**INDEPENDENT AUDITORS' REPORT**

To the Board of Directors

N-Vision Technologies, Inc.

Houston, Texas

We have audited the accompanying consolidated balance sheet of
N-Vision Technologies, Inc. and subsidiaries as of December 31,
2000, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year ended December
31, 2000, and from inception (May 15, 1999) to December 31, 1999.
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 generally accepted
auditing standards accepted in the United States of America.
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, such financial statements referred to in the
first paragraph present fairly, in all material respects, the
financial position of the N-Vision Technologies, Inc. and
subsidiaries, as of December 31, 2000 and the results of its
operations and its cash flows for the year ended December 31,
2000, and from inception (May 15, 1999) to December 31, 1999, in
conformity with generally accepted accounting principles accepted
in the United States of America.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company
has suffered recurring losses from operations and has a net
working capital deficiency, which raises substantial doubt about
its ability to continue as a going concern. Management's plans
regarding those matters are described in Note 2. The financial
statements do not include any adjustments that might result from
the outcome of these uncertainties.

THOMAS LEGER & CO., L.L.P.

Houston, Texas

March 7, 2001

F - 1

|**N-VISION TECHNOLOGY, INC. AND
SUBSIDIARIES**         |  |                     
|------------------------------------------------------ |  | --------------------
|**********CONSOLIDATED BALANCE SHEET**                 |  |                     
|**********DECEMBER 31, 2000**                         
|                                                       |  |                     
|                                                       |  |                     
|********************ASSETS                             |  |                     
|                                                       |  |                     
|**********************CURRENT
ASSETS**                 |  |                     
|************Cash                                       |  | $ 34,825            
|Accounts receivable - Net of
allowance                 |  |                     
|for doubtful accounts of $20,847                       |  | 1,009,131           
|Other receivables                                      |  | 9,562               
|Prepaid expenses                                       |  | 53,642              
|                                                       |  |                     
|Total Current Assets                                   |  | 1,107,160           
|                                                       |  |                     
|**PROPERTY AND EQUIPMENT - At cost**                   |  |                     
|************Equipment                                  |  | 2,029,668           
|Furniture and fixtures                                 |  | 213,556             
|Automobiles and trucks                                 |  | 486,469             
|Other                                                  |  | 12,966              
|                                                       |  | 2,742,659           
|Accumulated depreciation                               |  | (1,333,852)         
|                                                       |  |                     
|Net Property and Equipment                             |  | 1,408,807           
|                                                       |  |                     
|**OTHER ASSETS**                                       |  |                     
|************Cost in excess of assets acquired
- Net of |  |                     
|amortization of $138,994                               |  | 639,322             
|Deposits and other assets                              |  | 64,620              
|                                                       |  |                     
|Total Other Assets                                     |  | 703,942             
|                                                       |  |                     
|**TOTAL ASSETS**                                       |  | ******** $ 3,219,909
|                                                       |  |                     

F-2

|**N-VISION TECHNOLOGY, INC. AND
SUBSIDIARIES**              |  |                     
|----------------------------------------------------------- |  | --------------------
|**********CONSOLIDATED BALANCE SHEET**                      |  |                     
|**********DECEMBER 31, 2000**                               |  |                     
|                                                            |  |                     
|                                                            |  |                     
|********************LIABILITIES AND STOCKHOLDERS'
EQUITY    |  |                     
|                                                            |  |                     
|**********************CURRENT
LIABILITIES**                 |  |                     
|************Accounts payable                                |  | $ 1,346,932         
|Payroll taxes payable                                       |  | 246,952             
|Accrued expenses                                            |  | 457,082             
|Sales tax obligation                                        |  | 217,540             
|Notes Payable Bank                                          |  |                     
|Equipment                                                   |  | 625,000             
|Term loan                                                   |  | 302,342             
|Other notes payable                                         |  | 268,238             
|Current portion of long-term debt                           |  | 27,000              
|                                                            |  |                     
|Total Current Liabilities                                   |  | 3,491,086           
|                                                            |  |                     
|**LONG-TERM DEBT**                                          |  |                     
|************Debentures payable                              |  | 550,000             
|Automobile installment notes -
net of current portion       |  | 18,834              
|                                                            |  |                     
|Total Liabilities                                           |  | 4,059,920           
|                                                            |  |                     
|**STOCKHOLDERS' EQUITY**                                    |  |                     
|************Common stock, $.01 par value,
50,000,000 shares |  |                     
|authorized, 12,810,976 issued and
outstanding               |  | 128,110             
|Paid-in-capital                                             |  | 1,823,698           
|Retained deficit                                            |  | (2,791,819)         
|                                                            |  |                     
|Total Stockholders' Equity                                  |  | (840,011)           
|                                                            |  |                     
|**TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY**              |  | ******** $ 3,219,909
|                                                            |  |                     

F-3

|**N-VISION TECHNOLOGY,
INC. AND
SUBSIDIARIES**                                        |  |                          |  |                                    
|------------------------------------------------------------------------------------- |  | ------------------------ |  | -----------------------------------
|******************CONSOLIDATED
STATEMENTS OF OPERATIONS AND DEFICIT**                 |  |                         
|**********FOR THE YEAR ENDED
DECEMBER 31, 2000**                                      |  |                          |  |                                    
|******************AND THE PERIOD FROM
INCEPTION (MAY 15, 1999) TO DECEMBER 31, 1999**
|                                                                                      |  |                          |  |                                    
|                                                                                      |  |                          |  |                                    
|                                                                                      |  |                          |  | ********************
From Inception
|                                                                                      |  |                          |  | ******************(May 15, 1999)** 
|                                                                                      |  | **********For the Year** |  | ******To**                         
|                                                                                      |  | **Ended**                |  | ******December 31,**               
|                                                                                      |  | **********2000**         |  | ******1999**                       
|                                                                                      |  |                          |  |                                    
|********************
SALES                                                            |  | ******** $ 3,253,091     |  | $ 464,012                          
|                                                                                      |  |                          |  |                                    
|**COST OF SALES**                                                                     |  | ********2,804,491        |  | 490,892                            
|                                                                                      |  |                          |  |                                    
|Gross Profit (Loss)                                                                   |  | 448,600                  |  | (26,880)                           
|                                                                                      |  |                          |  |                                    
|**OPERATING EXPENSES**                                                                |  |                          |  |                                    
|********************General and
administrative                                        |  | 738,962                  |  | 256,335                            
|Salaries                                                                              |  | 700,460                  |  | 195,219                            
|Depreciation and
Amortization                                                         |  | 518,758                  |  | 167,455                            
|Interest expense                                                                      |  | 351,637                  |  | 62,057                             
|Legal and accounting                                                                  |  | 131,828                  |  | 90,828                             
|                                                                                      |  |                          |  |                                    
|Total Operating
Expenses                                                              |  | 2,441,645                |  | 771,894                            
|                                                                                      |  |                          |  |                                    
|Loss Before Income
Tax                                                                |  | (1,993,045)              |  | (798,774)                          
|                                                                                      |  |                          |  |                                    
|**FEDERAL INCOME TAXES**                                                              |  | ********-                |  | -                                  
|                                                                                      |  |                          |  |                                    
|**NET LOSS**                                                                          |  | ******** (1,993,045)     |  | (798,774)                          
|                                                                                      |  |                          |  |                                    
|**DEFICIT -**Beginning
of the year                                                    |  | (798,774)                |  | -                                  
|                                                                                      |  |                          |  |                                    
|**DEFICIT -**End of the
year                                                          |  | $ (2,791,819)            |  | $ (798,774)                        
|                                                                                      |  |                          |  |                                    
|                                                                                      |  |                          |  |                                    
|NET LOSS PER SHARE                                                                    |  | ******** $ (0.22)        |  | $ (0.19)                           
|                                                                                      |  |                          |  |                                    
|**WEIGHTED AVERAGE
SHARES OUTSTANDING**                                               |  | ******** 9,025,868       |  | 4,229,086                          

F-4

|**N-VISION
TECHNOLOGY,
INC. AND
SUBSIDIARIES**                                            |  |                     |  |                               |  |                                
|----------------------------------------------------------------------------------------- |  | ------------------- |  | ----------------------------- |  | -------------------------------
|************************CONSOLIDATED
STATEMENTS OF
CHANGES IN
COMMON STOCK                |  |                     |  |                               |  |                                
|************************FOR THE PERIOD FROM INCEPTION (MAY 15,
1999) TO DECEMBER 31, 2000 |  |                     |  |                              
|                                                                                          |  |                     |  |                               |  |                                
|                                                                                          |  |                     |  |                               |  |                                
|                                                                                          |  |                     |  |                               |  |                                
|                                                                                          |  |                     |  |                               |  |                                
|                                                                                          |  |                     |  |                               |  |                                
|                                                                                          |  |                     |  |                               |  |                                
|                                                                                          |  |                     |  |                               |  | ********************
Additional
|                                                                                          |  |                     |  | ******************Par Value** |  | ******Paid - In**              
|                                                                                          |  | **********Shares**  |  | ******Amount**                |  | ******Capital**                
|                                                                                          |  |                     |  |                               |  |                                
|********************
Original issue
to founders -
May 15, 1999                            |  |                     |  |                               |  |                                
|************************For services
and other
consideration                              |  | 5,000,000           |  | $ 50,000                      |  | $ -                            
|                                                                                          |  |                     |  |                               |  |                                
|Common Stock
issued at $.01
per share for
-                                               |  |                     |  |                               |  |                                
|Southern 3D
Exploration,
Inc.                                                             |  | 1,000,000           |  | 10,000                        |  | -                              
|Goods and
services                                                                        |  | 132,215             |  | 1,322                         |  | -                              
|Stock sold for
cash                                                                       |  | 460,330             |  | 4,603                         |  | 60,397                         
|Consolidated
loss from
operations for
the period                                          |  | -                   |  | -                             |  | -                              
|                                                                                          |  |                     |  |                               |  |                                
|**Balance at
December 31,
1999**                                                          |  | ********6,592,545   |  | 65,925                        |  | 60,397                         
|                                                                                          |  |                     |  |                               |  |                                
|Common Stock
issued at $.01
per share for
-                                               |  |                     |  |                               |  |                                
|Officers and
directors
compensation                                                       |  | 502,200             |  | 5,022                         |  | -                              
|Investment
Units sold for
cash                                                            |  | 150,000             |  | 1,500                         |  | -                              
|Investment
Units
exchanged for
Company debt                                               |  | 125,000             |  | 1,250                         |  | -                              
|Goods and
services                                                                        |  | 450,000             |  | 4,500                         |  | -                              
|Loan renewals                                                                             |  | 100,000             |  | 1,000                         |  | -                              
|Special share
distribution                                                                |  | 818,826             |  | 8,188                         |  | -                              
|Stock issued
in lieu of
bonus payment                                                     |  | 76,273              |  | 763                           |  | 37,369                         
|Stock issued
in lieu of
interest                                                          |  | 77,000              |  | 770                           |  | 37,730                         
|Stock sold for
cash                                                                       |  | 270,000             |  | 2,700                         |  | 67,300                         
|Restructuring
arrangement                                                                 |  | 1,744,624           |  | 17,447                        |  | 1,639,947                      
|Ponder
Industries,
Inc.                                                                   |  | 1,904,508           |  | 19,045                        |  | (19,045)                       
|                                                                                          |  |                     |  |                               |  |                                
|**Balance at
December 31,
2000**                                                          |  | ******** 12,810,976 |  | $ 128,110                     |  | $ 1,823,698                    
|                                                                                          |  |                     |  |                               |  |                                

F-5

|**N-VISION TECHNOLOGY,
INC. AND
SUBSIDIARIES**                                        |  |                                   |  |                        
|------------------------------------------------------------------------------------- |  | --------------------------------- |  | -----------------------
|******************CONSOLIDATED
STATEMENT OF CASH
FLOWS**                              |  |                                   |  |                        
|******************FOR THE YEAR ENDED
DECEMBER 31, 2000**                              |  |                                   |  |                        
|******************AND THE PERIOD FROM
INCEPTION (MAY 15, 1999) TO DECEMBER 31,
1999** |  |                                  
|                                                                                      |  |                                   |  |                        
|                                                                                      |  |                                   |  |                        
|                                                                                      |  |                                   |  |                        
|                                                                                      |  |                                   |  |                        
|                                                                                      |  |                                   |  |                        
|                                                                                      |  | ********************
For the Year |  | ******From Inception** 
|                                                                                      |  | **********Ended**                 |  | ******To December 31,**
|                                                                                      |  | **********2000**                  |  | ******1999**           
|**Cash Flows From
Operating Activities**                                              |  |                                   |  |                        
|********************Net Loss                                                          |  | $ (1,993,045)                     |  | $ (798,774)            
|                                                                                      |  |                                   |  |                        
|**Adjustments to
reconcile Net Loss
to net cash used in
operations**                  |  |                                   |  |                        
|******************by operations**                                                     |  |                                   |  |                        
|********************Depreciation and
amortization                                     |  | 518,758                           |  | 176,597                
|                                                                                      |  |                                   |  |                        
|**Changes in current
assets and
liabilities**                                         |  |                                   |  |                        
|********************Accounts receivable                                               |  | (892,443)                         |  | 11,378                 
|Other assets                                                                          |  | (6,513)                           |  | 136,218                
|Accounts payable and
accrued liabilities                                              |  | 2,013,481                         |  | 302,389                
|                                                                                      |  |                                   |  |                        
|Total adjustments                                                                     |  | 1,633,283                         |  | 626,582                
|                                                                                      |  |                                   |  |                        
|**Net Cash Used In
Operating Activities**                                             |  | ********(359,762)                 |  | (172,192)              
|                                                                                      |  |                                   |  |                        
|**Cash Flows From
Investing Activities**                                              |  |                                   |  |                        
|********************Cash acquired in
Southern 3-D
Exploration, Inc.
merger            |  | -                                 |  | 61,656                 
|Net book value of
property sold or
disposed                                           |  | 6,866                             |  | -                      
|Additions to
property and
equipment                                                   |  | -                                 |  | (3,236)                
|                                                                                      |  |                                   |  |                        
|**Net Cash Provided By
Investing Activities**                                         |  | ********6,866                     |  | 58,420                 
|                                                                                      |  |                                   |  |                        
|**Cash Flows From
Financing Activities**                                              |  |                                   |  |                        
|********************Repayment of short
and long-term debt                             |  | (189,528)                         |  | (51,228)               
|Long-term borrowing                                                                   |  | 243,187                           |  | 100,000                
|Net proceeds from
sale of debentures                                                  |  | 264,062                           |  | -                      
|Proceeds from
issuance of common
stock                                                |  | 70,000                            |  | 65,000                 
|                                                                                      |  |                                   |  |                        
|**Net Cash Provided By
Financing Activities**                                         |  | ********387,721                   |  | 113,772                
|                                                                                      |  |                                   |  |                        
|**Net Increase
(Decrease) In Cash
During The Period**                                 |  | ******** 34,825                   |  | -                      
|                                                                                      |  |                                   |  |                        
|Cash Beginning of
Period                                                              |  | -                                 |  | -                      
|                                                                                      |  |                                   |  |                        
|Cash End of Period                                                                    |  | $ 34,825                          |  | $ -                    
|                                                                                      |  |                                   |  |                        

F-6

|                                                                      |  | **For the Year**  |  | ******From Inception** 
|--------------------------------------------------------------------- |  | ----------------- |  | -----------------------
|                                                                      |  | **********Ended** |  | ******To December 31,**
|                                                                      |  | **********2000**  |  | ******2000**           
|**Supplemental Cash
Flow Information**                                |  |                   |  |                        
|********************Interest paid during
the year                     |  | $ 442,800         |  | $ 27,400               
|Income taxes paid
during the year                                     |  | 18,800            |  | -                      
|                                                                      |  |                   |  |                        
|**Noncash Investing
and Financing
Transactions**                      |  |                   |  |                        
|********************Common Stock
exchanged for
restructured bank
debt |  | 1,390,600         |  | -                      
|Common Stock issued
in lieu of interest
payments                      |  | 305,300           |  | -                      
|Notes payable issued
for zero balance
checking arrangement            |  | 302,300           |  | -                      
|Convertible
debentures exchanged
for current
obligations              |  | 250,000           |  | -                      
|Common Stock issued
for services                                      |  | 27,300            |  | 1,322                  
|Operating equipment
for shareholder debt                              |  | -                 |  | 44,500                 
|Common Stock issued
as compensation                                   |  | 43,300            |  | -                      
|Common Stock issued
in connection with
acquisitions                   |  | 19,045            |  | 168,220                

F-7

**N-VISION TECHNOLOGY, INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2000 AND 1999**

**NOTE 1 MERGER WITH PONDER INDUSTRIES, INC*.***

On December 19, 2000 N-Vision Technology, Inc., a Nevada
Corporation, (Nevada N-Vision) merged with Ponder Industries,
Inc. (Ponder), a Delaware Corporation with publicly owned Common
Stock traded in the "over-the-counter" marketplace. The merged
company changed its name to N-Vision Technology, Inc. (herein
after N-Vision or the Company), retained its Delaware charter and
Nevada N-Vision was dissolved.

Ponder was under the jurisdiction of a federal bankruptcy court
in a Chapter 11 proceeding and had no recent operating activities
except for the proceeding. Ponder's bankruptcy court approved
Plan of Reorganization included the merger with Nevada N-Vision
and the dismissal of all unasserted claims and contingent
liabilities. The Plan also established a Liquidating Trust that
received all of Ponder's pre-acquisition tangible and intangible
assets and assumed the responsibility for all of its asserted
liabilities. For accounting purposes, the transaction was treated
as an acquisition of Ponder, by Nevada N-Vision whose
shareholders own approximately 80% of the surviving corporation.

Under the terms of the Plan of Merger and Reorganization, the
Ponder stockholders and bankruptcy claimants received the
following shares of Common Stock of the merged companies:

**Class of Claimant** **Shares Issued**

Existing shareholders -

after giving effect to a 1 for 20 reverse stock split 476,127

Various creditors without priority claims 1,428,381

The Ponder acquisition is reflected in these financial statements
at the Par Value of the Compa0ny's common shares issued with an
offsetting equal value charged to Additional Paid In Capital.

In addition to the issued shares of Common Stock listed above,
the Company reserved but did not issue 750,000 shares of Common
Stock for a potential distribution to the Priority Claimants, as
they are defined in the bankruptcy plan. These shares are to be
distributed in the event the resources of the Liquidating Trust
are insufficient to compensate the priority class of creditors.

**NOTE 2  MERGER WITH PONDER INDUSTRIES, INC*.* (continued)**

Because Ponder had no operating activities during 2000 and 1999,
pro forma information is not presented. Inclusion of Ponder in
the consolidated results of operations as if the merger had been
effected at the beginning of the periods would result in an
immaterial change from that presented in the accompanying
consolidated statements of operations because all the assets and
obligations were transferred to a Liquidating Trust appointed by
the Federal Bankruptcy Court.

**NOTE 3** **** **NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES**

**Nature and History of Business**

The consolidated financial statements include N-Vision and its
wholly owned subsidiaries, Southern 3-D Exploration, Inc.
(Southern) and All Terrain Industries, Inc. (ATI), both are Texas
Corporations acquired in 1999, and N-Vision Energy, Inc. (N-V
Energy), a Texas Corporation formed in 2000.

As a development stage enterprise, N-Vision sought business
opportunities and capital from the date of its incorporation on
October 22, 1998 until it commenced operations in May 1999 and
acquired its two subsidiaries in September 1999.

Southern's and ATI's lines of business include contract
seismographic testing for the oil and gas industry and general
contract drilling in the mid-west and gulf coast areas of the
United States. Their results of operations are included in the
accompanying consolidated financial statements for the period
from their date of acquisition and their activities account for
all the consolidated revenue and substantially all of the
operations of the Company.

N-V Energy was formed to identify development drilling and
recompletion opportunities in existing oil and gas fields using
Southern's seismic technology and it plans to commence
exploration and development operations in 2001.

**Significant Accounting Policies Of The Company**

***Principles of Consolidation***

The consolidated financial statements include the accounts of the
Company and its subsidiaries. Significant inter-company accounts
and transactions have been eliminated.

**NOTE 4** **** **NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**

***Estimates***

The presentation 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 amounts of the revenues and expenses during the
reporting periods. Ultimate actual results could differ from
those estimates.

***Concentrations of Credit Risk***

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade
receivables and cash. The Company places its cash with high
quality financial institutions. At times the Company's deposits
may exceed federally insured limits of $100,000 but at December
31, 2000 no deposits exceeded the insured limits.

Generally, no collateral or other security is required to support
customer receivables. To reduce credit risk, a customer's credit
history is reviewed before extending credit. In addition, an
allowance for doubtful accounts is established based on factors
surrounding the credit risk of specific customers, historical
trends and other information. Management established an allowance
for doubtful accounts at the balance sheet date of $20,847.
During 2000 and 1999, 39% and 57% of revenues were attributable
to four and two customers, respectively.

***Property and Equipment***

Property and equipment are stated at cost less accumulated
depreciation, which is computed using the straight-line method
over lives ranging from five to seven years. In September 1999
N-Vision acquired substantially all of its operating equipment in
an all-stock transaction.

Expenditures for major acquisitions and improvements are
capitalized while expenditures for maintenance and repairs are
charged to operations. The cost of assets sold or retired and any
related accumulated depreciation are eliminated from the
accounts, and any resulting gain or loss is included in
operations.

**NOTE 5  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**

***Cost in Excess of Assets Acquired***

Cost in Excess of Assets Acquired is amortized on a straight-line
basis over periods ranging from 5 to 20 years.

***Income Taxes***

Federal income taxes are accounted for using a policy that
requires the recognition of deferred income taxes and valuation
allowances when necessary. Deferred income taxes are recognized
for the tax consequences in future years of differences between
the tax basis of assets and liabilities and their basis for
financial reporting purposes.

The two significant differences between the accounting bases are
the use of accelerated methods of asset depreciation for tax
reporting compared with the straight line method used for
financial reporting, and the use of the cash method of
recognizing revenues and expenses for income tax purposes
compared with using the accrual basis of accounting for financial
reporting. Recognized amounts of deferred taxes are determined
using enacted tax laws and statutory tax rates that are
applicable to the periods in which the differences are expected
to affect taxable income.

Valuation allowances are established when necessary to reduce
deferred tax assets to expected realizable amounts. Income tax
expense is the tax payable for the period adjusted for the change
during the period in deferred tax assets and liabilities.

***Statement of Cash Flows***

For purposes of the statement of cash flows, cash equivalents
include short-term, highly liquid investments with maturities of
three months or less at the time of acquisition.

***Net Loss Per Share***

Net loss per share is computed by dividing the net loss by the
common and common equivalent shares considered outstanding during
each period. Equivalent shares issuable under stock options are
determined using the treasury stock method. There is no
difference between basic and fully diluted earnings per shares
for the periods presented.

**NOTE 6  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**

***Legal Matters*****

N-Vision is subject to legal proceedings that have arisen in the
ordinary course of its business. Such actions are generally
asserted property damage claims by landowners

where the Company's geophysical testing is conducted. The claims
are usually small and are rebilled to the client contracting for
the service. In the opinion of Management, these actions will not
have a material adverse effect upon the financial position of the
Company.

***Meaning of "From Inception"***

In the financial presentation, the term from inception shall mean
from the effective inception of N-Vision's business operations,
which was on or about May 15, 1999.

**NOTE 7  GOING CONCERN**

At December 31, 2000 the Company's operating expenses have
exceeded operating revenues. This cumulative deficit has been
funded by open account creditor debt, secured and unsecured
loans, common stockholders' cash investment and Common Stock
exchanged for property and services.

Although the Company has continued to operate with the above
sources of funds through February 2001, it is uncertain whether
these same or comparable sources will be available for the full
development of its business strategy. The business strategy
includes a series of private and public securities offerings to
fund corporate growth and business development.

N-Vision's financial statements are prepared using generally
accepted accounting principles applicable to a going concern that
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, N-Vision
in its business strategy development stage has not established a
source of revenues sufficient to cover its operating costs and
allow it to continue as a going concern supported by its cash
flow from operations. N-Vision is seeking long-term funding
through private and public securities offerings. Management
believes that sufficient funding will be raised to meet operating
needs during the remainder of its current implementation stage.

**NOTE 8  MERGER AND ACQUISITION ACTIVITY**

***Ponder Industries, Inc.***

As described in Note 1, Ponder and Nevada N-Vision merged in
December 2000. Nevada N-Vision was the surviving entity in the
reverse merger, and the former owners and creditors of Ponder
were issued 1,904,508 shares of Common Stock in the combined
entity that was renamed N-Vision.

***Southern 3-D Exploration, Inc.***

Effective September 1999 N-Vision issued 1,000,000 shares of its
Common Stock at par value to acquire Southern and its subsidiary,
ATI. The Stock Purchase and Exchange Agreement provided for
additional, contingent shares of N-Vision to be issued in
connection with the acquisition based on Southern's 1999
operating performance, but no additional shares were required to
be issued. Due to the contingent acquisition purchase price and
the post acquisition change in management, this business
combination is accounted for by the purchase method of
accounting. The merger resulted in $229,876 of Cost in Excess of
Assets Acquired, which is amortized over 5 years. The results of
operations of Southern are included with the consolidated results
of operations beginning September 1, 1999. N-Vision did not incur
material liabilities in connection with the acquisition related
to discontinuing a business activity or to terminating or
relocating employees.

The following summarized information is provided on a pro forma
basis to present the results of operations for 1999 as if the
acquisition had been effected on January 1, 1999.

**1999 Pro Forma Results of Operations**

Revenue $ 2,086,800

Net income (loss) $ (2,021,833)

Earnings (loss) per share $ (.44)

***All Terrain Industries, Inc.***

Southern acquired All Terrain in 1998 for $2,500,000 cash, which
resulted in a purchased price that was $548,400 in excess of the
fair market value of the tangible assets acquired. That Cost in
Excess of Assets Acquired is amortized over 20 years.

**NOTE 9  MERGER AND ACQUISITION ACTIVITY (continued)**

***ACE Energy Ltd.***

N-Vision entered into an agreement in June 2000 with ACE Energy
Ltd., a Texas limited partnership ("Ace"), to acquire certain oil
and gas property rights. Upon executing the agreement, the
Company assigned and conveyed 150,000 shares of Common Stock to
Ace as non-refundable "earnest money." The transaction was not
consummated and the Common Stock was transferred to the holder.

**NOTE 10  STOCK TRANSACTIONS**

***Capitalization***

N-Vision is authorized to issue 50,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock, both with $.01 par value
per share. As set forth in the Company charter and by laws, the
Board of Directors shall determine the designations, rights,
preferences, privileges and voting rights of the Preferred Stock,
as well as any restrictions and qualifications thereon. No shares
of Preferred Stock have been issued.

***Special Purpose Common Stock Issues***

Merger and acquisition activity described in Note 4 resulted in
the issuance of 2,904,508 shares of Common Stock. In addition,
the Company has issued or agreed to issue Common Stock in a debt
restructuring, in connection with the sale of Investment Units,
and in connection with Stock Based Compensation arrangements.
Further, N-Vision has

***Special Purpose Common Stock Issues***

issued or agreed to issue Common Stock in satisfaction of certain
expenses and as inducements to advance funds to the Company.

***Stock for Debt***

In September 2000, the Company executed a debt exchange agreement
in which its primary lending institution accepted 1,744,624
shares of Common Stock for $1,657,393 of indebtedness (the
equivalent of $.95 per common share.). The Company agreed that
contemporaneously with a successful proposed private or public
offering, it would repurchase the shares sold to the lending
institution for $1.25 per common share. If a public offering is
not consummated within one year, the Company has committed to
assure the aforementioned shares are free of any securities
market trading restrictions and the Bank will have the right to
sell the stock in the open market.

**NOTE 11  STOCK TRANSACTIONS (continued**

***Investment Units***

In 2000 the Company raised $550,000 through the sale of
Investment Units, including $300,000 sold for cash and $250,000
exchanged for debt the Company had incurred. Each of the 22
Investment Units sold included a $25,000 Debenture obligation due
in two years, 12,500 shares of Common Stock and Warrants to
purchase an additional 12,500 shares of Common Stock at $1 per
share. See the summary below of Warrant activity during 2000 and
Note 6 for description of the Debentures.

***Stock Based Compensation***

N-Vision has issued or agreed to issue Common Stock as part of
its compensation package for employees and directors. See the
summary below of Stock Option activity during 2000.

***Stock Options and Warrants***

Stock Option and Stock Warrant activity of the Company during
2000 is summarized as follows:

**Shares 2000**

**Price Per Shares Expired or Ending Expiration**

**Recipient Share Granted Exercised Shares Date**

Stock Options $ .40 500,000 None 500,000 2005

Warrants $1.00 275,000 None 275,000 2002

Stock Options granted in August 2000 included options for 100,000
shares of Common stock for each of the four principal officers of
the Company plus options for 100,000 shares of Common Stock
shared among three key employees. The options vest 50%
immediately, 25% after year one and 25% after year two. The
Warrants were issued with the Investment Units.

***Accounting for Option Compensation***

risk-free The fair value of options granted was estimated on the
date of grant using the Black-Scholes options pricing model.
Principal assumptions in the model are interest

rate of 5.98% for the five-year options, no expected dividend
yield, the expected life of the options equal to the exercise
life of the option, and zero expected volatility

**NOTE 12  STOCK TRANSACTIONS (continued)**

Zero volatility was assumed because of the low level of trading
shares in the secondary market system.

The Company applies the Accounting Principles Board Opinion No.
25 and related interpretations in accounting for stock option and
purchase plans. Accordingly, no compensation cost has been
recognized for any stock option agreements. No options were
granted in 1999 and options totaling 500,000 shares were granted
in 2000. Had compensation cost been determined based upon the
estimated fair value at the grant dates for awards under those
plans consistent with the method of FASB Statement 123, the
Company's net loss and loss per share for the year ended December
31, 2000 would have been as reflected in the pro forma amounts
indicated below:

Net loss $ (2,044,082)

Net loss per common share $ (.19)

**NOTE 13  NOTES PAYABLE, LONG TERM DEBT AND DEBENTURES**

Notes payable and long-term debt at December 31, 2000 includes
the Bank debt and other obligations to the following institutions
and individuals:

|Notes Payable to Bank bearing interest
at the prime rate plus 1% or

10 % at December 31, 2000 (A): | 
|--------------------------------------------------------------------------------------------------- | 

| | Term loan collateralized by
equipment                                        | $ 625,000
| | ---------------------------------------------------------------------------- | ---------
| | Term loan collateralized by
accounts receivable, 

Equipment and intangibles | 302,342  

|                                                                                                                |            
|--------------------------------------------------------------------------------------------------------------- | -----------
|Notes payable to stockholders (B)                                                                               | 210,000    
|                                                                                                                |            
|Insurance premiums financed requiring
monthly payments

of about $7,500, bearing interest at
12%                | 37,484     
|                                                                                                                |            
|Unsecured, interest free demand note
payable to a

Corporation controlled by a major
stockholder of the Company | 20,754     
|Total notes payable                                                                                             | $ 1,195,580

(A) The promissory term notes to the bank, which were derivatives
of the previously, described debt restructuring, were due
December 15, 2000 and were renewed under substantially the same
terms until June 15, 2001.

**NOTE 14  NOTES PAYABLE, LONG TERM DEBT AND DEBENTURES (continued)**

(B) The following are the details of promissory notes issued to
shareholders:

Note (1) bears interest at 7.75%, is collateralized by specific
equipment and is due January 2001. This loan was renewed on three
occasions during 2000 and each renewal included compensatory
shares of Common Stock, an aggregate of 100,000 shares for the
year. This note was renewed again in January 2001.

Note (2) bears interest at 10%, is subordinated to other debt of
the Company and is due June 2001. Principal and accrued interest
on the note may be converted, at the holder's option, into Common
Stock of the Company at the conversion rate of $0.25 per share.

Note (3) represents an advance by a non-affiliated stockholder.
It is due on demand without a nominal interest rate but with a
compensatory issue of 5,000 shares of the Company's Common Stock.

***Automobile Installment Notes*****

Collateralized automobile installment notes have aggregate
monthly payments of approximately $2,800 and bear interest at
9.25%. The obligations totaling $45,834 require principal
payments of about $27,000 in 2001 with the remainder of the
principal balances due in 2002.

***Debentures***

As described in Note 5, various individuals, Shareholders or
vendors acquired N-Vision Investment Units (aggregating $550,000)
that included non-assignable, subordinated promissory notes
(Debentures). The Debentures are subordinate to other Company
notes and contracts and cannot be repaid if the Company is in
default in the payment of any of its contractual debt. The
Debentures have a nominal interest rate of 14%, can be paid, at
the Company's discretion, in stock or cash and are to be repaid
within two years of the date the Investment Units were sold.

**NOTE 15  INCOME TAXES**

The following table sets forth a reconciliation of the statutory
federal income tax for the years ended December 31, 2000 and
1999.

**2000** **1999**

Loss before income taxes $ 1,993,045 $ 798,774

Income tax benefit computed at statutory rates (677,635)
(271,583)

Increase in valuation allowance 665,047 270,904

Permanent differences, nondeductible expenses 12,588 679

Tax provision $ - $ -

No federal income taxes have been paid since the inception of the
Company.

***Deferred Income Taxes***

The tax effects of the temporary differences between reportable
financial statement income and taxable income are recognized as a
deferred tax asset and liability. Significant components of the
deferred tax assets and liabilities are set out below along with
a valuation allowance to reduce the net deferred tax asset to
zero.

In order to comply with generally accepted accounting principles,
management has decided to establish the valuation allowance
because of the potential that the tax benefits underlying
deferred tax asset may not be realized.

**NOTE 16  INCOME TAXES (continued)**

**2000** **1999**

**Deferred tax asset:**

Net operating loss carryforwards $ 771,424 $ 283,877

Conversion to cash basis for tax reporting - 10,390

Total deferred tax asset 771,424 294,267

**Deferred tax liability:**

Recognizing more depreciation for tax reporting

purposes than for financial reporting purposes 3,890 23,363

Conversion to cash basis for tax reporting 102,487 -

Total deferred liability 106,377 23,363

Net tax asset 665,047 270,904

Valuation allowance (665,047) (270,904)

Net deferred taxes $ - $ -

***Net Operating Loss Carryforwards***

The tax asset recognized above for the future use of net
operating loss carryforwards ("NOL") is available primarily
because of N-Vision's acquisition of Southern in September 1999.
As of December 31, 2000 the Company has a cumulative NOL for
federal income tax purposes of approximately $2,982,000 and an
NOL for alternative minimum tax purposes of approximately the
same amount. These carryforwards expire in years 2019 and 2020
Internal Revenue Code Section 382 limits future use of NOLs of
acquired companies approximately ($713,000 of the Company's NOL
arise from the Southern acquisition).

**NOTE 17  RELATED PARTY TRANSACTIONS**

At December 31, 2000 and 1999 the Company had a non-interest
bearing note payable of $20,754 issued to a company owned
primarily by a Common Stock stockholder. During 1999 this debt
was reduced $44,500 with the transfer of certain operating
equipment to the stockholder.

On August 31, 2000, the Company made a pro-rata share
distribution of 818,825 shares to the existing stockholders. The
distribution compensated the stockholders for the dilution
attributable to an additional special share allotment necessary
in the Ponder Industries, Inc. merger. The shares distributed
were equal to 10% of the recorded shares outstanding on that
date. See description of the Ponder merger in Note 1.

In December 2000, four-officer shareholders received 502,200
shares of Common Stock as partial compensation for their services
as Company executives and directors. The Company has deferred
$209,000 in earned executive compensation to be paid in the
future as funds become available.

The Company leases its equipment yard storage facility from a
Common Stock holder for $3,056 a month.

**NOTE 18  MAJOR CUSTOMERS**

The Company had customers that accounted for more than 10% of the
revenue for December 31, 2000 and for the period from inception
(May 15, 1999) to December 31, 1999 as follows:

**2000** **1999**

Customer A 19% 40%

Customer B - 17%

**NOTE 19  COMMITMENTS**

The Company leases its operating and administrative facilities on
both month-to-month and long-term arrangements. Its equipment
storage facility in southeast Texas is leased for $3,056 on a
month-to-month basis from an employee stockholder. In addition,
the Company leases the following from outside parties:

**Facility Basis of Contract Monthly Future Commitment**

Executive office Month-to-month $ 1,100 None

Administrative office To April 30, 2003

$ 3,690 Year 2001 - $45,800

3,766 Year 2002 - $47,016

3,918 Year 2003 - $15,672

**NOTE 20  SUBSEQUENT EVENTS**

***Letter of Intent to Acquire Oil and Gas Company***

On March 1, 2001, the Company issued a letter of intent to
acquire an Oklahoma oil and gas production company for
$12,000,000 in cash at the time of closing. The acquisition price
is subject to the outcome of a third party reservoir engineering
report, the eliminating certain low yield producing assets, and
an assessment of development potential and drilling in progress.
The effective date of the transfer of ownership is to be April 1,
2001 with a proposed closing date of May 1, 2001.

***Letter of Commitment to Raise Capital***

******On March 7, 2001, the Company engaged a New York financial
advisor and securities placement agent to assist in raising up to
$25,500,000 in long-term equity or equity-linked capital. The new
equity or equity-linked capital will be used to finance the
acquisition of oil and gas properties and to meet general
corporate needs. N-Vision paid the agent a $25,000 retainer with
the execution of the agreement. The agreement also provided for
the agent to be paid $10,000 monthly for services rendered,
reimbursement of out-of-pocket expenses and upon the successful
completion of the placement memorandum, to be paid $50,000 in
cash bonuses. The engagement letter provides that the agent and
advisor will receive a cash success fee of up to 5% of the funds
raised and warrants to acquire Common Stock equal to 5% of the
number of shares outstanding after the offering, exercisable at
the placement offering price.