SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

              ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year
                               Ended May 31, 1998

                         Commission file number 0-21210
                                                -------
                                   NELX, INC.

             (Exact name of registrant as specified in its charter)

                    Kansas                             84-0922335
                    ------                             ----------
              (State or other jurisdiction             (I.R.S. Employer
              of incorporation or organization)        Identification No.)

              Route 1, Box 4J, Bridgeport, WV          26330
              -------------------------------          -----
              (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:    (304) 622-9599
Securities Registered Pursuant to Section 12(b) of the Act:

                                      NONE

Securities Registered Pursuant to Section 12(g) of the Act

                          COMMON STOCK $.0001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for at least the past 90 days.

                             Yes  X      No    
                                  --         --    
                                           
                              
Indicate by check mark if disclosure  of  delinquent  filers in Response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained  to  the  best  of  Registrant's  knowledge  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

                             Yes          No   X          
                                 --            --
<PAGE>

Registrants  gross  revenues  for its most  recent  fiscal  year  were  $0,  and
operations expenses totaled ($184,932) for a net loss of ($184,932).

State the aggregate market value of the voting stock held by  non-affiliates  of
the Registrant:  $1,181,341 as of May 31, 1998 (a $.045/share average bid at May
31, 1998).

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock: 46,352,042 common shares as of May 31, 1998.

<PAGE>

                                TABLE OF CONTENTS

                                     PART I
                                                                        Page

Item 1.               Business ..................................       1

Item 2.               Properties ................................       3

Item 3.               Legal Proceedings..........................       3

Item 4.               Submission of Matters to a Vote of
                      Security Holders..........................        3

                                     PART II

Item 5.               Market for Registrant's Common Stock and
                      Security Holder Matters ..................        4

Item 6.               Management's Discussion and Analysis of
                      Financial Condition and Results of
                      Operations ...............................        5

Item 7.               Financial Statements and Supplementary Data..     6

Item 8.               Changes in and Disagreements with Accountants
                      on Accounting and Financial Disclosure.....       6

                                           PART III

Item 9.               Directors and Executive Officers of the
                      Registrant.................................       7

Item 10.              Executive Compensation......................      9

Item 11.              Security Ownership of Certain Beneficial
                      Owners and Management......................       11

Item 12.              Certain Relationships and Related
                      Transactions...............................       11

                                            PART IV

Item 13.              Exhibits, Financial Statement Schedule
                      and Reports on Form 8-K....................       12

<PAGE>

PART I


ITEM 1.        BUSINESS

General
-------
               The Registrant was  incorporated  in the State of Kansas in March
1983 as Nelson  Exploration,  Inc.  In October  1991,  the  Registrant  acquired
Westwind  Production   Company,  a  Nevada  corporation,   which  owned  certain
non-producing  oil  and  gas  properties  and  related  assets.  The  Registrant
currently has no business  operations and it has been  unsuccessful in achieving
any oil or gas  production.  All mineral leases have been sold or terminated and
written  off.  The company  has  divested  all real estate held for  investment,
development and resale,  except for a small commercial  property in Kansas.  For
financial information see "Financial Statements and Supplementary Data."

Parent (Registrant)
------
NELX, Inc.

Wholly owned Subsidiaries
-------------------------
        1.     MS Oil Company, Inc. (a Colorado corporation)
               Operations:          None


Oil and Gas Producing Activities.
---------------------------------
        None.  All attempts at production activities were terminated.

Patents, Trademarks, Licenses, Etc.
-----------------------------------
        The Registrant does not hold any patents,  trademarks,  licenses,  etc.,
with  respect to, nor are  patents  significant  in regard to, the  Registrant's
activities.

Governmental Regulation
-----------------------
     General  -  The  Registrant's   activities  may  be  subject  to  extensive
regulation by numerous federal, state and local governmental authorities, if the
Company engages in either the oil and gas or real estate business. Regulation of
the  Registrant's  development  activities,  if they ever  develop,  will have a
significant effect on the Registrant and its operating results.

<PAGE>

               Oil and Gas Activities - The Company currently has no oil and gas
               ----------------------
activities or operations.

Real Estate Business
--------------------
     The Company  originally  acquired  real estate as capital  assets to form a
base from which to grow. Due to the continuing lack of capital  partners for oil
and gas exploration,  the Company,  in 1997,  turned its attention to efforts to
liquidate its real estate  capital  assets and has done so. The Company now owns
only one small commercial property in Kansas.
    
     Market  factors:  Real estate  markets are greatly  influenced  by economic
cycles, availability of development, construction loans, competitive properties,
oversupply  and  other  matters  over  which  the  registrant  has  no  control.
Registrant  intends to maintain these market factors in perspective  and develop
on a basis that would allow the company and  properties  to be  liquidated  in a
cyclical market, to reduce debt.

     Capital:  The Company has no  commitments  for capital at this time for any
real estate development projects.

Competition and Markets
-----------------------
     There  are many  companies  and  individuals  engaged  in the  real  estate
business. Some are very large and well established with substantial capabilities
and long earnings records. The registrant is at a competitive  disadvantage with
other firms and individuals in marketing real properties since they have greater
financial  resources  and  larger  technical  staffs  than  the  Registrant.  In
addition,  in recent  years a number of small  companies  have been formed which
have objectives similar to those of the Registrant and which present substantial
competition to the Registrant.

     A number of  factors,  beyond the  Registrant's  control  and the effect of
which cannot be accurately  predicted,  affect the  development  of real estate.
These factors include area growth,  interest rates,  transportation  routes, the
marketing of competitive properties and other matters affecting the availability
of a ready market, such as fluctuating supply and demand.

Industry Segments
-----------------
Real Estate Rental Income & Expense
-----------------------------------
Income                              $ 0
Expenses                            $ 0
Net Income (Loss)                   $ 0

<PAGE>

Oil & Gas Income and Expense                (Operations discontinued)
----------------------------
Income                              $ 0
Cost of Sales                       $ 0
Expenses                            $ 0
Net Income                          $ 0

Employees
---------
     The Registrant retains consultants with respect to any activities for which
consulting  services may be necessary.  The Registrant from time to time retains
independent  engineering  and  geological  consultants  in  connection  with its
operations. The company President,  Charles L. Stout, is on a part time basis as
President of NELX, Inc.

ITEM 2.        PROPERTIES

Oil and Gas Properties
----------------------
        None

REAL PROPERTY
-------------
        None

ITEM 3.        LEGAL PROCEEDINGS

        There are presently no material  pending legal  proceedings  which would
result in any uninsured liability,  other than routine litigation  incidental to
the business, to which the Registrant is a party.


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

               None in Fiscal Year ended May 31, 1998.


                                           PART II

ITEM 5.        MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY 
               HOLDER MATTERS

               (a)    The Registrant's common stock is traded in the over-the-

<PAGE>

counter  market under the symbol NLXI (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.

FY 1997 (Ended May 31, 1998):

                                                   High Bid      Low Bid
                                                   --------      -------

        1st quarter                                .06           .025
        2nd quarter                                .075          .03
        3rd quarter                                .06           .03
        4th quarter                                .045          .03

                                                   High Bid      Low Bid
                                                   --------      -------
FY 1996:
        1st quarter                                .24           .09
        2nd quarter                                .125          .055
        3rd quarter                                .13           .045
        4th quarter                                .11           .03125

                                                   High Bid      Low Bid
                                                   --------      -------
FY 1995:
        1st quarter                                1.125         .63
        2nd quarter                                .938          .375
        3rd quarter                                .688          .219
        4th quarter                                .469          .141

        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  May  31,  1998,  there  were  749  holders  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.

<PAGE>

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        The Registrant was unable to satisfy all of its general  working capital
requirements  with  cash  flow  generated  from  oil  and gas  and  real  estate
operations  during the current fiscal year.  This deficit in working capital was
financed by loans, and capital contributions through private placement of stock.

In view of the current  economic  conditions  within the industries in which the
Registrant  participates,   the  Registrant  anticipates  that  cash  flow  from
operations  for fiscal 1995 will be  insufficient  to satisfy all of its general
working capital  requirements  necessitating  additional  capital infusions from
affiliates,  from sale of assets,  borrowing,  equity  participation or Fairmout
Agreements.

        The Registrant will continue a deficit  working capital  position in the
future if  sustaining  revenues  and growth  capital  are not  generated  by the
Registrant.

        Changes in Financial Conditions - Loss of Assets
        ------------------------------------------------
     In Fiscal Year 1997 ending May 31, 1998,  the Company  reconveyed 320 acres
of property in Adams County,  Colorado to a lender for debt reduction,  of which
resulted in debt  reduction of  approximately  $500,000.  The Company  settled a
lawsuit by Allan E.  Pezoldt by  conveying  240 acres of Weld  County,  Colorado
property  in  consideration  of  $60,000  in cash and  payoff  of debt  totaling
approximately $500,000. The Company had previously written down the asset to the
debt owed upon it.

        Results of Operations for 1997 Fiscal Year Compared to 1996 Fiscal Year
        -----------------------------------------------------------------------
        NELX,  Inc.  incurred  operating  expenses  for fiscal  year 1997 in the
amount of $184,932 as compared  with  operating  expenses of $786,976 for fiscal
year 1996. In fiscal year 1996,  the Company  determined,  that due to defaulted
mortgage  obligations on its real estate,  it would write down its assets to the
balance  outstanding  on its mortgage  obligations,  since there  appeared to be
sufficient equity in the real estate to satisfy the obligations.  In fiscal year
1996,  the Company wrote off a note  receivable and returned real estate held to
the  senior  mortgage  holder  on two of its real  estate  parcels,  since  both
mortgages  were in default.  In fiscal year 1996, an apartment  triplex owned by
the Company was lost in foreclosure,  but it resulted in the  extinguishment  of
approximately  $111,000  in debt.  1996  write-offs  of real  estate  and a note
receivable totaled $3,266,994. In the 1997 fiscal year, the Company conveyed two
undeveloped  acreage  tracts  to  settle  debt and  lawsuits  resulting  in over
$1,000,000  in debt  elimination.  The  property  conveyed had  previously  been
written  down.  The  Registrant   expects  that  its  operating   expenses  will
substantially decrease in fiscal year 1998 over 1997. The net loss on operations
for year ended May 31, 1998 was  ($184,932)  compared to ($826,089) for year end
May 31, 1997. The Company's  total net loss after  write-offs on assets for year
ended May 31, 1998,  was  ($184,932)  as compared to  ($4,093,083)  for the year
ended May 31,  1997.  The per share loss for year ended May 31, 1997 was ($.004)
compared to ($.20) for the year ended May 31, 1996.

<PAGE>

        Registrant had no oil and gas operating revenues in fiscal year 1997 and
no oil and gas operating revenues in fiscal year 1996.

        Registrants  monthly revenue for operations is insufficient to cover its
normal operating costs and debt service.


        Liquidity and Capital Resources
        -------------------------------
     Registrants  liquidity  is limited by its  ownership  of  undeveloped  real
estate,  which is not readily marketable.  The Company has no cash flow from any
other source.

     Registrant will be forced to seek venture  partners for capital,  or in the
alternative,  borrow  money upon its real  estate,  which may not be possible or
practical under current market conditions.

     Registrant  had no  significant  cash reserves or deposits at year end, and
was totally illiquid and without any operating funds.

     Registrant will be forced to and will seek private  placements of its stock
and loans to make up the lack of operating revenues.


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The  response  to this Item is  included  as a separate  Exhibit to this
report. Please see pages F-1 through F-12.

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

     a) No changes in accountants have been made.

     b) In  connection  with  audits  of two most  recent  fiscal  years and any
interim period preceding  resignation,  no  disagreements  exist with any former
accountant  on any  matter of  accounting  principles  or  practices,  financial
statement disclosure, or auditing scope of procedure, which disagreements if not
resolved to the  satisfaction of the former  accountant would have caused him to
make  reference  in  connection  with his  report to the  subject  matter of the
disagreement(s).

     c) The principal  accountant's  report on the financial  statements for the
past two years  contained no adverse  opinion or a disclaimer of opinion nor was
qualified as to uncertainty,  audit scope, or accounting  principles  except for
the "going concern" qualification.

<PAGE>

                                    PART III

ITEM 9.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

               (a) The names of the  directors  and  information  about them, as
furnished by the directors themselves, are set forth below:


        Name               Age  Relationship     Term of         Director
        ----               ---  ------------     -------         --------
                                With Company     Office Since
                                ------------     ------------
                              
Charles L. Stout ..........48   President &      Annual    Oct. 1997
                                Director

Harry Bullock .............65   Vice President   Annual    Oct. 1997


Kenneth L. Curry ..........38   Director         Annual    Oct. 1997


Officers and Directors

     The term of office  for each  director  is one (1) year,  or until  his/her
successor is elected at the Company's annual meeting and qualified.  The term of
office  for each  officer  of the  Company  is at the  pleasure  of the board of
directors.

     The  board  of  directors  has no  nominating,  auditing,  or  compensation
committee.  Therefore,  the  selection  of  person or  election  to the board of
directors was neither independently made nor negotiated at arm's length.

        Business Experience
        -------------------
Harry Bullock, age 65

     Director and Secretary, received his B.S. in Civil Engineering in 1952 from
the University of Wyoming.  From 1970 to 1980, he was President and principal in
Bullock  Engineering and  Development Co. of Denver.  From 1983 to 19986, he was
chairman of the Board of Interguer,  Inc., a public company.  Since 1971, he has
been principal and chairman of the Board of Bullock Exploration, Inc., a natural
resource  exploration  and  mining  contractor.  He is a member of the  National
society of  Professional  Engineers  and the  Colorado  Society of  Professional
Engineers.

<PAGE>

Charles L. Stout, age 48

     President and Director,  obtain a B.S. in Mechanical Engineering Technology
from  Fairmont  State  College.  He has post  graduate  study  at West  Virginia
University.  He is President and Director of Applied Mechanics Corporation which
he founded in 1983, a West Virginia Oil and Gas producer.  From 1984 to present,
he has been President of Appalachian Labor and Economic Development Corps., Ltd.
He is a director of Square Roots, Inc. and is owner of Applied Machining,  Inc.,
a tool and die shop.

Kenneth L. Curry, age 38

     Director,  attended West Virginia  University for a year studying forestry.
He is a Certified  Logger in West Virginia.  He is principal in and President of
Square Roots, Inc., a logging and lumber company in Bridgeport, West Virginia.

        Family Relationships
        --------------------
        There are no family  relationships  among any of the company's  officers
and directors.

        Involvement in Certain Legal Proceedings
        ----------------------------------------
        During the past five years there have been no filing of petitions  under
the federal  bankruptcy  laws, or any state  insolvency  laws, by or against any
partnership  in which any  director or  executive  officer of  Registrant  was a
general partner or executive  officer at the time or within two years before the
time of such a filing.

        No director or executive officer of Registrant has, during the past five
years,  been  convicted in a criminal  proceeding  or is the named  subject of a
pending  criminal  proceeding  (excluding  traffic  violations  and other  minor
offenses).

        During  the  past  five  years  no  director  or  executive  officer  of
Registrant  has  been  the  subject  of  any  order,  judgment  or  decree,  not
subsequently   reversed,   suspended  or  vacated  by  any  court  of  competent
jurisdiction  permanently or temporarily enjoining him from or otherwise limited
in his involvement in any type of business, securities or banking activities.

        During  the  past  five  years  no  director  or  executive  officer  of
Registrant  has  been  found  by a court of  competent  jurisdiction  in a civil
action, nor by the Securities and Exchange  Commission nor the Commodity Futures
Trading  Commission  to  have  violated  any  federal  or  state  securities  or
commodities law, which judgment or finding has not been  subsequently  reversed,
suspended or vacated.

<PAGE>

        The Executive  Officers of the Registrant are elected  annually for term
terminating  at  such  time as  their  respective  successors  are  elected  and
qualified.

        Compliance with Section 16(a) of the Exchange Act.
        --------------------------------------------------
        Section  16(a) of the  Securities  Exchange  Act of 1934 (the  "Exchange
Act") requires the Company's directors and officers and any persons who own more
than  ten  percent  of the  Company's  equity  securities,  to file  reports  of
ownership and changes in ownership with the  Securities and Exchange  Commission
(the "SEC").  Directors,  officers and greater than ten-percent shareholders are
required by SEC  regulation  to furnish  the Company  with copies of all Section
16(a) report files.

        The  Company  has   requested   that  its  officers  and  directors  and
greater-than-ten-percent  shareholders  comply with the Section  16(a) by filing
Form 5.

        The following persons had not filed Form 5 as of May 31, 1998:

        Charles L. Stout
        Harry Bullock
        Kenneth L. Curry

ITEM 10.       EXECUTIVE COMPENSATION

        Summary

     a)  Set  forth  in the  following  table  is  information  as to  the  cash
compensation  paid or set aside  directly or  indirectly  during the fiscal year
ended May 31, 1997,  to or for the benefit of any  executive  officer whose cash
compensation exceeded $60,000.00, and all executive officers as a group:

Name of Individual                          Capacities in               Salary
or Number of Group                          Which Served                and fees
------------------                          --------------              --------
Charles L. Stout                            President & Director        $0
Harry Bullock                               Vice President              $0
Kenneth L. Curry                            Director                    $0

                                            Directors                   $0
All Executive Officers
as a Group (3 persons)                      -                           $0

               b)  Compensation paid by the Company for all services provided 

<PAGE>

during  the  fiscal  year  ended  May 31,  1998,  (1) to  each of the  Company's
directors whose cash compensation exceeded $60,000 and (2) to all directors as a
group is set forth below:

<PAGE>

                                  ANNUAL COMPENSATION ($$)
                                  ------------------------
Name and Position                  Year              Fees                  Bonus
-----------------                  ----              -----                 -----
Charles L. Stout, President & Dir. 1997              $0                    $0

Harry Bullock, Vice President      1997              $0                    $0

Kenneth L. Curry, Director         1997              $0                    $0

Directors                          1997              $0                    $0

                                  LONG TERM COMPENSATION
                                  ----------------------
                                       Options
                        Restricted     & SARs
                        Stock          LTIP          LTIP           Other
Other                   Awards         Payouts       Payouts        Compensation

Charles L. Stout        None           None          None           None

Harry Bullock           None           None          None           None

Kenneth L. Curry        None           None          None           None

     All  directors  and  officers as a group  received no shares as  additional
compensation

        Option/SAR Granted During the Last Fiscal Year
        ----------------------------------------------
        Registrant  does not have a stock  option or stock  appreciation  rights
plan. Therefore this section is not applicable.

        Long Term Incentive Plans/Awards in Last Fiscal Year

        Registrant has no long-term incentive plans and consequently has made no
such awards, except as set forth under Long Term Compensation above.

        Compensation of Directors
        -------------------------
        (1)  Standard Arrangements.  None
        (2)  Other  Arrangements.  There  are  no  other  arrangements  for  the
compensation of directors of the Registrant.

     Employment  Contracts and  Termination of Employment and  Change-in-Control
     ---------------------------------------------------------------------------
Arrangements. None.
------------

<PAGE>

        Report on Repricing of Options/SARs
        -----------------------------------

        No options or stock appreciation rights are outstanding or were repriced
during the fiscal year ended May 31, 1998, or subsequently.

        Employee Stock Compensation Plan - No open plans.
        -------------------------------------------------

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

               (a) The  following  table sets  forth,  as of May 31,  1998,  the
beneficial  ownership  (as defined by the rules of the  Securities  and Exchange
Commission) of common stock of the Registrant by each person owning more than 5%
of  Registrants  Common  Stock and each officer and director and by all officers
and directors as a group, together with the percentage of the outstanding shares
of such class which such ownership represents.  Unless otherwise indicated, such
persons have sole voting and investment power with respect to such shares.

                                             Amount and Nature           Percent
                                             of Beneficial               of
Name of Beneficial Owner                     Ownership                   Class  
------------------------                     ---------                   -----  
Charles L. Stout                             20,000,000                  46%

Harry Bullock                                0                           0.002%

Kenneth L. Curry                             0                           0%

Total owned by Officers and Directors        20,100,000                  46.2%

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Certain Transactions
        --------------------

     On October 9, 1997, Charles L. Stout purchased  20,000,000 shares of common
stock for $20,000 and a commitment to fund additional payables. Charles L. Stout
was then appointed President and Director.

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

     (a) Financial Statements and Schedules.  The following financial statements
and schedules for NELX,  Inc., as of May 31, 1998, and 1997 are filed as part of
this report.

<PAGE>
                                                                      Page
                                                                      ----
        (1)    Financial statements of NELX, Inc:
               Reports of Independent Accountants
               Report of Michael B. Johnson & Co.
               years ended May 31, 1998 and May 31, 1997              F-2
               Balance Sheets                                         F-3
               Statements of Operations                               F-4
               Statements of Cash Flow                                F-5 - F-6
               Statements of Shareholders' Equity                     F-7
               Notes to Financial Statements                          F-8 - F-12

        (2)    Financial Statement Schedules:
               (a)    None
               (b)    Reports on Form 8-K:

                      7/7/97                       Incorporated by reference as
                                                   filed with Securities and
                                                   Exchange Commission

                      9/30/97                      Incorporated by reference as
                                                   filed with Securities and
                                                   Exchange Commission

                      10/30/97                     Incorporated by reference as
                                                   filed with Securities and
                                                   Exchange Commission
               (c)    Exhibits
Item No.
(under 601)

4.1*   Articles of Incorporation and By-Laws:
       Incorporated by Reference as filed with Form 10 with the 
       Securities and Exchange Commission
13.1*  Quarterly Report of NELX, Inc. 10-QSB for Period ended August 31, 1997.
13.2*  Quarterly Report of NELX, Inc. 10-QSB for Period ended November 30, 1997.
13.3*  Quarterly Report of NELX, Inc. 10-QSB for Period ended February 28, 1998.
22.1*  Subsidiaries of Registrant
* Previously filed


<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.

DATE                                               NELX, INC.

November 12, 1998                                  by:_________________________
                                                     Charles L. Stout, President

        Pursuant to the  requirements  of Section 13 or 15(d) 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.


______________________                      President         November 12, 1998
Charles L. Stout                            and Director


______________________                      Vice President    November 12, 1998
Harry Bullock


______________________                      Director          November 12, 1998
Kenneth L. Curry


<PAGE>

                                   NELX, INC.
                          NOTES TO FINANCIAL STATEMENTS
                              MAY 31, 1998 AND 1997


NOTE 4 - ASSET DISSOLUTION:

On April 17, 1998, the Company  conveyed the 240 acres of land in Weld County to
Allan  Pezoldt in  exchange  for the  $450,000  shown in 1997 as an  outstanding
mortgage.

On May 8, 1998,  the Company  conveyed  the 320 acres of land in Adams County to
Meheen  Engineering in exchange for the $500,000 shown in 1997 as an outstanding
mortgage.

On October 9, 1997, the Board of Directors  accepted an offer from Charles Stout
to acquire 20 million shares of common stock of NELX, Inc., in consideration for
his agreement to  contribute  $20,000 in immediate  cash and to contribute  such
additional  funding to settle  accounts  payable and commitments up to $250,000.
Subsequently,  on October 17, 1997, the initial cash contribution of $20,000 was
made. The 20 million shares  represents  46% of the  outstanding  stock of NELX,
Inc. Mr. Charles Stout was appointed President on October 9, 1997.

NOTE 5 - PRIOR YEAR ADJUSTMENT

During  fiscal year ending May 31, 1997,  NELX,  Inc.  wrote off  $3,266,994  of
non-producing  assets. In 1998, NELX, Inc.'s new management  returned assets and
restructured debt obligations. NELX, Inc. also received discounts from creditors
on debts,  which allowed the Company to remain in business.  Management's  prior
year write-off of non-producing assets of $3,266,994,  due to debt restructuring
and creditor discounts was overstated by $635,156.


<PAGE>

                                   NELX, Inc.
                          Consolidated Balance Sheets
                                    May 31,

                                                       1998       1997
ASSETS:

Current Assets:
    Cash and cash equivalents                        $    1,662   $         -
                                                     ----------   ---------- 
        Total Current Assets                              1,662             -

Fixed Assets:
    Land                                                      -       950,000
    Plant & Plant Equipment                             100,000       100,000
    Equipment                                             8,654        12,479
    Buildings                                            82,000        82,000
                                                         ------        ------
                                                        190,654     1,144,479
    Less Accumulated Depreciation                      (114,266)     (106,154)
                                                       --------      -------- 
        Net Fixed Assets                             $   76,388   $ 1,038,325
                                                     ==========   ===========
Other Assets:
    Deposits                                                  -         3,950
                                                          -----         -----  
                                                                    
        Total Other Assets                                    -         3,950
                                                         -----         -----
TOTAL ASSETS                                         $   78,050   $ 1,042,275
                                                     ==========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
    Bank Overdraft                                   $       -    $     8,533
    Accounts Payable                                    78,765        489,424
    Accrued Expenses                                    10,036        374,149
    Current Portion of Long-Term Debt                  158,984        812,252
                                                       -------        -------
        Total Current Liabilities                      247,785      1,684,358

Long-Term Liabilities:
    Notes Payable                                       25,841         30,617
                                                        ------         ------
        Total Long-Term Liabilities                     25,841         30,617
                                                        ------         ------
TOTAL LIABILITIES                                      273,626      1,714,975

STOCKHOLDERS' EQUITY:
    Common Stock, $.0001 par value 500,000,000 
     shares authorized, 46,352,042 and 25,477,042 
     issued and outstanding at May 31, 1998
     and 1997, respectively                              4,635          2,548
    Additional paid-in capital                       7,465,975      7,441,162
    Prior Year Adjustment                              635,156              -
    Retained Deficit                                (8,301,342)    (8,116,410)
                                                    ----------     ---------- 
TOTAL STOCKHOLDERS' EQUITY                           (195,5576)      (672,700)
                                                     ---------       -------- 
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                                 $  78,050     $1,042,275

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

<PAGE>
                                   NELX, INC.
                CONSOLIDATED FINANCIAL STATEMENTS OF OPERATIONS
                           For the Year Ended May 31,

                                                     1998         1997
REVENUES:
---------
    Oil & gas sales                                  $        -    $          -


Gross Profit                                                  -               -

EXPENSES:
---------
    Consulting                                           39,662        303,975
    Office Expense                                        4,527           8,276
    Travel                                                3,939           2,635
    Lease Expense                                         2,049          52,580
    Repairs & Maintenance                                     -             195
    Professional Fees                                    33,872         137,310
    Telephone & Utilities                                 6,323          87,233
    Depreciation & Depletion                              8,112          19,103
    Miscellaneous                                         5,708          25,559
    Taxes                                                 2,318               -
    Interest Expense                                     78,422         150,110
                                                         ------        -------
Total Expenses                                          184,932         786,976
                                                        -------         -------
OTHER REVENUES & (EXPENSES):
----------------------------
    Net Rental Expense                                        -         (39,113)
                                                        -------         ------- 
Total Other Revenue & (Expenses)                              -         (39,113)

NET LOSS BEFORE DISCONTINUED OPERATIONS              $   (184,932) $   (826,089)

DISCONTINUED OPERATIONS:
------------------------
    Loss on Write Off of Non-Producing Assets                   -    (3,266,994)
                                                       ----------    ---------- 
NET LOSS                                             $   (184,932) $ (4,093,083)
                                                     ============  ============ 
Loss per Common Shares:
Loss Before Discounted Operations                           (0.01)        (0.04)
Loss on Discontinued Operations                                 -         (0.16)
                                                             -----        ----- 
Net Loss Per Share                                   $      (0.01) $      (0.20)
                                                     ------------  ------------ 
Weighted Average Number of
Shares Outstanding                                     21,327,974    20,084,742

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

<PAGE>
                                   NELX, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                           For the Year Ended May 31,

                                                        1998         1997
Cash Flows from Operating Activities:
 Net Profit (Loss)                                    $ (184,932)   $(4,093,083)
 Amortization and Depreciation                             8,112         19,103
 Issuance of Common Stock for Services                         -        248,771
 (Decrease) Increase in Accounts Payable                (635,156)       349,775
 (Decrease) Increase in Bank Draft                        (8,533)         8,533
 (Decrease) Increase in Accrued Expenses                 (66,177)        66,177
 (Increase) Decrease in Accrued Interest Receivable       (3,950)           500
                                                          ------            ---
Net Cash Flows Used for Operating Activities            (890,636)    (3,400,224)

Cash Flows From Investing Activities:
 Purchase of Fixed Assets                                (55,081)        (5,476)
 Retirements/Repossession of Fixed Assets                953,825      3,379,202
                                                         -------      ---------
Net Cash Flow Used for Investing Activities              898,744      3,373,726

Cash Flows From Financing Activities:
 Issuance of Common Stock:                                 2,087          9,264
                                                           -----          -----
Net Cash Flows Provided by Financing Activities            2,087          9,264

Increase (Decrease) in cash                               10,195        (17,234)
                                                          ------        ------- 
Cash and Cash Equivalents -- Beginning
  of Year                                                 (8,533)         8,701
                                                          ------          -----
Cash and Cash Equivalents -- End of Year              $    1,662    $    (8,533)
                                                      ==========    =========== 
Supplemental Disclosure of Cash Flow
 Information Cash Paid During the Year for:
 Interest                                             $   20,327    $    22,860
 Income Taxes                                         $        -    $         -

The  accompanying  notes are  considered  an  intetral  part of these  financial
statements.

<PAGE>
<TABLE>
<CAPTION>
                                   NELX, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                  May 31, 1998

                                    Common Stock       Additional
                                                        Paid-In     Accumulated
                                 # of Shares  Amount    Capital       Deficit
                                 -----------  ------    -------       -------
<S>                               <C>         <C>      <C>          <C>   

Balance at May 31, 1995           10,437,581  $1,044   $5,195,578   $(1,119,758)

Issuance of Common Stock
 for Cash                          1,520,100     152      382,068             -

Issuance of Common Stock
 for Services Rendered             4,058,619     406      917,520             -

Issuance of Common Stock
 for Assets Acquired or Reduction
 in Liabilities                    2,931,000     293      688,596             -

May 31, 1996 Net Loss                      -       -            -    (2,903,569)
                                -----------------------------------------------
Balance at May 31, 1996           18,947,300   1,895    7,183,780    (4,023,327)

Issuance of Common Stock
 for Cash                            185,280      19        9,245             -

Issuance of Common Stock
 for Services Rendered             6,344,462     634      248,137             -

May 31, 1997 Net Loss                      -       -            -    (4,093,083)
                                ------------------------------------------------
Balance at May 31, 1997           25,477,042   2,548    7,441,162    (8,116,410)

Issuance of Common Stock

 for Cash                         20,875,000   2,087       24,813             -

May 31, 1998 Net Loss                      -       -            -      (184,932)
                                ------------------------------------------------
                                  46,352,042   4,635    7,465,975    (8,301,342)
                                ================================================
The  accompanying  notes are  considered  an  integral  part of these  financial
statements.

</TABLE>