Form 10-KSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549

(Mark One)

[X] Annual  report under section 13 or 15(d) of the  Securities  Exchange Act of
1934
For the fiscal year ended December 31, 1998.
[ ] Transition  report pursuant  section 13 or 15(d) of the Securities  Exchange
Act of 1934
For the transition period from................to................
Commission file number: 0-23171 - CIK 0001045280

Applied Capital Funding, Inc.
-----------------------------
(Exact name of small business issuer as specified in its charter)

Colorado                                                              84-1280679
--------------------------------------------------------------------------------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)

4155 E. Jewell Ave., Suite 909. Denver, CO                                 80222
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

Issuer's telephone number, (303) 691-6163

NONE
(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

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

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:  $-0- 
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2 of the Exchange Act.) $.001.
Note:  If  determining  whether  a  person  is  an  affiliate  will  involve  an
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

<PAGE>


(Issuers  involved in  bankruptcy  proceeding  during the past five years) Check
whether the issuer has filed all documents  and reports  required to be filed by
Section 12,13 or 15(d) of the Exchange Act after the  distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ] NOT APPLICABLE

(Applicable only to corporate registrants)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 15,112,000.

Documents incorporated by reference
If the following documents are incorporated by reference,  briefly describe them
and  identify  the part of the Form 10-KSB  (e.g.,  Part I, Part II,  etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities  Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).

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

     In accordance with paragraph H of the General  Instructions  the registrant
has elected to provide the information set forth under "Information  Required in
Annual Report of Transitional Small Business Issuers."

<PAGE>

                                     PART I

                                 Alternative 1.

     The Company has elected to furnish the information required by Questions 1,
3, 4, 11, 14-20, 28-43, 45, and 47-50 of Model A of Form 1-A, as follows:

                                   THE COMPANY

1.   Exact corporate name: Applied Capital Funding, Inc.
     State and date of incorporation: Colorado - September 28, 1994
     Street address of principal office: 4155 E. Jewell Avenue, Denver, CO 80222
     Company Telephone Number: 303-691-6163
     Fiscal Year: December 31.
     Person(s) to contact at Company: David R. Reitsema
     Telephone Number (if different from above:) N/A


                            BUSINESS AND PROPERTIES/

     With respect to the business of the Company and its properties:

     (a)  Describe in detail what  business the Company does and proposes to do,
including what products or goods are or will be produced or services that are or
will be rendered.

     The Company was organized in 1994 as a Colorado corporation.  It was formed
to engage in the business of  residential  mortgage  brokerage and its marketing
efforts were aimed primarily at refinance  loans.  From 1994 through the present
it has  originated  and sold loans,  primarily  to national  wholesale  lenders.
Although  the Company has had agents  working for it who  marketed to  realtors,
attorneys and other  traditional  sources of residential  loans, the Company has
not made them the primary focus of its  marketing,  choosing  instead to look to
refinance loans and second mortgage loans for its primary business. It currently
employs two loan officers.

     Commencing in 1994,  residential  interest  rates began climbing over their
historic lows of 1993. This resulted in  disappointing  revenues to the Company,
and the Company has only nominal current revenues.  However,  beginning in 1996,
residential  interest  rates began  falling and have  continued  their  downward
movement.  Although  there is no assurance that the rates will continue at their
present  level or  continue  to fall,  there is a  general  prevailing  economic
opinion that rates may rise before the end of 1999 at the earliest.

     The Company's principals have experience in marketing residential refinance
loans and intend to  implement  a strategy  to explore  new  marketing  efforts.
Traditional  marketing  methods include newspaper  advertising,  direct mail and
telemarketing,  and the Company's principals have experience with these types of
marketing.

     (b) Describe how these  products or services are to be produced or rendered
and how and when the Company intends to carry out its activities. If the Company
plans  to offer a new  product(s),  state  the  present  stage  of  development,
including  whether or not a working  prototype(s)  is in existence.  Indicate if
completion of development of the product would require a material  amount of the
resources  of the Company,  and the  estimated  amount.  If the Company is or is
expected to be dependent upon one or a limited number of suppliers for essential
raw  materials,  energy or other items,  describe.  Describe any major  existing
supply contracts.

     The Company's  services of mortgage brokering are carried out by soliciting
mortgages through newspaper and other print media advertising.  The Company does
not use its own  capital  to  supply  funds for  mortgages  to its  clients  but
utilizes  wholesale  lenders  who supply such funds.  The Company  prepares  the
necessary loan documents to facilitate the mortgage  including the filing of the
documents with the appropriate governmental agencies.

     (c)  Describe  the  industry  in which the Company is selling or expects to
sell its products or services  and,  where  applicable,  any  recognized  trends
within that industry. Describe that part of the industry and the geographic area
in which the business competes or will compete.

     The  mortgage   industry  -  commercial  and  residential  -  is  extremely
competitive as this time. The Company's business is predicated  substantially on
re-financing of home mortgages when interest rates reduce.  At the present time,
interest  rates are at an all-time low and the Company's  business is in a slack
period. The Company's mortgage business is derived mainly from an area comprised
of metropolitan  Denver,  Colorado and surrounding  suburban cities. The Company
may, at its  discretion,  expand its business to cities within a 200 mile radius
from Denver, Colorado.


<PAGE>


     Indicate whether competition is or is expected to be by price,  service, or
other  basis.  Indicate  (by  attached  table if  appropriate)  the  current  or
anticipated  prices or price ranges for the Company's  products or services,  or
the formula for determining  prices,  and how these prices compare with those of
competitors' products or services,  including a description of any variations in
product or service features. Name the principal competitors that the Company has
or expects to have in its area of  competition.  Indicate the relative  size and
financial  and market  strengths  of the  Company's  competitors  in the area of
competition in which the Company is or will be operating.  State why the Company
believes it can  effectively  compete with these and other companies in its area
of competition.

     Competition in the  residential  mortgage  business is generally  driven by
price of stated interest rates and loan origination points added to the mortgage
loan.  Prospective borrowers generally are aware of the difference that interest
rates (although varying only one-quarter to one-half  percentage point) can make
over a 15 or 30 year  mortgage.  Competition  is also  driven by the amount that
mortgage brokers and lenders add at the origination of the loan - i.e.  "points"
which are added to the initial  origination  fees. These points usually are from
1/4 point to 1 point.

     (d) Describe specifically the marketing strategies the Company is employing
or will employ in  penetrating  its market or in  developing  a new market.  Set
forth in response to Question 4 below the timing and size of the results of this
effort  which  will be  necessary  in order for the  Company  to be  profitable.
Indicate how and by whom its products or services are or will be marketed  (such
as by advertising,  personal  contact by sales  representatives,  etc.), how its
marketing  structure  operates or will  operate  and the basis of its  marketing
approach,  including any market studies. Name any customers that account for, or
based upon existing orders will account for a major portion (20% or more) of the
Company's sales. Describe any major existing sales contracts.

     Prospective   mortgagees  are  usually   derived  from  two  sources:   (i)
advertising and (ii)  references from real estate agents.  Advertising is placed
in print media, radio and television.  The Company is not currently  advertising
in any  media.  The  decision  to use any one or all of the media is based  upon
current  competition  at the time of  advertising  and the  perceived  resultant
responses  to such  advertising.  The  choices  of any one or more of the  media
varies considerably and is a constant variable.  The Company's contact with real
estate agents is also variable  depending upon the market thrust and location of
residential  sales.  The Company has no contact with  developers  or builders as
this segment of the market  usually has its own financing for new homes in place
at the time of sale.

     (e) State the backlog of written firm orders for products  and/or  services
as of a recent date (within the last 90 days) and compare it with the backlog of
a year ago from that date:

                  As of: 012/01/98       $ -0-
                      (a recent date)

                  As of: 012/01/97       $ -0-
                     (one year earlier)


<PAGE>


Explain the reason for significant  variations between the two figures,  if any.
Indicate  what types and amounts of orders are included in the backlog  figures.
State  the size of  typical  orders.  If the  Company's  sales are  seasonal  or
cyclical, explain.

     (f) State the number of the  Company's  recent  employees and the number of
employees it anticipates it will have within the next 12 months.  Also, indicate
the number of type of  employee  (i.e.,  clerical,  operations,  administrative,
etc.) The Company will use, whether or not any of them are subject to collective
bargaining  agreements,  and the expiration date(s) of any collective bargaining
agreement(s). If the Company's employees are on strike, or have been in the past
three years,  or are threatening to strike,  describe the dispute.  Indicate any
supplemental  benefits or  incentive  arrangements  the Company has or will have
with its employees.

     The Company has only two  employees at the present  time.  The Company does
not  anticipate any  additional  increase in the number of employees  until such
time as the Company is able to generate mortgage loans.

     (g) Describe generally the principal properties (such as real estate, plant
and  equipment,  patents,  etc.) That the  Company  owns,  indicating  also what
properties  it leases and a summary of the terms under those  leases,  including
the amount of payments,  expiration  dates and the terms of any renewal options.
Indicate what properties the Company intends to acquire in the immediate future,
the cost of such  acquisitions and the sources of financing it expects to use in
obtaining these properties, whether by purchase, lease or otherwise.

     The Company currently owns no property, real estate, or equipment.

     (h) Indicate  the extent to which the  Company's  operations  depend or are
expected to depend upon patents,  copyrights,  trade secrets,  know-how or other
proprietary  information  and the steps  undertaken  to secure and protect  this
intellectual  property,   including  any  use  of  confidentiality   agreements,
covenants-not-to-compete  and  the  like.  Summarize  the  principal  terms  and
expiration  dates of any significant  license  agreements.  Indicate the amounts
expended by the  Company for  research  and  development  during the last fiscal
year, the amount  expected to be spent this year and what percentage of revenues
research and development expenditures were for the last fiscal year.

     The Company's business does not depend on patents,  copyrights or any other
proprietary information.

     (i) If the  Company's  business,  products,  or  properties  are subject to
material regulation (including  environmental  regulation) by federal, state, or
local  governmental  agencies,  indicate the nature and extent of regulation and
its effects or potential effects upon the Company.

     There are no laws, regulations or rules governing the operation of the
Company's  operation as a mortgage  broker in the State of  Colorado,  nor under
federal law, other than the normal business regulations.

<PAGE>


     (j) State the names of any  subsidiaries  of the  Company,  their  business
purposes  and  ownership,  and  indicate  which are  included  in the  Financial
Statements attached hereto. If not included, or if included by not consolidated,
please explain.

     The Company has no subsidiaries.

     (k)  Summarize  the  material  events  in the  development  of the  Company
(including any material mergers or acquisitions)  during the past five years, or
for  whatever  lesser  period the  Company  has been in  existence.  Discuss any
pending or anticipated mergers, acquisitions, spin-offs or recapitalizations. If
the  Company  has  recently   undergone  a  stock  split,   stock   dividend  or
recapitalization  in  anticipation  of  this  offering,   describe  (and  adjust
historical per share figures elsewhere in this Offering  Circular  accordingly).
The Company is unable to ascertain  what this last sentence means as this is not
an offering. Shares have already been sold.

     The  Company  has  not  engaged  in any  business  combination,  merger  or
acquisition  activities.  As a  subsequent  event,  so  noted  in the  Company's
financial statements accompanying this report, On January 14, 1999, the Board of
Directors of the Company approved the issuance of 160,000 share of its preferred
stock in exchange for cancellation of 13,362,000  shares of its common stock. On
January 29,  1999,  the Board of  Directors  of the  Company  approved a 2 for 1
forward split of its common  stock,  effective as of the record date of February
22, 1999.

     4. (a)If the Company was not profitable  during its last fiscal year,  list
below in  chronological  order the events which in management's  opinion must or
should occur or the milestones which in management's opinion the Company must or
should  reach in order for the Company to become  profitable,  and  indicate the
expected  manner of occurrence or the expected  method by which the Company will
achieve the milestones.

--------------------------------------------------------------------------------
                                                     Date or number of months
                      Expected manner of occurrence  after receipt of proceeds 
Event of Milestone    or method of achievement       date should be accomplished
--------------------------------------------------------------------------------

1. Development of      Company officers                Not Applicable
    marketing plans    conduct planning session        (no offering proceeds)

2. Hiring additional   Advertising and                 Not Applicable
    sales personnel    industry contacts               (no offering proceeds)

     (b) State the probable  consequences  to the Company of delays in achieving
each  of  the  events  or  milestones  within  the  above  time  schedule,   and
particularly  the effect of any delays upon the  Company's  liquidity in view of
the Company's then anticipated level of operating costs. (See Question No. 11)

     The probable  consequences  to the Company  would be only a slight delay as
the tasks as set forth above are not  difficult to achieve.  However there is no
assurance  that the Company will be able to set an exact schedule on the meeting
of the milestones as described above.


<PAGE>


11. Indicate whether the Company is having or anticipates having within the next
12 months  any cash  flow or  liquidity  problems  and  whether  or not it is in
default or in breach of any note, loan, lease or other indebtedness or financing
arrangement  requiring the Company to make  payments.  Indicate if a significant
amount of the  Company's  trade  payables  have not been paid  within the stated
trade term.  State whether the Company is subject to any unsatisfied  judgments,
liens or settlement obligations and the amounts thereof.  Indicate the Company's
plans to resolve any such problems.

     The Company is not in breach or default of any note, loan or lease,  nor is
the Company carrying any debt or obligation for debt service. There are no liens
or judgements against the Company.

                    DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS

28.  If the  Company  has  within  the last  five  years  paid  dividends,  made
distributions  upon its stock or redeemed any  securities,  explain how much and
when:

    NONE

                    OFFICERS AND KEY PERSONNEL OF THE COMPANY

29.  Chief Executive Officer:                    Title: President
     Name: Gary G. Clark                         Age: 57
     Office Street Address: 4155 E. Jewell Ave.  Telephone No: 303-691-6163
                            Denver, CO 80222

Name of  employers,  titles and dates of  positions  held during past five years
with an indication of job responsibilities:

Gary G. Clark has been a mortgage  loan officer and mortgage  broker since 1991.
Mr. Clark also served as a director of Attache Holdings, Ltd., from July 1996 to
April 1996,  Enfield Trading  Corporation  from April to July 1996, and Gulf and
Orient Steamship Company.  His business experience includes management of retail
and  wholesale  companies,   personnel  training,  customer  service,  inventory
control, real estate sales, and investment opportunities.  From 1992 to November
1994, he was a mortgage banker with Hilliscot  Group,  Inc.,  Denver,  Colorado.
From 1990 to 1993 he was Sales Manager for Mobile Telecommunications,  Inc. From
1982 to 1990 he was Sales Manager for InterLink Communications of Colorado. From
1977 to 1982, he was Regional Sales Manager for Westinghouse  Corporation in the
Rocky  Mountain  region.  From 1967 to 1977,  he was the  President  and General
Manager for Bragdon Appliance  Company,  a Denver based retailer.  His education
includes a degree in Business  Administration  from the  University  of Colorado
with  advanced   studies  at  Notre  Dame  University,   Westinghouse   Learning
Foundation, and Jones Real Estate College.

    Also a Director of the Company?    [x] Yes  [ ] No

<PAGE>


     Indicate  amount of time to be spend on  Company  matters if less than full
time: Four days per month until fully operational.

31.  Chief Financial Officer:                    Title: Secretary
     Name: David R. Reitsema                     Age: 51
     Office Street Address: 4155 E. Jewell Ave.  Telephone No: 303-691-6163
                            Denver, CO 80222

Name of employers, titles and dates of position held during past five years with
an indication of job responsibilities:

     David R. Reitsema  incorporated  the Company in 1994, and served as officer
and  director  until  August  1996,  when he resigned to pursue  other  business
opportunities.  He was  appointed  to the Board of  Directors  and the office of
Secretary in July 1997.  He is the  President  and a Director of EDR  Financial,
Inc., a Colorado company engaged in investment  banking.  He is the President of
Corporate  International,  Ltd. A Colorado company engaged primarily in business
consulting with firms engaged in international transactions.  From 1992 to 1994,
he owned and operated  Silverthorne  Funding  Corporation,  a mortgage brokerage
firm  located in Denver,  Colorado.  Mr.  Reitsema  is an  attorney  licensed to
practice in the state of Colorado  since 1973. He received his B. A. Degree from
Calvin College in Grand Rapids,  Michigan,  and his Juris Doctor Degree from the
University of Denver College of Law.

     Also a Director of the Company?    [X] Yes  [ ] No

     Indicate  amount of time to be spend on  Company  matters if less than full
time: Four days a month until fully operational.

                            DIRECTORS OF THE COMPANY

33.  Number of Directors:  2.

     If Directors are not elected annually,  or are elected under a voting trust
or other arrangement, explain: NOT APPLICABLE.


34. Information concerning outside or other Directors (i.e., those not described
above): NOT APPLICABLE.

35.(a)  Have any of the  Officers  or  Directors  ever  worked  for or managed a
company (including a separate  subsidiary or division of a larger enterprise) in
the same business as the Company? [X] Yes [ ] No

(b). If any of the Officers,  Directors or other key personnel  have ever worked
for or managed a company in the same business or industry as the Company or in a
related business or industry,  describe what precautions, if any, (including the
obtaining  of  releases  or consents  from prior  employers)  have been taken to
preclude  claims by prior  employers for  conversion or theft of trade  secrets,
know-how or other proprietary information.

<PAGE>


     The officers  have not  previously  worked for any company  that  possessed
trade secrets, proprietary know-how or other proprietary information.

(c) If the  Company  has  never  conducted  operations  or is  otherwise  in the
development  stage,  indicate  whether any of the Officers or Directors has ever
managed any other company in the start-up or development  stage and describe the
circumstances, including relevant dates.

     NOT APPLICABLE

(d) If any of the Company's key personnel are not employees but are  consultants
or other independent  contractors,  state the details of their engagement by the
Company.

     NOT APPLICABLE

(e) If the Company has key man life  insurance  policies on any of its Officers,
Directors or key personnel, explain, including the names of the persons insured,
the amount of  insurance,  whether  the  insurance  proceeds  are payable to the
Company and whether there are arrangements  that require the proceeds to be used
to redeem  securities  or pay benefits to the estate of the insured  person or a
surviving spouse.

     NONE

36.  If a petition  under the  Bankruptcy  Act or any State  insolvency  law was
     filed by or against the  Company or its  Officers,  Directors  or other key
     personnel, or a receiver,  fiscal agent or similar officer was appointed by
     a  court  for  the  business  or  property  of  any  such  persons,  or any
     partnership in which any of such persons was a general partner at or within
     the past five years,  or any  corporation or business  association of which
     any such person was an executive  officer at or within the past five years,
     set forth below the name of such  persons,  and the nature and date of such
     actions.

     NOT APPLICABLE.


                             PRINCIPAL STOCKHOLDERS

37.  Principal  owners of the Company  (those who  beneficially  own directly or
     indirectly  10% or  more  of  the  common  and  preferred  stock  presently
     outstanding)   starting  with  the  largest  common  stockholder.   Include
     separately  all  common  stock  issuable  upon  conversion  of  convertible
     securities  (identifying them by asterisk) and show average price per share
     as if conversion  has occurred.  Indicate by footnote if the price paid was
     for  a   consideration   other  than  cash  and  the  nature  of  any  such
     consideration.

<PAGE>

--------------------------------------------------------------------------------
                             Average              No. of Shares
                    Class    Price     No. of     %       Held After       %
                    of       Per       Shares     of      Offering if All  of
                    Shares   Share     Now Held   Total   Securities Sold  Total
--------------------------------------------------------------------------------

Name:

Gary G. Clark       Common   n/a       706,000    5%      (no offering)    5%
David R. Reitsema   Common   n/a       706,000    5%      (no offering)    5%

38.: Number of shares  beneficially  owned by Officers and Directors as a group:
1,412,000

             MANAGEMENT RELATIONSHIPS, TRANSACTIONS AND REMUNERATION

39.(a)  If  any  of  the  Officers,   Directors,   key  personnel  or  principal
stockholders are related by blood or marriage, please describe. NOT APPLICABLE

(b) If the  Company  has  made  loans to or is  doing  business  with any of its
Officers,  Directors,  key  personnel  or 10%  stockholders,  or  any  of  their
relatives (or any entity controlled  directly or indirectly by any such persons)
within the last two years,  or  proposes  to do so within the  future,  explain.
(This  includes  sales or lease of goods,  property  or  services to or from the
Company, employment or stock purchase contracts, etc.) State the principal terms
of any significant loans, agreements, leases, financing or other arrangements.

     NOT APPLICABLE

(c)  If  any  of  the  Company's  Officers,  Directors,  key  personnel  or  10%
stockholders has guaranteed or co-signed any of the Company's bank debt or other
obligations,  including any indebtedness to be retired from the proceeds of this
offering, explain and state the amounts involved.

     NOT APPLICABLE

40.(a) List all  remuneration  by the  Company to  Officers,  Directors  and key
personnel for the last fiscal year:

     Gary G. Clark              $4,500
     David R. Reitsema          $4,500

41. (a) Number of shares subject to issuance under presently  outstanding  stock
purchase  agreements,  stock  options,  warrants or rights:  shares ( % of total
shares to be outstanding  after the completion of the offering if all securities
sold,  assuming  exercise of options and conversion of convertible  securities).
Indicate which have been approved by shareholders.  State the expiration  dates,
exercise prices and other basic terms for these securities:

     NONE

<PAGE>


(b) Number of common shares subject to issuance under existing stock purchase or
option plans but not yet covered by outstanding purchase agreements,  options or
warrants: shares.

     NONE

(c)  Describe  the  extent to which  future  stock  purchase  agreements,  stock
options, warrants or rights must be approved by shareholders.

     NOT APPLICABLE

42.  If the  business  is  highly  dependent  on the  services  of  certain  key
personnel,  describe any  arrangements  to assure that these persons will remain
with the Company and not compete upon any termination.

     The  business of the company is highly  dependent  upon the services of the
officers and  directors of the Company.  If these persons were not available for
any reason,  the Company  feels it would not be difficult to find other  persons
with like-in-kind  abilities,  but it is undetermined  whether the Company could
attract such  persons at the price or salary which the Company  might be able to
pay. The Company has no non-compete  agreements  with its officers and directors
and in the absence of such  agreements,  the Company is at risk with  respect to
the  competitiveness  of its  officers and  directors if such persons  decide to
leave the employ of the Company and seek other  employment  with companies which
may be in a position to compete.  After reviewing the above, one should consider
whether or not the  compensation to management and other key personnel  directly
or  indirectly,  is  reasonable  in view of the present  stage of the  Company's
development.

                                   LITIGATION

43. Describe any past, pending or threatened litigation or administrative action
which  has had or may  have a  material  effect  upon  the  Company's  business,
financial condition, or operations, including any litigation or action involving
the Company's Officers, Directors or other key personnel. State the names of the
principal  parties,  the nature and current  status of the matters,  and amounts
involved.  Give an evaluation by management or counsel,  to the extent feasible,
of the merits of the  proceedings or litigation and the potential  impact on the
Company's business, financial condition, or operations.

     The  Company  is not  engaged  in any  litigation  nor  is any  pending  or
contemplated.

                              MISCELLANEOUS FACTORS

45. Describe any other material factors, either adverse or favorable,  that will
or could affect the Company or its business (for  example,  discuss any defaults
under  major  contracts,  any  breach  of bylaw  provisions,  etc.) or which are
necessary to make any other information in this Offering Circular  [registration
statement in this case as this is not an offering  circular]  not  misleading or
incomplete.

<PAGE>


     The  mortgage  business is highly  dependent  on  interest  rates which are
substantially at the discretion of the Federal Reserve Commission and subsequent
wholesale lenders.  The mortgage brokerage  industry,  of which the Company is a
part,  is  impacted  to a large  degree by  interest  rates set by others.  As a
result,  any success or failure of attracting loan prospects and making mortgage
loans is highly volatile and unpredictable.

     Year 2000 Issues.  The mortgage  business of the Company may be impacted to
an unknown degree in the  computation of forward  interest rates and any unknown
problems exhibited by the Company's wholesalers of mortgage funds upon which the
Company's lending activities entirely depend. The Company is unable at this date
to make any reasonable  estimate of difficulties which may be encountered in the
future  due to the  impact  of  computer  technology  which  may  be  unable  to
accommodate the automatic use of the year 2000 in numbered use.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                            CERTAIN RELEVANT FACTORS

47. If the Company's financial  statements show losses from operations,  explain
the causes  underlying  these  losses and what steps the Company has taken or is
taking to address these causes.

     The  Company's  plan of  operation  during  the next  twelve  months  is to
initiate a modest advertising  campaign to seek refinancing mortgage loans. This
advertising  campaign  will be conducted  in the media deemed most  advantageous
based on the market analysis referred to above.

     The  Company's  business is  substantially  impacted  by mortgage  interest
rates. As previously  noted,  the Company  experienced a decline in its mortgage
loan  business due to an increase in interest  rates,  resulting in a decline in
the demand for  residential  mortgage  loans.  This  historical  fluctuation  of
mortgage business  revenues -- increase when interest rates fall;  decrease when
interest  rates  rise  --  is  an  expected  part  of  the  mortgage   business.
Additionally, general economic conditions have additional impact on the mortgage
loan business. As a result, the Company attempts to condition itself to downsize
its  operations  in time of decline  and  increase  and  expand  during a rising
market.

     Since  the  operation  of the  mortgage  brokerage  business  is  not  cash
intensive -- its loan officers being paid modest salaries and commissions  based
upon  performance  --  the  Company  believes  its  cash  requirements  will  be
sufficient to maintain its current operations. The Company is also aware that if
its operations expand and increase,  it may be faced with the necessity to raise
additional  capital for such  expansion.  This capital would be utilized for the
immediate,  up-front  costs of employing  additional  loan  officers and support
staff for loan processing. At the present time, the Company is unable to predict
the number of additional employees it may need in the future, nor the costs with
may be attributable to such increase in personnel.

48. Describe any trends in the Company's historical operating results.  Indicate
any changes now  occurring  in the  underlying  economics of the industry or the
Company's business which, in the opinion of Management,  will have a significant
impact  (either  favorable or adverse) upon the Company's  results of operations
within the next 12 months,  and give a rough estimate of the probable  extent of
the impact, if possible.

<PAGE>


     As noted above,  the Company is subject to a large degree by interest rates
set by  government  agencies  and  wholesale  lenders.  The Company is unable to
predict with  certainty the  fluctuations  of interest rates in the coming year.
These  interest  rates also are also  determined by the general  strength of the
economy  in the  nation  as  well  as the  State  of  Colorado  and  the  Denver
metropolitan  area.  Because of this,  it is difficult to determine  whether the
Company might experience good or bad times in the near future.

49. If the Company  sells a product or products  and has had  significant  sales
during its last fiscal  year,  state the  existing  gross margin (net sales less
cost of such sales as presented in accordance with generally accepted accounting
principals)  as a percentage  of sales for the last fiscal year:  %. What is the
anticipated  gross margin for next year of operations?  Approximately %. If this
is expected to change, explain. Also, if reasonably current gross margin figures
are available for the industry, indicate these figures and the source or sources
from which they are obtained.

     NOT APPLICABLE

50.  Foreign sales as a percent of total sales for last fiscal year: %. Domestic
government  sales as a percent of total  domestic sales for last fiscal year: %.
Explain the nature of these sales, including any anticipated changes:

     NOT APPLICABLE

                                     PART II

Item 1. Market Price of and  Dividends  on the  Registrant's  Common  Equity and
Other shareholder matters.

Information required by Item 201 of Regulation S-B.

     (a) Market  Information.  There is no current market price on the Company's
     common stock as the shares are not trading at the time of this report.

     (b) Holders.  At the date of December 31, 1998, there are 26 holders of the
     common equity of the Company.

     (c) Dividends.  The Company has paid no dividends and does not  contemplate
     any dividends during the next two fiscal years.

Item 2. Legal Proceedings

     If the registrant uses either  Alternative 2 or Alternative 3 of this form,
     furnish the information required by Item 103 of Regulation S-B.

     NOT APPLICABLE. The registrant is using Alternative 1.

<PAGE>


Item 3. Changes in and Disagreements with Accountants

     Furnish the information required by Item 304 of Regulation S-B.

     There have been no  changes  of and no  disagreement  with  accountants  on
accounting and financial disclosure.

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

     If any matter was  submitted  during the fourth  quarter of the fiscal year
covered by this report to a vote of security  holders,  through the solicitation
of proxies or otherwise, furnish the following information:

     No matter was submitted to the securities holders as described above.

Item 5. Compliance with Section 16(a) of the Exchange Act

     Gary G. Clark, No changes since registration
     David R. Reitsema, No changes since registration

Item 6. Reports on form 8-K

     State whether any reports on Form 8-K were filed during the last quarter of
the period  covered by this report,  listing the times  reported,  any financial
statement filed and the dates of such report.

     NONE

PART F/S

Furnish the information required by Item 310 of Regulation S-B.

     The audited  financial  statements  for the fiscal year ended  December 31,
1998, follow:


<PAGE>






                          APPLIED CAPITAL FUNDING, INC.


                              FINANCIAL STATEMENTS

                                      with

                          Independent Auditors' Report

                 For the Years Ended December 31, 1998 and 1997

<PAGE>



                         APPLIED CAPITAL FUNDING, INC.


                               TABLE OF CONTENTS

                                                                          Page
                                                                          ----

         Independent Auditors' Report                                     F-1

         Financial Statements

                  Balance Sheet                                           F-2

                  Statement of Operations                                 F-3

                  Statement of Cash Flows                                 F-4

                  Statement of Shareholder's Equity                       F-5

                  Notes to the Financial Statements                    F-6 - F-9



<PAGE>


                        Kish * Leake & Associates, P.C.
                          Certified Public Accountants



                          Independent Auditor's Report
                          ----------------------------


We have audited the accompanying balance sheet of Applied Capital Funding, Inc.,
at December 31, 1998,  and the related  statement of  operations,  shareholders'
equity,  and cash flows for the year ended  December  31,  1998 and 1997.  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting  principles  used and the overall  financial  statement
presentation.  We believe  that our audit  provides 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 Applied Capital funding,  Inc.
at December  31, 1998 and the results of its  operations  and its cash flows for
the years  ended  December  31,  1998 and 1997,  in  conformity  with  generally
accepted accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 5 to the  financial
statements,  the Company has a lack of sufficient  working capital to operate as
of  December  31,  1998.  This  raises  substantial  doubt  about its ability to
continue as a going concern.  Management's  plans  concerning  these matters are
also  described  in  Note  5.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of these uncertainties.


/s/ Kish, Leake & Associates, P.C.
----------------------------------
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
January 25, 1999

                                       F-1




<PAGE>


Applied Capital Funding, Inc.
Balance Sheet

                                                                       Audited
                                                                       December
                                                                       31, 1998
                                                                       --------

ASSETS

Current Assets - Cash                                                  $  2,430
                                                                       --------

TOTAL ASSETS                                                           $  2,430
                                                                       ========


LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES

Accounts Payable                                                       $    330
Other Accrued Expenses                                                    1,700
                                                                       --------

TOTAL LIABILITIES                                                         2,030
                                                                       --------


SHAREHOLDERS' EQUITY

Preferred Stock, No Par Value,
 Non Voting, Authorized 5,000,000 shares;
 Issued And Outstanding -0- Shares                                            0

Common Stock, No Par Value
 Authorized 50,000,000 shares;
 15,112,000 Shares Issued And Outstanding
                                                                         34,520

Retained (Deficit)                                                      (34,120)
                                                                       --------

TOTAL SHAREHOLDERS' EQUITY                                                  400
                                                                       --------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                                                   $  2,430
                                                                       ========


   The Accompanying Notes Are An Integral Part Of These Financial Statements.

                                       F-2

<PAGE>


Applied Capital Funding, Inc.
Statement Of Operations


                                                     Year Ended     Year Ended
                                                      December       December
                                                      31, 1998       31, 1997
                                                      --------       --------

Income:

Loan Fees                                                     0     $      425
                                                     ----------     ----------

Total Revenue                                                 0            425
                                                     ----------     ----------

Operating Expenses:

Appraisals, Credit Reports & Closing Fees                 1,752             56
Bank Charges                                                 22             72
Office                                                      607            226
Legal and Accounting                                      5,938            832
Rent                                                      1,200          1,200
Salaries                                                  9,000          6,000
Telephone                                                     0            142
Stock Transfer Fees                                         920              0
Taxes - Payroll                                             549            348
                                                     ----------     ----------

Total Expenses                                           19,988          8,876
                                                     ----------     ----------

Net (Loss)                                             ($19,988)       ($8,451)
                                                     ==========     ==========

Basic(Loss) Per Common Share                            ($-0.00        ($-0.00)
                                                     ==========     ==========

Weighted Average Common Shares Outstanding           15,112,000      7,120,333
                                                     ==========     ==========





   The Accompanying Notes Are An Integral Part Of These Financial Statements.

                                       F-3


<PAGE>


Applied Capital Funding, Inc.
Statement Of Cash Flow


                                                        Year Ended    Year Ended
                                                         December      December
                                                         31, 1998      31, 1997
                                                         --------      --------

Net (Loss)                                               ($19,988)     ($ 8,451)
                                                         --------      --------

Plus Items Not Affecting Cash Flow:                             0             0

Contributed Rent And Services                               3,000         4,200

Increase (Decrease) In Accrued Expenses                     1,408           352
                                                         --------      --------

Net Cash Flows From Operations                            (15,580)       (3,899)
                                                         --------      --------

Cash Flows From Investing Activities:

                                                                0             0
                                                         --------      --------

Net Cash Flows From Investing:                                  0             0
                                                         --------      --------

Cash Flows From Financing Activities:

Common Stock Issued For Cash                                    0        27,400
Deferred Offering Costs                                         0        (5,500)
                                                         --------      --------

Net Cash Flows From Financing:                                  0        21,900
                                                         --------      --------


Net Increase (Decrease) In Cash                           (15,580)       18,001
Cash At Beginning Of Period                                18,010             9
                                                         --------      --------

Cash At End Of Period                                    $  2,430      $ 18,010
                                                         ========      ========



Summary Of Non-Cash Investing And Financing
 Activities:

Common Stock Issued For Money Advanced                   $      0      $      0
                                                         ========      ========




   The Accompanying Notes Are An Integral Part Of These Financial Statements.

                                       F-4

<PAGE>
<TABLE>
<CAPTION>


Applied Capital Funding, Inc.
Statement Of Shareholders' Equity

                                        Number Of      Number Of                                 Retained
                                         Shares         Shares       Preferred       Common      Earnings
                                        Preferred       Common         Stock         Stock       (Deficit)        Total
                                        ---------       ------         -----         -----       ---------        -----

<S>                                     <C>            <C>          <C>           <C>           <C>            <C>         
Balance At December 31, 1995                    0      1,000,000    $         0   $       100   ($    5,662)   ($    5,562)

March, 1996 issued
 412,000 Shares Of No Par Value
 Common Stock For Advances
 Previously Made By Shareholder                 0        412,000              0         4,120                        4,120

Contributed Rent                                                                        1,200                        1,200

Net (Loss)                                                                                              (19)           (19)
                                      -----------    -----------    -----------   -----------   -----------    -----------

Balance At December 31, 1996                    0      1,412,000    $         0   $     5,420   ($    5,681)   ($      261)

September 1997 Issued 13,700,000
 Shares Of No Par Value Common
 Stock For Cash At  $.002 Per Share                   13,700,000                       27,400                       27,400

Deferred Offering Costs                                                                (5,500)                      (5,500)

Contributed Services And Rent                                                           4,200                        4,200

Net (Loss)                                                                                           (8,451)        (8,451)
                                      -----------    -----------    -----------   -----------   -----------    -----------

Balance At December 31, 1997                    0     15,112,000              0        31,520       (14,132)        17,388

Contributed Services And Rent                                                           3,000                        3,000

Net (Loss)                                                                                          (19,988)       (19,988)
                                      -----------    -----------    -----------   -----------   -----------    -----------

Balance At December 31, 1998                    0     15,112,000    $         0   $    34,520   ($   34,120)   $       400
                                      ===========    ===========    ===========   ===========   ===========    ===========






                              The Accompanying Notes Are An Integral Part Of These Financial Statements

                                                               F-5
</TABLE>

<PAGE>


Applied Capital Funding, Inc.
Notes To The Financial Statements
At December 31, 1998 and 1997
-----------------------------

Note 1 - Organization and Summary of Significant Accounting Policies
--------------------------------------------------------------------
Organization:
-------------

On September  26, 1994,  Applied  Capital  Funding,  Inc.  ("the  Company")  was
incorporated  under  the  laws  of  Colorado,  to  engage  in  the  business  of
originating  residential  mortgage  loans.  The  Company  may also engage in any
business  which is  permitted  by the  Colorado  Business  Corporation  Act,  as
designated by the board of directors of the Company.

Accounting Method:

The Company uses the accrual method to record its transactions.  When a mortgage
loan is closed the Company  then  records  the  revenue  and accrues  applicable
expenses.

Fiscal Year:

The Company has chosen December 31 as its fiscal year end.

Statement of Cash Flows:

For  purposes of the  statement  of cash flows,  the  Company  considers  demand
deposits and highly liquid-debt  instruments  purchased with a maturity of three
months or less to be cash equivalents.

Cash paid for interest and taxes in the period ended  December 31, 1998 and 1997
was $-0-.

Use Of Estimates:

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

                                       F-6

<PAGE>


Applied Capital Funding, Inc.
Notes To The Financial Statements
At December 31, 1998 and 1997
-----------------------------

Note 2 - Capital Stock
----------------------

Common Stock:

The Company initially authorized  50,000,000 shares of no par value common stock
and issued 1,000,000.  In March 1996, the Company's Board Of Directors  approved
the issuance of an additional 412,000 of common stock in exchange for the $4,120
that was owed an officer.

In September 1997 the Company sold 13,700,000  shares of its no par value common
stock for  $27,400 in cash or $.002 per share.  The  Company  incurred  deferred
offering  expenses  of $5,500  comprised  of legal and  accounting  fees.  These
expenses are deducted from the proceeds.  If the offering was unsuccessful  then
these expenses would have been deducted.

Preferred Stock

The Company initially  authorized  5,000,000 shares of no par value,  non-voting
preferred  stock, the rights and preferences of which is to be determined by the
Board Of Directors at the time of issuance. No stock has been issued.

The Company has declared no dividends through December 31, 1998.

Note 3 - Income Taxes
---------------------

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to differences  between the recorded book basis and tax basis
of assets and liabilities  for financial and income tax reporting.  The deferred
tax assets and liabilities represent the future tax return consequences of those
differences,  which will  either be taxable  or  deductible  when the assets and
liabilities  are recovered or settled.  Deferred  taxes are also  recognized for
operating  losses that are  available to offset  future  taxable  income and tax
credits that are available to offset federal income taxes.

The Company has a net operating loss carryforward for tax purposes of $23,421 at
December  31,  1998.  These  carryforwards,  will start to expire in 2011 if not
utilized.

                                       F-7
<PAGE>


Applied Capital Funding, Inc.
Notes To The Financial Statements
At December 31, 1998 and 1997
-----------------------------

Note 3 - Income Taxes (Continued)
---------------------------------

The components of the deferred income tax asset arising under FASB Statement No.
109 and recognized in the accompanying balance sheet at December 31, 1998 are as
follows:

              Deferred Tax Asset                $ 3,398
              Valuation Allowance                (3,398)
                                                -------
                                                $   -0-
                                                =======

The types of  temporary  differences  between  the tax basis of assets and their
financial  reporting  amounts  that give rise to a  significant  portion  of the
deferred tax asset are as follows:

                                          Temporary Differences    Tax Effect
                                          ---------------------    ----------
              Accrued Expenses                  $ 1,530              $   306
              Net operating loss carryforward    15,458                3,092
                                                -------              -------
                                                $16,988              $ 3,398
                                                =======              =======

Note 4 - Related Party Events
-----------------------------

The Company presently  maintains its principal offices at an address provided by
a related party. The office is located at 4155 E Jewell Ave - Suite 909, Denver,
Colorado 80222. Commencing August 1, 1997 the Company will pay a minimum of $100
per month in rent on a month to month basis.

Note 5 - Officer Compensation And Rent
--------------------------------------

During the year ended December 31, 1998 and 1997 Company management  contributed
$3,000 and $3,500  respectively  in services  and which have been  recorded as a
contribution of equity.

During the years ended December 31, 1997 management  contributed  rent which was
valued at $700 which was recorded as a contribution of equity.

Note 6 - Basis Of Presentation
------------------------------

In the course of its activities, the Company has sustained continuing losses and
expects such losses to continue in the foreseeable  future. The Company plans to
continue  financing  its  operations  with stock  sales and in the longer  term,
revenues  from its  operations.  The  Company's  ability to  continue as a going
concern is dependent  upon the  successful  completion of its offering of common
stock,   additional  financing  and,   ultimately,   upon  achieving  profitable
operations.

                                       F-8

<PAGE>


Applied Capital Funding, Inc.
Notes To The Financial Statements
At December 31, 1998 and 1997
-----------------------------

Note 7 - Subsequent Events
--------------------------

On January  14, 1999 the Board of  Directors  approved  the  issuance of 160,000
shares of  preferred  stock in exchange  for  13,362,000  shares of  outstanding
common stock.  The Directors  have  assigned the  following  preferences  to the
issued and outstanding  shares of Preferred  Stock: (i) Preferred Stock shall be
non-voting,  (ii) the holders of the stock as a group have the right to receive,
prorata, upon dissolution or winding up of the Company, 10% of the assets of the
Company  prior to  division  and  distribution  of assets to the  holders of the
Company's Common Stock.

On January 29, 1999 the Board of Directors  approved a 2 for 1 forward  split of
its common stock effective as of the record date of February 22, 1999.


                                       F-9

<PAGE>


                                    PART III

Item 1.  Index to Exhibits

Exhibits required in Part III of Form 1-A

Exhibit Number:    Description

Exhibit No. 2.     Plan of Acquisition                    Not Applicable
Exhibit No. 3.     Charter and Bylaws                     Previously Filed
Exhibit No. 5.     Voting trust agreement                 Not applicable
Exhibit No. 6.     Material contracts                     Not applicable
Exhibit No. 7.     Material foreign patents               Not applicable
Exhibit No. 11.    Statement re: computation of per
                    share earnings                        Not applicable
Exhibit No. 24.    Power of attorney                      Not applicable
Exhibit No. 27.    Financial Data Schedule                Attached


<PAGE>


Signatures

In  accordance  with  Section 12 of the  Securities  Exchange  Act of 1934,  the
registrant caused this registration  statement to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            APPLIED CAPITAL FUNDING, INC.
                                            (Registrant)

Date:  March 3, 1999

                                            /s/ David R. Reitsema
                                            ------------------------------------
                                            David R. Reitsema, Secretary