WELLSPRING INVESTMENTS INC, 10SB12G/A, 1999-05-24

WELLSPRING INVESTMENTS INC
10SB12G/A, 1999-05-24
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-SB/A

AMENDMENT NO. 1
TO
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS

UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934

WELLSPRING INVESTMENTS, INC.
(Name of small business issuer in its charter)

DELAWARE 33-0835337
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

610 NEWPORT CENTER DRIVE, SUITE 800
NEWPORT BEACH, CALIFORNIA 92660
(Address of principal executive offices) (Zip code)

(949) 719-1977
(Registrant's telephone number, including area code)

SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)

SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.0001
Title of Class

<PAGE>

TABLE OF CONTENTS

PART I

Item 1 Description of Business.

Item 2 Management's Discussion and Analysis or Plan of Operation.

Item 3 Description of Property.

Item 4 Security Ownership of Certain Beneficial Owners and
Management.

Item 5 Directors, Executive Officers, Promoters and Control
Persons.

Item 6 Executive Compensation.

Item 7 Certain Relationships and Related Transactions.

Item 8 Description of Securities.

PART II

Item 1 Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters.

Item 2 Legal Proceedings.

Item 3 Changes In and Disagreements With Accountants.

Item 4 Recent Sales of Unregistered Securities.

Item 5 Indemnification of Directors and Officers.

PART F/S

Financial Statements.

PART III

Item 1 Index to Exhibits.

Item 2 Description of Exhibits.

<PAGE>

PART I

ITEM 1 - DESCRIPTION OF BUSINESS

The Company was organized under the Laws of the State of Delaware, on
October 24, 1994, and is a "blank check" or "public shell" company whose
primary purpose is to engage in a merger with, or acquisition of one or a
small number of private firms. Such firms are expected to be private
corporations, partnerships or sole proprietorships. Since inception, the
primary activity of the Company has been directed towards organizational
efforts and obtaining initial financing. The Company has not engaged in
preliminary efforts to identify possible merger or acquisition candidates
and has no market studies available to it. The Company has no business
opportunities under contemplation for acquisitions.

BUSINESS OBJECTIVES

The Company plans to seek one or more potential businesses that Management
believes warrant the Company's involvement. As a result of its limited
resources, the number of potential businesses available will be extremely
limited. The Company will not restrict its search to any particular
industry. Nevertheless, Management does not intend to become involved with
a company that is an "investment company" under the Investment Company Act
of 1940; with a company that is a broker or dealer of investment securities
or commodities; or with any company in which the officers, directors or
shareholders of the target company are officers or directors of the Company.
These business objectives are extremely general and are not intended to be
restrictive upon the discretion of Management. Except for the general
limitations contained above, management has not developed and does not
intend to develop specific criteria to be followed in the search for and
selection of a business acquisition. Investors will therefore have
extremely limited information as to Management's specific intentions and
investors will be unable to determine even the industries which Management
might consider.

The target company may be (i) in its preliminary or developmental stage,
(ii) a "financially troubled" business or (iii) a going concern. It is
impossible to determine the capital requirements of the target business or
whether such business may require additional capital. Some target companies
may seek to establish a public trading market for their securities.

The analysis of potential business endeavors will be undertaken by or under
the supervision of Management. Management is comprised of individuals of
varying business experience, and Management will rely on its own collective
business judgment in evaluating businesses that the Company may acquire or
participate. See "Item 5 - Directors, Executive Officers, Promoters and
Control Persons." Locating and investigating specific business proposals may
take an extended period of time. If a business is located, the negotiation,
drafting, and execution of relevant agreements, disclosure documents and
other instruments will require substantial time, effort, and expense. The
time periods of these subsequent steps cannot be determined. If a specific
business endeavor cannot be located the costs incurred in the investigation
are not likely to be recovered. The failure to consummate an attempted
transaction would likely result in the loss of the costs incurred.

Applicable regulations require the reporting of certain information
regarding businesses acquired, including the filing of certified financial
statements of such companies. Thus, if during the pendency of this
registration statement, the Company determines that a material acquisition
is probable, this document will be appropriately revised, including the
addition of audited financial statements of the business to be acquired.
Consequently, a target company that does not have, or cannot obtain,
certified financial statements will not likely be considered by Management.

Shareholders of the Company are relying totally upon the business judgment
of Management. Shareholders will not likely be consulted or provided any
disclosure documentation in connection with any acquisition engaged in by
the Company, unless required by state corporate law or the Federal
securities laws. Although Management does not anticipate a sale of their
Company shares in connection with an acquisition, in the event Management
does enter into an agreement to do so, the remaining shareholders of the
Company may not be afforded an equal opportunity to do so. As Management
intends to offer a controlling interest in the Company, It is probable that
a change of control will occur as a result of an acquisition engaged in by
the Company. To the best knowledge of the Company, no shareholders are
party to any lock-up agreement or understanding. There are no arrangements,
agreements, or understandings between non-management shareholders and
management under which non-management

<PAGE>

shareholders may directly or
indirectly participate in or influence the management of the Company's
affairs, and there are no agreements concerning the election of members of
the Board of Directors.

Management has voluntarily elected to file this Form 10-SB with the
Securities and Exchange Commission pursuant to the recent requirement of the
National Association of Securities Dealers (NASD) that companies seeking to
have their securities quoted on the Over-The-Counter Bulletin Board must
first be subject to the reporting requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As such,
subsequent to the effectiveness hereof, the Company will be filing periodic
reports as required under the Exchange Act. Management anticipates that the
Company will continue to voluntarily file periodic reports in the event that
its obligation to file such reports is suspended under the Exchange Act.
Any potential target company must have financial statements which can be
audited and prepared as required by Rule 310 of Regulation S-B and/or
Regulation S-X.

A number of states have enacted statutes, rules and regulations limiting the
sale of securities of "blank check" companies in their respective
jurisdictions. Some states prohibit the initial offer and sale as well as
any subsequent resale of securities of shell companies to residents of their
states. In such an event, the shareholders of the Company, as well as the
shareholders of any target company, may be limited in their ability to
resell shares of the Company. To the best knowledge of the Company, the
following states may have such limitations (this list is not exhaustive and
a significant number of other states may also have such limitations):
Connecticut, Georgia, Oregon, Washington, and Florida.

COMPETITION

Inherent difficulties exist for any new company seeking to enter an
established field. The Company will remain an insignificant participant
among the firms which engage in mergers with and acquisitions of privately
financed entities. There are many established venture capital and financial
concerns which have significantly greater financial and personnel resources,
technical expertise and experience than the Company. The Company is also
subject to competition from numerous other recently formed public and
private entities with business objectives similar to those of the Company.

REGULATION

The Investment Company Act of 1940 ("Investment Act") defines an investment
company as an issuer which is or holds itself out as being engaged primarily
in the business of investing, reinvesting or trading of securities. The
Company does not intend to engage primarily in the activities of purchasing,
trading or selling securities and intends to conduct its activities so as to
avoid being classified as an "investment company" under the Investment Act.
The Company could be expected to incur significant registration and
compliance costs if required under the Investment Act, and the regulations
promulgated thereunder.

Section 3(a) of the Investment Act provides exclusions from its application
for companies which are not primarily engaged in the business of investing,
reinvesting or trading in "investment securities". Management intends to
implement its business plan in a manner which will result in the
availability of this exception from the definition of "investment company".
Accordingly, Management will continue to review the Company's activities
from time to time with a view toward reducing the likelihood that the
Company could be classified as an "investment company".

The Company's plan of business may involve changes in its capital structure,
management, control, and business, especially if it consummates its plan to
acquire or merge with another entity. Each of these areas are regulated by
the Investment Act, which regulations have the purported purpose of
protecting purchasers of investment company

<PAGE>

securities. Since the Company
will not register as an investment company, its shareholders will not be
afforded these purported protections.

Even if the Company restricts its activities as described above, it is
possible that it may be classified as an inadvertent investment company.
This would be most likely to occur if significant delays are experienced in
locating a business opportunity.

The Company intends to vigorously resist classification as an investment
company and to take advantage of any exemptions or exceptions from
application of the Investment Act, including an exception which allows an
entity a one-time option during any three (3) year period to claim an
exemption as a "transient" investment company. The necessity of asserting
any such contention, or making any other claim of exemption, could be time
consuming, costly or even prohibitive, given the Company's limited resources.

The Company intends to structure a merger or acquisition in such a manner as
to minimize Federal and state tax consequences to the Company and its
shareholders, and to any target company and its shareholders. Under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"), a
statutory merger or consolidation is an exempt transaction and may be tax
free to the companies and their shareholders if effected in accordance with
state law. A tax free reorganization may require the Company to issue a
substantial portion of its securities in exchange for the securities or
assets of a target firm. Consequently, a tax free reorganization may result
in substantial dilution of the ownership interests of the present
shareholders of the Company. Even if a merger or consolidation is
undertaken in accordance with the Code, there is no assurance that tax
regulations will not change and result in the Company or its shareholders
incurring a significant tax liability.

The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection
with trades in any stock defined as a penny stock. The Commission has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on
Nasdaq and any equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous
operation for three years, (ii) net tangible assets of at least $5,000,000,
if such issuer has been in continuous operation for less than three years,
or (iii) average annual revenue of at least $6,000,000, if such issuer has
been in continuous operation for less than three years. Unless an exception
is available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.

EMPLOYEES

The Company presently has no employees other than its officers. Each of the
officers has employment and/or other business associations elsewhere. None
of the officers has allocated more than a minimal amount of time to the
affairs of the Company.

FACILITIES

Since its inception, the Company has maintained its offices rent free at the
office of its President, M. Richard Cutler, 610 Newport Center Drive, Suite
800, Newport Beach, CA 92660. Mr. Cutler has agreed that the Company may
remain for at least one year or until consummation of a Business
Combination, whichever shall first occur. The Company will utilize a
minimal amount of space. There are no other preliminary agreements with
respect to future offices or facilities, however, following the consummation
of an acquisition, it is anticipated that the Company's offices will change
to those of the target company.

YEAR 2000 COMPLIANCE

As the Company does not have any material assets nor any computer systems,
it has not done an evaluation of its Year 2000 compliance. Management does
not anticipate that there will be any consequences, material or immaterial,
negative or positive, to the Company as a result of the Year 2000 computer
problem. As a result of a Business Combination or merger, however, the
Company may inherit computer systems that are not Year 2000 compliant, or
enter into contracts or business dealings with suppliers, contractors, or
others that are not Year 2000 compliant.

<PAGE>

Management cannot anticipate the
impact of such future occurrences. Failure to satisfactorily address the
Year 2000 issue could have a material adverse effect on the Company.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Management believes that the Company has minimal cash requirements during
the next 12 months. The Company does not anticipate any significant changes
in the number of its employees, does not plan to engage in research and
development and does not plan to purchase or sell plant or equipment.

The Company is a "blank check" or "public shell" company and as such expects
to concentrate primarily on the identification and evaluation of prospective
merger or acquisition "target" entities including private corporations,
partnerships or sole proprietorships. Management believes that target
companies will be limited to privately financed companies and expects to be
precluded from other public companies.

Management intends to identify prospects through present associations such
as its officers and directors, attorneys, and similar persons. The Company
does not anticipate engaging the services of professional firms that
specialize in business acquisitions and reorganizations. Nor does
Management intend to hire independent consultants or advisors for merger
related services. In the event that professional firms specializing in
business acquisitions and reorganizations, consultants, or advisors are
engaged, they may be paid, in addition to customary fees, a finder's fee for
introductions resulting in a business combination or merger. The finder's
fee may be up to ten percent (10%) of the value of the transaction, and may
be payable in equity securities of the Company. It is not anticipated that
finder's fees or other acquisition related compensation will be paid to
Management or their affiliates. If incurred, there is currently a minimal
amount of funds available to pay consulting or other service fees, and the
proceeds of future financings or funds from the target company would be
utilized.

Management expects to conduct a preliminary evaluation of target companies.
Such preliminary evaluations are not expected to be an in-depth evaluation
of the target company's operations. Nevertheless, this evaluation should
provide a sufficient overview to eliminate many prospects from further
consideration. Shareholders will not likely be consulted or provided any
disclosure documentation in connection with any acquisition engaged in by
the Company, unless required by state corporate law or the Federal
securities laws.

The specific method or form by which a Business Combination may be
structured cannot be determined at this time. It could involve a merger or
consolidation; merger or consolidation of the acquired business into a
subsidiary of the Company; an exchange of shares of stock, with or without
payment in cash; or an acquisition of assets. Although Management does not
anticipate a sale of their Company shares in connection with an acquisition,
in the event Management does enter into an agreement to do so, the remaining
shareholders of the Company may not be afforded an equal opportunity to do
so. As Management intends to offer a controlling interest in the Company,
It is probable that a change of control will occur as a result of an
acquisition engaged in by the Company.

It is not presently anticipated that the Company will acquire or merge with
a business or company in which the Company's promoters, management or their
affiliates or associates directly or indirectly have an ownership interest,
however there is no agreement, policy, or understanding to prevent such a
transaction. In the event of such a non-arm's length transaction,
Management would seek an independent appraisal of the transaction.
Notwithstanding the foregoing, there is the potential that a conflict of
interest will arise between the Company and its management in which case
Management's fiduciary duties may be compromised. Any remedy available
under state corporate law would, in such an event, most likely be
prohibitively expensive and time consuming. There are no arrangements,
agreements, or understandings between non-management shareholders and
management under which non-management shareholders may directly or
indirectly participate in or influence the management of the Company's
affairs, and there are no agreements concerning the election of members of
the Board of Directors.

A merger will likely be made through the exchange of the Company's stock
which has been authorized but unissued (and perhaps the balance of the
Company's assets) for stock of the target company. The Company has not
established a specific minimum level of earnings or assets which a target
company must satisfy. Moreover, Management may identify a target company
which is generating losses or which has negative equity, which may have a
material adverse effect on the price of the Company's common shares.

<PAGE>

Negotiations with target company management can be expected to focus on the
percentage of the Company which target company shareholders would acquire in
exchange for their shareholdings in the target company. The Company's
shareholders will, in all likelihood, hold no more than a relatively small
percentage of the common shares of the Company following any merger or
acquisition. This percentage may be subject to even further reduction in
the event the Company acquires a target company with substantial assets.
Any merger or acquisition effected by the Company can be expected to have a
significant dilative effect on the percentage of shares held by the
Company's then shareholders, including purchasers in this Offering.

The exact terms and format of any acquisition will be determined by the
Company's Management and, unless required by law, the Company's shareholders
will not have the opportunity to vote on the acquisition. The Company may
be required to file or maintain a registration statement to register any
securities to be issued in connection with any acquisition.

There are no plans, proposals, arrangements or understandings with respect
to the sale of additional securities to affiliates or others following the
registered distribution but prior to the location of a business opportunity.

If the Company does not consummate a transaction after expenditure of time
and funds in investigation and analysis of a business opportunity, the
losses incurred may adversely affect the Company's ability to carry out its
business objectives. It is also possible that the Company may expend all of
its cash without ever successfully acquiring any business opportunity.

The Company is not currently a party to any loan agreements or
understandings. It is not presently anticipated that the Company will
become a party to any loan agreement or understanding as a result of a
Business Combination. Following the consummation of a Business Combination,
the Company may, in Management's discretion, enter into loan agreements or
understandings in the course of funding its growth and/or operations.

Some target companies may not need additional capital but may desire to
merge with the Company for purpose of establishing a public trading market
for its shares. In such event, Management of the target company may desire
to avoid the delays, expenses, and other perceived adverse consequences of
undertaking a public offering. Such a merger, in all likelihood, would
involve the exchange of the Company's stock, including the authorized but
unissued stock with the outstanding shares of the target company.

ITEM 3 - DESCRIPTION OF PROPERTY

<PAGE>

ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of February 22, 1999, certain information
with respect to the Company's equity securities owned of record or
beneficially by (i) each Director of the Company; (ii) each person who owns
beneficially more than 5% of each class of the Company's outstanding equity
securities; and (iii) all Directors and Executive Officers as a group.

<TABLE>
<S> <C> <C>
Title Percent of
of Class Name and Address of Beneficial Owner Common Stock Outstanding

Common Stock M. Richard Cutler 790,000 79.0%
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660

Common Stock Brian A. Lebrecht 190,150 19.0%
610 Newport Center Drive
Suite 800
Newport Beach, CA 92660

All Directors and Officers as a Group (2) 980,150 98.0%

</TABLE>
_____________________

<TABLE>
<S> <C> <C> <C>
Title Series A Percent of
of Class Name and Address of Beneficial Owner Preferred Stock Outstanding

Series A Pfd Saalib Limited(1) 5,000 100%
East Wing 2nd Level
Hadfield House
Library Street
Gibralter

</TABLE>
_____________________

(1) No officer, director or principal shareholder of the Company, or
their affiliates, are related to Saalib Limited.

The Company believes that the beneficial owners of securities listed above,
based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable. Beneficial ownership is determined in accordance with the
rules of the Commission and generally includes voting or investment power
with respect to securities. Shares of stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed outstanding
for purposes of computing the percentage of the person holding such options
or warrants, but are not deemed outstanding for purposes of computing the
percentage of any other person.

ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following table sets forth the names and ages of the current directors
and executive officers of the Company, the principal offices and positions
with the Company held by each person and the date such person became a
director or executive officer of the Company. The executive officers of the
Company are elected annually by the

<PAGE>

Board of Directors. The directors serve
one year terms and until their successors are elected. The executive
officers serve terms of one year or until their death, resignation or
removal by the Board of Directors. There are no family relationships
between any of the directors and executive officers. In addition, there was
no arrangement or understanding between any executive officer and any other
person pursuant to which any person was selected as an executive officer.

The directors and executive officers of the Company are as follows:

Name Age Positions

M. Richard Cutler 41 President, Chief Executive Officer,
Secretary, Director (1994)

Brian A. Lebrecht 29 Vice President (1998)

M. RICHARD CUTLER, 41, is President, Chief Executive Officer, Secretary and
a Director of the Company, and has been since its inception. Mr. Cutler
founded the Law Offices of M. Richard Cutler in August 1996. Mr. Cutler has
practiced in the general corporate and securities area since his graduation
from law school. Mr. Cutler is a graduate of Brigham Young University
(B.A., magna cum laude, 1981); and Columbia University School of Law (J.D.
1984). While at Columbia, Mr. Cutler was honored as a Harlan Fiske Stone
Scholar, was Managing Editor of the Columbia Journal of Law and Social
Problems, received a Recognition of Achievement with Honors in Foreign and
International Law, Parker School of Foreign and Comparative Law and was
honored for best senior writing for "United States v. Ross: A Solution to
the Automobile Container Dilemma?" published in the Columbia Journal of Law
& Social Problems in 1983. Mr. Cutler was admitted to the State Bar of
Texas in 1984 and the State Bar of California in 1990. After law school,
Mr. Cutler joined the national law firm of Jones, Day, Reavis & Pogue where
he practiced in the corporate, securities and mergers and acquisitions
departments. Mr. Cutler subsequently spent five years in the corporate and
securities department of Akin, Gump, Strauss, Hauer & Feld, a Dallas law
firm. Subsequently, Mr. Cutler was with the Los Angeles office of Kaye,
Scholer, Fierman, Hayes & Handler, a New York based law firm, where he
continued his general business and securities practice. In 1991, Mr. Cutler
founded the law firm of Horwitz, Cutler & Beam, where he practiced corporate
and securities law for five years. Mr. Cutler has been admitted to the U.S.
Federal District Courts, Central and Northern Districts of California, as
well as the U.S. Court of Appeals, Ninth Circuit. Mr. Cutler is the author
of "Comparative Conflicts of Law: Effectiveness of Contractual Choice of
Forum," published in the Texas International Law Journal in 1985.

Mr. Cutler also serves the Company as corporate and securities counsel and,
as such, is expected to be paid legal fees from the proceeds of this
Offering. See "Certain Transactions."

BRIAN A. LEBRECHT, 29, has been Vice President of the Company since
September 1998. Mr. Lebrecht joined the Law Offices of M. Richard Cutler in
December 1996, and assists clients primarily in the areas of corporate
finance and mergers and acquisitions, including private placements, public
and private offerings, Securities and Exchange Commission and Blue Sky
compliance and reporting requirements, asset and stock purchases, and
general corporate practice. His clientele includes emerging growth companies
in the areas of health care, finance, clothing and apparel, Internet
commerce, retail, gas and service stations, giftwares, manufacturers
representatives, mail order, high-technology manufacturing, and a wide array
of service industries. He is an adjunct professor of Business Law at the
University of California, San Diego Extension, is active with the Service
Corps of Retired Executives (SCORE) and the Greater San Diego Chamber of
Commerce Small Business Development Center (SBDC), and is a licensed
California Real Estate Broker. Mr. Lebrecht is a graduate of the University
of San Diego with a Bachelors in Business Administration in 1991, and a J.D.
and M.B.A. in 1995, and is licensed to practice law in the State of
California and the United Stated District Court for the Southern District of
California. Immediately prior to joining the Law Offices of M. Richard
Cutler, Brian was the proprietor of The Law Offices of Brian A. Lebrecht in
San Diego, California, focusing on business transactions, formations, and
acquisitions as well as estate planning. His past experiences include a
position in the legal department of the Federal Home Loan Mortgage
Corporation (Freddie Mac) in Washington, D.C., a position within the General
Counsel's office of a major Southern California construction supplier, and
representation of consumer interests before the California State Contractors
License Board and the California State Banking Department, culminating in
published works in the California Regulatory Law Reporter.

As Management intends to offer a controlling interest in the Company, It is
probable that a change of management control will occur as a result of an
acquisition engaged in by the Company.

<PAGE>

ITEM 6 - EXECUTIVE COMPENSATION

In 1994, M. Richard Cutler was issued 1,000,000 shares of common stock for
services rendered. Otherwise, no remuneration has been paid to date to the
officers or directors of the Company in connection with their capacities as
such. The officers will be reimbursed for their expenses incurred on behalf
of the Company.

The Company's President, M. Richard Cutler, also serves as corporate and
securities counsel to the Company. Mr. Cutler was paid a legal fee of
$10,000.00 for preparation and filing of this registration statement. Mr.
Cutler was also paid a legal fee of $10,000.00 for the preparation and
filing of the Company's prior private placement. See "Item 7 - Certain
Relationships and Related Transactions." Mr. Cutler may also charge the
Company fees for subsequent legal work performed. To the extent that
additional filings, contracts, letters of intent and related legal work is
performed by Mr. Cutler, he will be paid from other funds available to the
Company. Any such fees will be on a basis commensurate with fees charged by
Mr. Cutler to non-affiliated clients, at prevailing rates believed to be
substantially lower than or similar to those charged by licensed attorneys
for similar legal services. If incurred, there is currently a minimal
amount of funds available to pay such fees, and the proceeds of future
financings or funds from the target company would be utilized.

Since the officers and directors are also the current shareholders they may
be expected to receive financial gain if a target company makes arrangements
to acquire a sufficient amount of stock to obtain control of the Company.
Since Management cannot now predict the form or structure of any possible
Business Combination, investors should be aware that additional compensation
with Management could be negotiated in connection with a Business
Combination. These arrangements could include consulting agreements,
membership on Boards or committees, legal services or other arrangements.
Consequently, there can be no present prediction of all compensation that
might ultimately be paid to Management.

SUMMARY COMPENSATION TABLE

The Summary Compensation Table shows certain compensation information for
services rendered in all capacities during each of the prior three (3)
fiscal years. Other than as set forth herein, no executive officer's salary
and bonus exceeded $100,000 in any of the applicable years. The following
information includes the dollar value of base salaries, bonus awards, the
number of stock options granted and certain other compensation, if any,
whether paid or deferred.

SUMMARY COMPENSATION TABLE

<TABLE>
Annual Compensation Long Term Compensation
Awards Payouts

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities
Other Annual Stock Awards Underlying LTIP All Other
Name and Principal Salary Bonus Compensation ($) Options SARs Payouts Compensation
Position Year ($) ($) ($) ($) ($)

M. Richard Cutler 1998 -0- -0- -0- -0- -0- -0- -0-

1997 -0- -0- -0- -0- -0- -0- -0-

1996 -0- -0- -0- -0- -0- -0- -0-

Brian A. Lebrecht 1998 -0- -0- -0- -0- -0- -0- -0-

</TABLE>

<PAGE>

<TABLE>
<S> <C> <C> <C> <C>
OPTION/SAR GRANTS IN LAST FISCAL YEAR

NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S OPTIONS/SAR'S GRANTED TO
GRANTED (#) EMPLOYEES IN FISCAL YEAR EXERCISE OF BASE PRICE
NAME ($/SH) EXPIRATION DATE

M. Richard Cutler -0- -0- N/A N/A
Brian A. Lebrecht -0- -0- N/A N/A

</TABLE>

ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company was organized in Delaware on October 24, 1994, with officers,
directors and founders subscribing for 1,000,000 shares at a par value of
$0.0001 per share purchased in exchange for services, of which all shares
were purchased by Management. Certain of these shares were subsequently
transferred to other shareholders. See "Item 4 - Security Ownership of
Certain Beneficial Owners and Management." The Company currently occupies
offices on a rent free basis at the office of the Company's President, M.
Richard Cutler. Mr. Cutler is also the Company's director and a shareholder.

The Company has retained Mr. Cutler to serve as corporate and securities
counsel. Mr. Cutler has been paid an attorney's fee of $10,000.00 for the
preparation and filing of this registration statement. Mr. Cutler was also
paid a legal fee of $10,000.00 for the preparation and filing of the
Company's initial private placement referenced immediately below. Mr.
Cutler may also charge for legal services rendered after the effective date
of this Offering. Mr. Cutler's fees are believed to be typical of rates
charged by independent counsel for similar legal services.

In January 1999 the Company completed a private placement of its securities,
consisting of 5,000 Units, to a total of one accredited investor. Each Unit
consisted of one (1) share of Series A Convertible Preferred Stock and ten
(10) warrants to purchase one (1) share of Common Stock at an exercise price
of $5.00 per share. See "Item 8 - Description of Securities." The offering
was completed in accordance with the requirements of Rule 506 of Regulation
D promulgated under the Securities Act of 1933, as amended, and thus the
securities issued are "restricted" in accordance with Rule 144. This
offering resulted in gross proceeds to the Company of $30,000. No
commissions were paid on the sale.

Certain conflicts of interest now exist and will continue to exist between
the Company and its officers and directors due to the fact that each has
other business interests to which he devotes his primary attention. Each
officer and director may continue to do so notwithstanding the fact that
Management time should be devoted to the business of the Company. Each of
the Company's officers and directors are or may become involved in other
personal and business ventures.

The officers, directors and founders are and may become, in their individual
capacities, controlling shareholders and/or partners of other entities
engaged in a variety of businesses. Thus, there exists potential for
conflicts of interest, including, among other things, time, effort, and
corporate opportunity, involved in anticipation with such other business
entities and transactions. Conflicts may arise if a target company or its
principals seek to acquire some or all of the stock holdings of present
Management.

M. Richard Cutler, attorney at law, has acted as corporate and securities
counsel to the corporation. Mr. Cutler owns 790,000 shares of the Company
and is an officer and director. Mr. Cutler will charge the Company his
usual and customary rates for legal services rendered to the Company. Mr.
Lebrecht owns 190,150 shares of the Company's common stock and works in the
Law Offices of M. Richard Cutler.

If a prospective Business Combination candidate required the sale of some or
all of the shareholdings of the officers and directors, the officers and
directors would be free to negotiate and effect such sales. Consequently,
the Company's Management would receive pecuniary gain which may not be
available to other shareholders.

<PAGE>

The Company has no specified procedure for the resolution of current or
potential conflicts of interest between the Company, its officers, and
directors or affiliated entities. Shareholders who believe that the Company
has been harmed by failure of an officer or director to appropriately
resolve any conflict of interest may be able to bring a suit to enforce
their rights or the Company's rights.

Management may be issued additional securities of the Company at the
discretion of the Board of Directors in accordance with their fiduciary
obligations under state corporate law.

BLANK CHECK ACTIVITIES

Management of the Company has not been involved as a promoter, director, or
officer of any prior blank check entities, other than as legal securities
counsel. In their role as securities counsel, members of Management may
have been compensated with securities of such entities, however in no case
have members of Management been a holder of more than five percent (5%) of
the outstanding securities of any blank check entity.

Management of the Company is not currently involved as a promoter, director,
or officer of any other blank check entities, other than as legal securities
counsel. Notwithstanding the foregoing, there are no agreements, policies,
or understandings between the Company and Management which prevents the
involvement of any member of Management in future blank check entities. In
the event of Management's future involvement, there would exist a potential
conflict of interest by the applicable members of Management in seeking
merger and/or acquisition candidates and/or assets.

ITEM 8 - DESCRIPTION OF SECURITIES

The Company's securities do not currently, and have not in the past, traded
on any active or liquid public market. Thus, there is currently no market
for the Company's securities and there can be no assurance that a trading
market will develop or, if one develops, that it will continue. Even if a
trading market should develop, the market may be substantially limited or
unsustained. There are currently no plans, proposals, arrangements or
understandings with any person with regard to the development of a trading
market in any of the Company's securities. To the best knowledge of the
Company, no shareholders are party to any lock-up agreement or understanding.

COMMON STOCK

The Company's Articles of Incorporation authorize the issuance of 25,000,000
shares of common stock, $0.0001 par value per share. The holders of each
share of common stock (i) have equal rights to dividends from funds legally
available therefore, when, as and if declared by the Company's Board of
Directors, (ii) are entitled to share in all assets of the Company available
for distribution, (iii) do not have pre-emptive, subscription or conversion
rights and (iv) are entitled to one non-cumulative vote at all shareholder
meetings.

All shares of common stock now outstanding are fully paid for and
non-assessable.

Stockholders have no cumulative voting rights, which means that Stockholders
owning more than 50% of the outstanding stock can vote to elect all
directors. Accordingly, the remaining Stockholders would not be able to
elect any of the Company's directors.

<PAGE>

PREFERRED STOCK

The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, par value $0.0001. The Preferred Stock of the Company can be issued
in one or more series as may be determined from time to time by the Board of
Directors without further stockholder approval. In establishing a series
the Board of Directors shall give to it a distinctive designation so as to
distinguish it from the shares of all other series and classes, shall fix
the number of shares in such series, and the preferences, rights and
restrictions thereof. All shares of any one series shall be alike in every
particular.

The Board of Directors of the Company has established Series A Convertible
Preferred Stock within the class of Preferred Stock.

Series A Convertible Preferred Stock. The Series A Convertible Preferred
Stock has the following rights, preferences and limitations:

(1) There are reserved for issuance 8,000 shares of Preferred Stock
for issuance as shares of Series A Convertible Preferred Stock. There are
currently issued and outstanding 5,000 shares of Series A Convertible
Preferred Stock.

(2) The shares of Series A Convertible Preferred Stock are entitled
to a dividend in the amount of thirteen percent (13%) per annum, cumulating
but not compounding, and payable quarterly thereafter in shares of Company
Common Stock valued at Five Dollars ($5.00) per share. The Series A
Convertible Preferred Stock shall not have any rights to assets or proceeds
from sale of assets of the Company in the event of liquidation. The Series
A Convertible Preferred Stock shall have no voting rights.

(3) There are reserved for issuance 8,000 shares of Common Stock for
issuance on conversion of issued and outstanding shares of Series A
Convertible Preferred Stock. Shares of Series A Convertible Preferred Stock
shall be convertible to newly issued shares of Common Stock on a one-for-one
basis. The shares of Series A Convertible Preferred Stock would be adjusted
ratably (i.e. non-dilution) with the Common Stock on any forward or reverse
stock split.

(4) Holders' Put Rights. In the event that the Company completes a
round of financing or engages in a business combination transaction, whether
through a private placement in accordance with Regulation D of the 1933 Act,
through a registration statement filed with the Commission, whether on a
Form SB-2 or otherwise, or whether through a statutory or other merger or
other combination transaction, which results in gross proceeds to the
Company or gross assets acquired by the Company of more than One Hundred
Fifty Thousand Dollars ($150,000), the Holders of Series A Convertible
Preferred Stock shall have the right, but not the obligation, to put all or
a portion of the Series A Convertible Preferred Stock back onto the Company
at a value of $10.00 per share. Management anticipates that this payment
would result as a consequence of cash paid to the Company for shares of its
capital stock in connection with a business acquisition.

WARRANTS

There are currently outstanding an aggregate of 50,000 Warrants issued to a
single investor. Each Warrant entitles the holder thereof to purchase One
share of Common Stock at a price of $5.00 per share. The Warrants are
exercisable for a five (5) year period commencing upon the date of issuance.
Upon expiration, the Warrants will terminate automatically, subject to
certain rights of the Company to extend the warrant term. The exercise
price and the number of shares issuable upon exercise of the warrants
thereunder is NOT subject to adjustment upon certain events such as stock
splits, reverse stock splits, stock dividends and similar transactions.

Subject to compliance with applicable securities laws, Warrant Certificates
may be transferred or exchanged for new certificates of different
denominations at the offices of the Company. The holders of Warrants, as
such, are not entitled to vote, to receive dividends or to exercise any of
the rights of shareholders for any purpose.

<PAGE>

The Warrants may be exercised only upon surrender of the Warrant Certificate
at the offices of the Company with the form of "Election to Purchase"
completed and signed, accompanied by payment of the full exercise price for
the number of Warrants being exercised.

NON-CUMULATIVE VOTING

The Articles of Incorporation and Bylaws of the Company specify that
shareholders will not have the right to accumulate their shares for the
purpose of electing directors of the Company. Consequently, all directors
of the Company will be elected by the present majority shareholders.

COMMON STOCK DIVIDENDS

The Company does not presently anticipate that it will pay dividends on its
Common Stock at any time in the foreseeable future. The payment of
dividends will depend, among other things, upon the earnings, assets,
general financial condition, and other factors. In the event that the
Company successfully completes a merger or acquisition as contemplated
hereunder, the Management of the acquired company will, in all likelihood,
have sole and exclusive authority to determine whether Common Stock
dividends will be paid thereafter.

The Company intends to furnish holders of its common stock annual reports
containing audited financial statements and to make public quarterly reports
containing unaudited financial information.

TRANSFER AGENT

The transfer agent for the common stock is Oxford Transfer and Registrar
Agency, Inc., 317 S.W. Alder, #1120, Portland, Oregon 97204.

<PAGE>

PART II

ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS

MARKET INFORMATION

To the best knowledge of the Company, no shareholders are party to any
lock-up agreement or understanding.

STOCKHOLDERS

As of February 22, 1999, the Company had 1,000,000 shares of Common Stock
outstanding and held by 43 shareholders of record.

As of February 22, 1999, the Company had 5,000 shares of Preferred Stock
outstanding and held by one shareholder of record.

DIVIDENDS

The Company has not paid cash dividends on its Common Stock in the past and
does not anticipate doing so in the foreseeable future.

The Company will pay a dividend on the Series A Convertible Preferred Stock
in the amount of thirteen percent (13%) per annum, cumulating but not
compounding, and payable quarterly thereafter in shares of Company Common
Stock valued at Five Dollars ($5.00) per share. See "Part I, Item 8 -
Description of Securities."

ITEM 2 - LEGAL PROCEEDINGS

The Company is not presently, but may from time to time be involved in
various claims, lawsuits, disputes with third parties, actions involving
allegations of discrimination, or breach of contract actions incidental to
the operation of its business. The Company is not currently involved in any
such litigation which it believes could have a materially adverse effect on
its financial condition or results of operations.

<PAGE>

ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

Effective January 20, 1999, Mendoza, Berger & Co, LLP, Certified Public
Accountants, were engaged by the Company as their principal accountant to
audit the Company's financial statements. There have been no changes in
accountants or disagreements of the type required to be reported under this
Item 3 between the Company and its independent auditors since their date of
engagement.

ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES

In November 1994 the Company issued 1,000,000 shares of its common stock to
M. Richard Cutler, an accredited investor, in exchange for services
rendered. The issuance was exempt from registration under Section 4(2) of
the Securities Act of 1933, as amended.

In January 1999 the Company completed a private placement of its securities,
consisting of 5,000 Units, to Saalib Limited, an accredited investor. Each
Unit consisted of one (1) share of Series A Convertible Preferred Stock and
ten (10) warrants to purchase one (1) share of Common Stock at an exercise
price of $5.00 per share. See "Item 8 - Description of Securities." The
offering was completed in accordance with the requirements of Rule 506 of
Regulation D promulgated under the Securities Act of 1933, as amended, and
thus the securities issued are "restricted" in accordance with Rule 144.
This offering resulted in gross proceeds to the Company of $30,000. No
commissions were paid on the sale.

ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Corporation Laws of the State of Delaware and the Company's Bylaws
provide for indemnification of the Company's Directors for liabilities and
expenses that they may incur in such capacities. In general, Directors and
Officers are indemnified with respect to actions taken in good faith in a
manner reasonably believed to be in, or not opposed to, the best interests
of the Company, and with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were
unlawful. Furthermore, the personal liability of the Directors is limited
as provided in the Company's Articles of Incorporation.

The Company does not currently maintain a policy of Directors and Officers
Liability Insurance.

<PAGE>

PART F/S

FINANCIAL STATEMENTS

The Financial Statements required by this Item are included at the end of
this report beginning on Page F-1.

PART III

ITEM 1 - INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION

*3.1 Articles of Incorporation of the Company.

*3.2 Bylaws of the Company.

*3.3 Certificate of Designation of the Series A Convertible
Preferred Stock

*4.2 Form of Warrant issued in the Company's Private Placement.

*5 Opinion of The Law Offices of M. Richard Cutler

23.1 Consent of Mendoza, Berger & Company, LLP,
Independent Certified Public Accountants.

*23.2 Consent of The Law Offices of M. Richard Cutler
(included in their opinion filed as Exhibit 5 hereto).

______________
* Previously Provided

ITEM 2 - DESCRIPTION OF EXHIBITS

Not applicable

SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.

Wellspring Investments, Inc.

/s/ M. Richard Cutler

By: M. Richard Cutler
Its: President

<PAGE>

WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)

Financial Statements as of
December 31, 1998 and the
Period from Inception
(October 24, 1994) through December 31, 1998

<PAGE>

WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS

Report of Independent Certified Public Accountants . . . . . . . . . . .F-2

Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-3

Statements of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . .F-4

Statements of Changes in Stockholders' Deficit . . . . . . . . . . . . .F-5

Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . .F-6

Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . .F-7

F-1

<PAGE>

Report of Independent Certified Public Accountants

The Board of Directors
Wellspring Investments, Inc.
Newport Beach, California

We have audited the accompanying balance sheet of Wellspring Investments, Inc.
(a development stage company) as of December 31, 1998, and the related
statements of loss, stockholders' deficit, and cash flows for the period
from inception (October 24, 1994) through December 31, 1998 and for the years
ended December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wellspring Investments, Inc.
as of December 31, 1998, and the results of its operations and its cash
flows for the period from inception (October 24, 1994) through
December 31, 1998 and for the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company has been in the development stage since
inception, has not generated operating revenues to date, and has incurred net
losses since its inception. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters also are
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Mendoza Berger & Company, LLP

/s/ Mendoza Berger & Company

Laguna Hills, California
January 29, 1999

F-2

<PAGE>

WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998

ASSETS

Deferred costs of stock issuance (Note 3) $ 10,000

Total assets $ 10,000

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Due to related party (Note 3) $ 672
Accrued liabilities (Notes 3 and 4) $ 10,800

Total current liabilities 11,472

Contingencies (Note 2)

Stockholders' deficit:
Preferred stock:
Series A Convertible Preferred Stock,
$.0001 par value,
5,000,000 shares authorized: no shares
issued and outstanding (Notes 5 and 8) -
Common stock, $.0001 par value, authorized:
25,000,000 shares; shares issued and outstanding:
1,000,000 shares (Note 3) 100
Deficit accumulated during the development stage (Note 2) (1,572)

Total stockholders' deficit (1,472)

$ 10,000

The accompanying notes are an integral part of these financial statements
F-3

<PAGE>

WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS
FOR THE PERIOD FROM INCEPTION (OCTOBER 24, 1994) THROUGH
DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

Cumulative
Amounts from Year Ended December 31,
Date of Inception
to December 31,
1998 1998 1997

Operating expenses:
Taxes and licenses $ 640 $ 265 $ 75
Officer compensation 100 - -

Total operating expenses 740 265 75

Other expense:
Interest expense 32 - -

Total other expense 32 - -

Net loss before income taxes (772) (265) (75)

Provision for income taxes (Note 4) (800) (800) -

Net loss $ (1,572) $ (1,065) $ (75)

Net loss per share (Notes 1 and 8) $ (.001) $ -

Weighted average common shares outstanding 1,000,000 1,000,000

The accompanying notes are an integral part of these financial statements

F-4

<PAGE>

WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION
(OCTOBER 24, 1994) THROUGH DECEMBER 31, 1998

<TABLE>

<S> <C> <C> <C> <C> <C> <C>
SERIES A CONVERTIBLE DEFICIT
COMMON STOCK PREFERRED STOCK ACCUMULATED
DURING THE
DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT STAGE TOTAL

Issuance of Common Stock
as compensation for services
to stockholder/director
($.0001 per share)(Note 3) 1,000,000 $ 100 - $ - $ - $ 100

Net loss for the period from
date of inception (October
24, 1994) to - - - - (216) (216)
December 31, 1994

Balance at December 31, 1994 1,000,000 100 - - (216) (116)

Net loss for the year - - - - (111) (111)

Balance at December 31, 1995 1,000,000 100 - - (327) (227)

Net loss for the year - - - - (105) (105)

Balance at December 31, 1996 1,000,000 100 - - (432) (332)

Net loss for the year - - - - (75) (75)

Balance at December 31, 1997 1,000,000 100 - - (507) (407)

Net loss for the year - - - - (1,065) (1,065)

Balance at December 31, 1998 1,000,000 100 - - (1,572) (1,472)

</TABLE>

The accompanying footnotes are an integral part of these financial statements

F-5

<PAGE>

WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (OCTOBER 24, 1994) THROUGH
DECEMBER 31, 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<S> <C> <C> <C>
Cumulative Amounts
From Date of Year Ended December 31,
Inception to
December 31, 1998 1998 1997

Cash flows from operating activities:

Net loss $ (1,572) $ (1,065) $ (75)

Adjustments to reconcile net loss to
net cash used in operating activities:

Issuance of common stock as compensation
for services to stockholder/director 100 - -

Changes in assets and liabilities:

Increase in deferred costs of stock issuance (10,000) (10,000) -
Advances from related party 672 265 75
Increases in accrued liabilities 10,800 10,800 -

Net cash used in operating activities - - -

Net increase (decrease) in cash - - -
Cash, beginning of period - - -

Cash, end of period - - -

</TABLE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>

<S> <C> <C> <C>
Cumulative Amounts
From date of Year Ended December 31,
Inception to
December 31, 1998 1998 1997

Cash paid for interest $ 32 $ - $ -

Common stock issued as compensation for
services to stockholder/director $ 100 $ - $ -

</TABLE>

The accompanying notes are an integral part of these financial statements

F-6

<PAGE>

WELLSPRING INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

1. COMPANY HISTORY AND SUMMARY OF ACCOUNTING POLICIES

Wellspring Investments, Inc. (the Company), is a developmental stage
enterprise incorporated on October 24, 1994 under the laws of the State
of Delaware. The Company intends to seek acquisitions or other business
endeavors. The Company has had no operations to date and its activities
have been limited to organizational efforts related to obtaining initial
financing. The Company intends to purchase, merge with or acquire
securities or assets held by target entities via an exchange of the
targeted company's securities or assets for the Company's cash,
securities and/or assets. The Company has not negotiated with or
identified a prospective acquisition candidate and has not targeted any
particular business or industry within which it will seek acquisitions.

Net Loss Per Share

The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share," which requires
presentation on the face of the income statement of both basic and
diluted earnings per share. Basic and diluted earnings per share have
replaced the previously presented primary and fully diluted earnings
per share. Basic earnings per share is computed by dividing net income
attributable to common shares by the weighted average number of
common shares outstanding during the period. There were no diluted
earnings per share during the periods presented. The computation of
basic earnings per share is presented on the face of the Statements of
Loss.

Income Taxes

Income taxes are provided based on the liability method of accounting
pursuant to SFAS No. 109, "Accounting for Income Taxes." Under this
approach, deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax basis of
assets and liabilities and their financial reporting amounts at each
year end.

Use of Estimates

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements. Actual results could differ from
those estimates.

2. DEVELOPMENT STAGE OPERATIONS

The Company has been in the development stage since its inception, October
24, 1994, and has had no operations to date and its activities have been
limited to organizational efforts related to obtaining initial financing.
The Company intends to seek acquisitions or other business endeavors,
as more fully discussed in Note 1.

F-7
<PAGE>

2. DEVELOPMENT STAGE OPERATIONS (Continued)

The accompanying financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has suffered recurring losses from operations since its inception;
has not begun operations and has not recorded any revenues, and continues
to rely on its capital raising efforts or loans from affiliates to fund
continuing operations. These conditions raise substantial doubt
as to the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amount of liabilities that may be necessary if the Company
is unable to continue as a going concern.

The Company's continuation is contingent upon the acquisitions it intends
to make and achieving profitable operations. Such operations will also
require management to secure additional financing for the Company in the
form of debt or equity, which management plans to partially satisfy
through the issuance of shares of its capital stock. Management's plans
with regard to these matters are as follows:

The Company has not engaged in preliminary efforts to identify
possible merger or acquisition candidates and has no market studies
available to it. The Company has no business opportunities under
contemplation for acquisitions. The Company expects to concentrate
primarily on the identification and evaluation of prospective merger
or acquisition "target" entities including private corporations,
partnerships or sole proprietorships. Management believes that
target companies will be limited to privately financed companies
and expects to be precluded from other public companies. The
specific method or form by which a business combination may be
structured cannot be determined at this time. It could involve a
merger or consolidation; merger or consolidation of the acquired
business into a subsidiary of the Company; an exchange of shares of
stock, with or without payment in cash; or an acquisition of assets.
The Company's plan to merge with or acquire another business or
concern would likely result in the Company issuing securities,
including authorized and unissued common stock, to shareholders or
owners of that concern.

3. RELATED PARTY TRANSACTIONS

During the period from inception to December 31, 1998, the Company had the
following transactions with related parties:

The Company currently occupies an office on a rent free basis at the
office of the Company's President, M. Richard Cutler. Mr. Cutler is
also the Company's sole director, a majority shareholder and the
Company's legal counsel.

On November 11, 1994, the Company issued 1,000,000 shares of its common
stock to Mr. Cutler in exchange for services rendered. The value of the
common stock issued was determined to be its total par value of $100.
On September 12, 1997, 210,000 of Mr. Cutler's shares were transferred
to other individuals in private transactions.

F-8
<PAGE>

3. RELATED PARTY TRANSACTIONS (Continued)

The Company has retained Mr. Cutler's law firm, The Law Offices of
M. Richard Cutler, to serve as the Company's corporate and securities
counsel. Mr. Cutler will charge the Company his usual and customary
rates for legal services rendered to the Company. During fiscal 1998,
Mr. Cutler prepared the Company's private placement offering and was paid
an attorneys fee of $10,000 in January 1999 from the Company's private
placement proceeds. This amount was accrued, outstanding and deferred
as costs related to the stock issuance as of December 31, 1998.
Additionally, Mr. Cutler has advanced funds totaling $672 to pay for
various filing fees and taxes.

Mr. Cutler has also been engaged to prepare and file a Form 10-SB
Registration Statement for which he will also be paid a legal fee of
$10,000 plus expenses, from the proceeds of the private placement
offering. Refer to Note 5.

Mr. Lebrecht, the Company's Vice President, owns 190,150 shares of the
Company's common stock and is also employed by The Law Offices of
M. Richard Cutler.

4. INCOME TAXES

The income tax provision for the year ended December 31, 1998 and 1997
consists of the following:

December 31, 1998 December 31, 1997

Current:
Federal $ - $ -
State 800 -
__________ _________
800 -

Deferred:
Federal (160) (11)
State (23) (7)
Less: valuation allowance 183 18
__________ _________
- -
__________ _________
$ 800 $ -

F-9
<PAGE>

4. INCOME TAXES (Continued)

Deferred income tax assets were comprised of the following:

December 31, 1998 December 31, 1997

Deferred income tax assets:
Net operating loss
carryforwards $ 305 $ 122

Less: valuation allowance (305) (122)

Net deferred income tax assets $ - $ -

Since inception the Company has reported losses for income tax and
financial reporting purposes. Accordingly, no provision for Federal
income tax was provided and State income tax was provided
at the statutory minimum required by state law. A 100% valuation
allowance was provided at December 31, 1998 and 1997 since management
could not determine that it was more likely than not that the net
deferred tax asset would be realized and it was determined that the
amounts were immaterial.

The Company has available at December 31, 1998 unused operating loss
carryforwards that may be applied against future taxable income and that
expire as follows:

Expires During Year Expires During Year
Ended December 31, Federal Ended December 31, State

2014 $ 217 2009 $ 109
2015 110 2010 55
2016 105 2011 53
2017 75 2012 38
2018 1,065 2013 533
__________ _________
$ 1,572 $ 788

5. PRIVATE PLACEMENT

On September 8, 1998, the Board of Directors approved a private placement
offering of units, totaling $30,000. The offering price is $6.00 per
unit, 1,000 units ($6,000) minimum investment. The private placement
offering consists of 5,000 units, each consisting of one share of Series
A Convertible Preferred Stock and ten common stock purchase warrants.
These units were issued on January 6, 1999, refer to Note 8.

F-10
<PAGE>

6. PREFERRED STOCK

In 1994, the Company authorized 5,000,000 shares of preferred stock,
par value $.0001 per share. As of December 31, 1998, the Company had
not issued any shares of its preferred stock.

Series A Convertible Preferred Stock

1. There are reserved for issuance 8,000 shares of Preferred
Stock for issuance as shares of Series A Convertible
Preferred Stock.

2. The shares of Series A Convertible Preferred Stock entitle the
holder to a dividend in the amount of thirteen percent (13%)
per annum, cumulating but not compounding, and payable
quarterly in shares of Company's common stock valued
at five dollars ($5.00) per share. The Series A Convertible
Preferred Stock shall not have any rights to assets or
proceeds from sale of assets of the Company in the event
of liquidation. The Series A Convertible Preferred Stock has
no voting rights.

3. The shares of Series A Convertible Preferred Stock shall be
convertible, at the option of its holder at anytime, into
newly issued shares of common stock on a one-for-one
basis. The shares of Series A Convertible Preferred Stock
would be adjusted ratably with the common stock on any
forward or reverse stock split.

4. Holders' Put Rights. In the event that the Company completes
a round of financing or engages in a business combination
transaction, whether through a private placement in
accordance with Regulation D of the 1933 Act, through a
registration statement filed with the Commission, whether
on a Form SB-2 or otherwise, or whether through a statutory
or other merger or other combination transaction, which
results in gross proceeds to the Company or gross assets
acquired by the Company of more than $150,000, the holder of
Series A Convertible Preferred Stock shall have
the right, but not the obligation, to put all or a portion of
the Series A Convertible Preferred Stock back into the
Company at a value of $10 per share. Management
anticipates that this payment would result as a consequence
of cash paid to the Company for shares of its capital stock
in connection with a business acquisition.

As of December 31, 1998, no shares of Series A Convertible
Preferred Stock were issued and outstanding. Refer to Note 8
for subsequent issuance of the Series A Convertible
Preferred Stock.

F-11

<PAGE>

7. WARRANTS

In connection with the private placement, discussed in Note 5, of 5,000
shares of Series A Preferred Stock exercisable at $5.00 per share, the
Company also offered 10 common stock purchase warrants, each convertible
into one share of common stock for every share of Series A Preferred
Stock, or 50,000 warrants. The warrants are exercisable for a five (5)
year period commencing on the date of issuance. As of December 31, 1998,
no warrants were issued and outstanding. Refer to Note 8 for
subsequent issuance of warrants.

8. SUBSEQUENT EVENT

The following transactions occurred after December 31, 1998, which, had
they taken place during fiscal 1998, would have changed the number of
shares used in the computation of earnings per share.

On January 6, 1999, the Company completed the private placement which
consisted of the following:

The Company issued 5,000 shares of Series A Convertible Preferred
Stock.

The Company issued 50,000 warrants which entitle the holders to
purchase one share of common stock at $5.00 per share.

The offering was completed in accordance with the requirements of Rule 506
of Regulation D promulgated under the Securities Act of 1933, as amended,
and thus the securities issued are "restricted" in accordance with Rule
144. The private placement raised a total of $30,000 from a
single unaffiliated investor. As of the date of the report, the proceeds
from the offering were used to pay the following expenses:

Payments to the Law Offices of M. Richard Cutler:
Private placement offering (Note 3) $ 10,000
Form 10-SB Regulation Registration Statement 10,000
Reimbursement of fees and expenses 2,564
__________
22,564
Accounting Fees 4,000
Deposit to Transfer Agent 500
__________
$ 27,064

F-12

CONSENT OF MENDOZA BERGER & COMPANY, LLP
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The undersigned independent certified public accounting firm
hereby consents to the inclusion of its revised report on the
financial statements of Wellspring Investments, Inc. (a Development
Stage Company) as of December 31, 1998 and the period from inception
(October 24, 1994) through December 31, 1998, and for the years
ended December 31, 1997 and 1998 and to the reference to it as
experts in accounting and auditing relating to said financial
statements and under the heading Part II, Item 3 - Changes in and
Disagreements with Accountants in the Registration Statement and
Prospectus on Amendment No. 1, Form 10-SB/A for Wellspring
Investments, Inc., dated January 29, 1999.

/s/ Mendoza Berger & Company
Mendoza Berger & Company, LLP

Dated: January 29, 1999