<PAGE>   1


                                   FORM 10-QSB

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

                  For the quarterly period ended July 31, 1998

               ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                                THE EXCHANGE ACT

           For the transition period from ___________ to ____________
                        Commission file number 93-67656-S

                        LEADING-EDGE EARTH PRODUCTS, INC.
           -----------------------------------------------------------
           (Name of small business issuer as specified in its charter)

                         Oregon                          93-1002429
         --------------------------------------   ------------------------
        (State of incorporation or organization) (I.R.S. Employer ID No.)

                    319 Nickerson St. #186, Seattle, WA 98109
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                  800-788-3599
                            -------------------------
                            Issuer's telephone number


         --------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

        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  X     No
                                 -----      -----

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

        Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court.


                              Yes        No
                                 -----      -----


                      APPLICABLE ONLY TO CORPORATE ISSUERS

        State number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 28,366,140 as of December 5,
1998.

        Transitional Small Business Disclosure Format (check one):


                              Yes        No   X
                                 -----      -----


                                       1
<PAGE>   2



                        LEADING-EDGE EARTH PRODUCTS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

PART I

ITEM 1.   FINANCIAL STATEMENTS

Interim Financial Statements for the period ending July 31, 1998, are attached
hereto.

ITEM 2.   PLAN OF OPERATION

The operations of Leading-Edge Earth Products, Inc. (the "Company"), from
inception until late 1997 were focused on research and development (R&D), after
which the corporate emphasis became manufacturing, marketing and sales. The
Company conducted R&D activities, directly, from 1992 to 1996. R&D was done and
paid for by an affiliate, Agile Building Technology, Inc. ("Agile"), from
January to October, 1996. In November 1996, management and shareholder-sponsored
R&D activities were undertaken in Pennsylvania, on behalf of the Company, by
LEEP Building Systems, Inc. ("LBS"), assisted by the Company's CEO, Grant
Record. Between November 1996 and early 1998, a viable, patent pending
structural panel and building system was completed, tested and patent claims
additional to the Company's earlier claims, were filed with the U.S. Patent and
Trademark Office. This product is known as "LEEP STRUCTURAL CORE(TM)" ("LEEP
CORE"). The management/investor group that sponsored the Company's 1996/1997 R&D
also developed a pilot manufacturing facility in Pennsylvania to produce LEEP
CORE. Pilot production began in early 1998. Significant purchase of equipment
and manufacturing facilities by the Company and its affiliates and/or
subsidiaries is planned during fiscal 1998/1999, as well as the addition of
personnel to expand the pilot manufacturing facility's capacity and support the
launching of large-scale manufacturing operations for LEEP CORE. The LBS plant
in Pennsylvania currently produces sufficient panels to build one commercial
building every ten days, in the lower-tier size range of LEEP's 1,000 to 15,000
sq.ft. target market.

The Company's primary fiscal year 1999 focus is to finance, manufacture, market
and sell LEEP CORE. The long-term strategy of the Company is to form, finance,
control, and manage regional manufacturing plants worldwide. The Company plans
to establish up to three such manufacturing plants within the next five years.

On November 25, 1998, the Company entered into a funding agreement with
Allegiance Capital Corporation of Dallas, TX, a major U.S. middle-market
investment banking company. Allegiance has a goal to structure and bring
together a total of $18.5 million during 1999 to allow LEEP to: (1) purchase LBS
and expand the Company's pilot operations in Pennsylvania to produce sufficient
LEEP CORE to construct one medium size commercial building a day, and (2)
purchase the previously announced 35-acre rail-side property in downtown
Shoshone, ID, and construct the Company's first full-scale, continuous,
automated, manufacturing plant.

The Company received notice from the Union Pacific Railroad and the Idaho
District Court that the "quiet title" procedure was successfully completed,
which will give the Company the right to purchase and receive clear title on a
35-acre rail-side site in downtown Shoshone, ID, from the Union Pacific
Railroad. The property includes a spur that connects to the Union Pacific's
major north-south rail line. The price to the Company is especially attractive
as Union Pacific wishes to develop additional rail customers in the region. The
Company intends to develop the property as a rail-side industrial park after
completion of its manufacturing facility at this location.


                                       2
<PAGE>   3

The Company has retained the Pinnacle Consulting Group, Snohomish, WA to assist
with completing and implementing the design of the Shoshone, ID facility.
Pinnacle's work will result in a set of drawings, specifications, and equipment
vendor lists. LEEP will be able to use Pinnacle's documentation package,
permanently, to duplicate the Shoshone facility anywhere in the world.

In October 1998, LEEP CORE was tested at the Structural Research Laboratory of
the University of Washington's Department of Civil Engineering. The University
report indicates that LEEP's 4" thick by 12' high by 4' wide wall system is five
times stronger than required to support the roof load of a typical American
commercial building. The tests certify, respectively, point-load--9,000 lbs.;
wall-load--14,000 lbs.; and point-load internally reinforced--30,000 lbs.

LIQUIDITY AND CAPITAL RESOURCES: In recent years the Company has been almost
entirely dependent on its CEO, Grant Record, arranging credit facilities, making
personal loans, procuring loans from other stockholders, and selling stock to
investors in order to meet the immediate cash needs of the Company. The Company
has no revenue from operations and does not have assets that can be liquidated
to cover cash requirements. Management, however, believes that the Company is in
the best position of its life to raise the required capital to meet its
published objectives. This is owing to the fact that the Company's R&D has been
completed and the Company has aggressively moved through its final developmental
phase and into production. The Company's business plan indicates that the $18.5
million to be raised as described under the plan of operation section above
would allow the Company to achieve high levels of production and sales in the
year 2000. In the interim the Company has secured a $50,000 bank line of credit
to help fund the Company until long term financing is obtained.

In the year ending April 30, 1996 the Company raised $23,541 from the sale of
stock, $202,700 in loans from stockholders, and exchanged $496,011 worth of
Company obligations for stock. In the year ended April 30, 1997 the Company
raised $25,000 from the exercise of stock options, borrowed $115,452 with demand
notes, and issued stock in exchange for $514,627 in Company obligations. In the
fiscal year just ended, the Company raised $20,000 from the sale of stock,
borrowed $51,562 from stockholders and $386,500 from a credit facility, which is
no longer available to the Company, and issued stock for $605,132 worth of
Company obligations. In the quarter ended July 31, 1998 the Company financed
some of its operations with payables and issued stock for $30,400 worth of
Company obligations,

Since there is no expectation of cash flow from operations in the short term the
Company will need to continue borrowing and selling stock in order to continue
funding its corporate overhead.

RESULTS OF OPERATIONS: Nearly all of the company's revenue for the quarter ended
July 31, 1998 consists of $13,543 in interest due on notes receivable from
affiliates which has been accrued. At the present time the Company does not have
any license or consulting revenue agreements. There was a substantial decrease
of $73,955 in professional fees from the previous years first quarter as a
result of the Company abandoning certain contracts with consultants.

The Company has not uncovered any material year 2000 issues that could affect
the Company's business, results of operations, or financial condition.

For further analysis, see the Company's Statement of Cash Flows.

PART II OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

                                       3
<PAGE>   4

Earlier reported deficiencies in the legal response to the Company's law suit
against Mr. Metz were brought current when Mr. Metz completed the first phase of
his deposition on March 27, 1998. A settlement with Tim Metz was reached on
December 31, 1998, which is attached as Exhibit 99 of this report.

ITEM 2.   CHANGES IN SECURITIES

There have been no changes in instruments defining the rights of holders of any
class of securities.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

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

No matters have been submitted to a vote of securities holders since the Annual
Meeting held in Seattle on January 25, 1998. Business transacted at that meeting
was summarized in the Company's 10-KSB report filed on November 5, 1998.

ITEM 5.   OTHER INFORMATION

Matters discussed herein, contain forward-looking statements that involve risk
and uncertainties. The Company's results may differ significantly from results
indicated by forward-looking statements. Factors that might cause some
differences, include, but are not limited to:

-       Changes in general economic conditions, including but not limited to
        increases in interest rates, and shifts in domestic building
        construction requirements;

-        Changes in government regulations affecting customers, the Company, or
        Agile;

-        Risks generally involved in the construction business, including
        weather, fixed price contracts and shortages of materials or
        price-competitive labor;

-        Competition;

-       The ability of the Company to successfully bring the products from their
        development stage into full and profitable production;

-       The Company's ability to raise sufficient debt and/or equity capital to
        perfect its business plans;

-       The occurrences of incidents which could subject the Company to
        liability or fines;

-       The Company's ability to obtain the sales orders necessary to support
        the volume of production required to sustain successful operations.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

Unaudited financial reports and notes thereto are attached covering the period
ending July 31, 1998.

An 8-K report was filed on December 10, 1998; no other 8-K reports have been
filed after the 10-K 



                                       4
<PAGE>   5

Report for the year ending April 30, 1998, was filed on November 5, 1998.

SIGNATURES

Pursuant to the requirements 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.


                                               Leading-Edge Earth Products, Inc.
                                                          (Registrant)


Date: December 30, 1998                        By:    Grant C. Record
                                               CEO and Secretary



                                       5
<PAGE>   6

                        LEADING-EDGE EARTH PRODUCTS, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          INTERIM FINANCIAL STATEMENTS

                                  JULY 31, 1998

                                   (UNAUDITED)




                                       6
<PAGE>   7

                        LEADING-EDGE EARTH PRODUCTS, INC.
                        (A Development Stage Enterprise)
                                   (Unaudited)
                           Balance Sheet as of 7/31/98

<TABLE>
<S>                                                       <C>     

ASSETS
CURRENT ASSETS
    Cash                                                  $       955
    Receivables from affiliate, net of reserve                  7,423
    Inventory                                                  30,724
    Prepaid expenses and deposits                              20,731
                                                          -----------
                 TOTAL CURRENT ASSETS                          59,833
OTHER ASSETS
    Investment in affiliates                                   67,100
                                                          -----------
                 TOTAL ASSETS                                 126,933
                                                          -----------

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
    Accounts payable                                           82,065
    Accrued contract salary payable                           395,343
    Accrued royalties and interest payable                     97,598
    Loans from shareholders                                   411,346
                                                          -----------
                 TOTAL CURRENT LIABILITIES                    986,352
                                                          -----------

CONTINGENT LIABILITIES                                              -

SHAREHOLDERS' EQUITY (DEFICIT)
  Preferred shares
  (10 million shares authorized, none issued)                       -
  Common stock, no par value
  (100 million shares authorized, 28,285,196 issued         
  and outstanding)                                          5,190,265
  Note receivable from shareholders                          (483,784)
  Deficit accumulated during developmental stage           (5,565,900)
                                                          -----------
        SHAREHOLDERS' DEFICIT                                (859,419)
                                                          -----------
                 TOTAL LIABILITIES AND SHAREHOLDERS'      
                 EQUITY                                   $   126,933
                                                          -----------

</TABLE>


                                       7
<PAGE>   8

                        LEADING-EDGE EARTH PRODUCTS, INC.
                        (A Development Stage Enterprise)
                                   (Unaudited)
        Statement of Operations for years ending July 31, 1998 and 1997,
          and From December 23, 1991 (inception) through July 31, 1998

<TABLE>
<CAPTION>

                                                             Three months           
                                                                Ended               Dec. 23, 1991
                                                   ------------------------------      through
                                                   July 31, 1998    July 31, 1997   July 31, 1998
                                                   -------------    -------------   -------------
<S>                                                   <C>              <C>           <C>    
INCOME
       License and consulting revenues            $         -      $         -      $   497,000
       Interest                                        13,543           10,328           99,697
       Other                                              421            7,000           19,398
                                                  -----------      -----------      -----------
            TOTAL INCOME                               13,964           17,328          616,095

RESEARCH AND DEVELOPMENT EXPENSES                       1,472            4,176          963,743

GENERAL AND ADMINISTRATIVE EXPENSES
       Contract salaries and incentives                15,000           47,728        1,492,583
       Travel and entertainment                         7,048           13,321          205,536
       Legal and professional                          20,650           94,605        1,418,108
       Promotion and corporate development             30,400           32,400          564,868
       Other general and administrative costs          15,206           13,422          459,932
                                                  -----------      -----------      -----------
            TOTAL GENERAL AND ADMINISTRATIVE           88,304          201,476        4,141,027

INTEREST AND OTHER EXPENSE
       Interest                                         9,983           11,489          244,270
       Adjustment for unpaid revenues from             
       affiliate                                       11,859           10,312          279,954
       Royalties and royalty buyout expense                 -                -          553,000
                                                  -----------      -----------      -----------
            TOTAL INTEREST AND OTHER EXPENSE           21,842           21,801        1,077,224
                                                  -----------      -----------      -----------
                  TOTAL EXPENSES                  $   111,618          227,453        6,181,994
                                                  -----------      -----------      -----------
            NET LOSS                              $   (97,654)     $  (210,125)     $(5,565,900)
                                                  -----------      -----------      -----------
            Loss per common share                      $(0.00)          $(0.01)          $(0.27)
            Weighted average shares                
            outstanding                            28,385,196       27,768,020       20,691,585
</TABLE>


                                       8
<PAGE>   9

                        LEADING-EDGE EARTH PRODUCTS, INC.
                        (A Development Stage Enterprise)
                                   (Unaudited)
          Statement of Cash Flows for Quarter ending July 31, 1998, and
            from December 23, 1991 (inception) through July 31, 1998


<TABLE>
<CAPTION>
                                                      Quarter      Dec. 23, 1991
                                                       Ended         Through
                                                   July 31, 1998   July 31, 1998
                                                  --------------   -------------
<S>                                               <C>              <C>        
CASH FLOWS FROM OPERATING ACTIVITIES

NET LOSS                                          $   (97,654)     (5,565,900)
ADJUSTMENTS TO RECONCILE NET LOSS
   TO CASH USED IN OPERATING ACTIVITIES
Noncash compensation expenses related to               
   nonqualified stock options and grants               30,400       2,738,225
Depreciation and amortization                                          16,185
Write-off of long-term assets                                         170,903
Accrued royalty obligation                                            200,000

CHANGES IN OPERATING ASSETS AND LIABILITIES
Receivables                                             2,629          (7,423)
Inventory                                                             (30,724)
Prepaid expenses and deposits                           4,052         (20,731)
Accounts payable                                       12,557         476,091
Accrued salary obligations                             15,000         409,967
Accrued interest payable                                9,726         299,633
                                                  -----------     -----------
    Total adjustments to Operating Loss                74,364       4,252,126
                                                  -----------     -----------
CASH USED IN OPERATING ACTIVITIES                     (23,290)     (1,313,774)
                                                  -----------     -----------

INVESTING ACTIVITIES
Investment in affiliate                                21,688         (67,100)
Equipment purchases, disposals                                       (159,064)
Purchase intangible                                                   (26,822)
Payments on notes receivable from shareholders                          6,500
                                                  -----------     -----------
CASH USED BY INVESTING ACTIVITIES                      21,688        (246,486)
                                                  -----------     -----------

FINANCING ACTIVITIES
Sale of common stock                                                  390,000
Exercise of stock options                                              67,537
Exercise of Class A warrants                                            3,300
Contributed capital                                                   100,910
Proceeds from notes payable                                           658,630
Proceeds - loans from shareholders                                    671,717
Payments from shareholder loan                                       (254,379)
Payments on notes payable                                             (76,500)
                                                  -----------     -----------
CASH PROVIDED BY FINANCING ACTIVITIES                               1,561,215
                                                  -----------     -----------

Change in cash                                         (1,602)            955
Cash at beginning of period                             2,557
                                                  -----------     -----------
CASH AT END OF PERIOD                             $       955     $       955
                                                  -----------     -----------
</TABLE>

                                       9

                                       
<PAGE>   10

                        LEADING-EDGE EARTH PRODUCTS, INC.

                                  JULY 31, 1998

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND POOLING OF INTERESTS. Leading-Edge Earth Products, Inc.
believes its products have applications for single-family, multifamily
residential and low-rise commercial construction. The Company is considered to
be in the development stage. Significant revenues have not yet been generated
from research and development activities or planned operations. The Company's
business activities have been financed primarily through the issuance of equity
securities, outside loans, and loans from shareholders.

On December 29, 1992 the Company entered into a business combination that was
accounted for as a pooling of interest wherein Leading-Edge Earth Products,
Inc., merged with an inactive public company, Crystal Asset Management, which
had been incorporated in Oregon in 1968. In March of 1993, the Company began
again to trade its stock publicly as Leading-Edge Earth Products, Inc.

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 assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECEIVABLES. As a result of an agreement with Agile and WLP in fiscal 1997, the
Company does not expect to collect license and consulting revenues and interest
due from Agile until after Agile is in production and is in a position to make
payments on amounts owing to the Company. Consequently the Company adjusted
revenues and established a reserve totaling $279,954 for amounts due from Agile
on July 31, 1998.

INVENTORY. Inventory consisting of steel for fabrication was purchased for
$30,724 during fiscal 1998 and has been reflected in the financial statements at
acquisition cost. As of July 31, 1998, all material purchased was accounted for
as raw material inventory.

INVESTMENT IN AFFILIATE. During fiscal 1998, the Company agreed to enter into a
joint venture agreement with L/A Investors involving certain production
facilities. All aspects of this arrangement were not finalized as of July 31,
1998. However, during fiscal 1998 cash was advanced by the Company for
investment in LEEP Building Systems, Inc. ("LBS") and L/A Investors has made
contributions toward LBS during fiscal 1998. To the extent cash was advanced by
the Company this arrangement has been accounted for as "investment in
affiliate". L/A Investors has recognized the investment by the Company by
issuing a note payable to the Company.

INCOME TAXES. Deferred Income tax assets and liabilities are computed for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances have
been established to reduce tax assets to the amount expected to be realized.
Income tax expense is the tax payable or 


                                       10
<PAGE>   11

refundable for the period plus or minus the change during the period in net
deferred tax assets and liabilities.

NET LOSS PER COMMON SHARE. Net Loss per common share is computed based on the
weighted-average number of common shares and common share equivalents
outstanding. When dilutive, stock options are included as common share
equivalents using the treasury stock method.

There was no difference between basic and fully diluted earnings per share for
all periods presented.

INVESTMENTS IN SUBSIDIARIES. The Company has a 35% interest in Agile. This
investment is accounted for using the equity method. Agile is a development
stage enterprise established in December 1995 to manufacture building panels
using technology developed jointly with the Company and/or independently. Agile
has incurred operating losses since its inception in 1995 through the period
ended April 30, 1998.

The Company has recorded no value related to this investment due to the
indeterminable values related to the Company's common stock and technology given
or the common stock of Agile received in the investment transaction. The Company
has not recognized its proportionate share of Agile's net losses as the Company
has no obligation to fund any such losses.

NOTE 2: RELATED PARTY TRANSACTIONS

ARCHITECTURAL SERVICES AGREEMENT. The Company has entered into an agreement with
the owner of DB Associates, a stockholder and member of the Board of Directors,
to provide architectural and sales services. In addition to normal hourly rates
for architectural services, DB Associates will be paid for sales and marketing
efforts at the rate of $1.00 per panel for each panel sold to persons or
companies for which DB Associates performs architectural work.

DB Associates will alternatively receive $0.25 per panel for providing
architectural review for compliance with the Company's standards on projects
with which DB Associates is not directly involved as architect.

JOINT VENTURE. At July 31, 1998, the Company and L/A Investors were in the
process of finalizing a joint venture agreement. During the initial stages of
this joint venture, the Company contributed cash and technology and L/A
Investors contributed cash and manufacturing equipment. Principals of L/A
Investors are significant shareholders of the Company's common stock.

STOCK OPTIONS. There were no stock options granted during the quarter ended July
31, 1998. Information on options outstanding is contained in the April 30, 1998
10-KSB.

NOTES RECEIVABLE FROM STOCKHOLDERS. The Company has from time to time issued
common shares in return for notes receivable from stockholders. In many
instances these stockholders were also officers and directors. These notes
receivable have been accounted for a reduction of stockholders' equity.

LOANS FROM STOCKHOLDERS. At July 31, 1998, the Company owed $411,346, in
unsecured, demand notes payable to stockholders plus interest which is accruing
at 8% or 10% per annum.

NOTE 3: PREFERRED AND COMMON STOCK

                                       11
<PAGE>   12

PREFERRED. The Articles of Incorporation authorize issuance of up to 10,000,000
shares of preferred stock. As of July 31, 1998, no preferred shares have been
issued. The Board of Directors has the authority, without further stockholder
action, to determine the preferences, limitations, and relative rights of the
preferred stock, subject to the requirements on the Oregon Business Corporation
Act.

COMMON STOCK. Only a portion of the Company's common stock outstanding on July
31, 1998 is freely tradable. The freely tradable shares include the 1,193,683
shares originally held by certain founding stockholders, 995,000 shares
registered on March 4, 1994 and subsequently sold, and those shares issued after
December 29, 1992 where the holding period and trading volume restrictions are
satisfied. The shares issued pursuant to the agreement of merger dated December
29, 1992 and many shares issued subsequent thereto, are "restricted securities"
under the Securities Act of 1933 and, therefore, are subject to limitations on
transferability.

All warrants to purchase shares of common stock have been called or have
expired.

NOTE 4: INCOME TAXES

Deferred tax assets primarily consist of net operating loss carry forwards.
There are no significant deferred tax liabilities. A valuation allowance has
been established to reduce the deferred tax assets to zero as a result of the
Company's recurring losses. Differences between the cumulative net loss for
financial reporting purposes and that available for income tax purposes arise
primarily as a result of nondeductible expenditures paid by the issuance of
securities and capitalized start up costs.

Net operating loss carry forwards for federal income tax purposes which are
available to offset future taxable income, if any, expire as follows:

<TABLE>
                     <S>                           <C>
                      2009                          $    7,000
                      2010                              31,000
                      2011                           1,091,000
                      2012                           1,627,000
                      2013                           1,399,000
</TABLE>

NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash, receivables, accounts payable,
notes payable and loans from stockholders. Except for notes receivable from
stockholders and loans from stockholders, the Company believes that the fair
value of these financial instruments approximates their carrying amounts based
on current market indicators, such as prevailing market rates. It is not
practicable to estimate the fair value of notes receivable from stockholders and
loans from stockholders, due primarily to the uncertainty surrounding the timing
of cash flows.

NOTE 6: INVESTMENT SERVICES AGREEMENT

On June 13, 1994, the Company entered into a consulting agreement with an
investment company. The Company agreed to pay the investment company a
consulting fee of 5% of all moneys raised on the Company's behalf. As part of
the agreement, the Company also issued 500,000 of restricted common shares to
the owners of the investment company upon signing of the agreement. Pursuant to
the agreement, an additional 500,000 restricted common shares were to be issued
after the sale of 800,000 shares of Company stock. The sale of shares
contemplated did not occur. This agreement expired in December 1994 and the
Company has requested return of the 500,000 shares due to 


                                       12
<PAGE>   13

nonperformance by the investment company. Settlement was reached subsequent to
April 30, 1997 whereby 400,000 shares remained outstanding, but highly
restricted, and 100,000 shares were released for sale.

NOTE 7: COMMITMENTS AND CONTINGENCIES

On July 27, 1995, the Company filed a complaint for Declaratory Judgment and
Injunction with the Superior Court of Washington in Seattle, Washington,
enjoining a former officer of the Company, and shareholder, not to use any
patented or trade secret information covered by his employment agreement. At the
same time, suit was brought against the shareholder in conjunction with
severance details as it relates to his employment contract and method of
compensation. The shareholder filed suit in the same time frame claiming certain
rights to technology and damages in excess of $395,000. A settlement was reached
on December 31, 1998, which is attached as Exhibit 99 of this report.

NOTE 8: CONTINGENT LIABILITY

In July 1998, LEEP Building Systems, (LBS), took possession of an Interfacing
Foam Generation System and in October 1998, LBS took possession of an air
chiller that had been manufactured to the Company's specification for its
proposed manufacturing process. Financing the equipment was arranged that
requires monthly payments of approximately $2,353. The payment responsibility
has been assigned to LBS pending the Company's acquisition of LBS but LEEP
continues to guarantee the payments to the financing company. As of January 5,
1999 the balance due on these contracts was $121,171.

Subsequent to April 30, 1998, finished goods inventory were shipped from the
manufacturing facility in Williamsport PA to Twin Falls, ID, where it is being
used in construction of buildings to demonstrate the uses, features and benefits
of the Company's product.

NOTE 9:  SUBSEQUENT EVENTS

The Company has since paid obligations of the Company amounting to $99,047 with
481,207 shares of restricted rule 144 stock and raised $70,000 in exchange for
425,000 shares of restricted rule 144 stock. In December of 1998 the Company
obtained a $50,000 line of credit which is personally guaranteed by an officer
of the Company. In exchange for that officers accommodation to guarantee the
line of credit the Company issued a three-year option to purchase 100,000 shares
of LEEP stock at $0.25 per share. In December of 1998 the Company settled a
lawsuit with a shareholder as noted in Note 7 above.


                                       13