FORM 10-KSB
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X] ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
    1934 For the fiscal year ended: December 31, 2000



                         Commission file number 001-14873

                               PNW Capital, Inc.
                               -------------------
                 (Name of small business issuer in its charter)
        Delaware                                    06-1474412
        --------                                    ----------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

12925 W. Arlington Pl., Littleton, CO 80217
- -------------------------------------------------------
(Address of principal executive offices)

Issuer's telephone number:             (303) 412-2469
                                      -----------------
Securities registered under Section 12(b) of the Exchange Act: None
                                                               -----

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
no par value

(Title of class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period  that the issuer was  required  to file such  reports),  and (2) has been
subject to such filing requirements for the past 90 days.

        Yes X     No
           ----       ----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of issuer's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

State issuer's  revenues for its most recent fiscal year: $0 ---

As of December 31, 2000, 59,981,200 shares of the Company's Common Stock, no par
value per share, were held by  non-affiliates,  which, based upon market closing
price on December 31, 2000, of $.025 had a value of $ 1,499,530.

The  number  of  shares  of Common  Stock of the  registrant  outstanding  as of
December 31, 2000, were 97,000,000.

                                       1


<PAGE>


                                TABLE OF CONTENTS

PART I                                                                     PAGE

     Item 1.   Description of Business                                         3
     Item 2.   Description of Property                                         5
     Item 3.   Legal Proceedings                                               5
     Item 4.   Submission of Matters to a Vote of Security Holders             6


PART II

     Item 5.   Market for Common Equity and Related Stockholder Matters        6
     Item 6.   Management's Discussion and Analysis or Plan of Operation       7
     Item 7.   Financial Statements                                            8
     Item 8.   Changes in and Disagreements With Accountants on Accounting     8
               and Financial Disclosure


PART III

     Item 9.   Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section 16(a) of the Exchange Act               9
     Item 10.  Executive Compensation                                         11
     Item 11.  Security Ownership of Certain Beneficial Owners and Management 13
     Item 12.  Certain Relationships and Related Transactions                 13
     Item 13.  Exhibits and Reports on Form 8-K                               15


SIGNATURES                                                                    16

                                       2


<PAGE>


PART I

Item 1 - Description of Business

Background

     The Company is a successor  registrant  pursuant to Section  12(g) 3 of the
Securities  Exchange Act of 1934, by virtue of a statutory merger of the Parent,
Winchester  Mining  Corp.,  a  Delaware   corporation,   and  its  wholly  owned
subsidiary,  Hi-Plains  Energy Corp.,  a Wyoming  corporation,  with  Winchester
Mining  Corporation  being the  survivor.  There was no change to the issued and
outstanding shares of Winchester mIning corporation, and all shares of Hi-Plains
Energy Corp. were retired by virtue of the merger.

     On May 15,  2000,  Winchester  Mining  Corp.  completed  a  Share  Purchase
Agreement  with  shareholders  of Hi-Planins  Energy Corp.  in which  Winchester
Mining Corp., a Delaware corporation, acquired all 780,000 shares outstanding of
the Registrant for the purposes of  accomplishing  a Merger of Hi-Plains  Energy
Corp. and Winchester Mining Corp. The Merger was completed on May 15, 2000.

     In 1996 the Company was listed on the OTCBB with the symbol WNCR. The prior
management raised funds for a mining property in the Northwest Territories.  The
budget was spent and the  Company  remained  inactive  until  March of 1999.  In
September of 1999, the Company raised several hunderd thousand dollars to invest
in online gambling.  The Company has since divested itself of these  acquistions
due to the questionable nature of the online gambling industry.  In September of
1999,  Wayne Miller became  president of Winchester  Mining,  Corp.  The Company
commissioned Digicorp of Vancouver British Columbia,  Canada to develop websites
for the Company:  Hollwoodmall.net and Pacificnorthwestmall.net.  They have been
under development since October of 1999. Radiant  Communication of Vancouver was
developing and managing these websites until work was terminated in late 2000.

     Bullseye Communication Group was hired to develop an overall marketing plan
for the Company and the two "mall" websites.  All website and "mall" development
work was  terminated in the fall fo 2000,  due to lack of capital and difficulty
of attacting business.

     In fall of 2000 the  Company  acquired  100% of the issued and  outstanding
stock of PB&J, a newly formed Colorado  Corporation upon issuance of 47,460,000
shares of common stock to the  principals of PB&J, who became the management and
Directors of PNWC.

                                       3

<PAGE>

     PB&J, the now wholly owned  subsidiary had no prior business  operations in
the prior two years,  although the  management did develope the concept and test
market the product on a limited  local basis.  The product has never been placed
in production for significant marketing effort due to lack of capital.

     PB&J has developed an innovative magnetized packaging and dispensing system
for  plastic  bags and dryer  sheets for locaton on kitchen  refrigerators.  The
products offer enhanced  convenience and managemnet  believes represent a timely
innovation for the industry.

     PB&J  conducted  test  markets  in  Safeway  and City  Market  Stores  with
favorable consumer response several years ago.


     The  Company  intends  to  attempt  to raise  capital  in a loan or private
placement and place the product in production,  and then commence marketing. The
budget  estimate is $250,000  for the  proposed  first phase of  production  and
marketing.  A second phase of production  and  marketing.  A second phase budget
estimate would be $1,000,000.

     On September 25, 2000, the Company  authorized  the  acquisition of 100% fo
the  outstanding  stock of  Peanut  Butter  and  Jelly,  Inc.  in  exchange  for
47,460,000 restricted common shares of the Company. In connection therewith, the
Company's three Directors,  Wayne Miller, Gary Burnie, and Barry Miller,  agreed
to resign to be  effective  upon 10 days after  filing of the 14f and mailing to
shareholder.

Competition

     The Company will remain an insignificant  participant among the firms which
engage in the  distribution of the product  developed by the Company.  There are
many  established  concerns  which  have  significantly  greater  financial  and
personnel  resources and technical  expertise  than the Company.  In view of the
Company's combined extremely limited financial resources and lack of significant
sales and market  presence,  the Company  will  continue to be at a  significant
competitive disadvantage compared to the Company's competitors.

                                       4
<PAGE>

Employees

        The  Company  has no  full  time  employees.  The  Company's  president,
treasurer and  secretary  have agreed to allocate a portion of their time to the
activities of the Company, without compensation.  These officers anticipate that
the  business  plan  of  the  Company  can  be  implemented  by  their  devoting
approximately  20 hours per month to the  business  affairs of the Company  and,
consequently,  conflicts  of interest may arise with respect to the limited time
commitment  by such  officers.  See  Item  9,  "Directors,  Executive  Officers,
Promoters  and Control  Persons;  Compliance  with Section 16(a) of the Exchange
Act."

Certain Risks

        The Company's  business is subject to numerous  risk factors,  including
the following:

     No Operating History or Revenue and Minimal Assets.  The Company has had no
operating history nor any revenues or earnings from operations.  The Company has
no  significant  assets  or  financial  resources.  The  Company  will,  in  all
likelihood,  sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in the Company
incurring  a net  operating  loss which  will  increase  continuously  until the
Company  can  consummate  a  business  combination  with a  profitable  business
opportunity.  There is no assurance that the Company can successfully  carry out
its business plan.

Item 2 - Description of Property
- - --------------------------------

        The  Company has no  properties  and at this time has no  agreements  to
acquire any  properties.  The Company  intends to attempt to acquire assets or a
business in exchange for its  securities  which assets or business is determined
to be desirable for its objectives.

     The Company's  mailing  address is 12925 W.  Arlington Rd.,  Littleton,  CO
80217.

Item 3 - Legal Proceedings
- - --------------------------

        The Company is not a party to any legal proceedings, nor does management
believe that any such proceedings are contemplated.

                                       5
<PAGE>

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

        No matters  were  submitted  by the  Company to a vote of the  Company's
shareholders through the solicitation of proxies or otherwise, during the fourth
quarter of the fiscal year covered by this report.

PART II

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

               (a)    The Registrant's common stock is traded in the over-the-
counter  market under the symbol PNWC (OTC  Bulletin  Board  Symbol).  The table
below sets forth the high and low bid prices of the  Registrant's  common  stock
for the periods indicated. Such prices are inter-dealer prices, without mark-up,
mark-down or commissions and do not necessarily represent actual sales.


             1999                                  High Bid      Low Bid
             ----                                  --------      -------
          1st quarter                                 .42          .02
          2nd quarter                                 .34          .09
          3rd quarter                                 .43          .06
          4th quarter                                 .31          .07


             2000                                  High Bid      Low Bid
             ----                                  --------      -------
          1st quarter                                 .31          .13
          2nd quarter                                 .23          .07
          3rd quarter                                 .22          .12
          4th quarter                                 .087         .015



        The  above  quotations  reflect  inter-dealer  prices,   without  retail
mark-up,  mark-down,  or commission  and may not  necessarily  represent  actual
transactions.

        The Company has not  declared or paid any cash  dividends  on its common
stock and does not anticipate paying dividends for the foreseeable future.

     (b) As of December 31, 2000,  there were 39  shareholders  of record of the
Registrant's common stock.

     (c) The Registrant has neither  declared nor paid any cash dividends on its
common stock,  and it is not anticipated that any such dividend will be declared
or paid in the foreseeable future.

                                       6
<PAGE>

        Effective  August 11, 1993, the Securities and Exchange Commission  (the
"Commission")  adopted Rule 15g-9,  which established the definition of a "penny
stock," for purposes relevant to the Company,  as any equity security that has a
market price of less than $5.00 per share or with an exercise price of less than
$5.00 per share, subject to certain exceptions.  For any transaction involving a
penny  stock,  unless  exempt,  the rules  require:  (i) that a broker or dealer
approve a person's account for transactions in penny stocks;  and (ii) that the
broker  or  dealer  receive  from  the  investor  a  written  agreement  to  the
transaction,  setting  forth the  identity and quantity of the penny stock to be
purchased.  In order to approve a person's  account for  transactions  in penny
stocks,  the  broker  or  dealer  must  (i)  obtain  financial  information  and
investment  experience and objectives of the person;  and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient  knowledge and experience in financial matters to
be capable of evaluating the risks of transactions  in penny stocks.  The broker
or dealer  must also  deliver,  prior to any  transaction  in a penny  stock,  a
disclosure  schedule  prepared  by the  Commission  relating  to the penny stock
market,  which,  in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination; and (ii) states that the broker or
dealer  received a signed,  written  agreement  from the  investor  prior to the
transaction.  Disclosure  also has to be made  about the risks of  investing  in
penny  stock in both  public  offerings  and in  secondary  trading,  and  about
commissions payable to both the broker-dealer and the registered representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in cases of fraud in penny stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.

Holders

     There are  approximately  36 record holders of the Company's Common Stock,
not including shares held in "street" name.

Dividends

        The Company has not paid any  dividends to date,  and has no plans to do
so in the immediate future.

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

RESULTS OF OPERATIONS FOR 2000 COMPARED TO 1999

The Company had no  revenues in 2000,  but had $15,537 in revenues in 1999.  The
Company  incurred  operations  expenses  totaling  $733,030 in 2000  compared to

                                       7
<PAGE>

$374,941 in 1999. The loss from  operations was ($773,030) in 2000 and ($359,404
in 1999.  The net loss was  ($772,250) in 2000 and  ($359,404) in 1999. The loss
per share was ($.01) in each year 2000 and 1999.

The  Company's  primary  elements  of  expenses  in 2000  werer  management  and
consulting  fees of $345,495  compared to $140,309 in 1999;  impairment  of long
term assets  (website  development)  of $306,176  compared to none in 1999;  and
gereral and administrative expenses of $133,606 compared to $133,126 in 1999. In
1999 the Company had a cost of revenues of $76,201 but  incurred no such expense
in 2000.

The  Company  had no  established  business  at year end and  needed  capital to
commence its business  plan to produce and market  dispensers.  Until and unless
the Company  obtains  sufficient  capital to commence  and  establish a business
generating signigficant revenues, the Company will continue to experience losses
in the future, comoparable to or greater than losses for 2000 and 1999.

LIQUIDITY AND CAPITAL RESOURCES

At year end, the company had minimal cash and need cash  infusions or loans from
shareholders for even limited  operations.  The Company has no capital resources
other than its stock with which to seek capital.

Item 7 - Financial Statements
- - -----------------------------

        The  response to this item is  submitted  as a separate  section of this
report beginning on page F-1.

Item 8 -  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
- - ----------------------------------------------------------------------------
Financial Disclosure
- - --------------------

     In  January  2001,  the  Company  engaged  Michael  Johnson & Co.,  Denver,
Colorado,  as its new  principal  independent  accountant to audit the Company's
financial statements.  The prior accountant was James E. Scheifley & Associates,
P.C.  There  has  been  no  disagreement   between  accountants   regarding  the
application of accounting  principles to any specific  completed or contemplated
transaction, or as to policies as to accounting.

                                       8

<PAGE>

PART III

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

 The current  Executive officers of Registrant are:

         Daniel C. Silva                President
         Joseph L. McFarland, Jr.       Secretary

      The persons who are directors of the Registrant are:

         Name                               Age
         ----                               ---
         Daniel Silva                        38
         Joseph L. McFarland Jr.             40


         Business Experience

         The following is a brief account of the business  experience  during at
least the past five years of the  persons  designated  to be new  directors  and
officers of the Registrant,  indicating the principal  occupation and employment
during  that  period  by  each,  and the  name  and  principal  business  of the
organizations by which they were employed.

      Joseph L. McFarland, Jr.
     ------------------------

     Joseph L.  McFarland,  age 40 received  an  education  at Denver  Technical
College  1983-87  in  Design  Engineering.  From 1998 to  present  he has been a
Principal  Manufacturing Engineer for Exabyte Corp. In 2000 he became a director
and principal  shareholder of Peanut Butter & Jelly, Inc. and was a principal in
a  company  with the same name from  1993 to 1996,  which  was  dissolved.  From
1996-98 he was a Consulting  Process  Engineer for Medtronic  Blood  Management.
From 1992-93 Mr. McFarland was Operations Manager for Ram-Line, Inc.

     Daniel C. Silva
     ---------------
     Mr. Silva, age 38 has been Broker/Owner of Silva Realty from October 1991 -
Present. He was  President/Marketing  Director and a major shareholder of Peanut
Butter + Jelly, Inc. June 1995 - 1996 when it was dissolved. He was President of

                                       9
<PAGE>

Board of Directors/Chief  Marketing Officer Water Enhancement Technologies (WET
TEK)  September  1993 - June 1995. He attended  Colorado Real Estate  College in
1991. He has a Bachelor of Science,  Business  Management at Metro State College
in 1989.  Mr. Silva was appointed a director and president in October of 2000.

         No  appointee  for a director  position  has been  subject of any civil
regulatory proceeding or any criminal proceeding.

Compliance with Section 16(a) of the Exchange Act

        Section  16(a) of the  Securities  Exchange  Act of 1934 (the  "Exchange
Act") requires that the Company's  officers and  directors,  and persons who own
more than ten percent of a registered class of the Company's equity  securities,
file  reports of  ownership  and changes in ownership  with the  Securities  and
Exchange   Commission.   Officers,   directors  and  greater  than  ten  percent
stockholders  are required by regulation to furnish to the Company copies of all
Section 16(s) forms they file.

Conflicts of Interest

        Members of the  Company's  management  are  associated  with other firms
involved in a range of business  activities.  Consequently,  there are potential
inherent  conflicts of interest in their acting as officers and directors of the
Company.  Insofar as the officers and  directors  are engaged in other  business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.


        The  Company's  Board of Directors has adopted a policy that the Company
will not seek a merger with, or acquisition  of, any entity in which any officer
or director  serves as an officer or  director or in which they or their  family
members own or hold a  controlling  ownership  interest.  Although  the Board of
Directors  could  elect to change this  policy,  the Board of  Directors  has no
present intention to do so.

        There can be no assurance that  management will resolve all conflicts of
interest in favor of the Company.

                                       10
<PAGE>

Item 10 - Executive Compensation
- - --------------------------------

                             EXECUTIVE COMPENSATION

Cash Compensation.

     Compensation  paid for all services provided up to December 31, 2000 (1) to
each of our executive officers and (2) to all officer as a group.

<TABLE>
<CAPTION>

SUMMARY COMPENSATION TABLE OF EXECUTIVES

                                    Cash Compensation                  Security Grants
<S>               <C>       <C>          <C>        <C>              <C>         <C>               <C>
NAME AND          YEAR      SALARY       BONUS      CONSULTING       NUMBER OF   SECURITIES        LONG TERM
PRINCIPAL                                           FEES/OTHER       SHARES      UNDERLYING        COMPENSATION/OPTION
POSITION                                            FEES ($)                     OPTIONS/
                                                                                 SARS (#)
================= ========= ============ ========== ================ =========== ================= ================
Daneil C          1998      0            0          0                0           0                 0
Silva,            1999      0            0          0                0           0                 0
President         2000      0            0          0                0           0                 0
----------------- --------- ------------ ---------- ---------------- ----------- ----------------- ----------------
Joseph L.         1998      0            0          0                0           0                 0
McFarland Jr.     1999      0            0          0                0           0                 0
Secretary         2000      0            0          0                0           0                 0
----------------- --------- ------------ ---------- ---------------- ----------- ----------------- ----------------
Barry Miller,     1998      0            0          0                0           0                 0
(resigned)        1999      0            0          0                0           0                 0
                  2000      0            0          0                0           0                 0
----------------- --------- ------------ ---------- ---------------- ----------- ----------------- ----------------
Gary Burnie       1998      0            0          0                0           0                 0
(resigned)        1999      0            0          0                0           550,000           0
                  2000      0            0          0                0           0                 0
----------------- --------- ------------ ---------- ---------------- ----------- ----------------- ----------------
Officers as a     1998      0            0          0                0           0                 0
Group             1999      0            0          0                0           550,000
                  2000      0            0          0                0           0                 0
----------------- --------- ------------ ---------- ---------------- ----------- ----------------- ----------------
</TABLE>

                                       11
<PAGE>

                     SUMMARY COMPENSATION TABLE OF DIRECTORS
<TABLE>
<CAPTION>

                             (TO DECEMBER 31, 2000)
<S>                       <C>       <C>           <C>          <C>                <C>           <C>
NAME AND PRINCIPAL        YEAR      ANNUAL        MEETING      CONSULTING         NUMBER OF     SECURITIES
                                    RETAINER      FEES ($)     FEES/OTHER FEES    OPTION        UNDERLYING OPTIONS/
POSITION                            FEES ($)                   ($)                SHARES        SARS (#)
                                                                                  EXERCISED
========================= ========= ============= ============ ================== ============= =====================
Daniel C. Silva
                          2000      0             0            0                  0             0
------------------------- --------- ------------- ------------ ------------------ ------------- ---------------------
Gary Burnie*              1998      0             0            0                  0             0
                          1999      0             0            0                  0             0
                          2000      $100,00       0            0                  2,000,00      0
------------------------- --------- ------------- ------------ ------------------ ------------- ---------------------
Wayne Miller*             1998      0             0            0                  0             0
                          1999      0             0            0                  0             0
                          2000      $100,000      0            0                  2,000,000     0
------------------------- --------- ------------- ------------ ------------------ ------------- ---------------------
Barry Miller*             1998      0             0            0                  0             0
                          1999      0             0            0                  0             0
                          2000      $25,000       0            0                  500,000       500,000
------------------------- --------- ------------- ------------ ------------------ ------------- ---------------------
Joseph L. McFarland, Jr.  2000      0             0            0                  0             0
------------------------- --------- ------------- ------------ ------------------ ------------- ---------------------
Directors as a            1998      0             0            0                  0             0
Group                     1999      0             0            0                  0             0
                          2000      $225,000      0            0                  2,500,000     500,000
========================= ========= ============= ============ ================== ============= =====================
</TABLE>

* Resigned


The following table shows the share  ownership of officers,  directors and 5% or
greater shareholders.

In August, 2000, the Company adopted the 2000 Noqualified Stock Option Plan. The
Plan sets  aside  10,000,000  shares of common  stock  option  for  issuance  to
employees,  directors, officers, attorneys, accounts, consultants or advisors to
the company. The Plan has a ten year term.

On September 20, 2000, the company  granted  options to officers,  directors and
consultants to purchase  7,000,000 shares of the Company's common stock at $0.05
per share under thwe Plan. The options were  immediately  exercised,  and shares
wre issued in satisfaction of the Company's  obligation to the four  individuals
for consulting services rendered through September 30, 2000. The transaction was
recorded by a charge to expense for  $257,035,  and a charge of $92,965  against
amounts previously accrued for such services, for a total value of $350,000.

Also, on September 20, 2000,  the Company  granted  options to five  consultants
(0ne of whom is also a director) to purchase 2,200,000 shares at $0.05 per share
under the Plan.  The options are  exercisable  at any time before ten years from
the date the Plan was adopted.  At December 31, 2000, none of these options had
been exercised.

                                       12

<PAGE>

Item 11 - Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
Name and Address of                         Number of           Percent of
Beneficial Owner                          Shares Owned          Shares Owned
                                          Beneficially
                                          and of Record

Joseph McFarland, Director & Secretary  12,339,600              12.7%
Europark Holdings, Inc.                 12,339,600              12.7%
Daniel C. Silva, President & Director   12,339,600              12.7%

Item 12.  Certain Relationships and Related Transactions

Acquisition of Peanut Butter and Jelly, Inc.
--------------------------------------------

On September 25, 2000,  the Company  authorized  the  acquisition of 100% of the
outstanding  stock of Peanut Butter and Jelly,  Inc. in exchange for  47,460,000
restricted common shares of the Company. Peanut Butter and Jelly, Inc. is also a
development   stage  company  the  acquisition  has  been  completed  after  the
acquisition the following  shows the share ownership of officers,  directors and
5% or greater shareholders.

The  following  shares  were issued to the  persons in the amunts  indicated  in
consideration  for 100% of the  outstanding  shares of Peanut  Butter and Jelly,
Inc.:

Joseph McFarland                        12,339,600              12.7%
Europark Holdings, Inc.                 12,339,600              12.7%
Daniel C. Silva, President & Director   12,339,600              12.7%
Maya Investment Corporation              4,460,000               4.5%
Robert Alan Kitsmiller                   3,322,200               3.4%
Daniel Enright                           2,373,000               2.4%

                                       13
<PAGE>

On September 20, 2000, the company  granted  options to officers,  directors and
consultants to purchase  7,000,000 shares of the Company's common stock at $0.05
per share under thwe Plan. The options were  immediately  exercised,  and shares
wre issued in satisfaction of the Company's  obligation to the four  individuals
for consulting services rendered through September 30, 2000. The transaction was
recorded by a charge to expense for  $257,035,  and a charge of $92,965  against
amounts previously accrued for such services, for a total value of $350,000.

Also, on September 20, 2000,  the Company  granted  options to five  consultants
(0ne of whom is also a director) to purchase 2,200,000 shares at $0.05 per share
under the Plan.  The options are  exercisable  at any time before ten years from
the date the Plan was adopted.  At December 31, 2000, none of these options had
been exercised.

On May 9, 2000, the Company acquired all the outstanding stock of Hi-Plains
Energy Corp., a Wyoming corporation that was also in the development stage, for
$15,600. Concurrently therewith, the Company paid consulting and legal fees of
$134,420 to facilitate the merger of Hi-Plains into Winchester, and the filing
of related forms with the Securities and Exchange Commission. The total of
$150,020 deemed to be the cost of the Hi-Plains shares.

Effective May 13, 2000, Hi-Plains was merged into Winchester, Winchester changed
its name to PNW Capital, Inc., and each share issued and outstanding immediately
prior to the effective date remained as issued and outstanding common stock in
Winchester (renamed PNW) without change.

                                       14

<PAGE>


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

(a)     No Exhibits are filed with this Annual Report.

(b)     Reports on Form 8-K

        The  Company  filed reports on Form 8k's in 2000 as follows:

        8k   May 11, 2000
        8k   May 16, 2000
        8k/A May 15, 2000
        8k/A May 26, 2000
        8k   Dec. 7, 2000
        8k   June 2, 2000

                                       15

<PAGE>


                                   Signatures

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                                    PNW Capital, Inc.



Date: May 15, 2001                                   By:/s/Daniel C. Silva
       ------------------                              -------------------------
                                                      Daniel C. Silva, President


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


Date:  5/15/2001               By:/s/Daniel C. Silva
       --------                ----------------------------------------
                               Daniel C. Silva, President, Chairman and Director


Date:  5/15/2001                /s/Joseph L. McFarland, Jr.
       --------                -----------------------------------------
                                Joseph L. McFarland, Jr., Secretary

Date:  5/15/2001                /s/Wayne Miller
       --------                -----------------------------------------
                                Wayne Miller,  Director

                                /s/Barry Miller
Date:  5/15/2001               -----------------------------------------
       ---------                Barry Miller, Director

                                 /s/Gary Burnie
Date:  5/15/2001                -----------------------------------------
       ---------                Gary Burnie, Director


                                       16
<PAGE>

                                PNW CAPITAL, INC.
                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES


A.       Financial statements

Report of independent certified public accountants                           F-1

Consolidated balance sheet, December 31, 2000                                F-2

Consolidated statements of loss for the periods ended
     December 31, 2000 and 1999                                              F-3

Consolidated statements of stockholders' equity (deficit) for the
     years ended December 31, 2000 and 1999                                  F-4

Consolidated statements of cash flows for the periods ended
     December 31, 2000 and 1999                                              F-5

Notes to consolidated financial statements                           F-6 to F-14



B.       Financial statement schedules

Schedules are omitted because of the absence of the conditions under which they
are required, or because the information required by such omitted schedule is
contained in the financial statements or the notes thereto.




<PAGE>




Bateman & Co., Inc., P.C.
Certified Public Accountants

                                                           5 Briardale Court
                                                      Houston, Texas 77027-2904
                                                           (713) 552-9800
                                                          FAX (713) 552-9700
                                                        www.batemanhouston.com



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To The Board of Directors and Stockholders
PNW Capital, Inc. (Formerly Winchester Mining Corporation)

We have audited the  accompanying  consolidated  balance  sheets of PNW Capital,
Inc. (Formerly Winchester Mining Corporation)(a development stage enterprise) as
of  December  31,  2000  and  the  related  consolidated   statements  of  loss,
stockholders'  equity  (deficit),  and cash flows for the two years then  ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audit. We conducted our audit in accordance with U.S.  generally accepted
auditing  standards.  Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of PNW  Capital,  Inc. as of
December 31, 2000,  and the results of its operations and cash flows for the two
years  then  ended  in  conformity  with  U.S.  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 2 to the
financial statements,  the Company has suffered recurring losses from operations
and negative cash flows from operations since  inception,  had a working capital
deficiency approximating $88,000 at December 31, 2000, and negative net worth at
that date. These conditions raise  substantial doubt about the Company's ability
to continue as a going  concern.  Management's  plans in regard to those matters
are also  described  in Note 2. The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.


                                                     BATEMAN & CO., INC., P.C.
Houston, Texas
May 4, 2001

                                     Member
               INTERNATIONAL ASSOCIATION OF PRACTISING ACCOUNTANTS
                  Offices in Principal Cities Around The World

                                      F-1

<PAGE>
<TABLE>
<CAPTION>

           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
                           Consolidated Balance Sheets
                                December 31, 2000

<S>                                                                                           <C>


ASSETS
  Current assets:
    Cash                                                                                                    $ 102
                                                                                              --------------------
      Total current assets                                                                                    102
                                                                                              --------------------
                                                                                              --------------------
      Total assets                                                                                          $ 102
                                                                                              ====================


LIABILITIES
  Current liabilities:
    Bank overdraft                                                                                          $ 119
    Accounts payable and accrued expenses                                                                $ 62,832
    Accrued liability for contingencies                                                                    25,000
                                                                                              --------------------
      Total current liabilities                                                                            87,951
                                                                                              --------------------
                                                                                              --------------------
      Total liabilities                                                                                    87,951
                                                                                              --------------------

  Commitments and contingencies                                                                         -

STOCKHOLDERS' EQUITY (DEFICIT)
  Common stock, $.0001 par value, 100,000,000 shares
    shares authorized, 97,000,000
    shares issued and outstanding                                                                           9,700
  Capital in excess of par value                                                                        1,684,935
  Deficit accumulated during the
    development stage                                                                                  (1,782,484)
                                                                                              --------------------
      Total stockholders' equity (deficit)                                                                (87,849)
                                                                                              --------------------
                                                                                              --------------------
      Total liabilities and stockholders' equity                                                            $ 102
                                                                                              ====================
</TABLE>
The accompanying notes are an interal part of these statements.

                                      F-2

<PAGE>
<TABLE>
<CAPTION>


           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
              Consolidated Statements of Loss For The Periods Ended
                           December 31, 2000 and 1999
<S>                                                          <C>                  <C>                   <C>


                                                                     Cumulative
                                                                    November 6,
                                                                   1996 through
                                                                   December 31,                    Years Ended December 31,
                                                                                  ------------------------------------------

                                                                           2000                  2000                  1999
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------

Revenues                                                               $ 15,537                   $ -              $ 15,537
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------

Less, Costs and expenses:
  Cost of revenues                                                       76,201                     -                76,201
  Consulting and management fees                                        901,021               345,495               140,309
  Provision for contingencies                                            25,000                     -                25,000
  Depreciation and amortization                                           8,292                 7,753                   305
  Impairment of long-lived assets                                       306,176               306,176                     -
  Writeoffs and abandonments of
    mineral properties                                                  276,000                     -                     -
  Other general and administrative                                      208,416               113,606                33,126
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------
    Total operating expenses                                          1,801,106               773,030               274,941
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------
    Loss from operations                                             (1,785,569)             (773,030)             (259,404)
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------

Other income (expense):
  Interest income                                                         2,724                   419                     -
  Foreign exchange                                                          474                   474                     -
  Interest expense                                                         (113)                 (113)                    -
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------
    Total other income (expense)                                          3,085                   780                     -
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------
    Loss before taxes on income                                      (1,782,484)             (772,250)             (259,404)

  Provision for income taxes                                                  -                     -                     -
                                                             -------------------  --------------------  --------------------
                                                             -------------------  --------------------  --------------------
      Net loss                                                      $(1,782,484)            $(772,250)            $(259,404)
                                                             ===================  ====================  ====================
                                                             ===================  ====================  ====================


Basic earnings (loss)
  per common share                                                                            $ (0.01)              $ (0.01)
                                                                                  ====================  ====================
                                                                                  ====================  ====================

Weighted average shares outstanding                                                        53,055,929            31,895,206
                                                                                  ====================  ====================
                                                                                  ====================  ====================
</TABLE>

The accompanying notes are an interal part of these statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>

                          WINCHESTER MINING CORPORATION
                        (A development stage enterprise)
  Consolidated Statements of Stockholders' Equity (Deficit) For The Years Ended
                           December 31, 2000 and 1999




                                                                                            Deficit
                                                                                          Accumulated
                                                                    Additional             During the
                                      Common Stock                    Paid In             Development
                                Shares              Amount            Capital                Stage                 Total
                          -------------------   --------------  -------------------   --------------------   ------------------
<S>                       <C>                   <C>             <C>                   <C>                    <C>

 Year ended December 31, 1999:
 Balances,
  December 31,
  1998                            25,250,000            2,525              502,643               (750,830)            (245,662)
 Shares issued
   for cash                        3,000,000              300              146,321                                     146,621
 Shares issued
   for debt                        5,500,000              550              274,450                                     275,000
 Development
   stage net
   loss                                                                                          (259,404)            (259,404)
                          -------------------   --------------  -------------------   --------------------   ------------------
 Balances,
  December 31,
  1999                            33,750,000            3,375              923,414             (1,010,234)             (83,445)

 Year ended December 31, 2000:
 Shares issued
   for cash                        8,490,000              849              412,221                                     413,070
 Shares issued
   for services                    7,000,000              700              349,300                                     350,000
 Shares issued
   for Multiplex
   Raceway stock                     300,000               30                    -                                          30
 Shares issued
   for Peanut
   Butter & Jelly,
   Inc. stock and
   for services                   47,460,000            4,746                    -                                       4,746
 Development
   stage net
   loss                                                                                          (772,250)            (772,250)
                          -------------------   --------------  -------------------   --------------------   ------------------
 Balances,
  December 31,
  2000                            97,000,000          $ 9,700          $ 1,684,935           $ (1,782,484)            $(87,849)
                          ===================   ==============  ===================   ====================   ==================


</TABLE>
The accompanying notes are an interal part of these statements.

                                      F-4

<PAGE>
<TABLE>
<CAPTION>



           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
           Consolidated Statements of Cash Flows For The Periods Ended
                           December 31, 2000 and 1999
<S>                                                             <C>                   <C>                  <C>



                                                                         Cumulative
                                                                        November 6,
                                                                       1996 through
                                                                       December 31,                Years Ended December 31,
                                                                                      --------------------------------------
                                                                                      --------------------------------------
                                                                               2000                2000                1999
                                                                --------------------  ------------------   -----------------
                                                                --------------------  ------------------   -----------------

 Cash flows from operating activities:
  Net loss                                                              $(1,782,484)         $ (772,250)         $ (259,404)
  Adjustments to reconcile net income to
   cash provided (used) by development
   stage activities:
    Provision for bad debts                                                  49,676               4,169                   -
    Depreciation and amortization                                             8,292               7,753                 305
    Stock issued for services                                               354,696             354,696                   -
    Impairment of long-lived assets                                         306,174             306,174                   -
    Change in current assets and liabilities:
      Accounts receivable                                                    (4,169)             (4,169)                  -
      Inventory                                                              (5,527)             (2,711)             (2,816)
      Prepaid expenses                                                         (539)                970                (970)
      Accounts payable and accrued expenses                                  62,832              36,714              21,669
      Accrued liability for contingencies                                    25,000                   -              25,000
      Due to related parties                                                595,000             (36,332)             69,665
                                                                --------------------  ------------------   -----------------
                                                                --------------------  ------------------   -----------------
  Cash flows from operating activities                                     (391,049)           (104,986)           (146,551)
                                                                --------------------  ------------------   -----------------
                                                                --------------------  ------------------   -----------------

 Cash flows from investing activities:
   Purchase of equipment                                                    (12,452)            (12,452)                  -
   Investment in Multiplex                                                  (75,000)            (75,000)                  -
   Website development costs                                                (71,861)            (71,861)                  -
   Acquisition of goodwill                                                 (149,057)           (149,057)                  -
   Loan to related party                                                    (50,000)                  -                   -
   Loan repayments                                                            4,493                   -                   -
                                                                --------------------  ------------------   -----------------
                                                                --------------------  ------------------   -----------------
  Cash flows from investing activities                                     (353,877)           (308,370)                  -
                                                                --------------------  ------------------   -----------------
                                                                --------------------  ------------------   -----------------

 Cash flows from financing activities:
  Net proceeds from sale of common stock                                    744,859             413,070             146,621
  Cash acquired in acquisition of Peanut
    Butter & Jelly, Inc.                                                         50                  50                   -
                                                                --------------------  ------------------   -----------------
                                                                --------------------  ------------------   -----------------
  Cash flows from financing activities                                      744,909             413,120             146,621
                                                                --------------------  ------------------   -----------------
                                                                --------------------  ------------------   -----------------

 Net increase (decrease)
  in cash and equivalents                                                     $ (17)               (236)                 70
                                                                ====================
                                                                ====================

 Cash and equivalents:
  Beginning of period                                                                               219                 149
                                                                                      ------------------   -----------------
                                                                                      ------------------   -----------------
  End of period                                                                                   $ (17)              $ 219
                                                                                      ==================   =================
                                                                                      ==================   =================


 Supplemental cash flow disclosures:
  Cash paid for interest                                                      $ 113               $ 113                 $ -
  Cash paid for income taxes                                                      -                   -                   -
  Non-cash financing and
   investing activities:
    Shares issued for debt                                                  595,000                   -             275,000
    Shares issued for services                                              354,696             354,696                   -
    Shares issued for investment                                                 30                  30                   -

</TABLE>
The accompanying notes are an interal part of these statements.

                                      F-5

<PAGE>

           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999





Note 1 - Organization and summary of significant accounting policies: Following
is a summary of the Company's organization and significant accounting policies:

         Organization and nature of business - The Company was incorporated as
         Winchester Mining Corporation on November 6, 1996 in the state of
         Delaware, and is a development stage enterprise engaged in searching
         for capital, in organizing and developing internet businesses, and in
         organizing and developing magnetized packaging systems. Its goal is to
         develop an on-line international network of entertainment based
         websites and payment clearing systems, including a shopping mall, and,
         through its subsidiary, to manufacture magnetized packaging systems for
         household products. It has also engaged in referrals of internet
         browsers for a fee to an offshore online gambling casino. Although its
         principal office is in Littleton, Colorado (having relocated there from
         Vancouver, BC, Canada in the fourth quarter of 2000), it expects its
         internet businesses to invite customers from anywhere in the world. It
         expects its magnetized packaging systems to be distributed nationwide
         throughout the U.S. In 1996 through 1997, the company attempted to
         establish a mining business and pursued several unsuccessful Canadian
         mining opportunities.

         As a development stage enterprise, the Company anticipates incurring
         substantial additional losses as it pursues its internet and packaging
         businesses and as it investigates other business opportunities.

         On May 13, 2000, in connection with its merger with Hi-Plains Energy
         Corp. (see Note 3 below), the Company changed its name from Winchester
         Mining Corporation to PNW Capital Corp.

         Basis of presentation - The accounting and reporting policies of the
         Company conform to U.S. generally accepted accounting principles of
         development stage enterprises.

         Principles of consolidation - The accompanying financial statements
         include the accounts of PNW Capital, Inc., and its wholly owned
         subsidiary, Peanut Butter & Jelly, Inc., a Colorado corporation. All
         significant intercompany transactions have been eliminated.

         Use of estimates - The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the
         reported amount of revenues and expenses during the reporting period.
         Actual results could differ from those estimates. The Company's
         periodic filings with the Securities and Exchange Commission include,
         where applicable, disclosures of estimates, assumptions, uncertainties
         and concentrations in products and markets which could affect the
         financial statements and future operations of the Company.

         Foreign currency translation - Foreign currency transactions have been
         translated into U.S. dollars using:

o Year-end rates for monetary assets and liabilities;
o Historical rates for all
other assets and liabilities; and
o Average rates during the year for revenues and expenses.

                                      F-6

<PAGE>


         Exchange gains and losses arising from these foreign currency
         translations are reflected in income or expense as incurred.

         Cash and cash equivalents - For purposes of the statement of cash
         flows, the Company considers all cash in banks, money market funds, and
         certificates of deposit with a maturity of less than three months to be
         cash equivalents.

         Fair value of financial instruments and derivative financial
         instruments - The carrying amounts of cash and accounts payable and
         accrued expenses approximate fair value because of the short maturity
         of these items. These fair value estimates are subjective in nature and
         involve uncertainties and matters of significant judgment, and,
         therefore, cannot be determined with precision. Changes in assumptions
         could significantly affect these estimates. At December 31, 2000 and
         1999, the Company had no derivative financial instruments.

         Provision for doubtful accounts - Management evaluates receivables
         based on historical collection experience, and provides an allowance
         for estimated uncollectible accounts. In addition, provision is made
         for specific accounts when the estimated allowance is not sufficient to
         absorb specific accounts deemed uncollectible. During the year ended
         December 31, 2000, an account in the amount of $4,169 was deemed
         uncollectible, and a provision was recorded to accommodate the doubtful
         account.

         Inventory - Inventories are stated at the lower of cost or market, with
         cost determined using the first-in first-out (FIFO) method.

         Because of the matters described in Note 2, Management determined that
         the carrying value of its inventory had become impaired during the
         fourth quarter of 2000, and it was written off, as described in Note 7,
         below.


         Property and equipment - Property and equipment are stated at cost less
         accumulated depreciation, computed on the straight-line method over the
         estimated useful lives of the assets. Estimated lives of depreciable
         assets range from five to seven years.

         Federal income taxes - Deferred income taxes are reported for timing
         differences between items of income or expense reported in the
         financial statements and those reported for income tax purposes in
         accordance with FASB Statement Number 109 Accounting for Income Taxes,
         which requires the use of the asset/liability method of accounting for
         income taxes. Deferred income taxes and tax benefits are recognized for
         the future tax consequences attributable to differences between the
         financial statement carrying amounts of existing assets and liabilities
         and their respective tax bases, and for tax loss and credit
         carryforwards. Deferred tax assets and liabilities are measured using
         enacted tax rates expected to apply to taxable income in the years in
         which those temporary differences are expected to be recovered or
         settled. The Company provides deferred taxes for the estimated future
         tax effects attributable to temporary differences and carryforwards
         when realization is more likely than not.
                                      F-7

<PAGE>


         Earnings (loss) per share of common stock - Earnings (loss) per share
         is computed on the weighted average number of shares outstanding during
         the year, in accordance with FASB Statement Number 128, Earnings Per
         Share.

Note 2 - Going concern assumption:
Since its inception in 1996, the Company has incurred operating losses
approximating $1,800,000 and negative cash flows from operations approximating
$391,000. Operating revenues since inception have been insignificant. Although
the Company sold common stock in March, 2000 and May, 2000 resulting in cash
proceeds approximating $413,000, substantially all of the proceeds have been
spent, with no significant cash remaining at December 31, 2000. At December 31,
2000, the Company had a working capital deficiency approximating $88,000 and
negative net worth. Therefore, management expects that additional debt or equity
financing will be required to complete its business plan. The Company intends to
seek additional equity financing; however, there is no assurance these endeavors
will be successful.

These factors create substantial doubt about the Company's ability to continue
as a going concern. The ability of the Company to continue as a going concern is
dependent upon (a) obtaining sufficient additional debt or equity financing to
finance operations, capital improvements, and other necessary activities, (b)
achieving a profitable level of operations, (c) acquiring a profitable business,
or (d) a combination of these actions. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.

Note 3 - Merger with Hi-Plains:
On May 9, 2000, the Company acquired all the outstanding stock of Hi-Plains
Energy Corp., a Wyoming corporation that was also in the development stage, for
$15,600. Concurrently therewith, the Company paid consulting and legal fees of
$134,420 to facilitate the merger of Hi-Plains into Winchester, and the filing
of related forms with the Securities and Exchange Commission. The total of
$150,020 deemed to be the cost of the Hi-Plains shares.

Effective May 13, 2000, Hi-Plains was merged into Winchester, Winchester changed
its name to PNW Capital, Inc., and each share issued and outstanding immediately
prior to the effective date remained as issued and outstanding common stock in
Winchester (renamed PNW) without change.

The purchase of the Hi-Plains stock and subsequent merger into PNW has been
treated as a purchase, under which the excess of the purchase price ($150,020)
over the net assets of Hi-Plains ($963) was capitalized as Goodwill ($149,057)
and amortized over a 15 year life. Amortization of $6,625 was recognized during
the year ended December 31, 2000.

Because of the matters described in Note 2 above, Management determined that the
goodwill had become impaired during the fourth quarter of 2000, and it was
written off, as described in Note 7, below.

Note 4 - Property and equipment:
During 2000, the Company acquired office and computer equipment having a cost of
$12,452, and recorded depreciation of $1,128. Because of the matters described
in Note 2 above, Management determined that the equipment had become impaired
during the fourth quarter of 2000, and it was written off, as described in Note
7, below.

                                      F-8

<PAGE>


Note 5 - Investment in Multiplex Raceway Systems:
In May, 2000, the Company purchased 300,000 shares of Multiplex Raceway Systems,
a privately-held company engaged in the development of fiber optic multiple
access systems, at a cost of $75,000 in cash. Then, in September, 2000, the
Company issued 300,000 shares of restricted common stock as additional purchase
price; this transaction was recorded at the par value of the stock issued, or
$30. The investment represents 2.4% of the total outstanding stock of Raceway.
The stock purchase represents the Company's initial investment against a total
commitment to purchase 25% of Raceway's stock for total consideration of
$500,000 in cash and 2,000,000 shares of PNW Capital, Inc. common stock. The
investment was recorded at cost.

Raceway is a development stage company, and PNW's management was subsequently
unable to obtain credible information regarding the status of Raceway or the
Company's investment in it. Accordingly, during the fourth quarter of 2000,
Management determined that the investment had become impaired, and it was
written off, as described in Note 7, below.

Note 6 - Website development costs in process:
As indicated in Note 1, the company is in the process of developing websites
from which to conduct its on-line retail operations. In March 2000, the Emerging
Issues Task Force reached a consensus on Issue No. 00-2, Accounting for Website
Development Costs, ("EITF Issue No. 00-2") to be applicable to all website
development costs incurred for the quarter beginning after June 30, 2000, with
early application permitted. The consensus states that for specific website
development costs, the accounting should be based generally on AICPA Statement
of Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. Under SOP 98-1, development costs are capitalized and
amortized to income over the estimated useful life of the website. The Company
has elected to adopt EITF Issue No. 00-2 and SOP 98-1 retroactively to January
1, 2000.

The Company incurred $71,861 in development costs through December 31, 2000,
which were capitalized; no amortization was recorded, as the sites were
incomplete. No costs had been incurred prior to January 1, 2000.

Because of the matters described in Note 2 above, Management determined that the
website development costs in process had become impaired during the fourth
quarter of 2000, and such costs were written off, as described in Note 7, below.

Note 7 - Impairment of long-lived assets:
The Company follows FASB Statement Number 121 - Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Because of the matters described in Note 2 above, Management
determined during the fourth quarter of 2000 that the carrying amount of certain
assets may not be recoverable, and accordingly they were written off by a charge
to income. The non-recoverable assets were as follows:

        Inventory                                                      $5,527
        Property and equipment, net of accumulated depreciation        11,324
        Investment in Multiplex Raceway Systems                        75,030
        Website development costs in process                           71,861
        Goodwill, net of accumulated amortization                     142,432
                                                                     -----------
          Total                                                      $306,174
                                                                     ===========
                                      F-9

<PAGE>


Note 8 - Acquisition of Peanut Butter & Jelly, Inc.:
On September 25, 2000, the Company authorized the acquisition of 100% of the
outstanding stock of Peanut Butter and Jelly, Inc. in exchange for 47,460,000
restricted common shares of the Company. In connection therewith, the Company's
three Directors, Wayne Miller, Gary Burnie, and Barry Miller, resigned, and were
replaced by Daniel C. Silva and Joseph L. McFarland, Jr.

Peanut Butter and Jelly, Inc. ("PB&J") is also a development stage company,
which plans to develop and manufacture magnetized packaging systems for
household products. The acquisition was completed in October 2000, and was
recorded as a purchase. At the date of acquisition, PB&J's sole asset was $50 in
cash, and it had not yet incurred any revenues and expenses. The acquisition was
recorded as follows:

        Investment in Peanut Butter & Jelly, Inc.                        $50
        Amount deemed to be compensation for services rendered by
          the principals of PB&J, recorded as a charge to income       4,696
                                                                     -----------
          Total fair value of shares issued                           $4,746
                                                                     ===========



Note 9 - Related party transactions:
The Company paid Management and Consulting fees of $146,078 (2000) and $31,663
(1999) to current or former officers and directors, or companies controlled by
current or former officers and directors. In addition, the Company paid $177,137
in Management and Consulting fees to non-officer shareholders in 2000. Of the
above amounts, $350,000 (which included $31,663 accrued in 1999) was paid by the
issuance in September, 2000 of 7,000,000 shares of common stock having a
stipulated value of $0.05 per share.

Note 10 - Accrued liability for contingencies:
Certain former officers and directors of the Company, or companies controlled by
the former officers and directors, have asserted two claims against the Company,
as follows:

o    A convertible debenture dated April 15, 1998 in the amount of $150,000,
     bearing 5% interest payable semi-annually, convertible into common shares
     at the rate of $0.05 per share at the option of the debenture holder for
     the then remaining balance of unpaid principal and interest. The former
     officers and directors assert this debenture was issued as consideration
     for expenditures made on the Company's behalf in connection with a 1997
     option agreement to purchase 50% interest in certain mineral properties in
     the Northwest Territories, Canada. The option agreement was abandoned by
     the Company, resulting in losses of approximately $276,000.

o    A convertible debenture dated April 15, 1998 in the amount of $100,000,
     bearing 5% interest payable semi-annually, convertible into common shares
     at the rate of $0.05 per share at the option of the debenture holder for
     the then remaining balance of unpaid principal and interest. The former
     officers and directors assert this debenture was issued as consideration
     for the pledge of Company shares owned by a company controlled by former
     officers and directors as collateral in connection with a proposed mineral
     property deal. The mineral property deal was not consummated.

                                      F-10

<PAGE>


The debenture holders have demanded that the Company convert the debentures into
common shares. However, current management of the Company disputes the validity
of the debentures, and believes they do not represent either bonafide
transactions or legally enforceable obligations. Accordingly, the debentures
have not been recognized as liabilities on the accompanying balance sheets.

Current management intends to vigorously contest the validity of these two
asserted debentures.

On March 18, 1999, the Company entered into an internet casino license agreement
for a period of three years. During fiscal 1999, Hollywood Casino Corporation
filed a domain name dispute complaint regarding the domain names used by the
Company in its internet casino referral operations. Subsequent to December 31,
1999, the National Arbitration Forum rendered a decision under which the Company
lost rights to all but one internet casino domain name.

Included in Costs of revenues for the year ended December 31, 1999 are $13,000
of casino licensing fees and $50,026 for the initial license payment. Under the
license agreement, the Company also was committed to make fee payments of
$15,000 in 2000, $12,000 in 2001, and $3,000 in 2002. However, the licensor has
not asked for payment of these amounts, and the Company has not paid them.

In 1999, the Company accrued a provision of $25,000 for defending against the
above contingent claims.

Note 11 - Federal income tax:
The currently payable (refundable) provision (credit) for Federal income tax
consists of the following:

                                                             December 31,
                                                       2000                1999
      Currently payable (refundable)
       provision (credit) attributable to:
          Current operations                      ($262,500)           ($88,100)
          Less, Limitation due to absence of
            prior taxable income                     262,500              88,100
                                                 -----------         -----------
          Net amount payable (refundable)           $     -             $     -
                                                 ===========         ===========

The Company follows FASB Statement Number 109 (SFAS 109), Accounting for Income
Taxes. Deferred income taxes reflect the net effect of (a) temporary difference
between carrying amounts of assets and liabilities for financial purposes and
the amounts used for income tax reporting purposes, and (b) net operating loss
carryforwards. The cumulative tax effect at the expected rate of 34% of
significant items comprising the Company's net deferred tax amounts are as
follows:

                                                           December 31,
                                                     2000                1999
      Deferred tax assets attributable to:
        Net operating loss carryforward            $606,000            $343,400
      Less, Valuation allowance                    (606,000)           (343,400)
                                                 -----------         -----------
        Net deferred tax assets                    $      -            $      -
                                                 ===========         ===========
                                      F-11

<PAGE>


At December 31, 2000 the Company had net operating loss carryovers which expire
as follows:

       Expires:                                                 Amount
         December 31, 2011                                      $10,100
         December 31, 2012                                      489,200
         December 31, 2013                                      251,500
         December 31, 2014                                      259,400
         December 31, 2015                                      772,200
                                                              ----------
           Total                                             $1,782,400
                                                              ==========

Note 12 - Commitments:
On October 1, 1999, the Company entered into a three year management agreement
with a company controlled by a former director of the company. The future
minimum management fees were as follows:

       Year ending December 31,                                  Amount
         2001                                                   $41,571
         2002                                                    31,179
                                                              ----------
           Total                                                $72,750
                                                              ==========

Also on October 1, 1999, the Company entered into a three year operating lease
for office space with a company controlled by a former director of the Company.
The future minimum rent payments were as follows:

       Year ending December 31,                                   Amount
         2001                                                     $4,367
         2002                                                      3,275
                                                               ----------
           Total                                                  $7,642
                                                               ==========

Both agreements were terminated simultaneously with the issuance of stock in
exchange for amounts then owed, as described in Note 9 above.

The Company incurred rent expense of $2,744 (2000) and $2,302 (1999).

Note 13 - Common stock:
During the development stage, the Company has issued shares of its common stock
as follows:

<TABLE>
<CAPTION>
<S>                                                                        <C>             <C>               <C>

                                                                                          Price
      Description and Dates                                                                Per            Net
                                                                         Shares           Share          Amount
      Shares issued for cash:
        November 7, 1996                                                       50,000       $0.010              $500
        February 27, 1997                                                  20,000,000      0.00923           184,668
        July 17, 1998                                                       5,200,000        0.062           320,000
        March 15, 1999                                                      2,000,000      0.04887            97,747
        March 31, 1999                                                      1,000,000      0.04887            48,874
        March 13, 2000                                                      1,790,000        0.149           266,768
        May 17, 2000                                                        6,700,000        0.218           146,302

</TABLE>

                                      F-12

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                        <C>             <C>            <C>


      Shares issued for debt (1):
        March 15, 1999                                                      3,500,000        0.050           175,000
        March 31, 1999                                                      2,000,000        0.050           100,000

      Shares issued for services(2):
        September 20, 2000                                                  7,000,000        0.050           350,000

      Shares issued for Multiplex stock (3):
        September 27, 2000                                                    300,000       0.0001                30

      Shares issued for PB&J:
        October 2, 2000:                                                   47,460,000
          Allocated to underlying assets (4)                                                0.0001                50
          Allocated to services (3)                                                         0.0001             4,696
                                                                           ----------                     ----------
                                                                           97,000,000                     $1,694,635
                                                                           ==========                     ==========
</TABLE>


(1)      Value based on face value of obligation relieved.
(2)      Value based on quoted value of shares issued.
(3)      Value based on value of services rendered.
(4)      Value based on value of net underlying assets.

Note 14 - Stock options and stock issued for services:
In August, 2000, the Company adopted the 2000 Nonqualified Stock Option Plan.
The Plan sets aside 10,000,000 shares of common stock option for issuance to
employees, directors, officers, attorneys, accountants, consultants or advisors
to the company. The Plan has a ten year term.

On September 20, 2000, the Company granted options to two officers and two
consultants to purchase 7,000,000 shares of the Company's common stock at $0.05
per share under the Plan. The options were immediately exercised, and shares
were issued in satisfaction of the Company's obligation to the four individuals
for consulting services rendered through September 30, 2000. The transaction was
recorded by a charge to expense for $257,035, and a charge of $92,965 against
amounts previously accrued for such services, for a total value of $350,000.

Also on September 20, 2000, the Company granted options to five consultants (one
of whom is also a director) to purchase an aggregate of 2,200,000 shares at
$0.05 per share under the Plan. No compensation cost was recognized when the
options were granted because the option price was equal to or greater than the
then quoted market value. The options are exercisable at any time before ten
years from the date the Plan was adopted. At September 30, 2000, none of these
options had been exercised.

Note 15 - Restatement of first quarter, 2000 results of operations:
As a result of the implementation of SOP 98-1 (see Note 5 above), the Company
retroactively capitalized $69,261 in website development costs that had
previously been expensed during the quarter ended March 31, 2000. Following is a
summary of the Company's operations for the quarter ended March 31, 2000, as
restated:

                                      F-13

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                 <C>              <C>


                                                                                      Quarter Ended
                                                                                        March 31,
                                                                                   2000              1999
      Revenues                                                                       $      -         $      -
      Less:
        Costs of revenues                                                                   -           50,026
        Consulting and management fees                                                 35,669          113,833
        Provision for contingencies                                                         -           25,000
        Other general and administrative                                               21,349              346
                                                                                    ----------       ----------
      Loss before taxes on income                                                     (57,018)        (189,205)
        Provision for taxes on income                                                       -                -
                                                                                    ----------       ----------
      Net loss                                                                       ($57,018)       ($189,205)
                                                                                    ==========       ==========
</TABLE>

The effect of the restatement on cash flows for the quarter ended March 31, 2000
was to increase operating cash flows by $69,261, and to decrease cash flows from
investing activities by the same amount.

Note 16 - New accounting pronouncements: The following recent accounting
pronouncements:

FASB Statements

Number 133, Accounting for Derivative Instruments and Hedging Activities,

Number  134,  Accounting  for  Mortgage-Backed  Securities  Retained  after  the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise,

Number 135, Recission of FASB Statement No. 75 and Technical Corrections,

Number 136,  Transfers of Assets to a Not-for-Profit  Organization or Charitable
Trust That Raises or Holds Contributions for Others,

Number 137,  Accounting  for  Derivative  Instruments  and Hedging  Activities -
Deferral of the Effective Date of FASB Statement No. 133,

Number 138,  Accounting for Certain  Dervative  Instruments  and Certain Hedging
Activities - an amendment of FASB Statement No. 133,

Number 139, Recission of FASB Statement No. 53 and amendments to FASB Statements
No. 63, 89 and 121, and

Number 140,  Accounting  for  Transfers  and  Servicing of Financial  Assets and
Extinguishments of Liabilities - a Replacement of FASB Statement No. 125,
and FASB Interpretations

Number 43, Real Estate Sales, and

Number 44, Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB Opinion No. 25,

are not currently expected to have a material effect on the Company's  financial
Statements.


B.      Financial statement schedules

Schedules are omitted because of the absence of the conditions  under which they
are required,  or because the  informatin  reauired by such omitted  schedule is
contained in the financial statements or the notes thereto.

                                      F-14