ESSCO USA INC, 10-12G/A, 1998-11-17

ESSCO USA INC
10-12G/A, 1998-11-17
FARM PRODUCT RAW MATERIALS

Previous: OPPENHEIMER LARGE CAP GROWTH FUND, N-1A/A, 1998-11-17

Next: BUCKINGHAM RESEARCH GROUP INC, 13F-E/A, 1998-11-17

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10 GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934

ESSCO (USA), INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware 33-0773383
(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)

(Address Of Principal Executive Offices) (Zip Code)
18500 Von Karman Avenue, Suite 560, Irvine, California 92612

(949) 477-6299
---------------
Company's Telephone Number, Including Area Code:

Securities To Be Registered Under 12(b) Of The Act: None.

Title Of Each Class Name Of Each Exchange On Which
To Be So Registered Each Class Is To Be Registered
- ---------------------- -----------------------------------

____________________________ ____________________________
____________________________ ____________________________

Securities To Be Registered Pursuant To Section 12(g) Of The Act:

(Title of Class):

-1-
<PAGE>
TABLE OF CONTENTS

Certain statement contained in this Form 10 Report are forward-looking
statements, including statement with respect to the Company's budgeted or
anticipated expenses. "Forward-looking statements" can be identified by the use
of forward-looking terminology such as "may," "will," "expect," "intend,"
"anticipate," "estimate," "continue," "present value," "future," or "reserves,"
or other variations thereof or comparable terminology. All of these statements
involve assumptions of future events which may not prove to be accurate and
risks and uncertainties. For these and other reasons, actual results may differ
materially from those projected or implied

-2-
<PAGE>
ITEM 1. BUSINESS

Essco (USA), Inc. (the "Registrant") was incorporated in the State of
Delaware on September 23, 1997 for the purpose of acquiring the existing
businesses of MIDLAND AGRICULTURAL, and the bulk freight business of MIDLAND
STEAMSHIPPING M. CO from Mr. Christos Traios. Mr. Traios, a Greek citizen, had
purchased certain maritime assets from the NATTEM Companies in 1993, and
subsequently formed Midland Steamshipping. On October 9, 1997, Essco (USA),
Inc. acquired 100% of the issued and outstanding shares of MIDLAND, Agricultural
S.A. and 49% of the issued and outstanding shares of MIDLAND STEAMSHIPPING M.
CO.

MIDLAND, Agricultural S.A. ("Midland Agricultural") was incorporated under
the laws of the Republic of Panama on November 17, 1995. Midland Agricultural
is based in Piraeus, Greece and derives its revenues from the trading of
agricultural commodities grown in the Former Soviet Union and transported and
sold to food manufacturers in various Mediterranean countries. Typically,
Midland Agricultural, enters into agreements with various farming entities
within Southern Russia, wherein Midland Agricultural will purchase set volumes
of various grain commodities at a set price. Midland Agricultural, then enters
into delivery agreements with food mills, food processors, or industrial
consumers to sell the same grain commodity to be delivered at a future date. By
coordinating the transportation and delivery of these grain commodities, Midland
Agricultural is able to recognize its operating profit. The agricultural
commodities traded include wheat, wheat-flour, corn, barley, sunflower seeds,
beans, millets, citrus, and livestock feed. Midland Agricultural also trades
other commodities from time to time, such as urea/fertilizer, cement, coal,
steel, and timber.

MIDLAND STEAMSHIPPING M. CO. ("Midland Shipping") was incorporated
according to Greek Maritime law on September 17, 1996. Midland Shipping is
based in Piraeus, Greece and derives its revenues from the operation of one bulk
carrier vessel of 3,500 mans DWG named "Victoria". Effective January 5, 1998,
the Victoria was re-registered and ownership was transferred to a newly formed
subsidiary, Essco Pioneer, Sa., Panama. As part of this exchange of assets,
Essco (USA), Inc. received 100% ownership of the Essco Pioneer (formerly
Victoria) in exchange for its 49% ownership in Midland Steamshipping. At this
time, Essco (USA), Inc. no longer has any ownership interest in Midland
Steamshipping M. Co.

At this time, Midland Agricultural is the largest single customer for Essco
shipping operations.

In November of 1997, the Company formed Essco (Hellas), Ltd. a Greek
corporation to act as charter agent and management company for Company owned
vessel(s) and those vessels managed by the Company under charter agreements.

Following the acquisition of Midland Agricultural and the acquisition of
the Essco Pioneer, Essco (USA), Inc.'s plan of operation for fiscal 1998
includes the following: (1) Essco (USA), Inc. intends to acquire additional bulk
carrier vessels for the purpose of covering the demand for transportation of
commodities and (2) increase its agricultural commodity trading activities in
the Former Soviet Union and Mediterranean markets.

Essco (USA), Inc. plans to acquire two river-sea going vessels with about
3,000 metric tons cargo capacity and one bulk/general vessel of 22,000 metric
tons cargo capacity. In order to increase its agricultural commodity trading
activities, Essco (USA), Inc. plans to continue to enter agreements with farmers
in the Former Soviet Union for the future delivery of agricultural commodities
at fixed quantities and prices. Essco (USA), Inc. does not anticipate the need
for material changes in the number of its employees in the next twelve months.

-3-
<PAGE>
Midland Agricultural and Midland Steamshipping were both companies formed, owned
and operated by Mr. Christos Traios. Mr. Traios has extensive experience in the
operation and management of shipping companies and vessels, as well as
agricultural commodity trading. Starting in 1986, Mr. Traios formed NATTEM,
S.A., a shipping, aviation, harbor construction and trading company which over
the following years grew to own 18 cargo vessels, managed 28 dry bulk cargo
vessels, and engaged invarious other business activities. In March of 1993, a
vessel owned and operated by NATTEM companies exploded. As a result, the NATTEM
companies were forced to sell the bulk of their assets to meet the financial
obligations that resulted. As part of these sales, the cargo vessel Victoria,
and certain hydrofoils were sold to Mr. Christos Traios. There were no further
liabilities upon the settlement of those debts.

In 1995, Mr. Traios created Mill-Agora an agricultural trading company which
subsequently changed its name to Midland Agricultural. Furthermore, Mr. Traios
formed Midland Steamshipping, which owned and operated the vessel "Victoria".

Midland Agricultural and Midland Steamshipping (or other ship owning
subsidiaries) benefit from working with each other. While neither company is
reliant solely upon the other for its revenues, and in turn operation margins,
there are benefits such as timing, coordination, and long term availability that
benefits both entities by working together. In the event that Essco is unable
to provide the necessary shipping capacity for Midland Agricultural, third party
shipping companies can be hired for the delivery of agricultural goods. In the
event that Midland Agricultural does not require the amount of shipping capacity
that Essco can deliver, the ships can be made available for third party shipping
contracts. However, the greatest operating margins are recognized when both
entities work together. It is for this reason that Essco intends to focus on
the expansion of its shipping capacity, in conjunction with increasing its
agricultural trading activities. All inter company transactions are conducted
at prevailing market prices.

OPERATING ENVIRONMENT

The shipping business is an internationally competitive business. The transport
of goods across open seas isalways subject to risks ranging from weather to
--
equipment malfunction or human error.

Essco (USA), Inc. intends to build upon its established niche of providing dry
bulk cargo services to the Black Sea Basin where most ocean going vessels cannot
service. As a result, there remains a shortage of cargo capacity to carry
agricultural goods from much of the Black Sea Basin.

Essco (USA), Inc. maintains complete insurance coverage on its vessels to
protect the Company in case of natural disaster or equipment failure.

In the case of Midland Agricultural, or Essco Commodities (a newly formed but
presently inactive, subsidiary), the agricultural trading business puts forth
its own set of risks. These risks range from political risk, to field rot of
grain products, to lack of transportation infrastructure. Likewise, given that
both Midland Agricultural and Essco Commodities will enter into pre-purchase
agreements with farming entities, it is possible that that these companies could
face risks from fluctuation in commodity prices.

All transactions are conducted and paid for in U.S. dollars thereby providing
minimal currency risk. As a result the Company does not undertake any hedging
strategies.

-4-
<PAGE>
For the period ending December 31, 1997, Midland Agricultural derived in excess
of 10% of its business from the following customers:

<TABLE>
<CAPTION>
CUSTOMER . . . . % OF TONNAGE
<S> <C>
PROALIM. . . . . 28%
Adam Commodities 20%
T.L.D. SRL . . . 17%
</TABLE>

It is the opinion of management that the market for agricultural
commodities is so immense in the Mediterranean Basin, that the Company could
easily replace any of its current customers. The Company does enter into
delivery contracts with each of its customers on a delivery by delivery basis,
including such items as purchase price, which expenses will be covered by which
party, and the amount of overage that is allowed. There are no long-term
contracts between Midland Agricultural and any of its customers.

TRANSACTION BACKGROUND

Midland Agricultural is the main commodity handling arm of the Company. In
this role Midland Agricultural purchases commodities for delivery, makes the
necessary shipping arrangements, and then manages the process until the
deliveries are made. It is anticipated that as the Company continues to grow,
much of the future business of Midland Agricultural will be handled by Essco
Commodities, Inc., another wholly-owned subsidiary of the Company.

As the Company has grown, the role of handling these commodities has grown
as a natural evolution of the core handling business. For instance, in Russia
collective and individual farmers struggle to plant, harvest and deliver their
goods to market. As a result of these shipping problems, many times the farmers
lack the financial means to plant the next season of crops, thereby further
diminishing their value.

In some cases, Midland Agricultural may enter into a pre-purchase agreement
with certain collective farms, whereby the Company advances a percentage of the
purchase price of the commodities (i.e. 25%) thereby locking in a purchase price
for commodities well below world market prices. In this instance, the
collective farm receives necessary funds to purchase seeds, fertilizer, etc. and
assures the ability to sell these products to the world market. Midland
Agricultural secures the products for shipping at a price that is discounted
from prevailing world markets.
-

Once Midland Agricultural has secured the purchase rights to the harvest,
it then sells these goods under contract to end buyers. The Shipping and
Handling business benefits from secured contracts, the collective farms benefit
from the ability to purchase necessary pre-planting goods, and Midland
recognizes a gain on the handling of commodities.

The following example demonstrates how, in some cases, Midland
Agricultural, may enter into pre-purchase agreements with farmers. Should
Midland Agricultural decide to purchase 30,000 metric tons of barley from the
Spring planting season at a price of $80.00 per M/T, as part of this agreement,
Midland may advance 25% of the total purchase price of $2.4 million or $600,000
to the farmer(s). It is anticipated that these goods would be available in
June.

Now that Midland has secured its supply, it begins to market this barley
to mills, brokers, purchasers etc. who want to secure their own supply at a set
price for future delivery. Midland enters an agreement to sell these 30,000 M/T
to a purchaser in Italy for $130 per M/T for June, July and August delivery.

Once the contracts are executed, Midland then contracts with a shipping
company (both company owned vessels and third party vessels) to deliver 30,000
M/T on a series of voyages in June, July and August at a rate of $25 per M/T
(which was the average price in 1997).

Once the harvest is complete, the farmers deliver the barley to the port of
Taganrog. At the same time, the cargo vessel pulls up to mooring for loading of
3,000 M/T of barley. After the loading process of 4 to 5 days, Midland
Agricultural must pay the remaining 75% for that 3,000 M/T of barley or
$180,000. The Essco Pioneer then travels for 6 days to Italy and delivers the
barley to the purchaser. With delivery, the purchaser pays to Midland
Agricultural $390,000 (3,000 M/T @ $130). The cargo vessel(s) return to
Taganrog for another load.

-5-
<PAGE>
In this scenario, Midland is purchasing barley at $80.00 per M/T, paying
the shipping company $25.00 per M/T, and selling the barley for $130.00 per M/T
thus recognizing a gross operating profit of $25.00 per metric ton.

The risks of these transactions remain political risk, the ability to
transport the goods to the end buyer, and negotiating purchase and sales
contracts.

Currently there are three growing seasons for Southern Russia and Ukraine
indicating that this scenario could be repeated three times a year. Midland
Agricultural or Essco Commodities enter into purchase agreements with farmers,
or farming collectives in each growing season to secure grain products for
delivery into the world markets. Typically, Midland Agricultural or Essco
Commodities would enter into agreements with specific handling companies within
Southern Russia or Ukraine, for the physical delivery of the grain commodity
thereby avoiding the need to enter into any form of warehousing agreements.

<TABLE>
<CAPTION>
PRICE RANGE OF GRAIN COMMODITIES
(Per Metric Ton in $US Dollars)

1997 HIGH LOW
<S> <C> <C>
Sunflower-. . 295.00 185.00
Seeds . . . . 152.00 78.00
Feed Barley . 148.00 68.00
Feed Wheat. . 188.00 186.00
Milling Wheat 88.00 88.00
Yellow Corn . 194.00 194.00
Soya Beans. . 225.00 225.00
Sugar Grade A 28.00 26.00
Energy Coal . 96.00 94.00
</TABLE>

CORPORATE STRUCTURE

The Corporate structure of Essco (USA), Inc. will continue to change as the
business of the Company evolves. As of January 15, 1998 the following corporate
structure represents the subsidiaries of the Company:
-

- - Essco Pioneer s.a., Panama - formed January 5, 1998
- - Midland Agricultural - formed November 17, 1995
- - Essco Commodities, Inc. - formed November 6, 1997
- - Essco (HELLAS), s.a. - formed November 12, 1997

It is anticipated that over time, several other subsidiaries will be
created. In addition, as the Company expands its transportation to include
possible trucking fleets, etc. this structure will be adapted. Furthermore, as
is traditional in the shipping business, each company owned vessel will be owned
by a separate wholly owned subsidiary.

-6-
<PAGE>
EMPLOYEES

At this time, Essco (USA), Inc. and its subsidiaries employ 10 full time
employees in its offices in Piraeus, 12 persons in its Taganrog representative
office and 3 people in its offices in the United States. From time to time the
Company will enter into temporary employment agreements with certain individuals
to perform specific functions. In particular, the company will enter into 6 to
8 month employment contracts with certain individuals to crew the vessel "Essco
Pioneer". Depending upon the number of voyages to be made in a particular
contract period, the Company can employ between 6 and 12 individuals to crew its
vessel.

Given that Essco intends to increase its operating fleet, it will enter
into temporary employment contracts with additional individuals to man these
additional vessels.

Item 2. Financial Information

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion should be read in conjunction with the Company's
Financial Statements and the related notes thereto attached hereto as pages F-1
through F-20.

Essco (USA), Inc. is a transportation and handling company that operates
predominantly within the Black Sea and Mediterranean Sea area. The activities
of the Company include the carrying of various grain cargoes from ports within
the Black Sea for delivery to mill and food processors within the Mediterranean
Sea. In addition to the transporting of cargo, the Company will from time to
time enter into management agreements with independent ship owners to manage
their vessels subject to standard operating agreements. Essco (USA), Inc. also
participates in the handling of grain commodities through its wholly owned
subsidiary(ies), Midland Agricultural and Essco Commodities. These activities
include the pre-purchase, transport and re-selling of specific grain products.
Prior to the formation of Midland Steamshipping, the bulk of the agricultural
commodities purchased by Midland Agricultural were transported by various
shipping companies servicing the Black Sea market.

With the rapid changes taking place in Russia, Ukraine, and Romania, along
with a growing demand for grain products in the Mediterranean Sea Basin,
management anticipates that with successful execution of its business plan,
Essco (USA), Inc. could grow significantly over the next several years.

The ability of the Company to expand its cargo fleet, and commit additional
capital for the purchase of grain commodities, and growth in general, hinges on
-
several factors. In part, difficulties encountered with the grain harvest(s)
around the Black Sea Basin, which can be affected by climatic conditions and
political factors, could potentially disrupt the Company's core shipping and
handling business. In addition, world market prices for grain commodities do
fluctuate based upon, in part, worldwide supply and demand. Lastly, in order
for Essco (USA), Inc. to capture the anticipated market share of the shipping
and handling of grain commodities within the Black/Mediterranean Sea Basins, it
will need to raise capital or enter into long-term lease operating agreements to
increase overall fleet cargo capacity.

The Company's operating performance is influenced by several factors, the
most significant of which is operating efficiency. In particular, the necessary
personnel, computer systems, and management systems required for the management
of a single vessel, requires only incremental increase for the management of
additional vessels. Furthermore, for items such as insurance, maintenance and
parts with various vendors, the ability to negotiate for larger quantities will
provide further economies of scale. Essco has been able to traditionally
maintain operating expenses equal to 65%-80% of revenues. As a result of recent
demand for vessels, operating expenses have increased in the short-term which
should be off-set as cargo rates begin to reflect this demand.

In addition, the handling business has historically been a high volume, low
operating margin business. For the periods of 1996 and 1997 gross operating
margins have ranged from 15% to 9% and are subject to prevailing cargo rates,
and worldwide commodity prices.

-7-
<PAGE>
The business of the Company is seasonal by nature. To a large extent, the
agricultural handling business is concentrated within the three growing seasons
(Spring, Summer, Fall) of Southern Russia and the Ukraine. Furthermore, while
the shipping operations of the Company are less seasonable, typically shipping
rates increase during peak period (coinciding with the growing seasons).

RESULTS OF OPERATIONS

The Company has evolved to handle the delivery of grain commodities for
which it receives payment upon delivery of such goods to the end buyer. In
1997, Midland Agricultural entered into several purchase contracts that outline
the basic terms and conditions of delivery and purchase price. However, these
contracts by nature are usually subject to a 10% adjustment in either direction.
As of December 31, 1997, the following delivery contracts had open balances,
indicating that the farmers had not yet delivered the following amounts to the
Company:

<TABLE>
<CAPTION>
COMMODITY METRIC TONS
<S> <C>
Sunflower Seeds 28,000
Feeding Barley. 22,000
Feeding Wheat . 18,000
Feeding Corn. . 8,000
Energy Coal . . 36,000
</TABLE>

-8-
<PAGE>
PERIOD ENDING DECEMBER 31, 1997

Sales for the year ended December 31, 1997 were $19,930,128 compared to
$23,169,860 for a similar period in 1996, a difference of $3,239,732 or 14%.
The basis for the decline in revenues can be attributed to the lower volumes of
grain commodities being handled by the Midland Agricultural subsidiary. As a
result of payment of dividends in 1996 of $2,602,429, Midland Agricultural, is
employing less capital for the purchase of grain commodities, and is thus,
recognizing lower overall revenues. In addition the agricultural business is
somewhat cyclical with obvious patterns to growing and harvest seasons of the
grain commodities it handles. As a result, the reduction in capital employed at
the beginning of 1997 is being demonstrated during this time period.

Essco (USA), Inc. is currently investigating several options ranging from a
public stock offering, to traditional bank financing to equipment leasing to
increase available capital for agricultural purchases. It is anticipated that a
portion of any proceeds raised would be utilized to expand the volume of grain
commodities being handled by the Company. Management believes that such an
increase in working capital could result in the increase in revenues in 1998.

Midland Steamshipping is in part, affected by the activities of Midland
Agricultural. Midland Steamshipping provides shipping and transportation
services to various vendors. For the period ended December 31, 1997, Midland
Agricultural accounted for 60% AGMAlexander G. MontanoFind out from Traios what
% of steamshipping business was agricultural business.of the revenues of Midland
Steamshipping. Midland Steamshipping is paid a prevailing market price for its
services, regardless of whether the paying client is Midland Agricultural (an
affiliated company) or some other unaffiliated customer.

Financial results for Midland Steamshipping were impacted as a result of
the level of cargo carried on behalf of Midland Agricultural. The decline in
overall commodity volumes handled by Midland Agricultural has resulted in fewer
number of trips required to transport said grains. This decline in volume has
been offset in part by higher cargo fees within the Black Sea and the Sea of
Azov which averaged $30.00 per metric ton, versus an average of $24.00 per
metric ton in 1996.

While there can be no assurances, it is anticipated by management that if
Midland Agricultural is able to expand the level of grain commodities it
handles, it will naturally require additional shipping services. As a result,
it is the plan of management to see Midland Agricultural increase the volumes
transported company owned and managed vessels.

Cost of Goods Sold for the period ending December 31, 1997 were $18,283,670
versus Cost of Goods Sold as of December 31, 1996 for $19,708,525. These
figures represent a gross operating margin of 8% in 1997 versus gross operating
margins of 15% for the same period in 1996. These figures represent higher cost
of goods sold as a percentage of revenues in part due to the lower volumes being
handled by the Company, and the fixed costs associated with operations.

Selling, Administrative and Other operating expenses were $645,931, versus
$858,906 representing a decrease of $212,975 over similar expenses in 1996. The
decreases in General and Administrative expenses are expected to be a one time
event, with such expenses increasing again in 1998.

Net Income was $1,187,020 for the period ended December 31, 1997
compared to a profit of $2,754,095 for a similar period in 1996. Management
attributes this decline in earnings as a result of the lower overall volumes
being handled by Midland Agricultural.

-9-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1997, the Company had positive working capital of
$1,046,222, compared to working capital as of December 31, 1996 of $2,583,789.
Management currently believes that the Company has sufficient working capital
and cash on hand to maintain its current business for the next twelve months.
In October and November of 1997, Essco raised capital of $474,000 through the
issuance of short-term notes. It is anticipated by Management that additional
capital will be raised, through either the issuance of shares, through bank
financing, or through leasing options to repay these notes, and fund anticipated
growth. Each of these potential sources of capital will be analyzed and
compared by Management. It is planned that any money raised through activities
of the Company will be utilized to purchase additional vessels for operations,
as well as providing additional capital to Midland Agricultural to increase the
total volume of goods being handled.

FOR THE SIX MONTHS ENDED JUNE 30, 1998

The Company reported consolidated net income of $549,791 and net income of
$627,041 for the six months ended June 30, 1998 and 1997, respectively. At June
30, 1998, the Company had working capital of approximately $1,653,477, which was
a slight increase from the same period the year before. The primary reason for
this change was a receivable from the Company's largest single shareholder.

Sales for the period ended June 30, 1998 were $9,673,737 compared to
$5,798,930 for a similar period in 1997, an increase of $3,874,807 or 67%. The
basis for the increase in revenues can be attributed to larger volumes of
agricultural commodities being handled by Midland Agricultural.

Cost of Goods Sold for the period ending June 30, 1998 were $8,702,192
versus Cost of Goods Sold as of June 30, 1997 for $5,117,030. These figures
represent a gross operating margin of 10% in 1998 versus gross operating margins
of 11% for the same period in 1997. These operating margins are within normal
ranges, depending in part on world commodity prices for certain agricultural
goods handled by the Company.

Selling, Administrative and Other operating expenses were $391,214 versus
$178,578 representing an increase of $212,636 or 120% over similar expenses for
the same period in 1997. The increases in General and Administrative expenses
can be attributed primarily to expenses related to the expansion of the
Company's activities in the United States, including expenses related to the
filing of the Company's Form 10 with the Securities and Exchange Commission.

Net Income was $549,791 for the period ended June 30, 1998 compared to a
profit of $627,041 for a similar period in 1997. Management attributes this
decline in earnings as a result of the increase General & Administrative
expenses currently being incurred by the Company.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1998, the Company had positive working capital of
$1,653,477, compared to working capital as of June 30, 1997 of $1,590,575.
Management currently believes that the Company has sufficient working capital
and cash on hand to maintain its current business for the next twelve months.

FOR THE PERIOD OF DECEMBER 31, 1995 - DECEMBER 31, 1996

Midland Agricultural commenced operations in November of 1995. As a
result, the financial period ended December 31, 1995 only reflect two months of
operations. Based upon these operating facts, comparisons on a year to year
basis would be inaccurate.

It is anticipated that to continue to grow the business, additional capital
will be required. At its current stage, the Company continues to utilize
internally generated cash flows to fund this growth, which may cause delays in
reaching the internal operating goals set forth by Management.

-10-
<PAGE>
The Company continues to evaluate alternative financing options in order to
continue the growth of its shipping and handling operations which will enable
the Company to exploit the currently defined niche.

PLAN OF OPERATION

Essco (USA), Inc. was formed as a vehicle to grow the existing shipping and
handling businesses of Midland Steamshipping and Midland Agricultural. Based
upon the historical operational data of these, and their predecessor companies,
it is believed that the overall shipping of agricultural goods from Former
Communist Countries bordering the Black Sea will be an opportunity for dramatic
growth.

At the current time, much of the agricultural industries of Russia,
Ukraine, and other countries are reeling from the lasting effects of communist
control. As these nations begin to privatize their agricultural industries,
Management expects market conditions to generate greater crop yields with lower
associated costs.

Essco (USA), Inc. intends to establish itself to service the current
marketplace, while creating a competitive advantage to grow with these crop
yields.

Based on this objective, Essco (USA), Inc. intends to add to its existing
fleet of one river/sea going vessel, two or three vessels of similar size during
1998. These vessels will operate predominantly in the shallower seas and
waterways of the Black and Mediterranean Sea(s). To acquire these vessels
several options are available:

- - Raise Capital to Purchase Vessels
- - Utilize Bank Debt (i.e. Ship Mortgages)
- - Enter Into Lease Agreements

In each case the objective of entering into any such financing agreement
will be for the addition of cargo tonnage to the fleet. It is anticipated that
Essco could expend up to $3,000,000 in the form of capital expenditures in 1998.
While the effects on the Company as a result of these expenditures will depend
in part upon the final approach taken, it is possible that these expenditures
could result in additional long-term debt or the issuance of additional shares.
It is believed that with the addition of each vessel, certain operating
efficiencies will be recognized, thereby increasing the overall profitability of
the Company.

In the event that the company enters into a ship lease, the following terms
are standard within the shipping industry. Essco or its subsidiary would enter
into a term lease contract (normally from 2 to 5 years) wherein the Company
would operate the vessel and make a monthly, quarterly, or annual lease payment.
In this event Essco would be responsible for most all operating, and maintenance
expenses. Typically, the lease contract also provides for a buy-out at the end
of the lease contract wherein the Company could purchase the vessel. Typically
a lease payment would include amortization plus a return ranging from as low at
5% to as high as 12%. It is currently anticipated that Essco would seek a
leasing program with payments in the range of 5% - 8%.

In addition to building up the shipping capabilities of the Company, Essco
will also seek to commit more capital to the handling of grain commodities.
Given current flows of monies, and payment terms required by collective and
individual farmers, it is very attractive for the Company to enter into purchase
agreements prior to planting of specific grain commodities. In some cases, by
advancing a certain down payment (i.e. 25%) the Company is able to secure a
supply of goods at a pre-set price. Once executed, the Company in turn enters
into purchase agreements with food mills, processors and trading companies that
seek a reliable supply of grain commodities at a set price. The difference
between the amount paid to the farmer, and the amount received from the buyer is
the gross profit, less operating expenses.

-11-
<PAGE>
In 1996, Midland Agricultural was able to commit an excess of $1,250,000 towards
the pre-purchase of grain commodities which resulted in profits in excess of
$1,600,000. Based on this historical performance, it is the goal of Essco to
raise sufficient capital, or enter into banking relationships, whereby, Midland
Agricultural, can contract to purchase higher volumes of grain commodities.
Furthermore, it is anticipated that by being able to roll the capital, as well
as a percentage of the operating profits into the next growing season, that the
overall volume of grain commodities purchased by the Company should grow each
season.

-12-
<PAGE>
FINANCING ACTIVITIES

In October and November of 1997, Essco (USA), Inc. raised $474,000 in the
form of short-term notes that are payable within 6 months. The proceeds of this
placement were utilized to pay for expenses related to the completion of the
acquisition of Midland Steamshipping, and Midland Agricultural, as well as
certain professional fees (i.e. legal, and audit) related to the filing of the
Company's Form 10 with the Securities & Exchange Commission.

It is anticipated that Essco (USA), Inc. will raise additional capital in
1998 to fund the purchase of additional vessels, as well as increasing capital
for its agricultural operations. At this time, several options are being
considered, ranging from the private sale of securities subject to certain
exemptions of the Securities and Exchange Act of 1933, as amended, to the
execution of commercial banking facilities ranging from ship mortgages, to
letter of credit facilities, to the issuance of convertible debentures.

ITEM 3. PROPERTIES

Essco (USA), Inc. has certain lease obligations as well as significant
fixed assets as part of its normal course of business.

Currently, the Company is headquartered in Irvine, California, wherein it
subleases office space from C & K Capital Corporation an affiliated entity.
Currently, Essco (USA), Inc. pays monthly rent of $2,000 for use of office
facilities and equipment. It is anticipated that in 1998, the Company will
require sufficient office space that it will lease additional office space in
Irvine.

The bulk of the Company's operations are managed from its offices in
Piraeus, Greece. Both the shipping and handling business are coordinated from
these offices totaling 180 square meters. The Company has entered into a 5 year
lease, with monthly lease payments of approximately $3,500 per month, with an
annual 10% increase during the term of the lease. (Approximate numbers are
utilized to take into considerations currency fluctuations.)

In addition, Midland Agricultural does maintain a representative office in
Taganrog, Russia. This office is responsible for communication and coordination
with growers in Southern Russia, loading of vessels and preparation of necessary
bills of lading. The Company currently leases 100 square meters under a 4 year
lease, with an annual 15% increase during the term of the lease, with an option
to extend. Monthly lease payments of approximately $2,500 are incurred per
month.

Lastly, at this time, the largest fixed asset owned by the Company is the
"VICTORIA" (currently being re-registered and renamed "Essco Pioneer"). Built
in 1976, the Victoria is a river/sea going vessel, certified to traverse shallow
seas and waterways. New vessels have an estimated life of 25 to 35 years
depending upon maintenance. Proper insurance and registrations are current on
this vessel.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth, as of December 31, 1997 and June 30, 1998,
recent changes in the stock ownership of each person known by Essco (USA), Inc.
to be the beneficial owner of five percent or more of Essco (USA), Inc.'s voting
securities, and each officer, director, director nominees, and all officer's and
directors as a group. Unless otherwise indicated, each person has beneficial
voting and investment power with respect to the shares owned.

-13-
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
As of December 31, 1997

SHARES OF COMMON STOCK
----------------------
NAME & ADDRESSES OF BENEFICIAL OWNERS BENEFICIALLY OWNED PERCENTAGE
- ------------------------------------- ---------------------- -----------
<S> <C> <C> <C>
Christos Traios . . . . . . . . . . . 3,250,000 78%
3, Irodotou Street
Priaeus - GREECE

Dr. Wolfgang Priemer. . . . . . . . . 50,000 1%
Director
18500 Von Karman Avenue, Suite 560
Irvine, CA 92612

Judith S. Pelton. . . . . . . . . . . 50,000 1%
Corporate Secretary
18500 Von Karman Avenue, Suite 560
Irvine, CA 92612

Officers & Directors as a Group . . . 3,350,000 80%

DayStar Partners L.P. . . . . . . . . 215,000 (1) 3%
100 Clock Tower Place, Ste. 130
Carmel, CA 93923

Larry Wells . . . . . . . . . . . . . 209,580 (1) 4.6%
100 Clock Tower Place, Ste. 130
Carmel, CA 93923

Total Shares Issued & Outstanding . . 4,143,380 100%
<FN>
(1) Larry Wells is general partner for Daystar Partners, L.P.
</TABLE>

-14-
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
As of June 30, 1998

Vizier Capital Management, Ltd. . . . 600,000 (2) 12%
Suite 304, Gabriel III Condominium
San Manguel Avenue, Ortigas Ct.
Pasig, Metro Manila
PHILIPPINES

Alexander G. Montano. . . . . . . . . 200,000 (3) 4%
Director & CFO
18500 Von Karman Avenue, Suite 560
Irvine, CA 92612

Dr. Wolfgang Priemer. . . . . . . . . 50,000 1%
Director
18500 Von Karman Avenue, Suite 560
Irvine, CA 92612

Judith S. Pelton. . . . . . . . . . . 50,000 1%
Corporate Secretary
18500 Von Karman Avenue, Suite 560
Irvine, CA 92612

Officers & Directors as a Group . . . 4,150,000 83%

Total Shares Issued & Outstanding . . 5,000,380 100%
<FN>
(1) Daniel C. Montano has a beneficial interest in Vizier Capital
Management, Ltd.
(2) includes 100,000 shares held of record by C.K. Cooper & Company, Inc.
18500 Von Karman, Suite 560,Irvine, CA 92612
</TABLE>

-15-
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names and ages of all directors of Essco
(USA), Inc.; indicates all positions and offices with Essco (USA), Inc.; and
states each persons term of office.

<TABLE>
<CAPTION>
- -------------------- --- --------------------- ----------------------------
NAME AGE POSITIONS AND OFFICES TERM OF OFFICE AS DIRECTOR
- -------------------- --- --------------------- ----------------------------
<S> <C> <C> <C>
Christos Traios. . . 37 Director, CEO, October 9, 1997 - Present
Alexander G. Montano 27 Director, CFO September 30, 1997 - Present
Daniel C. Montano. . 49 Director October 9, 1997 - Present
Dr. Wolfgang Priemer 57 Director October 9, 1997 - Present
</TABLE>

Under the bylaws of Essco (USA), Inc., directors are elected at the annual
meeting of the stockholders and serve until their successors are elected and
qualified.

The following table sets forth the names and ages of all directors of Essco
(USA), Inc.; indicates all positions and offices with Essco (USA), Inc.; and
states each persons term of office.

<TABLE>
<CAPTION>
- -------------------- --- --------------------- ----------------------------
NAME AGE POSITIONS AND OFFICES TERM OF OFFICE AS OFFICER
- -------------------- --- --------------------- ----------------------------
<S> <C> <C> <C>
Christos Traios. . . 37 CEO October 9, 1997 - Present
Alexander G. Montano 27 CFO September 30, 1997 - Present
Judy S. Pelton . . . 56 Secretary October 9, 1997 - Present
</TABLE>

The business experience during the past five years of each director and
executive officer is set forth below.

MR. CHRISTOS TRAIOS is Chairman of the Board, President and Chief Executive
Officer of the company. Mr. Traios founded Mill-Agro Hellas SA, and Meghael
Company in 1995 and 1996, which were predecessor companies of ESSCO. From 1986
to 1995, Mr. Traios was President and Chief Executive Officer of Nattem Group of
Companies. These companies included shipping, construction, passenger vessels,
and trading in the Black Sea and Mediterranean Sea areas. Mr. Traios attended
the Law School in Thessaloniki and is a citizen of Greece.

MR. DANIEL C. MONTANO is Vice Chairman of the Company and a member of the
Board of Directors. Mr. Montano has been associated with ESSCO since its
founding in 1997. Mr. Daniel Montano has been Managing Director of Investment
Banking for C&K Capital Corporation since January 1997. Prior to that he was
Director of Investment Banking at Brookstreet Securities Corporation from
January of 1995 until January of 1997. From 1979 until 1994, Mr. Montano was
Chairmen of the Broad and President of Montano Securities, a USA securities firm
which had ten offices across the United States. Mr. Montano is a member of the
Board of Directors of one other publicly traded company: Helen of Troy
Corporation. Mr. Montano obtained his MBA from the University of Southern
California and a BS from California State University at Los Angeles. Mr.
Montano also taught at Pepperdine University and California State University at
Fullerton. Mr. Daniel Montano is the father of Mr. Alexander Montano.

-16-
<PAGE>
MR. ALEXANDER MONTANO is Chief Financial Officer of ESSCO and a member of
the Board of Directors. Mr. Montano is also the Founder and President of C&K
Capital Corporation, an international financial services company. In addition,
Mr. Montano is the President of C.K. Cooper & Company, an investment
banking/securities brokerage firm that focuses primarily on the oil and gas
industry. Prior to these current activities Mr. Montano was employed by
Brookstreet Securities Corporation as Director of Research from 1995 to 1996.
From 1992 to 1995 Mr. Montano was Chief Operating Officer and Director for
Montano Securities Corporation, a nationwide securities brokerage and investment
banking firm with ten offices. On December 31, 1997, Mr. Montano filed personal
bankruptcy. Mr. Montano attended the University of Southern California and is
the son of Mr. Daniel Montano.

MS. JUDITH PELTON is the Corporate Secretary of the Company. She has
worked in the investment and securities business for over 25 years. Since
January 1997 she has been a Director at C.K. Capital Corporation. From 1995 to
1996 she was employed at Brookstreet Securities in the investment banking
department. From 1984 till 1994 she was employed at Montano Securities
Corporation, her last position was as Vice President of Administration, handling
regulatory and administrative functions for this nationwide USA
securities/investment banking firm.

WOLFGANG PRIEMER, PH.D is a member of the Company's Board of Directors.
Dr. Priemer is managing director and shareholder of KRUPS-LOGISTIC SYSTEMS, a
young company that developed and markets a new sophisticated technology for
sorting and commissioning for a large range of products. He holds a position as
an inactive director and shareholder of a company offering the service of
outsourcing the production of parts and components for machines to Eastern
Europe including to the own subsidiary machining company in Poland with 400
employees. He holds the position of an honoree director of the foreign trade
committee of the VDMA (German machine builders association) and is a vice
director of the same committee in the BDI (Association of German Industry). Dr.
Priemer received his Master Degree in mechanical engineering from the University
of Darmstadt and his Ph.D. from the University of Fribourg in marketing. He has
twenty-five years of experience in successfully managing as President a group of
internationally operating machine building companies - The Kolbus GmbH & Co. KG
- - with global turnover of then two hundred million dollars. Dr. Priemer has a
special expertise in taking over companies in turnaround situations and making
them successful. As foreign languages he speaks German, English, French and
some Spanish.

The following summary compensation table sets forth in summary form the
compensation received during each of Essco (USA), Inc.'s last two fiscal years
by Essco (USA), Inc.'s Chief Executive Officer. No other executive earned in
excess of $100,000.

-17-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

LONG TERM & OTHER COMPENSATION
------------------------------
-------- -------
AWARDS PAYOUTS
-------- -------
ALL OTHER
NAME AND ANNUAL COMPENSATION LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SARS (#) PAYOUTS ($) (1)
- ----------------------- ---- ---------- --------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Christos Traios 1997 $ 300,000 - - - -
Chief Executive Officer 1996 $ 300,000 - - - -
- ----------------------- ---- ---------- --------- -------- ------- ------------
</TABLE>

The following table sets forth the Option/SAR grants in the last fiscal
year.

<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
-------------------------------------

Individual Grants Potential realizable value at Alternative to
assumed rates of stock price (f) and (g):
appreciation of option term Grant date
value

Name Option/SARs Percent of total Exercise of Expiration 5% ($) 10% ($) Grant date
Granted (#) options/SARs base price date present value
granted to ($/Sh)
employees in
fiscal year
(a) (b) (c) (d) (e) (f) (g) (f)
- -------------------- ------------ ----------------- ------------- ----------- ------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
CEO Christos Traios. 1,000,000 100% $ 9.00 11/30/07 N/A N/A $ 0
------------ ----------------- ------------- ----------- ------ ------- ---------------
</TABLE>

There were no option/SAR exercised in the last completed fiscal year.

-18-
<PAGE>
On December 1, 1997, Essco (USA), Inc. entered into a five year employment
agreement with Christos Traios to serve as Essco (USA), Inc.'s chief executive
officer. Under the employment agreement, Essco (USA), Inc. agreed to pay Mr.
Traios an annual salary of $300,000 and a bonus of 10% of the operating profits
of Essco (USA), Inc. in excess of $3,000,000 per year. The employment agreement
also granted Mr. Traios the option to acquire 1,000,000 shares of Essco (USA),
Inc.'s $.001 par value common stock at an exercise price of $9.00 per share.
The non-qualified stock option expires November 30, 2007.

No other officer has a written employment agreement with Essco (USA), Inc

Essco (USA), Inc. has no annuity, pension or retirement plans or other
plans for which benefits are based on actuarial computations.

Essco (USA), Inc. has no standard arrangements by which its directors are
compensated.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

At December 31, 1997, the Company has $291,034 of related party receivable,
which primarily represent amounts from Midland Steamshipping, an affiliated
entity.

At December 31, 1997, the Company has $52,200 of related party payable,
which is owed to Midland Steamshipping, an affiliated entity.

At December 31, 1997 and June 30, 1998, the Company had paid to C & K
Capital Corporation, an affiliated entity, fees in total of $100,000 and
$109,000, respectively, for services rendered in relation to the acquisition of
Midland Steamshipping and Midland Agricultural. In addition, the Company had
reimbursed certain legal, travel, and office expenses incurred as a result of
these services provided.

The Company subleases office space from C & K Capital Corporation at a rate
of $2,000 per month, plus any extraordinary expenses such as telephone charges,
etc.

C & K Capital Corporation is a corporation owned by Mr. Alexander G.
Montano, the Chief Financial Officer of the Company. Mr. Daniel C. Montano, Vice
Chairman, is the father of Mr. Alexander G. Montano.

The Company will from time to time purchase agricultural commodities in
Russia at prevailing market prices from an agricultural company in which Mr.
Christos Traios is a shareholder.

On October 9, 1997, Essco (USA), Inc. acquired 100% of the issued and
outstanding shares of MIDLAND, Agricultural S.A. and 49% of the issued and
outstanding shares of MIDLAND STEAMSHIPPING M. CO. from Mr. Christos Traios in
exchange for 3,250,000 shares of Essco (USA), Inc.'s common stock.

The following persons may be considered promoters of Essco (USA), Inc.:
Alexander G. Montano, Daniel C. Montano and C.K. Cooper & Company, Inc.
Alexander G. Montano has received 100,000 shares of Essco (USA), Inc.'s common
stock (approximately 2%), subject to certain performance clauses that must be
met. In the case that these items are not met, these shares will be forfeited
by Mr. Montano. Vizier Asset Management, has received 600,000 shares of Essco
(USA), Inc.'s common stock (approximately 12%) subject to certain performance
clauses that must be met. In the case that these items are not met, these
shares will be forfeited by Vizier Asset Management. C. K. Cooper & Company,
Inc. may receive 100,000 shares of Essco (USA), Inc.'s common stock
(approximately 2%) subject to certain performance clauses that must be met. In
the case that these items are not met, these shares will be forfeited by C. K.
Cooper & Company, Inc. C.K. Cooper & Company, Inc. is a corporation over which
Alexander G. Montano exercises voting control.

It is the opinion of management that all related party transactions are
conducted within normal industry standards, and would be considered fair from a
financial point of view.

-19-
<PAGE>
ITEM 8. LEGAL PROCEEDINGS

None.

ITEM 9. MARKET PRICE OF AND DIVIDENDS OF ESSCO (USA), INC.'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

There is no established public trading market for Essco (USA), Inc.'s $.001
par value common stock. At the present time stock options have been granted to
Mr. Traios to purchase 1,000,000 shares of common stock at an exercise price of
$9.00 per share. Other than these options there are no outstanding options or
warrants to purchase common stock, or securities convertible into common stock
of Essco (USA), Inc. pursuant to Rule 144 under the Securities Act or that
Essco (USA), Inc. has agreed to register under the Securities Act for sale by
security holders. There are no securities that are being, or have been publicly
proposed to be, publicly offered by Essco (USA), Inc., the offering of which
could have a material effect on the market price of Essco (USA), Inc.'s common
stock.

As of December 31, 1997, there were approximately 134 holders of Essco (USA),
Inc.'s common stock.

In 1996, Midland Agricultural paid dividends equal to $2,602,429. To date,
Essco (USA), Inc. has never paid any dividends and it is unlikely that Essco
(USA), Inc. will pay dividends in the next two years.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES TO BE REGISTERED

On November 19, 1997, Essco (USA), Inc. received $474,000 in bridge
financing from DayStar Partners, L.P., a California limited partnership. Under
the terms of the bridge loan, Essco (USA), Inc. sold 47.4 Units consisting of a
$10,000 promissory note and 2,000 shares of Essco (USA), Inc.'s common stock.
The notes are due and payable six months following issuance. The transaction
was exempt from registration under Section 4(2) of the Securities Act of 1933 as
a transaction by an issuer not involving any public offering.

The purchaser was provided with business and financial information
regarding the Company and was provided with the opportunity to obtain additional
information in order to verify the information provided or to further inform
themselves regarding the Company.

The entity that acquired these units acknowledged in writing that such
person was obtaining "restricted securities" as defined in rule 144 under the
Securities Act; that such shares could not be transferred without registration
or an available exemption therefrom; that such person must bear the economic
risk of the investment for an indefinite period; and that the Company would
restrict the transfer of the securities in accordance with such representations.
Such persons also agreed that any certificates representing such should would be
stamped with a restrictive legend covering the transfer of such shares. The
certificates representing the foregoing shares bear an appropriate restrictive
legend conspicuously on their face, and the stop transfer instructions are noted
on the Company's stock transfer records.

-20-
<PAGE>
The following persons may be considered promoters of Essco (USA), Inc.:
Alexander G. Montano, Daniel C. Montano and C.K. Cooper & Company, Inc.
Alexander G. Montano may receive 100,000 shares of Essco (USA), Inc.'s common
stock (approximately 2%) in exchange for his efforts. Vizier Asset Management,
may received 600,000 shares of Essco (USA), Inc.'s common stock (approximately
12%) in exchange for his efforts. C. K. Cooper & Company, Inc. may receive
100,000 shares of Essco (USA), Inc.'s common stock (approximately 2%) in
exchange for his efforts. C.K. Cooper & Company, Inc. is a corporation over
which Alexander G. Montano exercises voting control. These entities are
entitled to begin receiving these shares as of May 1, 1998 depending upon Essco
(USA), Inc. accomplishing certain tasks, such as filing an appropriate Form 10
with the Securities and Exchange Commission, Essco (USA), Inc. having entered
into discussions with certain financial institutions in relation to banking
facilities and ship leasing. At this time, the requirements to begin receiving
these shares have been met.

As of December 31, 1997 there were approximately 43 holders of Essco (USA),
Inc.'s common stock. The holders of Essco (USA), Inc.'s common stock are
entitled to one vote for each share on all matters voted on by stockholders,
including election of directors. Except as otherwise required by law or
provided in any resolution adopted by Essco (USA), Inc.'s Board of Directors
with respect to any series of Preferred Stock, the holders of such shares will
possess all voting power. The shares of Essco (USA), Inc.'s common stock are
free of preemptive rights and will participate in all dividends, if any, that
are declared by Essco (USA), Inc.'s board of directors in the future.

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

Essco (USA), Inc.'s authorized capital stock consists of 21 million shares
of which 20 million shares are designated common stock, with $.001 par value and
1 million shares are designated $.001 par value preferred stock. As of December
31, 1997, there are presently issued and outstanding 4,143,380 shares of common
stock. No preferred stock has been issued by Essco (USA), Inc. nor have any
terms yet been associated with the Preferred Stock.

COMMON STOCK

There are approximately 129 holders of Essco (USA), Inc.'s common stock.
The holders of Essco (USA), Inc.'s common stock are entitled to one vote for
each share on all matters voted on by stockholders, including election of
directors. Except as otherwise required by law or provided in any resolution
adopted by Essco (USA), Inc.'s Board of Directors with respect to any series of
Preferred Stock, the holders of such shares will possess all voting power. The
shares of Essco (USA), Inc.'s common stock are free of preemptive rights and
will participate in all dividends, if any, that are declared by Essco (USA),
Inc.'s board of directors in the future.

PENNY STOCK REGULATIONS - RESTRICTIONS ON MARKETABILITY

The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. The Company's
securities may be covered by the penny stock rules, which impose additional
sales practice requirements on broker-dealers who sell such securities to person
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000

-21-
<PAGE>
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Delaware law, a corporation may indemnify its officers, directors,
employees, and agents under certain circumstances, including indemnification of
such persons against liability under the Securities Act of 1933. A true and
correct copy of Section 145 of the Delaware General Corporation Law which
addresses indemnification of officers, directors, employees and agents is
attached hereto as Exhibit 99.1

In addition, Section 102(b)(7) of the Delaware General Corporation Law and
the Company's Certificate of Incorporation provide that a director of this
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for liability (I) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
paying a dividend or approving a stock repurchase in violation of Section 174 of
the Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit.

The Company's Certificate of Incorporation and Bylaws contain provisions
that no director of the Company shall be liable to the Company for monetary
damages for breach of fiduciary duty as a director involving any act or omission
of such director other than (I) for breach of director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock redemption's or
repurchases, or (iv) for any transaction from which the director derived an
improper personal benefit.

The effect of these provisions may be to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (I) -
(iv) of the preceding sentence.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Not applicable.

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

Attached hereto as pages F-1 through F-20 are the financial statements of Essco
(USA), Inc.

INFORMATION SYSTEMS FOR THE YEAR 2000 TO FINANCIAL STATEMENTS

The Company will be required to modify its information systems in order to
accurately process data referencing the year 2000. Because of the importance of
occurrence dates in the shipping industry, the consequences of not pursuing
these modifications could significantly affect the Company's ability to manage
and report operating activities. Currently, the Company plans to purchase
software modifications from third parties in order to correct any existing
deficiencies. The total cost will be approximately $2,500 and the information
systems are anticipated to be updated by the end of 1998. Year 2000 issues as
they related to field operation programs, suppliers and contractors remain to be
evaluated by the Company. However, based on current available information, the
Company does not anticipate that the costs associated with any necessary
modifications will be material to the Company's operations or financial
condition.

-22-
<PAGE>
The following exhibits are attached hereto and incorporated herein by reference.

3.1 Certificate of Incorporation
3.2 By-Laws
4.1 Form of $.001 Par Value Common Stock Certificate
10.1 Employment Agreement with Christos Traios

99.1 8 Del. Code Ann. 145 Indemnification of officers, directors, employees
and agents

-23-
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, Essco (USA), Inc. has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.

ESSCO (USA), Inc.

By: /s/ Alexander G. Montano
---------------------------
Name: Alexander G. Montano
Title: Chief Financial Officer

Date:

-24-
<PAGE>

<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES

ESSCO (USA), INC. Page
- ----------------------------------------------------------------------------------- ----
<S> <C>

Consolidated Financial Statements:

Independent Auditor's Report. . . . . . . . . . . . . . . . . . . . . . . . . . F-1
----

Balance Sheets at December 31, 1997, 1996 and 1995 (Audited) and June 30, 1998
and 1997 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
----

Statements of Operations for the Years Ended December 31, 1997, 1996 and
1995 (Audited) and for the Six Months Ended June 30, 1998 and 1997 (Unaudited) F-4
----

Statements of Stockholders= Equity for the Years Ended December 31, 1997,
1996 and 1995 (Audited) and for the Six Months Ended June 30, 1998 (Unaudited) F-6
----

Statements of Cash Flows for the Year Ended December 31, 1997, 1996 and
1995 (Audited) and for the Six Months Ended June 30, 1998 and 1997 (Unaudited) F-7
----

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . F-9
- ----------------------------------------------------------------------------------- ----
</TABLE>

<PAGE>
Proof Date: November 12, 1998

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders of
Essco (USA), Inc.

We have audited the accompanying consolidated balance sheets of Essco (USA),
Inc. and subsidiaries as of December 31, 1997, 1996, and 1995, and the related
consolidated statements of operations, cash flows and stockholders= equity for
the periods from inception on October 1, 1995 to December 31, 1995, and for each
of the two years ended December 31, 1997. These consolidated 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 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Essco (USA), Inc. as
of December 31, 1997, 1996 and 1995, and the results of its operations and its
cash flows for the periods from inception on October 1, 1995 to December 31,
1995, and for each of the two years ended December 31, 1997, in conformity with
generally accepted accounting principles.

BROWN ARMSTRONG RANDALL
REYES PAULDEN & McCOWN
ACCOUNTANCY CORPORATION

Bakersfield, California
October 26, 1998

F-1
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997, 1996, 1995 (AUDITED) AND
JUNE 30 1998 AND 1997 (UNAUDITED)

June 30,
------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . $ 546,266 $ 755,459
Accounts receivable . . . . . . . . . . . . . . . . 454,261 590,800
Related party receivables . . . . . . . . . . . . . 1,512,591 256,800
------------ ------------
Total Current Assets. . . . . . . . . . . . . . . 2,513,118 1,603,059
------------ ------------
Fixed Assets - net of depreciation. . . . . . . . . . 849,861 25,176
------------ ------------
Investment in subsidiary. . . . . . . . . . . . . . . - 642,924
------------ ------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . $ 3,362,979 $ 2,271,159
============ ============

LIABILITIES AND STOCKHOLDERS= EQUITY
Current Liabilities
Accounts payable. . . . . . . . . . . . . . . . . . $ 300,101 $ 12,484
Accrued interest payable. . . . . . . . . . . . . . 30,540 -
Related party payables. . . . . . . . . . . . . . . 2,000 -
Notes payable . . . . . . . . . . . . . . . . . . . 509,000 -
Accrued employee benefits . . . . . . . . . . . . . 18,000 -
------------ ------------
Total Current Liabilities . . . . . . . . . . . . 859,641 12,484
------------ ------------

Stockholders= Equity
Preferred stock, no par value, 1,000,000 shares
Authorized, none issued and outstanding . . . . . - -
Common stock, $.001 par value, 20,000,000 shares
authorized, 5,000,380 and 3,250,000 shares issued
and outstanding, respectively . . . . . . . . . . 5,000 3,250
Additional paid in capital. . . . . . . . . . . . . 766,941 374,289
Receivables from sale of stock. . . . . . . . . . . (157,080) -
Retained earnings . . . . . . . . . . . . . . . . . 1,888,477 1,881,136
------------ ------------
Total Stockholders= Equity. . . . . . . . . . . . 2,503,338 2,258,675
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS= EQUITY. . . . $ 3,362,979 $ 2,271,159
- ----------------------------------------------------- ============ ============
</TABLE>

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

F-2
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997, 1996, 1995 (AUDITED) AND
JUNE 30, 1998 AND 1997 (UNAUDITED)

December 31,
------------
1997 1996 1995
----------- ---------- -------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 284,338 $1,565,390 $10,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . 1,021,420 625,900 -
Related party receivables . . . . . . . . . . . . . . . . . 291,034 404,983 -
----------- ---------- -------
Total Current Assets. . . . . . . . . . . . . . . . . . . 1,596,792 2,596,273 10,000
----------- ---------- -------
Fixed Assets - net of depreciation. . . . . . . . . . . . . . 21,705 28,640 -
----------- ---------- -------
Investment in subsidiary. . . . . . . . . . . . . . . . . . . 705,698 519,205 -
----------- ---------- -------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . $2,324,195 $3,144,118 $10,000
=========== ========== =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable. . . . . . . . . . . . . . . . . . . . . . $ 14,370 $ 12,484 $ -
Related party payables. . . . . . . . . . . . . . . . . . . 52,200 - -
Notes payable . . . . . . . . . . . . . . . . . . . . . . . 474,000 - -
Accrued employee benefits . . . . . . . . . . . . . . . . . 10,000 - -
----------- ---------- -------
Total Current Liabilities . . . . . . . . . . . . . . . . 550,570 12,484 -
----------- ---------- -------
Stockholders= Equity
Preferred stock, no par value, 1,000,000 shares
authorized, none issued and outstanding . . . . . . . . . - - -
Common stock, $.001 par value, 20,000,000 shares
authorized, 4,143,380, 3,250,000 and 84,500 shares issued
and outstanding, respectively . . . . . . . . . . . . . . 4,143 3,250 85
Additional paid in capital. . . . . . . . . . . . . . . . . 502,876 374,289 9,915
Receivable from sale of stock . . . . . . . . . . . . . . . (72,080) - -
Retained earnings . . . . . . . . . . . . . . . . . . . . . 1,338,686 2,754,095 -
----------- ---------- -------
Total Stockholders= Equity. . . . . . . . . . . . . . . . 1,773,625 3,131,634 10,000
----------- ---------- -------
TOTAL LIABILITIES AND STOCKHOLDERS= EQUITY. . . . . . . . $2,324,195 $3,144,118 $10,000
- ------------------------------------------------------------- =========== ========== =======
</TABLE>

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

F-3
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 1, 1995 TO
DECEMBER 31, 1995, AND FOR EACH OF THE TWO YEARS ENDED
DECEMBER 31, 1997 (AUDITED) AND THE
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)

Six Months Ended June 30,
-------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
------------ ------------

<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . $ 9,673,737 $ 5,798,930
Cost of Sales. . . . . . . . . . . . . 8,702,192 5,117,030
------------ ------------
Gross Profit . . . . . . . . . . . 971,545 681,900
------------ ------------

Other Income (Expenses)
General and administrative expenses. (391,214) (178,578)
Interest expense . . . . . . . . . . (30,540) -
Earnings of subsidiary . . . . . . . - 123,719
------------ ------------
Total Other Income (Expenses). . . (421,754) (54,859)
------------ ------------

Net Income . . . . . . . . . . . . . . $ 549,791 $ 627,041
============ ============

Basic earnings per share . . . . . . . $ .12 $ .19
- -------------------------------------- ============ ============
</TABLE>

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

F-4
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 1, 1995 TO
DECEMBER 31, 1995, AND FOR EACH OF THE TWO YEARS ENDED
DECEMBER 31, 1997 (AUDITED) AND THE
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)

Periods Ended December 31,
--------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . $19,930,128 $23,169,860 $2,224,000
------------ ------------ -----------
Cost of Sales. . . . . . . . . . . . . 18,283,670 19,708,525 1,909,296
------------ ------------ -----------
Gross Profit . . . . . . . . . . . 1,646,458 3,461,335 314,704
------------ ------------ -----------

Other Income (Expenses)
General and administrative expenses. (645,931) (858,906) (71,200)
Earnings of subsidiary . . . . . . . 186,493 151,666 -
------------ ------------ -----------
Total Other Income (Expenses). . . (462,438) (707,240) (71,200)
------------ ------------ -----------

Net Income . . . . . . . . . . . . . . $ 1,187,020 $ 2,754,095 $ 243,504
============ ============ ===========

Basic earnings per share . . . . . . . $ .34 $ .85 $ 2.88
- -------------------------------------- ============ ============ ===========
</TABLE>

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

F-5
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS= EQUITY
FOR THE PERIOD FROM INCEPTION ON OCTOBER 1, 1995 TO
DECEMBER 31, 1995, AND FOR EACH OF THE TWO YEARS ENDED
DECEMBER 31, 1997 (AUDITED) AND THE
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)

Common
Stock Common Additional Receivable Total
Number of Stock Paid in From Sale of Retained Stockholders'
Shares Amount Capital Stock Earnings Equity
--------- ------- ----------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Inception at
October 1, 1995 . . - $ - $ - $ - $ - $ -
Issuance of Stock . . 84,500 85 9,915 - - 10,000
Payment of Dividends. - - - - (243,504) (243,504)
Net Income. . . . . . - - - - 243,504 243,504
--------- ------- ----------- -------------- ------------ ---------------
Balance at
December 31, 1995 . 84,500 85 9,915 - - 10,000
Issuance of Stock . . 3,165,500 3,165 364,374 - - 367,539
Net Income. . . . . . - - - - 2,754,095 2,754,095
--------- ------- ----------- -------------- ------------ ---------------
Balance at
December 31, 1996 . 3,250,000 3,250 374,289 - 2,754,095 3,131,634
Issuance of Stock . . 893,380 893 128,587 (72,080) - 57,400
Payment of Dividends. - - - - (2,602,429) (2,602,429)
Net Income. . . . . . - - - - 1,187,020 1,187,020
--------- ------- ----------- -------------- ------------ ---------------
Balance at
December 31, 1997 . 4,143,380 4,143 502,876 (72,080) 1,338,686 1,773,625
Shareholder
Contribution. . . . - - 179,222 - - 179,222
Issuance of Stock . . 857,000 857 84,843 (85,000) - 700
Net Income. . . . . . - - - - 549,791 549,791
--------- ------- ----------- -------------- ------------ ---------------
Balance at
June 30, 1998
(Unaudited) . . . . 5,000,380 $ 5,000 $ 766,941 $ (157,080) $ 1,888,477 $ 2,503,338
========= ======= =========== ============== ============ ===============
</TABLE>

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

F-6
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 1, 1995 TO
DECEMBER 31, 1995, AND FOR EACH OF THE TWO YEARS ENDED
DECEMBER 31, 1997 (AUDITED) AND THE
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)

Six Months Ended June 30,
--------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 549,791 $ 627,041
Adjustments to reconcile net income
to net cash provided by operating activities:
Income from subsidiary. . . . . . . . . . . . . . . . - (123,719)
Depreciation. . . . . . . . . . . . . . . . . . . . . 61,764 3,464
Changes in assets and liabilities:
Decrease (increase) in trade receivables. . . . . . 567,159 35,100
Decrease (increase) in related party receivables. . (1,221,557) 148,183
Increase (decrease) in accounts payable . . . . . . 285,731 -
Increase (decrease) in accrued interest payable . . 30,540 -
Increase (decrease) in accrued employee benefits. . 8,000 -
Increase (decrease) in related party payables . . . (50,200) -
------------ ------------
Net Cash Provided by Operating Activities . . . . . . . . . 231,228 690,069
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary. . . . . . . . . . . . . . . . . (5,000) -
Additions to fixed assets . . . . . . . . . . . . . . . . - -
------------ ------------
Net Cash Used by Investing Activities . . . . . . . . . . . (5,000) -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on notes payable . . . . . . . . . . . . . . . 35,000 -
Proceeds from common stock issuance . . . . . . . . . . . 700 -
Dividends. . . . . . . . . . . . . . . . . . . . . . . . - (1,500,000)
------------ ------------
Net Cash (Used) Provided by Financing Activities. . . . . . 35,700 (1,500,000)
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents. . . . 261,928 (809,931)
------------ ------------
Cash and cash equivalents, beginning of period. . . . . . . 284,338 1,565,390
------------ ------------
Cash and cash equivalents, end of period. . . . . . . . . . $ 546,266 $ 755,459
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest Paid . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
============ ============
Taxes Paid. . . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING AND INVESTING ACTIVITIES:
Stock Issued in Exchange for Net Assets . . . . . . . . . . $ - $ -
============ ============
Stock Issued in Exchange for Notes Receivable . . . . . . . $ 85,000 $ -
============ ============
Shareholder Contribution of Majority Interest in Subsidiary $ 179,222 $ -
- ----------------------------------------------------------- ============ ============
</TABLE>

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

F-7
<PAGE>
<TABLE>
<CAPTION>
ESSCO (USA), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 1, 1995
TO DECEMBER 31, 1995, AND FOR EACH OF THE TWO YEARS ENDED
DECEMBER 31, 1997 (AUDITED) AND THE
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)

Years Ended December 31,
------------------------
1997 1996 1995
------------ ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . $ 1,187,020 $2,754,095 $ 243,504
Adjustments to reconcile net income
To net cash provided by operating activities:
Income from subsidiary . . . . . . . . . . . . . . (186,493) (151,666) -
Depreciation . . . . . . . . . . . . . . . . . . . 6,935 6,360 -
Changes in assets and liabilities:
Decrease (increase) in trade receivables . . . . (395,520) (625,900) -
Decrease (increase) in related party receivables 113,949 (404,983) -
Increase (decrease) in accounts payable. . . . . 1,886 12,484 -
Increase (decrease) in accrued employee benefits 10,000 - -
Increase (decrease) in related party payables. . 52,200 - -
------------ ----------- ----------
Net Cash Provided by Operating Activities. . . . . . . . 789,977 1,590,390 243,504
------------ ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets. . . . . . . . . . . . . . . - (35,000) -
------------ ----------- ----------
Net Cash Used by Investing Activities. . . . . . . . . . - (35,000) -
------------ ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on notes payable. . . . . . . . . . . . . . 474,000 - -
Proceeds from common stock issuance. . . . . . . . . . 57,400 - 10,000
Dividends. . . . . . . . . . . . . . . . . . . . . . . (2,602,429) - (243,504)
------------ ----------- ----------
Net Cash (Used) Provided by Financing Activities . . . . (2,071,029) - (233,504)
------------ ----------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents . . (1,281,052) 1,555,390 10,000
------------ ----------- ----------
Cash and cash equivalents, beginning of period . . . . . 1,565,390 10,000 -
------------ ----------- ----------
Cash and cash equivalents, end of period . . . . . . . . $ 284,338 $1,565,390 $ 10,000
============ =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Interest Paid . . . . . . . . . . . . . . . . . . . . . $ - $ - $ -
============ =========== ==========
Taxes Paid. . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ -
============ =========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING AND INVESTING ACTIVITIES:
Stock Issued in Exchange for Net Assets. . . . . . . . . $ - $ 367,539 $ -
============ =========== ==========
Stock Issued in Exchange for Notes Receivable. . . . . . $ 72,080 $ - $ -
- -------------------------------------------------------- ============ =========== ==========
</TABLE>

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

F-8
<PAGE>
ESSCO (USA), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION ON OCTOBER 1, 1995 TO
DECEMBER 31, 1995, AND FOR EACH OF THE TWO YEARS ENDED
DECEMBER 31, 1997 (AUDITED) AND THE
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------

NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Essco (USA), Inc.
and its wholly owned subsidiaries (collectively, the Company). Significant
intercompany items and transactions have been eliminated in consolidation.

No provision has been made for possible income taxes which may be paid on the
distribution of approximately $1,428,967 and $2,754,095 as of December 31, 1997
and 1996, and $1,916,488 and $1,881,136 as of June 30, 1998 and 1997,
respectively, of retained earnings of foreign subsidiaries, as substantially all
such amounts are intended to be indefinitely invested in these subsidiaries or
no additional income taxes would be incurred when such earnings are distributed.
It is not practicable to determine the amount of income taxes or withholding
taxes that would be payable upon the remittance of assets that represent those
earnings.

Essco (USA), Inc. was formed in October 1997 to serve as a holding company for
various foreign entities. On October 9, 1997 the Company acquired 100% of the
outstanding common stock of Midland Agricultural, and 49% of the outstanding
common stock of Midland Steamshipping from the sole shareholder of both
companies in exchange for 3,250,000 shares of the Company=s common stock. These
acquisitions have been accounted for as an exchange between companies under
common control; accordingly, the investments have been recorded at historical
cost in a manner similar to a pooling of interests. Midland Steamshipping is
accounted for in the Company=s financial statements using the equity method of
accounting through December 31, 1997. In January 1998, the Company exchanged its
interest in Steamshipping for 100% of the common stock of Essco (Pioneer), S.A.,
see Note 10.

Midland Agricultural, S.A., (hereafter referred to as "Agricultural") a Republic
of Panama Corporation, was formed on October 1, 1995. Agricultural was
incorporated according to the laws of the Republic of Panama on November 11,
1995, and registered at the corporations= registry on November 21, 1995.
Agricultural=s headquarters is in Athens, Greece. Agricultural was formerly
known as Mill-AGRO Hellas, SA; however, on May 3, 1997, the company name was
changed to Midland Agricultural, S.A. Agricultural operates in the commodities
markets of eastern Europe, brokering transactions between producers and food
manufacturers. Agricultural trades primarily in grain products such as wheat,
barley, and corn, but also trades in coal and other agricultural products.
Agricultural negotiates transactions between parties by providing the
transportation and storage to facilitate the transactions. Agricultural=s
affiliate, Midland Steamshipping is the exclusive provider of transportation
services for its commodity transactions. All accounts are settled with letters
of credit in U.S. dollars.

Midland Steamshipping Co. (hereafter referred to as "Steamshipping") a Greek
Maritime Corporation headquartered in Athens, was formed on September 17, 1996.
Steamshipping was formerly known as Megahel Nautical, however, its name was
changed on March 13, 1997, to Midland Steamshipping. Steamshipping provides dry
bulk cargo transportation within the Black Sea Basin, primarily delivering
agricultural commodities such as grains and seed. Prior to January, 1998
Steamshipping operated a single bulk carrier, the AVictoria.@ In January, 1998,
Steamshipping transferred the Victoria to a newly formed affiliate, Essco
(Pioneer), S.A. in exchange for the 49% of its common stock previously held by
the Company. Steamshipping historically generated approximately 60% of its
revenues from the transportation of commodities for its affiliate, Agricultural.
Virtually all sales are done in U.S. dollars.

F-9
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------

NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION (Continued)

Essco (Pioneer), S.A. (hereafter referred to as APioneer@) was formed January 5,
1998 in the Republic of Panama. The Company acquired 100% of the common stock
of Pioneer in exchange for its 49% investment in Steamshipping. Pioneer
immediately acquired the bulk carrier, AVictoria@ from Steamshipping in exchange
for the common stock of Steamshipping held by Pioneer. Victoria was
re-registered in the Republic of Panama as the APioneer.@ All transactions have
been accounted for as exchanges between companies under common control in a
manner similar to a pooling of interest. All assets acquired have been recorded
at net historical cost on the acquiring entities' books.

Essco (Hellas), S.A. (hereafter referred to as AHellas@), is a Greek corporation
formed on November 12, 1997, that commenced operations in 1998. This company
was formed to primarily operate the cargo voyages of the APioneer@ and to
provide certain general and administrative services for which Hellas receives
specified compensation. All material intercompany transactions have been
eliminated in consolidation.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

REVENUE RECOGNITION

The Company recognizes revenues from the sale of agricultural products in the
period of shipping and issuing of invoices. Voyage revenue and variable costs
and expenses are recognized pursuant to the shipping contract. In some cases,
income is recognized at the time each voyage leg commences. In the event that
specifications in the shipping contract are not outlined, income is recognized
at the completion of the voyage.

FIXED ASSETS

Fixed assets are recorded at cost. Depreciation on furniture and fixtures is
determined using the straight-line method over the estimated useful lives of the
assets, usually 5 to 7 years. Vessels are depreciated using the straight-line
method over the estimated useful lives of the assets; due to the advanced age of
the Company's vessel, the asset is being depreciated over approximately 7 years.
Expenditures for maintenance and repairs are expensed when incurred and
betterments are capitalized. New vessels are depreciated over 20 to 25 years;
used vessels over much shorter lives.

IMPAIRMENT OF LONG-LIVED ASSETS (SFAS 121)

In March 1995, the FASB issued SFAS No. 121 AAccounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,@ which requires
that long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The new
standard is effective for fiscal years beginning after December 15, 1995. The
provisions of this statement were implemented for the years ended December 31,
1996, 1997 and 1998, and had no material effect upon the company=s financial
condition or results of operations for these years.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, cash includes all cash and
investments with maturities of three months or less.

F-10
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------

INCOME TAXES

Unlike its Greek and Panamanian subsidiaries, the U.S. parent company, Essco, is
subject to U.S. income tax. Deferred tax is provided for the timing differences
in the reporting of income and expense for tax and financial statement purposes.

COMMON STOCK

The Company has authorized 20,000,000 shares of common stock. Each share
entitles the holder to one vote. There are no dividend or liquidation
preferences, participation rights, call prices or dates, conversion prices or
rates, sinking fund requirements, or unusual voting rights associated with these
shares. All pertinent rights and privileges of stock options granted and stock
warrants issued are explained in Note 12.

EARNINGS PER SHARE (SFAS 128)

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), AEarnings Per
Share@, which was adopted by the Company for the year ended December 31, 1997.
SFAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted average number
of common shares for the period. It also requires dual presentation of basic
and diluted earnings per share for companies with complex capital structures.
Under SFAS 128, the computation of diluted EPS shall not assume conversion or
exercise of securities that would have an antidilutive effect on earnings per
share. The excess price of the Company's granted options exceeds the average
market price, during 1997, of the Company's common stock. Therefore, these
options are considered antidilutive on the earnings per share ratio and were not
included in the calculation for any of the years presented.

STOCK-BASED COMPENSATION (SFAS 123)

In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
AAccounting for Stock-Based Compensation.@ This statement applies to the
financial statements for fiscal years beginning after December 15, 1995. It
defines a fair value based method of accounting for an employee stock option or
similar equity instrument.

However, it also allows an entity to continue to measure compensation costs for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, Accounting for Stock Issued to Employees. Under the fair
value based method, compensation costs is measured at the grant date based on
the value of the award and is recognized over the service period, which is
usually the vesting period. Under the intrinsic value based method,
compensation costs are the excess, if any, of the quoted market price of the
stock at grant date or other measurement date over the amount an employee must
pay to acquire the stock.

The Company has elected to continue accounting for stock-based compensation
under APB Opinion No. 25. The provisions of this statement were implemented for
the year ended December 31, 1997, and had no material effect on the Company=s
financial position or results of operations for either year.

INTERIM PERIOD FINANCIAL STATEMENTS

In the opinion of management, the unaudited consolidated financial statements
contain all adjustments which are of a normal recurring nature, necessary to
present fairly the financial position as of June 30, 1998 and 1997, and the
results of operations and cash flows for the six months ended June 30, 1998 and
1997. Interim financial results are not necessarily indicative of operating
results for the entire year.

F-11
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 (SFAS 130), Reporting Comprehensive Income. This statement requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS 130 will
be adopted by the Company for the year ended December 31, 1998. Prior period
financial statements provided for comparative purposes will be reclassified, as
required. Upon adoption, the Company does not expect SFAS 130 to have a
material effect upon the Company=s financial condition or results of operations.

In June 1997, the FASB issued Statements of Financial Accounting Standards No.
131 (SFAS 131), Disclosures about Segments of an Enterprise and Related
Information. The statement requires the Company to report income/loss, revenue,
expense and assets by business segment including information regarding the
revenues derived from specific products and services and about the countries in
which the Company is operating. The Statement also requires that the Company
report descriptive information about the way that operating segments were
determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the Company=s general-purpose financial statements, and changes in
the measurement of segment amounts from period to period. SFAS 131 has been
adopted by the Company for the year ended December 31, 1998. This statement has
no effect on financial statements traditionally presented by the Company, but
increases required disclosures.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company's commodity trading subsidiaries are parties to financial
instruments with off-balance sheet risk in the normal course of business. These
financial instruments include commitments to deliver commodities to processors
at prices negotiated in advance of the delivery date(s). The Company's exposure
to loss in the event of nonperformance by the other parties to the financial
instruments for commitments to deliver commodities to processors at prices
negotiated in advance of the delivery dates is represented by the contractual
amount of those instruments. Open commodity contracts at the balance sheet date
would be adjusted for the amount of gain or loss resulting from changes in the
market price for the traded commodity. Contracts to purchase commodities from
purchasers generally relate to the current or future crop years for future
delivery periods. Contracts for the sale of commodities to processors or other
consumers generally do not extend beyond one year. At December 31, 1997, 1996
and 1995, the Company had no open contracts requiring presentation or disclosure
in the financial statements.

NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------------------------------

The carrying amount of cash, accounts receivable, accounts payable and accrued
liabilities approximates fair value because of the short maturity of these
instruments. Virtually all accounts receivable are settled with letters of
credit within eight days from loading.

NOTE 3 - RELATED PARTY TRANSACTIONS
------------------------------

The following table summarizes related party receivables and payables in the
balance sheets at
December 31, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
December 31,
------------
1997 1996 1995
-------- -------- -----
<S> <C> <C> <C>
Related Party Receivables:
Due from Steamshipping . . . . . . . . $286,800 $ - $ -
Due from C & K Capital . . . . . . . . 2,555 - -
Due from Dan Montano . . . . . . . . . 1,679 - -
Due from Christos Traios . . . . . . . - -
Due from Related Entity Through Common
Control. . . . . . . . . . . . . . . - 404,983 -
-------- -------- -----
$291,034 $404,983 $ -
======== ======== =====
Related Party Payables:
Due to Steamshipping . . . . . . . . . $ 52,200 $ - $ -
Due to C & K Capital . . . . . . . . . - - -
-------- -------- -----
$ 52,200 $ - $ -
======== ======== =====
</TABLE>

F-12
<PAGE>
NOTE 3 - RELATED PARTY TRANSACTIONS
------------------------------

The following table summarizes related party receivables and payables in the
balance sheets at
June 30, 1998 and 1997:

<TABLE>
<CAPTION>
June 30,
------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Related Party Receivables:
Due from Steamshipping . . . . . . . . $ 6,800 $ 256,800
Due from C & K Capital . . . . . . . . - -
Due from Dan Montano . . . . . . . . . - -
Due from Christos Traios . . . . . . . 1,115,955 -
Due from Related Entity Through Common
Control. . . . . . . . . . . . . . . 389,836 -
------------ ------------
$ 1,512,591 $ 256,800
============ ============
Related Party Payables:
Due to Steamshipping . . . . . . . . . $ - $ -
Due to C & K Capital . . . . . . . . . 2,000 -
------------ ------------
$ 2,000 $ -
============ ============
</TABLE>

At December 31, 1997 and June 30, 1998, the Company had paid to C & K Capital
Corporation, an affiliated entity, fees of $100,000 and $109,000, respectively,
for services rendered in relation to the acquisition of Midland Steamshipping
and Midland Agricultural. In addition, the Company had reimbursed certain
legal, travel, and office expenses incurred as a result of these services
provided.

The Company subleases office space from C & K Capital Corporation at a rate of
$2,000 per month, plus any extraordinary expenses such as telephone charges.

C & K Capital Corporation is a corporation owned by Mr. Alexander G. Montano,
the Chief Financial Officer of the Company. Mr. Daniel C. Montano, Vice
Chairman, is the father of Mr. Alexander G. Montano.

The Company will from time to time purchase agricultural commodities in Russia
at prevailing market prices from an agricultural company in which Mr. Christos
Traios is a shareholder.

NOTE 4 - ECONOMIC DEPENDENCY, MAJOR CUSTOMERS, AND CONCENTRATIONS OF
-----------------------------------------------------------------
CREDIT RISK
------------

SALES

Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of accounts receivable. In the normal course of
business, the Company provides credit terms to its customers. Accordingly, the
Company performs ongoing credit evaluations of its customers and, if necessary,
maintains allowances for possible losses. To minimize risk, virtually all
transactions are consummated with letters of credit denominated in U.S.
currency.

Approximately 60% of Midland Steamshipping=s revenues for the year ended
December 31, 1997 were derived from the transport of grain commodities for
Midland Agricultural. Midland Steamshipping operates a single bulk carrier
vessel, the "Victoria."

F-13
<PAGE>
NOTE 4 - ECONOMIC DEPENDENCY, MAJOR CUSTOMERS, AND CONCENTRATIONS OF
-----------------------------------------------------------------
CREDIT RISK (Continued)
------------

SALES (Continued)

For the year ended December 31, 1997 Midland Agricultural derived approximately
65% of its revenues from 3 customers, the largest representing approximately 28%
of the Company=s revenues, and the lowest representing approximately 17%. The
following major customers represent 10% or more of total operating revenues for
the years ended December 31, 1997, 1996 and 1995 and six months ended June 30,
1998 and 1997:

<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
------------------- ------------
1997 1996 1995 1998 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
AGRICULTURAL
- ----------------------
PROALIM. . . . . . . 28% 29% 27% 25% 28%
- ----------------------
Adam Commodities . . 20% 18% 20% 22% 20%
T.L.D. SRL . . . . . 17% 18% 17% 15% 17%

STEAMSHIPPING
- ----------------------
Midland Agricultural 60% 56% 0% 0% 60%
- ---------------------- ----- ----- ----- ----- -----
</TABLE>

MARKETS

Midland Agricultural primarily handles agricultural goods that are harvested in
Southern Russia and delivered in Eastern Mediterranean ports. As a result, the
business of the Company is impacted by items such as weather patterns, and
political risk associated with Russia and the Middle Eastern countries.

NOTE 5 - CONTINGENCIES
-------------

The Company is involved in legal actions arising in the ordinary course of
business. In the opinion of management, the Company has adequate legal defenses
or insurance coverage with respect to each of these actions and does not believe
that they will materially affect the Company=s results of operations or
financial position.

NOTE 6 - FIXED ASSETS

Premises and equipment at December 31, are summarized as follows:

<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- -----
<S> <C> <C> <C>
Cost:
Furniture and equipment. $ 35,000 $35,000 $ -
Accumulated depreciation (13,295) (6,360) -
--------- -------- -----

$ 21,705 $28,640 $ -
========= ======== =====
</TABLE>

F-14
<PAGE>
NOTE 6 - FIXED ASSETS (Continued)
- -------------------------

Premises and equipment at June 30, are summarized as follows:

<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cost:
Vessel . . . . . . . . . $ 889,920 $ -
Furniture and equipment. 35,000 35,000
Accumulated depreciation (75,059) (9,824)
------------ ------------

$ 849,861 $ 25,176
============ ============
</TABLE>

Depreciation expense for fixed assets amounted to $6,935, $6,360 and $- in 1997,
1996 and 1995, and $61,764 and $3,464 for the six months ended June 30, 1998 and
1997, respectively.

NOTE 7 - LEASE COMMITMENTS
------------------

Currently, the Company is headquartered in Irvine, California, wherein it
subleases office space from C & K Capital Corporation, an affiliated entity.
Currently, the Company pays monthly rent of $2,000 for use of office facilities
and equipment.

The bulk of the Company=s operations are managed from its offices in Piraeus,
Greece. Both the shipping and handling business are coordinated from these
office totaling 180 square meters. The Company has entered into a 5 year lease,
with monthly lease payments of approximately $3,500 per month, with an annual
10% increase during the term of the lease.

The Company pays approximately $2,500 per month for 100 square meters of office
space in Taganrog. The Company just completed its first year of a four year
lease, with annual increases of 15%. The Company has the choice to exercise an
option to extend the lease for an additional four years.

<TABLE>
<CAPTION>
Year Ending Minimum
December 31, Payments
- ------------ ---------
<S> <C>
1998 . . . . $ 100,200
1999 . . . . 109,320
2000 . . . . 119,577
Thereafter . 189,667
</TABLE>

Rent expense for the years ended December 31, 1997 and 1996 amounted to $56,900
and $51,250, respectively.

F-15
<PAGE>
NOTE 8 - SUMMARIZED FINANCIAL INFORMATION - UNCONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------

The following unaudited summarized financial information is presented for the
Company=s 49% subsidiary, Midland Steamshipping. As discussed in Note 10, the
Company disposed of its entire interest in Steamshipping in January 1998.

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Current Assets. . . $ 601,116 $ 374,491 $ -
Non-current Assets. 928,902 1,180,047 -
Current Liabilities 15,300 45,015 -
Net Sales . . . . . 1,042,550 1,321,275 -
Gross Profit. . . . 516,694 591,937 -
Net Income. . . . . 380,598 309,523 -
</TABLE>

NOTE 9 - NOTES PAYABLE
--------------

In November of 1997, the Company entered into a purchase agreement with Daystar
Partners, L.P. and various others. Under this agreement, the Company is to sell
units consisting of (1) secured promissory notes issued by the Company in the
amount of $10,000 at an initial interest rate of 12% and maturing six months
from the issuance, and (2) 2,000 shares of the Company=s $.001 par value common
stock. Each unit has a purchase price of $10,200 and the purchase price of the
common stock is deemed to be $0.10 per share.

These notes are secured by a pledge of 49% of the outstanding capital stock of
Midland Steamshipping Co., 100% of the outstanding capital stock of Midland
Agricultural, SA., and 100% of the outstanding capital stock of ESSCO
Commodities, Inc., an inactive corporation formed in November 1997.

As of December 31, 1997, 474 units had been sold, and the total outstanding
balance of the promissory notes was $474,000 with due dates ranging between
April and May of 1998. As of October 1998 no principal payments had been made.

NOTE 10 - SUBSEQUENT EVENT
-----------------

Effective January 5, 1998, Midland Steamshipping transferred ownership of its
sole vessel, AVictoria@ to a newly formed corporation, Essco Pioneer (Panama).
Essco (USA), Inc. received 100% ownership in the newly formed Essco Pioneer in
exchange for its 49% ownership in Midland Steamshipping.

NOTE 11 - YEAR 2000
----------

The Company has reviewed its current computer software and hardware systems and
is currently working to resolve the potential problems associated with the Year
2000 and the processing of date sensitive information by such systems. Based on
preliminary information, the Company believes that it will be able to implement
successfully the systems and programming changes necessary to address the Year
2000 issues, and does not expect the cost of such changes to have a material
impact of the Company=s financial position, results of operations or cash flows
in future projects.

F-16
<PAGE>
NOTE 12 - STOCK OPTIONS
--------------

At December 31, 1997, the Company did not have a formal stock-based compensation
plan. They did, however, grant the Chief Executive Officer the option to acquire
1,000,000 shares of the Company's stock at an exercise price of $9.00 per share,
the Company applies APB Opinion 25 and related Interpretations in accounting for
stock-based compensation. Accordingly, no compensation cost has been recognized
for this granted option. Had compensation cost for the Company=s stock-based
compensation plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the method of FASB Statement 123,
the Company=s net income and earnings per share would also not have been
reduced, due to the nature and terms of these options.

A summary of the status of the Company=s fixed stock option grant as of December
31, 1997 and changes during the year ending at the date is presented below.

<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
--------- ---------------
<S> <C> <C>
Fixed Options
Outstanding at beginning of year. -0- $ -0-
Granted . . . . . . . . . . . . . 1,000,000 9.00
--------- ---------------
Outstanding at end of year. . . . 1,000,000 9.00
========= ===============
Options exercisable at year-end
Weighted-average fair value of
Options granted during the year -0- $ -0-
========= ===============
</TABLE>

The following table summarizes information about fixed stock options outstanding
at December 31, 1997:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted- Weighted- Number Weighted-
Number Average Average Outstanding at Average
Outstanding at Outstanding at Remaining Exercise December 31, Exercise
Exercise Prices Exercise Price Contractual Life Price 1997 Price
- ---------------- ------------------- ------------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
9.00. . . . . . 1,000,000 10 $ 9.00 $ 1,000,000 $ 9.00
</TABLE>

F-17
<PAGE>
NOTE 13 - INCOME TAXES
-------------

Ordinarily, earnings of Controlled Foreign Corporations (CFC) are includable in
a U.S. Parent Corporation return if the CFC is an includable subsidiary.
However, if the U.S. Parent Corporation is more than 50% foreign (non-U.S.)
owned, the CFCs are not taxable until their earnings are remitted to their U.S.
parent.

Essco, USA is more than 50% foreign citizen owned. The Company intends to
reinvest its annual earnings from its non-U.S. subsidiaries in foreign shipping
and agricultural activities. At each year end, the Company makes a determination
if this amount of qualified reinvestment has been reduced or diminished. The
Company believes it will be reinvesting in sufficient amounts in foreign
shipping and agricultural operations so that any significant U.S. income taxes
on the accumulated undistributed income of its foreign subsidiaries will be
postponed indefinitely. No provision for U.S. or state income tax on the income
accumulated in its foreign companies has been made since inception in 1995
through June 30, 1998. As of December 31, 1997, such undistributed foreign
earnings amounted to approximately $1,428,967; the unrecognized deferred U.S.
income tax attributable to such undistributed earnings approximated $496,500.

The Company has provided no deferred tax assets or liabilities because the
parent corporation is the only U.S. taxable entity. Since inception in October
1997, it incurred a loss of approximately $215,000. Management has fully
reserved any potential tax asset that may be realized from use of this operating
loss carryforward until such time as it is apparent positive income will flow to
the parent corporation.

For California state tax purposes, the Company chose to file a "Water's Edge
Election," thereby only including California income or losses for a period of
seven years beginning in 1997.

The components of income/(loss) before income taxes follows:

For the Years Ended December 31,:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
Domestic $ (215,428) $ - $ -
Foreign. 1,402,448 2,759,095 243,504
----------- ---------- --------
$1,187,020 $2,754,095 $243,504
=========== ========== ========
</TABLE>

For the Six Months Ended June 30, (unaudited):

<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Domestic $(150,742) $ -
Foreign. 700,533 627,041
---------- --------
$ 549,791 $627,041
========== ========
</TABLE>

Substantially all of the above foreign income was earned by companies that were
not subject to income taxes in their countries of incorporation, Greece and
Panama.

F-18
<PAGE>
NOTE 13 - INCOME TAXES (Continued)
-------------

Reconciliation of the actual federal income tax rate and the U.S. statutory
income tax rate follow:

For the Years Ended December 31,:

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Actual federal income tax
Provision/(credit) rate - - -
Adjustments:
Income not subject to
U.S. taxes. . . . . . 40% 35% 35%
Operating loss. . . . . (5)% - -
----- ----- -----
U.S. statutory income tax
Provision/(credit) rate 35% 35% 35%
===== ===== =====
</TABLE>

For the Six Months Ended June 30, (unaudited):

<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Actual federal income tax
Provision/(credit) rate. . . . . - -
Adjustments:
Income not subject to U.S. taxes 41% 35%
Operating loss . . . . . . . . . (6)% -
----- -----
U.S. statutory income tax
Provision/(credit) rate. . . . . 35% 35%
===== =====
</TABLE>

F-19
<PAGE>
NOTE 14 - INDUSTRY SEGMENTS
------------------

Industry segments are:

Commodity Sales - storage, transportation and delivery of bulk commodities.
Ocean Transportation - carrying freight throughout the Black Sea Basin.
Agency Fees - negotiated fees for vessel management and certain general and
administrative services.

Years Ended December 31,:

<TABLE>
<CAPTION>
Years Ended December
----------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Revenue:
Commodity sales. . . . . $19,930,128 $23,169,860 $2,224,000
Ocean transportation . . - - -
Agency fees. . . . . . . - - -
------------ ------------ -----------
Total Revenue. . . . . $19,930,128 $23,169,860 $2,224,000
============ ============ ===========

Operating Profit:
Commodity sales. . . . . $ 1,646,458 $ 3,461,335 $ 314,704
Ocean transportation . . - - -
Agency fees. . . . . . . - - -
------------ ------------ -----------
Total Operating Profit 1,646,458 3,461,335 314,704
Earnings of Subsidiary . . 186,493 151,666 -
General and Administrative (645,931) (858,906) (71,200)
Interest Expense . . . . . - - -
------------ ------------ -----------
Net Income . . . . . . . . $ 1,187,020 $ 2,754,095 $ 243,504
============ ============ ===========
</TABLE>

Six Months Ended June 30,:

<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenue:
Commodity sales. . . . . $ 8,900,996 $ 5,798,930
Ocean transportation . . 540,241 -
Agency fees. . . . . . . 232,500 -
------------ ------------
Total Revenue. . . . . $ 9,673,737 $ 5,798,930
============ ============

Operating Profit:
Commodity sales. . . . . $ 683,521 $ 681,900
Ocean transportation . . 242,054 -
Agency fees. . . . . . . 45,970 -
------------ ------------
Total Operating Profit 971,545 681,900
Earnings of Subsidiary . . - 123,719
General and Administrative (391,214) (178,578)
Interest Expense . . . . . (30,540) -
------------ ------------
Net Income . . . . . . . . $ 549,791 $ 627,041
============ ============
</TABLE>

F-20
<PAGE>

CERTIFICATE OF INCORPORATION
OF
ESSCO (USA), Inc.

l. The name of the corporation is ESSCO (USA), Inc

2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.

3. The nature of the business or purposes to be conducted or promoted is:
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.

4. The total number of shares of stock which the corporation shall have
authority to issue is: Twenty-One Million (21,000,000) of which stock Twenty
Million (20,000,000) shares of the par value of $.001 each shall be common stock
and of which One Million (1,000,000) shares of the par value of $.001 each shall
be preferred stock. Further, the board of directors of this corporation, by
resolution only and without further action or approval, may cause the
corporation to issue one or more classes or one or more series of preferred
stock within any class thereof and which classes or series may have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the board of directors,
and to fix the number of shares constituting any classes or series and to
increase or decrease the number of shares of any such class or series.

5. The name and mailing address of each incorporator is as follows:

NAME MAILING ADDRESS
---- ----------------

Richard O. Weed 5140 Birch Street, Suite 100
Newport Beach, CA 92660

The name and mailing address of each person who is to serve as a director
until the first annual meeting of the stockholders or until a successor is
elected and qualified, is as follows:

NAME MAILING ADDRESS
---- ----------------

Alexander G. Montano 18500 Von Karman, Suite 560
Irvine, CA 92614

6. The corporation is to have perpetual existence.

7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:

To make, alter or repeal the by-laws of the corporation.

To authorize and cause to be executed mortgages and liens upon the real and
personal property of the corporation.

To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.

-25-
<PAGE>
To designate one or more committees, each committee to consist of one or
more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The by-laws may provide
that in the absence or disqualification of a member of a committee, the member
or members present at any meeting and not disqualified from voting, whether or
not such member or members constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the board of directors, or in the by-laws of the corporation,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to the following matters: (I) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the Delaware General
Corporation Law to be submitted to stockholders for approval or (ii) adopting,
amending or repealing any by-law of the corporation.

When and as authorized by the stockholders in accordance with law, to sell,
lease or exchange all or substantially all of the property and assets of the
corporation, including its good will and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in whole or
in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its board of directors
shall deem expedient and for the best interests of the corporation.

8. Elections of directors need not be by written ballot unless the by-laws
of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of Delaware, as
the by-laws may provide. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the board of directors
or in the by-laws of the corporation.

Whenever a compromise or arrangement is proposed between this corporation and
its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.

9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

10. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (I) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit.

-26-
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this Certificate, hereby declaring and certifying that this
is my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this Twenty-third day of September 1997.

/s/ Richard O. Weed
----------------------
Richard O. Weed

-27-
<PAGE>

ESSCO (USA), Inc.

* * * * *

B Y - L A W S

* * * * *

ARTICLE I

OFFICES

Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.

Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section l. All meetings of the stockholders for the election of directors
shall be held in the City of Athens, State of Greece, at such place as may be
fixed from time to time by the board of directors, or at such other place either
within or without the State of Delaware as shall be designated from time to time
by the board of directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.

Section 2. Annual meetings of stockholders, commencing with the year 1997,
shall be held on the Fifteenth day of September, if not a legal holiday, and if
a legal holiday, then on the next secular day following, at 10:00 AM, or at such
other date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.

Section 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than 15 nor more than 60 days before the date of the meeting.

Section 4. The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

Section 5. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the certificate of incorporation,
may be called by the president and shall be called by the president or secretary
at the request in writing of a majority of the board of directors, or at the
request in writing of stockholders owning a majority in amount of the entire
capital stock of the corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.

-28-
<PAGE>
Section 6. Written notice of a special meeting stating the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than 15 nor more than 60 days before the date of the
meeting, to each stockholder entitled to vote at such meeting.

Section 7. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.

Section 8. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.

Section 9. When a quorum is present at any meeting, the vote of the holders of
a majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the certificate of
incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.

Section 10. Unless otherwise provided in the certificate of incorporation each
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder, but no proxy shall be voted on after three years from
its date, unless the proxy provides for a longer period.

Section 11. Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.

ARTICLE III

DIRECTORS

Section 1. The number of directors which shall constitute the whole board
shall be five directors. The directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.

Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.

-29-
<PAGE>
Section 3. The business of the corporation shall be managed by or under the
direction of its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.

Section 5. The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.

Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.

Section 7. Special meetings of the board may be called by the president on 5
days' notice to each director, either personally or by mail or by facsimile
communication; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors unless
the board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.

Section 8. At all meetings of the board, a majority of directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the board of directors the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.

Section 9. Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.

Section 10. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

-30-
<PAGE>
COMMITTEES OF DIRECTORS

Section 11. The board of directors may designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.

In the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member.

Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to the following matters: (I) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
General Corporation Law of Delaware to be submitted to stockholders for approval
or (ii) adopting, amending or repealing any by-law of the corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors.

Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.

COMPENSATION OF DIRECTORS

Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.

REMOVAL OF DIRECTORS

Section 14. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.

ARTICLE IV

NOTICES

Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by facsimile telecommunication.

Section 2. Whenever any notice is required to be given under the provisions of
the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.

-31-
<PAGE>
ARTICLE V

OFFICERS

Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.

Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.

Section 3. The board of directors may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.

Section 4. The salaries of all officers and agents of the corporation shall be
fixed by the board of directors.

Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.

THE PRESIDENT

Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.

Section 7. He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.

THE VICE-PRESIDENTS

Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.

THE SECRETARY AND ASSISTANT SECRETARY

Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.

-32-
<PAGE>
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.

THE TREASURER AND ASSISTANT TREASURERS

Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.

Section 12. He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meetings, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation.

Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.

Section 14. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.

ARTICLE VI

CERTIFICATES FOR SHARES

Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the chairman or vice-chairman of the board of
directors, or the president or a vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation.

If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of Delaware or a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.

-33-
<PAGE>
Section 2. Any of or all the signatures on a certificate may be facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.

LOST CERTIFICATES

Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.

TRANSFER OF STOCK

Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be canceled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.

FIXING RECORD DATE

Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.

REGISTERED STOCKHOLDERS

Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.

-34-
<PAGE>
ARTICLE VII

GENERAL PROVISIONS

DIVIDENDS

Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.

Section 2. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.

ANNUAL STATEMENT

Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.

CHECKS

Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.

FISCAL YEAR

Section 5. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.

SEAL

Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.

INDEMNIFICATION

Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.

ARTICLE VIII

AMENDMENTS

Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.

-35-
<PAGE>

NUMBER SHARES
_________________________

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEPTEMBER 23, 1997

ESSCO (USA), INC.

20,000,000 SHARES COMMON STOCK 1,000,000 SHARES PREFERRED STOCK
$.001. PAR VALUE EACH $.001 PAR VALUE EACH

THIS CERTIFIES THAT___________________________________________ IS THE REGISTERED
HOLDER OF ________________________________________ Shares of the Common Stock of
ESSCO (USA), Inc.

HEREINAFTER DESIGNATED "THE CORPORATION", TRANSFERABLE ON THE SHARE REGISTER OF
THE CORPORATION UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED OR
ASSIGNED.

This certificate and the shares represented thereby shall be subject to all
of the provisions of Certificate of Incorporation and the By-laws of said
Corporation, a copy of which is on file at the office of the Corporation and
made a part hereof as fully as though the provisions of said Certificate of
Incorporation and By-laws were imprinted in full on this certificate, to all of
which the holder of this certificate, by acceptance hereof assents and agrees to
be bound.

Any stockholder may obtain from the principal office of the Corporation,
upon request and without charge, a statement of the number of shares
constituting each class or series of stock and the designation thereof; and a
copy of the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights and the By-laws.

WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
DATED:

__________________________ __________________________
SECRETARY PRESIDENT

-36-
<PAGE>

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st day
of December, 1997, by and between ESSCO (USA), Inc., a Delaware corporation (the
"Company"), and Christos Traios (the "Executive").

WHEREAS, the Company desires to retain the services of the Executive as
Chief Executive Officer of the Company and the Executive desires to render such
services on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual promises contained herein,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:

1. Employment Term. The Company employs the Executive and the Executive
accepts employment by the Company, upon the terms and subject to the conditions
set forth in this Agreement, until November 30, 2002; provided, however, that
such employment may be sooner terminated pursuant to the terms of this
Agreement.

2. Management of the Company. The Executive shall devote the Executive's
time, best efforts, attention and skill to, and shall perform faithfully,
loyally and efficiently the Executive's duties as Chief Executive Officer of the
Company. Further, the Executive will punctually and faithfully perform and
observe any and all rules and regulations which the Company may now or shall
hereafter reasonably establish governing the Executive's conduct and the conduct
of the Company's business which are consistent with this Agreement.

3. Compensation; Benefits. In consideration of the services rendered to the
Company by the Executive, the Company shall pay the Executive a salary at the
annual rate of Three Hundred Thousand Dollars ($300,000) (the "Salary"). The
Salary shall be payable in accordance with the normal payroll practices of the
Company then in effect. In addition to Salary, the Executive shall be entitle
to an annual bonus equal to ten percent (10%) of the annual operating profits of
the Company in excess of Three Million Dollars ($3,000,000) per year (the
"Bonus"). The Salary, Bonus, and all other forms of compensation paid to the
Executive hereunder, shall be subject to all applicable taxes required to be
withheld by the Company pursuant to federal, state or local law. The Executive
shall be solely responsible for income taxes imposed on the Executive by reasons
of any cash or non-cash compensation and benefits provided by this Agreement.

-37-
<PAGE>
In addition to the Salary, during the Employment Term, the Executive shall
be entitled to: (i) all legal and religious holidays, and two (2) weeks paid
vacation per annum. The Executive shall arrange for vacations in advance at
such time or times as shall be mutually agreeable to the Executive and the
Company's Board of Directors. The Executive may not receive pay in lieu of
vacation; (ii) participate in all employee benefit plans and/or arrangements
adopted by the Company relating to pensions, hospital, medical, dental,
disability and life insurance, deferred salary and savings plans, and other
similar employee benefit plans or arrangements to the extent that the Executive
meets the eligibility requirements for any such plan as in effect from time to
time; (iii) payment by the Company directly, or reimbursement by the Company
for, reasonable and customary business and out-of-pocket expenses incurred by
the Executive in connection with the performance by the Executive of the
Executive's duties under this Agreement in accordance with the Company's
policies and practices for reimbursement of such expenses, as in effect from
time to time, including, without limitation, reasonable and necessary travel,
lodging, entertainment and meals incurred by the Executive in furtherance of the
Company's business and at the Company's request.

In addition to the payment of Salary, the Company hereby grants to the
Executive, One Million (1,000,000) non-qualified stock options (collectively,
the "Stock Options"). Each Stock Option provides the Executive with the right
to purchase one share of the Company's $.001 par value common stock at $9.00 per
share. The Stock Options are non-transferable, vest immediately in Executive,
and expire at the close of business on November 30, 2007.

4. Termination of Employment. The Executive's employment hereunder shall
terminate upon the earliest to occur of any the following events, on the dates
and at the times specified below:

(i) the close of business on November 30, 2002 (the "Expiration Date");

(ii) the close of business on the date of the Executive's death ("Death");

(iii) the close of business on the Termination Date (as defined below)
specified in the Notice of Termination (as defined below) which the Company
shall have delivered to the Executive due to the Executive's Disability.
"Disability" shall mean if (i) the Executive is absent from work for 30 calendar
days in any twelve-month period by reason of illness or incapacity whether
physical or otherwise) or (ii) the Company reasonably determines that the
Executive is unable to perform his duties, services and responsibilities by
reason of illness or incapacity (whether physical or otherwise) for a total of
30 calendar days in any twelve-month period during the Employment Term. The
Executive agrees, in the event of any dispute under this Section, and after
receipt by the Executive of such Notice of Termination from the Company, to
submit to a physical examination by a licensed physician selected by the
Company. The Executive may seek a second opinion from a licensed physician
acceptable to the Company. If the results of the first examination and the
second examination are different, a licensed physician selected by the
physicians who have performed the first and second examinations shall perform a
third physical examination of the Executive, the result of which shall be
determinative for purposes of this Section;

(iv) the close of business on the Termination Date specified in the Notice
of Termination which the Executive shall have delivered to the Company to
terminate his employment ("Voluntary Termination");

(v) the close of business on the Termination Date specified in the Notice
of Termination which the Company shall have delivered to the Executive to
terminate the Executive's employment for Cause. "Cause" as used herein means
termination based on (i) the Executive's material breach of this Agreement, (ii)
conviction of the Executive for (a) any crime constituting a felony in the
jurisdiction in which committed, (b) any crime involving moral turpitude whether
or not a felony), or (c) any other criminal act against the Company involving
dishonesty or willful misconduct intended to injure the Company (whether or not
a felony), (iii) substance abuse by the Executive, (iv) the failure or refusal
of the Executive to follow one or more lawful and proper directives of the Board
of Directors delivered to the Executive in writing, or (v) willful malfeasance
or gross misconduct by the Executive which discredits or damages the Company.

-38-
<PAGE>
Any purported termination by the Company or the Executive (other than by
reason of Death or on the Expiration Date) shall be communicated by written
Notice of Termination to the other. As used herein, the term "Notice of
Termination" shall mean a notice which indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. After receipt of a
Notice of Termination, the Executive shall continue to be available to the
Company on a part-time basis at reasonable and customary hourly rates to assist
in the necessary transition.

As used herein, the term "Termination Date" shall mean, (i) in the case of
Death, the date of the Executive's death, (ii) in the case of expiration of the
term hereof, the Expiration Date, or (iii) in all other cases, the date
specified in the Notice of Termination.

5. Employee Covenants.

Trade Secrets and Proprietary Information. The Executive agrees and
----------------------------------------------
understands that due to the Executive's position with the Company, the Executive
will be exposed to, and has received and will receive, confidential and
proprietary information of the Company or relating to the Company's business or
affairs collectively, the "Trade Secrets"), including but not limited to
technical information, product information and formulae, processes, business and
marketing plans, strategies, customer information, other information concerning
the Company's products, promotions, development, financing, expansion plans,
business policies and practices and other forms of information considered by the
Company to be proprietary and confidential and in the nature of trade secrets.
Trade Secrets shall not include any such information which (A) was known to the
Executive prior to his employment by the Company or (B) was or becomes generally
available to the public other than as a result of a disclosure by the Executive
in violation of the provisions of this Section. Except to the extent that the
proper performance of the Executive's duties, services and responsibilities
hereunder may require disclosure, the Executive agrees that during the
Employment Term and at all times thereafter the Executive will keep such Trade
Secrets confidential and will not disclose such information, either directly or
indirectly, to any third person or entity without the prior written consent of
the Company. This confidentiality covenant has no temporal, geographical or
territorial restriction. On the Termination Date unless the Executive remains
as an employee of the Company thereafter in which case, on the date which the
Executive is no longer an employee of the Company), the Executive will promptly
supply to the Company all property, keys, notes, memoranda, writings, lists,
files, reports, customer lists, correspondence, tapes, disks, cards, surveys,
maps, logs, machines, technical data, formulae or any other tangible product or
document which has been produced by, received by or otherwise submitted to and
retained by the Executive in the course of his employment with the Company. Any
material breach of the terms of this paragraph shall be considered Cause.

Prohibited and Competitive Activities. The Executive and the Company
-----------------------------------------
recognize that due to the nature of the Executive's engagement hereunder and the
relationship of the Executive to the Company, the Executive has had and will
have access to, has had and will acquire, and has assisted and may continue to
assist in, developing confidential and proprietary information relating to the
business and operations of the Company and its affiliates, including, without
limitation, Trade Secrets. The Executive acknowledges that such information has
been and will be of central importance to the business of the Company and its
affiliates and that disclosure of it to, or its use by, others (including,
without limitation, the Executive (other than with respect to the Company's
business and affairs)) could cause substantial loss to the Company.

-39-
<PAGE>
The Executive and the Company also recognize that an important part of the
Executive's duties will be to develop good will for the Company and its
affiliates through the Executive's personal contact with Clients (as defined
below), employees, and others having business relationships with the Company,
and that there is a danger that this good will, a proprietary asset of the
Company, may follow the Executive if and when the Executive's relationship with
the Company is terminated. The Executive accordingly agrees as follows:

(i) Prohibited Activities. The Executive agrees that the Executive will not at
any time during the Employment Term: (A) (other than in the course of the
Executive's employment) disclose or furnish to any other person or, directly or
indirectly, use for the Executive's own account or the account of any other
person, any Trade Secrets, no matter from where or in what manner he may have
acquired such Trade Secrets, and the Executive shall retain all such Trade
Secrets in trust for the benefit of the Company, its affiliates and the
successors and assigns of any of them, (B) directly or through one or more
intermediaries, solicit for employment or recommend to any subsequent employer
of the Executive the solicitation for employment of, any person who, at the time
of such solicitation, is employed by the Company or any affiliate, (C) directly
or indirectly, whether for the Executive's own account or for the account of any
other person, solicit, divert, or endeavor to entice away from the Company or
any entity controlled by the Company, or otherwise engage in any activity
intended to terminate, disrupt, or interfere with, the Company's or any of its
affiliates' relationships with, Clients, or otherwise adversely affect the
Company's or any of its affiliates' relationships with Clients or other business
relationships of the Company or any affiliate thereof, or (D) publish or make
any statement critical of the Company or any shareholder or affiliate of the
Company or in any way adversely affect or otherwise malign the business or
reputation of any of the foregoing persons (any activity described in clause
(A), (B), (C) or (D) of this Section being referred to as a Prohibited
Activity"); provided, however, that if in the written opinion of Counsel, the
Executive is legally compelled to disclose Trade Secrets to any tribunal or else
stand liable for contempt or suffer other similar censure or penalty, then the
disclosure to such tribunal of only those Trade Secrets which such counsel
advises in writing are legally required to be disclosed shall not constitute a
Prohibited Activity provided that the Executive shall give the Company as much
advance notice of such disclosure as is reasonably practicable. As used herein,
the term "Clients" shall mean those persons who, at any time during the
Executive's course of employment with the Company (including, without
limitation, prior to the date of this Agreement) are or were clients or
customers of the Company or any affiliate thereof or any predecessor of any of
the foregoing.

(ii) Non-Competition. By and in consideration of the Company's entering
into this Agreement, the Executive agrees that the Executive will not, during
the Employment Term and for a period of eighteen months thereafter, engage in
any Competitive Activity. The term "Competitive Activity" means engaging in any
of the following activities: (A) serving as a director of any Competitor (as
defined below), (B) directly or indirectly through one or more intermediaries,
either (X) controlling any Competitor or (Y) owning any equity or debt interests
in any Competitor (other than equity or debt interests which are publicly traded
and, at the time of any acquisition thereof by the Executive, do not in the
aggregate exceed 5% of the particular class of interests of such Competitor then
outstanding) (it being understood that, if interests in any Competitor are owned
by an investment vehicle or other entity in which the Executive owns an equity
interest, a portion of the interests in such Competitor owned by such entity
shall be attributed to the Executive, such portion determined by applying the
percentage of the equity interest in such entity owned by the Executive to the
interests in such Competitor owned by such entity), employment by (including
serving as an officer, director or partner of), providing consulting services to
(including, without limitation, as an independent contractor), or managing or
operating the business or affairs of, any Competitor or (D) participating in the
ownership, management, operation or control of or being connected in any manner
with any Competitor. The term "Competitor" as used herein (I) during the
Employment Term, means any person (other than the Company, Parke Industries,
Inc. or any of their respective affiliates) that competes, either directly or
indirectly with any of the business conducted by the Company or any affiliate.

-40-
<PAGE>
Remedies. The Executive agrees that any breach of the terms of this
---------
Section would result in irreparable injury and damage to the Company for which
the Company would have no adequate remedy at law. The Executive therefore agrees
that in the event of said breach or any threat of breach, the Company shall be
entitled to an immediate injunction and restraining order to prevent such breach
and/or threatened breach and/or continued breach by the Executive and/or any and
all persons and/or entities acting for and/or with the Executive, without having
to prove damages. The terms of this paragraph shall not prevent the Company from
pursuing any other available remedies to which the Company may be entitled at
law or in equity for any breach or threatened breach hereof, including but not
limited to the recovery of damages from the Executive. the provisions of this
Section 8 shall survive any termination of this Agreement. The existence of any
claim or cause of action by the Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants and agreements of this Section.

Proprietary Information and Inventions. The Executive agrees that any and
----------------------------------------
all inventions, discoveries, improvements, processes, formulae, business
application software, patents, copyrights and trademarks made, developed,
discovered or acquired by him prior to and during the Employment Term, solely or
jointly with others or otherwise, which relate to the business of the Company,
and all knowledge possessed by the Executive relating thereto collectively, the
"Inventions"), shall be fully and promptly disclosed to the Board of Directors
and to such person or persons as the Board of Directors shall direct and the
Executive irrevocably assigns to the Company all of the Executive's right, title
and interest in and to all Inventions of the Company and all such Inventions
shall be the sole and absolute property of the Company and the Company shall be
the sole and absolute owner thereof. The Executive agrees that he will at all
times keep all Inventions secret from everyone except the Company and such
persons as the Board of Directors may from time to time direct. The Executive
shall, as requested by the Company at any time and from time to time, whether
prior to or after the expiration of the Employment Term, execute and deliver to
the Company any instruments deemed necessary by the Company to effect disclosure
and assignment of the Inventions to the Company or its designees and any patent
applications (United States or foreign) and renewals with respect thereto,
including any other instruments deemed necessary by the Company for the
prosecution of patent applications, the acquisition of letters patent and/or the
acquisition of patents or copyrights in any and all countries and to vest title
thereto in the Company or its nominee.

6. Representations and Warranties of the Executive. The Executive
represents and warrants to the Company that:

(I) The Executive's employment by the Company as contemplated will not
conflict with, and will not be constrained by, any prior or current employment,
consulting agreement or relationship, whether written or oral; and

(ii) The Executive does not possess confidential information arising out
of any employment, consulting agreement or relationship with any person or
entity other than the Company which could be utilized in connection with the
Executive's employment by the Company.

7. Binding Effect or Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective heirs, executors,
representatives, states, successors and assigns, including any successor or
assign to all or substantially all of the business and/or assets of the Company,
whether direct or indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise; provided, however, that the Executive, or any beneficiary
or legal representative of the Executive, shall not assign all or any portion of
the Executive's rights or obligations under this Agreement without the prior
written consent of the Company.

8. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt.

-41-
<PAGE>
9. Amendment and Modification. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by each of the Executive and the Company. No
such waiver or discharge by either party hereto at any time or any waiver or
discharge of any breach by the other party hereto of, or compliance with, any
condition or provision of this agreement to be performed by such other party,
shall be deemed a waiver or discharge of similar or dissimilar provisions or
conditions, or a waiver or discharge of any breach of any provisions, at the
same or at any prior or subsequent time.

10. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of California without giving effect to the
conflict of law principles of that state.

11. Severability. In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other portion of this Agreement, and this Agreement shall be construed as if
such provision had never been contained herein.

12. Withholding Taxes. Notwithstanding anything contained herein to the
contrary, all payments required to be made hereunder by the Company to the
Executive, or his estate or beneficiaries, shall be subject to the withholding
of such amounts as the Company may reasonably determine it should withhold
pursuant to any applicable federal, state or local law or regulation.

13. Arbitration of Disputes. The parties hereto mutually consent to the
resolution by arbitration of all claims and controversies arising out of or
relating to this Agreement.

14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

15. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes any and all prior agreements, written or
oral, understandings and arrangements, either oral or written, between the
parties with respect to the subject matter, and shall, as of the date hereof,
constitute the only employment agreement between the parties.

16. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all further acts and things and shall execute and deliver
all other agreements, certificates, instruments, and documents as any other
party reasonably may request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated.

17. Construction. The headings in this Agreement are for reference purposes
only and shall not limit or otherwise affect the meaning or interpretation of
this Agreement.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.

"Company"
ESSCO (USA), Inc., a Delaware corporation

By: /s/ Alexander G. Alexander
-----------------------------
Name: Alexander G. Montano
Title: Chief Financial Officer

"Executive"

By: /s/ Christos Traios
---------------------
Name: Christos Traios

-42-
<PAGE>

DELAWARE CODE

TITLE 8. CORPORATIONS

CHAPTER 1. GENERAL CORPORATION LAW

SUBCHAPTER IV. DIRECTORS AND OFFICERS

145. Indemnification of officers, directors, employees and agents; insurance.

(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.

(b) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

(c) To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because the person has
met the applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the board of directors deems appropriate.

-43-
<PAGE>
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.

(g) A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.

(h) For purposes of this section, references to "the corporation" shall include,
in addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.

(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.

(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).

-44-
<PAGE>