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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                     FOR FISCAL YEAR ENDED DECEMBER 31, 1999

                          TOLLYCRAFT YACHT CORPORATION
                 (Name of small business issuer in its charter)

          Nevada                     0-21087                    86-0849925
(State or other jurisdiction of    (Commission                (I.R.S. Employer
incorporation or organization)      File No.)                Identification No.)

             8201 Peters Road, Suite 1000, Plantation, Florida 33324
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (253) 884-5750

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

                 Name of each exchange on which registered: NONE

           Securities registered pursuant to Section 12(g) of the Act:
                           COMMON STOCK, NO PAR VALUE
                                (Title of class)

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 ___

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

State issuer's revenues for its most recent fiscal year: $ NONE

The aggregate market value of the voting and non-voting common equity held by
non-affiliates was $43,437,483 computed by reference to the average bid and
asked price of such common equity, as of December 31, 1998, was $6 9/16.

The number of shares outstanding of the issuer's common stock, as of December
31, 1999, was 8,325,976.

DOCUMENTS INCORPORATED BY REFERENCE: None

Transitional Small Business Disclosure Format (check one): Yes ... No .X.

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                           FORWARD-LOOKING STATEMENTS

IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT ON FORM 10-KSB
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21A OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, AND THE COMPANY DESIRES TO TAKE ADVANTAGE OF THE "SAFE
HARBOR" PROVISIONS THEREOF. THEREFORE THE COMPANY IS INCLUDING THIS STATEMENT
FOR THE EXPRESS PURPOSE OF AVAILING ITSELF OF THE PROTECTIONS OF SUCH SAFE
HARBOR WITH RESPECT TO ALL OF SUCH FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS IN THIS REPORT REFLECT THE COMPANY'S CURRENT VIEWS
WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE
DISCUSSED HEREIN, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
HISTORICAL RESULTS OR ANTICIPATED RESULTS. IN THIS REPORT, THE WORDS
"ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE" AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED TO
CONSIDER THE SPECIFIC RISK FACTORS DESCRIBED BELOW AND NOT TO PLACE UNDUE
RELIANCE ON THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, WHICH SPEAK ONLY AS
OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE
THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES THAT MAY
ARISE AFTER THE DATE HEREOF.




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                                     PART I

Item 1.  Description of Business.

General

TOLLYCRAFT YACHT CORPORATION ("Tollycraft" or the "Company") was originally
incorporated in December 1992 in the State of Minnesota as Child Guard
Corporation. The Company changed its name from Child Guard Corporation to
Tollycraft Yacht Corporation concurrent with the merger on January 1, 1996 of
Child Guard Corporation and Tollycraft Acquisition Corporation, a company
registered in the State of Washington. In 1994 Tollycraft Acquisition
Corporation had purchased substantially all of the operating assets of the
original Tollycraft Corporation, a Washington corporation which was operating
under a confirmed Chapter 11 bankruptcy plan of organization. On December 12,
1996 the Company changed its state of registration from Minnesota and is now
duly organized and registered in the State of Nevada.

History and Acquisition

Child Guard Corporation was formed in 1992 as a development-stage company to
develop and market a child monitoring device. The developed product was not
marketed, and in 1995 the Company began merger talks with Tollycraft Acquisition
Corporation.

Tollycraft as a business entity has existed in various forms since 1936. The
original corporation was wholly owned by R.M. Tollefson and was first
incorporated in the State of Washington in 1936 under the name of Central Lumber
Company ("CLC"). CLC manufactured fine furniture and cabinetry. As an adjunct to
this regular line of business, Mr. Tollefson also produced several custom boats
for friends and himself.

As the reputation of his boat-building talents spread, the demand for custom
manufactured boats surpassed the demand for furniture and cabinets. With a
dedicated group of proficient cabinetmakers and his own expert knowledge of
yacht design, a complete line of wooden cruisers was launched. Mr. Tollefson
subsequently transferred the assets of his pleasure boat manufacturing
operations, "Tollycraft", to CLC in 1955. Concurrently, the name of CLC was
changed to Tollycraft Corporation.

For more than fifty years, Mr. Tollefson actively designed and built pleasure
cruisers and yachts to meet the specialized needs of cruising enthusiasts. His
understanding of the demands of extended voyages came from personal experiences
on the water-cruising yachts, which bear his name. Suggestions gathered from
fellow boaters also were incorporated into the many Tollycraft models produced
over the history of the Company.

A chronological synopsis of "Tollycraft" is as follows:

1932 - Mr. Tollefson, while involved in the cabinets business, started building
boats for himself.

1936 - Tollycraft commenced pleasure-boat manufacturing as a sole proprietorship
in Kelso, Washington, after building and selling the first boat which exhibited
the quality he demanded.

1941 - World War II interrupted boat building while Mr. Tollefson served in the
U.S. Coast Guard.

1946 - Central Lumber Company was incorporated in the State of Washington.

1952 - A fire destroyed Central Lumber Company's plant and equipment; after
that, the company narrowed the scope of its business activities to boat
manufacturing.

1955 - The assets of the sole proprietorship boat manufacturing operations were
transferred to Central Lumber Company, Mr. Tollefson's wholly owned company;
concurrently, the name was changed to Tollycraft Corporation.

1958 - Tollycraft built a plant in the Kelso Industrial Park on 14 acres of land
and commenced operations in the new 65,000 square foot building in 1959.

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1967 - Tollycraft Yachts began manufacturing fiberglass hulls starting with the
conversion of the 24', 28', 30', and 34' wooden hull designs into fiberglass.

1970 - The last wooden hull boat was built. The very successful 34' Sedan was
the first "keel up" fiberglass design, which sold 194 units in 11 years, and set
the Tollycraft design trend for the 1970's.

1987 - Mr. Tollefson retired from Tollycraft and took a relaxed role in the
marine industry as Chairman Emeritus of Tollycraft. Tollycraft Corporation, a
then public company, was taken private and merged through a leveraged buyout
into Olympic Equities, Inc. Thereafter, Olympic Equities, Inc. changed its name
to Tollycraft Yachts Corporation. As with many leveraged buyouts of the 1980's,
the transaction was ill fated and threatened the long-term financial stability
of the Company.

1989 - A group of investors purchased Tollycraft and provided capital to reduce
debt and increase working capital for continued operations. However, the
economic downturn and the passage of the 10 percent luxury tax caused
Tollycraft, as well as every other luxury boat builder in the United States, to
sustain substantial operating losses. The Company subsequently filed for
protection under Chapter 11 of the U.S. Bankruptcy Code on November 5,1993.

1994 - A group of investors formed Tollycraft Acquisition Corporation and,
effective June 6, 1994, purchased substantially all of the operating assets of
the old company.

1996 - January 31, Tollycraft Acquisition Corporation was acquired, in a merger
transaction, by Child Guard Corporation which concurrently changed its name to
Tollycraft Yacht Corporation.

1996 - November, Kramfors Unlimited/Peter Hobbs obtained voting control of
Tollycraft in order to effectively conduct a turnaround for the Company.

1997 - Tollycraft management closes the Washington manufacturing plant and
begins planning to relocate Corporate Offices to Florida to either outsource its
production domestically or overseas to Taiwan and/or to relocate production
facilities to a marine-oriented industrial complex in Mexico.

1998 - Tollycraft's Board of Directors resolved to convert all debt to equity
through issuance of preferred shares of capital stock.

Tollycraft enters into joint venture with Yachts of America for production of
Tollycraft Yachts in Progresso, Yucatan, Mexico.

Business

Tollycraft Yacht Corporation is a builder of high-quality cruising motor yachts.
The yachts are luxuriously equipped and built with the highest structural
integrity to ensure safe, long-range cruising. The current line of yachts is as
follows:

48'  Cockpit Motor Yacht
57'  Pilothouse Walkaround Motor Yacht
57'  Pilothouse Widebody Motor Yacht
65'  Pilothouse Motor Yacht

Current plans for new products include the following:

48' Convertible Motor Yacht
48' Pilothouse Motor Yacht
52' Pilothouse Motor Yacht
54' Convertible Motor Yacht
76' - 82' Pilothouse Motor Yacht

Long-term plans for new products include the following:

30' - 44' 4 models of Motor Yachts
30' - 44' 4 models of Convertible Motor Yachts
92' - 150' Semi-custom and Custom Motor Yacht

Engineering design drawings and plans are completed for the 48' Pilothouse. A
hull mold has been built.



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Design drawings and plans for the 52', 54', and 76' - 82' models have been
completed. The hull form for each model has also been tank tested.

All Tollycraft yachts have a 15-year transferable hull warranty, the longest and
most comprehensive warranty in the industry. To date, there has never been a
manufacturing-related hull failure. Tollycraft Yachts are designed for owner
convenience and overall functionality. The electrical and mechanical systems are
laid out and installed for ease of use and maintenance. Tollycraft incorporates
intelligent engineering, manufacturing integrity, quality craftsmanship, and the
patented "Quadralift Hull" construction into all its vessels, thus ensuring to
Tollycraft customers a truly seaworthy yacht.

Intelligent Engineering

Recent advancements have been made in controls, steering engines and gears
designed for use in large motoryachts. While Tollycraft exercises due caution in
adopting new systems until they are thoroughly tested and proven, the most
reliable of these are offered as standard or optional equipment.

State-of-the-art components, such as MMC electronic controls, custom AC/ DC
electrical, central chilled water heating and air conditioning, vacuum bagged
divinycell cored hull and deck structures, fully integrated electrical panels
and switches, Hynautic hydraulic steering, fuel distribution manifolds, and oil
lubricated shaft stuffing boxes are but a few of the advanced systems utilized
in Tollycraft yachts.

Modern systems are of little benefit, however, if they are improperly integrated
into the complete yacht. That is why Tollycraft engineers are careful to match
technology with function.

Critical components, such as engines and generator sets (gensets) are matched to
the specific needs of each vessel and each owner. Engine selections include MAN,
Caterpillar, Detroit Diesel and MTU products. Either ONAN or Northern Lights
manufacture Gensets.

All fiberglass lay-up schedules are verified by an outside consulting engineer
and tested by an independent laboratory. All lamination takes place in a
controlled environment. Temperature and humidity conditions are continuously
monitored and recorded to ensure materials are applied within the manufacturer's
specifications. Core materials are vacuum bagged to the laminate to ensure
proper bonding and structural integrity.

Wiring systems have been redesigned and simplified. Wire harnesses have been
developed which meet or exceed all industry standards. Plug-type connectors,
designed to withstand the marine environment, have been incorporated to ease
installation and minimize owner maintenance. All Tollycraft wire harnesses are
color coded in accordance with NMMA and ABYC specifications.

New products are ergonomically designed. Line of sight, ease of passage and
mobility restriction are just a few of the human factors Tollycraft's designers
consider on every new project. Primary consideration is given to safety and
functionality. Tollycraft's engineering department is committed to product
excellence. Every aspect of the final product must function as well as it looks.

Engineering staff and production personnel scrutinize every phase of the
production process. New techniques and processes are developed and implemented
to achieve cost savings, quality and product integrity. Cooperative efforts
maximize the efficiency of both departments.

Product standardization and documentation ensure Tollycraft's ability to
purchase and manufacture accurately and efficiently. Whenever possible, common
parts and processes are employed throughout the various models to minimize
training and maximize productivity.

New Tollycraft yachts feature an impressive list of standard equipment. In
addition, many options are available for the customer to choose from. If owners
wish to further personalize their yacht, Tollycraft's engineering department
will create custom designs upon request. Custom options are not inexpensive, but
they afford the owner an opportunity to create a truly unique and personal yacht
while maintaining the advantages and savings of a standardized production
process.


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Manufacturing Integrity

New ideas and designs are worth little if they do not stand up to the structural
mechanical and electrical integrity that is the foundation for Tollycraft
cruising yachts' reputation. Tollycraft's manufacturing integrity gives the
owner justifiable confidence in his vessel. Over 60 years of building cruising
yachts has taught the Company that it takes more than words to instill
confidence in a skipper who invests his money and the safety of his crew in a
yacht.

Tollycraft's are known as seaworthy yachts. Everyday cruising takes the yachts
into waters that test a hull rigorously, and it takes more than a tough hull to
survive rough sea conditions. Accordingly, every stringer is encapsulated into
the hull, every bulkhead is fiberglassed to the hull, every wood component is
glued and reinforced with screws, and wiring and plumbing are fastened every few
inches. Any component, whether purchased or manufactured, is proven to withstand
the rigors of the marine environment.

Dry rot, once the bane of wooden boats, still attacks modern yachts if
precautions are not taken. For this reason, Tollycraft uses premium
straight-grained mahogany for deck, cabinet and bulkhead framing. This
rot-resistant wood is then encapsulated with fiberglass wherever it might be
exposed to bilge water.

Engines, generators and other mechanical equipment are securely installed, with
special strengthening given to areas of extra stress such as rudder posts and
shaft logs. The entire mechanical structure is electronically bonded with a
heavy copper strap that employs a shaft sweep to make positive electrical
contact to external metal parts.

For strength and waterproofing, the hull deck and cabin structures are bonded
and screwed through overlapping fiberglass. Specially designed window frames
overlap their cabin side openings, which eliminates the possibility of leakage.

Decks are cored with closed-cell foam for stiffening and to eliminate any
feeling of resilience underfoot. Even shower stalls are laid up of heavy
fiberglass so they don't creak or bend when used by a normal sized adult.

Integrity is much more than a slogan at Tollycraft. It is the foundation of our
customers' confidence in our vessels.

The Quadralift Hull

Editors of boating magazines have been exposed to every claim about hull design
that the mind can dream up. Naturally they are skeptical when reviewing the sea
trials on any new hull. However, almost without exception, editors who have
tested Tollycraft's have reported that the Quadralift hull works as claimed.

Naval Architect Ed Monk Jr., who designed the original "Quadralift" hull for the
Tollycraft 61' Motor Yacht, won't call his design revolutionary, but rather the
"latest in hull technology ... the culmination of everything we've learned about
hulls over the years."

While Quadralift varies from model to model, its cupped dual chine separates
this hull from others. With the waterline midway between the two chines, the
Quadralift acts as an effective spray knocker, throwing spray horizontally away
from the hull. Deflecting the spray not only delivers a dry ride, but increases
efficiency by reducing the amount of wetted surface (drag) along the hull.

The design of the Quadralift provides extra buoyancy at the bow, permitting a
finer entry and reducing the tendency to broach in a following sea. In a chop,
or at anchor, the Quadralift has a roll-dampening effect, and with this extra
stability comes extra comfort. But the most dramatic demonstration of this
remarkable hull comes when you ease the throttles forward and feel your
Tollycraft rise effortlessly onto plane and handle smoothly at any speed. A
nearly full-length keel aids the tracking through turns and gives you excellent
control during slow-speed maneuvering.


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Product Line Enhancements

Tollycraft management believes that improvement is a process, not a project, and
should be accomplished on an incremental basis. Accordingly, key tactics
supporting this strategy focus on developing and maintaining a process that
empowers Tollycraft employees, contractors, vendors, dealers and customers to
provide input for product improvement on a continuous basis.

The Company is planning to expand its existing product line with new
complementary products. Existing models have been redesigned and additional
reengineering for modular assembly will improve the quality of finished yachts.
Exterior and interior styling is an ongoing process to provide Tollycraft
customers with up-to-date design enhancements. An additional benefit will be
lower manufacturing costs.

The most significant enhancement by the Company to its product line will be the
implementation of a relatively new fiberglass laminating technique named for its
developers. SCRIMP (Seeman Composites Resin Infusion Molding Process) is a
procedure which eliminates 90% of harmful V.O.C. emissions while dramatically
lowering labor and material costs. This process allows the skins and structural
stiffeners of the yacht to be infused in a one-step process. This method of
construction replaces the traditional labor-intensive, multi-step, multi-layer
laminating process previously used by the Company and still used by the vast
majority of yacht builders within the industry. The process allows dry lay-up of
materials resulting in a cleaner, healthier work environment. Exposure to wet
resins and accompanying harmful emissions are minimized. Direct labor costs are
reduced significantly. Production cost savings are also realized with reduced
expenses for costly protective clothing and expensive air handling and emission
filtration systems. Testing by the U.S. Navy using standard ASTM tests has shown
that the use of SCRIMP-based manufacturing methods has virtually eliminated
detectable voids in finished laminates. This level of quality and structural
integrity are inherently difficult to obtain using older multi-step layer
laminating techniques.

The Company through its joint venture partner, Yachts of America, will be
utilizing a 5 AXIS high speed CNC router system. This machine would allow the
production of plugs and molds in 60 days rather than the typical 9- to 15-month
schedule required when building molds and tooling by hand. The machine will
process digital information generated by the Company's CAD system and that of
outside naval architects and cut a mold or plug with little labor costs
incurred. The Company plans on producing molds and plugs for their own use as a
priority. Building molds could also generate additional revenue, tooling and
completed parts for other companies and custom yacht builders.

The Company plans to lead the industry in the production of yachts, molds and
tooling utilizing these methods.

Industry Analysis and Competition

The U.S. market for pleasure boats has undergone many changes over the last
decade. In 1986, 1987 and 1988 sales of pleasure boats skyrocketed by 18.7%,
28.5%, and 14.9%, respectively. Consumer confidence was high, and U.S. exports
of pleasure boats were booming. In total, manufacturers' sales of pleasure boats
expanded by over 75% in those three years.

Manufacturers' sales of inboard/outdrive boats finished out a six-year growth
surge with total growth of approximately 160% between 1984 and 1988. Outboard
and inboard motorboats also increased, with total manufacturers' sales growth of
87.9% and 96.3%, respectively, during the same period. The only pleasure boats
that did not benefit from this prosperity were sailboats, a market that
continued to suffer from declining demand.

The last cyclical downturn in the economy (the recession of 1989-1991) hit the
industry hard, as a number of factors combined to set the stage for a severe
slump in manufacturers' sales. Among the factors significantly impacting the
market for pleasure boats in the U.S. were the collapse of the financing
structure of the industry, savings and loan crisis, changing consumer confidence
in the economy, and fluctuating U.S. pleasure boat exports.

Making matters worse for pleasure boat manufacturers, Congress passed a 10%
luxury tax in 1991 on all pleasure boats costing more than $100,000. Although
this tax was repealed in 1993, the damage was already done.


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In 1992 the positive effects of the recovering U. S. economy reached the
pleasure boat industry. Consumer confidence in the economy was starting on its
upward climb towards a significant height in 1993, and banks began to loosen the
credit restraints on boat loans as interest rates continued to decline.
Consumers began to buy new boats again. Disposable income was up, the luxury tax
was repealed, and consumers had a rosier outlook on the economy.

The market for pleasure boats embarked on its recovery as manufacturers' sales
increased by 9.8% to $3.1 billion during 1992. Two more good years followed in
1993 and 1994, when sales rose by 11.8% and 9.4%, respectively. In 1995, sales
in the pleasure boat industry grew faster than they had since 1988, increasing
by 12.1% to 4.3 billion dollars. Business Trend Analysts have estimated annual
growth rates in the value of manufacturers sales in both 1996 and 1997 at over
4.4 billion dollars.

Overall growth in manufacturers' sales of pleasure boats over the next ten years
is projected at 6.9% annually. Business Trend Analysts expects the total
manufacturers' market for pleasure boats to climb to just above $7.746 billion
by 2006. The following table shows the annual sales of such boats:

U.S. MANUFACTURERS' SALES OF PLEASURE BOATS ($ Millions)

Year          Value
----          -----
1986         $3,406
1987         $4,378
1988         $5,029
1989         $4,775
1990         $3,894
1991         $2,840
1992         $3,118
1993         $3,487
1994         $3,813
1995         $4,274
1996         $4,439
1997 E       $4,677
1998 E       $4,905
2006 P       $7,746

E - Estimate
P - Projection

Source: The U.S. Market for Pleasure Boats, @ Business Trend Analysts Inc., 1998

Primary Competitors

Tollycraft's primary competition can be divided into two categories, Domestic
and Foreign

Domestic: Tollycraft's main competition is from Hatteras, Viking, and, to a
lesser extent, Bertram, Sea Ray, Ocean and Carver. Hatteras is the perceived
market leader on the East Coast (including the Great Lakes and Gulf of Mexico)
and its dealer network is very strong. They have a full line of yachts both in
the cruiser and yacht fisher segments. Hatteras's yachts are priced anywhere
from 10 to 20 percent higher than Tollycraft on the East Coast.

Foreign: Tollycraft has competition from the Taiwanese manufactured Ocean
Alexander, and, to a lesser extent, various Canadian manufacturers. These
competitors have built a reputation for emulating Tollycraft's products using
extremely cheap labor and trying to under price and undercut Tollycraft's market
on the West Coast. The offshore competitors basically sell a lower quality
product for a lower price. In addition, Canadian competitors reappear with the
cyclical swings of the Canadian dollar. These include Sunship by Westbay and
Queenship. Tollycraft competes well against these manufacturers.

The Company believes that foreign competition is the greatest challenge to
increasing current market share. From 1991 to 1997, imports of pleasure boats
into the United States have increased from $212,496,000 to $1,177,003,000,
respectively. Foreign companies all have significantly lower labor rates and
overall manufacturing costs. Some receive financial support from governments.
Although a majority of the products offered by foreign competitors are
substandard, some manufacturers are increasing their quality every year.


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Competitive Advantage

Tollycraft's primary competitive advantage results from the high quality of its
product. The Company has never had a manufacturing-related hull failure, and
customers have shown themselves willing to pay a premium for this quality.
Tollycraft's products have historically had a high resale value and have proven
to be a good investment for customers.

Tollycraft Yacht Resale Values

1988 Model Year - Resale Value as of March 1998

Model                             Resale Price*      1988 Price        Percent
------------------------------   ---------------    -------------    -----------
30' Sport Cruiser                     $65,000          96,500            67%
34' Sport Sedan                       117,550         170,390            69%
34' Sundeck Cruiser                   131,600         171,290            77%
40' Sundeck Motor Yacht               159,700         175,530            91%
40' Sport Sedan                       203,700         259,330            79%
44' Cockpit Motor Yacht               230,150         268,570            86%
53' Motor YachT                       454,550         563,406            81%
57' Cockpit Motor Yacht               536,800         636,206            84%
61' Pilothouse Motor Yacht            669,150         741,410            90%

Average resale value as a percent of original sales price after 10 years:  80%.

* (NADA Average)
  Source: NADA Appraisal Guide

Tollycraft's Prospects within the Industry

Sales of large luxury motor yachts have rebounded significantly since the repeal
of the luxury tax. Tollycraft's plan is to position itself for this continued
growth. Changing U.S. demographics will also help expand the customer base for
Tollycraft yachts (see the Tollycraft Customer Profile section that follows).
The Company expects to do more than maintain its share of the growing market.

An article in Powerboat reports, "The Consumer Resource for the Powercraft Owner
reported in its feature article that Tollycraft is tops in owner satisfaction:
Tollycraft scored an A+ in overall satisfaction and a 90 percent would buy again
index... The highest marks so far in Powerboat Reports Ownership Survey... Not
one Tollycraft owner was dissatisfied enough to say he wouldn't consider buying
another...This is unmatched in other surveys. Tollycraft managed to show itself
a winner in both quality and value categories. Overall satisfaction scored an
impressive A+, easily outranking all other boats in Powerboat Reports' survey."

Customer Profile

Tollycraft's customers typically have an annual income of $150,000 or higher,
with a net worth of $500,000 or more. Based on these figures, the average
potential Tollycraft customer, nationwide, has the following profile (Mendelsohn
Media Research, Inc., New York, 1991 annual survey of affluent households.):

Age: 48.4 years old
Number of homes owned: 1.8
Value of principal residence: $363,200
Value of other real estate owned: $223,000

In addition, 45 percent have assets in their business or profession, with the
mean value of their equity being $312,303. Only 12 percent of the homeowners
have a home mortgage. (U.S. Department of Commerce Survey of Income and Program
Participation, households with net worth over $500,000)

Changing U.S. demographics mean that the large "baby boom" generation is
entering the average age of Tollycraft's customers resulting in a greater number
of qualified, potential customers in the coming decade. Resident population in
the 35 to 54 year old age groups has been growing at a very strong rate. Since
1994 it has been the largest age category in the country. In 1980 there were
48.5 million people between the ages of 35 and 54 accounting for 21.4% of the
population. By 1998 the number is estimated to grow to 78.9 million people
representing 29.2% of the U.S. population. In the year 2000, this segment will
top 81.7 million people.



                                       7
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Distribution Network

Tollycraft is currently represented by 5 dealers in 10 locations: Seattle,
Portland, California, Michigan, and Florida (6). Representation is being
targeted in Toronto, San Francisco, Cape Cod, Chicago, New York, and Annapolis.
Once the domestic dealer network is established, the Company will also seek
international representation for its products.

Intellectual Property and Royalties

The Company has the following trademarks:
"TOLLYCRAFT" (Stylized), U. S. Trademark Registration # 855,456
"QUADRALIFT" and Design, U. S. Trademark Registration # 1,514,520
"T and Design", U. S. Trademark Registration # 855,455

The Company has the following patent:
Yacht, Serial No. 444,604, Filing Date: April 2, 1991, Patent No. D315, 892;
Expires: April 2, 2005. The loss of said patent, at the time of its expiration,
would not have a significant impact on the business of the Company.


Item 2.  Description of Property.

Tollycraft Yacht Corporation has signed a Joint Venture Agreement with Yachts of
Americas, a Mexican corporation to produce the yachts in a new 100,000
square-foot facility presently being designed for Tollycraft. The building will
be situated on 8 acres located in a new marine business park. The site has 240
feet of waterfront and will feature wharfs as well as a rail system for the
loading and hauling of vessels up to 150'.

Prior to August 1997, the Company leased manufacturing and office space in an
industrial park in Kelso, Washington. The plant facilities included two
buildings totaling 180,000 square feet. In September the Company shipped out all
finished goods and ceased domestic production. The Company returned possession
of the Washington facilities to the property owner.


Item 3.  Legal Proceedings.

D & C Lemmons v. Tollycraft
Cowlitz County, Washington
Stipulated Judgement in the amount of $291,048.00
Tollycraft believes it has a substantial offsetting claim against D & C Lemmons
for unlawfully conducting a landlord's lien foreclosure. Based upon the law
regarding landlord liens, the Company has been advised by counsel that it has a
strong chance of success in its claim against D&C Lemmons.

Larry and Vicki Castello v. Searock, Inc., d/b/a The Allied Marine Group,
Tollycraft Yachts, and D.R. Cooley, individually.
17th Judicial Circuit Court, Broward County, Florida
Original File Date: October 11, 1996
Claim for treble damages in excess of $2,700,000 plus attorney fees and costs
for failure to deliver a 57-foot yacht as scheduled. Answers by all Defendants
have been filed and motions to dismiss have been filed and heard. No decision
has been rendered on the Defendants Motion to Dismiss.

Dennis Pursley v. Tollycraft Yacht Corporation and 35 others
San Diego Superior Court, San Diego County, California
Claim for intentional misrepresentation, sale of security not qualified for
sale, and fraudulent transfer. While Mr. Pursley is a shareholder and a note
holder in Tollycraft, he was never contacted by any of the 35 defendants to
invest in the Company. Mr. Pursley's funds all came via the solicitation of his
own registered stockbroker who was with a licensed brokerage firm. It is
interesting to note that neither the broker nor the firm has been named as
defendants in the suit. The Company believes the suit has no merit and will
defend itself vigorously.


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

No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year.


                                       8
<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

The Company's common stock has been traded in the over-the-counter market since
1993. It is currently traded in the over-the-counter market and is quoted on the
OTC Electronic Bulletin Board (symbol "TLLR") maintained by NASDAQ. The market
for TLLR's common stock has often been sporadic and limited.

The following table sets forth the high and low bid prices for the Company's
common stock as reported by NASDAQ during the past two years and current year.
The prices reflect interdealer quotations, without retail markup, markdown or
commissions and may not represent actual transactions.

On December 9, 1996, the Company's security holders approved a 25-for-1 reverse
stock split. The amounts in the table set forth below have been restated for
comparative purposes to reflect the associated change in value caused by the
reverse split.

                                    Low              High
                                    Bid              Bid

1998
March 31                            5 1/4            7 3/4
June 30                             6                6 5/8
September 30                        2 49/50          4 5/16
December 31                         6 1/8            7

1999
March 31
June 30
September 30
December 31

No dividends have been declared with respect to the Company's common shares
since inception. The Company is not likely to pay any dividends in the
foreseeable future. The Company intends to reinvest any earnings in its
operations.

During the year ended December 31, 1997, the Company sold 22,120 Units in a
private offering to accredited investors in accordance with Rule 505 promulgated
under the Securities Act. Each Unit was priced at $5.00 with selling
agent/finders fees of $.50 deducted therefrom. Each Unit consists of one common
share, one "C" warrant exercisable until March 5, 1998 for one common share at
$6.00 and one "D" warrant exercisable until March 5, 1999 for one common share
at $8.00. The proceeds were used for general working capital.

On June 29, 1998, the Board of Directors of Tollycraft Yacht Corporation
resolved to convert all debt, secured and unsecured, to equity through the
issuance of capital stock.

The Company will issue up to 1,500,000 shares of its authorized 5,000,000
preferred shares of its capital stock proportionately to all debt holders of
record as of June 29, 1998. Each preferred share will carry a series of warrants
convertible to one share of the Company's common stock as follows:

"A" warrants exercisable at $2.25 after 12 months,
"B" warrants exercisable at $2.00 after 24 months,
"C" warrants exercisable at $1.25 after 36 months.


                                       9
<PAGE>

Item 6. Management's Discussion and Analysis or Plan of Operation.

The following narration outlines a program for Tollycraft Yacht Corporation to
continue as a builder of luxury motor yachts and also to be an attractive
investment for the capital markets. It contains certain forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995 with
respect to the financial condition, results of operations and business of the
Company. These forward-looking statements involve certain risks and
uncertainties, and, as such, may involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements, express or implied, by such forward-looking
statements. Such forward-looking statements speak only as of the date of this
document. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.

Since August of 1997 and throughout 1999, the Company continued its efforts in
relocating their manufacturing facilities to Merida, Yucatan, Mexico, and its
corporate administrative and sales offices to Plantation, Florida. The Company
was not involved with manufacturing activities. For a more complete discussion
of the Company's relocation plans, see the Sections entitled "Relocation of
Corporate Headquarters" and "Relocation of Manufacturing and Production".

The Company has also redesigned existing yachts, added complementary models to
the product line and developed manufacturing systems and procedures to greatly
reduce total costs of yacht construction.

Improvements are outlined as follows:

         |X|      Consolidated existing yacht models so the Company produces
                  yachts that have an acceptable profit margin.
         |X|      Designed and tested new yacht models that enhance the existing
                  product line and have a projected profit margin of at least
                  20%.
         |X|      Developed production sequencing, staging, tasking, and
                  man-loading systems that management believes will greatly
                  increase production efficiency and overall quality of the
                  yachts while reducing direct costs.
         |X|      Developed a management information system that will track
                  labor and material costs for each yacht under construction and
                  produce internal reports for proper control of production
                  costs.
         |X|      Identified key personnel positions with necessary experience
                  to implement and manage improved production methods.
         |X|      Identified subcontractors who are capable of supplying major
                  pre-manufactured components. Component manufacturing and
                  modular construction techniques will greatly reduce direct
                  labor costs and overall costs of construction.
         |X|      Prepared to implement environmentally safe SCRIMP laminating
                  process for additional labor and material cost savings.
         |X|      Developed plan through Yachts of the Americas, its joint
                  venture partner in Mexico, to utilize CNC router equipment to
                  dramatically speed up design and construction of molds and
                  tooling at significantly lower costs.
         |X|      Redesigned and upgraded interior fit and finish of the yachts
                  and modernized mechanical and electrical systems in all
                  models.
         |X|      Prior to plant shutdown, generated a backlog of $30,000,000 in
                  orders for new yachts at prices up to 40% higher than ever
                  before charged in the history of the Company. These prices
                  have been realized while only increasing the direct cost of
                  the yachts by a modest 10%.

The internal and external costs of developing these improvements to Tollycraft's
product line and manufacturing processes have been expensed when incurred in
prior financial periods.


                                       10
<PAGE>

Relocation of Corporate Headquarters to Florida

In recent years, 80% of the larger yachts produced by the Company have been sold
to clients located on the East Coast. The majority of these yachts were
delivered into Florida. Florida is well known throughout the world as "The Yacht
Capital of the World".

Tollycraft Yacht Corporation has announced that the Company's corporate
headquarters will be relocated from southwest Washington to southern Florida.
This southern Florida location will give Tollycraft a much needed presence where
high demand exists for yachts of Tollycraft quality. An office in this area will
also give the Company access to some of the most talented marketing,
engineering, design, and administrative employees in the industry.

Relocation of Manufacturing and Production to Mexico

In the past, the Company's manufacturing employees have been organized under a
union contract. Even with concessions negotiated in the most recent labor
contract, research has determined that existing contract rates are still among
the highest in the industry. With thousands of man-hours required to produce
each vessel, Tollycraft's yachts would become some of the most expensive yachts
to produce in their class. With retail prices increased to cover these costs it
became evident that Tollycraft must reduce costs or price itself out of
existence.

The most significant costs savings available to Tollycraft Yacht Corporation
will result from the Company's planned relocation of its manufacturing
facilities from southwest Washington to a marine-oriented industrial complex in
Progresso, Mexico. Tollycraft has been exploring several international locations
and has selected Progresso, Mexico over other sites considered for several
reasons:

         1.       Location on the Gulf of Mexico and proximity to Florida
         2.       The availability of an adequately trained work force
         3.       The area work force has a labor rate equivalent of $1.051 to
                  $2.50 US dollars per hour
         4.       Governmental and investor support to develop facilities to
                  Tollycraft specifications.
         5.       An approximate 50% reduction in the burdened costs of
                  comparable facilities in the U.S

Joint Venture

Once the decision was made to relocate the Company to Mexico under NAFTA,
Tollycraft then needed to determine whether a joint venture with an existing
boat builder was going to be a viable option. Unfortunately, after almost 6
months, it was determined that either the candidates were too weak financially
or lacked the sophistication to be able to go forward with such a project.
Instead a group of Mexican businessmen put together a company called Yachts of
the Americas, S.A. de C.V. and with Tollycraft's expertise and name have
acquired land and are building a state-of-the-art manufacturing facility to
begin and attract production from not just Tollycraft, but other USA yacht
manufacturers.

Tollycraft Yacht Corporation has signed a Joint Venture Agreement with "Yachts
of the Americas" a Mexican corporation to produce its vessels in Progreso,
Mexico. The vessels will be produced in a new 100,000 square-foot facility
presently being designed for Tollycraft. The building will be situated on 8
acres located in a new marine business park that is presently being developed by
the Governor of the State of Yucatan. The property comes with 240 feet of
waterfront that will feature an all-concrete wharf as well as a rail system for
the launching and haul out of vessels up to 150' in length. The joint venture
partners will provide the following:

         |X|      Construct manufacturing space in a new marine-oriented
                  industrial complex to Tollycraft specifications.
         |X|      Locate and prescreen the local work force to fill required
                  hourly and salaried production positions with adequately
                  trained workers.
         |X|      Fund manufacturing labor costs and provide payroll and other
                  administrative functions relating to the local work force as
                  well as obtain all necessary government permits.



                                       11
<PAGE>

Tollycraft Yacht Corporation projects a fully burdened labor rate of $4.00 to
$8.00 US per hour. Fully burdened labor rates include hourly and salaried
employees in the Mexico facilities, manufacturing facilities costs, electricity
and utilities, Mexico MRO expenses, communication, and travel expenses. This
compares to Tollycraft's previous fully burdened labor rate at its closed U.S.
facility of approximately $27.00 per labor hour. It is anticipated that the
Mexican joint venture will fund all of the direct labor and costs of the
production buildings in Mexico.

As part of the joint venture agreement, 2,000,000 shares of Tollycraft Yacht
Corporation common stock were issued to Yachts of America. Yachts of America has
credited the Company $2,000,000 in prepaid manufacturing costs.

The Company plans to build 39' to 125' yachts in Mexico, with the yachts being
built to the same standards of quality control as the products previously
manufactured by Tollycraft. Materials used in construction would remain the same
quality, with a majority of the materials being shipped from the United States.
Major savings would result from lower direct labor costs as well as cost
reductions in general and administrative expenses. In addition, this will allow
the Company to broaden its product line and again offer smaller Tollycraft
vessels that had previously been discontinued because domestic manufacturing
costs became prohibitive.

While the electronic, auto, appliance and textile industries have been part of
NAFTA and have had plants for years in Mexico this is a first for a premier
yacht builder. Tollycraft vessels have long enjoyed an excellent reputation for
quality. This move will more than insure that it will enjoy a reputation as an
excellent value as well.

Results of Operations

During the year ended December 31, 1999, the Company incurred a net loss of
$(27,027) which consisted primarily of general and aministrative expenses. For
the year ended December 31, 1998, the net loss was $(1,146,871). The Company
also incurred a negative cash flow from operations of $(50) for the year ended
December 31, 1999. The negative cash flow from operations was $(2,054) for the
year ended December 31, 1998.

Management has emphasized the following areas to improve the operations of the
Company:

         |X|      Relocate manufacturing operations to the Yucatan Peninsula
                  area of Mexico which will result in a projected 80% reduction
                  in labor costs.
         |X|      Relocate administrative offices to southern Florida.
         |X|      Increase basic pricing on each yacht to improve gross margins
                  and reflect the improved product being manufactured.
         |X|      Redefine manufacturing processes to produce yachts more
                  efficiently and with greater profit margins. |X| Select new
                  materials to continue upgrading the quality of each yacht
                  while emphasizing production efficiency.
         |X|      Implement a labor tracking information system to monitor and
                  reduce direct labor costs.
         |X|      Design a new line of yachts to augment the current models
                  offered. The new yachts will utilize updated manufacturing
                  techniques and have greater profit margins.
         |X|      Develop relationships with dealers that are able to provide
                  their own inventory financing.
         |X|      Increase the dealer network to increase sales volume and reach
                  economies of scale.
         |X|      Utilize CNC equipment to lower costs and expedite
                  manufacturing of molds and tooling and production of finished
                  yachts.
         |X|      Implements new SCRIMP laminating process to reduce labor and
                  material production costs.

Tollycraft Yacht Corporation, in its various business forms, has been
manufacturing high-quality watercraft for over 64 years. In that period of time,
the Company has produced some of the finest motor yachts available. However,
historically unprofitable operations and the circumstances surrounding the
Company's manufacturing facilities and landlord require Tollycraft management to
make significant changes to the way it does business.


                                       12
<PAGE>

Financial Condition

The management of Tollycraft is continuing efforts to raise funds in order to
proceed with this business plan. Alternatives being considered to improve the
Company's financial position include converting current debt to equity through
the issuance of preferred shares and the sale of common shares to raise working
capital.

In June 1998, the Company offered each debtor one share of preferred stock for
each $10 of debt they were owed. Notes payable, accounts payable, accrued
liabilities, and long-term debtors were offered this conversion. The offering
required a majority of the debtors to agree to the terms of the conversion. In
July 1998, a majority of the debtors agreed to the offering and, accordingly,
all of the then outstanding debt was converted to preferred stock. The Company
is in the process of authorizing and issuing the preferred stock.

In 1998, the Company converted substantially all of its liabilities to preferred
stock. As of December 31, 1999, the Company's current assets equaled $400,512.
In 1999, the Company's internally generated cash flow has not been sufficient to
finance its operations.

As part of the "turnaround process" it had always been recognized that after the
final decision was made as to the location of the facility, the next crucial
step had to be the cleanup of the balance sheet and the financial obligations.
The Company had a stockholders' deficit in 1998 of $16,444,150.00. With the
achievement of a plan to reduce costs and the ability to produce boats at a
profitable level, the next step was to be able to attract working capital
preferably in the form of equity. There were only a limited number of options
available. With no net worth and a staggering debt, the options were either to
file for Chapter 11 or, because of the fact that Tollycraft is a publicly held
company, a plan be put into effect that would convert the debt to equity. It was
decided that even under a Chapter 11 filing a plan would include a debt
conversion to equity. As a consequence, management decided to proceed with the
conversion on its own. Because Tollycraft is a publicly held company, it was and
is not the same as if the conversion were to take place with a privately held
company. The shares being offered were in the form of Units that carry a
preferred share with a value of $10.00 and additional options for the holder of
the Units or shares on specific dates into the future. These Units/shares will
be registered and it is the intent of the Company to have them trading as soon
as possible. While a creditor may want liquidity the Units/shares were set up to
be an attractive investment for investors. The holders of the shares on dates
12, 24 and 36 months from the original issue date are entitled to acquire common
shares (see below). This is a way to attract long-term investors so that
liquidity, if so desired, could be gained by the creditors within a short period
of time. Over this time, frame additional value will be added to the Company as
it begins production at profitable levels. Trading of the Units/preferred shares
would have minimal impact on the common stock. With the majority of the
creditors representing the largest amount of the debt, the Board of Directors,
on June 29th, 1998, resolved that all debt, secured and unsecured, convert to
equity through the issuance of capital stock.

Despite the Company's past difficulties in making timely payments to its
creditors, the Company does not expect any difficulties in obtaining raw
materials once production returns to a regular level.

There were no significant capital expenditures for equipment during the years
ended December 31, 1999 and 1998.

In order to begin production at regular capacity, the Company continues to be in
need of additional capital to build production tooling, finance inventory and
provide working capital. The Company is dependent on external sources of
liquidity until projected levels of production and improvements in direct costs
and production efficiencies are achieved which will return the Company to
profitability and a positive cash flow. A material commitment for capital
expenditures and working capital is necessary to meet the projected sales and
production goals. The expected source for a majority of the funds is from
financing provided by joint venture production partners for Mexico manufacturing
activities. There can be no assurance that the Company can achieve the
anticipated aforementioned improvements in operations on acceptable terms.


                                       13
<PAGE>

Year 2000 Compliance

The Company is aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The "Year 2000" problem
is concerned with whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Year 2000 problem is pervasive and complex as the computer
operation of virtually every company will be affected in some way.

The Company, like most owners of computer software, will be required to modify
significant potions of its software so that it will function properly in the
Year 2000. Preliminary estimates of the total costs to be incurred by the
Company to resolve this problem range from $5,000 to $10,000. Maintenance or
modification costs will be expensed as incurred, while the costs of new software
will be capitalized and amortized over the software's useful life.

Since the Company mainly uses third party "off-the-shelf" software, it does not
anticipate a problem in resolving the Year 2000 problem in a timely manner. The
Company is currently taking steps to ensure that its computer systems and
services will continue to operate on and after January 1, 2000. However, there
can be no assurance that Year 2000 problems will not occur with respect to the
Company's computer systems. Furthermore, the Year 2000 problem may impact other
entities with which the Company transacts business, and the Company cannot
predict the effect of the Year 2000 problem on such entities or the resulting
effect on the Company. The cost to be incurred by the Company related to
externally maintained systems is expected to be minimal.

Item 7.  Financial Statements.

The financial statements required by this item begin immediately following the
exhibit pages of this report.

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

There were no changes or disagreements with our accounting firm.




                                       14
<PAGE>


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with 16(a) of the Exchange Act.

Peter D. Hobbs                54         Chairman, Chief Executive Officer,
                                         Secretary, Director

D.R. Cooley                   44         President, Chief Operating Officer
                                         Chief Financial Officer, Director

Peter Hobbs: Involved in investment banking and capital raising since 1972.
Worked for several overseas companies actively involved in raising capital for
both domestic and overseas entities. One of these companies presently controls
the majority of voting stock of Tollycraft.

D.R. Cooley: Held positions in business and finance with responsibility in
investment banking, financing, and management of closely held businesses since
1977. Experienced in manufacturing entities, management buyouts, and turn around
activities.

Compliance with 16(a) of the Exchange Act. Federal securities laws require the
Company's directors, certain of its officers, and persons owning beneficially
more than ten percent (10%) of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of changes in
ownership with the Commission. The Company is required to disclose any failure
of persons, who at any time during the fiscal year, were directors, officers
required to report, or more than ten percent (10%) beneficial owners, to file
timely those reports during the fiscal year. The Company undertakes the
responsibility to file all required reports on behalf of its directors and
officers. To the Company's knowledge, based solely upon information furnished to
the Company by its directors and certain of its officers, during the fiscal year
ended December 31, 1999, all of the Company's directors, officers required to
report, and greater than ten percent (10%) beneficial owners made all such
filings on a timely basis.

Item 10.  Executive Compensation.

There was no executive compensation in 1999

Option Grants

There were no option grants in 1999. The following table shows information
regarding grants of stock options in 1996 to the executive officers named in the
Summary Compensation Table.

There were no stock options and SARs exercised by the named executive officers
during 1999.

The table shows the aggregate number of unexercised options and SARs that were
exercisable and unexercisable as of December 31, 1999, and the values of
"in-the-money" stock options and SARs on December 31, 1999, which represent the
positive difference between the market price of the Company's common stock and
the exercise price of such options/SARs.

AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

                                      Number of Unexercised                         Value of Unexercised
                                         Options Held At                          In-The-Money Options At
                                        December 31, 1999                          December 31, 1999 (3)
                             -----------------------------------------    -----------------------------------------
               Name             Exercisable          Unexercisable           Exercisable          Unexercisable
--------------------------   ------------------    -------------------    ------------------   --------------------
<S>                              <C>                       <C>                   <C>                   <C>
Peter D. Hobbs
D.R. Cooley                      120,000 (1)               0                     (3)                   (3)
                                  40,000 (2)
</TABLE>


Footnotes
(1)  Stock Option Agreement, adjusted for reverse split, expires 24 months after
     the debt owed by the Company to Vera Corporation is fully paid and no
     longer outstanding or is bargained, sold, assigned, transferred or conveyed
     to a third party, and written notice from the Company of such payoff or
     transfer is given to the Optionee.


                                       15
<PAGE>

(2)  Incentive Stock Option Agreement, adjusted for reverse split, exercisable
     as follows: (1.1) Up to 10,000 shares at $9.25 per share, which is the fair
     value at the time this option is granted, on or before 12/31/96; (1.2) Any
     unexercised shares issuable pursuant to Section 1.1 herein and up to 10,000
     additional shares, all at $12.50 per share on or before 12/31/97; (1.3) Any
     unexercised shares issuable pursuant to Sections 1.1 and 1.2 herein and up
     to 10,000 additional shares, all at 50% of the bid price of the stock as
     quoted at the time notice of exercise is given, on or before 12/31/98;
     (1.4) Any unexercised shares issuable pursuant to Sections 1.1, 1.2, and
     1.3 herein and up to 10,000 additional shares, all at 50% of the bid price
     of the stock as quoted at the time notice of exercise is given, on or
     before 12/31/98.
(3)  There were no option/SAR exercises in last fiscal year and FY-End
     Option/SAR Values are $0 since the options are not "in-the-money".

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth, as of December 18, 1999, the stock ownership of
each Named Executive Officer (see Item 10), directors, all executive officers
and directors of the Company as a group, and of each person known by the Company
to be a beneficial owner of 5% or more of its Common Stock. Except as otherwise
noted, each person listed below is the sole beneficial owner of the shares and
has sole investment and voting power of such shares. No person listed below has
any option, warrant or other right to acquire additional securities of the
Company except as otherwise noted.

Name and Address of                  Amount and Nature of      Percent
Beneficial Owner                     Beneficial Ownership      Of Class
---------------------------------    ----------------------    --------------

Peter D. Hobbs                       1,448,431 (1)             17.9%
7825 Fay Ave.#200
La Jolla, CA 92037
D.R. Cooley                          20,000                    0.02%
8201 Peters Road #1000
Plantation, FL 33324
Named Officers and                   1,468,431                 17.9%
Directors As a Group

(1) As Voting Trustee on behalf of Kramfors Limited, 2 Ice House Street, Suite
202, Central Hong Kong.

Item 12.  Certain Relationships and Related Transactions.

Peter D. Hobbs, Chairman, Secretary, Director of the Company is also an employee
of Kramfors Limited. Kramfors Limited has identified Mr. Hobbs as the voting
trustee of 17.9% of the common shares of the Company.

During 1999, Corporate Developers of America provided consulting and management
services to Tollycraft Yacht Corporation. Mr. Hobbs is the Executive Director of
Corporate Developers of America.


                                       16
<PAGE>

Item 13.  Exhibits and Reports on Form 8-K.

(a) Exhibit Table.

2        Plan of Acquisition, reorg. (3)

3.1      Articles of Incorporation (3)

3.2      By-Laws (3)

5        Instruments defining the rights of security holders (4)

9.1      Voting Trust Agreement (2)

9.2      Assignment of Voting Trust Agreement (5)

10.1     1996 Employee Stock Option Plan (3)

10.2     Consulting Agreement between Tollycraft and Kramfors Limited (5)

10.3     Incentive Stock Option Agreement between Tollycraft and D.R. Cooley (1)

10.4     Stock Option Agreement between Tollycraft and D.R. Cooley (1)

10.5     ASSEMBLY (MAQUILA) AND TECHNICAL ASSISTANCE AGREEMENT (*)

10.6     AGREEMENT FOR PAYMENT OF TAX OBLIGATIONS (*)

21       Subsidiaries of the registrant (*)

23       Consent of experts and counsel (*)

24       Power of attorney (*)

27       Financial Data Schedule (*)
____________________
(*)  Filed herewith.

(1)  Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
     for the fiscal year ended December 31, 1997.

(2)  Incorporated by reference to the Registrant's Current Report on Form 8-K as
     filed electronically on October 28, 1996.

(3)  Incorporated by reference to the Registrant's Current Report on Form 8-K/A
     as filed electronically on February 20, 1997.

(4)  Incorporated by reference to the Registrant's Registration Statement on
     Form 10-SB as filed electronically on July 23, 1996.

(5)  Incorporated by reference to the Registrant's Quarterly Report for the
     period ended September 30, 1996 on Form 10-QSB as filed electronically on
     November 27, 1996.

(b)  Reports on Form 8-K filed during the quarter ended December 31, 1998.

None.




                                       17
<PAGE>


                          TOLLYCRAFT YACHT CORPORATION
                              FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
                                      WITH
                          REPORT OF INDEPENDENT AUDITOR

                          TOLLYCRAFT YACHT CORPORATION
                     Years ended December 31, 1999 and 1998


                                    Contents

                                                                            Page
Report of Independent Auditor                                                19

Financial Statements:
   Balance sheets                                                            20
   Statements of operations                                                  21
   Statement of changes in stockholders' equity (deficit)                    22
   Statements of cash flows                                                  23
   Notes to financial statements                                             24






                                       18
<PAGE>


                                Timothy L. Steers
                        Certified Public Accountant, LLC
                                 The River Forum
                          4380 S.W. Macadam, Suite 520
                           Portland, Oregon 97201-6403
                               Phone: 503/274-6296
                                Fax: 503/274-6297
                            E-mail: steerscpa@aol.com


Tollycraft Yacht Corporation


We have audited the accompanying balance sheets of Tollycraft Yacht Corporation
as of December 31, 1999 and 1998, and the related statements of operations,
changes in stockholders' equity, 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tollycraft Yacht Corporation as
of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in accordance with generally accepted accounting
principles.

As more fully described in Note 7, the Company's previous landlord has seized
certain work-in-process inventories, raw material inventories, and equipment. No
adjustments have been made in the accompanying financial statements for this
event, as the outcome of this matter is uncertain.



/s/ Timothy L. Steers

April 27, 2000



                                       19
<PAGE>

<TABLE>
                                   TOLLYCRAFT YACHT CORPORATION
                                          Balance Sheets
<CAPTION>

                                                                              December 31
                                                                        1999             1998
                                                                    -------------   -------------
<S>                                                                 <C>             <C>
                                              ASSETS
Current assets:
   Cash                                                             $         95    $        145
   Raw material inventories                                              303,508         303,508
   Work-in-progress inventories                                           96,909          96,909
                                                                    -------------   -------------
         Total current assets                                            400,512         400,562

Equipment, net                                                         2,374,292       2,374,292

Other assets                                                           2,374,500       2,382,000
                                                                    -------------   -------------

                                                                    $  5,149,304    $  5,156,854
                                                                    =============   =============

                               LIABILITIES AND STOCKHOLDERS' EQUITY

Net deferred tax liabilities                                        $    330,498    $    330,498

Commitments and contingencies

Stockholders' equity:
   Preferred stock, no stated value; authorized
     5,000,000 shares, issued and outstanding
     4,400,000 shares in 1999                                         11,616,300              --
   Preferred stock to be issued                                               --      11,616,300
   Common stock, no par value; authorized 100,000,000
     shares, issued and outstanding 8,325,976 shares
     in 1999 (8,087,476 shares in 1998)                                9,673,683       9,654,206
   Retained deficit                                                  (16,471,177)    (16,444,150)
                                                                    -------------   -------------
         Total stockholders' equity                                    4,818,806       4,826,356
                                                                    -------------   -------------
                                                                    $  5,149,304    $  5,156,845
                                                                    =============   =============
See accompanying notes



</TABLE>

                                                20
<PAGE>


                          TOLLYCRAFT YACHT CORPORATION
                            Statements of Operations

                                                         Years ended December 31
                                                          1999            1998

Costs and expenses:
General and administrative expenses                   $   27,027      $  519,669
Interest expense, net                                         --         504,718
Loss on disposal of assets                                    --          14,528

Loss before provision for income taxes                    27,027       1,038,915

Provision for income taxes - deferred                         --         107,956

Net loss                                              $   27,027      $1,146,871
Net loss per common share                             $     .003      $     .229



   See accompanying notes




                                       21
<PAGE>
<TABLE>

                                    TOLLYCRAFT YACHT CORPORATION
                            Statements of Changes in Stockholders Equity

<CAPTION>

                                                                                    Preferred
                                                             Preferred stock         stock to
                                                            Shares      Amount       be issued
<S>                                                     <C>         <C>            <C>
Balance at January 1, 1998                                     --   $         --   $         --

Common shares issued in exchange for
Prepaid manufacturing at $1.00 per share                       --             --             --

Common shares issued in exchange for debt                      --             --             --

Common shares issued in exchange for debt at
$3.00 per share                                                --             --             --

Common shares issued in exchange for
Services at $3.00 per share                                    --             --             --

Preferred shares to be issued in exchange for debt             --             --     11,616,300

Common shares cancelled                                        --             --             --

Net loss                                                       --             --             --

Balance at December 31, 1998                                   --             --     11,616,300

Common shares issued in exchange for
Services at $.08 per share                                     --             --             --

Preferred shares issued                                 4,400,000     11,616,300    (11,616,300)

Net loss                                                       --             --             --

Balance at December 31, 1999                            4,400,000   $ 11,616,300             --
</TABLE>

<TABLE>
<CAPTION>

                                                                                                         Total
                                                              Common stock           Retained         stockholders'
                                                         Shares          Amount       deficit       equity (deficit)

<S>                <C>                                  <C>          <C>            <C>             <C>
Balance at January 1, 1998                              3,145,383    $  4,366,171   $(15,297,279)   $(10,931,108)

Common shares issued in exchange for
Prepaid manufacturing at $1.00 per share 2,000,000      2,000,000              --      2,000,000

Common shares issued in exchange for debt3,000,000      3,000,000              --      3,103,903

Common shares issued in exchange for debt at
$3.00 per share                                             8,044          24,132             --          24,132

Common shares issued in exchange for
Services at $3.00 per share                                53,333         160,000             --         160,000

Preferred shares to be issued in exchange for debt             --              --             --      11,616,300

Common shares cancelled                                  (119,284)             --             --              --

Net loss                                                       --              --     (1,146,871)     (1,146,871)

Balance at December 31, 1998                            8,087,476       9,654,206    (16,444,150)      4,826,356

Common shares issued in exchange for
Services at $.08 per share                                238,500          19,477             --          19,477

Preferred shares issued                                        --              --             --              --

Net loss                                                       --              --        (27,027)        (27,027)

Balance at December 31, 1999                            8,325,976    $  9,673,683   $(16,471,177)   $  4,818,806



   See accompanying notes
</TABLE>




                                       22
<PAGE>
<TABLE>

                                    TOLLYCRAFT YACHT CORPORATION
                                      Statements of Cash Flows
<CAPTION>

                                                                      Years ended December 31
                                                                        1999           1998
<S>                                                                <C>             <C>
Cash flows from operating activities:
Net loss                                                           $    (27,027)   $ (1,146,871)
Adjustments to reconcile net loss to net cash
  used in operating activities:
Depreciation and amortization                                             7,500          65,160
Loss on disposal of assets                                                   --          14,528
Common stock issued in exchange for services                             19,477         160,000
Changes in assets and liabilities:
Accounts receivable                                                          --           4,280
Prepaid expenses                                                             --             385
Accounts payable                                                             --         792,508
Deferred income taxes                                                        --         107,956
Net decrease in cash                                                        (50)         (2,054)

Cash at beginning of year                                                   145           2,199

Cash at end of year                                                $        (95)   $        145


Supplemental disclosure of noncash investing and financing activities are as
follows:

Common stock issued in exchange for services                       $     19,477    $    160,000
Common stock issued in exchange for prepaid manufacturing          $         --    $  2,000,000
Common stock issued in exchange for accrued liabilities
and long-term debt due the Internal Revenue Service                $         --    $  3,103,902
Common stock issued in exchange for accrued pension contribution   $         --    $     24,132

Conversion of notes payable, accounts payable,
  accrued liabilities and long-term debt for preferred
  stock to be issued                                               $         --    $ 11,616,300



See accompanying notes.


</TABLE>

                                       23
<PAGE>

                          TOLLYCRAFT YACHT CORPORATION
                          Notes to Financial Statements
                                December 31, 1999


1. Nature of business and summary of significant accounting policies

NATURE OF BUSINESS: Tollycraft Yacht Corporation, (the "Company") is engaged in
the manufacture and distribution of luxury motor yachts. The Company grants
credit to its customers. The ability to collect its accounts receivable is
affected by economic fluctuations in the geographic areas served by the Company.

INVENTORIES: Inventories are valued at net realizable value, which is lower than
cost.

EQUIPMENT: Equipment is carried at cost. Additions and improvements to jigs,
patterns and molds are capitalized. Depreciation is computed using the
straight-line method over the estimated useful lived of the assets, which range
from three to ten years.

REVENUE RECOGNITION: Revenue is recognized upon completion, shipment and title
transfer of each yacht. Accordingly, revenue and costs of individual yachts are
included in operations in the year during which they are completed.

ESTIMATED WARRANTIES: The Company records a warranty accrual at the time of sale
for estimated claims, based on actual claims experience. There is a general
one-year parts and labor warranty to the original owner for defects in all
Tollycraft built hulls, deck bridges, stringers and bulkheads.

ADVERTISING: The Company expenses the cost of advertising as incurred.

PENSION AND PROFIT SHARING PLAN: Union employees of the Company participate in a
pension plan, which qualifies under Section 401(k) of the Internal Revenue Code.
The Company is required by the union contract to make annual contributions of
$.05 per labor hour. The Company contributed $24,132 to the plan in 1998. No
contributions were made to the plan in 1999. The Company is in the process of
terminating the pension and profit sharing plans.

INCOME TAXES: Income taxes are accounted for and reported using an asset and
liability approach. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases 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 effect taxable income.

Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the year in
deferred tax assets and liabilities.

Nature of business and summary of significant accounting policies (continued)
Deferred tax assets result principally from the Company's net operating losses
not yet utilized for tax purposes. Valuation allowances have been provided for
those deferred tax assets as their utilization are uncertain. Deferred tax
liabilities result principally from the use of accelerated depreciation for tax
purposes.

NET LOSS PER COMMON SHARE: Net loss per share is computed by dividing net loss
by the weighted average number of common shares outstanding during the period.
The weighted average number of common stock shares outstanding was 8,171,718 for
1999 (5,018,273 for 1998). Preferred stock is not considered a common stock
equivalent.

SIGNIFICANT RISKS AND UNCERTAINTIES: The process of preparing financial
statements in conformity with generally accepted accounting principles requires
the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Management of the Company has made certain
estimates and assumptions regarding the reserve for warranty expenses, costs of
work-in-process inventory, contingent liabilities regarding their inventories
and equipment, and federal penalties on unpaid payroll taxes. Such estimates and
assumptions primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.


                                       24
<PAGE>

2. Operations

The Company has devoted substantial efforts during 1999 and 1998 in relocating
their corporate administrative and sales offices to Plantation, Florida, its
manufacturing facilities to Merida, Yucatan, Mexico and restructuring debt,
rather than in the marketing and manufacturing of luxury motor yachts.
Management believes that the efficiencies expected to be achieved by relocating
to the Eastern United States, which is closer to the geographic area most served
by the Company, and the lower operating overhead expected by relocating their
manufacturing to Mexico will enable the Company to achieve profitably.

The accompanying financial statements have been prepared on a basis of going
concern, which basis contemplates the realization of assets and the satisfaction
of liabilities as they become due through continuing operations. No adjustments
have been made to the accompanying financial statements should the Company be
unable to continue in existence, as the outcome of management's plan is
uncertain.

3.       Other assets

Other assets were as follows at December 31:
                                                         1999            1998
Prepaid manufacturing expenses                        $2,000,000      $2,000,000
Prepaid consulting services                              360,000         360,000
Product rights not used in operations                     14,500          22,000
                                                      ----------      ----------
         Total other assets                           $2,374,500      $2,382,000
                                                      ==========      ==========

4.       Equipment

         Equipment was as follows at December 31:
                                                     1999                1998
Manufacturing equipment                          $   486,126        $   486,126
Office furniture and fixtures                        391,575            391,575
Molds and patterns                                 2,888,444          2,888,444
                                                 ------------       ------------
                                                   3,766,145          3,766,145
Less accumulated depreciation                     (1,391,853)        (1,391,853)
                                                 ------------       ------------
Equipment, net                                   $ 2,374,292        $ 2,374,292
                                                 ============       ============
5.       Income taxes

         Net deferred tax liabilities were as follows at December 31:
                                                        1999            1998
Deferred  tax assets-
Net operating loss carryovers                       $ 6,987,849     $ 6,983,795
Valuation allowance for deferred tax assets          (6,987,849)     (6,983,795)
                                                    -----------     -----------
Deferred tax liabilities- depreciation                 (330,498)       (330,498)

Net deferred tax liabilities                        $  (330,498)    $  (330,498)

The Company had net operating loss carryovers as of December 31, 1999 of
approximately $20,567,000 ($20,540,000 for 1998) available to offset future
taxable income, if any. In the event of ownership changes aggregating 50% or
more in any three-year period, the amount of loss carryovers that become
available for utilization in any year may be limited. If not utilized against
future taxable income, the tax loss carryovers will expire $3,100,000 in 2010;
$2,000,000 in 2011; $11,500,000 in 2012; $2,910,000 in 2013; $1,030,000 in 2014;
and $27,000 in 2015.

6.       Capital stock

In April 1999, the Board of Directors authorized the issuance of 238,500 shares
of common stock in exchange for professional services. Management of the Company
valued the share grants at an average price of $.082 per share, which
represented no discount from the closing bid price of the Company's common stock
at the date of grant. The Company recorded professional fees expense totaling
$19,477 during the year ended December 31, 1999 as a result of these grants.


                                       25
<PAGE>

In June 1998, the Company offered each debtor one share of preferred stock
Company for each ten dollars of debt they were owed. Notes payable, accounts
payable, accrued liabilities, convertible promissory notes payable, and all
other long-term debtors were offered the conversion. The offering required a
majority of the debtors to agree to the terms of the conversion. In July 1998, a
majority of the debtors agreed to the offering and, accordingly, all of the then
outstanding debt was converted to preferred stock. In December 1999, the Company
issued the preferred stock.

In October 1998, the Company entered into an "Agreement for Payment of Tax
Obligations" with a Mexican corporation known as Grupo Clima, S.A. DE C.V
("Grupo"). Under the agreement, the Company issued 3,000,000 shares of its
common stock to Grupo. In exchange, Grupo has agreed to satisfy all of the
claims with the Federal, State of Washington, Cowlitz County, Washington and any
local taxing authorities against the Company. Grupo intends to negotiate a
settlement with each of the taxing authorities, sell the common stock and use
the proceeds to satisfy the tax claims, and obtain a full release of liability
for the Company and any of its officers. Under the agreement, no additional
shares may be issued should the amount of the claims exceed the proceeds from
the sale of the common stock, nor is Grupo obligated to return to the Company
any proceeds in excess of the aggregate claims. The Company may be contingently
liable for some or all of the taxing authorities claims should Grupo not be able
to obtain a full release of liability for the Company and any of its officers.

In February 1998, the Board of Directors authorized the issuance of 53,333
shares of common stock in exchange for legal services. Management of the Company
valued the share grants at $3.00 per share, which represented no discount from
the closing bid price of the Company's common stock at the date of grant. The
Company recorded professional fees expense totaling $160,000 during the year
ended December 31, 1998 as a result of these grants.

Also in February 1998, the Board of Directors authorized the issuance of 8,044
shares of common stock to the Tollycraft Union 401(k) Plan and Trust
representing accrued pension contributions for the plan years 1993, 1995 and
1996 totaling $24,132. Management of the Company valued the share grants at
$3.00 per share, which represented no discount from the closing bid price of the
Company's common stock at the date of grant.

7.       Commitment and contingencies

In September 1998, the Company entered into an agreement with a Mexican
corporation known as Yachts of the Americas' S.A. DE C.V. ("Yachts of the
Americas"). Under the agreement, Yachts of the Americas has agreed to build a
manufacturing plant and facilities and to manufacture boats and luxury motor
yachts in strict compliance with the specifications of the Company. The plant
and all machinery it builds or purchases will remain in the ownership of Yachts
of the Americas. The primary reason for entering into this agreement by the
Company and Yachts of the Americas is to take advantage of the NAFTA treaty
benefits between the two countries. The Company expects to be more competitive
in the United States markets as a result of this manufacturing agreement.

During 1998, the Company issued to Yachts of the Americas, 2,000,000 shares of
its common stock in accordance with the agreement. In exchange, Yachts of the
Americas has agreed to provide to the Company $2,000,000 of future manufacturing
services at their cost plus 20%.

In October 1997, the previous landlord of the building in which the Company
leased its office and manufacturing facilities seized substantially all of the
Company's personal property consisting of all work-in-process inventories, raw
material inventories and all manufacturing equipment, office furniture and
fixtures, and molds and patterns for failure to pay rent under their lease
agreement. The landlord also filed a claim against the Company for approximately
$291,000. In December 1997, the landlord held a lien foreclosure sale and sold
all personal property it had seized.

The Company believes it has a substantial claim against the landlord for
unlawfully conducting a landlord's lien foreclosure sale at a time after the
landlord's lien had expired. The Company also believes that certain equipment
and molds and patterns sold had preferential liens against them. Based on a
third-party appraisal, the value of the molds and patterns alone was
approximately $5,900,000. The Company is vigorously pursuing the matter and
believes it has a reasonable possibility of a favorable outcome. No adjustments
have been made in the accompanying financial statements for any gain or loss
contingency, as the outcome of the matter is uncertain.


                                       26
<PAGE>

                                POWER OF ATTORNEY

The Registrant and each person whose signature appears below hereby authorizes
D.R. Cooley, the agent for service named in this Report, with full power to act
alone, to file one or more amendments to this Report, which amendments may make
such changes in this Report as such agent for service deems appropriate, and the
Registrant and each such person hereby appoints such agent for service as
attorney-in-fact, with full power to act alone, to execute in the name and in
behalf of the Registrant and any such person, individually and in each capacity
stated below, any such amendments to this Report.

                                   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.


TOLLYCRAFT YACHT CORPORATION  (Registrant)


By: /s/ Peter D. Hobbs
    ------------------------------------------------
       Peter D. Hobbs,
       Chairman, Chief Executive Officer, Secretary


By: /s/ D.R. Cooley
    ------------------------------------------------
       D.R. Cooley, President,
       Chief Operating Officer, Chief
       Financial Officer

Date

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


Signature                            Title                            Date


/s/ D.R. Cooley            President, Chief Operating Officer,
----------------------     Chief Financial Officer, Director
   D.R. Cooley


/s/ Peter D. Hobbs         Chairman, Chief Executive Officer,
----------------------     Secretary, Director
   Peter D. Hobbs




                                       27