<PAGE>
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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(MARK ONE)
 [X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934
         For the fiscal year ended June 30, 2000

 [ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the transition period from __________ to __________

                         Commission File Number 0-22968

                                FOCAL CORPORATION
                 (Name of small business issuer in its charter)

          UTAH                                                    87-0363789
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

       1415 W. NORTH ST., #302
         ANAHEIM, CALIFORNIA                                         92801
----------------------------------------                          ----------
(Address of principal executive offices)                          (Zip Code)

         Issuer's telephone number (including area code): (714) 635-8821

Securities registered under Section 12(b) of the Exchange Act:

                                      None

Securities registered pursuant to Section 12(g) of the Exchange Act:

                     Common Stock, $0.10 par value per share
                     ---------------------------------------
                                (Title of Class)

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B 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]

         The registrant's revenues for its most recent fiscal year were -0-.

         As of June 30, 2000 non-affiliates of the Company held 1,818,970 shares
of the Company's only class of Common Stock, $0.10 par value per share. The
Company's common stock trades on the OTC Bulletin Board of the National
Association of Securities Dealers under the symbol "FCLO".

         The number of shares outstanding of the registrant's Common Stock was
6,637,380 as of June 30, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.

================================================================================
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

     Focal Corporation ("Company") was incorporated in Utah on August 12, 1980
as Petro Funding, Inc., for the purpose of acquiring, exploring and developing
natural resource properties. The Company changed its name to TVM Global
Entertainment, Inc. in November 1982, and to Cinema Features, Inc. in July 1983,
as part of the Company's plan to invest in movie production and distribution
rights. By January 1985, the Company had acquired the movie and video cassette
distribution rights for eight motion pictures. In 1989, the Company's movie
rights were independently appraised for audit purposes and the total cost base
of $2,100,000 was decreased by $770,000 to a revised value of $1,330,000.

     In March 1993, after several years of unprofitable operations, the
Company's Board of Directors entered into negotiations to sell the Company's
movie rights. As a result of a shareholders meeting held on May 17, 1993, and
with the approval of the Company's shareholders, all of the Company's assets
relating to movie production and distribution were sold to an independent
marketing firm in exchange for $1,200,000 worth of restricted stock. Shortly
thereafter, the shares of restricted stock were distributed to the shareholders
of the Company, on a pro rata basis and without consideration, and the Company's
Articles of Incorporation were amended to change the name of the Company to
Focal Corporation. In addition such amendment to the Company's Articles of
Incorporation effected a one-for-ten reverse stock split of the Company's Common
Stock, changed the par value of the Company's Common Stock to $0.10 per share,
and established a new class of undesignated preferred stock.

     During August 1993, the Company's Board of Directors approved a new
business plan to acquire and develop community shopping centers and other types
of operating real properties. In connection with the Company's new business
plan, the Board of Directors appointed Howard M. Palmer as President and
Chairman of the Board. See "Certain Relationships and Related Transactions."
Through Mr. Palmer's experience, coupled with a number of experienced
consultants, including independent architects, construction and civil engineers,
developers, brokers and attorneys, the Company intends to acquire and/or develop
real properties with operations or the potential for operations that generate
positive cash flows.

     In June of 1999, the Company entered into four different escrows for the
purchase of seven parcels of developable land in Rosamond, California. The
escrows on the seven parcels closed in September and October of 1999. The
purchase price for the four parcels totaled $1,657,659 and consisted of (i)
775,019 shares of the Company's Common Stock valued (for escrow purposes) at
$775,019, (ii) the assumption of various debts and liens totaling $730,066,
(iii) a note payable in the amount of $144,214, and (iv) cash in the amount of
$8,360. The largest of the parcels is 80 acres, on which the Company plans to
develop a modern recreational vehicle park. The Company intends to construct
approximately 525 recreational vehicle pads surrounding a fresh water lake,
various beaches and other recreation-oriented facilities. The Company has been
notified that a forced sale of certain of the parcels may occur to pay
delinquent property taxes. Foreclosure has also been initiated with respect to
the Rosamond parcels due to delinquent utility bond assessments.

     In June 1999, the Company entered into escrow for the purchase of
approximately 48 acres of undeveloped land in Rosamond, California. The purchase
price consists of (i) 395,244 shares of the Company's Common Stock valued (for
escrow purposes only) at $395,244, and (ii) cash in the amount of $6,000. The
purchase of the additional land has not yet closed.
<PAGE>

     The Company has never before acquired or developed a recreational vehicle
park. Accordingly, there is no assurance that the Company will successfully
develop a recreational vehicle park in the future. However, because the Company
has engaged the services of independent consultants with many years of
experience in site analysis, land use regulations and recreational park
development, the Company believes it has in such individuals the necessary
expertise to successfully accomplish its development plan. The Company also has
not secured either a mortgage loan or private investments to finance such
development, and there is no assurance that adequate financing will be obtained.
However, because the Company has contacted several investors expressing interest
in becoming equity partners in the property and its planned development, the
Company believes that it will secure adequate financing to successfully
implement its plans to develop a recreational vehicle park. The Company intends
to hire professional managers to conduct the day-to-day operations of the
recreational vehicle park once it is developed.

     As the Company's financial condition improves, and as appropriate
opportunities arise, the Company also intends to acquire strategically located
existing discount shopping centers, or vacant land suitable for the development
of discount shopping centers. The Company has never acquired a discount shopping
center, acquired vacant land suitable for development of a shopping center or
developed a shopping center. Accordingly, there is no assurance that any
shopping centers will be successfully acquired or developed in the future.
However, because the Company's President has over 25 years of experience in the
development, ownership and management of shopping centers, and because the
Company has engaged the services of independent consultants with many years of
experience in site analysis, property acquisition, land use regulations, anchor
tenant negotiations and the development of retail complexes with national
discount-oriented tenants, the Company believes it has in such individuals the
necessary expertise to acquire and/or develop shopping centers which generate
positive cash flows. It is intended that shopping centers which are either
acquired or developed by the Company will be operated, on a day-to-day basis, by
professional managers selected by the Company.

     The Company is in various stages of negotiation to acquire properties in
Las Vegas, Nevada (one shopping center), Lancaster, California (one shopping
center), Calexico, California (developable land), San Diego, California
(developable land), Victorville, California (developable land) and Barstow,
California (developable land). Each of the shopping centers is anchored by a
major national retailer (such as Target) on a long-term lease, and range in size
from 100,000 square feet to 150,000 square feet. The unimproved parcels are
zoned for commercial use, and the Company has received preliminary indications
of interest from major national retailers to be the anchor tenants. The parcels
range in size from 10 to 50 acres.

     As of June 30, 2000, the Company employed one person on a full time basis
and five part-time hourly employees. The Company also contracts with several
individuals as independent contractors for various services periodically
required by the Company.

ITEM 2. DESCRIPTION OF PROPERTY.

     The Company occupies a small office in Anaheim, California provided by
Palmer Development Company, an affiliate of the Company's President, on a month
to month basis. The Company presently pays no rent. Management of the Company
considers the office space to be adequate to meet the current demands of the
Company's business; however, the Company is currently looking at larger office
space in Orange County, California, which will accommodate a small property
management and administrative staff.

     In the opinion of the Company's Management, all of the Company's properties
are adequately insured.
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

     On January 10, 2000, a consultant used by the Company filed suit for
payment of unpaid engineering fees in the amount of approximately $60,000. In
July, 2000, a court granted summary judgment in favor of the plaintiff. As of
June 30, 2000, the Company has accrued a liability of approximately $60,000
related to this matter.


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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

     The Company's Common Stock is not listed on any exchange and is not quoted
or traded on the over-the-counter market. No broker maintains a position or
deals in the Company's Common Stock. No bid or asked prices are quoted in the
pink sheets or any local newspaper. Although the Company uses a transfer agent
to maintain its stock transfer ledgers, the Company is typically aware of any
transactions involving changes in record ownership.

     As of June 30, 2000, there were 6,637,380 shares of the Company's Common
Stock issued and outstanding, held of record by 470 shareholders.

     The Company has paid no dividends on its Common Stock and does not expect
to pay dividends in the foreseeable future.

     TransferOnline.com, a corporation doing business in Portland, Oregon,
serves as transfer agent for the Common Stock of the Company.

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

PLAN OF OPERATION

     The Company's current plan of operation is to develop its recently-acquired
parcels of property located in Rosamond, California into a regionally popular
recreational vehicle park. The Company intends to construct approximately 525
recreational vehicle pads surrounding a fresh water lake, various beaches and
other recreation-oriented facilities. The Company expects its planned
improvements to cost a total of approximately $15,000,000, which the Company
expects to finance partly through a mortgage loan and partly through private
equity investors. However, the Company believes that a significantly smaller
amount of investment funds will be sufficient to enable the Company to permit
public access to, begin operations of and generate cash flows from the
recreational vehicle park.

     The Company's investment objective in developing a recreational vehicle
park is to achieve long-term capital appreciation through increased cash flow
and value of the developed property. The Company will seek to accomplish its
investment objective through (i) state-of-the-art developments, improvements and
renovations which generally increase the popularity and public appeal of the
recreational vehicle park, (ii) strategic marketing and advertising efforts
promoting high rates of occupancy of the recreational vehicle pads, and (iii)
promotional events designed to foster long-term occupancies and frequent use of
the recreational vehicle park.

     The Company also currently plans to acquire commercial shopping centers in
the Western United States. The Company expects to target centers anchored by
long-term leases with national, credit-rated retail tenants and which generate
positive cash flows. The Company intends to acquire existing shopping centers of
approximately eight to 20 acres, which are expected to include a major discount
department store, a major supermarket and several credit-rated retailers
strategically spaced between the larger anchors. Some complexes also will
include separate out-lots suitable for family type restaurants. In addition, as
the Company's financial condition improves and as appropriate opportunities
arise, the Company plans to option or contract for strategically-located vacant
land suitable for the development of shopping centers, such options or contracts
to be subject to negotiating pre-building leases with major retail tenants.
<PAGE>

     The Company's investment objective in considering each potential shopping
center acquisition is to achieve long-term capital appreciation through
increased cash flow and increased value of the acquired property. The Company
will seek to accomplish this investment objective through (i) selective
acquisitions of shopping centers which are strategically located and which
generally provide positive cash flows, (ii) improved operations of the shopping
centers and lease-up of unleased space, and (iii) where deemed appropriate,
expansions, renovations and redevelopments of these properties. A key criterion
for property investments will be that they offer the opportunity for growth in
revenues from operations. The Company may purchase or lease properties for
long-term investment or sell such properties, in whole or in part, when
circumstances warrant. The Company may also participate with other entities in
property ownership, through joint ventures or other types of co-ownership.
Equity investments may be subject to existing mortgage financing and other
indebtedness which have priority over the equity interest of the Company.

RESULTS OF OPERATIONS

     The Company had no revenue from operations during the fiscal years ended
June 30, 2000 and 1999.

     The Company's expenses during the fiscal years ended June 30, 2000 and 1999
amounted to $719,768 and $456,644, respectively. Expenses increased by $263,124
primarily as a result of new project developments and additional fees paid to
independent contractors.

     The Company had a net loss of $719,768 for the year ended June 30, 2000,
and a net loss of $446,978 for the year ended June 30, 1999. Because there was
no revenue generated during those periods, these losses generally represent the
Company's operating expenses plus income tax, offset in 1999 by a gain from
certain forgiveness of indebtedness income.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's liquidity over the past two years has been materially and
adversely affected by continuing operating losses. The Company has experienced
total net losses of $1,166,746 for the two years ended June 30, 2000. The
Company currently has no operations and is dependent on private debt and equity
financing to fund its day to day cash requirements. Accordingly, the independent
auditors' reports covering the Company's financial statements are modified as to
the Company's ability to continue as a going concern.

     During the year ended June 30, 2000, the Company raised approximately
$172,000 through the sale of convertible notes payable. Certain of the Company's
convertible notes matured prior to June 30, 2000 and are in default.
Substantially all of the remaining convertible notes payable are in default due
to delinquent interest payments.

     The Company has issued approximately eighty convertible promissory notes to
various holders in exchange for cash. Some or all of the convertible promissory
notes may have been inadvertently issued in violation of federal and/or state
securities laws. The Company and its counsel are currently investigating whether
the issuance of any such convertible promissory notes occurred in violation of
law. If any of the convertible promissory notes are found to have been issued in
violation of applicable securities laws, the holders of those notes will have
the ability to force the Company to rescind the underlying transactions.

     At June 30, 2000, the Company had total liabilities of $2,453,907, of which
$164,727 represented expense reimbursements and loans payable to officers and
directors and their families (all of whom have agreed to defer payment until
such time as the Company is financially able to pay such payments).

     The Company currently does not have sufficient capital resources or sources
of liquidity through operations to finance its planned operations during the
next twelve months, including the development of the recreational vehicle park
in Rosamond, California. The Company intends to obtain the necessary funds to
support its planned operations during the next twelve months partly from
mortgage lenders and partly from private equity investors. However, there can be
no assurance that sufficient financing will be available to the Company on
acceptable terms, or at all. The inability to obtain such financing could have a
material adverse effect on the Company's planned operations and financial
condition. Nonetheless, the Company has identified certain individuals
expressing interest in providing equity investments for the planned development
of the recreational vehicle park; based on such expressed interest, the Company
believes it will be able to obtain adequate financing of its planned operations
during the next twelve months.
<PAGE>

OUTLOOK

     Certain statements contained in this "Outlook" and elsewhere in this Form
10-KSB are "forward-looking statements" that involve risks and uncertainties.
The actual future results of the Company could differ materially from those
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed in this report, uncertainties regarding
market fluctuations in the commercial real estate industry, increased
competition with respect to the acquisition or development of recreational
vehicle parks and/or shopping centers, and risks associated with managing the
Company's growth.

     The Company's future operating results could be impacted by factors such as
a slower growth rate in the market, increased competition, fluctuations in the
market value of the Company's Common Stock and Convertible Preferred Stock or
adverse changes in general economic conditions in the region of the United
States in which the Company does business.

     Management believes that financing from mortgage lenders and private equity
investors will generate sufficient working capital to complete the initial
development stages of the recreational vehicle park in Rosamond, California.
Management expects such financing to adequately fund planned improvements
sufficient to enable the Company to open the recreational vehicle park, to begin
operations there and to generate positive cash flows. The Company expects to use
such cash flows and future working capital financing to fund expansion and
continued development of the recreational vehicle park. The Company has
identified certain individuals expressing interest in providing equity
investments for the planned development of the recreational vehicle park, and
based on such expressed interest, the Company believes it will be able to obtain
adequate financing of its planned recreational vehicle park operations during
the next twelve months. However, there can be no assurance that sufficient or
acceptable financing will be available to the Company during either its initial
or subsequent stages of development of the recreational vehicle park. The
inability to obtain any such financing could have a material adverse effect on
the Company's planned operations and financial condition.

     Management also believes that future debt and equity investments will
generate sufficient working capital to conduct the business of the Company
during the period that the Company negotiates for and closes the acquisition of
a shopping center which meets the Company's investment criteria, which include
among other things, the ability to generate positive cash flows. Management
believes such cash flows will provide the liquidity and capital resources
necessary to conduct the business of the Company relating to its operations of a
shopping center. Management of the Company believes that any cash flows
resulting from the initial operations of an acquired shopping center will be
sufficient to support such operations over the next twelve months. However,
there can be no assurance that sufficient or acceptable financing will be
available to the Company during the period that the Company negotiates for and
closes the acquisition of its first shopping center. The inability to obtain
such financing could have a material adverse effect on the Company's intended
shopping center operations and its financial condition.

     Although the Company currently intends to acquire shopping centers and
finance the development of its planned recreational vehicle park in exchange for
shares of the Company's Common Stock or Convertible Preferred Stock, if the
Board of Directors determines that additional or other funding is required to
acquire the shopping centers or to develop the recreational vehicle park, the
Company may attempt to raise such funds through equity offerings, debt financing
or retention of cash flow, or a combination of these methods. If the Board of
Directors determines to raise equity capital, it has the authority, without
shareholder approval, to issue shares of Common Stock and/or Convertible
Preferred Stock in any manner (and on such terms and for such consideration) it
deems appropriate, including in exchange for property. Existing shareholders
have no preemptive right to purchase shares issued in any offering, and any such
offering might cause a dilution of a shareholder's investment in the Company.
Indebtedness incurred by the Company may be in the form of bank borrowings,
purchase money obligations to the sellers of properties, secured and unsecured,
and publicly and privately placed debt instruments. Such indebtedness may be
recourse to all of the properties of the Company or may be limited to the
particular property to which the indebtedness relates. The proceeds from any
borrowings by the Company may be used for working capital, to refinance existing
indebtedness or to finance acquisitions, expansions or development of new
properties.
<PAGE>

     The Company currently intends to adhere to a policy of limiting the
incurrence of debt so that the Company's ratio of total debt to total equity on
its portfolio of shopping center and other properties does not exceed 70%. The
Company may from time to time modify its debt policy in light of then current
economic conditions, relative costs of debt and equity capital, the market value
of acquired properties, general conditions in the market for debt and equity
securities, fluctuations in the market value of the Company's Common Stock and
Convertible Preferred Stock, growth and acquisition opportunities and other
factors. Accordingly, the Company may increase or decrease the total debt to
total equity ratio beyond the limits described above.

     Management of the Company considers the office space currently used to be
adequate to meet the current demands of the Company's business. The Company
believes that this space will not be sufficient in the near future considering
its expected growth and is currently looking at larger office space in Orange
County, California, which will accommodate a small property management and
administrative staff.

YEAR 2000 COMPLIANCE

     The Company has identified substantially all of its major hardware and
software platforms in use and is continually modifying and upgrading its
software and information technology ("IT") and non-IT systems. The Company has
modified its current financial software to be Year 2000 ("Y2K") compliant. As of
June 30, 2000, the Y2K issue has not posed significant operational problems for
the Company's internal computer systems. The Company has incurred insignificant
costs to date associated with Y2K compliance and the Company presently believes
estimated future costs will not be material. The Company presently believes that
henceforth, the Y2K problem will not pose significant operational problems and
is not anticipated to have a material effect on its financial position or
results of operations in any given year. However, actual results could differ
materially from the Company's expectations due to unanticipated technology
difficulties or project delays by the Company or its suppliers. If the Company
and third parties upon which it relies are unable to address the issue in a
timely manner, it could result in a material financial risk to the Company.

     ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial statements of the Company are submitted as a separate
section of this Form 10-KSB on pages F-1 through F-30.

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

         (a) Previous Principal Independent Accountant.

         (i)      The previous principal Independent Accountant was Caldwell,
                  Becker, Dervin, Petrick & Co., L.L.P. The previous accountant
                  was dismissed on May 2, 2000.

         (ii)     The audit report issued by Caldwell, Becker, Dervin, Petrick,
                  & Co., L.L.P. included elsewhere herein was unqualified and
                  modified as to the ability of the Company to continue as a
                  going concern.

         (iii)    The decision to change accountants was recommended by the
                  Company President and approved by the board of directors. The
                  President believed and the board concurred that it would be
                  more advantageous to have an accounting firm closer to the
                  Company's offices in Orange County. The previous Independent
                  accountant was appoximately a two hour drive from the
                  Company's office.

         (iv)     There were no disagreements with Caldwell, Becker, Dervin,
                  Petrick, & Co., L.L.P. on any matter of accounting principles
                  or practices, financial statment disclosure, or auditing scope
                  or procedure.

<PAGE>

         (v)      Caldwell, Becker, Dervin, Petrick, & Co., L.L.P. did not
                  advise the registrant of any reportable events as defined in
                  Regulation S-B, Item 304(a)(1)(iv)(B).

(b) New Principal Independent Accountant.

         On May 2, 2000, Squar, Milner, Reehl & Williamson, LLP was engaged by
         the registrant as its new principal independent accountant to audit its
         financial statements.


                                    PART III

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

         The directors*, executive officers and significant personnel of the
Company and their ages are as follows:

         Name                         Age                   Position
         ----                         ---                   --------

     Howard M. Palmer                 67             Chairman of the Board,
                                                     President and Director

     Leroy Hardy                      62             Vice President and Director

     Gerald W. May                    61             Treasurer and Director

     Richard C. Shinn                 67             Secretary

     ---------------
     *   The Company's Board of Directors have been operating with two vacancies
         and will continue to do so until suitable candidates can be identified
         and agree to join the Board.

         HOWARD M. PALMER has been Chairman of the Board, President and a
director of the Company since 1993. Before that time, Mr. Palmer was the owner
of Palmer Development Company, a real estate development and investment firm in
Anaheim, California, for the preceding five years. Mr. Palmer has over 25 years
of experience developing neighborhood and discount shopping centers throughout
the Western United States. Mr. Palmer is a licensed real estate broker in
California and a graduate of the University of Southern California.

         LEROY HARDY has been a director and the Vice President of the Company
since 1993. In addition to his positions with the Company, Mr. Hardy has been
operating a computer accounting service firm in Denver, Colorado for the last
five years. Mr. Hardy also has served as an assistant vice president of
operations for the First National Bank and Trust Company of Wyoming and an
independent oil and gas landman. Mr. Hardy attended the University of Wyoming.
On July 13, 1992, Mr. Hardy filed for a reorganization under Chapter 13 of the
United States Bankruptcy Code in connection with a work-out with the Internal
Revenue Service pertaining to a tax liability. Under the reorganization, Mr.
Hardy and the IRS agreed to amount owing and a payment plan, which Mr. Hardy
satisfied. The Chapter 13 case was dismissed in June 1996.

         GERALD W. MAY has been a director of the Company since 1993 and has
been the Treasurer of the Company since 1996. Mr. May has been an independent
accountant since 1977 and is a graduate of Creighton University, with a B.S. in
business administration.

         RICHARD C. SHINN has been Secretary of the Company since 1997. Mr.
Shinn is, and for the past ten years has been, president of Bell Financial,
Inc., a financial consulting firm. He received a degree in business management
from the University of Texas.
<PAGE>

         All directors hold office until the next annual meeting of shareholders
of the Company and the election and qualification of their successors. Officers
are elected annually by, and serve at the discretion of, the Board of Directors.

         All directors are reimbursed for out-of-pocket expenses in connection
with attendance at Board of Directors' meetings and receive a $100 per month
director's fee.

     COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING RULES

         Section 16(a) of the Securities Act of 1934, as amended ("Exchange
Act"), requires the Company's executive officers and directors, and persons who
beneficially own more than 10% of a registered class of the Company's Common
Stock to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission ("Commission"). Such officers,
directors and shareholders are required by Commission regulations to furnish the
Company with copies of all such reports that they file.

         Based solely upon a review of copies of such reports furnished to the
Company during its fiscal year ended June 30, 2000 and thereafter, or any
written representations received by the Company from a director, officer or
beneficial owner of more than 10% of the Company's Common Stock ("reporting
persons") that no other reports were required, the Company believes that, during
the Company's 2000 fiscal year, all Section 16(a) filing requirements applicable
to the Company's reporting persons were complied with.

     ITEM 10. EXECUTIVE COMPENSATION.

         Effective for fiscal years ended 1998 through 2002, Howard Palmer
entered into an employment agreement with the Company, pursuant to which Mr.
Palmer is entitled to base cash compensation of $180,000 per year, an increase
from his base cash compensation of $120,000 for fiscal year ending 1997. In
September 1997 Mr. Palmer agreed to accept 240,000 shares of Common Stock and
240,000 warrants to purchase Common Stock in lieu of his cash compensation for
1997. In the latter half of calendar year 1998, Mr. Palmer agreed to accept
360,000 shares of Common Stock and 360,000 warrants to purchase Common Stock in
lieu of his cash compensation for 1998. In January 1999 Mr. Palmer agreed to
accept 180,000 shares of Common Stock and 180,000 warrants to purchase Common
Stock in lieu of his cash compensation for the first half of fiscal year ended
June 30, 1999. In February 2000 Mr. Palmer agreed to accept 180,000 shares of
Common Stock and 180,000 warrants to purchase Common Stock in lieu of his cash
compensation for the latter half of fiscal year ended June 30, 1999. In May 2000
Mr. Palmer agreed to accept 360,000 shares of Common Stock and 360,000 warrants
to purchase Common Stock in satisfaction of his cash compensation for the year
ended June 30, 2000. The Company also maintains a reimbursement policy whereby
executive officers are reimbursed for actual expenses incurred in connection
with the management of the Company and its business. Services rendered by Mr.
Palmer for the year ended June 30, 2000, have been valued at $90,000, equating
to $.25 per common share received in lieu of cash compensation. Related warrants
were considered to have insignificant value.

         For services performed for the Company during fiscal years ended June
30, 2000 and 1999, the Company issued 148,000 shares of Common Stock to each of
Howard Palmer, Leroy Hardy and Gerald May. Of the 148,000 shares of Common Stock
awarded to each of these persons, 100,000 shares were issued as a bonus and
48,000 shares were issued for certain director fees which had been accrued from
the year ended June 30, 1999.

<PAGE>

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

         The following table sets forth as of June 30, 2000, certain information
with respect to the beneficial ownership of the Company's Common Stock held by
each director and officer and by all directors and officers as a group, as well
as the identity of each person known to the Company to be the beneficial owner
of more than 5% of the Company's Common Stock and the respective beneficial
ownerships of those persons.

                                        Amount and Nature
    Name and Address                 of Beneficial Ownership       Percent of
of Beneficial Owner(1)(2)                of Common Stock         Common Stock(3)
-------------------------                ---------------         ---------------

     Howard M. Palmer(4)                     3,941,844                 34.2

     Julia Murray(5)                           800,000                  6.9
     3484 Nightflower Lane
     Las Vegas, Nevada 89121

     Protective Land Investment Corporation    957,965                  8.3
     6770 Springpark Avenue #107
     Los Angeles, CA 90056

     Robert and Lynda Cullen(6)                551,584                  4.8
     1050 N. Anaheim Blvd.
     Anaheim, California  92801

     Richard C. Shinn(7)                       400,000                  3.5

     Estate of James T. Hays(8)                392,018                  3.4

     Leroy Hardy(9)                            228,783                  2.0

     Gerald W. May(10)                         247,783                  2.2

     All Directors and Officers              4,818,410                 41.8
     as a Group (4 persons)

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

     (1)   The address of each officer and director and of the Estate of James
           T. Hays is c/o Focal Corporation, 1415 W. North St., #302, Anaheim,
           California 92801.
     (2)   Except as indicated in the footnotes to this table and pursuant to
           applicable community property laws, the persons named in this table
           have sole voting and investment power with respect to all shares of
           Common Stock.
     (3)   All percentages have been calculated to include warrants and
           convertible securities which are immediately exercisable or
           convertible into shares of Common Stock by the particular
           shareholder.
     (4)   Mr. Palmer is the President and Chairman of the Board of Directors of
           the Company. Includes 454,644 shares which Mr. Palmer owns of record.
           Also includes (i) 260,000 shares held by Francis and William H.
           Platts, Mr. Palmer's sister and brother-in-law; (ii) 200,000 shares
           held by Kenneth and Helen Palmer, Mr. Palmer's son and
           daughter-in-law; (iv) 200,000 shares held by Jim and Barbara Palmer,
           Mr. Palmer's son and daughter-in-law; (v) 200,000 shares held by
           Patti Joe Palmer, Mr. Palmer's daughter; (vi) 200,000 shares held by
           Joanne and Philip Quon, Mr. Palmer's daughter and son-in-law; (vii)
           200,000 shares held by William H. Platts, Jr., Mr. Palmer's nephew;
           (viii) 200 shares held by Kenneth F. Palmer, Jr., Mr. Palmers
           grandchild; (ix) 130,000 convertible notes held by Richard and Witta
           Baughn, Mr. Palmer's deceased wife's nephew and his wife; (x) 74,000
           convertible notes held by Frances and William H. Platts, Mr. Palmer's
           sister and brother-in-law; (xi) 20,000 convertible notes held by
           Kenneth Palmer, Mr. Palmer's son; and (xii) warrants to purchase
           1,283,000 shares, held by Mr. Palmer.
<PAGE>

     (5)   Consists of 800,000 shares held in an informal escrow pending
           performance by Ms. Murray with respect to obtaining a $5,000,000 loan
           for the Company.
     (6)   Includes (i) 200,000 shares held of record by the Cullen Family
           Trust, a trust administered by the Cullens, (ii) warrants to purchase
           340,792 shares held by the Cullen Family Trust and (iii) a
           convertible note held by the Cullen Family Trust which is convertible
           into 10,792 shares.
     (7)   Represents shares owned by Bell Financial, Inc., of which Mr. Shinn
           is president.
     (8)   Prior to his death on July 17, 1994, Mr. Hays was the Secretary and a
           director of the Company. Mr. Hays owned the Company's Common Stock as
           follows: (i) 4,637 shares held directly by Mr. Hays, (ii) 50,000
           shares held by Mr. Hays and his wife as joint tenants, (iii) 27,568
           shares held directly by Mr. Hays' wife, (iv) 90,000 shares held by 7
           other individuals with familial relations to Mr. Hays; (v) 135,393
           shares held by Focal Development Corporation, a Colorado corporation
           controlled by Mr. Hays' wife ("FDC"); (vi) 29,783 shares held by
           Interdec Corporation, a Colorado corporation affiliated with Mr. Hays
           ("Interdec"), and (vii) warrants to purchase 54,637 shares.
     (9)   Includes 174,000 shares which Mr. Hardy owns of record. Also includes
           29,783 shares held by Interdec, for which Mr. Hardy serves as an
           officer and director and warrants to purchase 25,000 shares.
     (10)  Includes 193,000 shares which Mr. May owns of record. Also includes
           29,783 shares held by Interdec, for which Mr. May serves as an
           officer and director and warrants to purchase 25,000 shares.

     ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         During the fiscal year ended June 30, 1997, Bell Financial, Inc., of
which the Company's secretary, Richard C. Shinn, is president, was issued
400,000 shares of Common Stock for financial consulting services. During the
fiscal year ended June 30, 1998, Bell Financial, Inc made an unsecured loan of
$32,975 to the Company.

         During the fiscal year ended June 30 1997, Howard Palmer was issued
240,000 shares of Common Stock and 240,000 warrants to purchase 240,000 shares
of Common Stock, exercisable on or prior to December 31, 1999 at prices ranging
from $1 to $3 per share, in lieu of his $120,000 salary for fiscal year ended
1996.

         During the fiscal year ended June 30 1998, Howard Palmer was issued
240,000 shares of Common Stock and 240,000 warrants to purchase 240,000 shares
of Common Stock, exercisable on or prior to December 31, 1999 at prices ranging
from $1 to $3 per share, in lieu of his $120,000 salary for fiscal year ended
1997.

         In connection with a cash advance to the Company during the fiscal year
ended 1998, the Company issued to Howard Palmer 8,000, 3,000 and 12,000 warrants
to purchase shares of Common Stock, exercisable at prices ranging from $1 to $3
per share, and expiring on November 23, 2000, March 24, 2001, and April 16,
2001, respectively.

         In connection with the issuance of stock and notes payable during the
fiscal year ended 1998, the Company issued 100,000 warrants to purchase 100,000
shares of Common Stock to nine individuals. These warrants are exercisable at
prices ranging from $1 to $3 per share, and expire starting from August 5, 2000
to April 24, 2001.

         On August 31, 1998, Howard Palmer was issued 360,000 shares of Common
Stock and 360,000 warrants to purchase 360,000 shares of Common Stock,
exercisable on or prior to June 30, 2001 at prices ranging from $1 to $3 per
share, in lieu of his $180,000 salary for fiscal year ended June 30, 1998.

         On January 2, 1999, Howard Palmer was issued 180,000 shares of Common
Stock and 180,000 warrants to purchase 180,000 shares of Common Stock,
exercisable on or prior to June 30, 2001 at prices ranging from $1 to $3 per
share, in lieu of his $90,000 salary for the first half of the fiscal year ended
June 30, 1999.
<PAGE>

         On September 20, 1999, Howard Palmer was issued 148,000 shares of
Common Stock, 100,000 shares of which were issued to Mr. Palmer as an annual
bonus for services performed during the fiscal year ended 2000, and 48,000
shares of which were issued to Mr. Palmer in lieu of paying accrued director's
fees owed to Mr. Palmer from the fiscal year ended 1999.

         On September 20, 1999, Leroy Hardy was issued 149,000 shares of Common
Stock, 100,000 shares of which were issued to Mr. Hardy as an annual bonus for
services performed during the fiscal year ended 2000, 48,000 shares of which
were issued to Mr. Hardy in lieu of paying accrued director's fees owed to Mr.
Hardy from fiscal year ended 1999, and 1,000 shares of which were issued to Mr.
Hardy in lieu of paying $500 of accrued business expenses owed to Mr. Hardy.

         On September 20, 1999, Gerald May was issued 168,000 shares of Common
Stock, 100,000 shares of which were issued to Mr. May as an annual bonus for
services performed during the fiscal year ended 2000, 48,000 shares of which
were issued to Mr. May in lieu of paying accrued director's fees owed to Mr. May
from fiscal year ended 1999, and 20,000 shares of which were issued to Mr. May
in lieu of paying $10,000 from fiscal year ended 1999 of accrued business
expenses owed to Mr. May.

<PAGE>

                                   SIGNATURES


     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized


Date: September 27, 2000               FOCAL CORPORATION



                                       By: /s/ Howard M. Palmer
                                           -------------------------------------
                                             Howard M. Palmer
                                             Chairman of the Board and President


                                       By: /s/ Gerald W. May
                                           -------------------------------------
                                             Gerald W. May, Treasurer and
                                             Principal Financial Officer




<PAGE>

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




                                FOCAL CORPORATION

                              FINANCIAL STATEMENTS

                                  JUNE 30, 2000






<PAGE>


                          INDEX TO FINANCIAL STATEMENTS








Independent Auditors' Report ..................................... F-1

Balance Sheet .................................................... F-2

Statement of Operations .......................................... F-3

Statement of Shareholders' Deficit ............................... F-4

Statement of Cash Flows .......................................... F-5

Notes to Financial Statements .................................... F-6





<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Shareholders
Focal Corporation

We have audited the accompanying balance sheet of Focal Corporation (the
"Company") as of June 30, 2000, and the related statements of operations,
shareholders' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 significant estimates made by
management, as well as evaluating 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 Focal Corporation as of June
30, 2000 and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, there is substantial doubt about the ability of the
Company to continue as a going concern. The accompanying financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.



/s/ Squar, Milner, Reehl & Williamson, LLP

September 20, 2000
Newport Beach, California


                                      F-1
<PAGE>

<TABLE>

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

                                FOCAL CORPORATION
                                  BALANCE SHEET
                                  JUNE 30, 2000

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

<CAPTION>

                                     ASSETS
<S>                                                                        <C>
CURRENT ASSETS
    Cash                                                                   $       752
    Prepaid expenses and other current assets                                    1,000
                                                                           ------------
                                                                                 1,752
                                                                           ------------

LAND HELD FOR DEVELOPMENT                                                      815,001
                                                                           ------------

                                                                           $   816,753
                                                                           ============


                      LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
    Accounts payable and accrued liabilities                               $   836,820
    Accrued property taxes and utility assessments                             658,628
    Accrued interest payable                                                   112,282
    Convertible notes payable                                                  534,107
    Note payable and advances from related parties                              19,992
    Other notes payable and debt                                               292,078
                                                                           ------------
                                                                             2,453,907

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT
    Preferred stock, no par value; 100,000,000 shares
      authorized; no shares issued and outstanding;
      liquidation preference of $1.00 per share                                      -
    Common stock; $.10 par value; 40,000,000
      shares authorized; 6,637,380 shares issued and
      outstanding                                                              663,738
    Additional paid-in capital                                               2,662,371
    Accumulated deficit                                                     (4,963,263)
                                                                           ------------
                                                                            (1,637,154)
                                                                           ------------

                                                                           $   816,753
                                                                           ============
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-2
<PAGE>


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

                                FOCAL CORPORATION
                             STATEMENT OF OPERATIONS
                        FOR THE YEAR ENDED JUNE 30, 2000

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


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

REVENUES                                                        $             -

PAYROLL AND RELATED EXPENSES                                            165,000

INTEREST EXPENSE                                                        146,847

LOSS ON IMPAIRMENT OF LAND                                              167,356

OTHER OPERATING EXPENSES                                                240,565
                                                                    ------------

LOSS BEFORE INCOME TAXES                                               (719,768)

INCOME TAXES
   Deferred income tax benefit                                          287,000
   Less valuation allowance                                            (287,000)
                                                                    ------------

NET LOSS                                                            $  (719,768)
                                                                    ============

BASIC AND DILUTED LOSS PER COMMON SHARE                             $     (0.13)
                                                                    ============

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING                                                         5,632,715
                                                                    ============


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-3
<PAGE>

<TABLE>

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

                                FOCAL CORPORATION
                       STATEMENT OF SHAREHOLDERS' DEFICIT
                        FOR THE YEAR ENDED JUNE 30, 2000

-----------------------------------------------------------------------------------------------------------
<CAPTION>

                                         Common Stock           Additional                       Total
                                  ----------------------------    Paid-In      Accumulated   Shareholders'
                                    Shares         Amount         Capital       (Deficit)      (Deficit)
                                  ------------  -------------- -------------- -------------- --------------

<S>                                <C>          <C>            <C>            <C>            <C>
BALANCE - JUNE 30, 1999            4,343,837    $   434,384    $ 2,612,827    $ (4,243,495)  $ (1,196,284)

Shares issued to purchase land       775,022         77,502        (77,502)              -              -

Shares issued for deposit in
escrow                               395,244         39,524        (39,524)              -              -

Shares issued for broker fees         87,946          8,795         (8,795)              -              -

Shares issued upon conversion of
  notes payable                       24,000          2,400          9,600               -         12,000

Shares issued for payment of
accrued liabilities, compensation,
and director fees                    829,916         82,992        183,200               -        266,192

Shares issued for other services       1,415            141            565               -            706

Shares issued for charitable
  contribution                       180,000         18,000        (18,000)              -              -

Net loss                                   -              -              -        (719,768)      (719,768)
                                  ------------  -------------- -------------- -------------- --------------

BALANCE -JUNE 30, 2000             6,637,380    $   663,738    $ 2,662,371    $ (4,963,263)  $ (1,637,154)
                                  ============  ============== ============== ============== ==============


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>

                                       F-4
<PAGE>


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

                                FOCAL CORPORATION
                            STATEMENT OF CASH FLOWS
                        FOR THE YEAR ENDED JUNE 30, 2000

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


CASH FLOWS FROM OPERATING
  ACTIVITIES
Net loss                                                              $(719,768)
Adjustments to reconcile net loss to net cash
  used in operating activities:
    Salaries and expenses paid by issuance of stock                     212,024
    Loss on impairment of land                                          167,356
    Increase in interest payable                                         56,337
    Increase in accounts payable and accrued expenses                    69,561
    Increase in property taxes and utility assessments                   58,224
    Decrease in refundable deposits                                       9,000
                                                                      ----------
NET CASH (USED IN) OPERATING ACTIVITIES                                (147,266)

CASH FLOWS FROM INVESTING ACTIVITIES
    Capitalized land development costs                                  (35,001)
                                                                      ----------
NET CASH (USED IN) INVESTING ACTIVITIES                                 (35,001)

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from issuance of notes payable                             172,061
    Advances from related parties                                         2,500
                                                                      ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                               174,561

NET DECREASE IN CASH                                                     (7,706)

CASH - beginning of year                                                  8,458
                                                                      ----------

CASH - end of year                                                    $     752
                                                                      ==========


SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION
Cash paid during the year for interest                                $  34,137
                                                                      ==========

Non-cash transactions:
Common stock issued in connection with conversion of notes
   payable to common stock                                            $  12,000
                                                                      ==========
Assumption of debt in connection with the acquisition of land
   held for development                                               $ 873,000
                                                                      ==========


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-5
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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


1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Focal Corporation (the "Company") was incorporated in Utah in 1980 and engages
in the acquisition and development of commercial real estate. During the year
ended June 30, 2000, the Company acquired approximately 120 acres of undeveloped
land in Rosamond, California (the "Rosamond Property"), a community in the
Mohave desert approximately 100 miles northeast of Los Angeles. The Rosamond
Property was acquired with the issuance of common stock and the assumption of
liens and other encumbrances secured by such property (see Note 2). The Company
has obtained a feasibility study on the Rosamond Property and intends, among
other things, to develop a recreational vehicle park.

The Company was previously considered a development stage enterprise under
Statement of Financial Accounting Standards No. 7, DEVELOPMENT STAGE
ENTERPRISES. With the acquisition of the Rosamond Property, the Company began
operations in the acquisition and development of commercial real estate and
ceased to be a development stage enterprise during the year ended June 30, 2000.
Net losses incurred as a development stage company approximated $2.5 million.

The Company's common stock trades on the OTC Bulletin Board of the National
Association of Securities Dealers under the symbol "FCLO."


INTRODUCTION TO THE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to
assist in understanding the Company's financial statements. Such financial
statements and accompanying notes are the representations of the Company's
management, who is responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the
United States ("GAAP") in all material respects, and have been consistently
applied in preparing the accompanying financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews the carrying values of its long-lived assets for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. Impairment losses
approximating $167,000 were recorded upon the purchase of the Rosamond Property
(see Note 2).

                                       F-6
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


INCOME TAXES

Using the liability method required by Statement of Financial Accounting
Standards ("SFAS") No. 109, ACCOUNTING FOR INCOME TAXES, the estimated tax
effects of temporary differences between financial and income tax reporting are
recorded in the period in which the events occur. Such differences between the
financial and tax bases of assets and liabilities result in future tax
deductions or taxable income (see Note 4).

USE OF ESTIMATES

Management uses estimates and assumptions in preparing the Company's financial
statements in accordance with GAAP. Such estimates and assumptions affect the
reported amounts of certain assets and liabilities, disclosures relating to any
contingent assets and liabilities, and the reported amounts of certain expenses.
Actual results could vary from the estimates used to prepare the accompanying
financial statements in the near term.

STOCK-BASED COMPENSATION AND OTHER EXPENSES

Common stock and other equity instruments issued to any recipient for
compensation or other services rendered are accounted for using the fair value
method. Such method is based on the estimated fair value of (a) the services
received or (b) the equity instrument issued, whichever is more reliably
measurable. The estimated fair value of the warrants described in Note 3
("Convertible Notes Payable") and Note 5 ("Employment Contract with President")
are not material to the accompanying financial statements.

CONVERTIBLE NOTES PAYABLE

When the conversion feature is included in notes payable at the time of their
original issuance, no gain or loss is recognized when such notes are converted
into common stock.

LOSS PER SHARE

In accordance with SFAS No. 128, EARNINGS PER SHARE, basic loss per share is
computed by dividing the loss attributable to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
loss per share reflects the amount that would have resulted if certain dilutive
potential common stock had been issued. Because the Company has experienced
losses from inception, the convertible notes payable described in Note 3 are
antidilutive. Therefore, such notes do not impact

                                       F-7
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOSS PER SHARE (CONTINUED)

the weighted average number of common shares outstanding reported in the
accompanying statement of operations.

LAND DEVELOPMENT COSTS

Costs that directly relate to land development projects are capitalized. Costs
are allocated to project components by the specific identification method
whenever possible. Otherwise, acquisition costs are allocated based on their
relative fair value before development; costs incurred during development are
allocated based on their relative sales value. Interest costs are capitalized
while development is in progress.

Under GAAP, the carrying value of land held for development may not exceed
estimated fair value. Thus, the capitalization of costs described in the
preceding paragraph is limited accordingly. The Company did not capitalize any
interest costs during the year ended June 30, 2000.


                                       F-8
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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


2. LAND HELD FOR DEVELOPMENT

During September and October 1999, the Company acquired the Rosamond Property
with (1) the issuance of approximately 775,000 shares of common stock; (2) the
issuance of an unsecured note payable to the seller; and (3) the assumption of
certain liens and other encumbrances (including delinquent property taxes and
utility bond assessments) totaling approximately $600,000. The Company gave no
significant cash consideration. Based on independent valuations, the Company
recorded the purchase at estimated fair value which resulted in an immediate
impairment charge of approximately $167,000.

The Kern County Treasurer-Tax Collector has issued a Final Notice of Impending
Tax Collector's Power to Sell on certain parcels of the Rosamond Property
indicating that a forced sale to pay delinquent property taxes may occur.
Additionally, the Rosamond Community Services District (the agency responsible
for administering utility bond assessments) has notified the Company that
foreclosure action on the Rosamond Property has been or will be initiated due to
delinquent utility bond assessments.


3. NOTES PAYABLE AND OTHER DEBT

GENERAL

During the year ended June 30, 2000, the Company issued several unsecured notes
payable in exchange for cash with an option to convert such notes into common
stock. The Company also issued a note payable to the seller of the Rosamond
Property as part of the purchase consideration. In connection with such
purchase, the Company took title to the Rosamond Property subject to an existing
lien on such real estate. A summary of the Company's notes payable and other
debt follows.

CONVERTIBLE NOTES PAYABLE

At June 30, 2000, the Company is obligated under certain convertible notes
payable totaling $534,107. Such notes require monthly payments of interest only
at the rate of 12% per annum and mature at various dates through June 12, 2001.
Approximately $377,000 of these notes payable matured prior to June 30, 2000 and
are in default. Substantially all of the remaining notes payable are in default
due to delinquent interest payments.

The notes payable are convertible into Company common stock at the note holder's
option prior to maturity at the rate of one share for each $.50 of principal
amount. Upon conversion, such stock is issued with warrants to purchase an equal
number of shares of Company common stock over a three-year period at graduated
prices as follows: (a) within year one at $1 per share; (b) between years one
and two at $2 per share; and (c)

                                       F-9
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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

3. NOTES PAYABLE AND OTHER DEBT (CONTINUED)

CONVERTIBLE NOTES PAYABLE (CONTINUED)

thereafter at $3 per share. If not exercised, such warrants expire three years
after issuance.

During the year ended June 30, 2000, certain note holders exercised their option
to convert their notes (aggregating $12,000 in principal) to Company common
stock in accordance with the above terms. Accordingly, the Company issued 24,000
shares of common stock and an equal amount of warrants to purchase 24,000 shares
of Company common stock to such note holders.

See the "Other Matters" section of Note 5 for additional information.

NOTE PAYABLE ISSUED TO SELLER OF ROSAMOND PROPERTY

In connection with acquiring the Rosamond Property, the Company issued the
seller of such property a note payable in the amount of $144,214 as partial
consideration for the purchase (see Note 2). Such note payable is unsecured,
matures in September 2004, bears interest at 8% per annum, and requires
quarterly interest payments. At June 30, 2000, this note payable was in default
due to delinquent interest payments.

DEBT SECURED BY ROSAMOND PROPERTY

The Company purchased the Rosamond Property (see Note 2) subject to a $147,864
debt (including $47,864 of unpaid interest) secured by a deed of trust on the
Rosamond Property. Such debt is evidenced by a note payable (the "Note") signed
by the seller of the Rosamond Property. The Note matured in 1996, bears interest
at 13% per annum, and is in default. The Company has not assumed such note
payable as of September 20, 2000.

NOTE PAYABLE AND ADVANCES FROM RELATED PARTIES

At June 30, 2000, the Company is obligated under an unsecured $10,000 note
payable to a relative of one of the Company's officers bearing interest at 12%
per annum. The note matured in June 1996 and is convertible into Company common
stock and warrants under the terms discussed above in "Convertible Notes
Payable." Additionally at June 30, 2000, the Company owes related parties
non-interest bearing advances of approximately $10,000 due on demand. Related
parties advanced the Company $2,500 during the year ended June 30, 2000.


                                      F-10
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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

4. INCOME TAXES

The components of the deferred tax benefit are as follows for the year ended
June 30, 2000:


             Federal                                $      157,000
             State                                          46,000
                                                   ------------------
                                                    $      203,000
                                                   ==================

Deferred tax assets and liabilities are recorded based on the difference between
the financial statement and tax return bases of assets and liabilities. Deferred
taxes and liabilities at the end of each period are determined using the tax
rate expected to be in effect when taxes on these accounts are expected to be
paid or recovered. Accordingly, the current period tax provision can be affected
by the enactment of new tax rates and other tax legislation.

At June 30, 2000, the Company had a deferred tax asset of approximately
$1,160,000. The deferred tax asset results from ordinary loss carryforwards
available to reduce future taxable income. The only significant temporary
differnce for the year ended June 30, 2000 was approximately $167,000 for an
impairment loss on land. Since there is no reasonable assurance that such asset
will be realized in future years, the Company has recorded a 100% valuation
allowance against the deferred tax asset. The valuation allowance increased
$203,000 from June 30, 1999 to June 30, 2000. At June 30, 2000, the Company had
federal tax net operating loss carryforwards ("NOLs") of approximately $3.7
million. Such NOLs expire from the years ending June 30, 2001 through 2020.

The income tax benefit for the year ended June 30, 2000 differs from the amount
that would result from applying the federal statutory rate to the pre-tax loss
because of common stock issued for services of approximately $212,000 and state
income taxes at a rate of approximately 9%.


5. COMMITMENTS AND CONTINGENCIES

COMMITMENT TO PURCHASE LAND

During June 1999, the Company opened escrow to purchase approximately 48 acres
of undeveloped land in Rosamond, California. In connection therewith, the
Company has issued and deposited into escrow 395,244 shares of its common stock.
As of September 20, 2000, such escrow had not closed.

                                      F-11
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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

5. COMMITMENTS AND CONTINGENCIES (CONTINUED)

EMPLOYMENT CONTRACT WITH PRESIDENT

The Company has entered into an employment contract with its president that
provides for a monthly salary of $15,000 and annual vacation pay. The contract
expires June 30, 2002. The president has waived his rights to all vacation pay
earned for the three years ended June 30, 2000. Due to lack of funds, the salary
has been satisfied with the issuance of common stock. During the year ended June
30, 2000, the Company (a) issued 508,000 shares of common stock (consisting of
460,000 shares as salary and bonuses for the year ended June 30, 2000 and 48,000
shares for previously accrued director fees) and (b) recorded an expense of
$90,000 as the estimated fair value of the services rendered by its president
for the year ended June 30, 2000. Such stock issuance includes 360,000 shares
which carry an equal number of warrants to purchase common stock at prices
ranging from $1 to $3 per share, and expire in May 2003. The Company president
has accepted the 360,000 shares of common stock and related warrants described
above in full satisfaction of his salary for the year ended June 30, 2000. As of
June 30, 2000, accrued salary owed to the Company's president approximated
$131,000.

During the year ended June 30, 2000, the Company also issued 180,000 warrants to
its president relating to services rendered in the preceding year.

NEVADA MINING PROPERTY

The Company has a memorandum of understanding for the acquisition of a mining
property in Nevada. The memorandum calls for the seller to lease back and
operate the property and pay a royalty to the Company based on production.
Management is no longer pursuing this potential acquisition.

LITIGATION

The Company is a defendant in certain litigation related to the non-payment of a
contract for consulting services. The Company's counsel has indicated that the
Company has no defense and a court granted summary judgment in favor of the
plaintiff on July 14, 2000. Accordingly, the Company has accrued a liability of
approximately $60,000 related to this matter.

COMMON STOCK HELD BY THE COMPANY

At June 30, 2000, the Company held a certificate for 800,000 shares of its
common stock issued in 1996 in the name of a potential investor. These shares
will be released when and if such investor agrees to invest a specified amount
of cash in exchange for such

                                      F-12
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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


5. COMMITMENTS AND CONTINGENCIES (CONTINUED)

COMMON STOCK HELD BY THE COMPANY (CONTINUED)

shares. Due to the uncertainty associated with this incomplete transaction, such
shares have not been reflected in the accompanying financial statements.

OTHER MATTERS

The Company has issued approximately eighty convertible promissory notes to
various holders in exchange for cash. Some or all of the convertible promissory
notes may have been inadvertently issued in violation of federal and/or state
securities laws. The Company and its counsel are currently investigating whether
the issuance of any such convertible promissory notes occurred in violation of
law. If any of the convertible promissory notes are found to have been issued in
violation of applicable securities laws, the holders of those notes will have
the ability to force the Company to rescind the underlying transactions.


LEASES

The Company occupies a small office in Anaheim, California provided by Palmer
Development Company, an affiliate of the Company's President, on a month to
month basis. The Company presently pays no rent.

6. RELATED PARTY TRANSACTIONS

ISSUANCE OF COMMON STOCK TO OFFICERS AND DIRECTORS

During the year ended June 30, 2000, the Company issued 825,000 shares of common
stock to certain officers and directors for compensation, other services, and
accrued expenses, including the 508,000 shares issued to the Company's president
described above. The Company recorded an expense for the year ended June 30,
2000 of approximately $170,000 based on the estimated fair value of the services
rendered in connection with the issuance of such shares (including the $90,000
under the employment contract with the Company's president discussed in Note 5).

ADVANCES FROM COMPANY PRESIDENT AND PAYABLES

At June 30, 2000, the Company owed its president approximately $6,000 for
non-interest bearing advances made in prior years and approximately $164,000 for
accrued expenses and loans payable to officers and directors and their families.

7. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has experienced significant losses
approximating $720,000 and $447,000 for the years ended June 30, 2000 and 1999,
respectively. At June 30, 2000, current liabilities exceed current assets by
approximately $2,450,000. The Company is dependent upon funds from investors
and/or lenders to finance its cash requirements. Management plans to refinance
the Rosamond Property to provide cash flow for operations and preliminary
development of the Rosamond Property. There can be no assurance, however, that
the Company will be successful in such refinancing activity. The Company is also
dependent upon certain creditors and tax/utility bond assessment authorities not
foreclosing on the Rosamond Property. As discussed in Note 2, the Rosamond
Community Services District has notified the Company that foreclosure action on
the Rosamond Property has been or will be initiated due to

                                      F-13
<PAGE>
--------------------------------------------------------------------------------

                                FOCAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2000

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

7. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN (CONTINUED)

delinquent utility bond assessments. The effect of the foregoing matters raises
substantial doubt about the ability of the Company to continue as a going
concern.

8. ISSUANCE OF COMMON STOCK AND WARRANTS

COMMON STOCK ISSUED FOR CHARITABLE CONTRIBUTION

During the year ended June 30, 2000, the Company issued 180,000 shares of common
stock to Charitable Hands, Inc. as a charitable contribution.

WARRANTS

At June 30, 2000, the Company had approximately 2,790,000 warrants outstanding
to purchase an equal number of common shares of the Company at prices ranging
from $1 to $3 per share. During the year ended June 30, 2000, the Company issued
564,000 warrants in connection with the employment contract with its president
(see Note 5) and the conversion of notes payable (see Note 3). The warrants
expire at various dates through June 2003. No warrants were exercised during the
year ended June 30, 2000.

9. EFFECT OF ADJUSTMENTS ON PRIOR QUARTERLY RESULTS (Unaudited)

An adjustment related to the impairment of land held for development recorded
during the fourth quarter of the year ended June 30, 2000 had a material impact
on the unaudited results of operations for the quarter ended September 30, 1999
as follows:

                               As Previously Reported            As Revised
                               ----------------------           -----------
                               Net Loss    Loss/Share       Net Loss  Loss/Share
                               --------    ----------       --------  ----------

Quarter ended
  September 30, 1999           $254,548        $ .05        $421,548     $ .08


10. SERIES A PREFERRED STOCK

The Company's preferred stock is non-voting and does not have any dividend
rights; its liquidation preference applies to both voluntary and involuntary
dissolutions and liquidations. Each share of preferred stock is convertible into
one share of common stock as follows:

     By the stockholder: At any time after one year from the date of issuance
     By the Company: At any time after the common stock's market price exceeds
          $4.99 per share for twenty consecutive trading days.

The conversion ratio described above is subject to adjustment based on various
defined events including stock splits, stock dividends, mergers/reorganizations,
and the sale of all (or substantially all) of the Company's assets.

                                      F-14
<PAGE>

                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                              FINANCIAL STATEMENTS
                                  JUNE 30, 1999








                          INDEX TO FINANCIAL STATEMENTS

                                                                           Page

     Independent Auditors' Report                                           F-16

     Balance Sheet as of June 30, 1999                                      F-17

     Statements of Operations
      For the Years Ended June 30, 1999 and 1998                            F-18

     Statement of Operations
      From Inception of Development Stage to June 30, 1999                  F-19

     Statements of Shareholders' Equity (Deficit)
      From Inception of Development Stage to June 30, 1999                  F-20

     Statements of Cash Flows
      For the Years Ended June 30, 1999 and 1998                            F-23

     Statement of Cash Flows
      From Inception of Development Stage to June 30, 1999                  F-24

     Notes to Financial Statements                                          F-25




                                      F-15

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


     October 26, 1999


     To the Board of Directors
     Focal Corporation
     Anaheim, California

     We have audited the accompanying balance sheet of Focal Corporation (a
development stage company) as of June 30, 1999, and the related statements of
operations, shareholders' equity (deficit), and cash flows for the years ended
June 30, 1999 and 1998, and for the period from July 1, 1994 to June 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audit. The financial statements of Focal Corporation (a development stage
company) from inception (July 1, 1993) to June 30, 1994 were audited by other
auditors whose report has been furnished to us and is included in these
financial statements. Our opinion insofar as it relates to the amounts included
for Focal Corporation (a development stage company) for the period from
inception (July 1, 1993) to June 30, 1994, is based solely on the report of the
other auditors.

     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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, based on our audit and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Focal Corporation (a development stage
company) as of June 30, 1999, and the results of its operations and its cash
flows for the years ended June 30, 1999 and 1998 and from inception (July 1,
1993) to June 30, 1999, in conformity with generally accepted accounting
principles.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, there is doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.




     CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.
     Woodland Hills, California



                                      F-16

<PAGE>
<TABLE>

                                               FOCAL CORPORATION
                                         (A DEVELOPMENT STAGE COMPANY)
                                                 BALANCE SHEET
                                                 JUNE 30, 1999

<CAPTION>
                                                      ASSETS

     <S>                                                                                   <C>
     CURRENT ASSETS
             Cash                                                                                  8,458
             Refundable Deposit                                                                   10,000
             Deferred tax asset (Note 2)                                                   $          --
                                                                                           --------------

             Total Assets                                                                  $      18,458
                                                                                           ==============



                                  LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)


     CURRENT LIABILITIES
             Accounts payable (Note 12)                                                    $     520,745
             Accrued expenses - related parties (Note 8)                                          35,431
             Accrued payroll                                                                      73,633
             Accrued payroll - president (Note 8)                                                130,600
             Accrued income taxes                                                                    900
             Interest payable                                                                     49,807
             Loan payable - related party (Note 4)                                                23,630
             Notes payable (Note 3)                                                              374,046
             Advances from president (Note 5)                                                      5,950
                                                                                           --------------

             Total Current Liabilities                                                         1,214,742

     SHAREHOLDERS' EQUITY (DEFICIT)
             Preferred stock; 100,000,000 shares authorized, no shares
              outstanding, no par value                                                               --
             Common stock; 40,000,000 shares authorized 4,343,837 shares
              issued and outstanding, $0.10 par value (Note 10 and 14)                           434,384
             Additional paid in capital                                                        2,612,827
             Deficit accumulated before the development stage                                 (1,739,945)
             Deficit accumulated during the development stage                                 (2,503,550)
                                                                                           --------------

             Total Shareholders' Equity (Deficit)                                             (1,196,284)

             Total Liabilities and Shareholders' Equity (Deficit)                          $      18,458
                                                                                           ==============


               The Accompanying Footnotes are an Integral Part of These Financial Statements

</TABLE>

                                                        F-17

<PAGE>
<TABLE>

                                                 FOCAL CORPORATION
                                           (A DEVELOPMENT STAGE COMPANY)
                                             STATEMENTS OF OPERATIONS
                                    FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<CAPTION>

                                                                               1999              1998
                                                                           ------------------------------
     <S>                                                                   <C>               <C>
     REVENUES (Note 1)                                                     $          0      $          0

     OPERATING COSTS AND EXPENSES                                               456,644           358,165
                                                                           -------------     -------------

     (LOSS) FROM OPERATIONS                                                    (456,644)         (358,165)

     OTHER INCOME
             Relief of debt (Note 11)                                            10,566            57,479
                                                                           -------------     -------------

             (Loss) Before Income Taxes                                        (446,078)         (300,686)

     PROVISION FOR INCOME TAXES                                                    (900)             (900)
                                                                           -------------     -------------

             Net (Loss)                                                    $   (446,978)     $   (301,586)
                                                                           =============     =============

             (Loss) per common share and common share
              equivalent (Note 6)                                          $       (.11)     $       (.08)
                                                                           =============     =============





          The Accompanying Footnotes are an Integral Part of These Financial Statements

</TABLE>

                                                        F-18

<PAGE>

<TABLE>
                                                 FOCAL CORPORATION
                                           (A DEVELOPMENT STAGE COMPANY)
                                              STATEMENT OF OPERATIONS
                               FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1999


<CAPTION>
     <S>                                                                                    <C>
     REVENUES                                                                               $           0

     OPERATING COSTS AND EXPENSES                                                               2,711,393
                                                                                            --------------

     (LOSS) FROM OPERATIONS                                                                    (2,711,393)

     OTHER INCOME
             Relief of debt (Note 11)                                                             213,843
                                                                                            --------------

             (Loss) Before Income Taxes                                                        (2,497,550)

     PROVISION FOR INCOME TAXES                                                                    (6,000)
                                                                                            --------------

             Net (Loss)                                                                     $  (2,503,550)
                                                                                            ==============










     The Accompanying Footnotes are an Integral Part of These Financial Statements
</TABLE>


                                                        F-19
<PAGE>
<TABLE>

                                                 FOCAL CORPORATION
                                           (A DEVELOPMENT STAGE COMPANY)
                                   STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                               FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1999
<CAPTION>
                                                                         Accumulated    Accumulated        Total
                                                                           Deficit         Deficit         Share-
                                                            Additional     Before          During         holders'
                      Common Stock        Preferred Stock    Paid-in     Development    Development       Equity
                     Shares    Amount     Shares   Amount    Capital        Stage          Stage         (Deficit)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------
<S>                <C>        <C>         <C>      <C>      <C>          <C>            <C>             <C>
July 1, 1993 -
 Balance at
 beginning of
 development
 stage             1,526,396  $152,640         --  $   --   $1,576,181   $(1,739,945)   $       --      $  (11,124)

    Stock issued
    for services     349,960    34,996                          21,484                                      56,480

    Sale of stock    414,120    41,412                         165,648                                     207,060

    Net (Loss)                                                                             (473,122)      (473,122)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------

Balance at
  June 30, 1994    2,290,476   229,048         --      --    1,763,313    (1,739,945)      (473,122)      (220,706)

    Stock issued
    for services     114,800    11,480                          45,920                                      57,400

    Stock issued
    to officer
    in lieu of
    salary           200,000    20,000                          80,000                                     100,000

    Sale of stock     75,400     7,540                          30,160                                      37,700

    Stock issued
     for payment
     of note          10,000     1,000                           4,000                        5,000

    Net (Loss)                                                                             (512,625)      (512,625)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------

Balance at
 June 30, 1995     2,690,676   269,068                       1,923,393    (1,739,945)      (985,747)      (533,231)

    Net (Loss)                                                                    --       (268,936)      (268,936)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------

Balance at
 June 30, 1996     2,690,676   269,068         --      --    1,923,393    (1,739,945)    (1,254,683)      (802,167)
</TABLE>

The Accompanying Footnotes are an Integral Part of These Financial Statements


                                                        F-20

<PAGE>
<TABLE>

                                                 FOCAL CORPORATION
                                           (A DEVELOPMENT STAGE COMPANY)
                                   STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                               FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1999
                                                    (CONTINUED)
<CAPTION>
                                                                         Accumulated    Accumulated        Total
                                                                           Deficit         Deficit         Share-
                                                            Additional     Before          During         holders'
                      Common Stock        Preferred Stock    Paid-in     Development    Development       Equity
                     Shares    Amount     Shares   Amount    Capital        Stage          Stage         (Deficit)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------
<S>                <C>        <C>         <C>      <C>      <C>          <C>            <C>             <C>
    Stock issued
    for services     409,900    40,990         --      --      163,960            --             --        204,950

    Stock issued
     to officer
     in lieu of
     salary         240,000     24,000         --      --       96,000            --             --        120,000

    Net (Loss)                                                                             (500,303)      (500,303)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------

Balance at
 June 30, 1997     3,340,576   334,058         --      --    2,183,353    (1,739,945)    (1,754,986)      (977,520)

    Retirement
    of common
    stock            (31,339)   (3,134)        --      --        3,134            --             --             --

    Stock issued
    for services       4,600       460         --      --        1,840            --             --          2,300

    Stock issued
    to officer in
    lieu of salary   240,000    24,000         --      --       96,000            --             --        120,000

    Stock issued
    for payment
    of notes and
    advances         123,000    12,300         --      --       49,200            --             --         61,500

Net (Loss)                                                                                 (301,586)      (301,586)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------
Balance at
 June 30, 1998     3,676,837  $367,684         --      --   $2,333,527   $(1,739,945)   $(2,056,572)    $(1,095,306)

    Stock issued
    to officer in
    lieu of salary   180,000    18,000         --      --       72,000            --             --          90,000

    Sale of stock     25,000     2,500         --      --       22,500            --             --          25,000

</TABLE>

                                                          F-21

<PAGE>
<TABLE>

                                                    FOCAL CORPORATION
                                              (A DEVELOPMENT STAGE COMPANY)
                                      STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                                  FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1999
                                                       (CONTINUED)
<CAPTION>
                                                                         Accumulated    Accumulated        Total
                                                                           Deficit         Deficit         Share-
                                                            Additional     Before          During         holders'
                      Common Stock        Preferred Stock    Paid-in     Development    Development       Equity
                     Shares    Amount     Shares   Amount    Capital        Stage          Stage         (Deficit)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------
<S>                <C>        <C>         <C>      <C>      <C>          <C>            <C>             <C>
    Stock issued
    for payment
    of accrued
    wages            360,000    36,000         --      --      144,000            --             --        180,000

    Stock issued
    for services       2,000       200         --      --          800            --             --          1,000

    Stock issued
    to employee in
    lieu of bonus    100,000    10,000         --      --       40,000            --             --         50,000

Net (Loss)                                                                                 (446,978)      (446,978)
                   ---------  --------    -------  ------   ----------   ------------   ------------    -----------

Balance at
 June 30, 1999     4,343,837  $434,384         --      --   $2,612,827   $(1,739,945)   $(2,503,550)    $(1,196,284)


</TABLE>


The Accompanying Footnotes are an Integral Part of These Financial Statements


                                                          F-22

<PAGE>
<TABLE>

                                                    FOCAL CORPORATION
                                              (A DEVELOPMENT STAGE COMPANY)
                                                STATEMENTS OF CASH FLOWS
                                       FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<CAPTION>
                                                                                 1999              1998
                                                                              -----------      -----------
<S>                                                                           <C>              <C>
CASH FLOWS PROVIDED (USED) BY OPERATING
 ACTIVITIES:
    Net (loss)                                                                $ (446,978)      $ (301,586)
    Adjustments to reconcile net (loss) to net cash provided
     (used) by operating activities:
      Operating expenses paid by issuance of stock                               141,000            2,300
      Increase in interest payable                                                21,328           18,369
      Increase in accounts payable and accrued expenses                          193,072          180,470
     (Increase) in refundable deposits                                           (10,000)              --
                                                                              -----------      -----------


             Net Cash Flows (Used) by Operating Activities                      (101,578)        (100,447)
                                                                              -----------      -----------

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
    Refundable loan commitment fee                                                    --               --
                                                                              -----------      -----------

CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
    Issuance of notes payable                                                     88,000          101,000
    (Decrease) in notes payable                                                   25,000               --
    Increase (decrease) in loan payable                                           (5,483)          12,975
    Increase (decrease) in advances from president                                 2,300           (1,709)

             Net Cash Flows Provided by Financing Activities                     109,817          112,266
                                                                              -----------      -----------

NET INCREASE IN CASH                                                               8,239           11,819

CASH (OVERDRAFT) AT THE BEGINNING OF THE YEAR                                        219          (11,600)
                                                                              -----------      -----------

CASH (OVERDRAFT) AT THE END OF THE YEAR                                       $    8,458       $      219
                                                                              ===========      ===========


ADDITIONAL DISCLOSURES:
    Cash paid during each year for:
        Interest                                                              $   22,548       $   19,479
                                                                              ===========      ===========


        Income taxes                                                          $      900       $    2,252
                                                                              ===========      ===========

 NON CASH INVESTING AND FINANCING TRANSACTIONS:

    Common stock issued in consideration of notes payable and
     officer advances                                                         $       --       $   61,500
                                                                              ===========      ===========

     Common stock issued in consideration of accrued officer payroll          $  180,000       $  120,000
                                                                              ===========      ===========
</TABLE>

The Accompanying Footnotes are an Integral Part of These Financial Statements


                                                          F-23

<PAGE>
<TABLE>

                                                    FOCAL CORPORATION
                                              (A DEVELOPMENT STAGE COMPANY)
                                                 STATEMENT OF CASH FLOWS
                                  FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1999

<CAPTION>
<S>                                                                                           <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
    Net (loss)                                                                                $(2,503,550)
    Adjustments to reconcile net (loss) to net cash provided
     (used) by operating activities:
      Non-cash compensation and promotion                                                          83,960
      Operating expenses paid by issuance of stock and additional paid in capital                 274,200
      Compensation to officer paid by issuance of stock and additional paid in capital            382,000
      Operating expenses paid by reduction of loan commitment fee                                  30,000
      Loss on write-off of assets                                                                 (18,250)
      Increase in interest payable                                                                 55,945
      Increase in accounts payable and accrued expenses                                           910,955
                                                                                              ------------

             Net Cash Flows (Used) by Operating Activities                                       (784,740)
                                                                                              ------------

CASH FLOWS (USED) BY INVESTING ACTIVITIES:
    Refundable loan commitment fee                                                                (30,000)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
    Issuance of notes payable                                                                     449,046
    Issuance of common stock                                                                      359,210
    (Decrease) in notes payable                                                                    (5,000)
    Increase in loan payable                                                                        7,492
    Increase in advances from president                                                            12,450
                                                                                              ------------

             Net Cash Flows Provided by Financing Activities                                      823,198
                                                                                              ------------

NET INCREASE IN CASH                                                                                8,458

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

CASH AT JUNE 30, 1999                                                                         $      8,458
                                                                                              =============

ADDITIONAL DISCLOSURES:
    Cash paid during the period for:
        Interest                                                                              $     51,665
                                                                                              =============

        Income taxes                                                                          $      5,273
                                                                                              =============

NON CASH INVESTING AND FINANCING TRANSACTIONS:
    Common stock issued in consideration of notes payable and officer advances                $     66,500
                                                                                              =============

     Common stock issued in consideration of accrued officer payroll                          $    420,000
                                                                                              =============

The Accompanying Footnotes are an Integral Part of These Financial Statements
</TABLE>


                                                          F-24

<PAGE>

                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1999


NOTE 1  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Development Stage Company

Focal Corporation was incorporated in the State of Utah in 1980 as
Petro-Funding. The Company sold and distributed its assets from the movie
distribution business during May and June of 1993. The Company then changed the
focus of its business on July 1, 1993 to the acquisition, development and
management of commercial real estate, primarily shopping centers. The Company
has not acquired any properties as of the date of this report, and has not
recognized any income from the date of inception (July 1, 1993) to June 30,
1999. As the Company was involved in other businesses prior to July 1, 1993, an
accumulated deficit of $1,739,945 had been incurred to the last day of those
operations on June 30, 1993. Focal Corporation has not generated revenue since
the sale and distribution of assets from the movie distribution business during
May and June of 1993. As such, the accompanying financial statements have been
prepared using the accounting formats prescribed for development stage companies
since July 1, 1993.

Income Taxes

The Company files federal income and state franchise tax returns. The Company
accounts for deferred income taxes using the liability method in accordance with
Statement of Financial Accounting Standards No. 109 (SFAS No. 109), which it
adopted during 1994. Deferred income taxes are computed based on the tax
liability or benefit in future years of the reversal of temporary differences in
the recognition of income or deduction of expenses between financial and tax
reporting purposes. The net difference between tax expense and taxes currently
payable is reflected in the balance sheet as deferred taxes. Deferred tax assets
and/or liabilities are classified as current and non-current based on the
classification of the related asset or liability for financial reporting
purposes, or based on the expected reversal date for deferred taxes that are not
related to an asset or liability.

Use of Estimates

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

Year 2000 Compliance

In general, management believes its computerized systems used to report
financial information are year 2000 compliant. Management does not foresee any
material year 2000 problems with the Company's vendors, service providers, or
other third parties which affect the Company's financial information.

Long-Lived Assets

In 1998 the Company adopted SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." In accordance
with SFAS 121, long-lived assets held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicated that the
carrying amount of an asset may not be fully recoverable. For purposes of
evaluating the recoverability of long-lived assets, the estimated future cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value is
required.


                                      F-25

<PAGE>

                                FOCAL CORPORATION
                          (A DEVELOPMENT STATE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1999

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers cash and cash
equivalents to include cash on hand, bank balances and short term investments
with a maturity of three months or less.

NOTE 2 - DEFERRED TAXES

Deferred tax assets and liabilities are recorded based on the difference between
the financial statement and tax return bases of assets and liabilities. Deferred
tax assets and liabilities at the end of each period are determined using the
tax rate expected to be in effect when taxes on these accounts are expected to
be paid or recovered. Accordingly, the current period tax provision can be
affected by the enactment of new tax rates.

The net deferred tax amounts included in the accompanying balance sheet include
the following amounts of deferred tax assets and liabilities at June 30, 1999:

Deferred Tax Asset - Non-Current                                    $ 960,889
Deferred Tax Liability - Non-Current                                       --
                                                                    ----------
                                                                      960,889
Valuation allowance                                                  (960,889)
                                                                    ----------
Net Deferred Tax Asset - Non-Current                                $       0
                                                                    ===========

The deferred tax asset results from ordinary loss carryforwards available to
reduce future taxable income. The valuation allowance account is established to
reduce the tax asset account to $0 because the operating losses may not be
utilized. The valuation allowance increased by $97,342 from June 30, 1998 to
June 30, 1999 as a result of additional operating losses.

NOTE 3 - NOTES PAYABLE

Notes payable consisted of the following at June 30, 1999:

David Pammintuan, with interest at 12%                                $  29,000
William Platts, with interest at 12%                                     37,000
Mr. & Mrs. Robert Cullen, with interest at 12%                            5,396
Dr. Mark Moss, with interest at 12%                                      21,650
Richard Baughn, with interest at 12%                                     65,000
Robert Erickson, with interest at 12%                                    11,000
Andrea Malmquist, with interest at 12%                                  100,000
Christina Hodge, with interest at 12%                                     1,000
Howard Newsom, with interest at 12%                                      20,000
Garrette Newsom, with interest at 12%                                     2,000
John Garland, with interest at 12%                                        5,000
Laura Haskin, with interest at 12%                                        1,000
Robert Lyntton, with interest at 12%                                      5,000
Margaret Lyntton, with interest at 12%                                      500
Paul Tichy, with interest at 12%                                          1,500
Cynthia & Jerry Shodall, with interest at 12%                             6,000
Michael Alvarez, with interest at 12%                                    10,000
Bette Vikupitz, with interest at 12%                                      5,000
Frank Clark, with interest at 12%                                         5,000


                                      F-26

<PAGE>

                                FOCAL CORPORATION
                          (A DEVELOPMENT STATE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1999

Jackie Angel, with interest at 12%                                        2,500
Dan Gobel, with interest at 12%                                          10,000
Greg Thompson, with interest at 12%                                      15,000
William Czechowski, with interest at 12%                                  5,000
Mary Shodall/John Garland, with interest at 12%                           5,000
Wade Kitagawa, with interest at 12%                                       2,500
Larry Phoenix Trust, with interest at 12%                                 3,000
                                                                       ---------

                                                                       $374,046
                                                                       =========

None of these notes are collateralized. As of the date of this report, $296,046
of these notes are past due, and the remaining $88,000 are due prior to June 30,
2000.

Renewal of these loans are at the discretion of the holders. However, management
expects renewal to occur in the normal course of business for the foreseeable
future.

Total interest expense of $42,060 and $36,916 is included in operating expenses
as of June 30, 1999 and 1998, respectively.

NOTE 4 - LOAN PAYABLE - RELATED PARTY
<TABLE>

Loan payable - related party consisted of the following at June 30, 1999:
<CAPTION>
<S>                                                                                           <C>
Loan payable - Unsecured loan payable to Kenneth Palmer, son of the Company's
 president, with interest accrued at 12% annually                                             $    10,000

Loan payable - unsecured, non-interest loan payable to Bell Financial, due on
 demand.  The president of Bell Financial is also the secretary of Focal Corporation                7,492
                                                                                              ------------

                                                                                                   17,492

Interest payable related to the above loans                                                         6,138
                                                                                              ------------

                                                                                              $    23,630
                                                                                              ============
</TABLE>

Renewal of these loans are at the discretion of the holders. However, management
expects renewal to occur in the normal course of business for the foreseeable
future. Total interest expense of $1,816 and $1,597 is included in operating
expenses as of June 30, 1999 and June 30, 1998, respectively.

NOTE 5 - ADVANCES FROM PRESIDENT

<TABLE>
<CAPTION>
Advances from president consisted of the following at June 30, 1999:
<S>                                                                                           <C>
Advance - Howard Palmer, president of the Company, no stated terms                            $     5,950
                                                                                              ============
</TABLE>

                                      F-27
<PAGE>

                                FOCAL CORPORATION
                          (A DEVELOPMENT STATE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1999

NOTE 6 - LOSS PER COMMON SHARE

Primary loss per common and common equivalent share, assuming no dilution, is
computed based on the weighted average number of shares of common stock and
common stock equivalents outstanding during each year. The number of weighted
average common and common equivalent shares, as applicable, outstanding during
the years ended June 30, 1999 and 1998 was 4,100,409 and 3,708,176,
respectively. Fully diluted per share data is not presented as the effects would
be antidilutive.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The Company has entered into an employment contract with its president that
provides for a monthly salary and annual vacation pay. The contract expires on
June 30, 2002. Due to lack of Company funds, this amount is being accrued.
However, the president of the Company has elected to waive his rights to all
vacation pay earned during fiscal years 1998 and 1999 and, as such, no amounts
have been accrued for these periods.

NOTE 8 - RELATED PARTY TRANSACTIONS

The Company has accrued operating expenses of $35,431 due to officer and
directors of the Company at June 30, 1999.

During the year ended June 30, 1999, the Company issued 360,000 shares of common
stock and 360,000 warrants valued at $180,000 to Howard Palmer, president of the
Company, in lieu of salary for the fiscal year ending June 30, 1998. The Company
also issued an additional 180,000 shares of common stock and 180,000 warrants,
valued at $90,000 to Howard Palmer in lieu of salary for the period July 1, 1998
to December 31, 1998. As of June 30, 1999, accrued salaries includes $90,000 for
the period January 1, 1999 to June 30, 1999 and $40,600 of accrued wages for
prior years.

NOTE 9 - UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

The financial statements have been prepared assuming the Company will continue
as a going concern. The Company currently has no operations and is dependent
upon funds from a private placement for funding its day-to-day cash
requirements. The Company has been directing its efforts to acquiring
well-leased, existing ten to twenty acre discount shopping centers, anchored by
major national retail tenants. The Company has located properties in Arizona,
California and Nevada that fit its investment criteria and is exploring ways to
finance the acquisition of these properties. If the Company is able to acquire
these properties, the properties may generate adequate revenues for the Company
to finance its operations. The Company's president, who has been in the discount
shopping center development business for over twenty-five years, is currently
working with representatives of national retail chains to select possible sites
in various areas for future development of shopping centers. The Company
proposes to construct the facilities and lease them back to the retailers on
long term leases. At the present time there is no assurance that these events
will take place. The effect of the foregoing matters raises substantial doubt
about the ability of the Company to continue as a going concern. As discussed in
Notes 3 and 4, the Company is also dependent upon creditors not calling the
loans. (See Note 15.)




                                      F-28

<PAGE>

                                FOCAL CORPORATION
                          (A DEVELOPMENT STATE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1999

NOTE 10 - WARRANTS TO PURCHASE COMMON STOCK

The following is a recap of the outstanding warrants as of June 30, 1999:

<TABLE>
<CAPTION>
              Number of Shares           Date Issued                   Exercise Price                 Expiration Date
              ----------------     -----------------------             --------------                 ---------------
                     <S>                <C>                               <C>                        <C>
                       300,000           1993 & 1995                      $1 - $3                        12/31/99
                        93,440               1994                         $1 - $3                        12/31/99
                       102,000               1995                         $1 - $3                        12/31/99
                       260,000               1996                         $1 - $3                        12/31/99
                       326,392               1996                         $1 - $3                        12/31/99
                       240,000            July 1996                       $1 - $3                        12/31/99
                       240,000          September 1997                    $1 - $3                        12/31/99
                         8,000               1997                         $1 - $3                        11/23/00
                         3,000               1998                         $1 - $3                         3/24/01
                        12,000               1998                         $1 - $3                         4/16/01
                       360,000           August 1998                      $1 - $3                         8/30/01
                       180,000           January 1999                     $1 - $3                         1/18/02
                       100,000           Fiscal 1998                      $1 - $3                    8/5/00 - 4/24/01
              ----------------
             Total   2,224,832
</TABLE>


On July 1, 1998, the Company extended the expiration date of 200,000 warrants
held by Howard Palmer from June 30, 1998 to June 30, 2001.

In connection with the issuance of stock and notes payable during the fiscal
year 1999, the Company issued 176,000 warrants to ten individuals. These
warrants are exercisable at prices ranging from $1 to $3 per share, and expire
starting from July 10, 2001 through June 16, 2002.




                                      F-29

<PAGE>

                                FOCAL CORPORATION
                          (A DEVELOPMENT STATE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1999

NOTE 11 - (PROVISION) BENEFIT FOR INCOME TAXES

The components of the (provision) benefit for income taxes are as follows:

             Current                              1999                 1998
                                                  ----                 ----
             Federal                          $      0              $     0
             State                                (900)                (900)
                                              ---------             --------
                                              $   (900)             $  (900)

             Deferred                         $850,344             $690,392
             Federal                           110,545              173,155
             State                            (960,889)            (863,547)
                                              ---------            ---------
             Valuation Allowance              $      0             $      0


As of June 30, 1999 and 1998, for income tax purposes, the Company had
approximately $2,500,000 and $2,055,000, respectively, of ordinary loss
carryforwards available to reduce future taxable income through the year 2013.

NOTE 12 - SHARES HELD BY FOCAL CORPORATION

As of June 30, 1999, the Company held a certificate of 800,000 shares, which was
issued to a potential investor. These shares will be forwarded to the
shareholder when the obligation of investing $5,000,000 in the Company is
fulfilled. Due to the contingency of this transaction, it has not been recorded
on the books.

NOTE 13 - SUBSEQUENT EVENTS

Subsequent to the balance sheet date, Focal Corporation entered into four
separate escrows for lots located in Rosamond, California. The four lots,
totaling $1,657,659 in purchase costs all closed in September and October 1999.
In consideration for the lots, the Company paid the following:

    Issuance of 775,019 shares of Class A Common Stock Valued at     $   775,019
    Assumption of various debts and liens                                730,066
    Note payable to seller                                               144,214
    Cash                                                                   8,360
                                                                     -----------
                                                                     $ 1,657,659

                                      F-30