<PAGE>

                                   FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER: 0-09562


                            COLONIAL INDUSTRIES, INC.

                          formerly Impact Energy, Inc.



Texas                                                                 84-0818655
(Jurisdiction of Incorporation)            (I.R.S. Employer Identification  No.)

PO Box 980459, Houston Texas                                          77098-0459
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code:           (713) 592-8002

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

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

Yes[ ] No[x] (Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.)

Not[X] (Indicate by check mark whether if disclosure of delinquent filers
(229.405) is not and will not to the best of Registrant's knowledge be contained
herein, in definitive proxy or information statements incorporated herein by
reference or any amendment hereto.)

As of December 31, 2000, the aggregate number of shares held by non-affiliates
was approximately 1,802,434 shares. Due to the limited market for the Company
securities, no estimate is being supplied herewith of the market value for such
securities.

As of December 31, 2000, the number of shares outstanding of the Registrant's
Common Stock was 6,802,434.



                       Exhibit Index is found on page 8



                                       1
<PAGE>

--------------------------------------------------------------------------------

                                     PART I

--------------------------------------------------------------------------------


                        ITEM 1. DESCRIPTION OF BUSINESS.


 (A) HISTORICAL INFORMATION. Colonial Industries, Inc., formerly Impact Energy,
Inc., is a Texas corporation, originally a Colorado corporation organized April
1, 1980, formed to engage in exploration for, development and sale of, oil and
gas. During March of 1988, Impact contributed all its producing oil and gas
properties to Southwest Sites, Inc., and distributed the ownership of Southwest
to the shareholders of Impact. After the disposition, Impact began pursuing
investment opportunities in the financial services industry. Impact made public
announcements during 1988 of its intention to pursue the acquisition of failed
Banks and Savings and Loans, in the State of Texas. No acquisitions were made in
1988, although I pact did provide funding with respect to two Texas Banks. The
Company became inactive in 1989 and has remained so to date.

On April 23, 1998, Impact Energy, Inc. (Colorado) moved its place of
incorporation from Colorado to Texas, and changed its name to Colonial
Industries, Inc., and a share for share exchange took place. In November of
1998, pursuant to shareholder approval, the issued and outstanding common stock
was reverse-split 75 shares to 1 share.

(B) BUSINESS. Impact Energy, Inc. was a Colorado corporation organized April 1,
1980, originally formed to engage in exploration for, development and sale of,
oil and gas. During March of 1988, Impact contributed all its producing oil and
gas properties to Southwest Sites, Inc., and distributed the ownership of
Southwest to the shareholders of Impact. After the disposition, Impact began
pursuing investment opportunities in the financial services industry. Impact
made public announcements during 1988 of its intention to pursue the acquisition
of failed Banks and Savings and Loans, in the State of Texas. No acquisitions
were made in 1988, although Impact did provide funding with respect to two Texas
Banks. The Company became inactive in 1989 and has remained so to date.

Accordingly, this Issuer has no business or productive assets and remains
essentially dormant, its activities limited to maintaining its corporate
franchise in Texas, and making required periodic filings and disclosure.

(C) FINANCING PLANS. For more information, please see Item 6 of Part II,
Management's Discussion and Analysis.

(D) GOVERNMENT REGULATION. There are no issues of government regulation unique
to this Registrant or its business.

(E) PLANNED ACQUISITIONS. There are no planned acquisitions.

(F) EMPLOYEES. The Company has no employees or facilities, and enjoys the
non-exclusive office services of its President and Majority Shareholder.


                        ITEM 2. DESCRIPTION OF PROPERTY.

The Company has no employees or facilities, and enjoys the non-exclusive office
services of its Officers and Principal Shareholders.



                                        2

<PAGE>

                           ITEM 3. LEGAL PROCEEDINGS.

The Company has two tax liens and one outstanding judgement. Taxes are owed to
the IRS and the State of Texas in the amount of $9,812. An outstanding judgement
of $39,120 is also outstanding on the records of the County clerk of Dallas
County, Texas. These liabilities are reflected on the records as accounts
payable and estimated accrued interest on these obligations have also been
recorded through December 31, 2000.

There are no other legal or other proceedings pending against the Company, as of
the preparation of this Report, and no facts are known or suspected which would
give rise to any anticipation of any such proceedings in the foreseeable future.


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

There have been no matters submitted to a vote of shareholders during the annual
period covered by this report.

The Remainder of this Page is intentionally left Blank




                                        3
<PAGE>

--------------------------------------------------------------------------------

                                     PART II

--------------------------------------------------------------------------------


            ITEM 5. MARKET FOR COMMON EQUITY AND STOCKHOLDER MATTERS.


(A) MARKET INFORMATION. We have one class of securities, No Par Common Stock
(Common Stock ). As of the date of this Annual Report, the securities of the
Issuer are not traded over the counter or on any trading exchange. There is no
assurance of any future trading in or of the securities of this Issuer. As of
December 31, 2000, the Company has issued and outstanding 6,802,434 shares of
Common Stock. There stands of record 1,802,434 unrestricted free-trading, and
5,000,000 issued as Restricted Securities.

(B) HOLDERS. Management calculates that the approximate number of holders of the
Company's Common Stock, as of December 31, 2000 was 1,172.

(C) DIVIDENDS. No cash dividends have been paid by the Company on its Common
Stock and no such payment is anticipated in the foreseeable future. No other
dividends have been paid or declared by the Issuer and none are anticipated.

(D) SALES OF UNREGISTERED COMMON STOCK DURING 1999. None.


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


 (A) PLAN OF OPERATION. The Company is a candidate for a business combination,
joint venture, or structured acquisition, which, if effective, would create
profitability for the Company and its shareholders. There are no present plans
to pursue any acquisition at this time.

 (B) RESULTS OF OPERATIONS. We have no current business, and have had no
operations in the last two fiscal years. This Issuer has no business or
productive assets and remains essentially dormant, its activities limited to
maintaining its corporate franchise in Texas, and making required periodic
filings and disclosure.

(C) LIQUIDITY AND CAPITAL RESOURCES. We have no capital resources and no
liquidity. This Issuer has no business or productive assets and remains
essentially dormant, its activities limited to maintaining its corporate
franchise in Texas, and making required periodic filings and disclosure.


                          ITEM 7. FINANCIAL STATEMENTS.

Auditors Report of December 31, 2000 is filed herewith. These financial
statements, attached thereto are incorporated herein by this reference as though
fully set forth herein.


   ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                            FINANCIAL DISCLOSURE.

None.

The Remainder of this Page is Intentionally left Blank



                                        4

<PAGE>

--------------------------------------------------------------------------------

                                    PART III

--------------------------------------------------------------------------------



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


Jack Wells, President/Director, age 55, is also the president of ACX Industries,
Inc., the largest shareholder of this reporting corporation. He has over twenty
five years experience in all phases of the automobile industry, including nine
years as the owner-operator of one of Houston's largest recycling operations,
and six years as an independent automobile broker. He has served, on many
occasions, as an automotive consultant to banks and financial institutions and
as an expert automobile industry witness in court cases. In addition to his
affiliation with this corporation, he is the owner of Wells Investments, which,
through its subsidiaries, is a State of Texas licensed dealer of motorized
vehicles. He attended South Texas University and the University of Houston, is a
member of the National Automobile Dealers Association (NADA), the Houston
Automobile Dealers Association, and the Harris County Used Auto and Truck Parts
Association.

Joe Kane, Secretary/Director, age 57, is also secretary and treasurer of ACX
Industries. He is an attorney admitted to practice in both State and Federal
Courts, and a member of the bar of the Supreme Court of the United States. He is
currently serving as Chief Auditor for a division of a large hotel chain. From
1988 to 1990, he was employed as Director of Operations for a Texas based Life
Insurance Company. Previously, he was engaged in private practice of law and
small business consulting for 14 years. He earned his Bachelor of Science,
Business and Economics, from the Illinois Institute of Technology, a Master of
Business Administration from Michigan State University, and his Juris Doctor
from Loyola University School of Law.



                        ITEM 10. EXECUTIVE COMPENSATION.

The Officers and Directors devote an insubstantial amount of time to our affairs
at this time and for the last several years. They serve without compensation.


   ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

 (A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. To the best of
Registrant's knowledge and belief the following disclosure presents the total
security ownership of all persons, entities and groups, known to or discoverable
by Registrant, to be the beneficial owner or owners of more than five percent of
any voting class of Registrant's stock. More than one person, entity or group
could be beneficially interested in the same securities, so that the total of
all percentages may accordingly exceed one hundred percent of some or any
classes. Please refer to explanatory notes if any, for clarification or
additional information. The Registrant has only one class of stock; namely
Common Stock.

 (B) SECURITY OWNERSHIP OF MANAGEMENT. To the best of Registrant's knowledge and
belief the following disclosure represents the total beneficial security
ownership of all Directors and Nominees, naming them, and by all Officers and
Directors as a group, without naming them, of Registrant, known to or
discoverable by Registrant. More than one person, entity or group could be
beneficially interested in the same securities, so that the total of all
percentages may accordingly exceed one hundred percent of some or any classes.



                                        5
<PAGE>

Please refer to explanatory notes if any, for clarification or additional
information.


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

Jack Wells (1) President/Director                 5,000,000             73.50
PO Box 980459
Houston Texas 77098-0459

------------------------------------------------------------------------------

Joe Kane (1) Secretary/Director                   5,000,000             73.50
PO Box 980459
Houston Texas 77098-0459

------------------------------------------------------------------------------

All Officers and Directors as a Group (1)         5,000,000             73.50

==============================================================================

ACX Industries Inc. (1)                           5,000,000             73.50
PO Box 980459
Houston Texas

------------------------------------------------------------------------------

Total Shares Issued and Outstanding               6,802,434            100.00

==============================================================================


(1) The shares owned by ACX are treated as if owned by the Officers of this
Issuer, by reason of their affiliation with that principal shareholder. They are
the same 5,000,000 shares.


           ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.


              ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                              REPORTS ON FORM 8-K.


(A) FINANCIAL STATEMENTS. Exhibit F-99 Financial Statements: December 31, 1999
and 1998 (audited).


(B) FORM 8-K REPORTS. None.


(C) EXHIBITS. Exhibit F-00 Financial Statements: December 31, 2000 and 1999
(audited).


                 SUPPLEMENTARY INFORMATION TO BE FURNISHED WITH
              REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY
                REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
                       PURSUANT TO SECTION 12 OF THE ACT.

No annual report or proxy material has been sent to security holders.



                                        6
<PAGE>

                                   SIGNATURES

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


Dated:  September 10,  2001


                            COLONIAL INDUSTRIES, INC.
                               A TEXAS CORPORATION

                                       by


/s/                                                                        /s/
Jack Wells                                                            Joe Kane
President/Director                                         Secretary/Treasurer



                                        7

<PAGE>





--------------------------------------------------------------------------------

                                  EXHIBIT F-00
                          AUDITED FINANCIAL STATEMENTS:
                           DECEMBER 31, 2000 AND 1999

--------------------------------------------------------------------------------

<PAGE>

                            COLONIAL INDUSTRIES, INC.
                           BALANCE SHEETS (UNAUDITED)
              for the fiscal years ended December 31, 1999 and 2000

<TABLE>
<CAPTION>
                                                                                  December 31,       December 31,
                                                                                     2000               1999
                                                                                 --------------     --------------
<S>                                                                                    <C>                <C>
                             ASSETS

CURRENT ASSETS

        Cash                                                                           $ -0-              $ -0-

TOTAL CURRENT ASSETS                                                                     -0-                -0-
                                                                                   ---------          ---------

TOTAL ASSETS                                                                           $ -0-              $ -0-
                                                                                   =========          =========


               LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

    Accounts payable                                                               $  50,430          $  49,577
    Accounts payable - related party                                                   2,040
    Accrued interest                                                                  48,931             44,038
                                                                                   ---------          ---------
        Total Current Liabilities                                                    101,401             93,615
                                                                                   ---------          ---------

STOCKHOLDERS' EQUITY

    Common Stock, no par value; authorized 75,000,000 shares of no par value,
       issued and outstanding; 70,049,340 and 68,024,340 shares respectively
    Additional paid-in Capital (Discount on stock)                                   (48,932)           (48,932)

    Accumulated Surplus (Deficit)                                                    (52,469)           (44,683)
                                                                                   ---------          ---------

Total Stockholders' Equity                                                          (101,401)           (93,615)
                                                                                   ---------          ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $       0              $ -0-
                                                                                   =========          =========

</TABLE>


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

<PAGE>
                            COLONIAL INDUSTRIES, INC.
                          (a Development Stage Company)
                      STATEMENTS OF OPERATIONS (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                                                Deficit
                                                                    for the years                             accumulated
                                                                    ended December 31,                         during the
                                                ---------------------------------------------------            development
                                                    2000                 1999                1998                 stage
                                                -----------          -----------          -----------          -----------
<S>                                             <C>                  <C>                  <C>                  <C>
Revenues                                        $       -0-          $       -0-          $       -0-          $       -0-
                                                -----------          -----------          -----------          -----------

Expenses

  General & administrative                            2,893                                       645                3,538
                                                -----------          -----------          -----------          -----------

Total Operating Expenses                              2,893                                       645                3,538
                                                -----------          -----------          -----------          -----------

Net Operating Loss                                   (2,893)               (--)                  (645)              (3,538)

Other Income (Expense)

  Interest expense                                   (4,893)              (4,893)              (4,893)             (48,931)
                                                -----------          -----------          -----------          -----------

    Total Other Income (Expense)                     (4,893)              (4,893)              (4,893)             (48,931)
                                                -----------          -----------          -----------          -----------

Net Income (Loss)                               $    (7,786)         $    (4,893)         $    (5,538)         $   (52,469)
                                                ===========          ===========          ===========          ===========

Net Income (Loss) per Share                     $  (0.00114)         $  (0.00072)         $  (0.00081)         $  (0.02570)
                                                ===========          ===========          ===========          ===========

Weighted Average
    Shares Outstanding                            6,802,434            6,802,434            6,802,434            2,041,430
                                                ===========          ===========          ===========          ===========
</TABLE>

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


                                    page F-2

<PAGE>
                            COLONIAL INDUSTRIES, INC.
            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
   for the period from inception of the Development Stage on January 1, 1990,
         and for the fiscal years ended December 31, 1991, through 2000

<TABLE>
<CAPTION>

                                                                                              Additional             Deficit
                                                                                               Paid-in             Accumulated
                                                                                               Capital             During the
                                                             Common Stock                    (Discount on          Development
                                                        Shares              Amount              Stock)                Stage
                                                     ------------        ------------        ------------        ------------
<S>                                                           <C>        <C>                 <C>                 <C>
Balance at beginning of development                           999        $ 13,110,115        $                   $(13,159,047)
   stage - January 1, 1990

Net Loss December 31, 1990-1997                                                                                       (34,252)
                                                     ------------        ------------        ------------        ------------

Balance December 31, 1997                                     999          13,110,115                   0         (13,193,299)

Fractional shares from stock split                          1,435

Shares issued for acquisition of
   Colonial Industries and reorganization               6,800,000         (13,110,115)            (48,932)         13,159,047

Net Loss December 31, 1998                                                                                             (5,538)
                                                     ------------        ------------        ------------        ------------

Balance December 31, 1998                               6,802,434                                 (48,932)            (39,790)

Net (Loss) for the period ended
     December 31, 1999                                                                                                 (4,893)
                                                     ------------        ------------        ------------        ------------

Balance December 31, 1999                               6,802,434                                 (48,932)            (44,683)

Net (Loss) for the period ended
     December 31, 2000                                                                                                 (7,786)
                                                     ------------        ------------        ------------        ------------

Balance September 30, 2000                              6,802,434        $          0        $    (48,932)       $    (52,469)
                                                     ============        ============        ============        ============

</TABLE>


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



                                    page F-3

<PAGE>

COLONIAL INDUSTRIES, INC.
(a Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)

<TABLE>
<CAPTION>
                                                                                        From inception on
                                                             For the periods             January 1, 1990
                                                            ended September 30,              through
                                                         -------------------------        September 30,
                                                            2001            2000              2001
                                                         --------         --------      -------------------
<S>                                                      <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net Income (Loss)                                        $ (5,209)        $ (5,840)         $(57,678)
Adjustments to reconcile net loss to
  net cash provided by operations
  Account payable & accruals                                5,209            5,840            57,678
                                                         --------         --------          --------

Net cash flows from operating activities                        0                0                 0
                                                         --------         --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES                            0                0                 0
                                                         --------         --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES                            0                0                 0
                                                         --------         --------          --------
                                                                0                0                 0

NET INCREASE IN CASH

CASH AT BEGINNING OF PERIOD                                   -0-              -0-               -0-
                                                         --------         --------          --------

CASH AT END OF PERIOD                                       $ -0-            $ -0-             $ -0-
                                                         ========         ========          ========

Supplemental Cash Flow Information
  Cash Paid for:
     Interest                                            $      0         $      0          $      0
     Taxes                                               $      0         $      0          $      0

</TABLE>


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



                                    page F-4

<PAGE>

                           COLONIAL INDUSTRIES, INC.
                          (a Development Stage Company)
                 Notes to The Consolidated Financial Statements
                           December 31, 2000 and 1999


NOTE 1 - Summary of Significant Accounting Policies

      a.  Organization

      Colonial Industries, Inc., ("the Company") formerly known as Impact
      Energy, Inc., (a Colorado corporation organized on April 1, 1980), was
      originally formed to engage in exploration for, and development,
      production and sale of, oil and gas. During March, 1988 Impact contributed
      all its producing oil and gas properties to Southwest Sites Inc. and
      distributed the Ownership of Southwest to Impact's shareholders. After the
      disposition of the oil and gas properties, Impact began pursuing
      investment opportunities in the financial services industry.

      The Company made public announcements during 1988 stating its intent to
      pursue the acquisition of failed Banks and Savings and Loans in the state
      of Texas. No acquisitions were made in 1988 although the Company did
      provide the financing for the recapitalization of one Texas bank and
      provide the capital to refinance the control group of another.

      The Company went inactive in 1989 and has been dormant ever since.

      On April 23, 1998, Impact Energy, Inc. (Colorado) merged with Impact
      Energy, Inc a Texas corporation, with the Texas corporation being the
      survivor. Then on the same date, the Company merged with Colonial
      Industries, Inc. a Texas corporation organized on April 22, 1998 and
      changed the name of the Company to Colonial Industries, Inc. Colonial has
      75,000,000 no par value shares authorized, and a share for share exchange
      took place. A reorganization adjustment was made on the books and records
      and the retained deficit was eliminated.

      b.  Accounting Method

      The Company recognizes income and expenses on the accrual basis of
      accounting.

      c.  Earnings (Loss) Per Share

      The computation of earnings per share of common stock is based on the
      weighted average number of shares outstanding at the date of the financial
      statements.

<TABLE>
<CAPTION>
                                                         INCOME (LOSS)          SHARES            PER SHARE
                                                          (NUMERATOR)        (DENOMINATOR)         AMOUNT
                                                            ------------  -------------------- -----------------
<S>                                                        <C>                 <C>                <C>
           For the year ended December 31, 2000:
           Basic EPS:
           Income (loss) to common shareholders            $  (7,786)          6,802,434          $      --
                                                           =========           =========          =========

           For the year ended December 31, 1999:
           Basic EPS:
           Income (loss) to common shareholders            $  (4,893)          6,802,434          $      --
                                                           =========           =========          =========

           For the year ended December 31, 1998:
           Basic EPS:
           Income (loss) to common shareholders            $  (5,538)          6,802,434          $      --
                                                           =========           =========          =========
</TABLE>

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


<PAGE>

                            COLONIAL INDUSTRIES, INC.
                          (a Development Stage Company)
                 Notes to The Consolidated Financial Statements
                           December 31, 2000 and 1999

NOTE 1 - Summary of Significant Accounting Policies (Continued)

         c.  Earnings (Loss) Per Share (Continued)

<TABLE>
<CAPTION>
                                                            INCOME (LOSS)       SHARES          PER SHARE
                                                             (NUMERATOR)     (DENOMINATOR)        AMOUNT
                                                           ---------------   --------------   -------------
<S>                                                         <C>                  <C>           <C>
           From January 1, 1990 (inception of the
             development stage) to December 31, 2000:
           Basic EPS:
           Income (loss) to common shareholders             $     (52,469)       2,041,430     $      (.02)
                                                            =============     ============     ===========
</TABLE>

      d.  Cash and Cash Equivalents

      The Company considers all highly liquid investments with maturities of
      three months or less to be cash equivalents.

      e.  Provision for Income Taxes

      No provision for income taxes has been recorded due to net operating loss
      carryforwards totaling approximately $1,700,000 that will be offset
      against future taxable income. These NOL carryforwards have already begun
      to expire and are limited to use based on ownership changes through
      acquisitions. No tax benefit has been reported in the financial statements
      because the Company believes there is a 50% or greater chance the
      carryforward will expire unused.

      Deferred tax assets and the valuation account is as follows at December
      31, 2000 and 1999:

                                                  December 31,
                                            2000               1999
                                         ---------          ---------
      Deferred tax asset:
         NOL carrryforward               $ 578,000          $ 578,000
      Valuation allowance                 (578,000)          (578,000)
                                         ---------          ---------
      Total                              $      --          $      --
                                         =========          =========

      f.  Use of estimates

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

      g.  Principles of Consolidation

      The Consolidated Financial Statements include the accounts of Colonial
      Industries, Inc. a Colorado corporation and its wholly owned subsidiary
      Colonial Industries, Inc. a Texas corporation. All intercompany accounts
      and transactions have been eliminated in the consolidation.



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

<PAGE>

                           COLONIAL INDUSTRIES, INC.
                         (a Development Stage Company)
                Notes to The Consolidated Financial Statements
                          December 31, 2000 and 1999

NOTE 2 - Going Concern

      The accompanying financial statements have been prepared assuming that the
      Company will continue as a going concern. The Company has no assets and no
      operating activity and is dependent upon financing to continue operations.
      The financial statements do not include any adjustments that might result
      from the outcome of this uncertainty. It is management's plan to find an
      operating company to merge with providing necessary operating capital.

NOTE 3 - Development Stage Company

      The Company is a development stage company as defined in Financial
      Accounting Standards Board Statement No. 7. It is concentrating
      substantially all of its efforts in raising capital and developing its
      business operations in order to generate significant revenues. Management
      has elected to use January 1, 1990 as the date the Company began the
      development stage.

NOTE 4 - Liens and Judgements

      The Company has two tax liens and one outstanding judgement. Taxes are
      owed to the IRS and the State of Texas in the amount of $9,812. An
      outstanding judgement of $39,120 is also outstanding on the records of the
      County Clerk of Dallas County, Texas. These liabilities are reflected on
      the records as accounts payable and estimated accrued interest on these
      obligations have also been recorded through December 31, 2000.

NOTE 5 - Related Party Transactions

      During 2000, an officer of the Company paid $2,040 of expenses on behalf
      of the Company. There were no payments to the officer during 2000. The
      balance payable at December 31, 2000 is $2,040.

NOTE 6 - Stock Split

      On April 23, 1998, the Company authorized a 1 for 75,000 reverse stock
      split. These financial statements have been retroactively restated to
      reflect the split. The par value has also been retroactively restated.




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