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{\plain PETROMINERALS CORPORATION\par
}{\plain 915 WESTMINSTER\par
}{\plain ALHAMBRA, CALIFORNIA 91803\par
}{\plain \par
}{\plain 1998 ANNUAL MEETING OF SHAREHOLDERS\par
}{\plain TO BE HELD ON SEPTEMBER 24, 1998\par
}{\plain \par
}{\plain \par
}{\plain PROXY STATEMENT\par
}{\plain \par
}{\plain \par
}{\plain \par
}{\plain This Proxy Statement and accompanying Proxy are being furnished\par
}{\plain in connection with the solicitation by the Board of Directors\par
}{\plain of Petrominerals Corporation ("Petrominerals" or the "Company")\par
}{\plain of proxies to be voted at the 1998 Annual Meeting of Shareholders\par
}{\plain of the Company to be held on Thursday, September 24, 1998 at\par
}{\plain 10:30 A.M. at the DoubleTree Hotel, 191 North Los Robles,\par
}{\plain Pasadena, California, and at any adjournment or postponement\par
}{\plain thereof (the "Annual Meeting"), for the purposes set forth\par
}{\plain in this Proxy Statement and the accompanying Notice of\par
}{\plain Annual Meeting. This Proxy Statement and accompanying Proxy are\par
}{\plain being mailed to shareholders of the Company on or about August\par
}{\plain 21, 1998.\par
}{\plain \par
}{\plain SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE
ANNUAL MEETING,\par
}{\plain TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED\par
}{\plain ENVELOPE. Your executed Proxy may be revoked at any time before\par
}{\plain it is exercised by filing with the Secretary of the Company,\par
}{\plain at the Company's principal executive offices, a written notice\par
}{\plain of revocation or a duly executed Proxy bearing a later date. The\par
}{\plain execution of the enclosed Proxy will not affect your right to vote\par
}{\plain in person, should you find it convenient to attend the Meeting and\par
}{\plain desire to vote in person. Attendance at the Annual Meeting will\par
}{\plain not in and of itself constitute the revocation of a Proxy.\par
}{\plain \par
}{\plain The purpose of the Annual Meeting is to elect five directors to\par
}{\plain serve one year terms until the 1998 Annual Meeting and until their\par
}{\plain respective successors shall be elected and qualified. Unless\par
}{\plain otherwise directed in the accompanying Proxy, the proxyholders will\par
}{\plain vote FOR the election of the four management nominees listed\par
}{\plain under "Election of Directors." The shareholders shall also vote\par
}{\plain on the proposal presented by the Company to approve and\par
}{\plain ratify the selection of Independent Auditors. As to any other\par
}{\plain business which may properly come before the Annual Meeting, the\par
}{\plain proxyholders will vote in accordance with their best judgement.\par
}{\plain Management of the Company does not presently know of any other such\par
}{\plain business.\par
<PAGE>\par
}{\plain The Company intends to solicit proxies principally by the use of\par
}{\plain the mail and will bear all expenses in connection with such\par
}{\plain solicitations. In addition, some of the directors, officers\par
}{\plain and regular employees of the Company may, without extra\par
}{\plain compensation, solicit proxies by telephone, telegraph and\par
}{\plain personal interview. Arrangements have been made with banks,\par
}{\plain brokerage houses and other custodians and nominees to forward\par
}{\plain copies of the Proxy Statement and 1998 Annual Report to persons\par
}{\plain for whom they hold stock of the Company and to request\par
}{\plain authority for the execution of proxies. The Company will\par
}{\plain reimburse the foregoing persons for their reasonable expenses,\par
}{\plain upon request.\par
}{\plain \par
}{\plain VOTING SECURITIES\par
}{\plain \par
}{\plain On August 10, 1998, the Record Date for the determination of\par
}{\plain shareholders entitled to notice of and to vote at the Annual\par
}{\plain Meeting, 1,059,417 shares of the Company's common stock ("common\par
}{\plain stock") were outstanding. Shareholders are entitled to one vote\par
}{\plain per share on all matters to be considered at the Meeting, except\par
}{\plain that shareholders are entitled to exercise cumulative voting\par
}{\plain rights in electing Directors. Cumulative voting rights entitle a\par
}{\plain shareholder to cast as many votes as is equal to the number of\par
}{\plain directors to be elected, multiplied by the number of shares\par
}{\plain owned by such shareholder. A shareholder may cast all ofsuch\par
}{\plain such shareholder's votes as calculated above for one candidate or\par
}{\plain may distribute the votes among two or more candidates. No\par
}{\plain shareholder shall be entitled to cumulate votes for a candidate\par
}{\plain or candidates unless such candidate's or candidates' names\par
}{\plain have been placed in nomination prior to the voting, and a\par
}{\plain shareholder has given notice at the Meeting prior to the voting of\par
}{\plain shareholder's intention to cumulate the shareholders's votes. if\par
}{\plain any one shareholder has given such notice, all shareholders may\par
}{\plain cumulate their votes for candidates in nomination. Unless\par
}{\plain otherwise instructed, the shares represented by proxies to\par
}{\plain management will be voted in the discretion of management so as\par
}{\plain to elect the maximum number of management nominees which may be\par
}{\plain elected by cumulative voting.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain PRINCIPAL SHAREHOLDERS\par
}{\plain \par
}{\plain The following table sets forth the specified information, as of\par
}{\plain August 10, 1998, with respect to persons or groups beneficially\par
}{\plain owning more than 5% of the common stock, to the extent it is known\par
}{\plain to the Company, either from Securities Exchange Act fileings,\par
}{\plain Company records or information supplied by the persons named in the\par
}{\plain table.\par
}{\plain \par
}{\plain \_\_\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
\par
}{\plain Name and Address Amount and Nature of\par
}{\plain of Beneficial Owner Beneficial Ownership Percent of Class\par
}{\plain _\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\par
}{\plain <S> <C> <C>\par
}{\plain Everett L. Hodges. . . . 99,935 (1) 9.43%\par
}{\plain 3811 Via Del Campo\par
}{\plain San Clemente, CA 92672\par
}{\plain Morris V. Hodges . . . . 12,162 (2) 1.15%\par
}{\plain 27241 Burbank\par
}{\plain Foothill Ranch, CA 92610\par
}{\plain Paul L. Howard . . . . . 86,375 (3) 8.15%\par
}{\plain 2255 Huntley Circle\par
}{\plain San Marino, CA 91108\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain _____________________\par
}{\plain \par
}{\plain (1) The 99,935 shares beneficially held by Everett L. Hodges\par
}{\plain include 73,487 shares held of record jointly in the\par
}{\plain Everett L. Hodges and Mary M. Hodges Trust. This amount also\par
}{\plain includes 7,925 shares held directly by Everett L. Hodges,\par
}{\plain 10,398 shares held of record by Energy Production & Sales Co.,\par
}{\plain Inc. ("EPS"), and 8,125 shares held by California Oil\par
}{\plain Independents, Inc. The 99,935 shares do not include 18,208\par
}{\plain include 18,208 shares held in trust for the children and\par
}{\plain grandchild of Everett L. and Mary M. Hodges, as to which Mr. &\par
}{\plain Mrs. Everett L. Hodges disclaim any beneficial ownership.\par
}{\plain Everett L. Hodges and Morris V. Hodges, as a group, may\par
}{\plain be deemed to be a controlling person of Petrominerals by virtue\par
}{\plain of their share ownership.\par
}{\plain \par
}{\plain (2) The 12,162 shares beneficially held by Morris V. Hodges include\par
}{\plain 1,764 shares held of record jointly in the Morris V. Hodges and\par
}{\plain Kathryn M. Hodges Trust. This amount also includes 10,398\par
}{\plain shares held of record by Sunset Pipeline and Terminaling, Inc.\par
}{\plain The 12,162 shares beneficially held by Morris V. Hodges do not\par
}{\plain include 108,655 shares held by adult children of Morris V.\par
}{\plain Hodges and Kathryn M. Hodges, as to which Mr. and Mrs. Morris\par
}{\plain V. Hodges disclaim any beneficial ownership. Morris V. Hodges\par
}{\plain and Everett L. Hodges, as a group, may be deemed to be a\par
}{\plain controlling person of Petrominerals by virtue of their share\par
}{\plain ownership.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain (3) The 86,375 shares beneficially held by Paul L. Howard are held\par
}{\plain in the Howard Family Trust.\par
}{\plain \par
ELECTION OF DIRECTORS\par
}{\plain \par
}{\plain The Board of Directors proposes the election of five directors,\par
}{\plain each to hold office for a term of one year until the 1998\par
}{\plain Annual Meeting and until their respective successors are elected\par
}{\plain and qualified. All of the nominees have served as directors\par
}{\plain since the last annual meeting of shareholders. If any person\par
}{\plain other than the nominees proposed by management is nominated for\par
}{\plain election as a director, the persons named in the accompanying\par
}{\plain Proxy, unless otherwise directed, may, in their discretion, vote\par
}{\plain cumulatively so as to elect the maximum number of management\par
}{\plain nominees, which may be elected by cumulative voting. See "Voting\par
}{\plain Securities." Although it is not anticipated that any of the\par
}{\plain nominees will decline or be unable to serve, if that should occur,\par
}{\plain the proxyholders may, in their discretion, vote for substitute\par
}{\plain nominees.\par
}{\plain \par
}{\plain The following table sets forth the name, principal occupation,\par
}{\plain age and the year in which the individual first became a\par
}{\plain director for each nominee, and all persons nominated or chosen to\par
}{\plain become directors, together with all positions and offices with\par
}{\plain the Company held by each such person and term or period during\par
}{\plain which each has served, for election as a director at the\par
}{\plain annual meeting of stockholders.\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
}{\plain \par
}{\plain \par
}{\plain Served as a\par
}{\plain Name and Occupation Age Director Since\par
}{\plain \_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\par
}{\plain <S> <C> <C>\par
}{\plain David G. Davidson (1). . 73 1990\par
}{\plain Everett L. Hodges (2) . 64 1979\par
}{\plain Morris V. Hodges (3). . 62 1979\par
}{\plain Paul L. Howard (4). 72 1975\par
}{\plain William N. Hagler (5). 65 1998\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain The Board of Directors recommends a vote "FOR" the election of the\par
}{\plain nominees listed above for election as a director.\par
}{\plain \par
}{\plain (1) Mr. Davidson has been principally employed as President and\par
}{\plain owner of OP&E Company since 1984. Mr. Davidson serves as a\par
}{\plain Director of Mieco, Inc., a public company engated in domestic\par
}{\plain and foreign petroleum trading.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain (2) Mr. Everett L. Hodges served as President of the Company from\par
}{\plain September 1987 through February 1992. For more than the past\par
}{\plain ten years, Mr. Hodges has held a controlling interest in and\par
}{\plain has served as a director and officer of Energy Production &\par
}{\plain Sales Co., Inc., California Oil Independents; Inc., Coastal\par
}{\plain Petroleum Refiners, Inc. and California Tar Sands Development\par
}{\plain Corporation, and has served as a Director of St. James Oil\par
}{\plain Corporation since 1988. Mr. Hodges has also served as the\par
}{\plain President of the Violence Research Foundation, a non-profit\par
}{\plain foundation, since its inception in 1991. Certain of the\par
}{\plain foregoing companies have been affiliated with the Company in\par
}{\plain various transactions. See "CERTAIN RELATIONSHIPS AND RELATED\par
}{\plain TRANSACTIONS." Everett L. Hodges and Morris V. Hodges, as a\par
}{\plain group, may be deemed to be controlling persons.\par
}{\plain \par
}{\plain (3) Mr. Morris V. Hodges has held a controlling interest in and has\par
}{\plain served as a director and officer of the following companies for\par
}{\plain more than the past ten years: Hillcrest Beverly Oil\par
}{\plain Corporation; Century Resources Development; Kaymor Petroleum\par
}{\plain Products, Inc., Sunset Pipeline and Terminaling, Inc., Coastal\par
}{\plain Petroleum Refiners, Inc., and CPR Transportation. Mr. Hodges\par
}{\plain has also served as a Director of St. James Oil Corporation\par
}{\plain since 1988. Certain of the foregoing companies have been\par
}{\plain affiliated with the Company in various transactions. See\par
}{\plain "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." Morris V.\par
}{\plain Hodges and Everett L. Hodges, as a group, may be deemed to be\par
}{\plain controlling persons.\par
}{\plain \par
}{\plain (4) Mr. Howard served as President of the Company from November\par
}{\plain 1975 through September 1987, and at various times during this\par
}{\plain period, served as Chairman and Chief Executive Officer. For\par
}{\plain more than the past 10 years, Mr. Howard held a controlling\par
}{\plain interest in and served as a director and officer of Howard Oil\par
}{\plain Company and California Petroleum Products, Inc. See "CERTAIN\par
}{\plain RELATIONSHIPS AND RELATED TRANSACTIONS."\par
}{\plain \par
}{\plain (5) Mr. Hagler has been principally employed as President and owner\par
}{\plain of Unico, Inc., which is listed on the NASDAQ exchange, and,\par
}{\plain until just recently, served as a member of the Board of SABA\par
}{\plain Petroleum. He was appointed to the Board on January 29, 1998,\par
}{\plain and currently sits on the audit committee.\par
}{\plain \par
}{\plain STANDING COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS\par
}{\plain \par
}{\plain STANDING COMMITTEES. The Company has certain standing committees,\par
}{\plain each of which is described below.\par
}{\plain \par
}{\plain The AD\_HOC COMMITTEE consists of Messrs. Morris Hodges, Paul\par
}{\plain Howard and David Davidson. This committee evaluates proposed\par
}{\plain acquisitions, mergers or other pertinent negotiations which may\par
}{\plain come before the Board. This Committee held two meetings during\par
}{\plain the last fiscal year.\par
\par
}{\plain \par
}{\plain <PAGE>\par
}{\plain The AUDIT COMMITTEE consists of Messrs. David Davidson and William\par
}{\plain Hagler. Mr. Davidson serves as Chairman of the committee. The\par
}{\plain Audit Committee is responsible for reviewing the scope and\par
}{\plain procedures of internal auditing work, the results of independent\par
}{\plain audits, the accounting policies of management, and recommends to\par
}{\plain the Board the appointment of the Company's outside auditors. This\par
}{\plain committee held no meetings during the last fiscal year.\par
}{\plain \par
}{\plain The COMPENSATION COMMITTEE consists of Messrs. Paul Howard and\par
}{\plain David Davidson. This committee reviews and makes recommendations to\par
}{\plain the Board of Directors regarding compensation for the Company's\par
}{\plain officers and key employees. In addition to compensation matters,\par
}{\plain the committee determines, develops, and makes recommendations to\par
}{\plain the Board regarding employee benefits packages, and special\par
}{\plain stock option and stock bonus plans. This committee held no\par
}{\plain meetings during the last fiscal year.\par
}{\plain \par
}{\plain ATTENDANCE AT BOARD MEETINGS. During the last fiscal year, the\par
}{\plain Board of Directors of the Company held four (4) special meetings.\par
}{\plain Average attendance at such meetings of the Board was 80%. During\par
}{\plain the last fiscal year, each director attended at least 80% of the\par
}{\plain aggregate of (a) all meetings of the Board; and (b) all meetings\par
}{\plain of the committees of the Board on which such director served.\par
}{\plain \par
}{\plain EXECUTIVE OFFICERS\par
}{\plain \par
}{\plain The executive officers of Petrominerals, together with the years in\par
}{\plain which such Officers were named to their present offices, are as\par
}{\plain follows:\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
}{\plain \par
}{\plain \par
}{\plain Year Named to\par
}{\plain Name Position with Company Present Position\par
}{\plain \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\__ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\par
}{\plain <S> <C> <C>\par
}{\plain Paul L. Howard (1) President & Chief Executive 1995\par
}{\plain Officer; Chief Financial Officer\par
}{\plain Phillip Mungiovino (2). Corporate Secretary 1995\par
}{\plain Morris V. Hodges (3) . Assistant Secretary 1995\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain Each of the executive officers serves at the pleasure of the Board\par
}{\plain of Directors.\par
}{\plain \par
}{\plain (1) Mr. Howard was appointed to serve as Chairman, President\par
}{\plain and Chief Executive Officer, and Chief Financial Officer\par
}{\plain on March 24, 1995.\par
}{\plain \par
}{\plain (2) Mr. Mungiovino was appointed to the position of Corporate\par
}{\plain Secretary on March 24, 1995. He has been an employee of\par
}{\plain the Corporation for the past 24 years and has held the\par
}{\plain position of full\_charge bookkeeper.\par
}{\plain \par
}{\plain (3) Mr. Hodges was appointed Assistant Secretary on March 24,\par
}{\plain 1995.\par
}{\plain \par
}{\plain <PAGE>\par
}{\plain SUMMARY COMPENSATION TABLE\par
}{\plain \par
}{\plain CASH COMPENSATION\par
}{\plain \par
}{\plain The following table contains information concerning the most\par
}{\plain highly compensated former executive officers of the Corporation,\par
}{\plain for the three fiscal years ended December 31, 1996, whose cash\par
}{\plain compensation, on an annual basis, exceeded $60,000.\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
}{\plain \par
}{\plain \par
}{\plain Annual Compensation Long Term\par
}{\plain \_\_\_\_\_\_\_\_\_\_ Awards\par
}{\plain NAME AND PRINCIPAL POSITION \_\_\_\_\_\_\par
}{\plain \_\__\_\_\_\_\_\_\_\_\_\_\_\_ Securities\par
}{\plain Underlying\par
}{\plain Year Salary Bonus Options\par
}{\plain \_\_\_ \_\_\_\_ \_\_\_\_\_ \_\_\_\_\_\_\par
}{\plain <S> <C> <C> <C> <C>\par
}{\plain Paul L. Howard (1). . . . . . . . . . . 1997 $ 90,000 \_\par
}{\plain President & Chief Executive Officer;. . . . 1996 $ 84,000 \_\par
}{\plain Chief Financial Officer . . . . . . . . . . 1995 $ 45,000 \_\par
}{\plain Eugene L. Butler (2). . . . . . . . . . . 1995 $ 44,614 \_\par
}{\plain Former President & Chief Executive Officer. 1994 $123,306 \_\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain (1) Mr. Howard was appointed Chairman, President, Chief Executive\par
}{\plain Officer and Chief Financial Officer on March 24, 1995. Until\par
}{\plain March, 1996, his compensation consisted of a special director's\par
}{\plain fee of $5,000 per month. In March, 1996, Mr. Howard became an\par
}{\plain employee and his total compensation on an annual basis\par
}{\plain increased to $90,000. He received total compensation of\par
}{\plain $84,000 in 1996.\par
}{\plain \par
}{\plain (2) Mr. Butler was appointed President & Chief Executive Officer of\par
}{\plain Petrominerals Corporation on April 15, 1993. His employment\par
}{\plain terminated on March 24, 1995. Mr. Butler provided consulting\par
}{\plain services to the Corporation through May 31, 1995. Pursuant to\par
}{\plain the terms of his option agreement, Mr. Butler's option rights\par
}{\plain expired thirty days following the termination of his\par
}{\plain employment.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain OPTION/SAR GRANTS IN LAST FISCAL YEAR\par
}{\plain \par
}{\plain On March 6, 1997, the Board adopted a resolution granting\par
}{\plain stock options to purchase up to 5,000 shares of common stock to\par
}{\plain the CEO, and up to 2,500 shares of common stock to each of the\par
}{\plain three non\_employee directors. Under the terms of the resolution,\par
}{\plain the CEO and each of the directors can purchase shares of common\par
}{\plain stock for the average price that the Company's stock was\par
}{\plain trading before and after March 6, 1997. The average is $3.00 per\par
}{\plain share. The Company issued these options, which have a term of five\par
}{\plain years from issuance.\par
}{\plain \par
}{\plain The following table sets forth annual compensation and Stock\par
}{\plain options for the last three fiscal years, and the current\par
}{\plain fiscal year to the date hereof.\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
}{\plain \par
}{\plain \par
}{\plain Annual Compensation Long Term\par
}{\plain \_\_\_\_\__\_\_\_\_\_ Awards\par
}{\plain NAME AND PRINCIPAL POSITION \_\_\_\_\_\par
}{\plain _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Securities\par
}{\plain Underlying\par
}{\plain Year Salary Bonus Options\par
}{\plain \_\_ \_\_\_\ \_\_\_\ \_\_\_\_\_\par
}{\plain <S> <C> <C> <C> <C>\par
}{\plain \par
}{\plain Paul L. Howard (1) . . . 1997 $ 90,000 \_ 5,000\par
}{\plain President, Chief . . . . . . 1996 $ 84,000 \_\par
}{\plain Executive Officer &. . . . . 1995 $ 45,000 \_\par
}{\plain Chief Financial Officer\par
}{\plain Eugene L. Butler (2) . . . 1995 $ 44,614 \_\par
}{\plain former President & . . . . . 1994 $123,306 \_\par
}{\plain Chief Executive Officer\par
}{\plain ============================\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain (1) Mr. Howard was appointed Chairman, President, Chief Executive\par
}{\plain Officer and Chief Financial Officer on March 24, 1995. Until\par
}{\plain March, 1996, his compensation consisted of a special director's\par
}{\plain fee of $5,000 per month. In March, 1996, Mr. Howard became an\par
}{\plain employee and his total compensation on an annual basis\par
}{\plain increased to $90,000. He received total compensation of\par
}{\plain $84,000 in 1996.\par
}{\plain \par
}{\plain (2) Mr. Butler was appointed President & Chief Executive Officer of\par
}{\plain Petrominerals Corporation on April 15, 1993. His employment\par
}{\plain terminated on March 24, 1995. Mr. Butler provided consulting\par
}{\plain services to the Corporation through May 31, 1995. Pursuant to\par
}{\plain the terms of his option agreement, Mr. Butler's option rights\par
}{\plain expired thirty days following the termination of his\par
}{\plain employment.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain OTHER COMPENSATION OF EXECUTIVE OFFICERS\par
}{\plain \par
}{\plain The Company also provided travel and entertainment expenses to\par
}{\plain its executive officers and key employees. The aggregate amount of\par
}{\plain such compensation, as to any executive officer or key employee,\par
}{\plain did not exceed the lesser of $25,000 or 10% of the cash\par
}{\plain compensation paid to such executive officer or key employee, nor\par
}{\plain did the aggregate amount of such other compensation exceed 10% of\par
}{\plain the cash compensation paid to all executive officers or key\par
}{\plain employees as a group.\par
}{\plain \par
}{\plain TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS.\par
}{\plain \par
}{\plain In July 1993, the Board of Directors adopted a severance plan for\par
}{\plain executive officers providing that, in the event of termination of\par
}{\plain employment as a result of a change in control of the corporation,\par
}{\plain that such executive officer would receive severance in the amount\par
}{\plain of one year's base salary. The Plan does not provide for any\par
}{\plain severance in the event of the resignation, retirement or\par
}{\plain termination of any Executive Officer's employment with the Company\par
}{\plain for reasons other than a change in control of the Company.\par
}{\plain \par
}{\plain COMPENSATION OF DIRECTORS\par
}{\plain \par
}{\plain Since March 1995, directors have been compensated at the rate of\par
}{\plain $350.00 per month. In addition, non\_employee directors are\par
}{\plain reimbursed for reasonable expenses incurred in connection with\par
}{\plain any meetings.\par
}{\plain \par
}{\plain The Company did not pay any additional fees to directors for\par
}{\plain serving as members of the Audit, Ad\_Hoc, Compensation or\par
}{\plain Executive Committees during the last fiscal year.\par
}{\plain \par
}{\plain 1993 INCENTIVE STOCK OPTION PLAN AND 1993 NON\_STATUTORY STOCK
OPTION PLAN\par
}{\plain The Company has in effect two stock option plans \_\_ the 1993\par
}{\plain Incentive Stock Option Plan (the "Incentive Plan") and the 1993\par
}{\plain Non\_Statutory Stock Option Plan (the "Non\_Statutory Plan")(the\par
}{\plain Incentive Plan and the Non\_Statutory Plan are sometimes\par
}{\plain collectively referred to herein as the "Plans"), which were\par
}{\plain adopted by the Board of Directors and approved by the shareholders\par
}{\plain of the Company in 1993. The Plans in the aggregate provide for\par
}{\plain the granting of options to purchase a maximum of 1,200,000 shares\par
}{\plain of the Company's Common Stock to employees and directors of the\par
}{\plain Company and its affiliates (as defined therein); however,\par
}{\plain options which may be granted to non\_employee directors are\par
}{\plian limited to a maximum of 60,000 shares. The Plans expire on\par
}{\plain February 8, 2003.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain Any of the Company's current or future employees who render, in\par
}{\plain the opinion of the Board of Directors, the type of services which\par
}{\plain tend to contribute materially to the success of the Company or an\par
}{\plain affiliate of the Company are eligible to participate in the\par
}{\plain Incentive Plan. Any of the Company's current or future\par
}{\plain employees or directors (whether or not otherwise employed by the\par
}{\plain Company) who render, in the opinion of the Board of Directors,\par
}{\plain the type of services which tend to contribute materially to the\par
}{\plain success of the Company or an affiliate of the Company are eligible\par
}{\plain to participate in the Non\_Statutory Plan.\par
}{\plain \par
}{\plain The Plans are administered by the Board of Directors of the\par
}{\plain Company which has the authority to determine the employees and\par
}{\plain directors to whom options are to be granted, the number of shares\par
}{\plain subject to each option and the term thereof. The Board of\par
}{\plain Directors will have the power to reduce the option price of\par
}{\plain outstanding options (but not below the fair market value of the\par
}{\plain shares subject thereto), to enter into agreements relating to the\par
}{\plain value of the options at the date of grant and to make all other\par
}{\plain determinations necessary or advisable to the administration\par
}{\plain of the Plan. With the consent of the optionee, the Board of\par
}{\plain Directors will also have the power to substitute options with\par
}{\plain different terms for previously granted options, or to amend the\par
}{\plain terms of any option.\par
}{\plain \par
}{\plain The Board of Directors may delegate administration of the Plan\par
}{\plain to a committee composed of not less than three members of\par
}{\plain the Board of Directors. Administration of the Plan with\par
}{\plain respect to committee members, however, must remain vested in the\par
}{\plain Board. With respect to options granted to a director, the\par
}{\plain Board of Directors shall take action by a vote sufficient\par
}{\plain without counting the vote of the interested director. Interested\par
}{\plain directors may be counted in determining the presence of a quorum\par
}{\plain at a meeting of the Board of Directors which authorizes the\par
}{\plain granting of options to such directors.\par
}{\plain \par
}{\plain 1993 STOCK BONUS PLAN\par
}{\plain \par
}{\plain In February 1993, the Board of Directors adopted the Company's\par
}{\plain 1993 Stock Bonus Plan ("Bonus Plan"). The Bonus Plan provides\par
}{\plain for the awarding of up to 50,000 shares of the Company's Common\par
}{\plain Stock to officers and key employees of the Company. The Plan is\par
}{\plain administered by the Board of Directors which has the authority\par
}{\plain to determine the officers and key employees to whom stock bonuses\par
}{\plain are to be awarded, the time or times at which stock bonuses will\par
}{\plain be awarded, and, subject to the limits discussed below, the number\par
}{\plain of shares to be granted under each award. The Board of Directors\par
}{\plain has the power to delegate the administration of the Bonus Plan to\par
}{\plain a committee of the Board appointed in accordance with the Company's\par
}{\plain Bylaws. The aggregate fair market value (determined as of the\par
}{\plain date of grant) of the shares of Common Stock awarded to any\par
}{\plain officer or key employee under the Bonus Plan in any one calendar\par
}{\plain year cannot exceed one\_sixth of the officer's or key employee's\par
}{\plain salary (excluding bonuses and awards under other incentive plans\par
}{\plain maintained by the Company) for such calendar year. The Bonus\par
}{\plain Plan terminated on February 8, 1997. No stock bonus awards\par
}{\plain were made to officers or key employees of the Company during\par
}{\plain 1997.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain Directors Stock Compensation Plan\par
}{\plain \par
}{\plain On April 16, 1992, as part of its cost containment program,\par
}{\plain the Board of Directors of the Company adopted the Directors\par
}{\plain Stock Compensation Plan (the "Stock Compensation Plan"). The Stock\par
}{\plain Compensation Plan provides for the granting of stock to\par
}{\plain non\_employee directors of the Company in lieu of paying director's\par
}{\plain fees in cash. The purpose of the Stock Compensation Plan was to\par
}{\plain minimize cash outflow from the Company by compensating non\_\par
}{\plain employee directors for their services to the Company in stock\par
}{\plain rather than in cash. The maximum number of shares provided for\par
}{\plain the Stock Compensation Plan was 150,000. In February 1994, 99,600\par
}{\plain shares of common stock were distributed to each of the non\_\par
}{\plain employee directors for services rendered for the period May 1,\par
}{\plain 1992 through September 30, 1993. In February 1995, the balance of\par
}{\plain 50,400 shares earmarked under the Plan were distributed to each of\par
}{\plain the six non\_employee directors for services rendered for the\par
}{\plain period October 1993 through May 1994. Only non\_employee directors\par
}{\plain of the Company were eligible to participate in the Stock\par
}{\plain Compensation Plan.\par
}{\plain \par
}{\plain The Stock Compensation Plan was administered by the disinterested\par
}{\plain members of the Board, or, in the event there were none such, the\par
}{\plain President and Chief Executive Officer and the Secretary of the\par
}{\plain Company. The granting of stock under the Stock Compensation Plan\par
}{\plain was according to a pre\_set formula. Directors fees payable to\par
}{\plain non\_employee directors of the Company were set by the Board at\par
}{\plain $700 per month. Under the Stock Compensation Plan, the eligible\par
}{\plain directors will receive stock at a value of $700 per month,\par
}{\plain determined by the average trading price as quoted on the NASDAQ\par
}{\plain National Market System for the calendar month immediately preceding\par
}{\plain the month in which the directors fee is earned; provided,\par
}{\plain however, that the valuation of the stock shall not be less than\par
}{\plain the net book value of the Company expressed on a per share basis\par
}{\plain (but not less than $.70 per share).\par
}{\plain \par
}{\plain APPROVAL AND SELECTION OF INDEPENDENT AUDITORS\par
}{\plain \par
}{\plain The Board of Directors has appointed the firm of Brown,\par
}{\plain Armstrong, Randall, Reyes, Paulden & McCown, independent auditors,\par
}{\plain as the Company's auditors for the fiscal year ending December 31,\par
}{\plain 1998, subject to the approval of and ratification by the\par
}{\plain the shareholders. Brown, Armstrong, Randall, Reyes, Paulden &\par
}{\plain McCown, located in Bakersfield, California, has experience in\par
}{\plain auditing oil and gas producing companies.\par
}{\plain \par
}{\plain The Company expects one or more representatives of Brown,\par
}{\plain Armstrong, Randall, Reyes, Paulden & McCown to attend the annual\par
}{\plain meeting in order to respond to any appropriate questions.\par
}{\plain \par
}{\plain The Board of Directors recommends a vote "FOR" the approval and\par
}{\plain ratification of the appointment of Brown, Armstrong, Randall,\par
}{\plain Reyes, Paulden & McCown.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain VOTE REQUIRED\par
}{\plain \par
}{\plain Approval of the appointment of Brown, Armstrong, Randall,\par
}{\plain Reyes, Paulden & McCown as the Company auditors requires the\par
}{\plain affirmative vote of the holders of a majority of the shares of\par
}{\plain the Company's Common Stock present at the Meeting, in person or\par
}{\plain by proxy, voting as a single class.\par
}{\plain \par
}{\plain SECURITY OWNERSHIP OF\par
}{\plain BENEFICIAL OWNERS AND MANAGEMENT\par
}{\plain \par
}{\plain The following table lists the beneficial ownership, as of August\par
}{\plain 10, 1998, of the Company's common stock with respect to all\par
}{\plain directors and officers as a group.\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
}{\plain \par
}{\plain \par
}{\plain \par
}{\plain Name of Director Number of Shares and\par
}{\plain or Number of and Nature of Percent\par
}{\plain Persons in Group Beneficial Ownership Of Class\par
}{\plain \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ _\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\par
}{\plain <S> <C> <C>\par
}{\plain David G. Davidson. . . . . . . . 3,500 (1) .33%\par
Everett L. Hodges. . . . . . . . 99,935 (1)(2) 9.43%\par
}{\plain Morris V. Hodges . . . . . . . . 12,162 (1)(3) 1.15%\par
}{\plain Paul L. Howard . . . . . . . . . 86,375 (1)(4) 8.15%\par
}{\plain William N. Hagler. . . . . . . . \_ \_ \par
}{\plain All directors and officers as a\par
}{\plain group, including the persons\par
}{\plain named above (4 Persons). . . . . 201,972 19.06%\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain __________________________\par
}{\plain \par
}{\plain (1) Messrs. David G. Davidson, Everett L. Hodges, Morris V. Hodges\par
}{\plain and Paul L. Howard were each granted 3,125 shares of the\par
}{\plain Company's common stock under the Directors Stock Compensation\par
}{\plain Plan in 1994 in lieu of cash directors fees for the period\par
}{\plain from May 1, 1992 to June 1, 1994. See "EXECUTIVE COMPENSATION \par
}{\plain \_ Stock Option Plans."\par
}{\plain \par
}{\plain (2) The 99,935 shares beneficially held by Everett L. Hodges\par
}{\plain include 73,487 shares held of record jointly in the Everett L.\par
}{\plain Hodges and Mary M. Hodges Trust. This amount also includes\par
}{\plain 7,925 shares held directly by Everett L. Hodges; 10,398 shares\par
}{\plain held of record by Energy Production & Sales Co., Inc. ("EPS"),\par
}{\plain and 8,125 shares held by California Oil Independents, Inc.\par
}{\plain See "EXECUTIVE COMPENSATION \_Stock Option Plans."\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain (3) The 12,162 shares beneficially held by Morris V. Hodges include\par
}{\plain 1,764 shares held jointly in a family trust by Morris V. and\par
}{\plain Kathryn M. Hodges, and 10,398 shares held in the name of Sunset\par
}{\plain Pipeline and Terminaling, Inc. See "EXECUTIVE COMPENSATION\par
}{\plain \_ Stock Option Plans."\par
}{\plain \par
}{\plain (4) The 86,375 shares beneficially held by Paul L. Howard are held\par
}{\plain in the name of the Howard Family Trust. See "EXECUTIVE\par
}{\plain COMPENSATION \_ \_Stock Option Plans."\par
}{\plain \par
}{\plain CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS\par
}{\plain \par
}{\plain TRANSACTIONS WITH MANAGEMENT AND OTHERS\par
}{\plain \par
}{\plain During the last fiscal year, the Company has been involved\par
}{\plain in various related party transactions with certain Directors of\par
}{\plain the Company, or entities controlled or affiliated with such\par
}{\plain individuals. The following table sets forth the relationships,\par
}{\plain through ownership of securities, between Petrominerals and\par
}{\plain the following individuals and entities involved in related party\par
}{\plain transactions during the last fiscal year:\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
}{\plain \par
}{\plain \par
}{\plain \par
}{\plain Name Beneficial Owner Percentage Owned\par
}{\plain \_\__\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\\_\_\_\_ \_\_\_\_\_\_\_\_\par
}{\plain <S> <C> <C>\par
}{\plain 1. Petrominerals 81\_1, a General Partner:\par
}{\plain Limited Partnership. . . . . . . . . . Petrominerals 6.78%\par
}{\plain ("Partnership"). . . . . . . . . . . . Limited Partners:\par
}{\plain EPS 33.00%\par
}{\plain Morris V. Hodges 2.26%\par
}{\plain Paul L. Howard 2.26%\par
}{\plain Unrelated Parties 57.40%\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain The Petrominerals 81\_1 Limited Partnership was formed in 1981 for\par
}{\plain the purpose of drilling one development well on the Company's\par
}{\plain McGillivrae lease, located on the Hasley Canyon field, Santa\par
}{\plain Clarita Valley, Los Angeles County, California, and two\par
}{\plain development wells on the Field Fee lease, located on the Cat\par
}{\plain Canyon field, Santa Barbara County, California. The Limited\par
}{\plain Partners were granted options to participate in the drilling of\par
}{\plain one additional well on the McGillivrae lease and two additional\par
}{\plain wells on the Field Fee lease. During 1997, Petrominerals did not\par
}{\plain receive any income from the Partnership operations and realized\par
}{\plain $2,181 in overriding royalty interests. Petrominerals also\par
}{\plain received operations and equipment lease fees which totaled $3,600\par
}{\plain during 1997.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain The Partnership contributed the funds for the intangible costs of\par
}{\plain drilling the wells. Until the Partnership receives 110% of its\par
}{\plain investment in all ventures ("payout"), the Partnership will\par
}{\plain receive 176% and 110% of the revenues attributable to the working\par
}{\plain interest in the first and second McGillivrae wells, respectively,\par
}{\plain and Petrominerals, as General Partner, receives a five percent\par
}{\plain (5%) overriding royalty on the McGillivrae lease. Petrominerals'\par
}{\plain overriding royalty terminates after payout, at which time\par
}{\plain Petrominerals will receive 65% of the net revenues attributable to\par
}{\plain the working interest, and the Partnership will receive the\par
}{\plain remaining 35% of the net revenues attributable to the working\par
}{\plain interest. The Partnership does not anticipate that production will\par
}{\plain result in sufficient distributions to reach payout.\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
\par
}{\plain \par
}{\plain Name Beneficial Owner Percentage Owned\par
}{\plain \_\_\_\_\_\_\_\_\_\_\_\_\_\_ _\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\par
}{\plain <S> <C> <C>\par
}{\plain 2. Terra\_Therme II. . . . . Petrominerals 19.125%\par
}{\plain (Formerly the Newberry. Paul L. Howard 9.563%\par
}{\plain Partnership), a general Unrelated Parties 71.312%\par
}{\plain partnership\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain Terra\_Therme II, a general partnership, was formed in November\par
}{\plain 1982, for the purpose of acquiring and owning interests in\par
}{\plain geothermal leases located in the Newberry Crater area of the\par
}{\plain Deschutes National Forest in Central Oregon. In addition to their\par
}{\plain interests in Terra\_Therme II, the Company and Paul L. Howard,\par
}{\plain individually, held interests in lease options to acquire\par
}{\plain approximately 17,000 acres and 15,000 acres, respectively, of\par
}{\plain geothermal leases in the Newberry Crater area.\par
}{\plain \par
}{\plain In June 1991, Vulcan Power Company ("Vulcan") purchased certain\par
}{\plain rights in the Newberry Crater geothermal leases formerly held by\par
}{\plain another party. Vulcan formed a new joint venture partnership\par
}{\plain entity known as Vulcan Pacific, in which Vulcan acts as operator\par
}{\plain of the interests it acquired.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain The Terra\_Therme II Partnership retains a 1% net profits interest\par
}{\plain in certain of the properties in the Newberry site. In addition,\par
}{\plain the Terra\_\_Therme Partnership retains a 0.6% overriding royalty\par
}{\plain interest on certain remaining properties it acquired from Vulcan.\par
}{\plain The Company retains a 19.125% interest and Mr. Howard retains a\par
}{\plain 9.563% interest in the Terra\_\_Therme II Partnership. In the first\par
}{\plain half of 1997, the Terra\_Therme II Partnership filed for protection\par
}{\plain under Chapter 11 of the United States Bankruptcy Code.\par
}{\plain <TABLE>\par
}{\plain <CAPTION>\par
}{\plain \par
}{\plain \par
}{\plain \par
}{\plain Name Beneficial Owner Percentage Owned\par
}{\plain \_\__\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ _\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\par
}{\plain <S> <C> <C>\par
}{\plain 1. Petrominerals 96\_1, a General Partner:\par
}{\plain Limited Partnership. . . . . . . . . . Petrominerals 1.00%\par
}{\plain ("Partnership"). . . . . . . . . . . . Limited Partners:\par
}{\plain Paul L. Howard 23.21%\par
}{\plain Kaymore Petroleum\par
}{\plain Products, Inc. 17.86%\par
}{\plain David G. Davidson 17.86%\par
}{\plain Unrelated Parties 40.07%\par
}{\plain </TABLE>\par
}{\plain \par
}{\plain \par
}{\plain Kaymore Petroleum Products, Inc. is controlled by Morris V. Hodges.\par
}{\plain \par
}{\plain The Petrominerals 96\_1 Limited Partnership was formed in 1996 for\par
}{\plain the purpose of participating in the drilling and operation of one\par
}{\plain well on Petromineral's Mabel Strawn lease, located on the Hasley\par
}{\plain Canyon field, Santa Clarita Valley, Los Angeles County, California,\par
}{\plain pursuant to a Joint Venture Agreement with Petrominerals.\par
}{\plain \par
}{\plain Petrominerals, as General Partner, has contributed $2,800 to the\par
}{\plain Partnership, which represents approximately one percent (1%) of\par
}{\plain the aggregate contributions to the Partnership's capital, and the\par
}{\plain limited partners have contributed $277,200 to the Partnership.\par
}{\plain Petrominerals will receive or be charged its proportionate\par
}{\plain share of each item of the Partnership's income, gain, expense,\par
}{\plain deduction, loss or credit; provided, however, that Petrominerals\par
}{\plain bears 100% of the losses incurred by the Partnership after the\par
}{\plain losses exceed the capital contributions of the limited partners.\par
}{\plain \par
}{\plain Pursuant to the Joint Venture Agreement, Petrominerals assigned to\par
}{\plain the Joint Venture one drill site on the Mabel Strawn Lease, located\par
}{\plain on the Hasley Canyon field, Santa Clarita Valley, and contributed\par
}{\plain the use of metering and treatment equipment, its pipelines and\par
}{\plain shipping facilities and access to the other existing facilities.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain The Partnership contributed the sum of $280,000.00 for the\par
}{\plain intangible costs of drilling. Until the Partnership receives 125%\par
}{\plain of the funds it contributed to the Joint Venture ("payout"), the\par
}{\plain Partnership will receive 90% of the net working interest in the\par
}{\plain wells designated by Petrominerals to be drilled and Petrominerals\par
}{\plain will receive 10% of the net working interest. After payout, the\par
}{\plain Partnership will receive 30% of the working interest and\par
}{\plain Petrominerals will receive 70% of the working interest.\par
}{\plain \par
}{\plain The payment of the $280,000 is to pay 100% of the intangible costs\par
}{\plain of drilling the well. Thereafter, operation will be conducted by\par
}{\plain Petrominerals for $1,000 per well per month pursuant to an\par
}{\plain Operating Agreement between Petrominerals and the Partnership.\par
}{\plain Production commenced in January, 1997. Distributions through\par
}{\plain December, 1997, have been approximately $105,844 to the limited\par
}{\plain partners of the Partnership and approximately $11,765 to\par
}{\plain Petrominerals. In addition, Petrominerals has received\par
}{\plain approximately $28,800 in equipment rentals.\par
}{\plain \par
}{\plain Other than the transactions described above, no executive officer,\par
}{\plain director, stockholder known to the Company to own, beneficially or\par
}[\plain of record, more than 5% of the Company's Common Stock, or any\par
}{\plain member of the immediate family of any of those persons has engaged\par
}{\plain since the beginning of the Company's last fiscal year or proposes\par
}{\plain to engage in the future, in any transaction or series of similar\par
}{\plain transactions with the Company, directly or indirectly through a\par
}{\plain separate entity, in which the amount involved exceeded or will\par
}{\plain exceed $60,000.\par
}{\plain \par
}{\plain CERTAIN BUSINESS RELATIONSHIPS\par
}{\plain \par
}{\plain Other than as described above, no business relationship between the\par
}{\plain Company and any business or professional entity for which a\par
}{\plain director of the Company has served during the last fiscal year or\par
}{\plain currently serves as an executive officer, or in which a director\par
}{\plain of the Company has owned during the last fiscal year or currently\par
}{\plain owns a beneficial interest or of record 10% of the Company's common\par
}{\plain stock, has existed since the beginning of the Company's fiscal year\par
}{\plain or currently exists. In addition, the Company did not owe at the\par
}{\plain end of its last full fiscal year any business or professional\par
}{\plain entity for which a director of the Company served during the last\par
}{\plain fiscal year or currently serves as an executive officer,or in\par
}{\plain which a director of the Company served during the last fiscal year\par
}{\plain or currently owns beneficially or of record a 10% interest, or an\par
}{\plain aggregate amount in excess of 5% of the Company's total assets at\par
}{\plain the end of its last fiscal year. No director of the Company has\par
}{\plain served during the last fiscal year or currently serves as a partner\par
}{\plain or executive officer of any investment banking firm that performed\par
}{\plain services for the Company during the last fiscal year, or what the\par
}{\plain Company proposes to have perform services during the current year.\par
}{\plain The Company knows of no other relationship between any director and\par
}{\plain the Company substantially similar in nature and scope to those\par
}{\plain described above.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain INDEBTEDNESS OF MANAGEMENT\par
}{\plain \par
}{\plain During the Company's last fiscal year, no executive officer,\par
}{\plain director, any member of the immediate family or any of those\par
}{\plain persons, any corporation or organization for which any of those\par
}{\plain persons serve as an executive officer or partner or which they own\par
}{\plain directly or indirectly 10% or more of its equity securities, or\par
}{\plain any trust or other estate in which any of the Company's executive\par
}{\plain officers or directors have a substantial beneficial interest or for\par
}{\plain which theyserve as a trustee or in a similar capacity, has owed the\par
}{\plain Company at any time since the beginning of its last fiscal year\par
}{\plain more than $60,000.\par
}{\plain \par
}{\plain SECTION 16 COMPLIANCE\par
}{\plain \par
}{\plain Based upon a review of the original and amended Forms 3 and 4\par
}{\plain furnished to the Company during its last fiscal year and the\par
}{\plain original and amended Forms 5 furnished to the Company with regard\par
}{\plain to its last fiscal year, the Company does not know of any person\par
}{\plain who failed to file on a timely basis any reports required by\par
}{\plain Section 16(a) of the Securities Exchange Act of 1934, as amended.\par
}{\plain \par
}{\plain SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING\par
}{\plain \par
}{\plain From time to time the shareholders of the Company submit\par
}{\plain proposals which they believe should be voted upon by the\par
}{\plain shareholders. The Securities and Exchange Commission has adopted\par
}{\plain regulations which govern the inclusion of such proposals in the\par
}{\plain Company's annual proxy materials. All such proposals must be\par
}{\plain submitted to the Corporate Secretary not later than April 24,\par
}{\plain 1999, in order to be considered for inclusion in the Company's\par
}{\plain 1999 proxy materials.\par
}{\plain \par
}{\plain OTHER BUSINESS\par
}{\plain \par
}{\plain The Company does not intend to present any other business for\par
}{\plain action at the Annual Meeting and does not know of any other\par
}{\plain business intended to be presented by others. Should any other\par
}{\plain matters come before the meeting, the Proxies will be voted by the\par
}{\plain persons authorized therein, or their substitutes, in accordance\par
}{\plain with their best judgment on such matters.\par
}{\plain \par
}{\plain \par
}{\plain <PAGE>\par
}{\plain ANNUAL REPORT ON FORM 10\_K\par
}{\plain \par
}{\plain The Company's Annual Report on Form 10\_KSB for the fiscal year\par
}{\plain ended December 31, 1997, and the Company Second Quarter Form\par
}{\plain 10\_QSB for the period ending June 30, 1998, as filed with the\par
}{\plain Securities and Exchange Commission, are being mailed concurrently\par
}{\plain with the mailing of this Proxy Statement to shareholders of record\par
}{\plain on or about August 21, 1998. The cost of furnishing such Annual\par
}{\plain Report on Form 10\_K and of making this proxy solicitation will\par
}{\plain be borne by the Company. Copies of exhibits to the Annual Report\par
}{\plain on Form 10\_KSB are available, but a reasonable handling fee will\par
}{\plain be charged to the requesting shareholder. Each written\par
}{\plain request must set forth a good faith representation that, as of the\par
}{\plain record date, the person making the request is a beneficial\par
}{\plain owner of the Company's Common Stock and entitled to vote at the\par
}{\plain Annual Meeting. Shareholders should direct their written request\par
}{\plain to the Company, Attention: Corporate Secretary, 915 Westminster,\par
}{\plain Alhambra, California 91803.\par
}{\plain \par
}{\plain \par
}{\plain BY ORDER OF THE BOARD OF DIRECTORS\par
\par
}{\plain \par
}{\plain _____________________________________\par
}{\plain Phillip Mungiovino, Secretary\par
}{\plain \par
}{\plain \par
}{\plain Dated: August 21, 1998\par
}{\plain \par
}{\plain \par
}}
