FORM 10-K/A

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED: MARCH 31, 1998

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OR THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM _____ TO _____

                        COMMISSION FILE NUMBER: 33-8819-D

                            HALLMARK PROPERTIES, INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

              Colorado                                         84-1036901
--------------------------------------------              ----------------------
    State or other jurisdiction of                          (I.R.S. Employer
   incorporation or organization)                          Identification No.)

         7810 W.  70th Drive
           Arvada, Colorado                                      80004
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 (Address of principle executive offices)                       (Zip code)

                    Issuer's telephone number: (303) 901-4238

       Securities registered under Section 12(b) of the Exchange Act: None

       Securities registered under Section 12(g) of the Exchange Act: None

        Indicated  by check  mark  whether  the  issuer  (1) filed  all  reports
required  by Section 13 or 15(d) of the  Exchange  Act 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 such filing requirements for at least the
past 90 days. Yes [X] No [ ].

        Check if there is no disclosure of delinquent filers in response to Item
405  Regulation S-b in this form,  and no disclosure  will be contained,  to the
best of registrant's  knowledge, in this Form 10-K or any amendment to this Form
10-K. [X]

        Issuer's revenues for its most recent fiscal year: $-0- 
        Aggregate  market  value  of  voting stock held  by non-affiliates as of
July 15, 1998: $-0-

There is currently no trading market for the Registrant's securities.

        Number of shares of Common Stock, no par value,  outstanding as of March
31, 1998: 43,393,333.

        Documents incorporated by reference: None.


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                            HALLMARK PROPERTIES, INC.

                                   FORM 10-K/A

                                     PART I

ITEM 1.        DESCRIPTION OF BUSINESS

        (A)    BUSINESS DEVELOPMENT.

        Hallmark Properties,  Inc.,  ("Hallmark" or the "Company") was organized
under the laws of the State of Colorado on August 11,  1986,  for the purpose of
evaluating and seeking merger  candidates.  Commencing in December,  1986, under
the name of Diversified Management Acquisitions,  Inc., the Registrant sold in a
public  offering  15,000,000  units at $0.02 per unit,  for  total  proceeds  of
$300,100 which closed on April 28, 1987. Each unit contained one share of Common
Stock and one Callable  Common Stock  Purchase  Warrant.  All Warrants  expired,
without  exercise,  on December 2, 1988. In fiscal 1992, the Company changed its
name  to  Tierra  Environmental   Corporation,   in  connection  with  a  merger
transaction  with a  corporation  so  named;  such  merger  transaction  was not
consummated,  however,  and the  Company  changed  its name  again (to  Hallmark
Properties,  Inc.) in fiscal  1997.  See Item 6,  "Management's  Discussion  and
Analysis or Plan of Operations," years ended March 31, 1997 and 1998.

        (B)    BUSINESS OF ISSUER.

        Since  inception  in 1986,  management  of  Hallmark  has been  actively
seeking business  opportunities.  Several  potential  candidates were identified
between 1986 and the end of fiscal 1998,  however,  no  combination  with any of
these companies was ever completed. The Company has no agreement in principle or
any formal contract to acquire or enter into any business  opportunity as of the
date of this 10-K/A Report.

        The Company has engaged in limited  activities  but has been hampered in
its efforts due to its lack of capital.  It is likely that the Company will need
a  substantial  amount of  additional  capitalization  before it will be able to
participate  in any merger  activities.  There is no assurance  that the Company
will obtain any additional capitalization.

        The Company competes with numerous companies and firms which are larger,
better established,  have greater financial and other resources, more employees,
and more extensive  facilities than the Company. The Company is at a competitive
disadvantage to these other entities.

        The Investment Company Act of 1940 defines an "investment company" as an
issuer which is or holds itself out as being  engaged  primarily in the business
of investing,  reinvesting or trading in securities.  While the Company does not
intend to  engage in such  activities,  the  Company  could  become  subject  to
regulation  under the  Investment  Company  Act of 1940 in the event the Company
obtains or continues to hold a minority interest in a number of enterprises. The
Company could be

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expected to incur  significant  registration  and compliance cost if required to
register under the Investment Company Act of 1940.

        The Company  intends to structure  any merger or  acquisition  in such a
manner as to minimize  federal and state tax consequences to the Company and any
target company.

        The Company presently is a "shell" or "blank check" company,  because it
has no  specific  business  plan or purpose;  the Company  intends to locate and
consummate  a merger  or  acquisition  with a  company  or  companies,  or other
entities  or persons.  Under  Section  7(b) of the  Securities  Act of 1933,  as
amended (the "1933 Act"),  and rule 419 adopted by the  Securities  and Exchange
Commission (the  "Commission"),  the ability of the Company (as a shell or blank
check company) to raise capital through a public offering of its securities by a
registration   statement  filed  with  the  Commission  is  subject  to  certain
limitations.  These limitations,  which would apply to the Company if it were to
conduct  a  registered  public  offering  as a blank  check  or  shell  company,
generally  are as follows:  All  securities  issued by the Company in connection
with such an offering and the gross proceeds from the offering must be deposited
promptly into an escrow account with an insured depository  institution (usually
a  commercial  bank)  covered by  insurance  maintained  by the Federal  Deposit
Insurance Corporation ("FDIC").  The funds are held in escrow for the benefit of
the investors in the offering.  Initial  payments out of the escrow  account are
permitted only to pay underwriting commissions, underwriting expenses and dealer
allowances;  an  additional  amount of up to 10 percent of the amount  remaining
after payment of commissions,  expenses and dealer allowances may be paid to the
Company;  and the  balance  must  remain in  escrow.  The  securities  issued in
connection with the offering also must be deposited into the escrow account, for
the benefit of the purchasers thereof,  with the purchasers retaining any voting
rights with respect to the securities which they otherwise would have.

        The  securities  and  offering  proceeds  are  required to remain in the
escrow  account  until such time as the Company  were to execute an agreement to
acquire a business or assets that will  constitute  the  business  (or a line of
business)  of the  Company  and for which the fair value of the  business or net
assets to be acquired  represents at least 80 percent of the net public offering
proceeds  (including  any proceeds  received or to be received  from exercise of
securities such as warrants which were purchased in the public  offering).  Upon
execution of such an  agreement,  the Company would be required to file with the
Commission a post-effective  amendment to the original  registration  statement,
which amendment would disclose detailed information about the business or assets
to be acquired.

        Within five  business  days after the  post-effective  amendment  to the
registration  statement  is declared  effective by the  Commission,  the Company
would be required to send the prospectus  (which would be part of the amendment)
to each of the purchasers of securities in the public  offering.  Each purchaser
would have not less than 20 and no more than 45 business  days to decide,  based
on the  information  in the  prospectus  as so  amended,  whether  to  remain an
investor  or get his or her money back out of escrow.  If by the end of the 45th
business day, the Company had not received the affirmative written election by a
purchaser  to  remain  an  investor,  the  Company  would  have to  return  that
purchaser's  funds  (plus  interest)  to that  purchaser.  If enough  purchasers
elected to remain  investors  so that  their  invested  funds  equal at least 80
percent of the net public offering

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proceeds,  then the  acquisition  could be  consummated  by the  Company and the
investors  would receive  certificates  for the  securities of the Company which
they had paid for in the public offering.

        If there is no acquisition consummated within 18 months of the effective
date of the original registration  statement for the public offering, all of the
funds in the  escrow  account  would have to be  returned  to  investors  by the
Company,  and the securities  would be retired to authorized and unissued status
by the Company.

        If an acquisition  were to be consummated by the Company under rule 419,
all  security  holders of the  Company  would be  entitled  to  receive  audited
financial statements for the first full fiscal year of operations following such
consummation,  and other information, no later than 90 days after the end of the
Company's fiscal year.

        The Company  presently is filing  periodic  reports under the Securities
Exchange  Act of 1934 (the  "1934  Act") on a  voluntary  basis.  These  reports
consist  of annual  reports on Form 10-K,  quarterly  reports on Form 10-Q,  and
interim reports on Form 8-K Current Report. Under Section 15(d) of the 1934 Act,
the  Company was  required to file such  reports  through the  remainder  of the
fiscal  year  when its  public  offering  registration  statement  was  declared
effective by the Commission  (December  1986).  Thereafter,  the Company was not
required  to  file  such  reports  because  the  Company  never  has had the 300
shareholders  of record which would make such reporting  mandatory under Section
15(d).

        At such time as the  Company  were to  consummate  an  acquisition  of a
business or assets  after  conducting a  registered  public  offering as a blank
check or shell company,  the Company would be required to file audited financial
statements for the first full fiscal year of operations  after  consummation  of
such an acquisition  (see above).  Thereafter,  the Company would be required to
file reports with the Commission only if the Company had voluntarily  registered
a class of its securities  with the  Commission  under Section 12(g) of the 1934
Act, or if the Company had more than $10 million in assets as of the last day of
its most recent fiscal year. It should be noted that if the Company raised funds
in a public registered offering as a shell or blank check company,  any business
or assets acquired would have to have financial statements which either had been
audited or were capable of audit, in order for the Company to be able to acquire
such business or assets.

        If an  acquisition  were to be made by the Company  without funds from a
registered  public  offering,  the  Company  nonetheless  would  acquire  only a
business  or assets  which had been or could be audited.  The  Company  would be
required to file a Form 8-K Current Report to report the acquisition,  including
audited financial statements for the business or assets acquired.

        The  Company  presently  does not  intend to use any  public  notices or
general  advertisements in its search for business  opportunities.  Instead, the
Company  intends to rely primarily  upon the business  contacts of its President
and Secretary in locating possible acquisition candidates.

        The  Company  has had no  discussions  with any  particular  consultants
regarding the business of the Company or possible acquisition candidates for the
Company. The Company has no

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agreements  or  understandings  with  any  consultant.  None  of  the  Company's
officers,  directors or principal  shareholders in the past have used particular
consultants or advisers on a regular basis.

        Any independent consultants which the Company may hire would be retained
on the basis of their experience in evaluating business opportunities.  Any such
hires  probably  would be on a per project as needed  basis.  If the Company had
cash funds,  such  consultants  would be paid cash fees,  and  possibly  also be
issued small amounts of restricted shares of Common Stock.

        The  Company  presently  does not have any funds to loan to  prospective
business  acquisition  candidates in advance of  consummation  of an acquisition
transaction.  Such loans  would not be made even if the  Company  were to obtain
cash  funds  in  the  future,   which  funds  would  be  used  for  general  and
administrative   expenses  and  to  pay  the  costs  of  evaluating  prospective
acquisition candidates.

        As an alternative to the raising of capital  through  registered  public
offerings under rule 419, it is possible that the Company may seek to raise cash
funds  through  the  private  placement  of its  securities  under  rule  506 of
Regulation D. See below.

        It is likely  that the Company  will  undergo a change in its control in
the event an acquisition  transaction is  consummated,  because the Company most
likely will issue a significant  amount of restricted  shares of Common Stock as
the main component of the  consideration in such a transaction.  For example,  a
business could be acquired by the issuance of sufficient  shares of Common Stock
so that such acquired  business or its shareholders  owned more than 80 percent,
on a  pro  forma  basis,  of  the  shares  of  Common  Stock  outstanding  after
consummation of such a transaction

        The Company will not borrow funds and use the proceeds therefrom to make
any  payments to  promoters  of the  Company,  or officers or  directors  of the
Company or any of their affiliates or associates.  Further, the Company will not
enter into any  agreement  to acquire any entity or assets in which any officer,
director  or  principal  shareholder  of the  Company has any direct or indirect
interest of any kind.

        The officers and directors of the Company will not seek any different or
additional  consideration  for their shares of Common Stock,  or  otherwise,  in
connection with an acquisition transaction. For example, if the Company acquires
an entity by issuing  additional  shares of Common Stock to the  shareholders of
the entity,  all of the shareholders of the Company  (including its officers and
directors and principal  shareholders)  will be diluted  equally with respect to
the percentage of outstanding  shares such persons own after consummation of the
transaction.  Further,  the  officers  and  directors  of the Company  would not
consent to a proposed purchase of their stock in the Company, in connection with
an acquisition  transaction,  which  proposed  purchase would not be offered pro
rata to all  shareholders  of the  Company.  This is a  policy  of the  board of
directors which will not be changed by the board of directors.

        The officers and  directors of the Company will  negotiate the terms and
conditions of any acquisition transaction. Approval by the shareholders will not
be required under Colorado law to

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consummate any proposed acquisition transaction, and the board of directors will
not seek to obtain such approval.

        There  are  no  arrangements,   agreements  or  understandings   between
non-management   shareholders   and   management   under  which   non-management
shareholders  may  directly  or  indirectly  participate  in  or  influence  the
management of the Company's affairs. However,  non-management  shareholders will
continue to have voting  rights to elect  directors  to the  Company's  board of
directors pursuant to Colorado law.

        No finder's fees (whether in the form of cash or debt or equity) will be
paid to anyone in  connection  with the  business of the  Company.  Further,  no
finder's  fees  or  other  acquisition  related  compensation  will  be  paid to
officers,  directors,  promoters  or their  affiliates  or  associates  from the
revenues  or other  funds  of an  acquisition  or  merger  candidate,  or by the
issuance of debt or equity of such an entity.

        The  Company  will not  acquire or merge  with a business  or company in
which the Company's  promoters,  management or their  affiliates or  associates,
directly or indirectly,  have any ownership or other type of interest. This is a
policy adopted by the board of directors of the Company by resolution.  However,
it should be noted that if the Company were to violate  this  policy,  any legal
remedy available to the shareholders of the Company under Colorado  corporate or
other laws would most likely be  prohibitively  expensive and time consuming for
the shareholders of the Company to seek to have enforced.

        Because  the  Company  does not have cash funds to acquire a business or
assets of another  company,  the Company would effect a  consummation  of such a
business or assets by the issuance of a large number of shares of Common  Stock.
As a result of such a  transaction,  the control of the Company would be shifted
away from the current shareholders over to the new shareholders,  who would then
be in position to replace current directors with persons of their own choosing.

        The officers and  directors of the Company are expected to devote from a
few hours per  week,  up to their  full  time on the  business  of the  Company,
depending on the level of activities at the time. For example, relatively little
time may be  required  when  acquisition  candidates  have been  identified  but
further  evaluation  awaits delivery of documents and background  information on
the candidates.  However, a great deal of time would be required to evaluate the
candidate once documents are available,  and to negotiate and finalize the terms
of an acquisition transaction.

        It is not anticipated that additional  securities of the Company will be
issued to  management  or  promoters  of the Company,  or to the  associates  or
affiliates of such persons.

        The officers and directors of the Company presently have no interests in
any other  blank  check or shell  companies.  If such  persons  were to  acquire
interests  in such  other  companies,  they  would be faced  with  conflicts  of
interest in resolving how they would  choose,  for  different  companies,  among
different  acquisition or merger candidates which became available.  The Company
presently does not have a policy for dealing with such an  eventuality,  because
that type of situation  does not appear  likely to develop.  However,  if such a
conflict of interest should be

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presented,  the officers and  directors of the Company which would be confronted
with such a conflict  would be asked by directors and officers which were not so
involved,   either  to  not  vote  on   approving   or   rejecting   conflicting
opportunities, or to resign their positions as officers and directors.

        The Company anticipates that additional securities of the Company may be
offered  for  sale in a  private  placement  of  securities  under  rule  506 of
Regulation D, to raise cash to cover future general and administrative expenses,
and the  costs  of  evaluating  and  negotiating  with  prospective  acquisition
candidates. However, there is no assurance such an offering would be successful,
and no such private placement is presently  contemplated to be undertaken in the
immediate future.

        Officers  and  directors  of  the  Company   intend  to  increase  their
communications  to their  existing  business  contracts,  to  determine  if such
contacts include persons and companies which may be interested in an acquisition
transaction  with the Company.  The  communications  will be made  personally by
letter or private telecommunications.  No advertising campaign will be initiated
by the Company.

        In late summer 1997 the Company discussed with Lumiere Securities, Inc.,
a small NASD  brokerage  firm in Denver,  Colorado,  whether  that firm would be
interested  in  making  a  market  in the  securities  of the  Company.  Lumiere
expressed preliminary interest in the proposal,  and submitted an application to
the NASD on Form 211 for permission to initiate quotation and trading activities
in the Company's  securities  in the NASD's  Electronic  Bulletin  Board trading
system.  In late 1997,  Lumiere  withdrew  its  application  from the NASD,  and
advised the Company that it was no longer  interested in participating  with the
Company in the proposal.

        In the future,  the Company intends to initiate  discussions  with other
brokerage firms regarding market making activities for the Company's securities.
To date the Company has not initiated any such discussions, but the officers and
directors  of the Company may begin such  discussions  with one or more firms in
July or  August  1998.  No  consultants  will be used in  connection  with  such
discussions.

        The  promoters  and  management of the Company have been involved in the
following  previous blank check offerings:  Mr. Wynn was president,  a director,
and principal  shareholder  of  Diversified  Management  Acquisitions,  II, Inc.
("DMAII"), a Colorado corporation which completed an initial public offering (as
a blind pool) of shares in May 1988 for net proceeds of  approximately  $420,000
($.01  per  share).   In  November  1988  DMAII   completed  an  acquisition  of
Constellation Development Corporation,  a private marble quarry company, and Mr.
Wynn resigned as an officer and director.  Thereafter,  in 1996,  DMAII acquired
Carpet Holdings,  Inc. and changed its name from DMAII to Carpet Holdings,  Inc.
Mr. Wynn had no involvement in Constellation Development or Carpet Holdings. Mr.
Wynn has had no  involvement in DMAII since 1988, and has owned a nominal amount
of shares in that corporation since 1996.

        The former officers and directors of the Company (Louis Porter and James
Porter), who resigned in April, 1998, had been involved in one other blank check
offering:  Strategic  International,  Inc.  ("SII"),  a blind pool which  raised
approximately  $420,000 in its initial public offering in 1987.  Messrs.  Porter
were the executive officers,  principal  shareholders and directors of SII; they
resigned

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their  positions and sold their stock in connection  with a change in control of
SII in 1991. The subsequent history of SII is not known to the Company.

        The shares of Common  Stock of the Company are defined as "penny  stock"
under rule 3a51- 1 adopted by the  Commission  under the 1934 Act.  In  general,
"penny  stock"  includes  securities  which (i) are not listed on the  principal
stock  exchanges or the National  Association  of Securities  Dealers  Automated
Quotation  System  ("NASDAQ");  or (ii)  securities  which are not so listed and
which have a bid price in the market of less than $5.00; or (iii)  securities of
an issuer  with net  tangible  assets of less than $2 million ($5 million if the
issuer has been in continuous operation for less than three years), or which has
had average revenue of less than $6 million for the last three years.

        As "penny  stock," the  Company's  securities  are subject to rule 15g-9
adopted by the  Commission  under the 1934 Act.  Rule 15g-9  imposes  additional
sales practice  requirements  on  broker-dealers  which sell such  securities to
persons other than established customers and "accredited  investors" (generally,
individuals  with net worth in excess of $1 million or annual incomes  exceeding
$200,000,  or $300,000  together with their spouses,  or individuals who are the
officers or directors of the issuer of the securities). For transactions covered
by this rule, a broker-dealer must make a special suitability  determination for
the  purchaser  and  have  received  the  purchaser's  written  consent  to  the
transaction  prior to sale.  Consequently,  the rule may  adversely  affect  the
ability of  broker-dealers to sell the Company's  securities,  and therefore may
adversely  affect the ability of owners of the  Company's  securities,  whenever
purchased, to resell any of the securities of the Company in the public market.

        The  Company   will  provide  to  all  of  its   shareholders   complete
documentation  of any acquisition  candidate with which the Company has signed a
definitive  acquisition  agreement,  including audited financial information for
such candidate if available,  at such time as the Company files a Current Report
on Form 8-K with the  Commission  regarding  the  execution of such  acquisition
agreement and the terms and conditions thereof.

        As of the date of this Form 10-K,  none of the officers,  directors,  or
promoters of the Company, or any of their affiliates or associates, have had any
preliminary  contact  or  discussions  with  and  there  are no  present  plans,
proposals, arrangements or understandings with any representatives of the owners
of any business or company regarding the possibility of an acquisition or merger
transaction.

        The present management of the Company became acquainted with the Company
when it was  organized  in 1986.  Mr. Wynn was  president  and a director of the
Company  from  1986  until  he  resigned  such   positions  in  1988.  Mr.  Wynn
subsequently (in April 1998) again became president and a director in connection
with his purchase of shares from Louis Porter and James Porter, in a transaction
to which the Company was not a part. From the time he resigned in 1988, until he
became  president in April,  1998, Mr. Wynn was not involved with the management
of the Company  directly or  indirectly,  and he did not provide any services to
the Company during that 10 year period of time.


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        There are no agreements or understandings for any officer or director to
resign at the request of another  person.  None of the  officers or directors of
the  Company are acting on behalf of or will act at the  direction  of any other
person.

        The  activities  of  the  following  persons  will  be  material  to the
operations of the Company:  its President and its  directors.  The President and
directors of the Company are the only promoters of the Company.

        Until the end of fiscal 1998, the Company's office facility was provided
to the Company without cost by Shield Technology Corporation, which is a private
corporation  engaged in private  business  consulting and  management  services.
Shield Technology  Corporation is affiliated with Louis Porter and James Porter,
former officers and directors of the Company.  The Company's current offices are
located at 7810 W. 70th Drive,  Arvada,  Colorado,  in a building owned by Karen
Bejarano,  an officer and  director  of the  Company.  The offices are  provided
without  cost to the Company.  There are no present  plans to move the office of
the Company.

        There are  approximately  127 record  holders of the Common Stock of the
Company, as of the date of this Report on Form 10-K. See Item 5(b), below.

        The  securities  laws,  rules  and/or  regulations  of  numerous  states
prohibit or limit both the initial  sale of  securities  of blank check or shell
companies to investors in such states,  as well as the resale of such securities
by any person or brokerage firm to investors in such states.  The Company has an
obligation  not to violate  such laws with  respect  to sales of its  securities
effected by the Company through its officers and directors. The Company does not
presently intend to conduct any offering,  public or private, of its securities.
If the  Company  or its  affiliates  were  to  conduct  sales  of the  Company's
securities  (for the Company or for their own  accounts) in states  wherein such
activities were  prohibited,  the Company and such affiliates could be subjected
to injunctive proceedings initiated by state securities  administrators in state
courts  and to fines or  penalties  for  violations  of law.  In  addition,  the
purchasers of such securities could initiate proceedings for rescission of their
investments.  The initiation of any of these proceedings would be costly for the
Company  to  defend,  and the  imposition  of  fines  or  penalties  and/or  the
adjudication of civil liability for illegal sales of securities would impair the
Company's ability to continue in business.

        If a brokerage firm initiates  market making and other  activities  with
respect to the Company's  securities,  the compliance officers of such brokerage
firm must  supervise the brokerage  firm personnel to prevent sales to residents
of states where such transactions are illegal.

        Numerous states  (including the following states) do not allow resale of
securities of shell or blank check companies; certain of the states do not allow
resale of companies  which are not listed on the  principal  stock  exchanges or
NASDAQ, other states require companies to meet minimum operating revenues or net
worth tests,  and other states prohibit  resales of securities of blank check or
shell  companies.  In any of these  jurisdictions,  the result is the same for a
company such as Hallmark  Properties,  Inc.,  i.e., no trading could commence in
such  states  until  an  acquisition  is  consummated,   and  until  such  time,
shareholders in the  restrictive  states may not be able to resell their shares.
Those states which do not allow such resales include: Arkansas, Connecticut,

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Massachusetts,   California,   Delaware,  Idaho,  Illinois,  Indiana,  Kentucky,
Louisiana,  Michigan, Minnesota,  Oklahoma,  Pennsylvania,  Tennessee, Texas and
Utah. The foregoing list could be expanded in the future.

        Because the Company  conducted  its  original  initial  public  offering
before rule 419 was enacted by the  Commission,  and before laws and regulations
similar to rule 419 were enacted by many states, none of the shareholders of the
Company are subject to any "lock up" letter  agreement.  Such lock up agreements
are often entered into by blank check companies in connection with their initial
public  offerings  of  securities,  by which  agreements  the founders and other
holders of  restricted  securities of blank check  companies  agreed not to sell
their respective shares until a merger or acquisition had been consummated.

        During the fiscal year ended March 31, 1997,  the Company issued a total
of 40 million shares of restricted Common Stock to two persons (Louis Porter and
James Porter).  The issuances in 1996 to Louis Porter and James Porter were made
by the Company in  reliance  upon  Section  4(2) of the 1933 Act and Rule 501 of
Regulation  D, because such persons were officers or directors of the Company at
that time and therefore were deemed to be "accredited investors." No underwriter
was involved in these transactions.

        With  respect  to  possible  computer  malfunctions  at the  turn of the
millennium  on December 31, 1999,  the Company uses personal  computers  ("PCS")
which incorporate  software which does not permit  programming  errors regarding
the year 2000. As part of its future  evaluation of any  acquisition  candidate,
the Company will assess the ability of the computer systems of such candidate to
transition  to year 2000 without  malfunction.  It is possible  that a candidate
would be rejected if its systems do not  adequately  address  possible year 2000
malfunction  issues,  and such  candidate  evidences  reluctance  to revise  its
operating systems to avoid such malfunctions.

ITEM 2.        DESCRIPTION OF PROPERTY

        The  Registrant's  current  offices  are  located at 7810 W. 70th Drive,
Arvada,  Colorado 80004.  These facilities are provided free for the Registrant.
See above.

ITEM.  3       LEGAL PROCEEDINGS

        The  Company  is  not a  party  to any  legal  proceedings  and no  such
proceedings are known to be contemplated.

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

        None.


                                       10

<PAGE>



                                     PART II

ITEM 5.        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(A)     MARKET INFORMATION.

        The  Company's  Common  Stock is not  eligible for listing on the NASDAQ
system, and trading,  if any, has been limited to the  over-the-counter  market.
The  Common  Stock  has  been  quoted  from  time to time in the  "Pink  Sheets"
maintained by the National Quotation Bureau, Inc., however, the Common Stock has
not been so quoted for the last three fiscal years.

(B)     HOLDERS.

        (b)(1) The approximate  number of record holders of the Company's Common
Stock,  no par value, as of March 31, 1998 (and as of the date this Form 10-K is
filed)  was 127.  This  figure  does not  reflect  an  indeterminable  number of
shareholders whose shares are held in "street name."

(C)     DIVIDENDS.

        The Company has not paid a dividend with respect to its Common Stock and
is not expected to pay a dividend on its Common Stock in the foreseeable future.

        The  Company's  ability to pay  dividends is restricted by provisions of
the Colorado Business Corporation Act which provides that a Colorado corporation
may only pay dividends if, after giving effect to the dividend,  the corporation
would  be able to pay its  debts  as they  become  due in the  usual  course  of
business,  or the  corporation's  total  assets  would be less  than  its  total
liabilities plus the amount that would be needed,  if the corporation were to be
dissolved  at the time the  dividend,  to satisfy the  preferential  rights upon
dissolution  of  shareholders  whose  preferential  rights are superior to those
receiving the dividend.

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

RESULTS OF OPERATIONS

Years Ended March 31, 1997 and 1998.

        The  Company  raised  $300,100  in April 1987 in  consideration  for the
issuance  of  15,000,000  shares  of the  Company's  Common  Stock  in a  public
offering.  The Company was essentially  inactive from 1990 until the 1996 fiscal
year. The Company spent all of its public offering cash in  unsuccessful  merger
transactions prior to fiscal 1997.

        In the course of the audit of financial  statements for prior years, the
Company  determined  that  significant  reductions in the number of  outstanding
shares of Common  Stock,  and other  changes  to prior  entries in the books and
records of the Company, were needed. Included in the changes

                                       11

<PAGE>



were a reduction in the total number of outstanding  shares of Common Stock. The
amount of such  reduction was  43,281,637  shares,  as a result of the following
adjustments:

        First,  11,281,637  shares of Common Stock issued in 1992 in  connection
with  the  proposed  merger   transaction   between  the  Company,   and  Tierra
Environmental,  Inc.  and Dichlor  Chemical  Co.,  were  canceled and retired to
authorized  unissued  share  capital  of the  Company,  because  the  merger was
abandoned and never consummated.

        Second,  2,000,000  of the  shares  resulting  out of a 1 for 15 reverse
split of the  outstanding  shares of Common  Stock (the  2,000,000  shares  were
issued in the name of "DMA I") in  December  1997 were  canceled  and retired to
authorized  unissued share capital of the Company.  These  2,000,000  shares had
originally  been  issued in  connection  with the  Tierra - Dichlor  transaction
subsequently  abandoned,  and the  subject  shares  had been  shown in the stock
transfer books and on the books of the Company as being held in "DMA Treasury."

        Third,  30,000,000  shares of Common Stock issued in connection with the
1986  proposed  merger  transaction  with  Tunnelvision,  Inc.  and its division
Viewpoint  Video,  which  shares  were  returned  to  the  Company  because  the
transaction was abandoned, were canceled and retired to the status of authorized
unissued share capital of the Company.

        Reference is made to the financial statements and notes thereto included
with this Form 10-K report.

LIQUIDITY AND CAPITAL RESOURCES

        The  Company  had been  without  adequate  funds to  conduct  any actual
business  from 1990  through the date of this  Report.  The Company  settled its
outstanding  debt  ($24,386.81)  with proceeds of sale of  restricted  shares of
Common Stock in fiscal 1997. The debt  consisted of legal and  accounting  fees,
and transfer agent fees. See Item 12. The Company presently has no cash or other
liquid assets.

PLAN OF OPERATIONS

        In August 1996, the Company sold 40,000,000  shares of restricted Common
Stock to two  individuals  for  $24,386.81  cash,  which the Company used to pay
debts the Company had incurred.  In connection with the change in control of the
Company  resulting  from the  issuance of such  40,000,000  shares of its Common
Stock, the Company subsequently changed its name to Hallmark Properties, Inc. No
brokers were involved in this  transaction  and no commission or discounts  were
paid. The Company relied on the 4(2) exemption from  registration  to sell these
restricted securities.

        For the year ending March 31, 1999, the Company will continue  reviewing
opportunities to merge with or acquire other  companies.  The Company may need a
substantial  amount  of  capital  from  third  parties  to close  any  merger or
acquisition transaction, however there can be no assurance that the Company will
be able to raise such needed funds.


                                       12

<PAGE>



ITEM 7.        FINANCIAL STATEMENTS

        The following financial statements are filed as a part of this Form 10-K
immediately following the signature page:

        Report of Independent Certified Public
          Accountants............................................F-1

        Balance Sheet - March 31, 1997 and 1998..................F-2

        Statement of  Operations  - For the Years 
          Ended March 31, 1997 and 1998
          and Cumulative Amounts from Inception 
          of the Development Stage (August
          11, 1986) through March 31, 1998.......................F-3

        Statement of Stockholders' Equity
          (Deficit) For the Period from
          Inception of the Development 
          Stage (August 11, 1986) through
          March 31, 1998.........................................F-4-7

        Statements of Cash Flows - For the
          Years Ended March 31, 1997 and 1998
          and Cumulative Amounts from 
          Inception of the Development Stage 
          (August 11, 1986)
          through March 31, 1998.................................F-8

        Notes to Financial Statements - For the
          Years Ended March 31, 1997 and 1998....................F-9-10


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

        During the fiscal year ending March 31, 1998, the Company filed a report
on Form 8-K in December  1997  reporting  the change (as of October 16, 1997) of
independent  public  accountants.  The Company  dismissed  J.  Karean  Henderson
("Henderson") as its principal independent public accountant. Henderson had been
engaged in 1997 to audit the Company's  financial  statements for the two fiscal
years  which  ended on March 31,  1997.  During the period  when  Henderson  was
engaged,  there were no disagreements with Henderson on any matter of accounting
principles or practices,  financial  statement  disclosure or auditing  scope or
procedure  which if not resolved to the  satisfaction  of  Henderson  would have
caused  Henderson to make reference to any such matter in her reports,  nor were
there any other reportable events.


                                       13

<PAGE>



        Henderson's  reports on the financial  statements of the  registrant for
the two fiscal years ended March 31, 1997 did not contain an adverse  opinion or
a disclaimer of opinion nor were they  qualified or modified as to  uncertainty,
audit scope or accounting principles.

        The  decision  to change  the  Company's  principal  independent  public
accountants was approved by its Board of directors.

        As of  December 8, 1997 the Board of  Directors  appointed a new firm of
independent public accountants to audit the financial statements of the Company.
The new firm is  Tannenbaum & Company,  P.C.,  1873 south  Bellaire,  Suite 908,
Denver, Colorado 80222. The new firm has audited the financial statements of the
Company for the three fiscal  years ended March 31, 1998.  This Form 10-K report
includes the financial statements and audit reports thereon for 1997 and 1998.

        The Company has not consulted with Tannenbaum & Company,  P.C. regarding
either the  application of accounting  principles to a specified  transaction or
the type of audit opinion that might be rendered.

        A  letter  from  Henderson  addressed  to the  Securities  and  Exchange
Commission,  which  letter  concurs  with  the  statements  made by the  Company
concerning  Henderson  in its Form 8-K report  was filed as an exhibit  with the
Form 8-K report, and is incorporated into this Form 10-K by reference.

                                    PART III

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

(A)     IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.

        The  directors  of the Company are elected to hold office until the next
meeting of shareholders and until their respective  successors have been elected
and qualified. Officers of the Company are elected by the Board of Directors and
hold office until their successors are elected and qualified.

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

Miles D.  Wynn               44             Director, President and Treasurer

Karen J. Bejarano            51             Director and Secretary

        Miles D. Wynn,  President,  Treasurer and a Director,  has served as the
President and as a Director of the Registrant  since April 9, 1998. Mr. Wynn has
been a licensed commercial realtor in Denver, Colorado since 1982.


                                       14

<PAGE>



        Karen J.  Bejarano,  Secretary and a Director,  has been Secretary and a
Director of the Company since April 9, 1998. For the past 10 years, she has been
employed by a family real estate construction company in Arvada, Colorado.

        The officers and  directors of the Company are expected to devote from a
few hours per  week,  up to their  full  time on the  business  of the  Company,
depending on the level of activities at the time. For example, relatively little
time may be  required  when  acquisition  candidates  have been  identified  but
further  evaluation  awaits delivery of documents and background  information on
the candidates.  However, a great deal of time would be required to evaluate the
candidate once documents are available,  and to negotiate and finalize the terms
of  an  acquisition  transaction.  After  consummation  of an  acquisition,  the
officers  and  directors  of the  Company  would  probably  resign  to  let  new
management  operate  the  Company,  however,  it is possible  that the  original
officers and directors would continue to serve the Company.

(B)     SIGNIFICANT EMPLOYEES.

        The Company has no significant employees at the present time.

(C)     FAMILY RELATIONSHIPS.

        Karen J.  Bejarano is a sister of Miles D.  Wynn.

(D)     INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.

        During the past five years, no director,  executive officer, promoter or
control person of the Company has:

        (1) Had any  bankruptcy  petition  filed by or against  any  business of
which such person was a general partner or executive  officer either at the time
of the bankruptcy or within two years prior to that date;

        (2) Been convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);

        (3) Been subject to any order,  judgment,  or decree,  not  subsequently
reversed,  suspended  or  vacated,  of  any  court  of  competent  jurisdiction,
permanently r temporarily  enjoining,  barring,  suspending or likewise limiting
his involvement in any type of business, securities or banking activities; or

        (4) Been found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity  Futures  Trading  Commission to have violated a
federal or state  securities or commodities law, where the judgment has not been
reversed, suspended, or vacated.


                                       15

<PAGE>



(E) COMPLIANCE WITH SECTIONS 16(A) OF THE EXCHANGE ACT.

        Not applicable.

ITEM 10.       EXECUTIVE COMPENSATION

CASH COMPENSATION.

        During the past three fiscal years,  no officer of the Company  received
any cash  compensation.  Neither James L. Porter, the Company's former president
and  chief  executive   officer,   nor  Louis  Porter,   the  Company's  former,
vice-president  received any stock options employee  benefits,  or other form of
direct or indirect  remuneration from the Company during the 1995, 1996 and 1997
fiscal  years.  Messrs.  Porter  resigned as officers and  directors on April 9,
1998.  Mr. Wynn is not paid for his  services to the  Company.  He is  currently
devoting such time as is necessary to the affairs of the Company.

COMPENSATION UNDER PLANS.

        Stock  Options and Bonus  Plans.  No stock  options or bonuses have been
granted under any stock option or bonus plan.

OTHER COMPENSATION.

        No other compensation was paid or distributed to any officer or director
of the  Company for  services  rendered  as such,  during the last three  fiscal
years.

COMPENSATION OF DIRECTORS.

        The  Company  does not pay its  directors  for  their  services  in that
capacity;  however,  officers  and  directors  will  receive  reimbursement  for
out-of-pocket  expenses  incurred by them in connection with the business of the
Company,  and would be paid therefor when the Company had any money.  Currently,
the Company does not pay any directors fees for attendance at board meetings.

TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL.

        The Company has no compensation  plan or arrangement with respect to any
executive  officer  in  connection  with the  resignation,  retirement  or other
termination of such individual's employment with the Company. The Company has no
plan or arrangement with respect to any persons which will result in a change in
control  of  the  Company  or a  change  in  the  individual's  responsibilities
following a change in control.


                                       16

<PAGE>



ITEM 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(A)(B) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following  table sets forth  information as of the date of filing of
this Report as to the  beneficial  ownership of shares of the  Company's  Common
Stock,  by each person who, to the knowledge of the Company at that date,  was a
beneficial  owner of 5% or more of the  outstanding  shares of Common Stock,  by
each person who is an officer and/or director of the Company and by all officers
and directors of the Company as a group. The table does not include  information
regarding shares of Common Stock held in names of certain  depositories/clearing
agencies  as nominee  for various  brokers  and  individuals.  No such broker or
individual is believed to hold more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>

                                                            Amount and
                  Name and Address                          Nature of                  Percent
Title of          of Beneficial                             Beneficial                 of
Class             Owner                                     Ownership                  Class
-----             -----                                     ---------                  -----

<S>               <S>                                      <C>                           <C>
Common            Karen J.  Bejarano*                        -0-                         -0-
Stock             7810 W.  70th Drive
                  Arvada, CO 80004

Common            Esther Entertainment, Inc.               21,500,000                    51%
Stock             4415 Cahita Court
                  Denver, CO 80216

Common            Miles D.  Wynn*                          29,000,000(1)                 69%
Stock             4415 Cahita Court
                  Denver, CO 80216

Common            Robert Chester                           6,000,000                    14%
Stock             1507 Macley Court
                  Kelowna, BC, Canada V1Y 9L6

Common            Officers and directors                   29,000,000                    69%
Stock             as a group (two persons)
</TABLE>

*Officers and directors.

        (1) Includes  7,500,000  shares owned  directly,  and 21,500,000  shares
owned by Esther  Entertainment,  Inc., a private  corporation  controlled by Mr.
Wynn. Esther Entertainment, Inc. is a private housing construction company based
in Denver, Colorado.

        Robert  Chester  is not an  affiliate  of  Miles D.  Wynn or any  former
officers or directors of the Company.

                                       17

<PAGE>



        The  Porters,  who offered  and sold the  restricted  securities  of the
Company to other  individuals,  conducted such efforts pursuant to the exemption
from  registration  under the 1933 Act, which is provided by Section 4(1) of the
1933  Act,  if  the  securities  are  restricted  from  subsequent  resale,  the
purchasers  are able to fend  for  themselves  in  investment  affairs,  and all
material  information  about  the  issuer of the  securities  (the  Company)  is
provided to the purchasers before the sales transaction is effected.

(C)     CHANGES IN CONTROL.

        Management is not aware of any arrangements which may result in a change
of control of the Company.

ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(A)(B)(C)      TRANSACTIONS WITH MANAGEMENT AND OTHERS.

        In fiscal 1997, James L. Porter and Louis Porter, directors and officers
of the  Company  who  resigned  in April,  1998,  invested  $24,387  cash in the
Company,  for which the Company issued  20,000,000  restricted  shares of Common
Stock to James L.  Porter  and an  additional  20,000,000  restricted  shares of
Common  Stock to Louis  Porter.  The Company used the capital to pay third party
accounts payable, legal and accounting bills, and transfer agent fees.

(D)     TRANSACTIONS WITH PROMOTERS.

        Not applicable.

ITEM 13.       EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits  required to be filed are listed  below and,  except where
incorporated by reference, immediately follow the Financial Statements.

Number             Description
------             -----------

3.1                Articles of  Incorporation,  as amended,  incorporated  by
                   reference from the Annual Report on Form 10-K for the five
                   fiscal years ended March 31, 1991.

3.2                Bylaws, incorporated by reference form the Annual Report 
                   on Form 10-K for the five fiscal years ended March 31, 1991.

3.3                Articles of Amendment  to the  Articles of  Incorporation,
                   incorporated  by reference  from the Form 8-K dated August
                   19, 1996 filed August 21, 1996.

        (b) During the last  quarter  of the period  covered by this  report the
Company filed no reports on Form 8-K.  During the first quarter  (ended June 30,
1998) of fiscal  1999,  the  Company  filed a Form 8-K  Report for the change in
control of the Company,  which  resulted in the ownership of Common Stock as set
forth under Item 11 hereof.


                                       18

<PAGE>



        As of April 9, 1998 Louis  Porter,  then the president and a director of
the Company, and James Porter, then the vice-president, secretary and a director
of the Company,  entered into a private  transaction by which they sold to Miles
Wynn and Robert  Chester  35,000,000  shares of  restricted  Common Stock of the
Company  held  by Louis Porter and  James Porter.  Louis Porter and James Porter
sold additional  amounts of their shares of restricted Common Stock held by them
to several other individuals, each of whom holds less than 5% of the outstanding
shares of Common Stock; such individuals are not related to one another,  to the
knowledge  of the  Company.  A total of $75,000  was paid to the Porters in this
transaction ($.002 per share).

        Following the sale, to which transaction the registrant was not a party,
Louis  Porter  and James  Porter  elected  Miles Wynn and Karen  Bejarano  to be
directors of the Company.  Thereafter, Miles Wynn became the president and Karen
Bejarano became the secretary of the Company.  Mr. Wynn was the original founder
and president of the Company in 1986; Ms. Bejarano is his sister.

        The  purchasers  acquired the shares with their own  personal  financial
resources. The purchased shares are owned by the purchasers; there are no pledge
arrangements  in place or  contemplated  with respect to the  purchased  shares.
There are no  arrangements  or  understandings  among  members of the former and
members of the new control groups and any of their  associates,  with respect to
the election of directors (other than the election of Mr. Wynn and Ms. Bejarano,
as disclosed above) or any other matters.


SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE EXCHANGE ACT BY REGISTRANTS  WHICH HAVE NOT  REGISTERED  SECURITIES
PURSUANT TO SECTION 12 OF THE EXCHANGE ACT:

        The Registrant has not sent to its security holders any annual report or
proxy material  during the last fiscal year. If such report or proxy material is
furnished to security  holders  subsequent to the filing of this Form 10-K,  the
Registrant  shall furnish copies of such material to the  Commission  when it is
sent to security holders.


                                      -19-
<PAGE>



                                   SIGNATURES

        In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the  Registrant  caused this 10-K report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: July 20, 1998                        HALLMARK PROPERTIES, INC.



                                            By    /s/ Miles D.  Wynn
                                               ---------------------------------
                                               Miles D.  Wynn, President



        In accordance with the Securities  Exchange Act of 1934, this report has
been signed below by the following person on behalf of the Registrant and in the
capacities and on the date indicated.



Dated: July 20, 1998                        By    /s/ Miles D.  Wynn
                                              ----------------------------------
                                               Miles D.  Wynn, President,
                                               Principle Executive Officer,
                                               Principle Accounting Officer,
                                               Principle Financial Officer,
                                               and Director


Dated: July 20, 1998                        By      /s/ Karen Bejarano
                                               ---------------------------------
                                               Karen Bejarano,
                                               Secretary and Director


                                       20

<PAGE>


May 1, 1998


The Board of Directors
Hallmark Properties, Inc.
Denver, Co.

We have audited the Balance Sheet of Hallmark Properties,  Inc. (formerly Tierra
Environmental  Corporation),  (a development stage company) as of March 31, 1997
and 1998, and the related Statement of Operations, Stockholders' Equity and Cash
Flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based upon our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Hallmark Properties, Inc. as of
March 31, 1997 and 1998,  and the results of its  operations  and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.





TANNENBAUM & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS














                                             -F1-

<PAGE>
Hallmark Properties, Inc.
(A Development Stage Company)
Balance Sheet
(In Thousands, Except Per Share Data)
March 31, 1997 and 1998
<TABLE>
<CAPTION>

                                                    1997              1998
                                                    ----              ----
ASSETS

 Current assets
<S>                                              <C>               <C>       
  Cash and cash equivalents                      $        -        $        -
  Accounts receivable                                     -                 -
  Inventory                                               -                 -
  Short term notes receivable                             -                 -
                                                 ----------        ----------

    Total current assets                                  -                 -
                                                 ----------        ----------

 Other assets
  Real estate
  Other                                                   -                 -
                                                 ----------        ----------

    Total other assets                                    -                 -
                                                 ----------        ----------
                                                          -                 -
                                                 ==========        ==========

LIABILITIES  AND  STOCKHOLDER'S  EQUITY

 Current liabilities
  Accounts payable                                        -                 -
  Notes payable                                           -                 -
                                                 ----------        ----------

    Total current liabilities                             -                 -
                                                 ----------        ----------

 Stockholder's Equity
  Common stock, no par value, 400,000,000
   shares authorized, issued and outstanding
   50,900,000 and 50,900,000 at March 31,
   1990 and 1991 respectively                           296               296

  Deficit accumulated during the
  development stage.                             (      296)       (      296)
                                                 ----------        ----------

    Total Stockholder's Equity                   $(      -)        $(      - )
                                                 =========         ==========
                                                 $        -        $        -
                                                 ==========        ==========
 See accompanying notes
</TABLE>


                                     - F2 -


<PAGE>



Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Operations
(In Thousands, except per share data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>
                                                                Cumulative
                                                                amount from
                                                     1997          1998        inception
                                                  ----------    ----------    ----------
<S>                                               <C>           <C>            <C>       
 Income from operations                           $        -    $        -     $        7

 Cost of sales                                             -             -              -
                                                  ----------    ----------     ----------

 Gross profit                                              -             -              7
                                                  ----------    ----------     ----------

 Expenses
Organizational costs
  SEC (State and Federal)                                  -             -              1
Bank charges                                               -             -              -
Dues, fees, postage,
  printing and telephone                                   -             -              1
Legal, professional and
  consulting                                               -             -             10
Merger expense                                             -             -            261
Miscellaneous                                              -             -              4
Rent expense                                               -             -              6
Salaries                                                   -             -             19
Taxes                                                      -             -              -
Travel and entertainment                                   -             -              1
                                                  ----------    ----------      ---------

Total expenses                                             -             -            303
                                                  ----------    ----------     ----------

 Net income before income taxes                            -             -     (      296)
                                                  ----------    ----------     ----------

 Income taxes                                              -             -              -
                                                  ----------    -----------    ----------

 Net income                                                -             -     (      296)

 Retained Earnings
  (Accumulated deficit),
  beginning of the year                           (      296)   (      296)             -
                                                  ----------    ----------     ----------

  (Accumulated deficit),
  end of the year                                 $(     296)   $(     296)    $(     296)
                                                  ==========    ==========     ==========

 Per share earnings during
  reporting period                                $        -    $        -     $        -
                                                  ----------    ----------     ----------

 Weighted average number
  of shares                                        18,845,378    43,393,333    33,626,199
                                                  -----------   -----------    ----------

 See accompanying notes
</TABLE>
                                               - F3 -



<PAGE>



Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>

                                 Common Stock                                             Total Stock
                                   Number of                   Accumulated   Stock Sub-     Holders
                                    Shares         Amount        Deficit     scriptions     Equity
                                    ------         ------        -------     ----------     ------

<S>                               <C>            <C>           <C>            <C>           <C>      
 Balance August 11, 1986                   -     $       -     $       -      $       -     $       -

 Issuance of stock
 for cash, August
 12, 1986
 ($0.0001 per
  share                           33,500,000             3             -              -             3

 Issuance of stock
 for cash, August
 27, 1986
 ($0.005 per
  share                            2,200,000            11             -              -            11

 Issuance of stock
 for cash, August
 27, 1986
 ($0.005 per
  share                              200,000             1             -              -             1

 Stock subscriptions
 received                                                -             -             20            20

 Loss for period ended
 March 31, 1987                            -             -      (      4)              -     (      4)
                                  ----------     ---------      --------       ---------     --------

 Balance
 March 31, 1987                   35,900,000            15     (      4)             20            31


 Issuance of stock
 for cash, April
 1987 ($.02) per
 share                            15,000,000     $     257     $       -      $(    20)     $     237



 See accompanying notes
</TABLE>



                                      - F4 -



<PAGE>



Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>

                                 Common Stock                                              Total Stock
                                   Number of                   Accumulated   Stock Sub-      Holders
                                    Shares         Amount        Deficit     scriptions      Equity
                                    ------         ------        -------     ----------      ------


<S>                               <C>            <C>           <C>            <C>           <C>      
 Loss for period ended
 March 31, 1988                            -             -     (    268)              -     (    268)
                                 -----------     ---------     --------       ---------     --------

 Balance
 March 31, 1988                   50,900,000           272     (    272)              -             -

 Loss for through
 period ended
 March 31, 1989                            -             -             -              -             -
                                 -----------     ---------     ---------      ---------     ---------

 Balance
 March 31, 1989                   50,900,000           272     (    272)              -             -
                                 -----------     ---------     --------       ---------     ---------

 Loss for through
 period ended
 March 31, 1990                            -             -             -              -             -
                                 -----------     ---------     ---------      ---------     ---------

 Balance
 March 31, 1990                   50,900,000           272     (    272)              -             -
                                 -----------     ---------     --------       ---------     ---------

 Loss for through
 period ended
 March 31, 1991                            -             -             -              -             -
                                 -----------     ---------     ---------      ---------     ---------

 Balance
 March 31, 1991                   50,900,000           272     (    272)              -             -
                                 -----------     ---------     --------       ---------     ---------

 Loss for through
 period ended
 March 31, 1992                            -             -     (     24)              -     (     24)
                                 -----------     ---------     --------       ---------     --------

 Balance
 March 31, 1992                   50,900,000           272     (    296)              -     (     24)
                                 -----------     ---------     --------       ---------     --------

Reverse stock
  split (15:1),
  November 10,
 1992 ($.00 per
 share)                         (47,506,667)            -             -              -             -

 See accompanying notes.
</TABLE>
                                                -F5-



<PAGE>



Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>

                                 Common Stock                                             Total Stock
                                   Number of                   Accumulated   Stock Sub-     Holders
                                    Shares         Amount        Deficit     scriptions     Equity
                                    ------         ------        -------     ----------     ------
<S>                               <C>            <C>           <C>            <C>           <C>      
Loss for through
period ended
March 31, 1993                            -             -             -              -             -

Balance
March 31, 1993                     3,393,333           272     (    296)              -     (     24)
                                  ----------     ---------     --------       ---------     --------

Income for
year ended
March 31, 1994                            -             -             -              -             -

Balance
March 31, 1994                     3,393,333           272     (    296)              -     (     24)
                                  ----------     ---------     --------       ---------     --------

Income for
year ended
March 31, 1995                            -             -             -              -             -

Balance
March 31, 1995                     3,393,333           272     (    296)              -     (     24)
                                  ----------     ---------     --------       ---------     --------

Income for
year ended
March 31, 1996                            -             -             -              -             -

Balance
March 31, 1996                     3,393,333           272     (    296)              -     (     24)
                                  ----------     ---------     --------       ---------     --------

Issuance of stock
for cash, August 19,
1996 ($.0006)
per share
                                  40,000,000           24             -              -            24
See accompanying notes
</TABLE>



                                                -F6-


<PAGE>



Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Stockholder's Equity
(In Thousands, Except Per Share Data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>

                                 Common Stock                                             Total Stock
                                   Number of                   Accumulated   Stock Sub-     Holders
                                    Shares         Amount        Deficit     scriptions     Equity
                                    ------         ------        -------     ----------     ------
<S>                               <C>            <C>           <C>            <C>           <C>
Income for
year ended
March 31, 1997                            -             -             -              -             -

Balance
March 31, 1997                    43,393,333           296     (    296)              -            -
                                  ----------     ---------     --------       ---------    ---------

Income for
year ended
March 31, 1998                            -             -             -              -             -

Shares canceled
March 30, 1998                   (1,409,637)             -            -               -            -
                                 ----------      ---------     --------       ---------    ---------

Balance
March 31, 1998                    41,983,696     $     296     $(   296)      $       -    $       -
                                  ==========     =========     ========       =========    =========


See accompanying notes.
</TABLE>


















                                                -F7-


<PAGE>



Hallmark Properties, Inc.
(A Development Stage Company)
Statement of Cash Flows
(In Thousands, except per share data)
Years Ended March 31, 1997 and 1998
<TABLE>
<CAPTION>

                                                                        Cumulative
                                                                        amount from
                                                             1997          1998         inception
                                                          ----------    ----------     ----------

 Cash flows from operating activities

<S>                                                       <C>           <C>            <C>
  Net Loss                                                $        -    $        -     $(     272)

  Adjustments to reconcile Net
     Loss to Net Cash used in
    operating activities
Increase (decrease) in
   accounts payable                                       (       24)            -     (       24)

  Net cash used in operations                             (       24)            -     (      296)
                                                          ----------    ----------     ----------

 Cash used in investing activities                                 -              -              -
                                                          ----------    -----------    -----------

 Cash flows from financing activities
  Proceeds from sale of common
   Stock                                                          24             -             296
                                                          ----------    ----------     -----------

 Cash balance at beginning of year                                  -             -              -
                                                          -----------   -----------    -----------

 Cash balance at end of year                              $         -   $         -    $         -
                                                          ===========   ===========    ===========



 See accompanying notes
</TABLE>










                                               - F8 -



<PAGE>



Hallmark Properties, Inc.
Notes to Financial Statements
March 31, 1998


1.      Summary of significant accounting policies

Organization

        Hallmark  Properties,  Inc. ("Hallmark" or the "Company" formerly Tierra
        Environmental  Corporation) was organized under the laws of the State of
        Colorado on August 11, 1986,  for the purpose of evaluating  and seeking
        merger  candidates.  The Company is  currently  considered  to be in the
        development  stage as more  fully  defined in the  Financial  Accounting
        Standards  Board  Statement  No. 7. The  Company  has engaged in limited
        activities,  but has not  generated  significant  revenues to date.  The
        Company is currently seeking business opportunities.

Accounting methods

        The Company records income and expenses on the accrual method.

Fiscal year

        The Company has selected March 31 as its fiscal year.

Deferred offering cost

        Costs  associated  with any public  offering were charged to proceeds of
the offering.

Loss per share

        All stock  outstanding  prior to the public  offering had been issued at
        prices  substantially less than that which was paid for the stock in the
        public offering (Note 3).  Accordingly,  for the purpose of the loss per
        share  calculation,  shares  outstanding  at the end of the period  were
        considered to be outstanding during the entire period.

2.      Income taxes

        Since its  inception,  the Company has  incurred a net  operating  loss.
        Accordingly, no provision has been made for income taxes.

        The Company has a net operating loss of approximately $296,000, of which
        $272,000 expires in 2003 and $24,000 expires in 2007.



                                      -F9-


<PAGE>



Related Party Transactions

        On August 19,  1996 the Company  entered  into an  agreement  with James
        Porter and Louis Porter  whereby the Porters paid $24,817 to the Company
        and the Company  issued  40,000,000  of its common  stock to the Porters
        (20,000,000  to each).  The Company used the cash to settle  outstanding
        liabilities (approximately $24,000 at March 31, 1996 and $0 at March 31,
        1997).

3.      Public Offering

        The Company  sold to the public  15,000,000  units at a public  purchase
        price  of  $0.02  per  unit.  Each  unit  consists  of one  share of the
        Company's no par value common stock and common stock  purchase  warrant.
        The warrants entitle the holder to purchase one share of common stock in
        the Company at a purchase  price of $0.10 per share and are  exercisable
        for a two-year  period  commencing  January 6, 1987.  Upon notice to the
        warrantholders,  the  Company  may  redeem  the  warrants  at a price of
        $0.0001 per warrant. At March 31, 1987,  subscriptions for 980,050 units
        had  been  received.  At  April  28,  1987,  the  Company  had  received
        subscriptions  for the  remaining  14,091,950  units  and the  stock was
        issued.



























                                     - F10 -


<PAGE>