CONTINENTAL HERITAGE CORP, 10KSB, 2000-06-19

CONTINENTAL HERITAGE CORP
10KSB, 2000-06-19
REAL ESTATE

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FORM 10-KSB

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

For the fiscal year ended October 31, 1999.

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

For the transition period from to

Commission File Number 000-7633

VisionQuest Worldwide Holdings Corporation
(Exact name or Registrant as specified in its charter)

Delaware 75-1449332
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

7674 W. Lake Mead Blvd., Suite 150, Las Vegas, Nevada 89128
(Address of principal executive offices)

Registrant's telephone number, including area code: (702) 307-2010

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange On Which Registered
None --

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value per share
(Title of class)

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

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $148,429

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days: $*.

(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after
distribution of securities under a plan confirmed by a court. Yes[ ] No [ ]

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 9,777,355 shares of Common
Stock outstanding as of May 1, 2000.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

---------------

* As stated in Item 5 of this Annual Report on Form 10-KSB, there were no
published quotations in the Pink Sheets for the Company's common stock during
the fiscal year of the Company ended October 31, 1999. Accordingly, no
aggregate market value for the stock held by non-affiliates can be provided.

<PAGE>

TABLE OF CONTENTS

Page No.

Item 1. DESCRIPTION OF BUSINESS

Item 2. DESCRIPTION OF PROPERTY

Item 3. LEGAL PROCEEDINGS

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

Item 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS

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

Item 7. FINANCIAL STATEMENTS

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

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT

Item 10. EXECUTIVE COMPENSATION

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Item 13. EXHIBITS AND REPORTS OF FORM 8-K

SIGNATURES

INDEX TO FINANCIAL STATEMENTS

PART I

This Annual Report on Form 10-KSB contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, the Company's ability to establish
an adequate client base, its ability to develop and continue its marketing
strategies, its ability to obtain additional financing, its ability to increase
and maintain its distributor network, and those set forth below in this
Company's Annual Report on Form 10-KSB under the caption "Certain Factors That
May Affect Future Results."

Item 1. DESCRIPTION OF BUSINESS

History

The Company was organized as Continental Heritage Corporation in 1974 for the
purpose of operating and developing real estate and other investment projects
for its stockholders. Until the end of the fiscal year ended October 31, 1998,
the Company through its subsidiaries engaged in various aspects of real estate
business, such as management and investment in real properties. Effective
August 5, 1999, the Company changed its name to VisionQuest Worldwide Holdings
Corporation.

On November 27, 1998, pursuant to a Stock Exchange Agreement (the "Exchange
Agreement"), the Company acquired all of the outstanding Common Stock of Encore
International, Inc. ("Encore") in exchange for an initial issue of 5,500,000
shares of the Company's Common Stock. As a result, Encore became a wholly
owned subsidiary of the Company. Encore was organized to conduct a business of
distributing nutraceutical (nutrition supplements made to pharmaceutical
standards) and homeopathic products through a network of independent
distributors. Effective February 5, 1999, Encore, an Oklahoma corporation, was
merged with VisionQuest Worldwide, Inc. ("VisionQuest"), a Nevada corporation
and a wholly owned subsidiary of the Company, and has done business thereafter
under the name of VisionQuest. VisionQuest's business plan provides for the
development of a complete line of nutraceutical and homeopathic products. It
operates from corporate headquarters located at 7674 W. Lake Mead Blvd., Las
Vegas, Nevada 89128. All references to the Company shall mean both the Company
and its operating subsidiary, VisionQuest. All references to VisionQuest shall
refer only to the Company's operating subsidiary.

The three principal founding members of the business of VisionQuest are Steve
Gould, Lee Kaplan and Robert Bray, all of whom are current officers and/or
directors.

New Business of the Company

The Company develops and markets proprietary nutritional and dietary
supplements through a network of independently contracted distributors called
"Team Members." Though this distributor network, the products are sold in a
majority of the states and territories of the United States. It began
fulfilling product orders on June 14, 1999.

Because the Company is a direct selling company, its Team Members purchase
products from the Company and sell them to consumers through a free-enterprise
network marketing system. Team Members are compensated through retail sales as
well as commissions and bonuses earned in accordance with VisionQuest's
Marketing Program and Compensation Plan.

The Company is pursuing trademark and tradename registrations regarding
possible tradenames for its products. This trademark process is not yet
complete.

Business Strategy

The VisionQuest business strategy has been designed to capitalize on the
convergence of three powerful marketing trends:

* the direct sales and home based business boom,

* the growing sales of nutritional supplements and appeal of natural
preventive health care, and

* the worldwide utilization of Internet technology and marketing.

The Company believes that through its marketing program, its planned
development of quality leading edge nutritional and health related products,
and its effective technological support systems, it is poised to create a
productive, loyal sales organization capable of sustained growth.

Industry Overview

The direct sales industry has over 33 million participants in over 100
countries around the world producing over $77 billion a year.(1) Direct
selling has experienced a 15% growth for 10 years consecutively, and sales in
the United States now exceed $20 billion.(2) One of the largest segments of
the direct sales industry is network marketing. This method of selling is
perfectly aligned with the growing number of home-based businesses. In 1995,
there were over 27 million home based businesses and that number is projected
to be well over 50 million in the year 2000.

The sale of nutritional supplements is one of the largest segments of the
direct sales industry. The Company believes that the aging of the United
States population, together with a corresponding increased focus on healthcare
measures, will continue to result in increased demand for vitamins and
nutritional supplement products. The natural health and nutritional supplement
industry is currently estimated to be a $25.8 billion plus a year business in
the United States alone.(3)

With advances in technology and the advent of the Internet, home-based
marketing businesses have become more practical. An individual may conduct
business with anyone in the world from the comfort of their home. The use of
technology provides greater opportunity for success for businesses such as the
Company's.

----------------------------
(1) World Federation of Direct Selling Associations, International Statistical
Survey dated December 13, 1999.

(2) Direct Selling Association, 1999 Growth and Outlook Survey.

(3) Industry News of the National Business Journal.

Growth Strategy

Through its strong commitment toward quality, ethics and distributor support,
the Company believes it is creating a strong foundation for success. It is
providing access to a large, growing marketplace through innovative, effective
and high demand life-enhancing products linked to a state-of-the-art
free-enterprise marketing system.

In order to sustain consistent growth in sales revenue, the Company will
continue to focus on acquiring, developing, training and retaining new
independent distributors. The Company also anticipates it can increase its
market presence by acquiring existing sales organizations, as well as the
exploration of acquisitions of competitive network marketing companies.

Products

The initial VisionQuest product line is composed of a balance of historically
proven, life-enhancing health remedies and new health discoveries from around
the world including a variety of breakthrough products derived from the sea.
Through effective products and formulations developed using sound principles
and time proven therapies such as homeopathy and ayurvedic medicine, the
VisionQuest product line is designed to promote consumer confidence and
results.

The Company's cornerstone product philosophy is based on a three pronged
approach to achieving optimum health:

* cleanse the body of toxins,

* boost the body's immune system, and

* provide the body with comprehensive nutritional protection.

This philosophy consists of three exclusive product formulations:

* LiveRx(tm), a homeopathic formulation designed to cleanse the liver and
kidneys;

* OceanGold(tm), a high potency shark liver oil designed to enhance the
body's immune system; and

* Pro Algaen Omega(tm), a comprehensive marine nutraceutical formulation
containing ingredients from the sea, which have long been recognized as
beneficial to human health and vitality.

As another part of its initial product line, the Company developed
SlenderQuest(tm), a unique homeopathic weight management system. The system
comes complete with a Guided Imagery Success Program which includes a behavior
modification audiocassette and a comprehensive informational pamphlet designed
to assist an individual with proper diet, exercise, nutrition and healthy
living. SlenderQuest offers a safe and effective approach to long-term weight
management.

The Company has also released PhytoBlast(tm) -- a therapeutic phytynutrient
enzyme complex for the whole family, and BioLift(tm) -- an energy and mood
elevation product.

The Company also intends to bring on a number of new products in the upcoming
year to include a complete line of herbal products designed to support the
mind, body and spirit.

VisionQuest Homeopathic Products

The Company has chosen to incorporate homeopathy into its product philosophy
because homeopathy has a 200-year history of successfully treating a wide
variety of chronic and acute illnesses. Homeopathy was recognized by Act of
Parliament in England in 1948, and is now generally accepted throughout the
world as a safe alternative form of medical treatment.

The Company's homeopathic combinations are produced by the largest natural
health laboratories in India and are tested at the Calcutta Drug Testing
Institute, an Indian government approved laboratory for the testing of
homeopathic and herbal medicines. These accredited facilities have been
meticulously producing homeopathic and ayurvedic herbal medicines for over 30
years. Each phase of the manufacturing process is overseen by a team of
scientists and homeopathic physicians ensuring that our products meet strict
quality control standards and contain only the finest all-natural ingredients.

Unlike other products on the market, the Company's homeopathic combinations
contain multiple ingredients focused around a central symptomatology. These
combinations produce a broad effect because the ingredients reinforce each
other, providing the optimum approach to illness.

To retain distribution rights for some of its products, the Company has
entered into an agreement with Marine Biologics, Inc., a broker for third
party suppliers. Under this agreement, the Company will have exclusive
distribution rights for these specific formulations. The agreement has an
initial term of five years commencing August 5, 1998 and automatically renews
for an additional term at the end of five years, provided that neither party
provides written notification of its intention not to renew.

To provide assistance in the development and support of these as well as
future products, the Company has engaged the services of Leonard Haimes, M.D.,
a medical doctor with 40 years experience in internal and bariatric medicine.
Dr. Haimes, who is a specialist in homeopathic medicine, is nationally
recognized in the field of alternative health care. On March 25, 1999, the
Company entered into a five-year agreement with Dr. Haimes to perform
consulting and support services relative to both the company's current product
line and in the development and testing of new products. Through this
alliance, the Company has secured his services as the Company's Medical
Director and his endorsement of its products.

Marketing and Distribution System

The Company distributes its products using a network marketing business-model.
Network marketing is a form of person-to-person direct selling through channels
of distributors or "Team Members", who purchase products at wholesale prices
from the Company and then make retail sales to consumers. The emergence of
readily available means of mass communication such as personal computers,
facsimiles, low-cost long distance telephone services, and the Internet have
contributed to the rapid growth of direct selling, including network marketing.
Network marketing is gaining in popularity as a viable alternative to
traditional retail and mail order marketing. The concept of network marketing
is based on the strength of recommendations that frequently come from friends,
relatives and close acquaintances and are based on personal satisfaction and
superior results. The Company believes that network marketing is an effective
way to distribute its products because it allows person-to-person product
education, which is not as readily available through traditional distribution
channels.

Customers who desire to sell the Company's products may become Team Members by
being sponsored into the program by another Team Member, thereby becoming part
of the sponsoring Team Member's down-line sales organization. The Company
believes many of its Team Members are attracted to the Company because of the
quality of its products and its rewarding compensation plan. New Team Members
must enter into a contract that obligates them to adhere to the Company's
Guidelines and Procedures. Team Members are also required to purchase a Team
Member kit, which includes a detailed manual of the Guidelines and Procedures,
for $29.95, which approximates the Company's costs of producing and
distributing the kit. Team Members must also pay a minimal annual renewal fee.

Team Members order products directly from the Company, subject to certain
limitations and restrictions. For example, a Team Member may not purchase more
products than the Team Member can reasonably expect to sell and personally
consume during a business month. A Team Member's distributorship continues
until terminated by the Company or voluntarily canceled by the Team Member.
Initial training of Team Members concerning the Company, its products, the Team
Member compensation plan, and how to effectively engage in network marketing is
provided primarily by a Team Member's sponsor and others in their up-line
organization. In addition, the Company develops and sells a variety of
training materials, sales aids and a detailed Guidelines and Procedures manual
which includes a description of the Company's Team Member compensation plan.
Team Members may not sell competitive products to other Team Members or solicit
Team Members to participate in other network marketing opportunities. The C
company also restricts Team Members from advertising or making representations
or claims concerning its products or compensation plan.

The Team Member compensation plan provides several opportunities for Team
Members to earn compensation, provided they are willing to consistently work at
building, training and retaining their down-line organizations and maintaining
sales of the Company's products to consumers. The Company believes its Team
Member compensation plan is distinctive for its equitable Team Member
commission and bonus pay-outs, which are designed to create appropriate
incentives for sales of VisionQuest products. Each Team Member must purchase
and sell product in order to earn commissions and bonuses. Team Members cannot
simply recruit others for the purpose of developing a down-line and then earn
income passively. Team Members can earn compensation by purchasing products at
wholesale prices from the Company and selling them to consumers at higher
retail prices, enrolling customers and down-line Team Members in the recurring
product ordering program, generating sales volume in their down-line sales
organization, and participating in revenue sharing bonus pool programs paid to
Team Members who meet certain performance requirements. The VisionQuest
Compensation Plan is designed to pay out to its Team Members between 51% and
54% of sales revenue in commissions and bonuses. At present, we have
approximately 1,000 Team Members and expect to increase this number to
approximately 5,000 during the next fiscal year.

The Company also offers Preferred Customer and Customer Convenience programs
designed for consumers who desire to purchase the VisionQuest products for
personal use, but choose not to become Team Members. The Company believes this
program gives it access to a market that would otherwise be missed by targeting
customers who enjoy VisionQuest products, but prefer a mail order type
relationship with the Company. Customers in these programs do not engage in
retail sales of products purchased through the program, although they may
enroll as Team Members at any time if they desire. Customers in these programs
are not eligible to earn commissions unless they become Team Members.

The Company's product return policy allows retail customers to return the
unused portion of any product to the Team Member and receive a full cash
refund. Any Team Member who provides a refund to a customer is reimbursed by
the Company with product or credit in his or her account upon providing proper
documentation and the remainder of the returned product.

Team Members who return unused and resalable product will be refunded 100% of
the purchase price, less a 10% restocking fee for up to one year from the date
of purchase, as outlined in the Company's Guidelines and Procedures. Returns
as a percentage of net sales were less than 1% in fiscal 1999.

Substantially all of the Company's sales are made to customers and through
independent distributors or Team Members. No single Team Member accounted for
5% or more of net sales in the last fiscal year. Team Members are independent
contractors and are not agents, employees, or legal representatives of the
Company. Team Members may sell products only in markets where the Company has
approved the sale of its products.

The Company vigorously pursues reports of alleged Team Member misconduct. If
it determines that a Team Member has violated any of the Team Member Guidelines
and Procedures, it may take a number of disciplinary actions. For example, the
Company may terminate the Team Member's rights completely or impose sanctions
such as warnings, fines, probation, suspend privileges, withhold commissions
until specific conditions are satisfied, or take other appropriate action at
the Company's discretion.

Information Technology and Marketing Support Systems

The Company believes its ability to efficiently manage its distribution,
compensation, manufacturing, inventory control and communications functions
through the use of sophisticated and dependable information processing systems
is critical to its success. The Company's information technology systems are
designed and selected to facilitate order entry and customer billing, maintain
distributor records, accurately track purchases and distributor incentive
payments, manage accounting and finance operations, and provide customer
service and technical support.

During the development of its business plan used to launch VisionQuest, the
Company adopted an "outsourcing" business model, whereby several
business-critical operations were contracted to a select group of vendors
specializing in specific areas of operational expertise. Chief among these is
the industry-vertical software application and operational responsibilities for
the Company's order entry, distributor, billing, e-commerce and compensation
program (the "Team Member System"). This system was tailored to conform to the
specifications of the VisionQuest Marketing Program. This approach was adopted
to mitigate cost and scheduling concerns during the Company setup and initial
phases of operations.

The Company intends to periodically and aggressively update and enhance its
Team Member System. New enhancements would be implemented in order to provide
a more open architecture platform, allowing greater flexibility and enhanced
interface compatibility with other systems. This is critical as the Company
grows and requires greater agility in responding to Team Member and customer
demands, new marketing initiatives, as well as planned international expansion.
The Company's information systems are maintained by in-house staff, outside
consultants and an outsourced partner.

Utilization of the Internet

The Company believes that effective use of the Internet has become a key
market differentiator in the network marketing arena and is critical to future
success. It also believes that the Company can effectively control many of the
costs generally associated with fast-growth network marketing companies by
leveraging the Internet to mitigate personnel, marketing material and other
costs. The Company's Internet strategy has four basic tenets:

* to increase awareness and sales of VisionQuest products;

* to enhance Team Members' effectiveness in the endeavor to recruit, retail
products, and manage their business;

* to automate the process of basic order taking and customer service
functions and thus reduce the costs associated them; and

* to disseminate information regarding VisionQuest products, programs,
policies and events, and marketing materials.

The Company believes that these goals are being achieved. Through the
Company's website, www.visionquestonline.com, the Company has established
VisionWorksOnline. Through VisionWorksOnline, the Company is able to provide
our Team Members and other customers with the ability to order products online,
obtain promotional and motivational materials for use in sale of the products,
obtain descriptions of the products, and many other features. The Company
considers VisionWorksOnline to be the most comprehensive distributor business
tool currently available in the direct sales industry.

Research and Development

Since the Company obtains its products from established and reputable
developers and manufacturers, it ensures that its products are developed and
manufactured under strict standards for quality. Each facility is equipped
with sophisticated computer controlled manufacturing processes, which ensure
all products meet a rigorous standard of quality. Additional research, testing
and comparisons are performed by VisionQuest personnel in order to ensure the
best manufacturer and product selection.

A large number of additional products are currently being researched and
developed including complimentary nutritional, herbal and homeopathic
formulations, skin and hair care products as well as technology and
communications services. These products and services will be strategically
launched to support the Company's sales growth and to expand into new markets.

Government Regulation

In addition to regulation of its direct selling activities, the Company, in
both the United States and future foreign markets, is or will be subject to and
affected by laws, governmental regulations, administrative determinations,
court decisions and similar constraints (as applicable, at the federal, state
and local levels) including, among other things, regulations pertaining to (i)
the formulation, manufacturing, packaging, labeling, distribution, importation,
sale and storage of the Company's products, (ii) product claims and advertising
(including direct claims and advertising by the Company as well as claims and
advertising by its Team Members, for which the Company may be held
responsible), (iii) the Company's Marketing Program, (iv) transfer pricing and
similar regulations that affect the level of foreign taxable income and customs
duties and (v) taxation of Team Members, which in some instances may impose an
obligation on the company to collect the taxes and maintain appropriate
records.

The formulation, manufacturing, packaging, storing, labeling, advertising,
distribution and sale of the Company's products are subject to regulation by
one or more governmental agencies, including the Food and Drug Administration,
the Federal Trade Commission, the Consumer Product safety Commission, the
Department of Agriculture, the Environmental Protection Agency and the Postal
Service. The Company's activities are also regulated by various agencies of
the states, localities and foreign countries in which the Company's products
are manufactured, distributed and sold. The FDA, in particular, regulates the
formulation, manufacture, packaging, storage, labeling, promotion, distribution
and sale of foods, dietary supplements and the OTC medications, such as those
distributed by the Company. FDA regulations require the Company and its
suppliers to meet relevant good manufacturing practice regulations for the
preparation, labeling, packing and storage of drugs. Dietary supplements are
also regulated under DSHEA (Dietary Supplement and Education Act). Under
DSHEA, a dietary supplement is a product intended to supplement the diet that
contains one or more of certain dietary ingredients, such as a vitamin, a
mineral, an herb or botanical, an amino acid, a dietary substance for use by
humans to supplement the diet by increasing the total dietary intake, or a
concrete, metabolite, constituent, extract or combination of the preceding
ingredients.

Through its Team Member manual and training materials and programs, as well as
the Company's official website, the Company attempts to inform and educate its
Team Member organization as to the scope of permissible and impermissible
activities. The Company investigates allegations of Team Member misconduct.
However, VisionQuest Team Members are independent contractors, and the Company
is not able to monitor directly all Team Member activities. As a consequence,
there can be no assurance that all Team Members comply with applicable
regulations and the Company's Guidelines and Procedures.

The Company is unable to predict the nature of any future laws, regulations,
interpretations or applications, nor can it predict what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on its business in the future. Any or all of such requirements
could have a material adverse effect on the Company's business operations and
financial condition.

The Company's Marketing Program, which includes its Compensation Plan, is
subject to a number of federal and state statutes and regulations administered
by the FTC and various state agencies. The legal requirements applicable to
network marketing organizations are generally directed at ensuring that product
sales are ultimately made to consumers and that advancement within such
organizations be based on sales of the organizations' products rather than
compensation derived just from the recruitment of additional Team Members.
Where required by law, the Company will obtain regulatory approval of its
network marketing system or, where such approval is not required, the favorable
opinion of legal counsel as to regulatory compliance.

Competition

The network marketing and nutritional supplement industry is large and
intensely competitive. The Company competes indirectly and directly with a
wide variety of companies that market nutritional supplements and homeopathic
formulations in each of the Company's product categories. Many of the
Company's competitors in the nutritional supplements market have longer
operating histories, greater name recognition and larger financial resources
than the Company. While the Company believes that consumers appreciate the
convenience of ordering products from home through a sales person, the buying
habits of many consumers accustomed to purchasing products through traditional
retail channels are difficult to change. The Company's product offerings in
each product category are also relatively small compared to the wide variety of
products offered by many other nutritional product companies.

The Company competes for new independent distributors in the network marketing
and direct sales industry by emphasizing the proprietary nature, value,
proprietary components and the quality of the Company's products and the
convenience of the Company's distribution system. The Company also competes
with other direct selling organizations, many of which have longer operating
histories and greater name recognition and larger financial resources than the
Company. The Company competes for new independent distributors on the basis of
its compensation plan and its products.

Employees

As a start-up, developmental stage company that is conscious of efficiency and
cost-effectiveness, the Company utilizes an outside staffing company to handle
all of its human resource and employee benefit management. VisionQuest is
staffed with a President and CEO, Vice President of Operations and Technology,
and managers of marketing, logistics, Member Services departments as well as
Controller and several administrative support staff. In total, the Company has
11 employees.

By continuing to outsource aspects of its business operations, and with the
utilization of technology in areas of order processing and communications,
management believes that staffing can be kept at a minimal level even with
significant growth. Future staffing requirements will be addressed as sales
revenues and workload demand.

Impact of Year 2000 Issues

The Year 2000 issue concerns the inability of information technology systems
and equipment utilizing microprocessors to recognize and process date-sensitive
information after 1999 due to the use of only the last two digits to refer to a
year. This problem could affect both computer software and hardware and other
equipment that relies on microprocessors. As of the filing of this document,
the Company has not experienced any significant Year 2000 issues. All our
systems have been made Y2K compliant. Additionally, there have been no Y2K
problems experienced by the Company either directly or indirectly as a result
of third party participants such as suppliers or customers. The Company was not
affected by the change to Year 2000, and felt no impact from any of its vendors
or financial institutions.

Recent Transactions

As of November 1, 1994, the Company was indebted to Walter G. Cook (who was
president and a director of the Company until November 27, 1998) and a
corporation owned by him in the amount of $678,083 representing an aggregate of
unpaid principal and interest on loans made by Mr. Cook to that date since he
became the principal shareholder of the Company in 1975. Such loans bore
interest at rates of 8-10% per annum. During the three year period ended
October 31, 1997, as a result of additional loans made by Mr. Cook to the
Company and accrued interest, $778,001 of principal and interest was owed to
Mr. Cook and the aforesaid corporation as of October 31, 1997 (the "Cook
Loans"). The debt of $778,001 accrued interest at the rate of 12% per annum
from October 31, 1997. On October 14, 1998, the Company paid down the Cook
Loans by $150,000 and on November 20, 1998, the unpaid principal and interest
on the Cook Loans was $689,039.06.

In connection with the Exchange Agreement, on November 20, 1998, the two
properties owned by the Company, consisting of an office building in Hurst,
Texas and 65 undeveloped acres of realty in Forrest Hill, Texas, certain assets
related to the Hurst office building and a $3,000 principal amount note payable
to the Company were transferred to Walter G. Cook in full satisfaction of the
Cook Loans. In connection therewith, Mr. Cook assumed payment of a $150,000
mortgage loan on the two properties, on which $145,942.91 was owed, and certain
obligations owing on the two properties.

On February 9, 1999, the Company completed a loan agreement (the "Loan
Agreement") with seven private investors (the "Investors") wherein it received
$1,000,000 (the "1999 Loan"). The Loan Agreement further provided that an
additional $500,000 could be borrowed if management determined that such
additional funds were required for the operation of the business. The 1999
Loan is evidenced by a $1,000,000 promissory note dated February 12, 1999, the
date of the first draw under the Loan Agreement, which note bears interest at
10% per annum. The note matures on August 31, 2000. The Investors also
received Class A Warrants entitling them to purchase an aggregate of 2,000,000
shares of the Company's Common Stock. The Class A Warrants are exercisable at
$.3125 per share and expire five years from February 9, 1999. Class A Warrants
for the purchase of an aggregate of 351,250 shares of the Issuer's common stock
were also issued to Gerald M. Holland and Damaso Saavedra, who are two
individuals who represented the Investors in the negotiations with the Company
which Class A Warrants were those the Investors would have otherwise received.
See "Management's Discussion and Analysis of Financial Condition or Plan of
Operation - 1999 Private Financing."

Effective May 27, 1999, as part of the 1999 Loan, the Investors loaned an
additional $200,000 to the Issuer and received Class A Warrants to purchase an
aggregate of 400,000 additional shares of the Issuer's Common Stock. Effective
August 4, 1999, the Investors, as part of the 1999 Loan, loaned an additional
$300,000 to the Issuer and received Class A Warrants to purchase an aggregate
of 600,000 additional shares of the Issuer's Common Stock. See "Management's
Discussion and Analysis of Financial Condition or Plan of Operation - 1999
Private Financing."

Under the terms of the Exchange Agreement, the Company agreed to issue an
additional 1,000,000 shares of the Company's Common Stock to Steve Gould,
Robert Bray, Lee Kaplan and Gerald M. Holland (the "Shareholders") if the
consolidated net revenues of the Company are at least $8,000,000 for the twelve
(12) month period commencing March 1, 1999 (the "Year 1999 Additional Shares")
and an additional 1,000,000 shares if the consolidated net revenues of the
Company are at least $15,000,000 (on a non-cumulative basis) for the twelve
(12) month period commencing March 1, 2000 (the "Year 2000 Additional Shares").
The Loan Agreement provided that in the event that the Shareholders were
entitled to receive the Year 1999 Additional Shares, Class B Warrants for the
purchase of an aggregate of 427,500 additional shares of the Company's Common
Stock would be issued to Gerald M. Holland and Damaso Saavedra. The Class B
Warrants are exercisable at $.3125 per share and expire five years from March
1, 2000. In the event that the Shareholders were entitled to receive the Year
2000 Additional Shares, Class C Warrants for the purchase of an aggregate of
427,500 additional shares of the Company's Common Stock would be issued to
Gerald M. Holland and Damaso Saavedra. The Class C Warrants are exercisable at
$.3125 per share and expire five years from March 1, 2001. The revenue goal
for the year commencing March 1, 1999 was not met and the Year 1999 Additional
Shares were not required to be issued.

On October 1, 1998, prior to the Company's acquisition of Encore
International, Inc., Encore executed and delivered promissory notes in the
amount of $56,000 each to Steve Gould and Lee Kaplan to evidence its debt for
funds advanced to initiate the business of Encore. Such notes bore interest at
the rate of 6% per annum and were to mature on September 30, 1999. Under the
terms of the Loan Agreement, both Messrs. Gould and Kaplan agreed to accept
replacement notes which provide that no payment of interest or principal on
such replacement notes may be made to them unless all payments of principal and
interest due at that time on the promissory notes delivered to the Investors
shall have been made. The replacement notes delivered by the Company to
Messrs. Gould and Kaplan bear interest at a rate of 10% per annum and mature
August 31, 2000. In consideration for their accepting the replacement notes,
Messrs. Gould and Kaplan each received Class A Warrants to purchase 112,000
shares of Company's Common Stock. Such Class A Warrants are on the same terms
and conditions as the Class A Warrants issued to the Investors pursuant to the
Loan Agreement. See "Management's Discussion and Analysis of Financial
Condition or Plan of Operation - 1999 Private Financing."

In 1999, the Company also received an aggregate of $200,000 in loans in
transactions with three private individuals. In connection with these
transactions, the Company issued three subordinated promissory notes in the
amounts of $100,000, $50,000 and $50,000, bearing interest at a rate of 10% per
annum. The notes mature on December 31, 2000, April 30, 2001 and May 31, 2001,
respectively. These three investors also received Class A Warrants entitling
them to purchase 200,000 shares, 100,000 shares and 100,000 shares,
respectively, of the Company's Common Stock. The Class A Warrants are
exercisable at $.3125 per share, $.50 per share and $.50 per share,
respectively; and expire five years from the date of issuance.

In February 2000, the Company sold 1,000,000 shares of its Common Stock to one
individual for the sum of $100,000.

On April 26, 2000, the Company executed a loan agreement ("Loan Agreement No.
2") with 11 private investors, which included the Investors, Damaso Saavedra
and Messrs. Gould and Kaplan (all of whom are collectively referred to as the
"New Investors"), evidencing total borrowings of $415,000 (the "$415,000
Loan"). The $415,000 Loan is evidenced by a promissory note dated November 16,
1999, the date of the first advance, and provides for payment of interest at
the annual rate of 10% commencing monthly on June 30, 2000 and six equal
payments of principal commencing December 31, 2000. The note matures on May
31, 2001. The New Investors also received Class D Warrants entitling them to
purchase an aggregate of 4,150,000 shares of the Company's Common Stock. The
Class D Warrants are exercisable at $.10 per share and expire five years from
April 1, 2000. See "Management's Discussion and Analysis of Financial
Condition or Plan of Operation - 2000 Private Financing."

In connection with $415,000 Loan, the Company and the Investors agreed to
certain modifications of the 1999 Loan. All interest accrued through March 31,
2000, totaling $138,419.20, on the $1,000,000 note, the $200,000 note and the
$300,000 note will be converted into the Company's common stock at a rate of
$.10 per share or a total of 1,389,192 shares. The $1,000,000 note, the
$200,000 note and the $300,000 note will be exchanged for one note in the
amount of $1,500,000 dated April 1, 2000 and which matures on September 30,
2000. Additionally, the interest due to Messrs. Kaplan and Gould under each of
their $56,000 promissory notes from the Company or $6,382.48 will be converted
into 63,825 shares of the Company's Common Stock and new Subordinated Notes
will be issued to each, such notes bearing interest at 10% per annum and
maturing on September 30, 2000.

Loan Agreement No. 2 provides that the Class A warrants to purchase an
aggregate of 3,000,000 shares of the Company's common stock which were issued
as part of the 1999 Loan to the Investors will be cancelled and in exchange
therefor the Company will issue Class E warrants to purchase an aggregate of
7,500,000 shares, which Class E warrants will have an exercise price of $.10
per share during the first year of the warrant's five-year term and $.20 per
share during the remaining four years of the warrants' term. In addition, Loan
Agreement No. 2 provides that the Class A warrants for the purchase of 112,000
shares of the Company's common stock which were issued to each of Messrs. Gould
and Kaplan in connection with the 1999 Loan will also be cancelled and
exchanged for Class E warrants at the same ratio of 2.5 Class E warrants for
each Class A warrant. Also as part of the $415,000 Loan, Class A warrants for
the purchase of an aggregate of 351,250 shares of common stock which were
issued to Gerald M. Holland and Damaso Saavedra will be exchanged for common
stock on a 1-for-1 basis. Also modified by Loan Agreement No. 2 was the
issuance of the Year 1999 and Year 2000 Additional Shares. Under the
modification, the effective dates for calculation of the Additional Shares was
amended to the calendar year 2001 and the calendar year 2002. If revenues are
such that the Additional Shares are required to be issued for the years 2001
and/or 2002, Messrs. Holland and Saavedra will be entitled to receive for each
such year an aggregate of 427,500 shares of common stock rather than 427,500
Class B or C warrants.

Item 2. DESCRIPTION OF PROPERTY

In March 1999, the Company executed a five year lease for approximately 12,000
square feet of office space located at 7674 West Lake Mead Blvd., Suite 150,
Las Vegas, Nevada. The Company anticipates that this space will be sufficient
for its future growth while eliminating the need for interim transitions that
may be necessary during the developmental stages of a company's growth cycle.
The space houses the Company's Corporate Headquarters, including Management,
Administrative and Marketing personnel. The Company has incurred minimal costs
relating to leasehold improvements on its Corporate Headquarters office space.

The Company has acquired property and equipment through direct purchase and
execution of long term leases. Currently, property and equipment assets net of
accumulated depreciation comprise approximately 35% of the total assets of the
Company. Property held under capital leases represents approximately 70% of the
total property and equipment. The emphasis on leased assets has been made in
order to allow for minimal usage of current working capital in the early
development stage of the Company.

In order to accommodate the technology needs of the Company, the Company made
substantial initial purchases of computer hardware and software and
telecommunications equipment. The Company's technology purchase decisions have
been made, in large part, based on the expanding focus on the Internet as an
efficient conduit for collecting and dispensing information and data which are
vital to the daily operations of a network marketing company, such as the
Company.

Future funding needs for additional property and equipment should be minimal,
as the Company believes it has an infrastructure in place to handle significant
growth.

Item 3. LEGAL PROCEEDINGS

There are no material legal proceedings pending against the Company or any of
its subsidiaries.

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

On August 5, 1999, the Company held a Special Meeting of Shareholders at the
Company's offices located at 7674 W. Lake Mead Blvd., Suite 150, Las Vegas,
Nevada 89128. Shareholders were asked to vote on the following proposals to
amend the Company's Articles of Incorporation::

1. Change of name of the Company to VisionQuest Worldwide Holdings
Corporation.

2. Increase in the number of authorized shares of Common Stock to 150,000,000
with a change in the par value to $.001 per share.

The vote on the amendment to change the name of Company was 5,610,283 shares in
favor, 100 shares against and 500 shares abstaining. The vote on the amendment
to increase the number of authorized shares of Common Stock was 5,609,783 in
favor, 100 shares against and 1,000 shares abstaining. There were no broker
"non-votes" on either of the matters voted on by the shareholders. This
information was previously reported in Company's Form 10-QSB for the quarter
ending July 31, 1999, which was filed with the Commission on September 29,
1999.

PART II

Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

Market Information

The principal United States market in which the Company's Common Stock has been
traded in the past is the over-the-counter market. The Company has been
advised by the National Quotation Bureau, LLC that during the fiscal year ended
October 31, 1999, there were no bid or offer quotations for Company's Common
Stock in the Pink Sheets published by it.

Security Holders

The approximate number of holders of record of the Company's Common stock as of
April 10, 2000 was 246.

Dividends

The payment of dividends, if any, in the future will be at the discretion of
the Company's Board of Directors and will depend, among other things, upon the
Company's earnings, its capital requirements and its financial condition. The
Company has not paid dividends since its inception and has no intention of
doing so in the near future.

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

The following discussion of the Company's results of operations and financial
condition should be read in conjunction with the Company's audited Financial
Statements listed in Part II, Items 7 and 13 and the Notes thereto appearing
elsewhere in this Annual Report on Form 10-KSB.

No discussion or comparison with 1998 is included because the Company's
previous business, which has been discontinued, and the new business are so
dissimilar, no comparison is possible at this time.

After consummation of the Exchange Agreement with Encore and Encore's
subsequent merger with VisionQuest Worldwide, Inc., the Company initiated and
began operating its marketing program though a national network of
distributors. The VisionQuest Marketing Program was developed by the officers
of the Company who believe that the program illustrates a comprehensive
understanding of the network marketing industry. The Company intends to align
its product line with future health and business trends, as those trends are
identified through research and other means.

The Company's goal is to align its product line and Marketing Program with
future health and business trends. As those trends are identified through
research and other means, the Company will continue to implement its business
plan and expand its network of distributors by identifying new individual
distributors as well as the acquisition of sales and marketing organizations
which would support sales growth.

The Company has recruited a significant number of Hispanic Team Members and is
actively providing specialized support to expand this market. To do so, the
Company has entered into a Royalty Agreement with Olga Breeskin, a Latin
celebrity, for her active roll in endorsing the Company through translating
audio and video sales and training materials.

In October 1999, the Company launched a stock incentive program for its Team
Members based on sales production, and has extended the program through March
31, 2000. There are 300,000 shares of the Company's common stock reserved for
issuance under the incentive program.

The Company has applied for membership in the prestigious Direct Selling
Association (DSA). Acceptance as a member in the DSA may take up to one full
year. This membership will provide added credibility to the Company's business
as well as the opportunity for the Company to be better informed of changes in
regulatory guidelines affecting the direct selling industry.

Looking forward, the Company intends to continue expanding its consumable
product line and will accomplish this by adding to its marketing program,
maintaining its leading edge technology, and upgrading its communications
services including competitive Internet and long distance services. These
services will open new markets for the Company and its Team Members.

The Company's assets include approximately $1,563,000 as of May 31, 2000 in
product and sales material inventory at wholesale or distributor purchase
price.

In the Company's original business plan, it was estimated that it would
require between $1,000,000 to $1,500,000 in funding requirements and a year of
operations before the Company could show a net bottom line profit. The Company
anticipates that it will require an additional $1,000,00 in capital within the
next 18 months to meet its loan obligations and other needs described in the
next two paragraphs. The Company will continue to investigate opportunities
for additional investor funding. It anticipates that the any additional
investor funding will be in exchange for stock and/or warrants to purchase
stock. The Company will continue to investigate opportunities for additional
investor funding. It anticipates that the any additional investor funding will
be in exchange for stock and/or warrants to purchase stock. Although efforts
are underway, the Company has no current arrangements with respect to sources
of additional financing and there can be no assurance that additional financing
will be available to us on commercially reasonable terms, or at all. The
inability to obtain additional financing, when needed, would have a material
adverse effect on the Company, including possibly requiring it to curtail or
cease operations. To the extent that any future financing involves the sale of
the Company's equity securities, the Company's then existing stockholders could
be substantially diluted. The dilution is the result of the difference between
the net tangible book value per share of common stock if any, before the sale
of any additional shares and the price per share attributable to the shares of
common stock.

In addition to the funding requirements described in the next paragraph, the
Company's obligations with respect to the 1999 Loan, the $112,000 of loans due
to Messrs. Gould and Kaplan the $415,000 Loan and the three individual loans
aggregating $200,000 will become due within the next 18 months. Upon maturity
of this indebtedness, the Company will require $2,227,000 in funds to meet its
obligations under these loans. Unless the Company is able to renegotiate all
or some of the loans or secure new financing, it will not be able to meet its
obligations and will not be able to continue its operations.

Additional funding also will be required to support the Company's projected
operational overhead during the next 12 months, as well as to develop and
acquire additional new product lines which are in line with the Company's
marketing philosophy. These additional products will provide a more
comprehensive marketing opportunity for its Team Members, as well as generate
additional revenues for the Company.

The Company is confident that with the anticipated additional capital, it can
enter into a growth period which will allow the Company to become financially
self sufficient. The Company intends to utilize any additional funding to
enhance its ability to generate e-commerce and Internet business activity as
well as expanding into international markets.

1999 Private Financing

On February 9, 1999, the Company completed the Loan Agreement with the
Investors wherein it received $1,000,000 (the "1999 Loan"). The Loan Agreement
further provided that an additional $500,000 could be borrowed if management
determined that such additional funds were required for the operation of the
business. The 1999 Loan is evidenced by a $1,000,000 promissory note dated
February 12, 1999, the date of the first draw under the Loan Agreement, which
note bears interest at 10% per annum. The note matures on August 31, 2000.
The Investors also received Class A Warrants entitling them to purchase an
aggregate of 2,000,000 shares of the Company's Common Stock. The Class A
Warrants are exercisable at $.3125 per share and expire five years from
February 9, 1999. Class A Warrants for the purchase of an aggregate of 351,250
shares of the Company's common stock were also issued to Gerald M. Holland and
Damaso Saavedra, who are two individuals who represented the Investors in the
negotiations with the Company which Class A Warrants were those the Investors
would have otherwise received.

Effective May 27, 1999, as part of the 1999 Loan, the Investors loaned an
additional $200,000 to the Company and received Class A Warrants to purchase an
aggregate of 400,000 additional shares of the Issuer's Common Stock. Effective
August 4, 1999, the Investors, as part of the 1999 Loan, loaned an additional
$300,000 to the Company and received Class A Warrants to purchase an aggregate
of 600,000 additional shares of the Company's Common Stock.

On October 1, 1998, prior to the Company's acquisition of Encore
International, Inc., Encore executed and delivered promissory notes in the
amount of $56,000 each to Steve Gould and Lee Kaplan to evidence its debt for
funds advanced to initiate the business of Encore. Such notes bore interest at
the rate of 6% per annum and were to mature on September 30, 1999. Under the
terms of the Loan Agreement with the Investors, both Messrs. Gould and Kaplan
agreed to accept replacement notes which provide that no payment of interest or
principal on such replacement notes may be made to them unless all payments of
principal and interest due at that time on the promissory notes delivered to
the Investors shall have been made. The replacement notes delivered by the
Company to Messrs. Gould and Kaplan bear interest at a rate of 10% per annum
and mature August 31, 2000. In consideration for their accepting the
replacement notes, Messrs. Gould and Kaplan each received Class A Warrants to
purchase 112,000 shares of Company's Common Stock. Such Class A Warrants are
on the same terms and conditions as the Class A Warrants issued to the
Investors pursuant to the Loan Agreement.

In 1999, the Company also received an aggregate of $200,000 in loans in
transactions with three private individuals. In connection with these
transactions, the Company issued three subordinated promissory notes in the
amounts of $100,000, $50,000 and $50,000, bearing interest at a rate of 10% per
annum. The notes mature on December 31, 2000, April 30, 2001 and May 31, 2001,
respectively . These three investors also received Class A Warrants entitling
them to purchase 200,000 shares, 100,000 shares and 100,000 shares,
respectively, of the Company's Common Stock. The Class A Warrants are
exercisable at $.3125 per share, $.50 per share and $.50 per share,
respectively; and expire five years from the date of issuance.

2000 Private Financing

In February 2000, the Company sold 1,000,000 shares of its Common Stock to one
individual for the sum of $100,000.

On April 26, 2000, the Company executed Loan Agreement No. 2 with 10 private
investors, which included the Investors, Damaso Saavedra and Messrs. Gould and
Kaplan (all of whom are collectively referred to as the "New Investors"),
evidencing the $415,000 Loan. The $415,000 Loan is evidenced by a promissory
note dated November 16, 1999, the date of the first advance, and provides for
payment of interest at the annual rate of 10% commencing monthly on June 30,
2000 and six equal payments of principal commencing December 31, 2000. The
note matures on May 31, 2001. The New Investors also received Class D Warrants
entitling them to purchase an aggregate of 4,150,000 shares of the Company's
Common Stock. The Class D Warrants are exercisable at $.10 per share and
expire five years from April 1, 2000.

In connection with $415,000 Loan, the Company and the Investors agreed to
certain modifications of the 1999 Loan. All interest accrued through March 31,
2000, totaling $138,419.20, on the $1,000,000 note, the $200,000 note and the
$300,000 note will be converted into the Company's common stock at a rate of
$.10 per share or a total of 1,384,192 shares. The $1,000,000 note, the
$200,000 note and the $300,000 note will be exchanged for one note in the
amount of $1,500,000 dated April 1, 2000 and which matures on September 30,
2000. Additionally, the interest due to Messrs. Kaplan and Gould under each of
their $56,000 promissory notes from the Company or $6,382.48 will be converted
into 63,825 shares of the Company's Common Stock and new Subordinated Notes
will be issued to each, such notes bearing interest at 10% per annum and
maturing on September 30, 2000.

The Class A warrants to purchase an aggregate of 3,000,000 shares of the
Company's common stock which were issued in the 1999 Loan to the Investors will
be cancelled and in exchange therefor the Company will issue Class E warrants
to purchase an aggregate of 7,500,000 shares which Class E warrants will have
an exercise price of $.10 per share during the first year of the warrant's
five-year term and $.20 per share during the remaining four years of the
warrants' term. In addition, Loan Agreement No. 2 provides that the warrants
for the purchase of 112,000 shares of the Company's common stock which were
issued to each of Messrs. Gould and Kaplan in connection with the 1999 Loan
will also be cancelled and exchanged for Class E warrants at the same ratio of
2.5 Class E warrants for each Class A warrant. Also as part of the $415,000
Loan, Class A warrants for the purchase of an aggregate of 351,250 shares of
common stock which were issued to Gerald M. Holland and Damaso Saavedra will be
exchanged for common stock on a 1-for-1 basis. Also modified under Loan
Agreement No. 2 was the issuance of the Year 1999 and Year 2000 Additional
Shares. Under the modification, the effective dates for calculation of the
Additional Shares was amended to the calendar year 2001 and the calendar year
2002. If revenues are such that the Additional Shares are required to be
issued for the years 2001 and/or 2002, Messrs. Holland and Saavedra will be
entitled to receive for each such year an aggregate of 427,500 shares of common
stock rather than 427,500 Class B or C warrants.

Use of Proceeds of 1999 and 2000 Private Financing

The majority of the proceeds of the 1999 private financing has been utilized
for deposits and payments on product inventory and sales and marketing
materials as well as operating capital during the Company's pre-launch phase
and initial operation period. The proceeds from the 2000 private financing
will be used for operating capital.

The Company intends to pursue a moderately aggressive approach to building
inventory and expanding its product line during the next twelve months, while
maintaining some funds in reserve so that it can support the needs of the
Company's Team Members in a timely manner.

Certain Factors Which May Affect Future Results

We may be considered a development stage company because of our entry into a
new line of business. There is a significant risk that we may not be able to
obtain the volume of business necessary to become a going concern. We believe
that our business plan provides a comprehensive approach in assembling all the
essential parts that will make up a successful network marketing company;
however, there can be no assurance that we will be able to generate projected
revenues or achieve profitable operations.

Our capital requirements will continue to be significant. To date, we have
been dependent upon the proceeds of borrowings from private investors to fund
our development activities. Although numerous opportunities are being pursued,
we have no current finalized arrangements to secure additional financing, and
there is no assurance that additional financing which we are currently seeking
will be secured on commercially reasonable terms, or at all. The inability to
obtain additional financing, when needed, would have a material adverse effect
on us, including possibly requiring us to curtail or cease operations. To the
extent that any future financing involves the sale of our equity securities,
our then existing stockholders could be substantially diluted.

We do not contemplate that we will directly manufacture any of our products.
We intend to contract with third parties to manufacture our products. Although
we believe we will be able to negotiate satisfactory manufacturing and supply
agreements, the failure to do so would have a material adverse effect on us. We
can provide no assurance that these manufacturers will dedicate sufficient
production capacity to satisfy our requirements within scheduled delivery
times, or at all. Failure or delay by our suppliers in fulfilling our
anticipated needs would adversely affect our ability to develop and market our
products.

If our outside manufacturers fail to supply our products in sufficient
quantities and in a timely fashion, our business may suffer. We anticipate that
we will obtain most of our from a single source, or limited number of sources,
of supply. We believe that we have or will be making satisfactory arrangement
for supply of our products. In the event that our suppliers are unable or
unwilling to provide us with the products on commercially reasonable terms, or
at all, delays in securing alternative sources of supply would result and could
have a material adverse effect on the our operations.

The markets that we intend to enter are characterized by intense competition.
Our products will directly compete with similar products of numerous
well-established companies. Our ability to compete in these markets is
dependent, in part, upon our significantly expanding our membership network.
Some of our competitors dominate the industry. They have the necessary
financial resources to enable them to withstand substantial price competition
or downturns in the market for the products, which we may not be able to
withstand.

We depend substantially on the continued services and performance of our
senior management. Our business may be hurt if one or more of our senior
management or key employees leave us. Although we have an employment agreement
with Mr. Gould, this does not guarantee that he will remain with us. If we lose
the services of Mr. Gould or other key employees, we may not be able to attract
and retain additional qualified personnel to fill their positions in the
future.

Item 7. FINANCIAL STATEMENTS

The financial statements and supplementary data are indexed in Item 13 hereof.

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

As reported in Company's Current Report on Form 8-K filed with the Commission
on January 23, 1999, Spillar, Mitcham, Eaton & Bicknell, L.L.P. ("Spillar"),
the independent accounting firm which audited the financial statements of the
Company during fiscal year 1997, was dismissed by the Company on January 15,
1999.

Spillar's report on the Company's financial statements for either of the past
two years did not contain an adverse opinion or a disclaimer of opinion, and,
except as to the ability of the Company to continue as a going concern, was
neither qualified nor modified as to uncertainty, audit scope, or accounting
principles.

The decision to change accountants was approved by the Board of Directors of
the Company on January 15, 1999.

During the Company's two most recent fiscal years and any subsequent interim
period preceding such dismissal, there were no disagreements with Spillar on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement(s), if not
resolved to the satisfaction of Spillar, would have caused it to make reference
to the subject matter of the disagreement(s) in connection with its report.

During the Company's two most recent fiscal years and any subsequent interim
period preceding such dismissal, the Company has had no reportable events as
defined in Item 304(a)(1)(v) of Regulation S-B.

The Company has engaged Buchbinder Tunick & Company, L.L.P. as its new
independent accountants effective January 15, 1999. During the Company's two
most recent fiscal years and any subsequent interim period prior to engaging
such accountants, the Company has not consulted with Buchbinder Tunick &
Company, L.L.P. regarding any of the matters specified in Item 304(a)(2) of
Regulation S-B.

PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following information is provided with respect to each director and
officer of the Company as of October 31, 1999:

Name Age Position

Steve Gould 38 President, Chief Executive Officer
and a Director

Lee Kaplan 46 Chairman of the Board of Directors
and a Director

William Spallino 42 Vice President

Kimberly Hale 29 Secretary

Robert Bray 49 Director

Jules Ross Director

Gerald M. Holland Director

Steve Gould has been President, Chief Executive Officer and a director of the
Company since November 27, 1998. For the past 18 years, Mr. Gould's career has
been in the direct sales industry and has included seven years where he served
as President of an international network marketing company producing over $200
million a year in sales. His career has spanned numerous aspects of corporate
management, sales and product development.

Lee Kaplan has been Chairman of the Board of Directors, Vice President and a
director of the Company since November 27, 1998. For the past 20 years, Mr.
Kaplan has been self-employed as a marketing consultant.

William Spallino has been Vice President of the Company since June 30, 1999.
For the past 20 years, Mr. Spallino has been involved in the Information
Technology industry, and from May 1994 through September 1998, was Chief
Information Officer with a leading network marketing company.

Kimberly Hale has been Secretary of the Company since March 25, 1999. For the
past 10 years, Ms. Hale has been employed in various legal and executive
assistant capacities, and has been the Executive Assistant to Steve Gould since
May 1996.

Robert Bray has been a director of the Company since November 27, 1998. He has
served as President of Covenant Brothers, a retail clothing company, from
January 1982 to the present and has also been employed as an Executive
Distributor for NuSkin International, a retailer of nutritional products, from
April 1993 to the present.

Jules Ross has been a director of the Company since June 8, 1999. He has been
a self-employed investor since 1990.

Gerald M. Holland has been a director of the Company since June 8, 1999. He
has served as President of Holland Builders, Inc., a commercial general
contracting and development firm, from 1965 to the present.

Pursuant to the provisions of the Company's Bylaws, the Company's current
directors and executive officers hold office until his or her successor is
elected or appointed and qualified, or until his or her death, resignation or
removal by the Board of Directors.

The term of each director will expire at the next Annual Meeting of
Stockholders and when their respective successors have been elected and
qualified. Officers serve at the pleasure of the Board of Directors.

Pursuant to the terms of the Loan Agreement, the Investors were entitled to
designate two individuals to be elected to the Company's Board of Directors.
These individuals are Gerald Holland and Jules Ross, both of whom are
Investors. Messrs. Holland and Ross were elected to the Board on June 8, 1999.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our officers,
directors and greater than 10% stockholders to file reports of ownership and
changes in ownership of our securities with the Securities and Exchange
Commission. Copies of the reports are required by SEC regulation to be
furnished to us. Based on our review of such reports, we believe that all
reporting persons complied with all filing requirements during the fiscal year
ended October 31, 1999, except for the late filing of a Form 3 during June 1999
for Messrs. Ross and Holland.

Item 10. EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the annual and long-term compensation paid by
the Company for services performed on the Company's behalf for the last two
completed fiscal years (i.e., the fiscal years ended October 31, 1999 and
October 31, 1998), with respect to the person who was, as of October 31, 1999,
the Company's Chief Executive Officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMOENSATION(1) COMPENSATION
AWARDS

SECURITIES ALL
NAME AND PRINCIPAL FISCAL SALARY BONUS OTHER ANNUAL UNDERLYING OPTIONS OTHER
POSITION YEAR COMPENSATION (NUMBER OF SHARES) COMPENSATION
<S> <C> <C> <C> <C> <C> <C>

Steve Gould 1999 $ 198,154 - $ - - $ 1,436(3)
Chairman, President and 1998 - - - - -
Chief Executive Officer(2)
</TABLE>

(1) Does not include the dollar value of perquisites and other personal
benefits.

(2) Mr. Gould did not become an officer or employee until November 27, 1998.

(3) Represents 1% commission on gross sales revenues pursuant to the provisions
of Mr. Gould's employment agreement with the Company.

Lee Kaplan Consultant Agreement

Effective March 1999, Encore (now VisionQuest) retained Lee Kaplan as a
consultant with respect to matters concerning the establishment and maintenance
of the network of independent contractors to be assembled in connection with
the VisionQuest Marketing Program. Mr. Kaplan has received monthly
compensation of $5,000 commencing March 1999.

Prior to the acquisition by Company of Encore, Lee Kaplan acted as a
consultant to Encore. For such services, $158,000 was accrued as compensation
of which $95,000 was paid with a balance of $63,000 reflected as indebtedness
as of October 31, 1998. Expenses, such as travel and lodging, incurred by Mr.
Kaplan in performing such services were borne by Mr. Kaplan out of the
compensation paid or payable to him.

Robert Bray Severance Agreement

Prior to the acquisition by the Company of Encore, Robert Bray received
compensation from Encore in the form of consulting fees in the amount of
$42,748 as payment for his services as an officer of Encore. Effective October
1, 1998, Encore (now VisionQuest) and Robert Bray entered into an agreement
which provided that VisionQuest would pay to Robert Bray as severance
compensation the total sum of $30,000, payable $5,000 per month until paid.
This amount was paid in full to Mr. Bray, commencing January 1999.

Employment and Distributorship Agreements

Encore (now VisionQuest) and Steve Gould have entered into a five-year
employment agreement commencing October 15, 1998, which provides that Mr. Gould
shall receive an initial salary of $200,000 annually with a guaranteed annual
increase of not less than 10% and a bonus of 1% of the gross sales revenue as
computed on a monthly basis. Thus, Mr. Gould's aggregate annual income is
based on the revenue level he is able to attain for the Company.

Neither Mr. Kaplan nor Mr. Bray receive a salary from the Company. VisionQuest
granted a master distributorship referred to as "Cirrus Strategies" to Mr.
Kaplan. Cirrus Strategies is the sole distributorship granted directly from
the Company and is the first (or highest) tier of distributorship in the
VisionQuest Marketing Program. All distributorships held by individual Members
branch from Cirrus Strategies. In accordance with the Company's Marketing
Compensation Plan, Cirrus Strategies will receive a portion of the sales
effected by all Members holding Distributorships beneath it in the tier of
organization. Of the revenues generated under Cirrus Strategies, Mr. Kaplan
will receive 55% and Mr. Bray will receive 10%. The remaining 35% of generated
revenues will be paid, on a pro rata basis, to the remaining six investors who
loaned funds to Encore prior to its acquisition by the Company.

VisionQuest also granted a Distributorship to Steve Gould, which
distributorship is one of several second-tier distributorships and, as such,
branches directly off of Cirrus Strategies. Mr. Gould receives a portion of
the sales effected by all Members holding distributorships beneath his in the
tier of organization.

The amount of revenues received under the various Distributorship agreements
will be paid in accordance with the Company's Marketing Compensation Plan,
which is being developed by management. Since the Marketing Compensation Plan
is not finalized, the Company is unable at this time to project the exact
amount of revenues which will be received by Messrs., Gould, Kaplan and Bray
under the Distributorships.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below is based on information obtained from the persons named below
with respect to the shares of Common Stock beneficially owned, as of April 26,
2000, by

* each person known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock,

* each director of the Company,

* each executive officer of the Company, and (iv) all executive officers and
directors of the Company as a group.

AMOUNT AND NATURE PERCENTAGE OF
NAME AND ADDRESS OF OF BENEFICIAL OUTSTANDING
BENEFICIAL OWNER(1) OWNERSHIP(2) SHARES OWNED (3)(4)

Steve Gould(5)(6)(8) 3,434,357 31.1%

Lee Kaplan (6)(8) 3,434,357 31.1%

Gerald M. Holland(6)(7)(8) 8,019,652 64.4%

Jules Ross(6)(7)(8) 8,864,860 69.2%

Robert Bray (8) 550,000 5.6%

Case Holding Company, Inc.(7)(8) 5,482,356 50.6%

Peter Casoria, Jr(7) (8) 6,147,657 60.2%

Charles J. Sugarman(7) (8) 6,036,922 58.0%

Rosalyn S. Sugarman(7) (8) 6,231,302 59.2%

Richard A. Hahner(7) (8) 5,640,102 56.2%

Peter Casoria, Sr.(7) (8) 5,640,102 56.2%

Dennis M. Lopez(7) (8) 5,640,102 56.2%

William Spallino 15,000 *

Kimberly Hale 5,000 *

David C. Ellis(9) 1,260,537 12.9%

Damaso W. Saavedra(7) 553,010 5.4%

All executive officers and
directors as a group
(7 persons) 14,506,365 80.4%
-------------------------------
*Less than 1.0%

(1) The address of each of Messrs. Gould, Kaplan, Bray and Spallino and Ms.
Hale is c/o the Company, 7674 W. Lake Mead Boulevard, Suite 150, Las Vegas,
Nevada 89128. The address for the other listed persons is as follows: for
Jules Ross, 2300 Kensington Boulevard, Davie, FL 33325; for Richard Hahner,
4860 N.E. 12th Avenue, Fort Lauderdale, FL 33334; for Case Holding Co., Inc.,
c/o Mr. Cy Case, 4367 N. Federal Highway, #209, Fort Lauderdale, FL 33308; for
Peter Casoria, Jr., 552 N.E. 34th Court, Oakland Park, FL 33334; for Peter
Casoria Sr., 552 N.E. 34th Court, Oakland Park, FL 33334; for Dennis Lopez,
4800 Bayview Drive PH3, Fort Lauderdale, FL 33308; for Gerald M. Holland, 4860
N.E. 12th Avenue, Fort Lauderdale, FL 33334; for Charles J. Sugarman, 69
Covert Run Pike, Fort Thomas, KY; for Rosalyn S. Sugarman, 1904 S. Ocean Drive,
Apartment 806, Hallandale, Florida 33009; for David C. Ellis, 6628 E. 88th,
Tulsa, OK 74133 and for Damaso W. Saavedra, 312 S.E. 17th Street, 2nd Fl., Ft.
Lauderdale, Florida 33316.

(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and/or investment power with respect to all shares of
Common Stock deemed beneficially owned by them.

(3) The calculation of a stockholder's percentage of beneficial ownership
includes in both the numerator and denominator those shares underlying options,
warrants or other derivative securities deemed beneficially owned by that
stockholder. Shares underlying options, warrants or other derivative
securities held by other stockholders are disregarded in this calculation.
Therefore, the denominator used in calculating beneficial ownership among the
Company's stockholders may differ.

(4) Based on the number of shares outstanding (9,777,355) at May 1, 2000, plus
the number of shares acquirable by the specified person(s) within 60 days of
May 1, 2000 upon exercise of Class D and E Warrants for the purchase of Common
Stock of the Company and/or the number of shares covered by the Irrevocable
Proxy described in note (9) below.

(5) Owned of record by Fat Cat, LLC, of which Steve Gould is the owner of all
of its equity.

(6) The holdings for Mr. Gould include 1,280,150 shares presently purchasable
under Class D and E Warrants held by him, for Mr. Kaplan, 1,280,150 shares
presently purchasable under Class D and E Warrants held by him, for Mr.
Holland, 2,676,770 shares presently purchasable under Class D and E Warrants
held by him; for Mr. Ross, 3,037,510 shares presently purchasable under Class D
and E Warrants held by him; for Case Holding Company, 1,050,045 shares
presently purchasable under Class D and E Warrants held by it; for Mr. Casoria,
Jr., 735,565 shares presently purchasable under Class D and E Warrants held by
him; for Mr. Casoria, Sr., 262,615 shares presently purchasable under Class D
and E Warrants held by him; for Mrs. Sugarman, 750,000 shares presently
purchasable under Class E Warrants held by her; for Mr. Sugarman,, 624,830
shares presently purchasable under Class D and E Warrants held by him; for Mr.
Hahner, 262,615 shares presently purchasable under Class D and E Warrants held
by hi m; for Mr. Lopez, 262,615 shares presently purchasable under Class D and
E Warrants held by him; and for Mr. Saavedra, 412,510 shares presently
purchasable under Class D Warrants held by him.

(7) On February 9, 1999, the Investors entered into the Loan Agreement with the
Company pursuant to which the Investors initially loaned $1,000,000 to the
Company. The Investors subsequently loaned an additional $500,000 to the
Company. Under the Loan Agreement and the subsequent loans, the Investors
received on a pro rata participation basis Class A Warrants for the purchase of
an aggregate of 3,000,000 shares of Common Stock. Additional warrants to
purchase 351,250 shares were issued to other persons in connection with their
services rendered to secure the Loan Agreement. Under the modification of the
Loan Agreement effected through Loan Agreement No. 2 covering the $415,000 Loan
effective April 26, 2000, the Class A Warrants were exchanged for Class E
Warrants on a 2.5 for 1 basis and the Class A Warrants to purchase 351,250
shares of Common Stock were exchanged for shares of Common Stock on a 1 for 1
basis. The Investors joined by Messrs. Gould and Kaplan and Damaso W. Saaved
ra, or the New Investors, were the lenders under the $415,000 Loan. In
connection with the $415,000 Loan, Class D Warrants to purchase 4,150,000
shares of the Company's Common Stock were issued on a pro rata basis to the
Investors and New Investors, See "Management's Discussion and Analysis and
Results of Operation - 1999 Private Financing and 2000 Private Financing" for
details of the Class D and E Warrant issuances.

(8) In connection with the execution of the Loan Agreement, Messrs. Gould,
Bray, Kaplan and Holland granted an Irrevocable Proxy in favor of the Investors
to vote 4,978,264 shares of Common Stock (which figure is now 5,342,882 due to
the acquisition by Messrs. Holland, Gould and Kaplan of additional shares in
the Class A Warrant exchange under the $415,000 Loan which became subject to
the Proxy). The Proxy entitles the Investors to vote on major decisions
presented to the Company's stockholders, however, the Proxy may not be used to
vote to remove any director or officers from office for reasons other than
gross negligence, theft, or legal incompetency. With respect to the election
of directors, the Investors may only vote for a person currently holding the
position. The Proxy terminates upon repayment of the loans. The amount of the
shares subject to the Proxy are included in the beneficial ownership figures
for Messrs. Holland, Ross, Casoria, Jr., Casoria, Sr., Sugarman, Hahner, Lopez,
Mrs. Sugarman and Case Holding Company, Inc.

(9) Includes 1,236,537 shares held of record by David C. Ellis Profit Sharing
Trust, of which Mr. Ellis is the sole beneficiary and trust.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since November 1, 1996, no director or executive officer of the Company, any
nominee to election as a director, or any person know to the Company to own of
record or beneficially more than 5% of the Company's Common Stock or any member
of the immediate family of any of the foregoing persons had, or will have, any
direct or material interest in any transaction or series of similar
transactions to which the Company or any of its subsidiaries, was or is to be a
party, in which the amount involved exceeds $60,000, except as follows:

As of November 1, 1994, the Company was indebted to Walter G. Cook and a
corporation owned by him in the amount of $678,083 representing an aggregate of
unpaid principal and interest on loans made by Mr. Cook since he became the
principal shareholder of the Company in 1975. Such loans bore interest at
rates of 8-10% per annum. During the three year period ended October 31, 1997,
as a result of additional loans made by Mr. Cook to the Company and accrued
interest, $778,001 of principal and interest was owed to Mr. Cook and the
aforesaid corporation as of October 31, 1997 (the "Cook Loans"). The debt of
$778,001 bears interest at the rate of 12% per annum. On October 14, 1998, the
Company paid down the Cook Loans by $150,000.

Under the terms of the Exchange Agreement, the two properties owned by the
Company, consisting of an office building in Hurst, Texas and 65 undeveloped
acres of realty in Forrest Hill, Texas, certain assets related to the Hurst
office building and a $3,000 note payable to the Company were transferred to
Walter G. Cook in satisfaction of the Cook Loans. The satisfaction of the Cook
Loans upon the terms set forth in the preceding sentence took place on November
20, 1998. In connection therewith, Mr. Cook assumed payment of a $150,000
mortgage loan on the two properties.

On October 1, 1998, prior to the Company's acquisition of Encore
International, Inc., Encore executed and delivered promissory notes in the
amount of $56,000 each to Steve Gould and Lee Kaplan in payment for funds
advanced by them to initiate the business of Encore. Such notes bore interest
at the rate of 6% per annum and matured on September 30, 1999. In connection
with the Company's 1999 private financing, both Messrs. Gould and Kaplan agreed
to accept replacement notes which provide that no payment of interest or
principal may be made to them unless at such time all payments of principal and
interest then due on the promissory note delivered to the Investors shall have
been made. The replacement notes delivered by the Company to Messrs. Gould and
Kaplan bear interest at a rate of 10% per annum and mature August 31, 2000. In
consideration of their agreeing to accept the replacement notes, Messrs. Gould
and Kaplan each received Class A Warrants to purchase 112,000 shares of
Company's Common Stock. Such Class A Warrants are on the same terms and
conditions as the Class A Warrants issued to the Investors in the 1999
Private Financing. See "Management's Discussion and Analysis of Financial
Condition or Plan of Operation - 1999 Private Financing."

On April 26, 2000, the Company executed Loan Agreement No. 2 with 12 private
investors, which included the Investors, Damaso Saavedra and Messrs. Gould and
Kaplan. The $415,000 Loan is evidenced by a promissory note dated April 26,
2000 which note bears interest at 10% per annum. The note matures on September
30, 2000. The New Investors also received Class D Warrants entitling them to
purchase an aggregate of 4,150,000 shares of the Company's Common Stock. The
Class D Warrants are exercisable at $.10 per share and expire five years from
April 1, 2000. See "Management's Discussion and Analysis of Financial
Condition or Plan of Operation - 2000 Private Financing."

In connection with $415,000 Loan, the Company agreed to certain modifications
of the $1,500,000 Loan completed in February 1999. All interest accrued
through March 31, 2000, on the $1,000,000 note, the $200,000 note and the
$300,000 note totaling $138,419.20, will be converted into the Company's common
stock at a rate of $.10 per share or 1,384,192 shares. Messrs. Gerald M.
Holland and Jules Ross, who are Directors of the Company, will receive 380,653
and 484,468 shares for the interest owed to them. The $1,000,000 note, the
$200,000 note and the $300,000 note will be exchanged for one note in the
amount of $1,500,000 dated April 1, 2000 and which matures on September 30,
2000. The Class A warrants to purchase an aggregate of 3,000,000 shares of
the Company's common stock which were issued in the 1999 Loan will be cancelled
and in place the Company will issue Class E warrants to purchase an aggregate
of 7,500,000 shares which Class E warrants will have an exercise price of $.10
per share during the first year of the warrant's five-year term and $.20 per
share during the remaining four years of the warrants' term. In addition, Loan
Agreement No. 2 provides that the warrants for the purchase of 112,000 shares
of the Company's common stock which were issued to each of Messrs. Gould and
Kaplan in connection with the 1999 Loan will also be cancelled and reissued as
Class exchanged for Class E warrants at the same ratio of 2.5 Class E warrants
for each Class A warrant. Also as part of the $415,000 Loan, Class A warrants
for the purchase of an aggregate of 351,250 shares of common stock which were
issued to Gerald M. Holland, a Director, and Damaso Saavedra will be exchanged
for common stock on a 1-for-1 basis. Also modified under Loan Agreement No. 2
was the issuance of the Year 1999 and Year 2000 Additional Shares. Under the
modification, the effective dates for calculation of the Additional Shares was
amended to the calendar year 2001 and the calendar year 200 2. If revenues are
such that the Additional Shares are required to be issued, Messrs. Holland and
Saavedra will be entitled to receive an aggregate of 427,500 shares of common
stock rather than 427,500 Class B or C warrants.

Item 13. EXHIBITS AND REPORTS OF FORM 8-K

(a) Financial Statements

Report of Independent Certified Public Accountants F-2

Consolidated Balance Sheet as of October 31, 1999 F-3

Consolidated Statements of Operations
for the years ended October 31, 1999 and 1998 F-4

Consolidated Statements of Changes in Stockholders' Deficiency
for the years ended October 31, 1999 and 1998 F-6

Consolidated Statements of Cash Flows
for the years ended October 31, 1999 and 1998 F-7

Notes to Consolidated Financial Statements F-9

(b) Reports on Form 8-K

None.

The following exhibits required to be filed by Item 601 of Regulation S-B are
incorporated by reference or attached to and filed as part of this Annual
Report on Form 10-KSB:

No. Description:

3.1(a) Certificate of Incorporation of Company(1)

3.1(b) Amendment to Certificate of Incorporation

3.1(c) Certificate of Amendment to Certificate of Incorporation(6)

3.2 Bylaws of Company(1)

10.1 Promissory Note dated October 31, 1994 of Manhattan National
Properties, Inc. and Continental Heritage Corporation payable to
Walter G. Cook in the amount of $147,433.46(1)

10.2 Promissory Note of Continental Heritage Corporation dated October
31, 1994 payable to the order of Spanish West Enterprises, Inc. in
amount of $34,027.13(1)

10.3 Promissory Note of Continental Heritage Corporation dated October
31, 1994 payable to Walter G. Cook in the amount of $227,624.36(1)

10.4 Promissory Note of National Heritage Corporation and Continental
Heritage Corporation dated October 31, 1994 payable to Walter G.
Cook in the amount of $226,929.81(1)

10.5 Promissory Note of Apollo Enterprises, Inc. and Continental
Heritage Corporation dated October 31, 1994 payable to Walter G.
Cook in the amount of $41,860.79(1)

10.6 Promissory Note of Company and Apollo Enterprises, Inc., Manhattan
National Properties, Inc. and National Heritage Corporation dated
October 31, 1997 payable to Walter G. Cook in the amount of
$778,001.27. (1)

10.7 Stock Exchange Agreement dated November 27, 1998 by and among the
Company and the shareholders of Encore(3)

10.8 Employment Agreement between Steve Gould and Encore International,
Inc. dated as of October 15, 1998.(4)

10.9 Loan Agreement dated February 9, 1999(4)

10.10 Form of $1,000,000 Promissory Note delivered to the Investors(4)

10.11 Form of Class A Warrant(4)

10.12 Form of Class B Warrant(4)

10.13 Form of Class C Warrant(4)

10.14 Non-Recourse Pledge Agreement(4)

10.15 Irrevocable Proxy(4)

10.16 Subordinated Promissory Note from Company in favor of Steve
Gould(4)

10.17 Subordinated Promissory Note from Company in favor of Lee
Kaplan(4)

10.18 Amended and Restated Supply and Marketing Agreement(4)

10.19 Consulting Agreement between the Company and Dr. Leonard Haimes(4)

10.20 Form of $200,000 Promissory Note from Company dated May 27, 1999
delivered to Investors(5)

10.21 Security Agreement dated May 27, 1999 among Company, VisionQuest
Worldwide, Inc. and Gerald M. Holland, as agent(5)

10.22 Amended Security Agreement dated July 4, 1999 among Company,
VisionQuest Worldwide, Inc. and Gerald M. Holland, as agent.

10.23 Subordinated Loan Agreement and Form of $100,000 Promissory Note
from Company dated June 4, 1999 to AWC, Inc. Retirement Trust

10.24 Form of $300,000 Note dated August 4, 1999

10.25 Subordinated Loan Agreement and Form of $50,000 Promissory Note
from Company dated September 24, 1999 from Company to Alan Witten.

10.26 Subordinated Loan Agreement and Form of $50,000 Promissory Note
from Company dated November 4, 1999 from Company to Ronnie Davis.

10.27 Stock Purchase Agreement dated February 18, 2000 between the
Company and David C. Ellis(8)

10.28 Loan Agreement No. 2 dated April 26, 2000 and attached Form of
$415,000 Note

10.29 Form of $1,500,000 Replacement Note.

10.30 Form of Replacement Note from Company to Steve Gould and Lee
Kaplan.

10.31 Form of Class D Warrant

10.32 Form of Class E Warrant

16.1 Letter dated January 20, 1999 from Spillar, Mitcham, Eaton &
Bicknell, L.L.P. to the Securities and Exchange Commission(7)

21 List of Subsidiaries
27 Financial Data Schedule (for SEC use only).

(1) Incorporated by reference to the Exhibit bearing the same number in
Company's Annual Report on Form 10-K for the fiscal year ended October 31,
1994.

(2) Incorporated by reference to the Exhibit to Company's Quarterly Report on
Form 10-Q dated September 11, 1998 and filed on September 14, 1998.

(3) Incorporated by reference to Exhibit 99.1 to Company's Current Report on
Form 8-K filed with the Commission on December 8, 1998.

(4) Incorporated by reference to the Exhibit bearing the same number in
Company's Annual Report on Form 10-KSB/A for the Fiscal Year ended October
31, 1998.

(5)Incorporated by reference to the Exhibit to the Company's Quarterly report
on Form 10-QSB for the quarter ended April 30, 1999.

(6) Incorporated by reference to the Exhibit to the Company's Current Report on
Form 8-K filed with the Commission on August 5, 1999.

(7) Incorporated by reference to the Exhibit to the Company's current Report on
Form 8-K filed with the Commission on January 26, 1999.

(8) Incorporated by reference to Exhibit No. 1 to the Schedule 13D filed with
the Commission by David C. Ellis on May 25, 2000.

SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchanges Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Dated: June 14, 2000
VISIONQUEST WORLDWIDE HOLDINGS CORPORATION

BY: /s/Steve Gould
Steve Gould, President, Chief Executive
Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Dated: June 14, 2000
/s/Steve Gould
Steve Gould, President, Chief Executive
Officer, Chief Financial Officer
and Director

Dated: June 14, 2000
/s/ Lee Kaplan
Lee Kaplan, Chairman of the
Board of Directors

Dated: June 14, 2000
/s/Robert Bray
Robert Bray, Director

Dated: June 14, 2000
/s/Jules Ross
Jules Ross, Director

Dated: June 14, 2000
/s/Gerald M. Holland
Gerald M. Holland, Director

INDEX TO FINANCIAL STATEMENTS

Page No.

Report of Independent Certified Public Accountants

Consolidated Balance Sheet as of October 31, 1999

Consolidated Statements of Operations
for the years ended October 31, 1999 and 1998

Consolidated Statements of Changes in Stockholders' Deficiency
for the years ended October 31, 1999 and 1998

Consolidated Statements of Cash Flows
for the years ended October 31, 1999 and 1998

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders
VisionQuest Worldwide Holdings Corporation

We have audited the accompanying consolidated balance sheet of VisionQuest
Worldwide Holdings Corporation and subsidiaries (a development stage company)
as of October 31, 1999, and the related consolidated statements of operations,
changes in stockholders' deficiency, and cash flows for each of the two years
in the period ended October 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the 1999 and 1998 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
VisionQuest Worldwide Holdings Corporation and subsidiaries as of October 31,
1999 and the results of its operations and its cash flows for each of the two
years in the period ended October 31, 1999 in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a development stage
enterprise. As discussed in Note 8 to the financial statements, the Company
had deficiencies in both working capital and total capital at October 31, 1999
and had incurred significant losses during its development stage that raise
substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are discussed in Note 8. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ Buchbinder Tunick & Company LLP
BUCHBINDER TUNICK & COMPANY LLP

Boca Raton, Florida
December 9, 1999
(except for Note 7 which is dated April 26, 2000)

VISIONQUEST WORLDWIDE
HOLDINGS CORPORATION AND SUBSIDIARIES
Formerly Continental Heritage Corporation
(A Development Stage Company)
Consolidated Balance Sheet
October 31, 1999

ASSETS
Current assets:
Cash $ 200
Inventory 339,405
Merchandise deposits 96,750
Prepaid expenses and other receivables 24,923
-------
Total current assets 461,278

Property assets, at cost less
accumulated depreciation and amortization of $29,900 265,597

Other assets 26,396
-------
Total assets $ 753,271
=======
LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Cash overdraft $ 8,938
Accounts payable and accrued expenses 268,647
Current portion of long-term debt 1,801,457
---------
Total current liabilities 2,079,042

Long-term debt less current portion 219,333

Commitments

Stockholders' deficiency:
Preferred stock, $.50 par value,
2,000,000 shares authorized;
- 0 - shares issued and outstanding -
Common stock, $.001 par value; 150,000,000 shares
authorized; 6,914,259 shares
issued and outstanding 6,914
Additional paid-in capital 732,397
Deficit accumulated during the development stage (1,635,733)
Accumulated deficit (648,682)
---------
Total stockholders' deficiency (1,545,104)

Total liabilities and stockholders' deficiency $ 753,271
=======

See notes to consolidated financial statements.

VISIONQUEST WORLDWIDE
HOLDINGS CORPORATION AND SUBSIDIARIES
Formerly Continental Heritage Corporation
(A Development Stage Company)
Consolidated Statements of Operations
For the years ended October 31, 1999 and 1998

Cumulative
During
Development
Stage
1999 1998
Development stage activities:
Net sales $ 148,429 $ - $ 148,429
Cost of goods sold 54,280 - 54,280
------- ------- -------
Gross profit 94,149 - 94,149
------- ------- -------
Operating expenses:
General and administrative 1,098,134 258,178 1,356,312
Professional fees 198,319 36,039 234,358
Interest 109,312 - 109,312
Depreciation 29,100 800 29,900
--------- ------- ---------
Total operating expenses 1,434,865 295,017 1,729,882
--------- ------- ---------
Loss from development
stage activities (1,340,716) (295,017) $(1,635,733)
--------- ------- =========
Discontinued operations:
Income (loss) from discontinued
operations (net of credit for income
taxes of $ - 0 - and $6,800,
respectively) $ 13,370 $ (89,153)

Gain on disposal of discontinued
operations (net of income taxes
of $31,000) 96,978 -
------ ------
Income (loss) from
discontinued operations 110,348 (89,153)
------- ------
Net loss $(1,230,368) $ (384,170)
========= =======

See notes to consolidated financial statements.

1999 1998
Per share data:
Basic:
Loss from development stage activities $ (0.19) $ (0.04)
Discontinued operations:
Income (loss) from discontinued operations - (0.01)
Gain on disposal of discontinued operations .01 -
---- ----
Net loss $ (0.18) $ (0.05)
==== ====
Diluted:
Loss from development stage activities $ (0.19) $ (0.04)
Discontinued operations:
Income (loss) from discontinued operations - (0.01)
Gain on disposal of discontinued operations .01 -
---- ----
Net loss $ (0.18) $ (0.05)
===== =====

Weighted average number of common shares outstanding:

Basic 6,891,506 6,873,860
========= =========
Diluted 6,891,506 6,873,860
========= =========

See notes to consolidated financial statements.

VISIONQUEST WORLDWIDE
HOLDINGS CORPORATION AND SUBSIDIARIES
Formerly Continental Heritage Corporation
(A Development Stage Company)
Consolidated Statements of Changes in Stockholders' Deficiency
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>

Deficit
$.001 Par Value Accumulated
Common Stock Additional During Total
Number of Paid-In Development Accumulated Stockholders'
Shares Par Value Capital Stage Deficit Deficiency
<S> <C> <C> <C> <C> <C> <C>
Balance
November 1, 1997 6,859,259 $ 6,859 $ 599,952 $ - $ (669,877) $ (63,066)

Net loss for
the year ended
October 31, 1998 - - - (295,017) (89,153) (384,170)
-------- ----- ------- ------- ------ --------
Balance
October 31, 1998 6,859,259 6,859 599,952 (295,017) (759,030) (447,236)

Fair value of
common stock
issued for
services 55,000 55 5,445 - - 5,500

Notes payable to
stockholders
contributed to
equity - - 127,000 - - 127,000

Net loss for the
year ended
October 31, 1999 - - - (1,340,716) 110,348 (1,230,368)
--------- ----- -------- --------- ------- ---------
Balance
October 31, 1999 6,914,259 $ 6,914 $ 732,397 $(1,635,733) $ (648,682) $(1,545,104)
========= ===== ======= ========= ======= =========
</TABLE>

See notes to consolidated financial statements.

VISIONQUEST WORLDWIDE
HOLDINGS CORPORATION AND SUBSIDIARIES
Formerly Continental Heritage Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the years ended October 31, 1999 and 1998

Cumulative
During
Development
Stage
1999 1998
Development stage activities:
Net loss $(1,230,368) $ (384,170) $(1,614,538)
Adjustments to reconcile
net loss to net cash
used in development
stage activities:
(Income) loss from
discontinued operations (110,348) 89,153 (21,195)
Depreciation and amortization 29,100 800 29,900
Fair value of common stock
issued for services 5,500 - 5,500
Increase in inventory (339,405) - (339,405)
Increase in merchandise deposits (96,750) - (96,750)
Increase in prepaid expenses and
other receivables (24,923) - (24,923)
Increase in other assets 2,604 (28,000) (25,396)
Increase in cash overdraft 8,938 8,938
Increase in accounts payable and
accrued expenses 199,262 32,630 231,892
------- ------- -------
Net cash used in development
stage activities (1,556,390) (289,587) (1,845,977)
--------- ------- ---------
Investing activities:
Purchase of property assets (83,566) (5,467)
Loan receivable - (20,000)
Acquisition of customer list - (1,000)
------ ------
Net cash used in
investing activities (83,566) (26,467)
------ ------
Financing activities:
Proceeds from borrowings 1,731,858 315,133
Payments on long-term debt (105,664) -
Proceeds from issuance
of common stock - 1,000
--------- -------
Net cash provided by
financing activities 1,626,194 316,133
--------- -------
Cash provided by (used in)
discontinued operations (26,710) 4,285
--------- -------
(Decrease) increase in cash (40,472) 4,364

Cash, beginning of period 40,672 36,308

Cash, end of period $ 200 $ 40,672
========= ========

Supplementary cash flows disclosure:

Interest paid -
development stage activities $ 315,516 $ 177,000
======= =======

Income taxes paid $ - $ -
======= =======

Supplemental schedule of noncash
investing and financing activities:

Capital lease obligations of $206,464 were incurred when the Company entered
into various leases for new equipment and furniture.

See notes to consolidated financial statements.

VISIONQUEST WORLDWIDE
HOLDINGS CORPORATION AND SUBSIDIARIES
Formerly Continental Heritage Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements

Note 1 - Significant Accounting Policies

Principal Business Activity

The Company has realized no significant revenues from operations through
October 31, 1999. Its development activities began on December 30, 1997 and it
considers itself to be a development stage company that intends to engage in
the wholesale and retail distribution of nutri-ceutical and homeopathic
products.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. Material intercompany items and transactions
have been eliminated in consolidation.

Inventory

Inventories consist solely of finished goods and are valued at the lower of
cost or market, using the average cost method, on a first-in, first-out basis.

Property Assets

Property assets are recorded at cost. Depreciation is calculated by the
straight-line method over the estimated useful lives of the assets which
approximate 5 years for equipment and 7 years for furniture and fixtures.
Leasehold improvements are amortized over the life of the lease. The cost of
improvements and betterments is capitalized while maintenance and repairs are
charged to operations as incurred.

Revenue Recognition

Revenue from sales of products is recognized at the time products are shipped
to customers.

Per Share Data

Basic per share data is calculated by dividing net income by the weighted
average number of common shares outstanding during the respective periods.
Diluted per share data normally would be calculated by dividing net income by
the sum of the weighted average number of common shares that would have been
outstanding if potentially dilutive securities or common stock equivalents had
been issued. However, no dilutive per share data has been computed in as much
as the exercise price of outstanding common stock purchase warrants have
continuously exceeded the average market price of the Company's common stock.

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 disclosure 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.

Concentration of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk
include cash and trade accounts receivable. While the Company attempts to
limit its financial exposure, its deposit balances may, at times, exceed
federally insured limits. The Company has not experienced any losses on such
balances.

The Company purchases approximately 70% of its inventory from one supplier.
Any risk associated with this arrangement is contingent upon the financial
condition of the supplier.

Note 2 - Stock Exchange Agreement

On November 27, 1998, the Company entered into a Stock Exchange Agreement with
the stockholders of Encore International, Inc. whereby the Company acquired the
outstanding stock of Encore in exchange for 5,500,000 shares of the Company's
common stock with a maximum 2,000,000 additional common shares issuable to
Encore's stockholders in the event certain sales levels are achieved by the
Company on a consolidated basis during the two twelve month periods commencing

March 1, 1999 and March 1, 2000, respectively. The combination has been
accounted for as a reverse acquisition and, accordingly, the accompanying
financial statements have been retroactively stated as if the resulting
combination had been continuously effected. Subsequent to the acquisition, the
Company changed its name to VisionQuest Worldwide Holdings Corporation and
Encore changed its name to VisionQuest Worldwide.

As a result of the transaction, the Company discontinued its previously
conducted real estate operations and transferred all of its assets to satisfy
its debt to a major stockholder. The statements of operations and cash flows
have been restated to reflect these transactions.

Summarized operating data for the discontinued real estate operations are as
follows:

Years Ended
October 31,
1999 1998

Rental income $ 16,818 $ 220,870
====== =======
Income (loss) from
discontinued operations $ 13,370 $ (89,153)

Gain on disposal of discontinued
operations (net of income taxes
of $31,000) 96,978 -
------ ------
$ 110,348 $ (89,153)

Note 3 - Property Assets

At October 31, 1999 property assets are summarized as follows:

Furniture and fixtures $ 14,208
Equipment 64,929
Leasehold improvements 9,896
Property held under capital leases 206,464
-------
295,497
Accumulated depreciation
and amortization (29,900)
-------
$ 265,597

Note 4 - Long-term Debt

At October 31, 1999, long-term debt consisted of the following:

10% notes payable - investors (a) $1,500,000
10% notes payable - individual (b) 50,000
10% notes payable - retirement trust (c) 100,000
10% notes payable - stockholders (d) 112,000
10% demand notes payable - stockholders 48,133
Capital lease obligations with interest at 6.7% to 33.7% 158,800
Other 51,857
---------
2,020,790
Current maturities 1,801,457
---------
$ 219,333
=======

(a) The notes payable to investors consist of three notes of $1,000,000 (Note
A), $200,000 (Note B), and $300,000 (Note C). Payments for interest were to
begin September 30, 1999 for Note A and March 31, 2000 for Notes B and C. Six
consecutive equal monthly payments of principal will be paid starting March 31,
2000 for all three notes. All unpaid principal and interest is due September
30, 2000 for Note A and August 31, 2000 for Notes B and C. The notes are
secured by 4,978,264 of the outstanding shares of the Company held by the
original stockholders of Encore International, Inc. Notes B and C are secured
by the Company's inventory. In connection with the loans, evidenced by Notes
A, B, and C, the lenders received warrants to purchase an aggregate 3,000,000
of the Company's common shares at $.3125 per share. Two other individuals
received warrants to purchase an aggregate 351,250 common shares under similar
terms.

(b) Interest will be paid monthly starting April 30, 2000, and monthly
principal payments of $8,333 will commence November 30, 2000. In connection
with the loan agreement, the lender received a warrant to purchase 100,000
shares of the Company's common stock at $.50 per share. The note is
subordinated in right of payment to Notes A, B, and C referred to above.

(c) Interest will be paid monthly starting January 31, 2000, and monthly
principal payments of $16,667 will commence on July 31, 2000. In connection
with the loan agreement, the lender received a warrant to purchase 200,000
shares of the Company's common stock at $.3125 per share. The note is
subordinated in right of payment to Notes A, B, and C referred to above.

(d) Interest will be paid beginning on September 30, 1999, and monthly payments
of principal start on March 31, 2000. The maturity date of the loan is August
31, 2000. The payment of principal and interest is subordinated to all
payments of principal and interest due on Notes A, B, and C referred to above.
In connection with the financing, the stockholders received warrants to
purchase an aggregate of 224,000 of the Company's common shares at $.3125 per
share through February 8, 2004.

The aggregate amount of maturities on long-term debt for the next five years is
as follows:

Years Ending
October 31

2000 $1,801,457

2001 161,458

2002 36,525

2003 14,666

2004 6,684
---------
$2,020,790

Note 5 - Income Taxes

The Company reports income for federal income tax purposes on a calendar year
basis. At October 31, 1998, it had net operating loss carryforwards of
approximately $346,000 available to it for application against future taxable
income. Such carryforward was exclusive of accrued but unpaid interest expense
aggregating approximately $149,000, which would become deductible when paid.

Such carryforwards are substantially limited to the Company as a result of
transactions effected in November 1998, which resulted in a change in the
nature of the business.

For income tax reporting purposes, costs of the Company's start-up activities
are capitalized and amortized over a five-year period beginning in the month in
which business began which, for income tax reporting purposes, is deemed to
have been May 1999. At October 31, 1999, a net operating loss carryforward of
approximately $910,000 was available to the Company for application against
future taxable income. At October 31, 1999, the future tax benefit of the loss
carryforward approximated $310,000, against which a full valuation allowance
has been provided.

Note 6 - Commitments and Contingencies

The Company occupies office space in Las Vegas, Nevada under a non-
cancelable operating lease that is guaranteed by a stockholder and requires
monthly rentals of $19,569 plus annual escalations through March 31, 2004. The
Company also leases equipment and furniture under capital leases.

Minimum future lease payments under the leases are tabulated as follows:

Years Ending Operating Capital
October 31, Leases Leases

2000 $ 247,000 $ 88,174

2001 260,000 74,688

2002 267,000 27,849

2003 275,000 5,029

2004 116,000 2,751
------- ------

Total minimum lease payments $ 1,165,000 198,491
=========
Less interest and other costs 39,691
-------
Present value of minimum
lease payments 158,800

Less: current portion 62,915
-------
Long-term portion $ 95,885
======

Note 7 - Subsequent Events

Pursuant to a loan agreement dated April 26, 2000, the Company entered into the
following transactions:

- The Company borrowed $415,000 commencing November 16, 1999, the date of
the first advance. Interest is at 10% per annum and will be paid monthly
starting June 30, 2000, and monthly principal payments of $69,167 start
December 31, 2000 with a maturity date of May 31, 2001. In connection
with the loan agreement, the lenders received warrants to purchase
4,150,000 shares of the Company's common stock at $.10 per share.

- The Company exchanged Notes A, B, and C for a new promissory note in the
amount of $1,500,000. All unpaid principal and interest accruing on and
after April 1, 2000 at 10% per annum will be due and payable on September
30, 2000. The note is secured by 4,978,264 shares of the outstanding
shares of the Company held by the original stockholders of Encore
International, Inc. and all products held by the Company for resale. In
connection with the new loan, the original warrants held by the lenders
will be exchanged for a new class of warrants which will allow the holder
to purchase 7,500,000 shares at $0.10 per share for a period of one year
commencing April 1, 2000 and at $0.20 per share for the following four
years. In addition, the lenders received 1,384,196 shares as payment for
the unpaid accrued interest of $138,419 due on March 31, 2000 on the
original Notes A, B, and C.

- The Company exchanged 351,250 shares of common stock for the same number
of warrants held by the two individuals described in Note 4(a).

- The Company replaced the notes payable to stockholders for $112,000, as
described in Note 4, with new notes in the same amount. The new notes
require that all unpaid principal and interest accruing on and after April
1, 2000 at 10% per annum will be due and payable on September 30, 2000.
The stockholders received 123,650 shares of common stock in payment for
unpaid accrued interest due through March 31, 2000 from the previous
issued notes. The stockholders exchanged their previously issued warrants
for a new class of warrants which allow them to purchase 560,000 shares at
$0.10 per share for a period of one year commencing April 1, 2000 and at
$0.20 per share for the following four years.

- The Company changed the dates of the measuring period, as defined in the
Stock Exchange Agreement discussed in Note 2, to issue additional shares
to the original Encore shareholders to the two twelve month periods
commencing January 1, 2001 and January 1, 2002. If such shares are
issued, two other individuals will receive 427,500 shares of the Company's
common stock for each measuring period instead of warrants that were
previously referred to in the original agreement.

An additional $50,000 note was issued in November 1999 to evidence a loan in
that amount. Interest at 10% per annum, will be paid monthly starting May 31,
2000. Monthly payments of principal of $8,333 start on November 30, 2000. In
connection with the note, the lender received a warrant to purchase 100,000
shares of the Company's common stock at $.50 per share. The note is
subordinated in right of payments to the agreement described above.

Note 8 - Going Concern

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern. The Company has incurred substantial losses in
its development stage, and had deficiencies in both working capital and total
capital at October 31, 1999.

References are made to Note 7 elsewhere herein for information as to the
refinancing of existing debt obligations and additional borrowings effective
subsequent to October 31, 1999.