TRI NATIONAL DEVELOPMENT CORP, 10KSB40, 1999-08-11

TRI NATIONAL DEVELOPMENT CORP
10KSB40, 1999-08-11
LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 1999

Commission File No. 0-29164

TRI-NATIONAL DEVELOPMENT CORP.
(Name of Small Business Issuer in its charter)

WYOMING 33-0741573
(State of Incorporation) (I.R.S. ID)

480 CAMINO DEL RIO S., SUITE 140
SAN DIEGO, CALIFORNIA 92108
(Address of registrant's principal executive officers)

(619) 718-6370
(Registrant's telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

Common Stock, No Par Value Per Share
(Title of Class)

Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No

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

As of July 31, 1999, 30,111,978 shares of the registrant's common stock
were outstanding. The aggregate market value of the Registrants's free-
trading common stock, held by non-affiliates on July 31, 1999 was
approximately $23,985,000, based on the closing price of the stock on July
31, 1999.

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TRI-NATIONAL DEVELOPMENT CORP.

FORM 10-KSB
FOR THE FISCAL YEAR ENDED APRIL 30, 1999

TABLE OF CONTENTS

PAGE
----

PART I

ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . .3
ITEM 2. Properties. . . . . . . . . . . . . . . . . . . . . . . 15
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 16
ITEM 4. Submission of Matters to a Vote of Security Holders . . 16

PART II

ITEM 5. Market for Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . 17
ITEM 6. Management's Discussion and Analysis of Results
of Operations and Financial Condition . . . . . . . . . 20
ITEM 7. Financial Statements and Supplementary Data . . . . . . 24
ITEM 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures. . . . . . . . . . 39

PART III

ITEM 9. Directors and Executive Officers of the Registrant. . . 40
ITEM 10. Executive Compensation. . . . . . . . . . . . . . . . . 43
ITEM 11. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . 44
ITEM 12. Certain Relationships and Related Transaction . . . . . 44

PART IV

ITEM 13. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . 45

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

Tri-National Development Corp. is a multi-faceted international real estate
development, sales and management company. The Company's development
efforts are focused in four major areas: residential development, resort
properties, commercial development and assisted living facilities.

The Company's projects include current and planned developments in Canada,
Mexico and the United States, with a primary focus on large scale, multi-use
projects in Northern Baja California, Mexico. The Company started
buying property in 1991 some 50 miles south of the San Diego border, in a
region known as the "Gold Coast", the stretch of land in between Tijuana
and Ensenada. Since that time, there have been an enormous amount of
development in the area, with plans for new marinas, a new international
airport, film studios, and numerous commercial and residential complexes
proposed, initiated and constructed. As a result, TND's property has seen
dramatic appreciation and drawn the Company's focus to this area in Mexico.
Since then, the Company has significantly added to its real estate holdings
in this region through options and purchases of numerous projects,
utilizing its long standing relationships and reputation to purchase
quality properties at significant values. This allows the Company to
become a major force in the ongoing development of this rapidly growing region.

The Company is also actively pursuing, through a separate division, the
development of assisted living facilities, primarily in the S.W. United
States, to meet the growing need for well-person care for aging baby
boomers. The Company sees significant potential synergy between the Baja
developments and the assisted living division as the Company works with
strategic partners to bring U.S. quality medical care to Baja, thereby
allowing the provision of assisted living facilities at a greatly reduced
cost relative to similar U.S. properties.

The Company was founded in 1988 by Michael Sunstein and became a publicly
traded Canadian corporation in 1989. Since then, the Company has renounced
its original state of incorporation under the laws of the Province of
British Columbia, Canada and on February 24, 1997 applied for Certificate
of Registration and filed Articles of Continuation in the office of the
Secretary of State of Wyoming. The Company is now incorporated under the
laws of the state of Wyoming in accordance with W.S. 17-16-1710 without any
break in corporate existence and publicly traded on the NASDAQ OTC BB under
the symbol "TNAV". The Company maintains its executive offices in San
Diego, California at 480 Camino Del Rio S., Suite 140 and its telephone
number is 619-718-6370. As used herein, the term "TND" or "Company"
refers to Tri-National Development Corp. and its subsidiaries, unless the
context indicates otherwise.

BUSINESS STRATEGY

The Company remained tightly focused in 1998 and 1999 on the Company's
business strategy to maximize shareholder value, which focuses on three
priorities: growth, profitability and liquidity through both domestic and
international real estate investments. The Company intends to: (1)
purchase and expand Bajamar Ocean Front Hotel and Golf Resort, an existing
27 hole golf course (averaging approximately 4,000 to 5,000 rounds per
month), 81 room hotel (averaging 70% occupancy rate) located in Baja
California, Mexico, about 50 miles south of San Diego, California; (2)
construct and sell 328 ocean view timeshare units, 32 ocean view
condominiums and 26,000 square feet of commercial space within the Bajamar
Resort; (3) purchase and develop the 2,500 acre Hills of Bajamar
commercial, residential and industrial project; (4) expand Plaza Rosarito,
an existing 187,500 square foot commercial shopping center, 52 developed
residential lots, a 36-unit condominium complex and 15 acres of undeveloped
ocean front land zoned for a 450-room hotel and convention center, located
in Rosarito Beach, Baja California; (5) expand Portal Del Mar, an existing
126-unit condominium development overlooking the Pacific Ocean; (6)
purchase and expand the former Banco Atlantico building, an existing 20,000
square foot, 2-story commercial building, located in the banking district
of Tijuana, Mexico; and (7) develop and construct assisted living
facilities in the Southwest U.S. and Mexico,

<PAGE>

starting with our existing projects in Youngtown, Arizona, Carlsbad,
California, San Marcos, California, and San Diego, California.

The Company continues to explore opportunities to enter new markets and
plans to grow in its existing markets. Growth in, both new and existing
markets, are expected to be supplemented by strategic acquisitions from
time to time. The Company's business strategy could be materially affected
by various risk factors such as changes in general economic conditions
either nationally or in the regions in which the Company operates or may
commence operations, job growth and employment levels, home mortgage
interest rates or consumer confidence, among other things. Nevertheless,
the Company remains optimistic about its ability to grow its business in 2000.

LAND ACQUISITION AND DEVELOPMENT

Management believes that its business requires in-depth knowledge of local
markets in order to acquire land in desirable locations and on favorable
terms, to engage subcontractors, to plan communities keyed to local demand,
to anticipate customer tastes and price ranges in specific markets and to
assess the regulatory environment. The development process generally
consists of three phases: land acquisition; land development; construction
and sale or lease. The development cycles vary depending on the extent of
the government approvals required, the size of the development, necessary
site preparation, weather conditions and marketing results. When feasible,
the Company acquires land positions through the use of options. In
addition, the Company frequently acquires finished lots, condos and
commercial building within its pricing parameters, which reduces the
development cycle. In acquiring land, the Company considers such factors
as: current market conditions, with an emphasis on the prices of comparable
sales and leases, expected sales and lease rates, proximity to metropolitan
areas, population, industrial and commercial growth patterns, estimated
costs, customer preferences and environmental and regulatory matters. The
Company employs standards for assessing all proposed purchases based, in
part, upon after tax cash flow and overall return on investment.
Consistent with these standards, the Company seeks to minimize and defer
all expenditures for purchases by utilizing options, phasing land purchases
and development, and relying upon non-recourse seller financing or third
party lenders. In addition, the Company emphasizes pre-sales in virtually
all of its developments versus speculative inventory.

The Company acts as the general contractor for its developments and hires
subcontractors for all production activities. The use of subcontractors
enables the Company to reduce its investment in direct labor costs,
equipment and facilities. The Company generally prices product only after
if has entered into contracts for the construction with subcontractors, an
approach which improves its ability to estimate costs accurately.

SALES

Sales by the Company are generally made pursuant to a standard sales
contract, which generally require a customer deposit at the time of
execution and an additional payment upon mortgage approval. Subject to
particular contract provisions, the Company generally permits customers to
cancel their obligations and obtain refunds of their deposits in the event
mortgage financing is unobtainable within a specified period of time.

Management believes the Company's current supply of land is sufficient for
its reasonably anticipated needs over the next several years, and that it
will be able to acquire land on acceptable terms for future developments
absent great changes in current land acquisition market conditions. The
principal raw materials used in the construction of homes are concrete and
forest products.

CURRENT AND PLANNED RESIDENTIAL, RESORT AND COMMERCIAL DEVELOPMENTS

HILLS OF BAJAMAR

The Hills of Bajamar property is a 2,500-acre parcel located in the
Municipality of Ensenada, on the Pacific Ocean side of Baja, Mexico,
roughly 50 miles south of San Diego, California. The purchase contract
completed in 1992 through the Company's wholly-owned Mexican subsidiary,
Planificacion Desarollos de

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Jatay, S.A. de C.V. ("Planificacion"), provides for an overall purchase
price of $6,000,000 for the 2,500 acres ($2,400 per acre or $.60 per sq.
meter). In September 1998, the Company, in accordance with its contract,
had taken title to an additional 257 acres. This gives the Company title
to approximately 500 acres and places the balance of 2,000 acres in trust
with Banco Ixe. Title to the 2,000 acres will be released to the Company
as annual payments are made to the seller.

To date, the Company has contributed a total of $4,300,000 in cash and
stock toward this property and its development. Certified bank appraisals
completed in March of 1998 valued the property in excess of $71,000 per
acre. The purchase terms were negotiated in 1991 prior to four events: (1)
the passage of NAFTA; (2) the liberalization of foreign ownership of land
in Mexico; (3) the California Department of Real Estate issuing a decree
that the advertisement in California for sale of foreign homes and land is
no longer subject to their jurisdiction; and (4) the mega-developments in
the area (see below).

The Hills of Bajamar property is located in the region that has become
known as "the Gold Coast" because of the current and planned developments.
New developments in the region include: (1) access to U.S. title insurance;
(2) access to U.S. mortgage money; (3) a $200 million plan to privatize and
expand the port of Ensenada, which is underway and is to include a 70 mile
railroad link to the United States, Baja California's first container-
handling facility, and a new passenger cruise ship terminal, which is also
under construction; (4) a $400 million power plant that will generate 440
megawatts, enough to power one million homes, to be built in the Rosarito
and Ensenada area; (5) the possible legislation of casino gaming which
would be a tremendous windfall for the Mexican economy and the Baja
California coast; (6) construction is under way on Puerto Salina, a
reported $150 million, 600-boat marina that is located just one mile north
of the Hills of Bajamar or 46 nautical miles south of San Diego; (7) Fox
Studios has built a movie studio located on a 150-acre site just north of
the Hills of Bajamar with a project cost in excess of $55 million for the
filming of the movie, the Titanic. There are several additional movies
scheduled for filming at this same studio.

The Company's development focus is the creation of a large-scale world
class resort, also encompassing a residential and retirement complex on the
combined ultimate 4,000 acres of the Hills of Bajamar and the Bajamar Hotel
and Golf Resort. The residential complex will include condominiums,
single-family housing, ranchettes and assisted living, located within a
1-hour drive from San Diego, California. The region caters primarily to
Southern California travelers already visiting Baja California, and
provides an alternative attraction to Palm Springs, Phoenix and Las Vegas.
Where these desert communities are only viable six months of the year due
to extreme heat in the summer, Baja California offers a year round climate
averaging 75 degrees Fahrenheit. Additionally, Baja California offers the
amenities available from its oceanfront location including fishing,
sailing, swimming, surfing, other water sports, and oceanfront golf, a
competitive advantage that desert communities cannot provide.

The residential development will be built around a 150-acre medical campus
the Company plans to joint venture with International Health Networks, Inc.
on the southwest corner of the Hills of Bajamar property (see below). The
medical campus will utilize the lower cost for support available in Mexico,
combined with the historic quality of medicine in the United States. The
medical campus will also provide services to the 2 million tourists
crossing the border each month, including the 500,000 people that cross for
work and business, and the 75,000 ex-patriots living in the region who
presently must rely on the Mexican health care system, which is designed
primarily for Mexican Nationals.

In November of 1998, FMA International, a world-renowned master planner,
was retained and recently finished the conceptual drawings for the master
plan for the entire 2,500 acres. The zoning has been approved and
engineering is expected to be completed by August of 1999 and a
construction company has been retained to start cutting the roads, in
accordance with the master plan. This allows the Company to launch a 1,100
one-quarter acre residential lot sales program in late 1999. Stewart Title
of Houston, Texas will be doing all of the title work for this property.
The Company anticipates including the master plan and lot sales on its web
site as soon as it is available.

The roads and utilities to the Hills of Bajamar are to be completed by
Promar, S.A. de C.V., a Mexican development company, pursuant to a contract
and in accordance with the master plan. The Company has been informed that
the improvements to the property will be completed by Bechtel Corp., a U.S.
company,

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which also has been contracted by Promar to build a new international
airport 7 miles to the southeast of the property. The improvements are to
be paid by Promar as an additional cost to the airport. This will
significantly enhance the Hills of Bajamar, while allowing Promar access to
the airport from the main coast highway by way of a toll road off ramp
through a portion of the Hills of Bajamar.

SALES OF PROPERTY AT HILLS OF BAJAMAR

International Health Networks, ("IHN") is Nevada corporation and a
majority-owned subsidiary of the Company. IHN is headed up by three
prominent physicians, all of whom are also shareholders of Tri-National,
including Dr. Jerry Parker, who is a director of the Company. IHN is a
multitude of U.S. medical services designed for Mexico that the Company has
envisioned for the past several years as the magnet for attracting the
retiree market in Baja California, Mexico.

The primary focus for IHN is a planned medical campus, to be built on Hills
of Bajamar property. The medical campus was originally contracted for by
IHN in 1997 in an agreement that called for 150 acres at the south end of
the property at a price of $25,000 per acre with an option for an
additional 100 acres at $60,000 per acre for 3 years. The Company retained
the construction rights to build all required facilities on the combined
250 acres and maintain a property management contract. The campus is to
include an acute care hospital associated with an recognized U.S. medical
provider, a medical school complete with dormitories, class rooms and
auditorium, medical exhibition center, R & D facilities for pharmaceutical
industry and facilities for long-term care combined with anti-aging and
wellness programs. This campus is important not only to the region, but to
the Company's desire to create a retirement mecca on its properties. With
IHN now a majority-owned subsidiary of TND, the original contract is being
revised.

In May of 1999, TND received the approvals from the Mexican government for
the development of a medical school and a four-year university. The Company
had originally planned to build this facility on it's Hills of Bajamar
property, however it has redesigned it's concept plans to build the school
on the north end of Bajamar upon closing of escrow.

In February of 1998, TND signed an agreement with Netrom, Inc. (OTC
BB:NRMM) of San Diego, California to sell 50 acres of its Hills of Bajamar
property for $60,000 per acre for 1 million shares of Netrom's Convertible
Preferred Stock, at a value of $3.00 per share, plus a construction and
multi-year management contract. NetRom, Inc., a developer of action sports
CD-Rom and interactive internet programming, has begun the pre-planning
stages with the intent to develop the site as a post-production multimedia
studio, with additional rights to use the site for Action Sports events.

In June of 1998, TND signed an agreement with Taig Ventures, Inc., a Utah
corporation, to sell 50 acres of its Hills of Bajamar property at $60,000
per acre for 3,000,000 shares of Taig's Convertible Preferred Stock, at a
value of $1.00 per share, plus a construction and multi-year management
contract. Taig Ventures, Inc., a telecommunications company that services
emerging markets, is based and has operations in Vancouver, B.C.. Taig has
begun the pre-planning stages to develop infrastructure on the site to
offer local and long distance telephone service, cable TV, cellular and
internet access to Baja California. Taig's entry to this region follows on
the privatization of Mexico's telecommunication services and a proposed
border-free telecommunications zone between San Diego and Tijuana by the
San Diego based International Communications Council.

PLAZAS RESORT AND COMMERCIAL PROPERTY

Plazas Resort and Commercial Property, is a planned 328-unit vacation
ownership (timeshare) complex and 26,000 square feet of commercial space,
already under construction, that will encompass 14+ acres located on the
golf course and facing the Pacific Ocean, within the Bajamar resort. While
we have been waiting for the June 1996 escrow to close on the Bajamar
Resort (see below), work has continued on the plans for the structures, as
well as, all of the marketing materials. The Company has also begun
accepting preliminary sales of the timeshares, which the Company
anticipates will be in great demand, since there is no real competition in
the region, certainly not on a golf course and on the ocean only 50 miles
from San Diego. To

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date, the Company has contributed in excess of $4,200,000 in cash and stock
toward the Plazas Resort and over $1,000,000 toward the commercial space
(see "Notes to the Financial Statements").

LA PERLA

In January of 1999, the Company entered into an acquisition agreement with
Valcas Internacional, S.A. to acquire 2+ developed acres of ocean front
land within the Bajamar resort, with plans for a 32-unit condominium
complex for $5,000,000. The Company paid $1,000,000 in accordance with the
new contract for the 32-unit La Perla condominiums to be built and signed
notes for an additional $4,000,000, pursuant to a construction contract
executed simultaneously. The Company launched a full sales program in May
31, 1999 and pre-sold all 32 units with deposits. The Company expects to
have construction financing in place and start construction on the units by
September 30, 1999.

BAJAMAR OCEAN FRONT HOTEL AND GOLF RESORT

Bajamar Ocean Front Resort located in Baja California, Mexico on the
Pacific Ocean roughly 50 miles south of the San Diego border is the subject
of a June 1996 escrow established with Stewart Title Company of Houston,
Texas. The escrow was opened with Desarrollos Urbanos Baja California,
S.A., which is 1/2 owned by Grupo Situr, S.A., once the largest Mexican
resort development-company in Mexico. Subsequent to the opening of the
escrow, Grupo Situr's financial problems grew into a national issue and the
Mexican government became involved with several banks involved with Grupo
Situr in an attempt to work out the overall issues. The property at
Bajamar, which is the subject of our contract, is only a small fraction of
the Grupo Situr holdings. However, all contracts and sales were put on
hold until a complete workout plan was effected with the banks.
Consequently, we have retained our escrow position and patiently waited for
the resolve, which we believe to be very close to occurring.

Our escrow includes the existing 27 holes of golf, the existing 81-room
hotel, the clubhouse, tennis courts, land and plans for an additional 102-
room hotel with conference center, land and plans for an additional 9 holes
of golf and approximately 300 acres of developed land for residential
housing adjacent to the golf courses. The closing of this escrow is also
important to the timeshare and fractional ownership program that is located
on land separate from this escrow (see above, however, located within the
Bajamar resort. Both the timeshare and fractional ownership programs will
benefit from a relationship with the adjacent golf courses and hotel. We
had previously delayed the start of these programs in anticipation of our
escrow closing and thereby guaranteeing the availability of these amenities.

PORTAL DEL MAR

In February of 1999, Tri-National Portal, S.A. de C.V., a wholly-owned
Mexican subsidiary of Tri-National Development Corp., signed purchase
agreements and provided the $100,000 down payment to acquire Portal Del Mar
for $1,250,000. Portal Del Mar is a 126-unit, 2 and 3-bedroom condominium
development on 6 acres overlooking the Pacific Ocean in Baja California,
Mexico, just south of Rosarito Beach. The 126 ocean view condominiums are
in various stages of completion, with approximately 46 completed. The
Company plans to add a clubhouse, 3 tennis courts, 2 pools and a spa with
beach access and palapas. Each condo completed is intended to include
solid wood doors with electronic entry card, tile floors throughout, floor
to ceiling sliding glass door that give way to an oversize terrace with
ocean views, full kitchen cable TV, VCR, phone, fireplace and all fully
furnished. Comparable condominiums located across the road are selling in
the $250,000 range. The Company closed on this property in June of 1999
and intends to initially begin timeshare sales in late 1999 at $5,000 per week.

PLAZA ROSARITO

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located in the heart of Rosarito Beach in Baja California, Mexico, minutes
from the 20th Century fox film studio where "Titanic" was filmed and down
the street from the famous Rosarito Beach Hotel. Plaza Rosarito includes
15 acres of undeveloped oceanfront land zoned for a 450-room hotel and
convention center that is already approved for a $38 million construction
loan from Fonatur, the tourism arm of the Mexican government, and 18 acres
of developed land, including 187,500 square feet of existing steel,
concrete and marble commercial space, 52 developed residential lots and a
80% complete 36-unit condominium complex.

The Company has initial plans and will start to execute multi-year, triple-
net leases from established preliminary commitments for approximately
100,000 square feet of the existing commercial property at up to $2.50 per
square foot per month from U.S. and Mexican retail operations, consistent
with comparable lease rates in the area, which upon full lease up should
generate in excess of $4 million annually and become one of the most
significant shopping centers in Baja California.

ASSISTED LIVING

Alpine Gardens East (AGE) is a Nevada corporation created in January 1998
to focus on assisted living for senior citizens. Tri-National acquired 75%
of this corporation for a combination of cash and preferred stock.
Tri-National's objective is to provide high quality assisted living services
to senior housing residents in a cost-effective manner through AGE. AGE
assisted living facilities are expected to combine housing, minimum health
care and personal support for elderly residents who need assistance with
certain activities of daily living, without the need of a complete nursing
facility.

In June of 1998, the Company closed on the 5.5 acre developed parcel for
its first assisted living project in Youngtown, Arizona, just north of
Phoenix and adjacent to Sun City. The Company has offered for sale 126
condominiums, for investment and senior housing at Youngtown. The Company
subsequently announced that it has already received in excess of 200
reservations to buy the 126 condominiums at a price of $197,500 each. This
facility is expected to be built and delivered for under $14,000,000 and
will be available for move-in in early 2000. To date, the Company has
contributed over $4,000,000 in cash and stock to this project and in July
of 1999 the Company received a commitment for $10,500,000 in construction
financing from Del Mar Mortgage. A formal ground breaking took place with
the Mayor of Youngtown and the Company just recently finished construction
on two models. The total retail value of this project is in excess of
$24,000,000. AGE will operate this 126-unit assisted living facility. The
facility includes a 36-unit Alzheimer's and Dementia component, which will
be overseen by fellow-shareholder, Dr. Javaid Sheikh, a world-renowned
expert on geriatrics and currently Associate Professor of Psychiatry at
Stanford University.

On November 3, 1998, the Company executed contracts and provided the
$60,000 down payment to acquire 3.66 acres of undeveloped property
overlooking the Pacific Ocean in Carlsbad, California for $2.9 million.
The Company plans to develop a 180-bed assisted living facility with an
Alzheimer's care component. The Company expects to close on this property
and start construction in late 1999.

In April of 1999, the Company acquired 2.39 acres of undeveloped property
in San Marcos, California, currently valued at $1,600,000. The Company
plans to develop a 60-unit Alzheimer's care facility. The Company expects
to start construction on this property in late 1999.

RECENT DEVELOPMENTS

PROTEXA

In January of 1999, the Company announced that it entered into a Letter of
Intent with Groupo Protexa of Monterrey, Mexico to form a joint venture for
the development and operation of up to 50 Circle K convenience stores in
Baja, California, Mexico.

Groupo Protexa was founded in 1945 and now operates 38 different Mexican
and International companies throughout six divisions, Industrial
Construction, Air Transportation, Environment, Food Products, Services

<PAGE>

and Real Estate. Protexa operates in more than 35 cities throughout Mexico
and 10 countries around the globe, employing more than 10,000 people.

Protexa now owns or franchises nearly 100 Circle K convenience stores
throughout the Republic of Mexico and plans to fully develop this well
established international brand throughout Mexico. Under the agreement
with Tri-National, Protexa will operate 50 Circle K convenience stores
developed and owned by Tri-National, with the first store planned in
Tri-National's Plaza Rosarito in Rosarito Beach, Baja California, Mexico.

FORMER BANCO ATLANTICO BUILDING

In March of 1999, Tri-National Holdings, S.A. de C.V., a wholly-owned
Mexican subsidiary, signed purchase agreements and provided the $25,000
down payment to acquire the fomer Banco Atlantico building for $950,000.
This building is a 20,000 square foot, 2-story commercial building in the
heart of the banking district in Tijuana, Mexico and across the street from
the Plaza Rio Tijuana shopping center. The Company has entered into
discussions with a tenant to lease the entire building and provide their
own improvements. The Company expects to close on this property by August
31, 1999.

LA PAZ HOTEL

In June of 1999, Tri-National La Paz, S.A. de C.V., a wholly-owned Mexican
subsidiary, signed purchase agreements and provided the $100,000 down
payment to acquire an existing 250-room mid-rise hotel with a 18-hole golf
course on the beach overlooking the Sea of Cortez, approximately 30 miles
outside of Los Cabos, for $6,400,000. The Company has entered into
negotiations with a European resort management company to operate this
property with a guaranteed occupancy rate year round. The Company expects
to close on this property by October 31, 1999.

STRIP MALL IN TIJUANA

In June of 1999, Tri-National Tijuana, S.A. de C.V., a wholly-owned Mexican
subsidiary, signed purchase agreements and provided the $25,000 down
payment to acquire an existing roughly 15,000 square foot single story
commercial center adjacent to Plaza Rio Tijuana Shopping Center in Tijuana,
Mexico for $550,000. The Company has entered into negotiations with a
tenant to lease the entire building and utilize the existing tenant
improvements. The Company expects to close on this property by September
30, 1999.

HILLS OF BAJAMAR

In July of 1999, Planificacion Desarollos de Jatay, S.A. de C.V., a wholly-
owned Mexican subsidiary, signed purchase agreements to acquire an
additional 400 acres of undeveloped land adjacent to its Hills of Bajamar
property for $6,000 per acre. The 400 acres lie in between the toll road
and the entrance to the Hills of Bajamar property.

TEMECULA RETIREMENT CAMPUS

In August of 1999, the Company signed contracts to acquire 22.68 acres of
developed land in Temecula, California with the business plan, drawings,
permits, approvals and zoning for a retirement and assisted living campus,
which upon full build out is in excess of $50,000,000. The Company expects
to close on this property and start construction in late 1999.

TRI-NATIONAL MORTGAGE COMPANY

In August of 1999, the Company formed a wholly-owned Nevada corporation to
arrange financing for prospective customers to facilitate sales of
residential lots, condominiums, single family homes and timeshare sales.
Management believes that the ability to offer customers financing on firm,
competitive terms as a part of the sales process is an important factor in
completing sales. Not only does this facilitate sales, but the mortgages
earn income while enhancing the balance sheet. The principal sources of
income

<PAGE>

for this subsidiary are: (1) interest income earned on mortgage loans (2)
net gains from the sale of loans, if sold and (3) loan servicing fees.

CITIZENS BUSINESS BANK LAWSUIT AND SUBSEQUENT $5 MILLION AWARD

On August 14, 1998, Tri-National and its wholly owned subsidiary, MRI Grand
Terrace, Inc., appeared in the Superior Court of San Bernardino before the
Honorable Barry Plotkin, to hear Chino Valley Bank, now known as Citizens
Business Bank (AMEX:CVB), attempt to attack the judgement of approximately
$5,000,000 signed by Judge Plotkin on June 3, 1998. Tri-National
successfully defeated the bank's motion for a new trial, as well as a
motion for the Judge to set aside the jury's verdicts reached on May 7,
1998. In denying Citizens Business Bank's motions, the court upheld the
jury's respective verdicts of 12 to 0 and 11 to 1, wherein they found the
bank guilty of fraud and negligent misrepresentation in connection with the
sale of the Grand Terrace Retirement Hotel to Tri-National and MRI Grand
Terrace, Inc. in 1992. On August 17, 1998, the bank posted a $7.5 million
bond to allow time to decide whether or not to start the appeal process.
Post judgement interest against the bank continues at the rate of
approximately $500,000 per year. Citizens Business Bank has a total net
worth of approximately $100 million.

Additionally, Tri-National's motion for attorney fees and costs was heard
and approved on September 25, 1998. On December 3, 1998, the court awarded
the Company an additional $185,000. These costs are in addition to the
existing $5,000,000 judgement for punitive and compensatory damages,
including pre-trial interest.

The bank has filed its appeal on June 16, 1999. This now gives Tri-National
the right to cross appeal on the basis of the additional damages
we believed we could show. However, we decided not exercise this right and
possibly open the door for the Appellate Court to return us to court to
evaluate those damages. Instead, we will merely file our answer their
appeal by September 16, 1999 and let the Appellate Court proceed.

ACTIVITY LINK, INC.

In January of 1998, TND, through its wholly owned subsidiary, Tri-National
Resorts Management, Inc., acquired 85% of Activity Link, Inc., a Nevada
corporation, for a combination of $228,000 in cash and 75,000 shares of
restricted Common Stock in TND and a quarterly distribution of profits in
the amount of 15%, once Activity Link, Inc. achieved $300,000 in net
profits. Activity Link, Inc. owned the proprietary rights to "Activity
Link", a reservation system for many different types of tourist activities
that was planned to access directly the concierge desks of major hotels and
resorts. The hotels and resorts were to be billed for each ticket or
reservation paid through Activity Link. Three beta sites for Activity Link
were being prepared for a vacation ownership developer in Hawaii, starting
in late 1998.

As previously announced, the Company reduced its position in Activity Link
to allow the pursuit of outside financing to successfully launch the
project. When raising sufficient amounts of outside capital proved more
difficult than originally planned, it became apparent that the Company's
capital would still be required to move the project forward. Management
made the decision that its time, effort and resources could better serve
the shareholders in its real estate projects, choosing to stay tightly
focuses

As of April 30, 1999, no restricted Common Stock in TND had been issued and
a total of $110,000 had been invested in connection with this acquisition.
The Company has written this investment off to $0.

COMMON STOCK REPURCHASE PROGRAM

On September 16, 1998, Tri-National announced that the Board of Directors
had authorized a Common Stock Repurchase Program for up to approximately $3
million. The $3 million used for the Common Stock Repurchase Program could
come from the $5 million award from Citizens Business Bank. Management has
never seen litigation as a profit center, hence, any cash awarded from the
lawsuit has never been included in the Company's budget for operating
capital or acquisitions and development. Management has been given
discretion over the timing and amounts of the periodic buybacks, including
in advance of receipt of the award. Shares bought back will be held as
treasury stock and may be used for general corporate purposes.

<PAGE>

As of the date of this filing, the Company has bought back a total of
approximately 3.5 million free trading common shares.

WEB SITE

In June of 1999, the Company re-launched its web site, www.tri-national.com.
Further the Company retained Netrom, Inc., a provider of multi-media
technology, to enhance the Company's existing web-site to include state-of-
the-art interactive 3-D and virtual reality multimedia technology to sell
the Company's real estate projects on the world wide web. Visitors to the
new site can not only download the Company's financial information,
shareholder letters and press releases, but can also view the Company's
growing number of projects in Arizona, California and Northern Baja
California, Mexico from almost anywhere on the planet. This new web site
is an incredibly powerful tool that will enable the Company to sell condos,
single-family homes, residential lots and fractional ownership units, as
well as, exposure for the leasing of our commercial properties to virtually
anyone in the world. This not only increases our exposure for sales, but
also cuts our sales and marketing costs tremendously.

RADIO SHOW

The Company is engaged in presentations on the financial news program,
Winning on Wall St. with Mark Mandell. The program is being aired in
Boston, Chicago, Denver, Florida, Knoxville, Las Vegas, New York, Palm
Beach, Phoenix, Portland and San Francisco two to three times per week.
This program gives the Company exposure to potential home buyers and
shareholders.

FACTORS AFFECTING FUTURE RESULTS REGARDING FORWARD-LOOKING STATEMENTS

The Company's business, results of operations and financial condition are
subject to many risks, including those set forth below. Certain statements
contained in this report, including without limitation statements
containing the words "believes," "anticipates," "expects," and words of
similar import, constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. The Company has made forward-looking
statements in this report concerning, among other things, the impact of
future acquisitions and developments, if any, and the level of future
capital expenditures. These statements are only predictions, however;
actual events or results may differ materially as a result of risks facing
the Company. These risks include, but are not limited to, those items
discussed below. Certain of these factors are discussed in more detail
elsewhere in this report, including without limitation under the captions
"Business" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Given these uncertainties, readers are
cautioned not to place undue reliance on such forward-looking statements,
which speak only as of the date of this report. The Company disclaims any
obligation to update any such factors or to publicly announce the result of
any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.

The Company has executed numerous contracts for, among other things,
acquisition and development of real estate projects. Certain risks are
inherent with the implementation of the Company's business strategy. These
risks include, but are not limited to, access to capital necessary for
acquisition and development, the Company's ability to sustain and manage
growth, governmental regulation, competition and risks common to the real
estate development industry.

CAPITAL REQUIREMENTS

<PAGE>

Company has, at its option, the ability to renegotiate for up to an
additional $15 million of bonding from New England Surety Co., once the $8
million has been placed, using additional collateral. The Company intends
to repay the principal and interest with cash flow generated from leases
and sales of residential lots, condominiums, single family homes and
timeshares. As of April 30, 1999 the Company placed $7,424,254 in
Corporate Notes.

In addition to the Corporate Notes, the Company is seeking joint venture
partners, such as Capital Trust, Inc. of New York, to finance several
projects, including the Bajamar Hotel and Golf Resort, the Hills of Bajamar
properties and La Paz.

COMPETITION

The retirement and residential housing business are highly competitive, and
the Company competes with numerous housing producers ranging from regional
and national firms to small and local builders primarily on the basis of
price, location, financing, design, reputation quality and amenities. In
addition, the Company competes with other housing alternatives including
existing homes and rental housing.

VACATION OWNERSHIP (TIMESHARE)

Resort timesharing has existed in Mexico since the early 1970's. During
the past few years, timesharing has been on of the fastest-growing vacation
and real estate industries in the country. On a worldwide basis, it is
estimated that over 3.75 million households own timesharing in more than
5,000 timeshare projects. It also estimated that worldwide sales volume in
the timeshare industry in 1998 was close to $6 billion.

There are 273 timeshare projects in Mexico, which is about six percent of
the world's total. The timeshare projects are located in Cancun (44),
Puerto Vallarta (42), Acapulco (30), Mazatlan (78), Los Cabos (24), Ixtapa
(19), Manzanillo (14), Cozumel (5), Huatulco (4) and elsewhere around the
country (63). About 21.5 percent of all overnight accommodations in the
nine major coastal resort destinations of Mexico are timeshare units,
including 40.1 percent in Puerto Vallarta.

On a historical basis, more than $6 billion of timeshare inventory has been
sold in Mexico. This involves 795,300 intervals being sold to 568,100
customers, including 233,500 Mexican residents and 334,600 international
consumers. Some 82 percent of the international buyers live in the United
States. The 568,100 owners represent about 16 percent of the world's
total. About $808 million of timesharing, about 15 percent of the world's
total was sold in Mexico in 1997.

This contributes significantly to Mexico's economy. In 1997, the year-round
occupancy rate in built timeshare projects was about 76.5 percent,
compared to about 56.5 percent in the hotel industry. The average
timeshare-vacationing party spends 9.4 nights while on their timeshare
vacation, including occupancy of their timeshare unit and other forms of
overnight accommodation. The average visitor party is 3.8 persons. These
figures mean that the timeshare industry annually generates almost 27
million visitor days in Mexico with over $7 billion in expenditures,
creates directly and indirectly 94,000 jobs and about $900 million in payroll.

There are three vacation ownership properties to compete with in Baja
California, Mexico; the Rosarito Beach Hotel, the Grand Baja Club and
Hussongs Vacation Club in Ensenada, none of which are located on or near a
golf course. However, the U.S. competition is the Four Seasons at Aviara
and Grand Pacific Resorts in Carlsbad, California, the Winner's Circle in
Del Mar, California, Pacific Monarch Resorts in Laguna Hills, California
and the Marriott in Palm Desert, California all at least a 1-3 hour drive
from the Players Club at Bajamar.

The majority of timeshare owners in Mexico are upper-middle income
households. Most are between 40 and 60 years of age, college graduates and
married households. The median income of U.S. owners in Mexico is more
than $68,000. Almost one-third have incomes over $100,000.

<PAGE>

ASSISTED LIVING

The health care industry is highly competitive and the Company expects the
assisted living business in particular will become more competitive in the
future. The Company will face competition from numerous local, regional
and national providers of assisted living and long-term care whose
facilities and services are on either end of the senior care continuum from
skilled nursing facilities and acute care hospitals to companies providing
home based health care, and even family members. In addition, the Company
expects that as assisted living receives increased attention among the
public and insurance companies, competition from current and new market
entrants, including companies focused on assisted living, will increase.
Some of the competitors in this industry operate on a not-for-profit basis
or as charitable organizations, while others have, or may obtain, greater
financial resources than those available to the Company.

RAPID GROWTH

MANAGEMENT OF GROWTH

As part of its ongoing business, the Company has experienced and expects to
continue to experience rapid growth. The Company is planning significant
expansion both through internal expansion and acquisitions and development.
In order to maintain and improve operating results, the Company's
management must manage growth and expansion effectively. The Company's
ability to manage its growth effectively requires it to continue to expand
its operational, financial and management information systems and to
continue to attract, train, motivate, manage and retain key employees. As
the Company continues its expansion, it may become more difficult to manage
geographically dispersed operations. The Company's failure to effectively
manage growth could have a material adverse effect on the Company's results
from operations.

EXTERNAL GROWTH

In line with its business strategy, the Company has entered into, and will
continue to enter into, a number of agreements to acquire properties for
development. There can be no assurance that one or more of such
acquisitions will be completed or that the Company will be able to find
additional suitable properties to continue a steady rate of growth. There
can be no assurance that suitable properties will be available for future
acquisition and development at prices attractive to the Company. The
acquisition and development of properties are subject to a number of risks,
many of which are outside the Company's control. There can be no assurance
that the Company will be able to complete its planned facilities in the
manner, for the amount or in the time frame currently anticipated. Delays
in the progress or completion of development projects could affect the
Company's ability to generate revenue or to recognize revenue when anticipated.

DEVELOPMENT AND CONSTRUCTION RISKS

As part of its business strategy during the next few years, the Company
plans to develop a number of assisted living, resort, commercial and
residential properties. The Company's ability to achieve its development
plans will depend upon a variety of factors, many of which are beyond the
Company's control. The successful development of additional properties
involves a number of risks, including the possibility that the Company may
be unable to locate suitable sites at acceptable prices or may be unable to
obtain, or may experience delays in obtaining, necessary zoning, land use,
building, occupancy, licensing and other required governmental permits and
authorizations. Development schedules may be changed by the Company in
order to accommodate requirements of staffing of new projects and to allow
a phase-in of start-up losses inherent in the marketing and lease-up of new
facilities. Certain construction risks are beyond the Company's control,
including strikes, adverse weather, natural disasters, supply of materials
and labor, and other unknown contingencies which could cause the cost of
construction to exceed estimates. If construction is not commenced or
completed, or if there are unpaid subcontractors or suppliers, or if
required occupancy permits are not issued in a timely manner, cash flow
could be significantly reduced. In addition, any property in construction
carries with it its own risks such as construction defects, cost overruns,
adverse weather conditions, the discovery of geological or environmental
hazards on the property and changes in zoning restrictions or the method of
applying such zoning restrictions. The nature of licenses

<PAGE>

and approvals necessary for development and construction, and the timing
and likelihood for obtaining them vary widely from country to country,
state to state, and from community to community within a state.

REGULATION AND ENVIRONMENTAL

The Company and its subcontractors must comply with various federal, state
and local ordinances, rules and regulations concerning zoning, building
design, construction and similar matters. The operations of the Company
are affected by various federal, state and local environmental laws,
ordinances and regulations, including regulations pertaining to
availability of water, municipal sewage treatment capacity, land use,
protection of endangered species, population density and preservation of
the natural terrain and coastlines. These and other requirements could
become more restrictive in the future, resulting in additional time and
expense to obtain approvals for development. When acquiring land for
development or existing facilities, the Company typically obtains
environmental reports on the properties as part of its due diligence in
order to lessen its risk of exposure.

The Company is also subject to regulations and restrictions by the
government of Mexico concerning investments in business operations in this
country by U.S. companies, none of which has to date had a material adverse
effect on the Company's consolidated operations. The Company's foreign
operations are also subject to exchange rate fluctuations, which could
affect the Company's financial statements and the reported profits.

ASSISTED LIVING

Health care is an area subject to extensive regulation and frequent
regulatory change. Currently, no federal rules explicitly define or
regulate assisted living. While a number of states have not yet enacted
specific assisted living regulation, the Company is and will continue to be
subject to varying degrees of regulation and licensing by health or social
service agencies and other regulatory authorities in various states and
localities in which it operates or intends to operate. Changes in, or the
adoption of, such laws and regulations, or new interpretations of existing
laws and regulations, could have a significant effect on methods of doing
business, costs of doing business. In addition, the President and Congress
have proposed in the past, and may propose in future, health care reforms
that could impose additional regulations on the Company or limit the
amounts that the Company may charge for its services. The Company cannot
make any assessment as to the ultimate timing and impact that any pending
or future health care reform proposals may have on the assisted living or
health care industry in general. No assurance can be given that any such
reform will not have a material adverse effect on the business, financial
condition or results of operations of the Company.

VOLATILITY OF STOCK PRICE

Sales of substantial amounts of shares of Common Stock in the public market
or the perception that those sales could occur could adversely affect the
market price of the Common Stock and the Company's ability to raise
additional funds in the future in the capital markets. The market price of
the Common Stock could be subject to significant fluctuations in response
to various factors and events, including the liquidity of the market for
the shares of the Common Stock, variations in the Company's operating
results, change in earnings estimates by the Company and/or securities
analysts, publicity regarding the industry or the Company and the adoption
of new statutes or regulations in any the Company's particular industries.
In addition, the stock market in recent years has experienced broad price
and volume fluctuations that often have been unrelated to the operating
performance of particular companies. These market fluctuations may
adversely affect the market price of the shares of Common Stock.

CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS

As of April 30, 1999, the Company's Directors and executive officers and
their affiliates beneficially owned approximately 18.84% of the Company's
outstanding shares of Common Stock (exclusive of unexercised options to
purchase shares of Common Stock). See Item 12 "Security Ownership of
Certain Beneficial Owners and Management." As a result, these
stockholders, acting together, would be able to significantly

<PAGE>

influence many matters requiring approval by the stockholders of the
Company, including the election of Directors. These shares are available
for sale in accordance with Rule 144. Rule 144 provides, in essence, that
a shareholder who is an affiliate of the Company, after holding restricted
securities for a period of one year, may every three months, sell them in
an unsolicited brokerage transaction in an amount equal to 1% of the
Company's outstanding common shares, or the average weekly trading volume,
if any, during the four weeks preceding the sale. Non-affiliated
shareholders holding restricted securities are not subject to the 1%
limitation and may sell unlimited amounts of shares they own, under certain
circumstances, after a one year holding period. If a substantial part of
the shares, which can be sold were so sold, the price of the Company's
common shares might be adversely affected.

EMPLOYEES

As of April 30, 1999, the Company and its subsidiaries employed 16 people
on a full-time basis and 3 on a part-time basis. The Company's success is
highly dependent on its ability to attract and retain qualified employees.
To date, the Company believes it has been successful in its efforts to
recruit qualified employees, but there is no assurance that it will
continue to be successful in the future. The Company believes relations
with its employees are excellent. No employees are represented by
collective bargaining agreements.

ITEM 2. PROPERTIES

LEASES

The Company leases two office facilities in San Diego, California and one
in Ensenada, Baja California under operating leases which expire in 1999
and the year 2000, respectively. The leases generally require the Company
to pay all maintenance, insurance and property taxes and are subject to
certain minimum escalation provisions.

The Company plans to maintain additional operations in Rosarito Beach, Baja
California at the Plaza Rosarito site, which the Company owns (see below).

The Company believes that such properties, including the equipment located
therein, are suitable and adequate to meet the requirements of its
businesses.

U.S. PROPERTIES

The Company owns approximately 5.5 acres of developed land in Youngtown,
Arizona for the construction of a 126-unit assisted living and Alzheimer's
care facility.

The Company owns approximately 2.39 acres of developed land in San Marcos,
California for the construction of a 60-unit Alzheimer's care facility.

MEXICAN PROPERTIES

The Company owns, through its wholly-owned Mexican subsidiary,
Planificacion Desarollos de Jatay, S.A. de C.V. ("Planificacion"), 494
acres of undeveloped land, known as the Hills of Bajamar. The Hills of
Bajamar is an approximate 1,000 hectare (roughly 2,500 acre) parcel of real
property located in the Municipality of Ensenada, on the Pacific Ocean side
of Baja, Mexico, 50 miles south of San Diego, California. Planificacion has
a land purchase contract which provides for an overall purchase price of
$6,000,000 for the 2,500 acres ($2,400 per acre or $.60 per sq. meter).
The terms for the remaining balance of $4,800,000 are $600,000 per year for
8 years.

The Company owns, through its wholly-owned Mexican corporation,
Planificacion Desarollos de Jatay, S.A. de C.V. ("Planificacion") 16 acres
of developed land at the Bajamar Hotel and Golf Resort for the construction
of a 328-unit vacation ownership complex, 26,000 square foot commercial
building and a 32-

<PAGE>

unit condominium complex. The Bajamar Hotel and Golf Resort is location
directly across the highway from the Hills of Bajamar.

The Company owns, through its wholly-owned Mexican subsidiary Tri-National
Portal, S.A. de C.V., a 126-unit condominium project known as, Portal Del
Mar. Portal Del Mar is situated on 6 acres overlooking the Pacific Ocean
outside of Rosarito Beach in Baja California, Mexico.

The Company owns 65%, through its wholly-owned Mexican subsidiary Tri-
National Holdings, S.A. de C.V., Plaza Rosarito. Plaza Rosarito includes
15 acres of undeveloped oceanfront land zoned for a 450-room hotel and
convention center that is already approved for a $38 million construction
loan from Fonatur, the tourism arm of the Mexican government, and 15 acres
of developed land, including 187,500 square feet of existing steel,
concrete and marble commercial space, 52 developed residential lots and a
80% complete 36-unit condominium complex. The other 35% ownership in this
property is made of up the Company's Mexican partners and investment
banker, Capital Trust, Inc. of New York.

The Company uses U.S. title insurance for all its U.S. and Mexican
properties, primarily Stewart Title in Houston, Texas.

ITEM 3. LEGAL PROCEEDINGS

The only legal proceeding the Company is involved with is as a plaintiff
against Citizens Business Bank. The legal proceeding is detailed above in
Item 1 - Business, "Litigation Against Citizens Business Bank".

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

None.

<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

Until March of 1994, the Company's Common Stock was traded on the Vancouver
Stock Exchange. In January of 1996, the Company filed for a voluntary
delisting from the Vancouver Stock Exchange and activated its symbol, TNAV,
on the NASDAQ OTC BB. The following table sets forth the trading history on
the NASDAQ OTC BB:

1996 QUARTER HIGH BID LOW BID HIGH ASK LOW ASK
- ------------------------------------------------------------------------

First (1/1 - 3/30) $0.3125 $0.21875 $0.37500 $0.25000
Second (4/1 - 6/30) 0.3125 0.21875 0.37500 0.25000
Third (7/1 - 9/30) 0.3125 0.12500 0.43750 0.31250
Fourth (10/1 - 12/31) 0.3125 0.25000 0.43750 0.28125

1997 QUARTER
- ------------

First (1/1 - 3/30) $0.34375 $0.18750 $0.50000 $0.25000
Second (4/1 - 6/30) 0.37500 0.20000 0.43750 0.25000
Third (7/1 - 9/30) 0.87500 0.10000 1.00000 0.18750
Fourth (10/1 - 12/31) 1.00000 0.37500 1.03125 0.59375

1998 QUARTER
- ------------

First (1/1 - 3/30) $0.62500 $0.25000 $0.68750 $0.28125
Second (4/1 - 6/30) 0.68750 0.25000 0.78000 0.34375
Third (7/1 - 9/30) 0.57000 0.31250 0.60000 0.37000
Fourth (10/1 - 12/31) 0.70000 0.43000 0.71875 0.46000

1999 QUARTER
- ------------

First (1/1 - 3/30) $1.00000 $0.62500 $1.03130 $0.68750
Second (4/1-6/30) 1.00000 0.62500 1.06250 0.68750

COMMON STOCK

The authorized Common Stock of the Company consists of 100,000,000 shares
of Common Stock without par value. At April 30, 1999, there were
25,861,978 shares issued and outstanding.

The Common Stock has full voting rights on all matters for which
shareholder approval is required or permitted.

The Common Stock does not possess any preferential right to dividends and
therefore is entitled to dividends only when and if dividends on such
Common Stock are declared by the Board of Directors, and only from funds
legally available therefore.

The holders of common stock have equal ratable rights to dividends from
funds legally available therefore, when, as and if declared by the Board of
Directors of the Company; are entitled to shares ratably in all of the
assets of the Company available for distribution to holders of Common Stock
upon liquidation, dissolution or winding up of the affairs of the Company;
do not have preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions applicable thereto. Such shares are
entitled to one vote

<PAGE>

per share on all matters which stockholders may vote on at all meetings of
shareholders. All shares of common stock are fully paid and nonassessable.

The holders of shares of common stock of the Company do not have cumulative
voting rights. Thus, the holders of more than 50% of such outstanding
shares, voting for the election of directors can elect all of the directors
to be elected, and in such event, the holders of the remaining shares will
not be able to elect any of the Company's directors.

HOLDERS

As of April 30, 1999, there were approximately 900 registered holders of
the Company's Common Stock.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock,
and may elect to retain its net income in the future to increase its
capital base. The Company does not currently anticipate paying cash
dividends on its Common Stock in the foreseeable future.

STOCK FOR LOTS CONVERSION

During the year end April 30, 1998, the Company carried out a Private
Placement to existing shareholders for 4,000 square foot residential lots
at the Hills of Bajamar. The cash price per lot was $10,000 and the stock
price per lot was 5,000 shares of Common Stock at a value of $2.00 per
share. A total of 12 shareholders subscribed to the Private Placement for
a total 16 lots, totaling 80,000 shares of Common Stock.

Once the master plan for the Hills of Bajamar is completed, a plot
selection will be sent out to all of the participants in the Private
Placement, on a first-come first-served basis. Once the participants have
made a lot selection, their Common Stock will be cancelled. The Company is
also planning a Phase II with terms and conditions to be announced.

STOCK ISSUED FOR SERVICES

In an effort to preserve cash, the Company issued a total of approximately
2.5 million shares of Common Stock in the Company for services for the year
end April 30, 1999. Services included full-time and part-time employees,
outside consultants, marketing, architects and master planners, accounting
and legal services, web site design and internet marketing.

STOCK ISSUED TO CAPITAL TRUST, INC.

A total of 3,500,000 restricted common shares were issued to Capital Trust,
Inc. of New York, in connection with the $8 million loan for the closing of
Plaza Rosarito. The 3,500,000 common shares will be canceled upon
repayment of the loan.

ESCROW SHARES

In April of 1998, 749,483 Escrow Shares held by the Company's transfer
agent, Montreal Trust, were cancelled, thereby reducing the total issued
and outstanding by 749,483 shares. The Escrow Shares were issued in 1988
as Performance Shares, pursuant to Canadian law.

COMMON STOCK REPURCHASE PROGRAM

<PAGE>

in the Company's budget for operating capital or acquisitions and
development. Management has been given discretion over the timing and
amounts of the periodic buybacks, including in advance of receipt of the
award. Shares bought back will be held as treasury stock and may be used
for general corporate purposes. As of the date of this filing, the Company
has bought back a total of approximately 5 million free trading common shares.

STOCK OPTIONS GRANTED AND EXERCISED DURING THE YEAR

In December of 1996, 975,000 Employee Stock Options were issued to officers
and directors to purchase Common Stock in the Company at a price of $.25
per share, expiring December 31, 1999. For the twelve months ended April
30, 1998, 100,000 Employee Stock Options had been exercised at $.25 per share.

For the year ended April 30, 1997 a total of 1,000,000 Employee Stock
Options were issued to officers and directors to purchase Common Stock in
the Company at a price of $.50 per share and expiring December 31, 1999.
For the twelve months ended April 30, 1998, no Employee Stock Options had
been exercised at $.50 per share.

For the year ended April 30, 1998 a total of 1,000,000 Employee Stock
Options were issued to officers and directors to purchase Common Stock in
the Company at a price of $.50 per share and expiring December 31, 2000.
For the twelve months ended April 30, 1998, no Employee Stock Options had
been exercised at $.50 per share.

WARRANTS GRANTED AND EXERCISED DURING THE YEAR

In 1996, the Company carried out a private placement of 1,945,741 units of
the Company at a price of $0.285 per unit for gross proceeds of $521,971.
Each unit consists of one common share in the capital of the Company and a
two year non-transferable share purchase warrant. Each non-transferable
share purchase warrant entitles the holder thereof to purchase one common
share in the capital of the Company at any time during the first six months
of the term of the warrant at a price of $0.285, at any time during the
second six months of the term of the warrant at a price of $0.40, at any
time during the third sixmonths of the term of the warrant at a price of
$0.55 or at any time during the final six months of the term of the warrant
at a price of $0.75. The term of the warrant commenced on the October 30,
1996 and expired on October 30, 1999. As of October 30, 1999, a total of
1,818,495 warrants had been exercised, leaving 127,246 warrants unexercised
and expired.

In 1996, the Company also carried out a private placement of 968,020 units
at a price of $0.35 per unit for gross proceeds of $338,807. Each unit
consists of one common share in the capital of the Company and a two year
non-transferable share purchase warrant. Each non-transferable share
purchase warrant entitles the holder thereof to purchase one common share
in the capital of the Company at any time during the first year of the term
of the warrant at a price of $0.40 or at any time during the final year of
the term of the warrant at a price of $0.50. The term of the warrant
commenced on the October 30, 1996 and October 30, 1998. As of October 30,
1998, a total of 943,145 warrants had been exercised, leaving 24,875
unexercised and expired.

During the year ended April 30, 1998, the Company carried out a private
placement of 1,857,332 units for gross proceeds of approximately $669,194.
Each unit consists of one common share in the capital of the Company and a
one year non-transferable share purchase warrant for a term of one year.
Each non-transferable share purchase warrant entitles the holder thereof to
purchase one common share in the capital of the Company at any time during
the year of the term of the warrant at an average price of approximately
$.80 per share. As of April 30, 1999, a total of 28,572 warrants had been
exercised; 280,337 warrants were outstanding at an average exercise price
of $.74 and 1,601,777 had expired unercised. The shares issued pursuant to
this private placement are restricted securities as defined by Rule 144.

<PAGE>

RECENT SALES OF SECURITIES

The Company offered and completed a private placement of 2,000,000 shares
of its common stock from April of 1999 and closed in July of 1999 for gross
proceeds of $1,250,000. The Use of Proceeds for the private placement was
the payment and acquisition of Portal Del Mar. The shares issued pursuant
to this private placement are restricted securities as defined by Rule 144.

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

SAFE HARBOR STATEMENTS

Statements of the Company's or management's intentions, beliefs,
anticipations, expectations and similar expressions concerning future
events contained in this document constitute "forward looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. As
with any future event, there can be no assurance that the events described
in forward looking statements made in this report will occur or that the
results of future events will not vary materially from those described in
the forward looking statements made in this report. Important factors that
could cause the Company's actual performance and operating results to
differ materially from the forward looking statements include, but are not
limited, changes in the general level of economic activity in the markets
served by the Company, competition in the real estate industry and other
industries where the Company markets its products and the introduction of
new products by competitors in those industries, delays in refining the
Company's construction and sales techniques, cost overruns on particular
projects, availability of capital sufficient to support the Company's level
of activity and the ability of the Company to implement its business strategy.

OVERVIEW

As of this writing the Company is three months into it's new fiscal year,
which continues until April 30, 2000. The first year of the new millenium
should also bring the Company to a new era of increasing earnings and cash
flow. The majority of the Company's shareholders have long recognized TND
as a growth company moving towards maturity, much like a research and
development company during it's early stages. As a growth company with a
low priced stock, TND has had to buy relatively expensive money to execute
its business strategy and growth. This high cost is evident in our past
fiscal year with the huge fees, sales commissions, associated expenses and
interest expense, all of which appears under the G & A expenses, which
translated into the year end loss of $.10 to $.12 per share. As a growth
company, TND has focused on the acquisition of properties that will support
that growth and properties that will quickly begin contributing to earnings
and cash flow. The Company incurred the 1998 loss in order to provide for
this growth and the opportunity to benefit the shareholders with consistent
annual earnings for the next ten years and more.

ACTIVITY LINK

As a part of that focus, the Company has also closely examined each aspect
of its business strategy and made adjustments where appropriate. The
Company had previously related to you that it had reduced its position in
the Activity Link venture to allow the pursuit of outside financing
required for the successful execution of the project. When raising
sufficient amounts of such outside capital proved more difficult than
originally anticipated, it became apparent that the Company's capital would
still be required to move the project forward. Management made the
difficult decision that any such capital would be better used in the
Company's real estate projects, choosing to stay tightly focused. The
Company has therefore given its position back to the founders of Activity
Link and written off the initial investment of approximately $110,000.

<PAGE>

The Company is now able to focus on the primary goal in executing its
business strategy, identifing and developing assets that will contribute
earnings and cash flow for multiple years. The Company's business strategy
of property development and management is dramatically different than most
real estate companies, which by design buy and sell properties for a one
time gain and then have to reinvent their sales each year in order to
maintain their profits.

HILLS OF BAJAMAR

An example of that development strategy is evident in the use of the 2,500-
acre Hills of Bajamar property, which the Company began acquiring in 1992,
near Ensenada, Baja California. TND now has title to 494 acres and will
continue to make time payments to acquire title to additional parcels,
which the bank holds in trust on our behalf. The Company recently received
zoning approvals and subdivided approximately 300 acres into 1,100 one-quarter
acre residential lots. Two hundred of these acres were reacquired
from Netrom, Inc. when it was mutually decided to undo the sale from last
year, whereby TND received 4,200,000 common shares of Netrom, Inc. for 200
acres of the Hills of Bajamar. Neither company was best served by
maintaining the inventory of either the stock or the land. Consequently,
the sale was annulled resulting in the Company's ability to subdivide the
acreage and create the lots, which it is now intended to begin selling next
month at an opening price of $30,000 for the least expensive parcels and
increasing for ocean view lots. TND will receive a 10% down payment and
then self finance the balance with payments of 1% per month including
interest until paid. Successful execution of this strategy would result in
gross sales in excess of $33,000,000 and monthly cash flow of some $300,000
per month for up to 180 months. The financed balance of approximately
$30,000,000 in mortgages earning 15% interest would show as solid income
producing assets, while greatly enhancing the balance sheet.

The roads and utilities to improve the Hills of Bajamar property are to be
installed pursuant to a contract with Promar S.A. de C.V. a Mexican
company. The Company has been informed the improvements to its property
outlined in that contract are to be completed by the Bechtel Corporation
from the U.S., which has also been contracted to build a new international
airport some seven miles to the southeast of the Hills of Bajamar. The
improvements, which are to be paid by Promar as an incremental cost of
building the airport, will benefit the Hills of Bajamar property while
allowing Promar access to the airport from the main coast highway by way of
a toll road spur through a portion of our property. The addition of this
airport to the region will greatly enhance the value of all of the
Company's properties in Baja California.

FOBAPROA

Most of the additional Mexican projects the Company has acquired involve
purchases from a Mexican Bank Trust program known as Fobaproa. This agency
is a Mexican version of the Resolution Trust Corporation in the U.S. which
was created a number of years ago and given responsibility for liquidating
massive quantities of U.S. bank properties taken back after default. It is
reported that there are up to $60 billion worth of Mexican real estate
properties under Fobaproa's jurisdiction. Tri-National has been working in
Mexico for almost ten years now, and has developed a reputation as a strong
development partner, a contributor to the communities in which it works,
and a company with major development and financing resources. As a direct
result of the credibility and respect the Company has gained, it is being
given the opportunity to participate in the acquisition of some of these
properties at terms that represent very attractive values.

PORTAL DEL MAR

In July, we completed the acquisition of properties from Fobaproa with an
appraised value of over $40,000,000 U.S. . The first of these properties
was the 126-unit condominium project known as Portal del Mar Resort just 5
miles south of Rosarito Beach, Baja California (see attached press
release). The first 46 condos are completed but require renovation and the
remaining 80 condos have their foundations in place and will require the
balance of the construction. The resort is planned to include a lake, spa,
tennis courts and clubhouse. We intend to complete the condos including
furnishings and sell them as timeshare weeks starting at $5,000 per week,
generating total potential retail sales in excess of $40,000,000. It is
intended that Tri-National will receive a 50% down payment and carry the
balance of roughly $20,000,000 as

<PAGE>

mortgages earning 15% interest, thereby further enhancing our balance sheet
and generating significant additional earnings and cash flow over the
ensuing seven years.

PLAZA ROSARITO

The second property is the Plaza Rosarito property located in Rosarito
Beach, Baja California. This property includes 15 acres of the last beach
front land available for the development of a hotel and convention center
in Rosarito Beach. It also includes 52 residential lots with improvements,
30 condos completed requiring renovation and an existing 187,500 square
foot shopping center that has never been occupied. The Company has
invested over $1,500,000 of it's own funds and Capital Trust, Inc., a New
York Stock Exchange investment banker, provided an additional $8,000,000 to
facilitate the closing in July of 1999. The Company plans to sell the
shopping center as retail condominiums with total sales that should exceed
$45,000,000. Successful execution of this strategy would result in 30%
being paid as down payments, with the balance of almost $32,000,000 carried
on the books at 15% interest for 10 years. The additional mortgage
receivables added to the balance sheet would be generating approximately
$7,000,000 in annual gross revenues. In addition, the partnership with
Capital Trust and their participation in this project has dramatically
increased the Company's credibility on Wall Street and in the financial markets.

BAJAMAR PROPERTIES

Across the highway from our Hills of Bajamar property are three previously
acquired properties within the Bajamar Resort. These parcels are
independent of the Company's existing 1996 escrow, which covers much of the
Bajamar Resort including the existing 27-hole golf course and 81-room
hotel. The three properties consist of (1) a 32-unit condominium project,
known as La Perla, overlooking the ocean and the golf course, (2) a 26,000
square foot commercial building under construction and (3) land and permits
for a 328-unit ocean front timeshare called the Players Club. Reservations
and deposits have already been taken for all 32 of the La Perla condos,
representing a total sales value in excess of $7,000,000. A commitment for
the construction financing is expected by the middle of August, which will
start building the units, with a total build out of approximately seven
months. Progress is also being made regarding the original escrow for the
acquisition of the Bajamar golf course and hotel. The Company expects to
have word from Mexico City by the end of September.

Additionally, the Company currently has deposits on three other properties
being acquired from Fobaproa, and a number of others are under evaluation.
Financing for these additional projects, including some existing hotel
properties in Mexico under review, will most likely be provided as a part
of various joint ventures being negotiated at this time.

ASSISTED LIVING

On the United States side of the border, the Company is focused mainly on
Assisted Living Facilities. Solymar Corporation, our development partner,
has been extremely busy identifying new opportunities, while continuing
construction on the first project, Youngtown Gardens in Arizona. As
previously reported, this 126-unit, 200 bed facility recently enjoyed its
grand opening with 2 models completed. A construction financing commitment
for $10,500,000 for this project was recently received and will shortly
commence building the remainder of the project with a completion target of
February. The 126 units have been offered for sale pursuant to condominium
approval at $197,500 each and there is now over 200 written offers. The
Company is now proceeding with the paperwork necessary to execute these
sales. The sales call for 20-30% down payments and mortgages to be provided
by a major bank in Arizona with Morgan Stanley Dean Witter being the
preferred lender. The assisted living facilities are being developed under
a subsidiary incorporated as Alpine Gardens East.

In addition to the Youngtown facility, the Company has contracts for land
approved for similar facilities in the California cities of Bonita,
Carlsbad, Temecula and Vista. Contracts have also been executed for sites
in Las Vegas, Nevada and two additional Arizona sites. Seven existing
sites are still pending completion of due diligence studies in Oregon and
Washington states. The Company's goal of 2,000 senior care beds by the end
of the year 2000 appears to now be within reach.

<PAGE>

Through Tri-National Management, Inc., a wholly owned subsidiary of Tri-
National, it is intended to retain management contracts on the majority of
the various properties that are built or developed. This will serve as an
additional profit center and generate long term cash flows resulting from
development activities.

YEAR 2000

The following disclosure is a Year 2000 readiness disclosure statement
pursuant to the Year 2000 Readiness and Disclosure Act.

The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Because of this
programming convention, software, hardware or firmware may recognize a date
using "00" as the year 1900 rather than the year 2000.

The Company currently does not expect that the total costs of its Year 2000
readiness procedures will be material to its financial condition or results
of operations. All costs are charged to expenses as incurred.

The Company believes it has and is taking the appropriate steps to assess
and address its Year 2000 issues and currently does not expect that its
business will be adversely affected by the Year 2000 issue in any material
respect.

OUTLOOK

We continue to believe that the Company's publicly traded stock is
significantly undervalued and are working to increase broker and investor
awareness of "TNAV" and the Company's developments and potential. We
anticipate that the combination of the large asset base we are building
coupled with the rapidly growing cash flow and earnings we project for the
year ending April 2000, will result in the Company achieving a
substantially higher stock market valuation than we currently enjoy. It
is our intention to build an earnings and asset base in the near future
which Wall Street will be unable to ignore, and which will allow us to
reach the minimum stock price targets required to move up to either the
NASDAQ National Market System or the American Stock Exchange.

We are excited about the developments of the last year, the credibility we
have earned in the marketplace and in Mexico, and quality of our
development and financing partners. We look forward to continuing on our
path toward becoming a major force in the international and domestic real
estate development markets.

<PAGE>

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TRI-NATIONAL DEVELOPMENT CORP.

PAGE
----

Report of Ludlow & Harrison, Independent Auditors. . . . . . . . . . . 25
Consolidated Balance Sheets as of April 30, 1999 and 1998. . . . . . . 26
Consolidated Statements of Operations for year ended
April 30, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Consolidated Statements of Cash Flows for year ended
April 30, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Consolidated Statements of Shareholder's Equity for the year
ended April 30, 1999. . . . . . . . . . . . . . . . . . . . . . . . . 30
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 31

<PAGE>

LUDLOW & HARRISON
a CPA Corporation

3545 Camino Del Rio South Suite D (619) 283-3333
San Diego, CA 92108 Fax: (619) 283-7997
- --------------------------------------------------------------------------

Independent Auditor's Report
----------------------------

We have audited the accompanying balance sheets of Tri-National Development
Corporation as of April 30, 1998 and 1999, and the related statements of
income, retained earnings, cash flows and stockholders' equity 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 on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our 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 Tri-National
Development Corporation as of April 30, 1998 and 1999, and the results of
its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.

/s/ LUDLOW & HARRISON
Ludlow & Harrison
A CPA Corporation

August 6, 1999

<PAGE>

TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS

ASSETS: APR 30, 1999 APR 30, 1998
- ------- ------------ ------------
Current assets:
- ---------------
Cash and cash equivalents $ 461,023 $ 219,481
Accounts receivable, net 445,096 307,079
Citizens Business Bank Judgment
Receivable (Note 2) 5,605,341 5,034,153
------------ ------------
Total current assets 6,511,460 5,560,713
------------ ------------

Investments:
- ------------
NetRom, Inc. convertible preferred stock
(Note 3) 3,000,000 3,000,000
NetRom, Inc. common stock (Note 4) - 4,200,000
Taig convertible preferred stock (Note 5) 3,000,000 -
MRI medical diagnostics, Inc. (Note 6) 24,638 20,050
Hills of bajamar (Note 7) 4,191,109 3,723,661
Plaza resort timeshares (Note 8) 13,354,544 13,079,055
Bajamar las perlas condominiums (Note 9) 6,000,000 -
Activity link, Inc. ( Note 10) - 110,264
Assisted living-Youngtown (Note 11) 4,002,300 3,568,000
Assisted living-Carlsbad and San Marcos
(Note 12) 104,500 32,500
Plaza rosarito (Note 14) 1,076,738 -
Portal del mar condominiums (Note 15) 100,000 -
Hall of fame fitness center (Note 16) 50,558 -
Alpine gardens east (Note 13) 270,500 -
International health network (Note 17) 18,500 -
------------ ------------
Total investments 35,193,387 27,733,530
------------ ------------

Other assets:
- -------------
Capitalized equipment lease 478,840 -
Property, furniture, and equipment,
net (Note 18) 158,795 637,062
------------ ------------
Total other assets 637,635 637,062

------------ ------------
TOTAL ASSETS $ 42,342,482 $ 33,931,305
============ ============

Liabilities and stockholders' equity:
- -------------------------------------
Current liabilities:
- --------------------
Accounts payable and accrued liabilities $ 600,813 $ 354,463
Citizens Business Bank Judgment legal
expenses (Note 2) 1,961,870 1,762,000
Deferred revenue-Citizens Business
Bank Judgment (Note 2) 3,643,471 3,272,153
Loans payable-short term-1 year or less
(Note 19) 1,519,572 1,196,644
------------ ------------
Total current liabilities 7,725,726 6,585,260

Notes payable-net of current portion
(Note 20) 20,828,199 9,230,561
------------ ------------
Total Liabilities 28,553,925 15,815,821
------------ ------------

<PAGE>

Stockholders' equity:
- ---------------------
Common stock 12,928,233 9,070,722
Treasury stock (2,181,174) -
Convertible preferred stock 9,458,000 9,458,000
Accumulated deficit (6,416,502) (413,238)
------------ ------------
Total stockholders' equity 13,788,557 18,115,484
------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 42,342,482 $ 33,931,305
============ ============
See accompanying notes.

<PAGE>

TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED
----------------------------
APR 30, 1999 APR 30, 1998
------------ ------------
Revenues:
- ---------

Revenues $ 611,861 $ 434,413
Gain on sale of assets 2,562,397 2,880,000
------------ ------------
Total Revenues 3,174,258 3,314,413
------------ ------------

Operating Expenses:
- -------------------

Corporate note expense (Excluding
interest) 1,863,942 39,597
Consulting fees 926,640 96,242
Sales and marketing 448,944 40,664
Legal, accounting and insurance 336,801 184,301
Interest expense 780,009 661,225
General and administrative 1,532,684 963,821
------------ ------------
Total operating expenses (Note 18) 5,889,020 1,985,850

------------ ------------
Loss from Operations (2,714,762) 1,328,563

Write-down of investments (Note 10) (191,909) (530,173)

------------ ------------
Net income before taxes (2,906,671) 798,390

Provision for income taxes - -

------------ ------------
Net income (loss) $ (2,906,671) $ 798,390
============ ============

Earnings per share-fully diluted $ (0.113) $ 0.046

See accompanying Notes.

<PAGE>

TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED
----------------------------
APR 30, 1999 APR 30, 1998
------------ ------------
Cash from Operating activities
- ------------------------------
Net cash loss from operations $ (2,963,224) $ (1,598,213)
Accounts receivable & notes receivable (136,943) 95,537
Accounts Payable 246,350 127,150
------------ ------------
Net Cash from Operating activities (2,853,817) (1,375,526)
------------ ------------

Cash used in Investments
- ------------------------
Furniture and Equipment 385,787 37,493
Alpine Gardens East (270,500) -
MRI Medical Diagnostics (4,588) (20,050)
Activity Link, Inc. - (110,264)
Assisted Living-Youngtown (434,300) (110,000)
Assisted Living-Carlsbad and San Marcos (72,000) (32,500)
U.S. Treasury Bills - -
Hills of Bajamar (459,765) (2,000)
Plaza Rosarito (1,076,738) -
Portal Del Mar (100,000) -
Hall of Fame Fitness Center Building (50,558) -
International Health Network (18,500) -
Capitalized equipment lease (17,889) -
Plaza Resort Timeshares (75,489) 200,000
------------ ------------
Net Cash used in Investments (2,194,540) (37,321)
------------ ------------

Cash provided by financing
- --------------------------
Notes and Loans Payable 6,458,541 222,822
Common Stock Private Placements &
Warrants 2,212,532 1,632,314
Minority Interest - (256,365)
Purchases of Treasury Stock (3,381,174) -
------------ ------------
Net Cash provided by financing
activities 5,289,899 1,598,771
------------ ------------

Net change in cash and equivalents 241,542 185,924
Cash and equivalents, beginning of year 219,481 33,557
------------ ------------
Cash and equivalents, end of year $ 461,023 $ 219,481
============ ============

<PAGE>

TRI-NATIONAL DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
RETAINED
PREFERRED COMMON TREASURY MINORITY EARNINGS TOTAL
STOCK STOCK STOCK INTEREST (DEFICIT) EQUITY
----- ----- ----- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT AT APRIL 30, 1997 $6,000,000 $7,438,408 $ - $ 256,365 $(1,198,031) $12,496,742

ISSUANCE OF PREFERRED STOCK 3,458,000 3,458,000
ISSUANCE OF COMMON STOCK 1,632,314 1,632,314
SALE OF TREASURY STOCK - -
MINORITY INTEREST (256,365) (13,597) (269,962)
NET INCOME 798,390 798,390
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT APRIL 30, 1998 9,458,000 9,070,722 - - (413,238) 18,115,484

ISSUANCE OF PREFERRED STOCK
ISSUANCE OF COMMON STOCK 2,212,532 2,212,532
COMMON STOCK FOR SERVICES 1,644,979 1,644,979
TREASURY STOCK REPURCHASED (3,381,174) (3,381,174)
TREASURY STOCK ISSUED
TO VALCAS 1,200,000 1,200,000
MINORITY INTEREST
NET INCOME (LOSS) (2,906,671) (2,906,671)
NULLIFICATION OF NETROM, INC.
SALE OF LAND (3,726,917) (3,726,917)
REDUCTION OF INTEREST
EXPENSE ON VALCAS NOTES 630,324 630,324
---------- ---------- ---------- ---------- ---------- ----------
BALANCES AT APRIL 30, 1999 $9,458,000 $12,928,233 $(2,181,174) $ - $(6,416,502) $13,788,557
========== ========== ========== ========== ========== ==========
</TABLE>

See accompanying notes.

<PAGE>

TRI-NATIONAL DEVELOPMENT CORP.

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

ORGANIZATION AND BUSINESS ACTIVITY

Tri-National Development Corp. ("TND" or the "Company") is a multi-faceted
international real estate development, sales and management company,
publicly traded under the symbol, "TNAV" on the NASDAQ OTC BB. The
Company's development efforts are focused in four major areas: residential
development, resort properties, commercial development and assisted living
facilities.

The Company was incorporated on July 31, 1979 as Rocket Energy Resources
Ltd. under the laws of the Province of British Columbia, Canada by
registration of its Memorandum and Articles. The Company changed its name
to MRI Medical Technologies, Inc. in April of 1989. On December 7, 1992,
the Company changed its name to Tri-National Development Corp. and
recapitalized on the basis of five (5) common shares of MRI Medical
Technologies, Inc. for one (1) common share of Tri-National Development
Corp. In January of 1997, the Shareholders approved a special resolution
to change the corporate domicile from Vancouver, B.C. to the state of
Wyoming. On February 24, 1997, the Company's Articles of Continuation were
accepted by the state of Wyoming and it is now incorporated in good
standing under the laws of the State of Wyoming. The Company maintains its
executive offices in San Diego, California at 480 Camino Del Rio S. in
Suite 140 and its telephone number is 619-718-6370.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Greater San
Diego Imaging Center, a 100% owned subsidiary and Activity Link, Inc.,
owned 100% by the Company. All material intercompany accounts and
transactions have been eliminated in the consolidation.

EARNINGS PER SHARE

Primary earnings per share have been computed based on the weighted average
number of shares and equivalent shares outstanding during each period. The
dilutive effect of stock options and warrants has been considered in the
computation of equivalent shares and is included from the respective dates
of issuance.

The fully diluted computation is based on the number of shares for the
twelve months ended April 30, 1999 and 1999. The computation contemplates
the dilutive effects of common stock equivalent shares as well as
conversion of the convertible preferred stock.

Since the date of issuance of the warrants and options, both primary and
fully diluted earnings per share computations limit the assumption of the
repurchase of treasury shares to a maximum of 20% of the outstanding shares
of the Company.

FURNITURE AND EQUIPMENT

Furniture and equipment are stated at cost and depreciated over the
estimated useful lives of the assets (five to seven years) using the
straight line method.

NOTE 2. Citizens Business Bank Award Receivable

In March 1992, the Company advanced $383,064 to MRI Medical Diagnostics,
Inc. for a joint venture interest in its subsidiary, MRI Grand Terrace,
Inc., a California corporation, to enable it to acquire a retirement hotel
located in Grand Terrace, California. In addition to the joint venture
interest, the loan was evidenced by a 15% note receivable from MRI Medical
Diagnostics, Inc. and a second trust deed and an

<PAGE>

assignment of rents from MRI Grand Terrace, Inc.. On March 22, 1993, MRI
Grand Terrace, Inc. filed a complaint against Chino Valley Bank, now known
as Citizens Business Bank (AMEX:CVB), as a result of the purchase of the
residential retirement hotel in Grand Terrace from the Chino Valley Bank.
MRI Grand Terrace, Inc. claimed that the sellers of the property (Chino
Valley Bank) had failed to disclose that the property's parking lot
encroached on the property of the adjacent parcel of land. Contrary to the
bank's representations, the Conditional Use Permit (CUP) under which the
hotel was operating was in violation, which restricted the ability of TND
and MRI Grand Terrace, Inc. to operate, refinance or sell the facility.
MRI Grand Terrace, Inc. stopped making mortgage payments to the mortgage
holder (the same Chino Valley Bank), which then filed a Notice of Default
as an initial step to foreclosure on the property. MRI Grand Terrace, Inc.
then sought Bankruptcy protection in July of 1993, and was ultimately
dismissed from Bankruptcy in May of 1995. The Chino Valley Bank
subsequently sold the property in foreclosure to itself. TND filed it's
own action against the Chino Valley Bank in early 1995, claiming that it
was defrauded and misrepresented when it advanced the $383,064 for the
closing in 1992. The Company purchased the stock of MRI Grand Terrace,
Inc., as described in Note 4 to these financial statements, in an effort to
control both lawsuits. As a result of the uncertainty of the final results
of the lawsuits, the Company previously wrote off the investment. In May
of 1998, TND and MRI Grand Terrace, Inc. received judgements in their favor
for fraud, intentional misrepresentation and deceit/negligent
misrepresentation in the Superior Court of San Bernardino, California. TND
and MRI Grand Terrace, Inc. received judgements totaling almost $5 million
dollars, including punitive and compensatory damages, plus pre-trial
interest. Beginning May 7th, 1998 the $5 million judgement began accruing,
post judgement interest of 10% or $1,400 per day until the full award is
paid. A 35% portion of the award is due to the Company's attorney. The
attorneys, however, filed for recovery of those fees as an additional award
that was heard and approved September 25, 1998. On December 3, 1998, the
court awarded the Company an additional $185,000 in legal fees.

NOTE 3. Netrom, Inc. Convertible Preferred Stock

In January of 1998, the Company, on behalf of its wholly-owned Mexican
subsidiary, Planificacion y Desarrollo Regional Jatay, S.A. de C.V., sold
50 acres of its Hills of Bajamar property to NetRom, Inc., a California
publicly traded corporation for $60,000 per acre, for a total purchase
price of $3,000,000, plus construction and management contracts on said 50
acres.

NetRom, Inc. delivered to Tri-National Development Corp. at closing,
1,000,000 shares of its Preferred Convertible stock at a value of $3.00 per
share for a total value of $3,000,000. The preferred stock accumulates
interest at a rate of 15% per annum and will be convertible into common
stock at $3.00 per share or market price for the 10 day average prior to
the date of conversion, which ever is less, but in no event less than $1.50
per share. The conversion date is at the option of Tri-National
Development Corp., however, no sooner than 12 months from the date of
closing and in no case later than 15 days after the common stock of NetRom,
Inc. trades at or above $4.00 per share for a period of thirty consecutive days.

Additionally, NetRom, Inc. provided TND warrants to purchase 1,000,000
common shares at a price of $1.25 per share, presuming that NetRom, Inc.
achieves its stated projection of $.31 per share in earnings for the year
ending December 31, 1998. In the event that NetRom, Inc. falls below the
$.31 per share earnings projection, but no lower than $.21 in earnings for
that period, then the warrant price will fall to $1.00 per share. Further,
if the earnings fall to between $.11 and $.21, then the option price will
be reduced to $.75 per share and in the event the earnings fall below $.11
per share, the option price will be reduced to $.50 per share. The price
and terms for the property are based on arms length negotiations between
the parties and was approved by the Board of Directors of TND and the
shareholders of NetRom, Inc. at their Annual Meeting of Shareholders, held
on January 19, 1998.

In April of 1999, the Company converted the 1,000,000 shares of Netrom,
Inc. preferred shares to 2,320,345 shares of restricted common shares and
released for sale 850,000 shares within the volume limitations

<PAGE>

pursuant to Rule 144. As of April 30, 1999, the Company had sold 450,000
shares at an average price of $.75 per share.

NOTE 4. Netrom, Inc. Common Stock

In June of 1998, NetRom, Inc. exercised an option to acquire an additional
200 acres of the Company's Hills of Bajamar property for $4.2 million. The
$4.2 million was paid with 4.2 million restricted shares of NetRom, Inc.
common stock. By exercising its option to acquire the 200 acres, NetRom,
Inc. increases their total holdings to 250 acres. The combined parcel will
be utilized via a joint venture arrangement with Tri-National to develop an
extreme sports destination resort on a 500-acre total parcel. This
investment of 4.2 million common shares of NetRom, Inc. represents
approximately 30% of the total shares outstanding of NetRom, Inc.

In April of 1999, this transaction was mutually undone. Neither company
was best served by maintaining the inventory of either the stock or the
land. Consequently, the sale was annulled resulting in the cancellation
of the 4,200,000 restricted common shares of Netrom, Inc. and return of the
200 acres of the Company's Hills of Bajamar.

NOTE 5. Taig Ventures, Inc. Preferred Convertible Stock

In June of 1998, the Company, on behalf of its wholly-owned Mexican
subsidiary, Planificacion y Desarrollo Regional Jatay, S.A. de C.V., a
Mexican corporation, sold 50 acres of its Hills of Bajamar property to Taig
Ventures, Inc., a Utah telecommunications corporation for $60,000 per acre,
for a total purchase price of $3,000,000, plus construction and management
contracts on said 50 acres (see "Business").

Taig Ventures, Inc delivered to Tri-National Development Corp. at closing,
3,000,000 shares of its Convertible Preferred Non-Voting Class B shares at
a value of $1.00 per share for a total value of $3,000,000. The preferred
stock accumulates interest at a rate of 15% per annum and will be
convertible into common stock at $1.00 per share or market price for the 10
day average prior to the date of conversion, which ever is less, but in no
event less than $.75 per share. The conversion date is at the option of
Tri-National Development Corp., however, no sooner than 12 months from the
date of closing and in no case later than 15 days after the common stock of
Taig Ventures, Inc. trades at or above $2.00 per share for a period of
thirty consecutive days.

Additionally, Taig Ventures, Inc. provided TND warrants to purchase
1,000,000 common shares at a price of $3.00 per share, presuming that
Taig's common shares are trading at $4.00 or higher; $2.00 per shares if
Taig's common shares are trading between $3.00 and $4.00 per share; $1.25
per share if Taig's common shares are trading between $2.00 and $3.00; and
in no event less than $.75. The price and terms for the property are based
on arms length negotiations between the parties and was approved by the
Board of Directors of TND and the shareholders of Taig Ventures, Inc. at
their Annual Meeting of Shareholders, held on April 30, 1999.

NOTE 6. Investment in MRI Medical Diagnostics, Inc., a Colorado corporation

In 1992 the Company sold its wholly owned subsidiary, MRI Medical
Diagnostics Inc., a California corporation to Petro-Global, Inc., a
Colorado publicly traded corporation. In return the Company received
6,000,000 restricted common shares of the purchaser, Petro-Global, Inc.,
plus certain mineral properties and leases. In 1992, the mineral
properties were written down to a nil value in the records and the name was
changed from Petro-Global, Inc. to MRI Medical Diagnostics, Inc.(MRI-Med).
MRI-Med filed for Chapter 11 bankruptcy protection in July 1993 in
conjunction with the Chino Valley Bank action (see Note 2). After
dividends in kind totaling 2,000,000 shares in 1992 and 1993 to TND
shareholders, and due to uncertainty in the underlying value of the
remaining 4,000,000 MRI-Med shares held by the Company, the carrying cost
of these shares was written-off in 1994. Tri-National Development Corp.
filed a reorganization plan on behalf of MRI-Med in August 1995 and, in
settlement of the litigation described in Note (2), the Company received
5,900,000 shares of MRI-Med at a deemed value of $0.50 per share, ordered
by the U.S. Federal Bankruptcy Court, plus 1,400,000 shares for
reimbursement of current expenses. In July of 1997, MRI-

<PAGE>

Med recapitalized on a 1 for 5 basis. The investment is recorded in the
books at a cost of $496,994. The Company declared and paid a stock
dividend of 750,000 shares of MRI-Med to TND shareholders of record August
31, 1997 and declared a second stock dividend of an additional 750,000 to
TND shareholders of record January 27, 1998. After the stock dividends paid
to TND shareholders in 1992, 1993, 1997 and 1998, and shares sold to
finance the reorganization the Company retains approximately 415,000 post-
split shares of MRI-Med. MRI-Med is currently traded on the Over the Counter
Bulletin Board under the symbol "MMDI" and trades in the $.05 to $.10 range.

NOTE 7. Real Estate Development Property: Hills of Bajamar

The Hills of Bajamar (formerly the Santa Fe Ranch) consists of
approximately 2,470 acres (divided into ten 247 acres parcels) of
undeveloped land located fifty miles south of San Diego, California on the
Pacific Coast side of the State of Baja California, Mexico, in the
Municipality of Ensenada. The Company originally had a right to acquire a
100% interest in the property pursuant to a series of agreements requiring
ongoing payments, for each 247 acres parcel released by the vendor.

In an effort to accommodate the Vancouver Stock Exchange, which the Company
was trading on at the time, the Company entered into an agreement with
Pacific Medical International, Inc. (PMI) whereby, subject to TND
shareholder approval, TND divested itself of all of its rights in
consideration for: retention of 86.45 acres of the first parcel of the
Santa Fe Ranch to be released by the original vendor; and the greater of
(1) a one percent royalty on the gross proceeds from the sale of any land
that is part of the said Santa Fe Ranch, or (2) $150,000 for each 247 acres
parcel released by the vendor, beginning with the release of the fourth
parcel and continuing with each release thereafter.

Prior to receiving shareholder approval, the Board renegotiated the
agreement and, on June 23, 1995, the Company held an Extraordinary General
Shareholder Meeting that approved the renegotiated agreement. Under the
renegotiated agreement, the Company was granted 51% of the issued and
outstanding shares of PMI with any dilution of stock to raise further
funding to come from the shareholdings of the minority shareholders of PMI
and not their treasury. PMI also agreed to assume a convertible promissory
note to a Mr. Yates on renegotiated terms and Yates agreed to such
assumption by PMI. The Yates note was originally secured by the Company's
rights to its 86.45 acres of the Santa Fe Ranch. The renegotiated note
with PMI provided for Yates to receive the greater of $2,000 or 50% of the
sale price for each acre of the Santa Fe Ranch sold until all funds due to
him were paid, with Yates also to receive a lien against the first 250
acres of the Santa Fe Ranch as security.

The Company then entered into a new agreement in November of 1996 with PMI
to acquire all right and title to the 237 acres then fully paid and in
escrow, as well as, the balance of the contract for the remaining 2,233
acres for a $700,000 promissory note payable, 500,000 shares of TND Class
B Series B Preferred Stock at a value of $4.00 per share and the return of
its 51% interest in PMI. In January of 1998, the Company converted the
$700,000 promissory note into 1,000,000 common shares of the Company. The
Company's basis in the Hills of Bajamar taking into account cash invested,
stock issued and notes given, totals $4,159,159. PMI remains responsible
for its own debts, including Mr. Yates.

In September of 1998, the Company, in accordance with its contract, took
title to an additional 257 acres, for a total of 494 acres, and placed the
balance of 2,000 acres of Hills of Bajamar in trust with Banco Ixe. Title
to the 2,000 acres will be released to the Company as annual payments are
made to the seller.

NOTE 8. Plazas Resort Timeshares and Commercial Property

In December of 1996, the Company entered into an acquisition agreement with
Valcas Internacional, S.A., to acquire 100% of the stock of Inmobilaria
Plaza Baja California, S.A., a Mexican corporation, including its existing
assets, which include 16+ developed acres of ocean front land within the
Bajamar resort with plans for 328 vacation ownership (timeshare) units,
plus a 26,000 square-foot adjacent commercial building under construction
for $13,079,055, payable with notes for $9,079,055 and 1,000,000 Class B
Series B Convertible Preferred shares with a value of $4.00 per share. See
details for Notes Payable. During the the Company's third quarter, the
Company paid $200,000 additional as it modified the original contract.

<PAGE>

NOTE 9. La Perla Condominiums

NOTE 10. Activity Link, Inc.

NOTE 11. Assisted Living - Youngtown

In January of 1998, TND finalized negotiations and executed agreements to
purchase its first assisted living facility to be built and delivered, for
a combination of $110,000 in cash, 864,500 shares of the Company Class B
Series B Convertible Preferred Stock and a new mortgage for a total of
$8,140,000. Tri-National, through its majority owned subsidiary, Alpine
Gardens East, intends to own and operate this 126-bed assisted living
facility in Youngtown, Arizona. This facility is planned to include 40
two-bedroom units, 50 one-bedroom units and 36 units reserved for Alzheimer
and Dementia residents. In June of 1998, the Company closed on this
property. In July of 1999, a formal ground breaking took place with the
Mayor of Youngtown and the Company just recently finished construction on
two models. The Company has received a commitment for $10,500,000 in
construction financing from Del Mar Mortgage for the buildout of the rest
of the project.

NOTE 12. Assisted Living - Carlsbad

In October of 1998, the Company entered into a purchase agreement to
acquire 3.66 acres of undeveloped property overlooking the Pacific Ocean in
Carlsbad, California for $2,900,000, with a $40,000 down payment at
signing. The Company, through its majority owned subsidiary, Alpine
Gardens East, intends to develop and operate this 180-bed assisted living
facility, with an Alzheimer's care component. As of April 30, 1999, the
Company had paid a total of $104,500 in connection with this acquisition.

NOTE 13. Alpine Gardens East

Alpine Gardens East is a Nevada corporate formed to own and operate
assisted living facilities in the southwest United States. As of April 30,
1999, the Company has paid $270,500 in cash and the issuance of 864,500
shares of Class B Series B preferred stock, which was converted during year
end to 864,500 common shares.

<PAGE>

NOTE 14. Plaza Rosarito

On November 20, 1998, Tri-National Holdings, S.A. de C.V., a wholly-owned
Mexican subsidiary, purchased the Plaza San Fernando from Banco Bital with
a $1 million cash down payment. In July of 1999, Capital Trust, Inc. of
New York, the Company Investment Banker, provided the remaining $8 million
necessary to close and complete the escrow and will maintain a
participation in the project. Plaza San Fernando's appraised value is in
excess of $33 million. Tri-National has renamed this property, Plaza
Rosarito. It is located in the heart of Rosarito Beach in Baja California,
Mexico, minutes from the 20th Century fox film studio where "Titanic" was
filmed and down the street from the famous Rosarito Beach Hotel. Plaza
Rosarito includes 15 acres of undeveloped oceanfront land zoned for a 450-
room hotel and convention center that is already approved for a $38 million
construction loan from Fonatur, the tourism arm of the Mexican government,
and 18 acres of developed land, including 187,500 square feet of existing
steel, concrete and marble commercial space, 52 developed residential lots
and a 80% complete 36-unit condominium complex.

NOTE 15. Portal Del Mar Condominiums

NOTE 16. Former Banco Atlantico Building

In February of 1999, Tri-National Tijuana, S.A. de C.V., a newly formed,
wholly-owned Mexican subsidiary, signed purchase agreements and provided
the $25,000 down payment to acquire Banco Atlantico for $950,000. Banco
Atlantico is a 20,000 square foot, 2-story commercial building in the heart
of the banking district in Tijuana, Mexico.

NOTE 17. International Health Networks, Inc.

International Health Networks, (IHN) is Nevada corporation and a majority-
owned subsidiary of the Company. IHN is headed up by three prominent
physicians, all of whom are also shareholders of Tri-National, including
Dr. Jerry Parker, who is a director of the Company. IHN is a multitude of
U.S. medical services designed for Mexico that the Company has envisioned
for the past several years as the magnet for attracting the retiree market
in Baja California, Mexico.

The primary focus for IHN is a planned medical campus, to be built on Hills
of Bajamar property. The medical campus was originally contracted for by
IHN in 1997 in an agreement that called for 150 acres at the south end of
the property at a price of $25,000 per acre with an option for an
additional 100 acres at $60,000 per acre for 3 years. The Company retained
the construction rights to build all required facilities on the combined
250 acres and maintain a property management contract. The campus is to
include an acute care hospital associated with a recognized U.S. medical
provider, a medical school complete with dormitories, class rooms and
auditorium, medical exhibition center, R & D facilities for pharmaceutical
industry and facilities for long-term care combined with anti-aging and
wellness programs. This campus is important not only to the region, but to
the Company's desire to create a retirement mecca on its properties. With
IHN now a majority-owned subsidiary of TND, the original contract is being
revised.

<PAGE>

NOTE 18. Furniture and Equipment

Furniture and equipment consists of the following:

Furniture and equipment $672,679
Less accumulated depreciation (25,478)
--------
$647,201
========

NOTE 19. Loans Payable Short-Term

To implement its business strategy, the Company intends to initially fund
acquisitions, development and general working capital by issuing a Private
Placement of nine-month Corporate Notes at 10% interest per annum to
institutional and accredited investors. The investors principal and
interest are guaranteed by the Company and further bonded by New England
Surety Co., for up to $8 million. The Company collateralized the $8 million
in bonding from New England Surety Co. with 187 acres of its Hills of
Bajamar property. The Company has, at its option, the ability to
renegotiate for up to an additional $15 million of bonding from New England
Surety Co., once the $8 million has been placed, using additional
collateral. The Company intends to repay the principal and interest with
cash flow generated from leases and sales of residential lots,
condominiums, single family homes and timeshares. As of April 30, 1999 the
Company placed $7,424,254 in Corporate Notes, of which $1,484,850 will be
retired in the next 12 months.

NOTE 20. Long-Term Notes Payable

Long-term notes payable at April 30, 1999, consisted of the following:

Note payable to Scripps Bank secured
By vehicle, due in monthly installments
Of $460 per month, including interest of
7.45% through September 2001 $ 12,286

Note payable to Greater San Diego
Imaging Center, LLC balloon
Payment 12% due January 30, 2000 349,434

Note payable for capital lease to
Commercial Money Center, Inc. 460,952

Notes payable to Valcas Internacional,
S.A. de C.V., pursuant to La Perla 5,000,000
Construction contract

Corporate Notes payable to accredited
Investors - 10% per annum 7,424,254

Note payable and cash payable to
DUBSCA upon closing of vacation
ownership (timeshare) project 9,079,055

<PAGE>

Note payable to North County Bank
Guaranteed by a stockholder and equipment,
due in monthly installments of $860, with
interest at 10.5%, through October, 2001 21,788
----------
22,347,771
Less current portion ( 1,519,572)
----------
Long-term debt, net of current portion $20,828,199
==========

Maturities of long-term debt are as follows:

Period ending
April 30 Amount
-------- -------

2000 $1,519,572
2001 5,207,050
2002 5,207,050
2003 5,207,050
2004 5,207,050
$22,347,771
===========

NOTE 21. Leases

Future minimum operating lease payments as of April 30, 1999 are as follows:

1999 $210,700
2000 252,840
--------
$463,540
========

NOTE 22. Greater San Diego Imaging Center

This facility has provided magnetic resonance imaging (MRI) services in the
San Diego area since 1990. On June 4, 1996 the Company entered into an
Asset Purchase Agreement with Greater San Diego Imaging Center (GSDIC) with
an effective date of November 1, 1996. GSDIC owns and operates a magnetic
resonance imaging center in San Diego, California. The Company agreed to
purchase the fixed assets, certain trade accounts receivable, certain
assignable contracts, leases and agreements, prepaid expenses and the
goodwill of the business. The purchase price is $599,999 for the fixed
assets and $1.00 for other assets and is payable as follows:

(a) by payment of $325,000, of which $25,000 U.S. was paid upon execution
of the agreement (partially paid from deposit on letter agreement), and
(b) by the issuance of 857,142 common shares of TND based upon a value of
$0.35 U.S. per share for total share consideration having a value of
$300,000 U.S., and
(c) on December 30, 1996, the Company entered into an agreement with First
Colonial Ventures, Ltd., Nevada publicly traded company, to sell it 1/3 of
GSDIC for $350,000 cash, payable over twelve months. As of April 30, 1998,
First Colonial had paid a total of $112,367, with unpaid principal,
interest and penalties of $357,748. The Company has declared First
Colonial in default and has retained the 1/3 interest as liquidated damages.

<PAGE>

This facility, with tenant improvements, was originally financed for $2.5
million. The equipment has a current appraisal of $1.2 million and tenant
improvements valued at $241,000. An $75,000 "open unit" upgrade was
completed for claustrophobic and large patients.

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

None.

<PAGE>

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The By-Laws of the Company provide for indemnification of officers and
directors. The specific provision of the By-Laws related to such
indemnification is as follows:

PART 19

INDEMNITY AND PROTECTION
DIRECTORS, OFFICERS AND EMPLOYEES

19.1 Subject to the provisions of the Company Act, the Directors shall
cause the Company to indemnify a Director or former Director of the Company
and the Directors may cause the Company to the Company is or was a
shareholder the heirs or personal representatives of any such person
against all costs, charges and judgment, actually and reasonably incurred
by him or them including an amount paid to settle an action or satisfy a
judgement in a civil, criminal or administrative action or proceeding to
which he is or they are made a party by reason of his being or having been
a Director of the Company or a director of any such corporation. Each
Director of the Company on being elected or appointed shall be deemed to
have contracted with the Company on the terms of the foregoing indemnity.

19.2 Subject to the provisions of the Company Act, the Directors may cause
the Company to indemnify any officer, employee or agent of the Company or
of a corporation of which the Company is or was a shareholder
(notwithstanding that he is also a Director) and the heirs or personal
representatives against all costs, charges and expenses whatsoever incurred
by him or them and resulting from his acting as of officer, employee or
agent of the Company (if he shall not be a full time employee of the
Company and notwithstanding that he is also a Director), and his heirs and
legal representatives against all costs, charges and expenses whatsoever
incurred by him or them and Secretary by the Company Act or these Articles
and each such Secretary and Assistant Secretary shall on being appointed be
deemed to have contracted with the Company on the terms of the foregoing
indemnity.

19.3 The failure of a Director or officer of the Company to comply with the
provisions of the Company Act or of the Memorandum or these Articles shall
not invalidate any indemnity to which he is entitled under this Part.

19.4 The Directors may cause the Company to purchase and maintain insurance
for the benefit of any person who is or was serving as a Director, officer,
employee or agent of any corporation of which the Company is or was a
shareholder and his heirs or personal representatives against any liability
incurred by him as such Director, officer, employee or agent.

OFFICERS AND DIRECTORS

The following table sets forth the name, age and position of each of the
persons who were serving as executive officers and directors of the Company
as of July 31, 1999.

<PAGE>

POSITIONS HELD
NAME AGE WITH THE CORPORATION SINCE
- ---- --- -------------------- -----
Michael A. Sunstein 57 Director, CEO & 1989
President
Gilbert Fuentes 66 Chief Financial Officer 1996
Paul G. Goss 56 V.P. Legal Counsel, U.S. 1996
Bersain Gutierrez 42 V.P. Legal Counsel, Mexico 1998
Shane Kennedy 35 Director 1994
Arthur Lilly 67 Director 1995
Dr. Jerry Parker 62 V.P. Medical Development 1996
Jay Pasternak 42 Director 1994
Dr. Robert Rosen 52 Director 1989
Jason Sunstein 28 Secretary, 1989
V.P. Investor Relations
Ted Takacs 52 Director 1994
James Vernes 51 V.P. Real Estate Sales 1998

Set forth below is biographical information about each of the Company's
executive officers and directors.

MICHAEL A. SUNSTEIN. Mr. Sunstein has been the Chief Executive Officer and
a Director of the Company since 1989. Prior to joining the Company, Mr.
Sunstein spent 15 years in the housing industry, primarily with Kaufman and
Broad Homes, Inc., a New York Stock Exchange listed company, where he
served as President of the Midwestern Division and acting President of the
East Coast Division. In those capacities he was responsible for the
financial, building and delivery of approximately $30,000,000 in housing
sales annually. He resigned from Kaufman and Broad and started his own
firm in the building and materials and single-family home industry in Michigan.

GILBERT FUENTES. Mr. Fuentes has been the Chief Financial Officer since
1996. He has 25 years of experience in the banking industry. He has held
the positions of President and Chief Executive Officer, Senior Vice
President, Chief Financial Officer, Treasurer and Comptroller for multi-
billion dollar banking organizations. He has authored several articles in
the fields of finance and cash management, as well as the 1992 and 1993
Economic Forecast of the United States and Mexico, published by the U.S.
Mexico Foundation. Mr. Fuentes has developed innovative cash management
systems, investment strategies and strategic financial plans that resulted
in millions of dollars of incremental income for his former employers.

PAUL G. GOSS. Mr. Goss has been a Vice President and General Counsel to
the Company since September of 1996. Mr. Goss has been the Executive Vice
President and General Counsel for One Capital Corporation, a private
merchant bank with offices in New York and Denver since 1990. Prior to
joining One Capital Corporation, Mr. Goss was engaged in the private
practice of law in Denver, Colorado with a concentration in real estate,
corporate and securities law. He is a member of the Denver and Colorado
Bar Associations. Mr. Goss has a Masters in Business Administration in
addition to his law degree from the University of Denver.

LIC. BERSAIN GUTIERREZ. Mr. Gutierrez joined the Company in October of
1998 as V.P. Legal Counsel, Mexico and Director of Mexican Operations. He
has been instrumental in negotiating, coordinating title policies, surveys
and the filing and approval for Municipal zoning and permits for the
Company's real estate projects in Mexico. Prior to joining the Company,
Mr. Gutierrez held high positions in the Secretaria de Hacienda y Credito
Publico (I.R.S. of Mexico), as well as District Attorney for the Federal
District of Mexico City. He also held high positions in the Procudaria de
Justicia del D.F. (the F.B.I. of Mexico). Mr. Gutierrez graduated with
honors from the law school of Universidad Autonoma de Mexico in 1979.

SHANE KENNEDY. Mr. Kennedy has been a Director of the Company since 1994.
Mr. Kennedy has been an insurance adjuster for the Insurance Corporation of
British Columbia since 1990 and is also President of Northern Trader
Incorporated, which is an import and export company. He is Canadian
citizen. Mr. Kennedy received his B.A. degree in Political Science from
the University of British Columbia.

<PAGE>

ARTHUR W. LILLY. Mr. Lilly has been a Director of the Company since 1995.
Since January 1, 1995, he has been and is currently Vice President of
Finance and Chief Financial Officer of Canlan Investment Corp. From 1968
to 1994, Mr. Lilly was a partner in the accounting firm of Lilly
Johanneson, which served as the Company's auditors from 1988 to 1994. Mr.
Lilly, a Chartered Accountant, has a Bachelor of Commerce degree from the
University of British Columbia.

DR. JACOB J. PARKER. Dr. Parker is currently Medical Director and Director
of Radiology for several MRI centers and breast imaging centers in Northern
California since 1973. He was previously Chief of Radiology and Nuclear
Medicine at Ross General Hospital, Clinical Professor of Radiology at the
University of California, Irvine, and Instructor of Radiology at the
University of Southern California Medical Center from 1970 to 1988.
Dr.Parker received his M.D. from the University of Manitoba, Canada in 1962.

JAY PASTERNAK. Mr. Pasternak has been a Director of the Company since
1994. He is a Canadian citizen who has spent the last ten years in the
private practice of mental health counseling at the Denwood Institute in
Toronto, Canada, Ontario Hydro, Futures Ontario and the Hubar Memorial
Hospital, all Canadian government facilities. Mr. Pasternak is a C.L.S.
graduate from McMaster University in Hamilton, Ontario (1994) and a Human
Services Counselor graduate from George Brown University 1996.

DR. ROBERT R. ROSEN. Dr. Rosen has been a Director of the Company since
1989. Dr. Rosen is an opthamologist and is presently Executive Director of
MAC-IPA, a 47 physician multi-specialty IPA in Montgomery County,
Tennessee, where he is responsible for policy, long range strategic
planning, physician recruitment, contracting and utilization review. From
1993 to 1995 he was Medical Director of the MidSouth Eye Center in
Clarksville, Tennessee, a private practice, and Medical Director of EYE PA,
a nationwide integrated delivery system for eyecare, a subsidiary of
EYECORP/PRG. From 1992 to 1993 he was Associate Medical Director of East
County Physician Medical Group (IPA) in San Diego, California and from 1977
to 1993 he was President and Medical Director of Eye Care Professionals in
San Diego, a single specialty medical corporation. He was also Medical
Director of the Pearle Eye Foundation from 1987 to 1993, a non-profit
corporation and he also served as Medical Director for Pearle Visioncare,
a California Knox-Keane HMO from 1986 until 1993. Dr. Rosen was Assistant
Clinical Professor of Opthamology at the University of California, San
Diego from 1977 until 1993.

JASON A. SUNSTEIN. Mr. Sunstein has been Vice President of Investor
Relations for the Company since 1989 and for MRI Medical Diagnostics, Inc.
since 1992. He attended San Diego State University where he majored in
Finance and is a licensed securities broker. He is the son of Michael
Sunstein.

THEODORE TAKACS. Mr. Takacs has been a Director of the Company since 1994.
Mr. Takacs is a Canadian citizen who for the last ten years has been
engaged in labor relations consulting and negotiation. He is presently a
Constituency Assistant to the Honorable Bill Barlee in Osoyoos, British
Columbia where he also owns and operates an orchard.

JAMES J. VERNES. Mr. Vernes joined the Company in 1998 as Vice President
of Marketing and Sales. He is one of the foremost authorities on the sales
and marketing of vacation ownership (timeshare) projects. He will be
responsible for the marketing and sales of the Company's vacation ownership
development at Bajamar. He has orchestrated over $215 million in sales and
has been the Director for some of the largest and most successful projects
in Canada, Mexico and the United States. He has created an innovative
approach to sales and marketing that has established such records as $21
million in sales in one day and a total of $34.5 million in 6 months at a
total cost of sales of 25%. Mr. Vernes' techniques and philosophies are at
the zenith of the industry. By networking sales through the real estate
brokerage communities, he has proven that superior results can be achieved
in a highly professional, sophisticated manner. Mr. Vernes will guide the
vacation ownership development at Bajamar through all phases from the
design and development to pricing, sales and marketing. His consulting,
marketing and sales expertise will provide the development with the widest
market for its product and play an instrumental role in the project's long
term success.

<PAGE>

ADVISORY TEAM

The Company has assembled a team of advisors to consult the Company from
time to time on various business matters. The following are key members of
the advisory team:

DOUGLAS MORGAN. Mr. Morgan joined the Company in 1989 as a shareholder and
in September of 1998 as a consultant for internet marketing, web design and
computer software, hardware and networking. Mr. Morgan is a Magna Cum
Laude graduate from both Massachusetss Institute of Technology with a
Bachelors Degree and Stanford University with a Masters Degree, both in
Computer Science and Electrical Engineering. He has over 25 years of
experience in the computer industry with an early background in
programming, design and project management with companies such as Computer
Sciences Corp., Hughes, NCR and Hewlett Packard.

DANIEL LOMAX. Mr. Lomax has been involved with the Company in various
capacities since 1990 and most recently as President of Solymar, the
construction company contracted to build the Company's assisted living
facilities. Mr. Lomax entered the general contracting and development
business in the State of California in 1960 with single-family homes,
remodeling, commercial projects and major shopping center tenant
improvements. In 1975, Mr. Lomax received his BI heavy construction
license from the State of Arizona and started designing, building and
financing single-family town homes, single-family lot homes and
condominiums, exceeding 1,500 units.

LOUIS LESSOR. Mr. Lessor has been a consultant to the Company since 1991
on financing and real estate transactions. Mr. Lessor has successfully
built, owned and operated numerous real estate companies, hotel properties
and oil and gas companies since 1935, including Chairman and President of
Louis Lessor Enterprises, Inc. of Beverly Hills, CA, which was listed on
the American Stock Exchange. Louis Lessor Enterprises built developed and
operated over $1,000,000,000 of commercial and residential real estate
properties and over $500,000,000 of housing projects for the Army, Navy,
Air Force and Marine Corps. all over the U.S.

DAVID RENTZ. Mr. Rentz has been a consultant to the Company since 1998 on
corporate financing and real estate transactions and most recently as
President of Rentz Christian & Co., the Company's investment banker. Rentz
Christian is the Dealer Manager of $3.2 million Private Placement for a
"Participating First Mortgage Financing Program" (see "Subsequent Events")
for Portal Del Mar (see "Business"). Mr. Rentz has been the President of
Rentz Christian & Co. for the past four years. Prior Rentz Christian &
Co., Mr. Rentz was the President of Florida Country Development, which
purchased from the Carlson Companies (TGI Fridays; Radisson Hotels, Carlson
Travel Group, etc.) the rights to franchise Country Kitchen Restaurants in
Florida. Mr. Rentz has developed commercial and residential real estate
projects in Kansas City, Mo. and Springfield, Mo. Mr. Rentz holds an MBA
from Rockhurst College and a B.S. in Economics from Central Missouri State
University.

DAVID SONNENBLICK. Mr. Sonnenblick has been a consultant to the Company
since 1996 on financing, real estate transactions and mergers and
acquisitions. Mr. Sonnenblick is currently the Managing Director of the
Los Angeles office for Sonnenblick Goldman Co., a national 105-year old
investment banking firm, headquartered in New York. Mr. Sonnenblick has
successfully closed transactions valued in excess of $1,000,000,000 on
behalf of his clients. Mr. Sonnenblick attended the University of Denver
where he was an honors student and completed his studies at the University
of Colorado where he received a B.A. in Economics in 1982.

ITEM 10. EXECUTIVE COMPENSATION

Currently, all consultants, officers and Directors of Tri-National
Development Corp. serve with minimum compensation and have so served since
they have joined the Company.

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of April 30, 1999 (based on a total of
25,861,978 outstanding shares of Common Stock) by (I) each of the Company's
Directors, (II) each of the Named Executive Officers and (III) all
executive officers and directors as a group. Except as otherwise
indicated, the Company believes the persons named in the table have sole
voting and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.

Amounts and percentages listed below do not include outstanding and
unexercised warrants and options.

NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER (1) OWNED (2) BENEFICIALLY OWNED
- -------------------- ------------------- ------------------
Michael A. Sunstein 2,063,240 %7.9800
Jerry Parker, M.D. 1,850,857 7.1600
Paul G. Goss 325,000 1.2600
Jason Sunstein 275,000 1.0600
Jay Pasternak 121,287 0.4700
Dr. Robert Rosen 90,000 0.3500
Arthur Lilly 74,000 0.2900
Gilbert Fuentes 50,000 0.1900
James Vernes 15,000 0.0700
Shane Kennedy 1,200 0.0100
Advisory Team 1,242,000 4.8000
All Directors and Officers
as a Group (10) 4,965,584 18.840
TOTAL OF ABOVE 6,107,584 23.640

(1) Except where otherwise noted, the address of the Company's directors
and executive officers is c/o Tri-National Development Corp., 480 Camino
Del Rio S., Suite 140, San Diego, California 92108.

(2) Does not include the following Employee Stock options issued to
officers and directors:

In December of 1996, 975,000 Employee Stock Options were issued to officers
and directors to purchase Common Stock in the Company at a price of $.25
per share, expiring December 31, 1999. As of April 30, 1999, 150,000
Employee Stock Options had been exercised at $.25 per share.

For the year ended April 30, 1997 a total of 1,000,000 Employee Stock
Options were issued to officers and directors to purchase Common Stock in
the Company at a price of $.50 per share and expiring December 31, 1999.
As of April 30, 1999, no Employee Stock Options had been exercised at $.50
per share.

For the year ended April 30, 1998 a total of 1,000,000 Employee Stock
Options were issued to officers and directors to purchase Common Stock in
the Company at a price of $.50 per share and expiring December 31, 1999.
As of April 30, 1999, no Employee Stock Options had been exercised at $.50
per share.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of April 30, 1999, no person known to the Company, other than the
officers and directors listed above, was a beneficial owner of more than
five percent of the Company's Common Stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

<PAGE>

PART IV

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

The following documents are filed as a part of the report:

(a) FINANCIAL STATEMENTS. The following consolidated financial statements
of the Company are included in Part II, Item 7 of this report:

Independent Auditors' Report
Consolidated Balance Sheets as of April 30, 1999 and 1998
Consolidated Statements of Operations for the year ended April 30, 1999
Consolidated Statements Cash Flows for the ended April 30, 1999
Consolidated Statements of Shareholders' Equity for the year ended
April 30, 1999
Notes to Consolidated Financial Statements

(b) REPORTS ON FORM 8-K. For the year end April 30, 1999, the two
following reports on Form 8-K were filed by the Company and are
incorporated herein by reference.

DATE OF REPORT SUBJECT OF REPORT
- -------------- -----------------

May 5, 1998 Chino Valley Bank Award
September 16, 1998 Common Stock Repurchase Program

(c ) EXHIBITS. The following exhibits are filed as a part of this report:

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

10.6 Taig Ventures, Inc. Asset Purchase Agreement for
50 Acres
10.7 Asset Purchase Agreement for Portal Del Mar
(Note: will be filed with first amendment after
translation)
10.8 Asset Purchase Agreement for Plaza Rosarito
(Note: will be filed with first amendment after
translation)
10.9 Chino Valley Bank Judgement
27.1 Financial Data Schedule

SIGNATURES:

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by this undersigned, thereunto duly authorized, in the
City of San Diego, California, on this 6th day of August, 1999.

TRI-NATIONAL DEVELOPMENT CORP.
a Wyoming Corporation

BY: Michael A. Sunstein BY: Gilbert Fuentes
TITLE: Chief Executive Officer, President TITLE: Chief Financial
Director Officer, Treasurer

BY: Jason A. Sunstein
TITLE: Vice President,
Secretary

EXHIBIT 10.6

AGREEMENT OF PURCHASE AND SALE OF ASSETS
----------------------------------------

THIS AGREEMENT IS made as of the 30th of April 1998, between Taig Ventures,
Inc. ("Taig"), a Utah corporation and Tri-National Development Corp.
("TND"), a Wyoming corporation. In consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties agree as follows:

ARTICLE 1 - Purchase and Sale of Assets
1.01 - Assets
The assets to be conveyed, transferred, signed, and delivered, as provided
by this Agreement, shall, without limitation, include 50 acres of the
property, (see Exhibit A - Legal Description) known as the Hills of Bajamar
owned by Planificacion y Desarrollo Regional Jatay, S.A. de C.V., ("PDRJ")
a Mexican Corporation, which is a wholly-owned subsidiary of "TND", but
does not include any other assets of "TND" or "PDRJ". The 50 acres will be
transferred to "Taig" at a price of $ 60,000 per acre, for a total purchase
price of $ 3,000,000.
1.02 - Consideration - As full payment for the transfer of the assets
by "TND" to "Taig", the latter shall deliver at closing, the following:
Common Stock in Taig Ventures, Inc. "Taig" shall deliver to "TND", at
closing, shares of its common stock in the total amount of 3,000,000 shares
based on a value of $ 1.00 per share. "TND" commits to withhold these
shares from sale for a period of at least one year from the first day of
public trading of "Taig" common shares on the NASD Over the Counter Market,
expected in July of 1998. "Taig" in consideration for "TND" withholding the
sale of the shares for a minimum of one year agree that in the event that
the common shares identified herein are not trading at a price of at least
$ 1.00 per share one year from the date of this Agreement, "Taig" will
issue additional common shares to "TND" in an amount to then equal the
difference between $ 1.00 and the market price at close of that date. The
price and terms for the property is based on recent negotiations between
the parties and is subject to the approval of both parties' Board of
Directors.
1.03 - Participation Agreement - It is agreed that "Taig" intends to
proceed with the development of a Communications Facility on all or a
portion of the property. The compound used to house the Facility will
contain warehousing units for the storage of non-hazardous material,
transmissions systems along with other forms of communications equipment,
and limited employee housing units. Any amendments hereto or modifications
hereof shall be binding upon the parties hereto and their respective heirs,
successors and assigns. "Taig" agrees that "TND" retains the right to
review and pre-approve any usage for the property other than as above
stated."Taig" also agrees that "TND" reserves the exclusive right to
develop and manage all facilities on this site and the adjacent land,
providing the cost for same is competitive with outside sources.
1.04 - Exclusive Rights
In exchange for the exclusive right to provide and service all of the
residential and commercial communication needs for the Hills of Bajamar
property, "TND" will retain a 10% equity position in the Communications
Facility built on said property. The cost for providing and servicing the
communication needs of the property must remain competitive with outside
sources.
1.05 - Closing - The closing of this Agreement will take place on or
before the 30th day of April, 1998.
1.06 - Taxes - "Taig" and "TND" shall pay all taxes and fees,
excluding their individual income taxes, arising out of the transfer of the
assets.

ARTICLE 2 - Representations and Warranties of "TND"
2.01 - Warranties
"TND" represents and warrants that;

(i) Organization: "TND" is a corporation duly organized, validly existing,
and in good standing under the laws of Wyoming, has all necessary corporate
powers to own and sell its properties

<PAGE>

and carry on business as now owned and operated by it and is in good
standing in the State of Wyoming.
(ii) Title: "TND" through its wholly owned subsidiary "PDRJ" is the owner,
beneficially and of record, of all assets identified or referred to in
paragraph 1.01 of this Agreement which as of closing shall be free and
clear of all liens, encumbrances, security agreements and any other
restrictions.
(iii) Condition of Property: "TND" confirms that the property identified or
referred to in paragraph 1.01 of this Agreement is fit for human occupation
and has not been used in the past for the deposit or storage of hazardous
waste or chemicals and that it is suitable for its intended purpose as
outlined in 1.03 of this Agreement.
2.02 - Absence of Changes
Since March 1, 1997, there has not been and will not at closing be any
changes in the financial condition or operation of "TND", except changes in
the ordinary course of business, which changes have not in the aggregate
been materially adverse to "Taig"'s interests.
2.03 - Compliance With Laws
"TND" represents that, to the best of its knowledge, it has complied with,
and is not in violation of any applicable federal, state or local statutes,
laws or regulations, affecting the assets or operation of the business of
"TND", both in Mexico and in the United States.
2.04 - No Breach or Violation
The consummation of the transaction contemplated by this Agreement shall
not result in or constitute any of the following:
(i) A breach of any term or provision of this Agreement;
(ii) A default or event that, upon notice or lapse of time or both, would
be a default, breach or violation of the Articles of Incorporation or
Bylaws of "TND", or any lease, license, promissory note, contract,
commitment or other agreement, instrument or arrangement to which "TND" is
a party;
(iii) An event that would permit any party to terminate any agreement.
2.04 - Authority
"TND" has the right, power, legal capacity and authority to enter into and
perform its respective obligations under this Agreement, subject only to
its Board of Directors approval, which should be secured prior to closing.
2.05 - Full Disclosure
None of the representations and warranties made by "TND", hereunder, or on
its behalf, contains or shall contain any untrue statement of material
fact, or omits or shall omit any material fact, the omission of which would
be misleading.

ARTICLE 3 - Representations and Warranties of "Taig"
"Taig" represents and warrants that:
(i) Organization: "Taig" is a corporation duly organized, validly existing,
and in good standing under the laws of Utah, has all necessary corporate
powers to own and sell its properties and carry on business as now owned
and operated by it and is in good standing in the State of Utah.
(ii) Pre-existing Relationship: "Taig" has a pre-existing business
relationship with "TND" of a nature and duration that has enabled it to
evaluate the business and financial circumstances of "TND" and the risks
and merits of this acquisition.

ARTICLE 4 - Obligations Before Closing

4.01 "TND"s Covenants
"TND" covenants that from the date of this Agreement until the closing:
(i) Access to Information: "Taig" and its representatives shall have full
access during all business hours to all properties, books, accounts,
records, contracts, and documents of, or relating to the assets and
property of "TND" being sold hereunder.
(ii) Conduct of Business: "TND" shall carry on its business and activities
diligently and in substantially the same manner as it previously has been
carried on, and shall not institute or

<PAGE>

use any unusual or novel methods of manufacture, purchase, sale, lease,
management, accounting or operation that shall vary materially from those
methods used by "TND" as of the date of this Agreement.
4.02 Warranties at Closing
All representations and warranties of "TND" and "Taig" set forth in this
Agreement, shall also be true and correct as of the closing date as if made
on that date.

ARTICLE 5 - Conditions Precedent to "Taig"s Performance

5.01 Conditions
The obligations of "Taig" to purchase the assets under this Agreement are
subject to the satisfaction, at or before closing, of all of the conditions
set out below in this Article 5. "TND" may waive any or all of those
conditions in whole or in part without prior notice.
5.02 Accuracy of Representations
Except as otherwise set forth in this Agreement, all representations and
warranties by "TND" in this Agreement shall be true on and as of the
closing date as though made at that time.
5.03 Performance of "TND"
"TND" shall have performed, satisfied and complied with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by it on or before the closing date. During the period from
execution of this Agreement by both parties to the closing date, there
shall not have been any material adverse change in the financial condition
or the results of operations of "TND" and "TND" shall not have sustained
any material loss or damage to its assets, whether or not insured, that
materially affects its ability to conduct a material part of its business.
5.04 Absence of Litigation
No action, suit or proceeding before any court or any governmental body or
authority, pertaining to the transaction contemplated by this Agreement,
shall have been instituted or threatened on or before closing date.
5.05 Consents
All necessary agreements and consents to the consummation of the
transaction contemplated by this Agreement, if any, shall have been
obtained by "TND" and delivered to "Taig" at or before closing.

ARTICLE 6 - Conditions Precedent to "TND"s Performance

6.01 Conditions
The obligations of "TND" to sell and transfer the assets under this
Agreement are subject to the satisfaction, at or before the closing, of all
the following conditions in this Article 6.
6.02 Accuracy of Representations
Except as otherwise set forth in this Agreement, all representations and
warranties by "Taig" in this Agreement shall be true on and as of the
closing date as though made at that time.
6.03 "Taig"s Warranties
All representations and warranties by "Taig" in this Agreement shall be
true on and as of the closing date as though such representations and
warranties were made on and as of that date.
6.04 Absence of Litigation
No action, suit or proceeding before any court or any governmental body or
authority, pertaining to the transaction contemplated by this Agreement,
shall have been instituted or threatened on or before closing date.
6.05 Performance of "Taig"
"Taig" shall have performed, satisfied and complied with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by it on or before the closing.

<PAGE>

6.06 Bankruptcy
In the event of bankruptcy, receivership or insolvency by either party, the
surviving party shall succeed to the rights and or position in the 50 acres
and or any subsequent contracts that may have been entered into for the
development of the property, subject to Bankruptcy court approval. Neither
party shall assign or sell their interest in this Agreement without the
other party's consent, which shall not be unreasonably withheld. The
parties also agree to enter into a formal buy & sell agreement at the
earliest possible date.
6.07 Consents
All necessary agreements and consents to the consummation of the
transaction contemplated by this Agreement, if any, shall have been
obtained by "TND" and delivered to "Taig" at or before closing.

ARTICLE 7 - The Closing

7.01 Closing
The Closing of the purchase and sale described herein shall take place on
or before April 30, 1998 at 10:00 A.M. Pacific Time, at the offices of
"TND" 480 Camino del Rio South, San Diego, California or at another time
and place agreeable to the parties.
7.02 "TND"s Obligations At the Closing
"TND" shall deliver or cause to be delivered to "Taig":
(i) Instruments of placement of all assets or other property of "TND" being
acquired hereunder by "Taig" into an escrow, with title being available
subject only to receipt by "TND" of full payment pursuant to this
Agreement.
7.03 "Taig"s Obligations
"Taig" shall execute and deliver to "TND":
(i) Common Shares of its Stock described in paragraph 1.02 of this
Agreement in a form acceptable to "TND".

ARTICLE 8 - Costs

8.01 Expenses
Each of the parties shall pay all costs and expenses incurred or to be
incurred by it in negotiation and preparation of this Agreement and in
closing and carrying out the transactions contemplated by this Agreement.

ARTICLE 9 - Form of Agreement

9.01 Headings
The Subject Headings of the paragraphs and subparagraphs of this Agreement
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
9.02 Modification and Waiver
This Agreement constitutes the agreement between the parties pertaining to
the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment for this Agreement shall
be binding unless executed in writing by all the parties. No Waiver of any
of the provisions of this Agreement shall be deemed, or shall constitute,
a Waiver of any other provisions, whether or not similar, nor shall any
Waiver constitute a continuing Waiver. No Waiver shall be binding unless
executed in writing by the party making the Waiver.
9.03 Execution of the Agreement
This Agreement may be executed simultaneously in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

<PAGE>

ARTICLE 10 - Parties

10.01 Rights of Parties
Nothing in this Agreement, whether express or implied, is intended to
confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or discharge
the obligation or liability of any third persons to any party to this
Agreement, nor shall any provisions give any third persons any right of
subrogation or action over or against any party to this Agreement.
10.02 Assignment
This Agreement shall be binding on, and shall inure to the benefit of the
parties to it and their respective heirs, legal representatives,
successors, and assigns; provided, however, "Taig" may not assign any of
its rights under it, except to a wholly owned subsidiary corporation of
"Taig". No such assignment by "Taig" to its wholly owned subsidiary shall
relieve "Taig" of any of its obligations or duties under this Agreement.

ARTICLE 11 - Remedies

11.01 Arbitration
Any controversy or claim arising out of or relating to this Agreement, or
the making, performance, or interpretation thereof, shall be settled by
arbitration in San Diego, California in accordance with the Rules of the
American Arbitration Association then existing, and judgement on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy.
11.02 Time is of the Essence
Time is of the Essence in this Agreement.

ARTICLE 12 - Nature and Survival of Representations and Obligations

12.01 Effect of Closing
All representations, warranties, convenants, and agreements of the parties
contained in this Agreement, or in any instrument, certificate, opinion or
other writing provided for in it, shall survive the closing.

ARTICLE 13 - Notices
All notices, demands and other communications under this Agreement shall be
in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or
on the third day after mailing if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:

To "TND" at: Att: Mr. Michael Sunstein
Tri-National Development Corp.
480 Camino del Rio South, Suite 140
San Diego, California, 92108
U.S.A.

To "Taig" at: Att: Mr. Shane Kennedy
Taig Ventures, Inc.
4170 Still Creek Drive, Suite 200
Burnaby, B.C., V5C 6C6
Canada

<PAGE>

Either party may change its address for purposes of this paragraph by
giving the other party written notice of the new address in the manner set
forth above.

ARTICLE 14 - Governing Law
This Agreement shall be construed in accordance with, and governed by, the
laws of the State of California.

IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on
the 30th day of April 1998.

"TND": Tri-National Development Corp. by

/s/ MICHAEL SUNSTEIN
Michael Sunstein, President

"Taig":Taig Ventures, Inc. by

/s/ SHANE KENNEDY
Shane Kennedy, President

EXHIBIT 10.9

LEONARD S. SANDS
State Bar No. 28460
12721 Hanover Street
Los Angeles, CA 90049

(310) 394-1364

Attorney for Plaintiff and Cross-Defendant
MRI Grand Terrace, Inc.

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF BERNARDINO, WEST DISTRICT

MRI GRAND TERRACE, INC. ) CASE NO. RCV 01458
)
Plaintiff, ) NOTICE OF ENTRY OF
) JUDGMENT
v. )
)
CHINO VALLEY BANK, et al. )
)
Defendants. )
_____________________________ )
)
AND RELATED ACTIONS )
_____________________________ )

PLEASE TAKE NOTICE that the following Judgment in favor of Plaintiff,
TRI National Development Corp in the above captioned case was signed by the
Honorable Barry L. Plotkin on June 3, 1998 and entered on the same date.

This action came on regularly for trial on April 13, 1998, in
Department 4 of the above-entitled Court, the Honorable Barry L. Plotkin
presiding. Leonard S. Sands appeared as attorney for Plaintiff, TRI
National Development Corp and Steven Cote appeared as attorney for
Defendant, Chino Valley Bank, now known as Citizens Business Bank.

A jury of 12 persons was regularly impaneled and sworn. Witnesses
were sworn and testified. After hearing the evidence and arguments of
counsel, the jury was duly instructed by the Court and

- 1 -

<PAGE>

the cause was submitted to a jury. The trial was bifurcated; the first
phase determined liability. The jury found against defendant and for
plaintiffs on two causes of action: negligent and intentional
misrepresentation. The second phase determined damages. The jury
deliberated and thereafter returned into court with its verdict as follows:

FOR FORM OF SPECIAL VERDICT MISREPRESENTATION DAMAGES:

We, the jury in the above entitled action, find the following special
verdict on the following questions submitted to us:

Question No. 1: Did the defendant make a representation as to a
past or existing material fact?
Answer: YES

Question No. 2: Was the representation false?
Answer: YES

Question no. 3a: Did the defendant know that the representation
was false when it made it?
Answer: YES

Question No. 3b: Did the defendant make the representation
recklessly without knowing whether it was true or false?
Answer: NO

Question No. 4: Did the defendant make the representation with an
intent to defraud the plaintiff?
Answer: YES

Question No. 5: Was the plaintiff aware of the falsity of the
representation?
Answer: NO

Question No. 6: Did the plaintiff act in reliance upon

- 2 -

<PAGE>

the truth of the representation?
Answer: YES

Question No. 7: Was the plaintiff justified in relying upon the
representation?
Answer: YES

Question No. 8: Was the foreclosure of the MRI Grand Terrace
Retirement Hotel a direct and proximate result of defendant's
misrepresentation?
Answer: YES

If your answer to Question No. 8 is "yes", go to Question No. 11.
Question No. 11: Do you find that plaintiff sustained losses as
a result of the misrepresentation?
Answer: YES

If your answer is "yes", what is the amount of all damage
suffered as a consequence of the foreclosure?
Answer: $190,000.00

Question No. 12: Do you find that plaintiff sustained any other
damages proximately caused by the misrepresentation(s)?
Answer: NO

The jury further found that plaintiff recover prejudgment
interest on the amount of damages herein ($190,000) accruing
interest at the legal annual rate from the date of rescission (2/18/93).

FOR FORM OF SPECIAL VERDICT - PUNITIVE DAMAGES

We, the jury in the above entitled action, find the following special
verdict on the following questions submitted to us:

- 3 -

<PAGE>

Question No. 1: Did you find by clear and convincing evidence
that defendant made a representation as to a past or existing
material fact?
Answer: YES

Question No. 2: Did you find by clear and convincing evidence
that the representation was false?
Answer: YES

Question No. 3a: Did you find by clear and convincing evidence
that defendant knew that the representation was false when he/she
made it?
Answer: YES

Question No. 3b: Did you find by clear and convincing evidence
that defendant made the representation recklessly without knowing
whether it was true or false?
Answer: NO

Question No. 4: Did you find by clear and convincing evidence
that defendant made the representation with intent to defraud the
plaintiff?
Answer: YES

Question No. 5: Did you find by clear and convincing evidence
that plaintiff was not aware of the falsity of the
representation?
Answer: YES

Question No. 6: Did you find by clear and convincing evidence
that plaintiff acted in reliance upon the trust of the
representation?
Answer: YES

Question No. 7: Did you find by clear and convincing

- 4 -

<PAGE>

evidence that plaintiff was justified in relying upon the
representation?
Answer: YES

Question No. 8: Did you find by clear and convincing evidence
that defendant's misrepresentation caused plaintiff damage?
Answer: YES

Question No. 9: What was the content of the false
representation(s) you have found was/were made to plaintiffs?
Answer: 1) CVB had ample evidence of and prior knowledge of
condition of property.
2) At the time the contract was signed, CVB officer(s)
made verbal representations and assurances which were
not founded in fact.

FOR SPECIAL VERDICT PUNITIVE DAMAGES BIFURCATED TRIAL PHASE II

We, the jury in the above entitled action, find the following special
verdict on the questions submitted to us:

Question No. 1: Shall punitive damages be assessed against
defendant Chino Valley Bank?
Answer: YES

Question No. 2: We assess punitive damages against the defendant
Chino Valley Bank as follows:
For Tri-National Development Corp in the amount of $320,000
For MRI Grand Terrace, Inc. in the amount of $1,280,000

NOW, THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED that said
Plaintiff have and recover from said Defendant, Chino Valley Bank,

- 5 -

<PAGE>

now known as Citizens Business Bank, the following:

1. Plaintiff, Tri-National Development Corp. recover judgment on the
merits against Defendant, Chino Valley Bank, in the amount of $190,000
compensatory and consequential damages with interest at the statutory rate
of 10% per annum accruing from the date of entry of judgment until paid.

2. Plaintiff recover pre-judgment interest on the damages set forth
in No. 1 above against defendant, at the statutory rate of 10% per annum
accruing from 2/18/93 until paid in the amount of $123,191 (2/18/93 to and
including May 11, 1998) which amount shall further accrue interest at the
statutory rate of 10% per annum commencing from the date of entry of
judgment until paid.

3. Plaintiff recover punitive damages against Defendant in the
amount of $320,000 with interest at the statutory rate of 10% per annum
accruing from the date of entry of judgment until paid.

Dated: June 17, 1998

-------------------------------
Honorable Barry L. Plotkin
Judge of the Superior Court

APPROVED AS TO FORM:

/s/ LEONARD S. SANDS
- ------------------------------
Leonard S. Sands
Attorney for Plaintiffs
MRI Grand Terrace, Inc. and
Tri-National Development Corp.

- 6 -

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