively minor FTC violations, CLS was required to deposit
$60,000 in an escrow account to pay redress.  The amount has been requested by
FTC and deposited in 1999 into an escrow account.  At December 31, 1999, this
amount has been written down to net realizable value of $36,000 and is
included in other assets.

Note 3. Loss on Legal Settlement

During 1998, CLS, along with PSIG, were named as defendants in a lawsuit
brought by a customer. The suit was settled in February 1999 which resulted in
a non-cash loss of $1,949,777.  CLS and PSIG agreed that $645,151 of the total
loss amount is attributable to CLS.  Accordingly, CLS recorded its agreed
share of the loss in its December 31, 1998, financial statements.






<PAGE>
                            CLS FINANCIAL SERVICES, INC
                           NOTES TO FINANCIAL STATEMENTS
                                 DECEMBER 31, 1999
                                       AUDITED

NOTE 4. Loans Receivable From Related Party and Payable to Related Party

CLS has loans receivable from related parties as follows:
                                                1999              1998
                                             -----------       ------------
PSIG                                         $3,701,645        $3,684,228
PSRESG                                           94,220            40,817
PSAG                                             25,315             4,122
PSCW                                             15,329                 -
A partnership which PSIG is a partner            67,800           159,155
                                             -----------       -----------
                                             $3,904,309        $3,888,322
                                             ===========       ===========
The loan receivable from PSIG at December 31, 1999, is due on demand, bears
interest at 12%.  Interest income earned from PSIG was $481,110 in 1999 and
$422,286 in 1998. Interest receivable from PSIG of $47,540 at December 31,
1999, and is included in other receivables.  At December 31, 1998, there was
no interest receivable from PSIG. At December 31, 1999, the loan is secured by
real property as follows (amounts are as represented by PSIG):

Single Family Residential                                     $  705,728
Multi-Family Residential                                         638,760
Undeveloped Land                                               1,852,474
                                                              ----------
                                                              $3,196,962
                                                              ==========

The other related party loans receivable are due on demand, bear no interest
and are unsecured.




















<PAGE>
                             CLS FINANCIAL SERVICES
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1999

NOTE 5. Loans Receivable

CLS's other loans receivable are concentrated in the State of Washington and
are generally secured by real estate.  Types of real property securing loans
receivable at December 31, 1999 and 1998 are as follows:

                                             1999                 1998
                                         --------------       --------------
Single Family Residential                 $ 665,056             $ 199,694
Undeveloped Land                                  -                80,141
Other                                        15,130                40,527
                                         --------------       --------------
                                          $ 680,186             $ 320,362
                                         ==============       ==============

Security positions on loans receivable are as follows:

                                             1999                 1998
                                          ------------          ----------
First lien position                       $ 590,799             $ 287,913
Second lien position                         42,407                     -
Third lien position                          31,850                     -
Other                                        15,130                32,449
                                          ------------          ----------
                                          $ 680,186             $ 320,362
                                          ============          ==========

Principal payments to be received for the years ending December 31 are as
follows:

        2000                                      $    250,556
        2001                                           210,000
        2002                                           158,927
        2003                                            42,407
        2004                                            18,296
                                                     ----------
                                                   $   680,186

These loans have interest rates ranging from 10% to 14%.


Note 6. Loans Payable

Loans payable include loans and debenture payable made up of amounts due
to investors with varying terms.  Interest rates vary from 10% to 14%.





<PAGE>
                              CLS FINANCIAL SERVICES
                           NOTES TO FINANCIAL STATEMENTS
                                    AUDITED
                               December  31, 1999

Note 6. (Continued)

Principal payments on loans and debentures payable for the years ending
December 31 are as follows:

           2000                              $ 1,541,469
           2001                                  919,886
           2002                                2,870,034
           2003                                2,546,502
           2004                                  649,509
           Thereafter                            993,200
                                             ------------
                                             $ 9,520,600
                                             ============

As of December 31, 1999, CLS had issued $5,250,000 in unsecured debenture
certificates.  Debenture certificates plus accrued interest amounting to a
total of $5,920,640 are outstanding at December 31, 1999.

Note 7.  Notes Payable

                                            1999                1998
                                        --------------        -------------
Line of credit with an individual for a
maximum of $700,000 due Nov 15, 2000.
Interest at 12% annually is to be paid
monthly.  In addition. CLS is to pay
a loan service fee of $2300 per month
when there are outstanding balances. The
line of credit is secured by a blanket
assignment of notes and related deeds of
trust as draws are made.                  $699,357            $215,000
                                        ===============       ==============


CLS also has a line of credit with a bank for a maximum of $150,000. This line
of credit is secured by personal guarantees of the Class One CLS stockholders,
and expires November 24, 2002.

Note 8. Common Stock

Class One shares of common stock are voting shares.  Class Two shares are
nonvoting.  Class Two shares are to receive 80% of any dividends paid, and
have a dissolution preference over Class One to the extent of the Class Two
capital contributions.
During 1998, CLS redeemed 180 and one half share of Class Two common stock in
exchange for real property with a book value (after deducting related loans
payable) approximately equal to the par value of the stock.
<PAGE>
<PAGE>
ITEM 9     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE
None

                             PART III

ITEM 10    DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT.
The following are the officers of the company:
       Name            Age      Title                  Address
-----------------------------------------------------------------------------
Gerald C. Vanhook     51      President               Mill Creek, WA
Lorrie Vanhook        53      Secretary               Mill Creek, WA
Melvin  Johnson, Jr   42      Vice President          Edmonds, WA
Debbie Little         42      Asst Vice President     Lynnwood, WA

1) Gerald C. Vanhook, (Jerry, 51) is and has been the President of the company
since its inception in 1990.  Prior to that, he worked for CLS Mortgage, Inc.,
in Spokane from February 1984 until November 1989, in which he was responsible
for acquiring and selling similar securities.  He has been employed in several
management positions with Consumer Financial Companies, Mortgage Banks, and
Credit Unions since 1969.

2) Lorrie Vanhook, (Lorrie, 53) is and has been the corporate
Secretary/Treasurer and is the Department Manager for loan processing.  She
joined the company in July of 1990, and performed duties as a loan officer.
She is the wife of Jerry Vanhook.  She has been employed in a variety of
positions with GTE over the past 20 years.

3) Melvin Johnson, Jr., (Mel, 42) is and has been the Loan Officer/Investment
Officer since joining the company in April of 1989.  He became a stockholder
and Vice-President on March 1, 1994.  He has been employed in a variety of
banking positions with First Interstate Bank from 1981-1989.  He graduated
with a degree in Education from Central Washington University in 1980.

4) Debbie Little, (Debbie, 42) is and has been employed as the Office Manager.
She joined the company in February of 1993.  She became Assistant Vice
President of Operations on October 1, 1996.  She is not a stockholder.  She
has been employed as a Field Supervisors with ITT Financial Services.  She
graduated from Willamette University with a degree in Public Policy
and Speech in 1980.

Family Relationships
Mr. Gerald C. Vanhook, the President, is married to Lorrie Vanhook, the
Secretary.  They own 67% of the companys outstanding and issued stock in Joint
Tenancy with the Right of Survivorship.









<PAGE>
Involvement in certain legal proceedings
See Item 3 and Item 7.

ITEM 11   EXECUTIVE COMPENSATION

Summary Compensation Table
      A           B               C                 D             E
Name & Position     Year           Salary           Bonus      Other Salary
------------------------------------------------------------------------------
Gerald Vanhook      1997          $154,152.00         0             0
President           1998           154,152.00         0             0
                    1999            85,402.00         0             0
------------------------------------------------------------------------------
Lorrie Vanhook      1997            52,152.00         0             0
Secretary           1998            52,152.00         0             0
                    1999            52,152.00         0             0
------------------------------------------------------------------------------
Melvin Johnson      1997           154,152.00         0             0
Vice-President      1998           154,152.00         0             0
                    1999           108,467.00         0             0
------------------------------------------------------------------------------
Debbie Little       1997            44,400.00         0             0
Asst. Vice Pres.    1998            44,400.00         0             0
                    1999            48,948.00         0             0
------------------------------------------------------------------------------


The company pays it officers a salary based upon performance.  The company
pays for health insurance and reimburses officers for expenses incurred in the
normal course of business. Gerald Vanhook and Melvin Johnson reduced their
salaries by 50% in 1999. Mel Johnson did, however, earn commission on specific
real estate transactions that he originated and closed.

ITEM 12    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

The company is a closely held corporation.  The company originates loans to
high risk borrowers and generally services these loans in its servicing
department.  The company is attempting to build a mid-level management team
capable of carrying on the business. The President and the Secretary of the
Company are married, namely Gerald C. Vanhook and Lorrie Vanhook, who own 67%.
The other owner of the business is Melvin Johnson, Jr and his wife Deidre, who
own 17% of the Company.  In addition, 16% of the Company is owned by Puget
Sound Investment Group, Inc., which is also owned  50% by the Vanhooks and 50%
by the Johnsons.









<PAGE>
ITEM 13     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Business Relationships
The role of Puget Sound Real Estate Services Group (referred to as "PSRESG")
is to close the Company loans and to service loans.  The amount of closing
fees paid to PSRESG in 1999 was 175,997.00 as compared to 1998 at 140,285.00.
PSRESG also collects the late fees associated with the loans, late fees
collected in 1999 were 22,856.00. PSRESG also handles miscellaneous litigation
for all companies has needed.  PSRESG also manages collection litigation for
CLS, when needed.

The role of Puget Sound Appraisal Group (referred to as "PSAG") was to ppraise
some of the properties or at minimum review and conduct a visual inspection of
the property if appraised by a third party. PSAG also conducted appraisals for
outside mortgage companies. In 1999 PSAG appraisal fees were 37,180.00
compared to 1998 of 55,485.00.  PSAG's operations were limited to appraisal
services only. In September 1999, management decided to close this
corporation.

The role of Puget Sound Investment Group (referred to as "PSIG") is varied.
PSIG purchases distressed properties or raw land generally for much less than
market value and repairs property for resale, rent or development. In
addition, PSIG has three wholly owned subsidiaries, PSAG, PSRESG and Puget
Sound Construction, Inc.

 
<PAGE>
<PAGE>
ITEM 14   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, & REPORTS ON 8-K

Exhibits
The following exhibits are filed as part of this report.  Exhibits previously
filed are incorporated by reference as noted.

Exhibit
Number            Exhibit                                              Page

2      Plan of acquisition, reorganization, arrangement, liquidation, or
       succession*
3      Articles of incorporation, by-laws*
4      Instruments defining the rights of security holders, including
       indentures*
9      Voting Trust agreement*
10     Material contracts*
11     Statement recomputation of per share earnings*
12     Statement recomputation of ratios*
13     Annual report to security holders, Form 10-Q or quarterly report to
       security holders*
16     Letter change in certifying accountant*
18     Letter change in accounting principles*
21     Subsidiaries of the registrant*
22     Published report regarding matters submitted to vote of security
       holders*
23     Counsel of experts and counsel*
24     Power of Attorney*
27     Financial Data Schedule                                            24
28     Information from reports furnished to state insurance regulatory
       authorities*
99     Additional exhibits
* Items denoted by an asterisk have either been omitted or are not applicable.

Reports on Form 8-K
The company did not file any reports on Form 8-K in the year 1999.
<PAGE>
<PAGE>
                            SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.





_______________________________________                 ___________________
Gerald C. Vanhook, President                              Date




_______________________________________                 _____________________
Melvin Johnson, Jr. Vice-President                        Date




_______________________________________                 _____________________
Lorrie Vanhook, Secretary                                 Date




_______________________________________                 _____________________
Debbie Little, Asst. Vice-President                       Date