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


                    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, 1998

 [ ]     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-.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant on April 13, 1999 was approximately $1,307,396.

         The number of shares outstanding of the registrant's only class of
Common Stock, $0.10 par value per share, was 5,175,176 on April 13, 1999.

                       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. See
"Management's Discussion and Analysis or Plan of Operations." 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 to the name change, the 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
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 existing shopping centers anchored
by national retail tenants with operations that generate positive cash flows. As
the Company's financial condition improves, and as appropriate opportunities
arise, the Company also intends to acquire strategically- located vacant land
suitable for the development of discount and neighborhood 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
accomplish the Company's business plan. 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.



                                        1
<PAGE>



     The Company is in various stages of negotiation to acquire properties in
Las Vegas, Nevada (two shopping centers), Lancaster, California (one shopping
center), Calexico, California (developable land, San Bernardino, 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 K-Mart) on a long-term lease, and range in size
from 84,000 square feet to 297,733 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 14 to 63 acres.

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. 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.

ITEM 3. LEGAL PROCEEDINGS.

     The Company is not a party to any litigation and is not aware of any
pending or threatened litigation against the Company. James Collins, a former
financial consultant of the Company, has a stipulated judgment against the
Company for $24,000 in unpaid consulting fees. Jackson, DeMarco & Peckenpaugh,
the Company's former counsel, has recorded a $71,000 judgment (and lien against
the Company's assets) for unpaid legal fees.

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.

     Although previously traded in Utah pursuant to a Secondary Trading
Transactional Exemption under old Rule 177-14-2m of the Utah Uniform Securities
Act, there has been no active trading market for the Common Stock of the Company
since 1984. 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 April 13, 1999, there were 5,175,176 shares of the Company's Common
Stock issued and outstanding, held of record by 462 shareholders.

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

     Oxford Transfer & Registrar Agency, Inc. in Portland, Oregon serves as
transfer agent for the Common Stock of the Company.



                                        2
<PAGE>



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

PLAN OF OPERATIONS

     In May 1993, the Company discontinued its operations relating to movie
distribution and sold substantially all of its assets to Maverick Marketing
Management, Inc., a Nevada corporation ("Maverick"), in exchange for shares of
common stock of Maverick and shares of common stock of Interdec Corporation, a
Colorado corporation ("Interdec"), which were held by Maverick. All of the
shares of common stock of Maverick and Interdec were subsequently distributed to
the Company's shareholders on a pro rata basis and for no consideration. The
Company realized a $271,000 net gain on the sale of the assets to Maverick.

     The Company's current plan of operations is 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.

     The Company's investment objective in considering each potential
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, 1998 and 1997.

     The Company's expenses during the fiscal years ended June 30, 1998 and 1997
amounted to $358,165 and $610,696, respectively. Expenses decreased by $252,531
primarily as a result of $200,000 in consulting fees paid to Bell Financial,
Inc. (of which the Company's Secretary, Richard C. Shinn, is president) during
Fiscal 1997, which were not incurred during Fiscal 1998, and reduced expenses
for executive compensation by virtue of the resignation of the Company's former
Chief Financial Officer.

     The Company had a net loss of $301,586 for the fiscal year ended June 30,
1998, and a net loss of $500,303 for the fiscal year ended June 30, 1997.
Because there was no revenue generated during those periods, these losses
generally represent the Company's operating expenses plus income tax, offset by
certain forgiveness of indebtedness income.



                                        3
<PAGE>



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 $801,889 for the two years ended June 30, 1998. 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' report covering the Company's financial statements is qualified as to
the Company's ability to continue as a going concern.

     The Company is in the process of attempting to raise approximately $500,000
("Offering") for working capital. The offering is expected to consist of
Convertible Notes and will be made to "accredited investors" only pursuant to
Regulation D under the Securities Act of 1933.

     During the fiscal year ended June 30, 1998, the Company raised $101,000
through the sale of Convertible Notes. The Convertible Notes are convertible
into 202,000 shares of Common Stock. The purchasers of the Convertible Notes
also received Warrants to purchase an additional 202,000 shares of Common Stock.

     At June 30, 1998, the Company had total liabilities of $1,095,525, of which
$279,528 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).


OUTLOOK

     Certain statements contained in this "Outlook" 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 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
fair 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 proceeds from the Offering 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 its first
shopping center. Once the Company has acquired a shopping center that meets the
Company's investment criteria, which include among other things, the ability to
generate positive cash flows, management believes that such cash flows will
provide the liquidity and capital resources necessary to conduct the business of
the Company. Management of the Company believes that between the funds generated
by the Offering and any cash flows resulting from the acquisition of a shopping
center, the Company will generate enough cash to support its operations over the
next twelve months. Nonetheless, the negotiations for acquisition or development
of a shopping center are not yet final. Further, there is no guarantee that any
shopping center acquired or developed will generate positive cash flows.
Accordingly, there is no guarantee that the Company will generate enough cash to
support its operations over the next twelve months.

     The Company believes it currently is in the final stages of negotiating the
acquisitions of several discount shopping centers and lots of land which are



                                        4
<PAGE>



suitable for the development of discount shopping centers. Nonetheless, 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
accomplish the Company's business plan.

     Currently, the Company does not own or manage any shopping centers or other
real properties. In addition, the Company currently does not have funds
necessary for the acquisition or development of shopping centers. Therefore, the
Company intends to rely on its management to successfully negotiate the
acquisition of existing shopping centers and vacant land in exchange for shares
of the Company's Common Stock or Convertible Preferred Stock. It is anticipated
that each such acquisition will be separately negotiated based on the owner's
equity or tax base in the subject property. No assurance can be given, however,
that management will be able to convince sellers of desirable properties to
accept the Company's securities in lieu of cash or a secured note.

     Although the Company currently intends to acquire shopping centers 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, 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 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
investments. 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.

     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 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 fair 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.



                                        5
<PAGE>



IMPACT OF YEAR 2000

     Many existing software programs use only two digits to identify the year in
the date field. If such programs are not corrected, date data concerning the
Year 2000 could cause many computer applications to fail, lock-up or generate
erroneous results.

     The Company believes that its software programs and computerized systems
used to report financial information currently are Year 2000 compliant.
Nonetheless, there can be no assurance that there will be no interruption of
operations or other limitations of system functionality, or that the Company
will not incur substantial costs to avoid such occurrences.


     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-16.

     Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

         Kelly & Company ("Kelly") resigned as the Company's Certifying
Accountant effective September 9, 1995.

         The reports of Kelly on the Company's financial statements for the past
two fiscal years did not contain an adverse opinion or a disclaimer of opinion.
However, the financial statements were prepared to reflect the uncertainty as to
the Company's ability to continue as a going concern.

         In connection with the audit of the Company's financial statements for
the year ended June 30, 1994 and the interim period through the date of
dismissal, there was no disagreement between the Company and Kelly on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, and there was no reportable event required to be
disclosed.

         The Company requested that Kelly furnish it a letter addressed to the
Commission stating whether it agrees with the above statements. A copy of that
letter, dated September 8, 1995, was filed as Exhibit 16 to the Company's Form
8-K dated September 25, 1995.

         On September 25, 1995, the Company appointed Caldwell, Becker, Dervin,
Petrick & Company ("CBDP") as its new Certifying Accountant. The Company did not
consult with CBDP or any other accounting firm regarding the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of opinion that might be rendered regarding the Company's financial
statements, nor did the Company consult with CBDP with respect to any accounting
disagreement or any reportable event at any time prior to the appointment of
such firm.



                                        6
<PAGE>



                                    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                66              Chairman of the Board,
                                                     President and Director

     Leroy Hardy                     61              Vice President and Director

     Gerald W. May                   60              Treasurer and Director

     Richard C. Shinn                66              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 last 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 was the
Treasurer of the Company from 1993, to 1995. 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.

         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.



                                        7
<PAGE>



         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, 1998 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 1998 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 year ended 1998, 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. Subsequent to
fiscal year ended 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 1997. The remainder of his compensation is being accrued. 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.



                                        8
<PAGE>



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

         The following table sets forth as of April 13, 1999, 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.

<TABLE>
<CAPTION>
                                                    Amount and Nature
      Name and Address                           of Beneficial Ownership                      Percent of
  of Beneficial Owner(1)(2)                          of Common Stock                        Common Stock(3)
  -------------------------                      -----------------------                    ---------------
     <S>                                                <C>                                        <C>
     Howard M. Palmer(4)                                2,849,844                                  55.1%

     Julia Murray(5)                                      800,000                                  15.5%
     3484 Nightflower Lane
     Las Vegas, Nevada 89121

     Robert and Lynda Cullen(6)                           551,584                                  10.7%
     1050 N. Anaheim Blvd.
     Anaheim, California  92801

     Richard C. Shinn(7)                                  400,000                                   7.7%

     Estate of James T. Hays(8)                           302,018                                   6.4%

     David Pamintuan(9)                                   263,930                                   5.1%
     14605 W. Wild Oak Drive
     Canyon Country, California 91351

     Don Zink(10)                                         254,500                                   4.9%
     2100 Sepulveda Blvd., #24
     Manhattan Beach, California  90266

     Leroy Hardy(11)                                       79,783                                   1.8%

     Gerald W. May(12)                                     79,783                                   1.8%

     All Directors and Officers                         3,409,410                                  65.9%
     as a Group (4 persons)
</TABLE>
     ------------------
     (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.



                                        9
<PAGE>



     ------------------
     (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 306,644 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 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; and (ix) warrants to purchase 1,283,000
                  shares, held by Mr. Palmer.
     (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) 135,393 shares held by Focal
                  Development Corporation, a Colorado corporation controlled by
                  Mr. Hays' wife ("FDC") and (v) 29,783 shares held by Interdec
                  Corporation, a Colorado corporation affiliated with Mr. Hays
                  ("Interdec"), and (vi) warrants to purchase 54,637 shares.
     (9)          Includes 66,680 shares which Mr. Pamintuan owns of record.
                  Also includes warrants to purchase 139,250 shares and
                  convertible notes which are convertible into 58,000 shares.
     (10)         Includes (i) 54,500 shares held by 1st S. I. Fund Trust, a
                  trust administered by Mr. Zink and (ii) warrants to purchase
                  200,000 shares.
     (11)         Includes 25,000 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.
     (12)         Includes 25,000 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.

         In connection with the reorganization of the Company and the Board of
Directors' desire to acquire real estate assets, operating funds and additional
management personnel, the Company entered into an agreement dated July 29, 1993
among the Company, Focal Development Corporation of Nevada ("FDCN") (a Nevada
corporation controlled by the estate of James T. Hays) and Howard M. Palmer.
Pursuant to the agreement, Mr. Palmer became President of the Company and began
the process of locating and negotiating for shopping center properties through
his independent network of experienced retail site selectors, lease negotiators
and property managers. Each acquisition will be negotiated and approved by the
Company's Board of Directors on an individual basis. In connection with the
agreement, FDCN transferred its 404,839 shares of the Company's Common Stock as
follows: 160,000 shares to Mr. Palmer, 80,000 shares to Don Zink and the balance
to Mr. Hays. Mr. Zink subsequently transferred his 80,000 shares to a business
associate. Mr. Hays subsequently gifted his shares to various individuals,
including 64,054 shares to his wife. In addition, Coast Advisors, Inc., an
affiliate of Mr. Palmer, was issued 10,000 shares of the Company's Common Stock
in exchange for a $5,000 capital contribution.

         In August 1993, Howard M. Palmer was issued 250,000 shares of the
Company's Common Stock in connection with his appointments as Chairman of the
Board and President of the Company. Mr. Palmer subsequently transferred these
shares to Coast Advisors, Inc., a Nevada corporation affiliated with Mr.
Palmer.



                                       10
<PAGE>



         In September 1993 and for services rendered to the Company, the
directors of the Company were issued warrants to purchase shares of Common Stock
as follows: Howard M. Palmer, 410,000 shares; James T. Hays, 54,637 shares;
Gerald W. May, 25,000 shares; and Leroy Hardy, 25,000 shares. The warrants
issued to the Company's directors are exercisable into Common Stock at $1.00 per
share through December 31, 1999. Other than the exercise price, the terms and
conditions of the warrants issued to the directors are identical to the warrants
issued in the Company's private placement of Common Stock and warrants in
October 1993 through June 1994. The fair market value of the Company's Common
Stock, as determined by the Company's Board of Directors, was $0.50 per share on
the date of the grant of the warrants.

         In September 1993, Don Zink was issued warrants to purchase 200,000
shares of the Company's Common Stock for financial and real estate services
previously rendered to the Company. The warrants issued to Mr. Zink contain the
same terms and conditions as those issued to directors of the Company and
described above. The fair market value of the Company's Common Stock, as
determined by the Company's Board of Directors, was $0.50 per share on the date
of the grant of the warrants. In addition, Mr. Zink was issued an additional
40,000 shares of the Company's Common Stock pursuant to a consulting arrangement
with the Company, whereby Mr. Zink had rendered financial and real estate
services to the Company.

         In September 1993, Robert and Lynda Cullen, as trustees for the Cullen
Family Trust, were granted warrants to purchase 120,000 shares of Common Stock
at an exercise price between $1.00 and $3.00 per share for consulting services
rendered to the Company. In December 1993 the Cullen Family Trust purchased
60,000 shares of Common Stock for $.50 per share and was granted warrants to
purchase an additional 60,000 shares of Common Stock in terms identical to those
described above. In February 1994, the Cullen Family Trust purchased 140,000
shares of Common Stock and was granted warrants to purchase an additional
140,000 shares of Common Stock on terms identical to those described above. In
January 1995, the Cullen Family Trust was granted warrants to purchase 10,000
shares of Common Stock on terms identical to those described above. In September
1995, the Cullen Family Trust acquired a Convertible Note in the principal
amount of $5,395.84, which is convertible into 10,792 shares of Common Stock
and, in connection therewith, was granted a warrant to purchase an additional
10,792 shares of Common Stock on terms identical to those described above.

         At various times between October 1993 and June 1995, David Pamintuan
purchased an aggregate of 66,680 shares of Common Stock for $.50 per share, and
was granted warrants to purchase an additional 81,250 shares of Common Stock on
terms identical to those described above with respect to the Cullens. During
September and November 1995, Mr. Pamintuan acquired Convertible Notes in the
aggregate principal amount of $29,000, which are convertible into 58,000 shares
of Common Stock and, in connection therewith, was granted warrants to purchase
an additional 58,000 shares of Common Stock on terms identical to those
described above.

         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.



                                       11
<PAGE>



         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.



                                       12
<PAGE>



     Item 13. EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibits

         3.1 ...................     Articles of Incorporation of the Company.*

         3.2 ...................     Amendment to the Articles of Incorporation
                                     changing the Company's name to TVM Global
                                     Entertainment, Inc.*

         3.3 ...................     Amendment to the Articles of Incorporation
                                     changing the Company's name to Cinema
                                     Features, Inc.*

         3.4 ...................     Amendment to the Articles of Incorporation
                                     changing the Company's name to Focal
                                     Corporation.*

         3.5 ...................     Restated Bylaws of the Company.*

         3.6 ...................     Amendment to the Articles of Incorporation
                                     authorizing the Series A Convertible
                                     Preferred Stock.*

         4.1 ...................     Specimen stock certificate of the Company.*

         10.1 ..................     Form of Warrant Certificate issued to
                                     directors of the Company (schedule of
                                     directors receiving Warrants attached
                                     thereto).*

         10.2 ..................     Employment Agreement dated October 1, 1993
                                     between the Company and Howard M. Palmer.*

         10.3 ..................     Agreement dated July 29, 1993 between the
                                     Company and Howard M. Palmer, whereby the
                                     Company acquired operating funds,
                                     management expertise and potential real
                                     estate assets in exchange for Common Stock
                                     and future consideration.*

         10.4 ..................     Bill of Sale and Transfer of Rights in
                                     Movie Properties dated June 27, 1993
                                     between the Company and Maverick Marketing
                                     Management, Inc.*

         10.5 ..................     Form of Convertible Promissory Note.**
     ---------------
     *   Filed as an exhibit to the Company's Registration Statement on Form
         10-SB dated November 26, 1993 or amendment thereto dated March 28, 1994
         (Registration No. 0-22968) and incorporated herein by reference.
     **  Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
         the fiscal year ended June 30, 1995, and incorporated herein by
         reference.



         (b) Reports on Form 8-K.

         Inapplicable.



                                       13

<PAGE>






                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                                      FOCAL CORPORATION



     Dated: May 21, 1999                       By:/S/ HOWARD M. PALMER
                                                  ------------------------------
                                                      Howard M. Palmer, Chairman
                                                      of the Board and President

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

         Name                             Title                         Date
         ----                             -----                         ----


 /S/ HOWARD M. PALMER            Chairman of the Board and          May 21, 1999
 --------------------            President (Principal
 Howard M. Palmer                Executive Officer)



 /S/ GERALD W. MAY               Director and Treasurer             May 21, 1999
 --------------------            (Principal Financial
 Gerald W. May                   and Accounting Officer)



 /S/ LEROY HARDY                 Vice President and                 May 21, 1999
 --------------------            Director
 Leroy Hardy



 /S/ RICHARD SHINN               Secretary                          May 21, 1999
 --------------------
 Richard Shinn



                                       14
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                              FINANCIAL STATEMENTS
                                  JUNE 30, 1998














                          INDEX TO FINANCIAL STATEMENTS

                                                                     Page

     Independent Auditors' Report                                    F-2

     Prior Independent Auditors' Report                              F-3 - F-4

     Balance Sheet as of June 30, 1998                               F-5

     Statements of Operations
      For the Years Ended June 30, 1998 and 1997                     F-6

     Statement of Operations
      From Inception of Development Stage to June 30, 1998           F-7

     Statements of Shareholders' Equity (Deficit)
      From Inception of Development Stage to June 30, 1998           F-8 - F-9

     Statements of Cash Flows
      For the Years Ended June 30, 1998 and 1997                     F-10

     Statement of Cash Flows
      From Inception of Development Stage to June 30, 1998           F-11

     Notes to Financial Statements                                   F-12 - F-16



                                       F-1

<PAGE>







                          INDEPENDENT AUDITORS' REPORT


     March 5, 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, 1998, and the related statements of
operations, shareholders' equity (deficit), and cash flows for the years ended
June 30, 1998 and 1997, 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, 1998, and the results of its operations and its cash
flows for the years ended June 30, 1998 and 1997 and from inception (July 1,
1993) to June 30, 1998, 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-2
<PAGE>



                                       F-3
<PAGE>



                                       F-4
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                                  JUNE 30, 1998




<TABLE>
<CAPTION>

                                     ASSETS


    <S>                                                                                           <C>
     CURRENT ASSETS
             Cash                                                                                           219
    Deferred tax asset (Note 2)                                                                   $          --
                                                                                                  --------------

             Total Assets                                                                         $         219
                                                                                                  ==============




                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)


     CURRENT LIABILITIES
             Accounts payable (Note 12)                                                           $     425,124
             Accrued expenses - related parties (Note 8)                                                 27,980
             Accrued payroll                                                                             73,633
             Accrued payroll - president (Note 8)                                                       220,600
             Accrued income taxes                                                                           900
             Interest payable                                                                            34,617
             Loan payable - related party (Note 4)                                                       22,975
             Notes payable (Note 3)                                                                     286,046
             Advances from president (Note 5)                                                             3,650
                                                                                                  --------------

             Total Current Liabilities                                                                1,095,525
                                                                                                  --------------

     SHAREHOLDERS' EQUITY (DEFICIT)
             Preferred stock; 100,000,000 shares authorized, no shares
              outstanding, no par value                                                                      --
             Common stock; 40,000,000 shares authorized 3,676,837 shares
              issued and 3,676,837 outstanding, $0.10 par value (Note 10 and 13)                        367,684
             Additional paid in capital                                                               2,333,527
             Deficit accumulated before the development stage                                        (1,739,945)
             Deficit accumulated during the development stage                                        (2,056,572)
                                                                                                  --------------

                                            Total Shareholders' Equity (Deficit)                     (1,095,306)
                                                                                                  --------------

             Total Liabilities and Shareholders' Equity (Deficit)                                 $         219
                                                                                                  ==============
</TABLE>



  The Accompanying Footnotes are an Integral Part of These Financial Statements


                                                        F-5



<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED JUNE 30, 1998 AND 1997




<TABLE>
<CAPTION>
                                                                                     1998               1997
                                                                                --------------    --------------

     <S>                                                                        <C>               <C>
     REVENUES (Note 1)                                                          $           0     $           0

     OPERATING COSTS AND EXPENSES                                                     358,165           610,696
                                                                                --------------    --------------

     (LOSS) FROM OPERATIONS                                                          (358,165)         (610,696)

     OTHER INCOME
             Relief of debt (Note 11)                                                  57,479           111,193
                                                                                --------------    --------------

             (Loss) Before Income Taxes                                              (300,686)         (499,503)

     PROVISION FOR INCOME TAXES                                                          (900)             (800)
                                                                                --------------    --------------

             Net (Loss)                                                         $    (301,586)    $    (500,303)
                                                                                ==============    ==============

             (Loss) per common share and common share
              equivalent (Note 6)                                               $        (.08)    $        (.17)
                                                                                ==============    ==============
</TABLE>



  The Accompanying Footnotes are an Integral Part of These Financial Statements


                                       F-6

<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF OPERATIONS
              FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1998




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

     OPERATING COSTS AND EXPENSES                                                                     2,254,749
                                                                                                  --------------

     (LOSS) FROM OPERATIONS                                                                          (2,254,749)

     OTHER INCOME
             Relief of debt (Note 11)                                                                   203,277
                                                                                                  --------------

             (Loss) Before Income Taxes                                                              (2,051,472)

     PROVISION FOR INCOME TAXES                                                                          (5,100)
                                                                                                  --------------

             Net (Loss)                                                                           $  (2,056,572)
                                                                                                  ==============
</TABLE>



  The Accompanying Footnotes are an Integral Part of These Financial Statements



                                       F-7
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
              FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1998


<TABLE>
<CAPTION>
                                                       Common Stock                      Preferred Stock
                                            --------------------------------    --------------------------------
                                                Shares            Amount            Shares            Amount
                                            --------------    --------------    --------------    --------------

<S>                                             <C>           <C>                          <C>    <C>
July 1, 1993 -
 Balance at beginning of
 development stage                              1,526,396     $     152,640                --     $          --

    Stock issued for services                     349,960            34,996

    Sale of stock                                 414,120            41,412

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

Balance at June 30, 1994                        2,290,476           229,048                --                --

    Stock issued for services                     114,800            11,480

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

    Sale of stock                                  75,400             7,540

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

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

Balance at June 30, 1995                        2,690,676           269,068

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

Balance at June 30, 1996                        2,690,676           269,068                --                --
</TABLE>


(CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
                                                                Accumulated      Accumulated         Total
                                                                  Deficit          Deficit           Share-
                                              Additional          Before           During            holders'
                                               Paid-in          Development      Development         Equity
                                               Capital            Stage             Stage           (Deficit)
                                            --------------    --------------    --------------    --------------

<S>                                         <C>               <C>               <C>               <C>
July 1, 1993 -
 Balance at beginning of
 development stage                          $   1,576,181     $  (1,739,945)    $          --     $     (11,124)

    Stock issued for services                      21,484                                                56,480

    Sale of stock                                 165,648                                               207,060

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

Balance at June 30, 1994                        1,763,313        (1,739,945)         (473,122)         (220,706)

    Stock issued for services                      45,920                                                57,400

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

    Sale of stock                                  30,160                                                37,700

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

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

Balance at June 30, 1995                        1,923,393        (1,739,945)         (985,747)         (533,231)

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

Balance at June 30, 1996                        1,923,393        (1,739,945)       (1,254,683)         (802,167)
</TABLE>



 The Accompanying Footnotes are an Integral Part of These Financial Statements



                                       F-8
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
              FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1998
                                   (CONTINUED)


<TABLE>
<CAPTION>
                                                       Common Stock                      Preferred Stock
                                            --------------------------------    --------------------------------
                                                Shares            Amount            Shares            Amount
                                            --------------    --------------    --------------    --------------

<S>                                             <C>           <C>                          <C>               <C>
    Stock issued for services                     409,900            40,990                --                --

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

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

Balance at June 30, 1997                        3,340,576           334,058                --                --

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

    Stock issued for services                       4,600               460                --                --

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

    Stock issued for payment
    of notes and advances                         123,000            12,300                --                --

Net (Loss)
                                            --------------    --------------    --------------    --------------
                                                3,676,837     $     367,684                --                --
                                            ==============    ==============    ==============    ==============
</TABLE>


(CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
                                                                Accumulated      Accumulated         Total
                                                                  Deficit          Deficit           Share-
                                              Additional          Before           During            holders'
                                               Paid-in          Development      Development         Equity
                                               Capital            Stage             Stage           (Deficit)
                                            --------------    --------------    --------------    --------------

<S>                                         <C>               <C>               <C>               <C>
    Stock issued for services                     163,960                --                --           204,950

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

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

Balance at June 30, 1997                        2,183,353        (1,739,945)       (1,754,986)         (977,520)

    Retirement of common stock                      3,134                --                --                --

    Stock issued for services                       1,840                --                --             2,300

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

    Stock issued for payment
    of notes and advances                          49,200                --                --            61,500

Net (Loss)                                                                           (301,586)         (301,586)
                                            --------------    --------------    --------------    --------------
                                            $   2,333,527     $  (1,739,945)    $   (2056,572)    $  (1,095,306)
                                            ==============    ==============    ==============    ==============
</TABLE>


 The Accompanying Footnotes are an Integral Part of These Financial Statements



                                       F-9
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 1998 AND 1997



<TABLE>
<CAPTION>
                                                                                     1998               1997
                                                                                --------------    --------------

<S>                                                                             <C>               <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
    Net (loss)                                                                  $    (301,586)    $    (500,303)
    Adjustments to reconcile net (loss) to net cash provided
     (used) by operating activities:
      Operating expenses paid by issuance of stock                                      2,300           204,950
      Increase in interest payable                                                     18,369             9,731
      Increase in accounts payable and accrued expenses                               180,470           157,243
                                                                                --------------    --------------

             Net Cash Flows (Used) by Operating Activities                           (100,447)         (128,379)
                                                                                --------------    --------------

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
    Refundable loan commitment fee                                                         --           120,000
                                                                                --------------    --------------

CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
    Issuance of notes payable                                                         101,000           138,000
    (Decrease) in notes payable                                                            --            (5,000)
    Increase (decrease) in loan payable                                                12,975          (150,000)
    Increase (decrease) in advances from president                                     (1,709)           14,190
                                                                                --------------    --------------

             Net Cash Flows Provided by Financing Activities                          112,266            (2,810)
                                                                                --------------    --------------

NET INCREASE  (DECREASE) IN CASH                                                       11,819           (11,189)

CASH (OVERDRAFT) AT THE BEGINNING OF THE YEAR                                         (11,600)             (411)
                                                                                --------------    --------------

CASH (OVERDRAFT) AT THE END OF THE YEAR                                         $         219     $     (11,600)
                                                                                ==============    ==============


ADDITIONAL DISCLOSURES:
    Cash paid during each year for:
        Interest                                                                $      19,479     $       4,279
                                                                                ==============    ==============

        Income taxes                                                            $       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            $     120,000     $     120,000
                                                                                ==============    ==============

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



                                      F-10
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS
              FROM INCEPTION OF DEVELOPMENT STAGE TO JUNE 30, 1998




<TABLE>
<CAPTION>

<S>                                                                                               <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
    Net (loss)                                                                                    $  (2,056,572)
    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                       264,650
      Compensation to officer paid by issuance of stock and additional paid in capital                  100,000
      Operating expenses paid by reduction of loan commitment fee                                        30,000
      Loss on write-off of assets                                                                       (18,250)
      Decrease in prepaid expenses                                                                       10,000
      Increase in interest payable                                                                       34,617
      Increase in accounts payable and accrued expenses                                                 957,883
                                                                                                  --------------

             Net Cash Flows (Used) by Operating Activities                                             (593,712)
                                                                                                  --------------

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

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
    Issuance of notes payable                                                                           361,046
    Issuance of common stock                                                                            244,760
    (Decrease) in notes payable                                                                          (5,000)
    Increase in loan payable                                                                             12,975
    Increase in advances from president                                                                  10,150
                                                                                                  --------------

             Net Cash Flows Provided by Financing Activities                                            623,931
                                                                                                  --------------

NET INCREASE (DECREASE) IN CASH                                                                             219

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

CASH (OVERDRAFT) AT JUNE 30, 1998                                                                 $         219
                                                                                                  ==============

ADDITIONAL DISCLOSURES:
    Cash paid during the period for:
        Interest                                                                                  $      29,117
                                                                                                  ==============

        Income taxes                                                                              $       4,373
                                                                                                  ==============

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                               $    240,000
                                                                                                  ==============
</TABLE>

 The Accompanying Footnotes are an Integral Part of These Financial Statements


                                                          F-11

<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998




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,
1998. 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.

NOTE 2 - INCOME 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.



                                      F-12
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STATE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998

NOTE 2 - INCOME TAXES (CONTINUED)

The net deferred tax amounts included in the accompanying balance sheet include
the following amounts of deferred tax assets and liabilities at June 30, 1998:

Deferred Tax Asset - Non-Current                                  $     863,547
Deferred Tax Liability - Non-Current                                         --
                                                                  --------------
                                                                        863,547
Valuation allowance                                                    (863,547)

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 $114,947 from June 30, 1997 to
June 30, 1998 as a result of additional operating losses.

As of June 30, 1998 and 1997, for income tax purposes, the Company had
approximately $2,055,000 and $1,755,000, respectively, of ordinary loss
carryforwards available to reduce future taxable income through the year 2013.

NOTE 3 - NOTES PAYABLE

Notes payable consisted of the following at June 30, 1998:

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%                                      16,650
Richard Baughn, with interest at 12%                                     35,000
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
Notes payable - various individuals, with interest at 10%                10,000
                                                                  --------------
                                                                  $     286,046
                                                                  ==============

None of these notes are collateralized. As of the date of this report, all of
these notes are past due.

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 $38,513 and $18,635 is included in operating expenses
as of June 30, 1998 and 1997, respectively.



                                      F-13
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998

NOTE 4 - LOAN PAYABLE - RELATED PARTY

Loan payable - related party consisted of the following at        $      10,000
 June 30, 1998:

Loan payable - Unsecured loan payable to Kenneth Palmer, son of          12,975
 the Company's president, with interest accrued at 12% annually

Loan payable - unsecured, non-interest loan payable to Bell              22,975
 Financial, due on demand.  The president of Bell Financial
 is also the secretary of Focal Corporation


Interest payable related to the above loans                               4,322

                                                                  $      27,297
                                                                  ==============

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 $1,597 and $1,064 is included in operating
expenses as of June 30, 1998 and June 30, 1997, respectively.

NOTE 5 - ADVANCES FROM PRESIDENT

Advances from president consisted of the following at June 30, 1998:

Advance - Howard Palmer, president of the Company, no             $       3,650
 stated terms                                                     ==============

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, 1998 and 1997 was 3,708,176 and 3,340,576,
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 1997 and 1998 and, as such, no amounts
have been accrued for these periods.

NOTE 8 - RELATED PARTY TRANSACTIONS

The Company has accrued operating expenses of $27,980 due to officer and
directors of the Company at June 30, 1998. During the fiscal year 1998, the
Company recognized $27,949 of the amount due to a deceased officer as relief of
debt. This amount has been on the books since 1995 (see Note 11).

During the year ended June 30, 1998, the Company issued 240,000 shares of common
stock and 240,000 warrants (see Note 10) valued at $120,000 to Howard Palmer,
president of the Company, in lieu of salary for the fiscal year ending June 30,
1997. For the fiscal year 1998, salary to Howard Palmer of $180,000 has been
accrued. Accrued payroll -- president includes this $180,000 for the current
fiscal year plus $40,600 remaining from the fiscal year ended June 30, 1997.



                                      F-14
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998


NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)

Subsequent to the year end, the Company issued 360,000 shares of common stock
and 360,000 warrants valued at $180,000 to Howard Palmer in lieu of salary for
the fiscal year ended June 30, 1998. In addition, the Company extended the
expiration date of 200,000 warrants held by Howard Palmer from June 30, 1998 to
June 30, 2001 (see Note 10).

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.

NOTE 10 - WARRANTS TO PURCHASE COMMON STOCK

In connection with the restructuring of the Company, 260,000 warrants were
issued to certain individuals in 1996 to purchase common stock. Each warrant
represents the right to purchase one share of the Company's common stock at
prices ranging from $1 to $3 per share. The warrants expire on December 31,
1999.

In connection with the issuance of stock and notes payable during 1994, the
Company issued 93,440 warrants to purchase common stock at prices ranging from
$1 to $3 per share. The warrants expire on December 31, 1999.

In connection with the issuance of stock and notes payable during 1995, the
Company issued 102,000 warrants to purchase common stock at prices ranging from
$1 to $3 per share. The warrants expire on December 31, 1999.

In connection with the issuance of stock and notes payable during 1996, the
Company issued 326,392 warrants to purchase common stock at prices ranging from
$1 to $3 per share. The warrants expire on December 31, 1999.

Along with shares of common stock issued to two individuals in 1993 and 1995,
300,000 warrants were issued, exercisable at prices ranging from $1 to $3 per
share, expiring on December 31, 1999.

On July 31, 1996, the Company issued 240,000 warrants to Howard Palmer (see Note
8). These warrants are exercisable at prices ranging from $1 to $3 per share,
and expire on December 31, 1999.

On September 25, 1997, the Company issued 240,000 warrants to Howard Palmer (see
Note 8). These warrants are exercisable at prices ranging from $1 to $3 per
share, and expire on December 31, 1999.

In connection with the issuance of stock for cash advance during the fiscal year
1998, the Company issued 8,000 shares, 3,000 shares, and 12,000 shares of
warrants to Howard Palmer. These warrants are exercisable at prices ranging from
$1 to $3 per share, and expire on November 23, 2000, March 24, 2001, and April
16, 2001, respectively.



                                      F-15
<PAGE>



                                FOCAL CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1998

NOTE 10 - WARRANTS TO PURCHASE COMMON STOCK (CONTINUED)

On August 31, 1998, the Company issued 360,000 warrants to Howard Palmer (see
Note 8). These warrants are exercisable at prices ranging from $1 to $3 per
share, and expire on June 30, 2001.

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 (see Note 8).

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

NOTE 11 - INCOME FROM RELIEF OF DEBT

The Company had $27,949 from 1995 of accrued operating expenses due to a former
officer, who passed away four years ago. The Company has been unsuccessful in
trying to locate the family of the former officer to discuss any payment
arrangement. Because there is no assurance that the Company will ever be able to
contact the family of the former officer, the Company recognized this liability
as relief of debt for the fiscal year 1998.

The Company recognized an additional relief of debt from various accrued
operating expenses including, but not limited to, accounting fees and
architectural fees, which have been on the books since 1994. The Company
determined that various individuals and companies will not collect these
liabilities, and therefore, recognized an additional $29,530 as income.

NOTE 12 - ACCOUNTS PAYABLE

A lien was recorded against any real property owned by the Company in the County
of Orange for the balance due to a subcontractor in an amount of $24,000. This
amount has been on the books since 1995.

NOTE 13 - SHARES HELD BY FOCAL CORPORATION

As of June 30, 1998, 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.



                                      F-16