AMERICAN CORPORATE INVESTORS INC, 10KSB, 1999-05-18

AMERICAN CORPORATE INVESTORS INC
10KSB, 1999-05-18
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

(MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

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

FOR THE TRANSITION PERIOD FROM _______ TO __________

COMMISSION FILE NUMBER: 33-1507-NY

AMERICAN CORPORATE INVESTORS,INC.
(Name Of Small Business Issuer In Its Charter)

<TABLE>
<S> <C>
Delaware 13-3437739
(State Or Other Jurisdiction Of Incorporation (IRS Employer Ident. No.)
or Organization)

2424 North Federal Highway, Suite 350, Boca Raton, FL 33431
(Address Of Principal Executive Offices) (Zip Code)
</TABLE>

Issuer's Telephone Number: (561) 338-5611

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

<TABLE>
<S> <C>
Title of each class Name of Exchange on which registered

Common 5,643,017 Shares Outstanding as of the date of this Report
(Title Of Class)
</TABLE>

Check whether the issuer (1) 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 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 X
--- ---

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

State the issuer's revenues for its most recent fiscal year. $1,121,619

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked price of such stock, as of a specified date within the past 60
days. As of May 10, 1999, the value of such stock was: $24,990,980.

FORM 10-KSB

AMERICAN CORPORATE INVESTORS, INC.
DECEMBER 31, 1998

PART I

ITEM 1. BUSINESS

Shortly after the acquisition of Ramoil, Registrant acquired Ramoil Engineering,
S.p.A. ("Engineering"), a company that had been principally owned by the same
shareholders as Ramoil. Due to certain aspects of applicable Italian law
relating to the corporate structure of Engineering and to the transfer of
ownership thereof, the acquisition of Engineering was completed in a manner
which constituted Engineering as a wholly owned subsidiary of Ramoil, which is a
wholly owned subsidiary of Registrant.

Engineering's principal business involves the manufacture and sale of commercial
furniture and aluminium frames for windows, doors and other uses. Following the
termination of the international trade operations of Ramoil in late 1996,
Engineering became, and currently remains, the only source of revenues for
Registrant. At the same time, Engineering terminated sales of its products in
Russia, an event that reduced Engineering's operations by 90%. The balance of
Engineering's business was with various European and Middle Eastern entities and
continues today.

During fiscal 1997, management completely changed the nature of Ramoil's
business operations. Following the termination of its business operations in
Russia, management decided to concentrate on establishing a new business plan
centered around operations in the Middle East and in the United Arab Emirates
(UAE) in particular. Pursuant to local regulations any foreign corporation that
desires to engage in business in the UAE is required to have a local sponsor.
Through the business contacts of senior management, in early 1997 Registrant
entered into a sponsorship agreement with Sheikh Hazza Bin Zayed Al-Nahyan,
Chairman of National Security for the UAE and Chairman of Saadiyat Free Zone.
Pursuant to the Sponsorship Agreement, Registrant has been introduced to various
projects throughout the UAE. Under this Agreement, the Sponsor will assist
Registrant with all aspects of doing business in the UAE including assistance in
compliance with local registration requirements under UAE law. Although not
obligated to do so, the Company's sponsor has provided Registrant with virtually
all of the business opportunities presently being developed. In consideration of
making these projects available to Registrant, Registrant is obligated to pay a
base annual fee to the Sponsor and a percentage commission on all business
generated by projects introduced.

Having secured the required sponsorship, in March 1997 Registrant registered
Ramoil under the laws of the UAE and opened an office in Abu Dhabi. To date,
Registrant has secured several contracts for diverse projects in the UAE.
Following is a brief discussion of each of the projects undertaken by Ramoil:

<PAGE>

A. HOTEL AND OFFICE COMPLEX. Ramoil has entered into a contract to serve as
Developer for the construction of a hotel and office complex in the UAE. To
date, initial architectural plans have been completed and negotiations with
several international hotel management companies are currently ongoing.
Management expects to conclude an agreement with one of the interested
parties within the first half of 1999. Any such agreement would provide
experienced hotel management and a hotel operator with a proven track record
for the hotel portion of this project upon completion.

In 1998, Ramoil entered into an agreement with the owner of the land site
whereby Ramoil received a concession to the land site to be developed for a
twenty-year period. The concession right includes the right to mortgage the
land but not the right to sell the land. The fair market value of this land
site at December 31, 1998 is $36,800,000. The agreement provides that Ramoil
will retain title to the assets developed on this land site during the
concession period. At the end of the twenty-year concession period, Ramoil
has agreed to pass the title of all assets and improvements on the land
developed to the original owner.

All net profits from the project will be divided 80% to Ramoil and 20% to
the original landowner. Further, in February 1998, Ramoil successfully
negotiated an extension of the original 20-year concession term through
April 30, 2019. Current estimates indicate that this project will require
approximately $80 Million to complete. To date, Ramoil has invested
approximately $2 Million in this project. Current estimates indicate that
this project will require approximately $80.5 million to complete. As of the
date of this report, construction has not begun on this project.

B. AL AIN APARTMENT PROJECT. This project is for the construction of a
residential housing complex including 83 apartments and villa units in Al
Ain City in the UAE. Under the original contract signed by Ramoil, the
Company will be required to provide financing for a total of approximately
$11.5 Million, that was to be returned to it with interest from the
operating revenues of the project. Recently, at the request of the Company,
the contract for this project was terminated and the Company was released
from its obligations thereunder. To date, Ramoil, through loans from Mr.
Radulovic, its CEO and principal shareholder, had provided funding of
approximately $2.2 Million. As part of the termination of the Company's
participation in this project, the amount previously funded by the Company
will be repaid upon completion of the project or, alternatively, prior to
December 31, 2001. However, no specific repayment schedule has been
committed to.

C. CITY MIX CONCRETE PLANT PROJECT. City Mix Concrete, Inc. ("CMIX") is a UAE
corporation registered for the purpose of constructing a concrete plant in
the UAE. Ramoil has entered into an agreement that will permit it to use the
CMIX license to construct the concrete plant and sell concrete in the UAE
for a 20year period. All equipment including the modular plant itself will
remain the property of Registrant at the conclusion of the license period.
Further, the City Mix License is transferable by Registrant to a third party
in its discretion.

Under this agreement Ramoil will be obligated to pay a royalty for this
license equal to 12% of the net profits generated from this operation. At
the end of the license period all interest in any existing contract to
supply concrete will revert to CMIX and Ramoil will have no further

<PAGE>

interest. Management has begun negotiations for an extension of this 20-year
term. However, as of the date hereof, no agreement has been reached and no
assurances can be given that any extension will be granted.

Following the grant of this license in 1997, Ramoil purchased a modular
concrete plant that was shipped to the UAE for assembly. As of the date of
this report, Registrant, through Engineering, has purchased the required
mixers and trucks that currently await shipment to the UAE. Assembly of the
plant has been ongoing and management projects that the plant will be fully
operational by summer, 1999. As of the date of this report, through the
efforts of the Company's sponsor, CMIX has received preliminary approval as
the exclusive concrete supplier for a new port and free trade zone
development project in the UAE. Of course, finalizing this contract must
await completion of the plant to be certain that CMIX will be able to
fulfill its obligations thereunder.

As of December 31, 1998, the Company has invested $3,968,465 towards the
construction and assembly of this plant detailed as follows:

<TABLE>
<S> <C>
Plant parts and assembly $1,300,875
Trucks and equipment 2,029,873
Engineering costs 637,717
---------

Total project investment $3,968,465
</TABLE>

Of the amount invested in this project by Registrant, $2,948,315 represented
loans to Registrant by Trinal, Inc., a privately held corporation
principally owned and controlled by Mr. Taflevich, the Company's President,
and by Cristal Ball Inc., an affiliated company of Mr. Taflevich.

When completed the concrete plant will have a capacity of 3,000 cubic meters
of concrete per day

D. D. SAADIYAT FREE TRADE ZONE. The UAE is currently completing plans for the
construction of a new port facility and free trade zone. This project, know
as the Saadiyat Free Trade Zone Authority ("SFTZA") is scheduled to be
constructed on Saadiyat Island in Abu Dhabi and is estimated to require
approximately $3.3 Billion to complete. Final approval for the project was
given by the UAE Executive Council earlier this year. This constitutes the
final consent in the approval process for this project and the Saadiyat
Project Development Company will now proceed with plans to raise the capital
required for construction, which is planned to be completed through a
combination of a public and institutional offering in the UAE and a global
offering of shares to institutional and corporate investors. Through the
efforts of its Sponsor, Registrant has been offered an opportunity to
purchase shares of SFTZA as a "founder" along with six other major
corporations. However, in order to purchase the shares offered in the
project, Registrant will be required to invest $165 Million. Although
Registrant must either pay for the shares or forfeit its right within 60
days following the formal grant of this option (which is expected to occur
within the next 30 days). At present, Registrant has no viable means of
paying for the shares in this project. Although negotiations

<PAGE>

with various financial sources, both institutional and private, are ongoing,
there can be no assurance that Registrant will be able to participate in
this investment. In fact, at the present time it is highly unlikely that
Registrant will be able to meet the purchase deadline and there is no
indication that any extensions will be granted. The share purchase option
was originally schedule to expire on May 15, 1999. However, the Company has
received oral notification that that this deadline will be extended,
although no written confirmation of this has been received. At present, the
status of this option is uncertain and there can be no assurance that, even
if the Company were able to raise the necessary funding, which at this time
appears unlikely without the participation of a major financing source, that
the Company would still be eligible to purchase the shares.

The foregoing summarizes the business opportunities that Ramoil has been able to
secure though the efforts of its sponsor in the UAE. However, it must be
remembered that the foregoing projects each require a significant capital
commitment by the Company. Further, in some cases, Ramoil will need to provide
specific funds within restrictive time periods or suffer a loss of both the
opportunity and of any previous investment made in such project. At present, it
seems highly unlikely that Ramoil will be able to meet all of its obligations,
particularly for providing funding, in connection with all of the foregoing
projects. In such event the Company will lose the related opportunity. Further,
it is possible that Ramoil's failure to meet its commitments under the foregoing
projects will cause its Sponsor to either terminate the sponsorship agreement or
to cease providing available business opportunities to Registrant in the future.
In such event, it is highly likely that Registrant will lose all or a
significant portion of its investment in the foregoing projects due to the
unavailability of needed financing.

In evaluating the Company's ability to establish viable commercial operations,
it must be remembered that, at present, the only revenue generating operations
are those of Engineering. However, in terms of the future growth of this segment
of the Company's operations, great emphasis has been placed upon Engineering's
participation in the various projects in the UAE. As with the operations of
Ramoil, should the foregoing project not proceed, or if Ramoil is unable to meet
its obligations with respect to such projects, or if Ramoil loses the support of
its sponsor, it is highly likely that Engineering will also lose any expected
participation in those projects.

In September, 1998, Registrant and Mr. Radulovic reach an agreement whereby Mr.
Radulovic agreed to convert certain of his loans to Registrant, in the principal
amount of $520,902, into shares of common stock at the rate of $3.00 per Share
and received 173,634 Shares. In December 1998, Mr. Radulovic agreed to convert
an additional $815,000 in loans made to support the Company's operations in Abu
Dhabi also at the rate of $3.00 per Share and received an additional 271,666
Shares. The price per share was negotiated based upon 80% of the average closing
price for Registrant's shares during September 1998, when the original agreement
to convert his loans to equity was reached. All of the Shares received by Mr.
Radulovic were "restricted securities" as defined under the Securities Act of
1933, as amended (the "Act").

Also in September 1998, both Trinal and Cristal Ball agreed to convert their
outstanding loans in the principal amount of $2,948,315 to shares of common
stock at the rate of $3.00 per Share. Consequently, these companies received, in
the aggregate, 982,771 Shares of Registrant's

<PAGE>

common stock all of which Shares were also "restricted securities" as that term
is defined under the Act. See, "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT."

ITEM 2. PROPERTIES.

The Company's principal corporate offices are located at 2424 North Federal
Highway, Suite 350, Boca Raton Florida, where it occupies approximately 5,000
square feet of office space. This lease expires July 31, 2000, and provides for
a current monthly rental of approximately $3,000 with annual increases through
the end of the lease term.

In connection with its operations in the UAE, the Company opened an office in
Abu Dhabi, UAE, pursuant to a lease with an unaffiliated third party, where it
occupies approximately 4,000 square feet of office space.

The Company believes it's present facilities will be adequate for its purposes
for the foreseeable future and does not anticipate the need for additional
office or operating facilities.

ITEM 3. LEGAL PROCEEDINGS.

There are several currently pending actions against Registrant. These include
the following matters:

A. In May 1996 a legal action was filed against the Company and its
principal shareholder. In this suit, a Russian oil company, Lukoil,
alleges that it is owed $12.5 Million from a formerly affiliated
entity of the Company resulting from a failure to comply with the
terms of an oil-trading contract. Although the original state court
action was voluntarily dismissed, the suit was later instituted in
Federal District court. The Company intends to vigorously defend
against the claims being made. Currently, the Company has filed a
motion to dismiss this action. This motion has not yet been
scheduled for a hearing.

B. Also in May 1998, Lukoil also filed a suit in Federal District Court
for the purpose of enforcement of a prior arbitration award obtained
against an affiliated company of Registrant. This award, in the
amount of approximately $12,162,000 was obtained from the
International Commercial Arbitration Court of the Chamber of
Commerce and Industry of the Russian Federation in Moscow. The US
suit seeks to confirm the award against the affiliated company and
to recover the amount awarded from that company as well as
Registrant and Mr. Radulovic personally. The two Lukoil cases have
now been consolidated in the Federal Court action. As of the date of
this Report, Registrant has not entered into any settlement
discussions and counsel for the Registrant defending these suits
cannot provide an evaluation of the likelihood of success by the
Company in this matter. The Company has also filed a motion to
dismiss this action. No decision has yet been received.

<PAGE>

C. In August 1996, suit was filed against Registrant and Mr. Radulovic
claiming damages of approximately $3.3 Million arising out of
contract it had with another affiliated company of Mr. Radulovic.
Although the Company is vigorously defending this suit, at present,
Registrant has not entered into any settlement discussions and
counsel for the Registrant defending these suits cannot provide an
evaluation of the likelihood of success by the Company in this
matter.

D. There are two other matters, both involving claims against
affiliated companies of Mr. Radulovic which, in the aggregate,
involve less than $200,000. Settlement discussions for both these
claims are currently in progress and, in management's opinion, there
will not be any material adverse impact upon Registrant or its
operations.

The Company knows of no other litigation pending, threatened or contemplated, or
unsatisfied judgements against it. The Company knows of no legal action pending
or threatened or judgements entered against any officers or directors of the
Company in their capacity as such.

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

None during the year ended December 31, 1998.

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

The principal market on which the Company's securities are traded is the
over-the-counter market. Since July, 1996 the Company's securities have been
trading on the "Bulletin Board" electronic quotation system under the symbol
"ACIZ." Prior to that time there had been only sporadic trading in the Company's
securities. The following table sets forth for the periods indicated the range
of high and low bid quotations for the Company's Common Stock.

PERIOD HIGH LOW

-------------------------------------------------------------------------------
<S> <C> <C>
Quarter ended September 30, 1996 $5.25 $5.25
Quarter ended December 31, 1996 $5.625 $4.825
Quarter ended March 31, 1997 $5.25 $5.00
Quarter ended June 30, 1997 $6.125 $5.00
Quarter ended September 30, 1997 $5.625 $3.625
Quarter ended December 31, 1997 $4.875 $3.875
Quarter ended March 31, 1998 $5.00 $4.875
Quarter ended June 30, 1998 $6.25 $5.00
Quarter ended September 30, 1998 $5.625 $3.875
Quarter ended December 31, 1998 $10.00 $9.875
Quarter ended March 31, 1998 $10.25 $10.00
</TABLE>

<PAGE>

On May 10,1999 the reported bid price (and most recent sale price) for the
Company's Common Stock was $10.00 per share; there were 473 record holders of
the Company's Shares; and there were six (6) market makers for the Company's
securities.

The Company has not paid any dividends and there are presently no plans to pay
any such dividends in the foreseeable future. The declaration and payment of
dividends in the future will be determined by the Board of Directors in light of
conditions then existing, including earning, financial condition, capital
requirements and other factors. There are no contractual restrictions on the
Company's present or future ability to pay dividends. Further, there are no
restrictions on any of the Company's subsidiaries which would, in the future,
adversely affect the Company's ability to pay dividends to its shareholders.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA:

<TABLE>
<CAPTION>
SUMMARY BALANCE SHEET DATA: YEAR ENDED DECEMBER 31
----------------------
1998 1997
---- -----
<S> <C> <C>
Total Assets $9,700,684 $6,098,991

Total Current Assets 902,251 2,471,731

Total Current Liabilities 1,722,313 4,407,391

Stockholders Equity 6,417,396 1,208,169

Accumulated Deficit (6,022,515) (5,031,472)

<CAPTION>
SUMMARY EARNINGS DATA: YEAR ENDED DECEMBER 31
----------------------
1998 1997
---- ----
<S> <C> <C>
Total Revenues $1,240,645 $1,121,619

Cost of Sales 428,993 635,559

Selling, General & Administrative
Expenses 1,065,563 2,684,108

Depreciation 163,990 170,599

Sponsorship Fee 149,774 52,078

Interest Expense (130,006) (139,804)

Interest Income 93,869 166,654

Gain (Loss) on Disposal of Assets 5,162 8,885

Other Income 63,621 -0-

Bad Debt expense (445,660) (239,582)

Income (Loss) Before Taxes (980,689) (2,624,571)

Income Tax (Benefit) (10,354) -0-

Net Income (Loss) (991,044) (2,624,571)

Earnings per Share ($0.18) ($0.58)
- -------------------------------------------------------------
THE COMPANY'S FISCAL YEAR ENDS DECEMBER 31 OF EACH YEAR.
</TABLE>

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

I. RESULTS OF OPERATIONS

During fiscal 1998, ended December 31, 1998, the Company's gross sales were only
slightly higher than in 1997 ($1,240,645 as compared to $1,121,619) but
continued dramatically lower than in 1996 when the Company's revenues totaled
$6,202,012. This reflects the termination of a prior operations in Russia and
Eastern Europe by Ramoil and Engineering and the termination of a consulting
agreement with an affiliated company at the end of 1996. As such, the total
sales revenues in fiscal 1997 represented sales solely by Engineering. Total
cost of revenues during fiscal 1997 were $635,559, as compared to $3,224,158 for
fiscal 1996. As a result, the Company realized a net operating loss of
$2,420,725 during fiscal 1997, as compared to a net operating gain of $159,280
in fiscal 1996. As discussed earlier, it must be remembered that in September
1996 Ramoil discontinued all international trade operations, a factor that had a
materially adverse impact upon revenues in fiscal 1997. In addition, in
September 1996, Engineering also discontinued all sales of products in Russia, a
factor that resulted in a drop in sales of more than $4.5 Million between fiscal
1996 and 1997.

The final balances of receivables from entities of the former Soviet Union and
eastern European countries, amounting to $445,660, have been written off in 1998
to uncollectible bad debt expense. Although the Company still continues to seek
restitution in the appropriate governing bodies of the regions mentioned,
however, the outcome of these efforts cannot be estimated.

After selling, general and administrative expenses, depreciation, a loss on the
sale of fixed assets, interest income and expenses, and provision for taxes, the
Company realized a net operating loss of ($2,624,571, or ($0.58) per share in
fiscal 1997, as compared to a profit of $42,228, or $0.01 per share, for fiscal
1996.

During fiscal 1997, selling, general and administrative expenses remained
virtually unchanged at $2,684,108, as compared to $2,665,296 for fiscal 1996.
When expressed as a percentage of overall revenues, selling, general and
administrative expenses represented almost 240% of total revenues for fiscal
1997 (compared to just under 43% in fiscal 1996). Again, this resulted from the
termination of trading activities in the third quarter of fiscal 1996, which
dramatically reduced revenues, with the increased costs associated with Ramoil's
commitments to various projects in the UAE. Management projects that the costs
directly related to Ramoil's start-up operations in the UAE will continue to
escalate for the foreseeable future, particularly as it meets its funding
commitments under various project contracts during the period prior to realizing
any revenues from those efforts.

The gross profit percentage for 1998 was 81% compared with 47% for the similar
period in 1997. This increase is due to the fact that revenues in 1998 were
mostly engineering services as opposed to sales of construction goods.
Engineering services accounted for 83% of total revenues in 1998 as opposed to
40% for 1997. The result of this is to reduce the cost of goods sold and
therefore increase the gross profit percentage.

<PAGE>

Total operating expenses and general administration costs are 50% lower for 1998
than for the comparable period in 1997. This is primarily due to the significant
cuts made by Registrant as part of its restructuring plan implemented in 1997.
Ramoil has cut its workforce from 42 employees to 12 employees during fiscal
years 1997 and 1998, respectively. The resultant savings associated with this
work force cut has served to significantly reduce the Company's overall overhead
costs.

Interest revenues are comprised of interest imputed on the receivable balance
owed to the Company by an affiliate owned by the majority shareholder. Interest
is imputed at the prime-lending rate. Interest revenues decreased in 1998 due to
a decrease in the prime-lending rate during fiscal 1998 and to the overall
decrease in the balance due from affiliates.

The Company opened a branch office in Abu Dhabi, United Arab Emirates in
September 1996 in order to conduct business and explore new markets in the
region. The Company entered into a sponsorship agreement as discussed above.
Under its terms, the sponsor provides consulting and mediation services in the
emerging markets of Abu Dhabi. The salaries and overhead of the branch office
are funded by the Company on a monthly basis. The total cost of the Abu Dhabi
branch office was $324,000 as compared to $198,000 for fiscal 1997.

Sponsorship fees for fiscal 1998 increased 288% over fiscal 1997 as a result of
the addition of a sponsorship agreement entered into by CMIX.

In management's opinion, the first project from which it anticipates revenues is
the Citimix concrete plant now being completed. This plant is scheduled to be
completed in the second half of 1999, with revenues expected to be realized
shortly thereafter. However, no assurance can be given that revenues, if any,
realized from this concrete plant will be adequate to offset the continued high
cost of the other projects being undertaken by Ramoil in the UAE.

Management believes that until such time as it can realize significant revenues
from its newly initiated operations in the UAE, if ever, the Company will
continue to reflect net operating losses. In fact, it is likely that, even if
revenues are derived from the concrete plant during fiscal 1999, the Company as
a whole will continue to operate at a loss. Furthermore, should its efforts to
establish commercially viable operations in the UAE not be successful it is
likely that the Company will be unable to continue as a going concern.

III. DISCUSSION OF FINANCIAL CONDITION

On a consolidated basis, as of December 31, 1998 the Company had total assets of
$9,700,684 with total liabilities of $3,283,288 (compared with $6,098,981 and
$4,890,822 respectively for December 31, 1997). Of the Company's assets at
December 31, 1998, cash and cash equivalent accounted for $5,681 and $556,972
represents trade accounts receivable (compared to $252,379 and $1,431,575
respectively at December 31, 1997). The decrease in the Company's current assets
at December 31, 1998 was principally due to the decreases in cash, inventory,
accounts receivable, including trade and other accounts. However, the overall
increase in total assets resulted, for the most part, from significant increases
in long term notes receivable (representing the Company's funding in the Al

<PAGE>

Ain Project which is to be repaid upon completion), property, plant and
equipment (representing the Company's investment in the City Mix Project). In
addition, at December 31, 1998, the Company no longer reflected any liability
for deferred sales revenue and showed a significant decrease in accounts payable
and accrued expenses resulting from the significant decrease in overall business
operations.

At December 31, 1998, the Company's total stockholders' equity increased
substantially to $6,417,396, as compared to $1,208,169 at December 31, 1997.
The principal reasons for this significant increase was the increase in
contributed capital in excess of stated value which resulted from the exercise
of certain previously granted stock purchase warrants by a consultant of the
Company. This was sufficient to offset the negative impact of the continuing
losses from operations, which resulted in the Company's accumulated deficit
increasing to $6,022,515 as compared to $5,031,472 at the end of 1997. The
principal source of funds for the Company's operations have been, and continue
to be, revenues earned by Engineering and the continued financial support of the
Company's major shareholder, both of which factors are essential to the Company
ability to continue operations.

During the fiscal year ending December 31, 1999, the Company will face
substantial expenditures in connection with the projects now committed to in the
UAE. In addition, the Company will require approximately $165 Million in order
to pay for the shares of the Saadyiat Free Trade Zone Authority. This payment
must be made within 60 days following the official grant of option to purchase
these shares, or the Company will lose its right to acquire such shares. At
present, management has not identified any funding source able or willing to
assist the Company in meeting either of these commitments.

Based upon available cash on hand and expected revenues from the operations of
Engineering, management is of the opinion that it will not have adequate
available funds to meet its anticipated capital expenditures and cash needs for
fiscal 1999. Therefore, unless a funding source is identified and appropriate
funding agreements reached, of which there can be no assurance, it is unlikely
that the Company will be able to meet any of its funding commitments for the
projects now under way in the UAE, except, in management's opinion, the funding
needs for the City Mix Project. However, it is uncertain as to what effect a
default in any of its funding commitments in the UAE will have. It is possible
that the Company's sponsor will terminate his sponsorship and support of the
Company, in which event the Company will no longer be able to conduct any
operations in the UAE and may suffer a loss of all funds invested in those
project to date. In such an event, it is highly unlikely that the Company will
able to re-establish any commercial operations within the forseeable future.

IV. TRENDS AFFECTING LIQUIDITY, CAPITAL RESOURCES AND OPERATIONS

Over the past decade, economic conditions worldwide have favored the development
of business oriented projects designed to meet the needs of developing business
and financial interests in many developing areas. Among the fastest growing
areas in the world is the Middle East. Combining the great wealth that come from
extensive oil-related interests with diminished threats of war and terrorist
activities, the UAE has emerged as a leader in this region. Management believes
this trend, coupled with the support of the Company's sponsor, who himself is a
recognized leader in the

<PAGE>

region, has situated the Company in a position to participate in the growth of
the UAE. Provided the Company can meet its financial obligations under the
various projects discussed above, management believes it can be an integral part
of the growth being experienced in the UAE and that the benefits to the Company
will be a major factor in its growth over the foreseeable future.

With the collapse of traditional political and ideological barriers, the demand
for products from all parts of the world has increased perceptibly with many
developing and third world nations now looking for products from many different
countries. This has been particularly true of countries with "soft" currencies
(i.e. currencies not readily exchangeable into established currencies such as
British pounds, US dollars, etc.), which at present are unable to pay for their
purchases in US dollars. Management believes that the greatest demand for all
kinds of foreign products will come from these new developing third world
countries over the foreseeable future. This is but one factor that favors the
development of a free trade zone in the Middle East, such as the Saadiyat Free
Trade Zone proposed by the UAE.

Management knows of no other trends reasonably expected to have a material
impact upon the Company's operations or liquidity in the foreseeable future.

VI. INFLATION.

During the past few years inflation worldwide has been relatively stable which,
coupled with the relative strength of the economic conditions in the Middle
East, including the UAE, discussed above, is expected to have a beneficial
effect upon the Company's planned operations in the UAE. In management's
opinion, these favorable conditions are expected to continue for the foreseeable
future and management does not anticipate that inflation will have an adverse
impact upon its operations in the foreseeable future.

VII. FORWARD LOOKING STATEMENTS.

Certain statements made in this report on Form 10-KSB as "forward looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements involve known and unknown risks, uncertainties, and other
factors that may cause actual results, performance, or achievements of the
Company to be materially different from any future results implied by such
forward looking statements. Although the Company believes that the expectations
reflected in such forward looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
in the forward looking statements. Certain factors that might cause such a
difference might include: the securing of additional or the renewal of existing
construction contracts, the growth of the market for the Company's services and
products, the effect of European economic unification upon the Company's ability
to secure additional business, the ability of the Company to secure significant
additional financing to meet the Company's actual and projected financing
obligations of various projects it has entered into in the UAE.

VIII. YEAR 2000 COMPLIANCE.

The Year 2000 issue is the result of computer programs being written using two
digits, rather than four to define the applicable year. Any of the Company's
computer programs that have

<PAGE>

data-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities.

Based upon an assessment made during fiscal 1998, the Company has begun to
updated all versions of operations and financial software so that all of its
systems will utilize dates beyond December 31, 1999 properly. In addition, the
Company is evaluating its auxiliary computer application systems for Year 2000
compliance, a process which is expected to be completed during the first half of
1999. The Company believes that the planned modifications and conversions will
allow it to mitigate the Year 2000 issue.

The Company also plans to initiate formal communications with all of its
significant suppliers, financial institutions and major customers to determine
the extent to which the Company may be vulnerable to any third parties' failure
to remediate their own Year 2000 issues. The financial impact to the Company of
bringing its equipment and systems into Year 2000 compliance is not anticipated
to be material to its financial position or results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: REFERENCE:
- --------------------- ----------
<S> <C>
Independent Auditor's Report F-1

Consolidated Statement of Financial Condition F-2

Consolidated Statement of Operations F-3

Consolidated Statements of Cash Flows F-4

Statement of Changes in Stockholders' Equity F-5

Notes to Financial Statements F-6 - F-9
</TABLE>

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

<PAGE>

DONAHUE ASSOCIATES, INC.
CERTIFIED PUBLIC ACCOUNTANTS
354 Main Street, Chatham, N.J. 07928
Phone (973)635-2111 Fax: (973)635-0992

INDEPENDENT AUDITORS REPORT

The Shareholders,
American Corporate Investors, Inc.

We have audited the accompanying balance sheet of American Corporate Investors,
Inc. as of December 31, 1998 and as of December 31, 1997 and the related
statements of income and change in owners' equity, and cash flows for the fiscal
years then ended. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements presented are free from
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 the management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Corporate Investors,
Inc. as of December 31, 1998 and as of December 31, 1997 and the results of
operations and cash flows for the fiscal year then ended in conformity with
generally accepted accounting principles consistently applied.

Chatham, New Jersey
April 21, 1999

<PAGE>

AMERCIAN CORPORATE INVESTORS INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

December 31, December 31,
1998 1997

<S> <C> <C>
ASSETS
Current assets:
Cash in banks $ 5,681 $ 252,379
Trade accounts receivable 556,972 1,431,575
Inventories (Note 2) 250,175 364,556
Other accounts receivable 89,423 423,221
Total current assets 902,251 2,471,731

Other assets:
Due from affiliates (Note 3) 671,140 1,006,003
Taxes refunds receivable 280,466 187,146
Other assets (Note 2) 164,874 183,005
Note receivable (Note 4) 2,000,000 409,000
Property, plant, and equipment
(net of accumulated depreciation) 5,439,647 1,583,911
Goodwill (net of accumulated amortization) 242,306 258,195
Total assets $9,700,684 $6,098,991

LIABILITIES & OWNERS' EQUITY
CURRENT LIABILITIES
Accounts payable 1,385,609 2,938,773
Deferred sales 0 723,527
Other liabilities 336,704 745,091
Total current liabilities 1,722,313 4,407,391

Long term liabilities:
Equipment loans payable 1,175,130 347,931
Pensions and benefits payable 385,845 135,500
Total liabilities 3,283,288 4,890,822

Common stock, par value
$.0001 per share, 300,000,000
authorized, 5,643,017 issued
and outstanding 564 372
Contributed capital in excess
of par value 12,396,495 6,126,970
Cumulative translation
adjustment (Note 2) 42,852 112,299
Accumulated deficit (6,022,515) (5,031,472)
Total liabilities & owners' equity $9,700,684 $6,098,991
</TABLE>

PLEASE SEE THE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

<PAGE>

AMERICAN CORPORATE INVESTORS INC.
CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
<S> <C> <C>
Revenues:
Gross sales $1,240,645 $1,121,619
Less cost of goods sold (428,993) (635,559)

Net profit on sales 811,652 486,060

Operating expenses:
Salaries and overhead 446,705 2,033,249
General administration 618,858 650,859
Sponsorship fees 149,774 52,078
Depreciation & amortization 163,990 170,599
Total operating expenses 1,379,327 2,906,785

Net income (loss) before other
revenues & expenses (567,675) (2,420,725)

Other revenues & expenses:
Interest income 93,869 166,654
Gain on fixed assets sold 5,162 8,885
Other income 63,621 0
Bad debt expense (Note 6) (445,660) (239,582)
Interest expense (130,006) (139,804)
Net income (loss) before provision for income taxes (980,689) (2,624,572)

Provision for income taxes (10,354) 0
Net income (loss) ($991,044) ($2,624,572)

Earnings per share:
Basic ($.18) ($.58)
Diluted ($.18) ($.58)

Weighted average of common shares:
Basic 5,564,209 4,562,699
Diluted 5,564,209 4,562,699
</TABLE>

PLEASE SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

<PAGE>

AMERICAN CORPORATE INVESTORS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDING DECEMBER 31, 1998

<TABLE>
<S> <C>
Cash flows from operating activities:

Net income (loss) ($991,044)
Adjustments to reconcile net loss to cash
provided by operating activities; add back
depreciation & amortization 163,990
Net cash provided (used) by operating activities (827,054)

Cash flows from other operating activities:
Decrease in trade accounts receivable 874,603
Decrease in other accounts receivable 333,798
Decrease in ending inventories 114,381
Decrease in receivables from affiliates 334,863
Increase in taxes refunds receivable (93,320)
Decrease in other assets 18,131
Decrease in accounts payable (1,553,164)
Increase in notes receivable (1,591,000)
Decrease in deferred sales revenue (723,527)
Decrease in other liabilities (408,387)
Increase in equipment loans payable 827,199
Increase in pensions and benefits payable 250,345

Net cash provided (used) by other operating activities (2,443,132)

Cash flows from financing activities:
Issuance of common stock (Note 1) 92,500
Sale of common stock warrants 510,000
Shareholders' loans converted to common stock (Note 1) 5,667,217
Sale of vehicle 18,616
Purchase of plant & equipment (Note 6) (3,968,465)
Capitalized costs on equipment purchase (51,764)
Purchase of office equipment (2,223)
Change in cumulative translation adjustment (Note 2) (69,447)

Net cash provided (used) by financing activities 2,196,434
Increase (decrease) in cash during 1998 (246,698)

Cash balance at December 31, 1997 252,379
Cash balance at December 31, 1998 $5,681
</TABLE>

PLEASE SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

<PAGE>

AMERICAN CORPORATE INVESTORS INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDING DECEMBER 31, 1998

<TABLE>
<CAPTION>
COMMON PAID IN CUMULATIVE RETAINED TOTAL
STOCK CAPITAL ADJUSTMENT DEFICIT CAPITAL
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1997 $372 $6,126,970 $ 112,299 ($5,031,472) $1,208,169

Common stock
warrants sold 510,000 510,000

Shareholders loans
conversion 188 5,667,029 5,667,217

Issuance of common stock 4 92,496 92,500

Change in translation
adjustment (69,447) (69,447)

Net income (loss) (991,044) (991,044)

Balance at
December 31, 1998 $564 $12,396,495 $42,852 ($6,022,516) $6,417,395
</TABLE>

PLEASE SEE THE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

AMERICAN CORPORATE INVESTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998

NOTE 1- GENERAL DESCRIPTION AND NATURE OF BUSINESS

OUTSTANDING COMMON STOCK

American Corporate Investors, Inc. (the Company) is a Delaware corporation
organized on December 30, 1986 for the purpose of engaging in and acquiring
profitable business opportunities in the United States and overseas. On June 10,
1996, the Company effected a 1-for-10 reverse split of its issued common stock
reducing its outstanding common shares from 16,670,000 to 166,700.
Simultaneously, the Company acquired 100% of the outstanding shares of Ramoil
Management Company, Inc.(RMC) in exchange for 3,135,000 newly issued shares of
the Company's stock.

Simultaneous to this transaction, the Company issued common stock warrants where
each warrant entitled the holder to purchase one share of common stock. A total
of 800,000 warrants were issued with an exercise price of $2.50 and 450,000
warrants were issued with an exercise price of $5.00. The warrants expired in
July 1998. During the exercise period of the warrants, 450,000 of the $2.50
warrants had been exercised.

In September 1998, the two majority shareholders of the Company elected to
convert outstanding loans to RMC amounting to $5,667,217 into 1,889,771 shares
of common stock. In addition, 37,000 shares were issued, as a result of warrants
exercised at $2.50 prior to the warrants expiration date, which increased
owners' equity by $92,500.

As a result of the above transactions, the Company's has 5,643,017 issued and
outstanding shares at December 31, 1998.

COMPANY HOLDINGS

Ramoil Management Company, (RMC) was incorporated in 1992 in Boca Raton, Florida
and is in the business of providing consulting and managerial services to its
subsidiary companies, Ramoil Engineering S.P.A.(RME) and City Mix Concrete Inc.
(CMIX) and, until December 31, 1997, to its affiliate, Ramoil Holdings, Inc.
(RMH). In late 1996, RMC opened a branch office in Abu Dhabi, United Arab
Emirates (UAE) in order to manage the various projects that RMC was engaged in.

Ramoil Engineering S.P.A. (RME) was established in 1993 under Italian law and
provides construction supplies and services. Its principal line of business
consists of the manufacture and sale of commercial furniture and aluminum frames
for windows, doors, and other uses. RME is also involved in providing
engineering services for various construction projects in Italy.

<PAGE>

AMERICAN CORPORATE INVESTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
CONTINUED

City Mix Concrete, (CMIX) was established in 1998 in Abu Dhabi, United Arab
Emirates and will process and sell concrete to various building projects in the
UAE. Although not yet active, the plant project is under construction and
management expects the plant to be on line in mid 1999. CMIX is owned by RMC
through a consulting agreement with its majority shareholder, Rodoljub
Radulovic.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements included the accounts of RMC, RME, and
CMIX. All intercompany accounts and intercompany sales and purchases have been
eliminated in these consolidated financial statements.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the reported amount of assets and liabilities and the reported amount of revenue
and expenses during the period reported. Actual results could differ from those
estimates.

REVENUE RECOGNITION

RME recognizes revenue upon shipment of the related goods or performance of
services.

INVENTORIES

Inventories are stated at lower of cost or market. Cost is determined by using
the first-in, first-out method ("FIFO") or by the specific identification method
where feasible. As of December 31, 1998, inventory detailed as follows:

<TABLE>
<S> <C>
Work in process $72,332
Finished goods 177,843
-------
Ending inventory $250,175
</TABLE>

<PAGE>

AMERICAN CORPORATE INVESTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
CONTINUED

PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment are recorded at cost. Depreciation and
amortization are calculated on the straight-line method based upon the following
estimated useful lives:

Buildings and Plant 33 years
Leasehold improvements Lease term
Machinery and equipment 7-9 years
Furniture and fixtures 5-8 years
Office equipment 3-5 years
Vehicles 4-5 years
</TABLE>

At December 31, 1998, the property, plant, and equipment account details as
follows:

<TABLE>
<S> <C>
Buildings and Plant $2,555,985
Leasehold improvements 438,152
Machinery and equipment 3,105,742
Furniture and fixtures 331,127
Office equipment 58,043
Vehicles 164,725
Accumulated depreciation (985,963)
---------

Total property, plant, and equipment $5,439,647
</TABLE>

Goodwill is the excess of funds paid over cost by RME to purchase Artifex Inc in
1995. The goodwill account is being amortized over a forty-year period on a
straight-line basis.

OTHER ASSETS

OTHER ASSETS INCLUDE PREPAID RENT AND SPONSORSHIP FEES IN THE COMPANY'S ABU
DHABI BRANCH.

INCOME TAXES

The Company utilizes Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", which requires the Company to compute deferred
income taxes based upon the difference between the financial statement and tax
bases of the assets and liabilities using the tax rates in effect for the year
in which the differences are expected to reverse.

<PAGE>

AMERICAN CORPORATE INVESTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
CONTINUED

FOREIGN CURRENCY TRANSLATION

The financial statements of RME are prepared in Italian lire and the financial
statements of CMIX are prepared in Arabian dirhams. Assets and liabilities are
converted at the exchange rate in effect as of the balance sheet date. Income
and expense items are translated at the average rate in effect over the time
period reported. The capital accounts of RME and CMIX are translated at the rate
prevailing at inception. The resulting differences caused by these translation
adjustments have been accumulated in a separate component of stockholders equity
called the "cumulative translation adjustment". The $69,447 decrease in the
cumulative translation adjustment for fiscal 1998 is due mainly to the drop in
the Italian lire rate from 1,758 per dollar at December 31, 1997 to 1,652 per
dollar at December 31, 1998.

NOTE 3- RELATED PARTY TRANSACTIONS

The Company had provided management services to Ramoil Holding Co. LTD (RHC); a
company affiliated through common ownership by the Company's majority
shareholder. Under the terms of the management agreement, the Company received a
minimum annual fee of $1,000,000 with additional amounts due based on other
services. The Company has accounted for these fees as "Due from Affiliates".
Funds that were subsequently remitted by the majority shareholder directly to
the Company or to third parties on behalf of the Company were then netted
against this receivable balance.

During fiscal 1998, management has decided to cancel this consulting agreement
for fiscal 1997 and 1998. The majority shareholder has agreed to a formal
payment plan where the balance of this account will be received over a
three-year period with interest compounded monthly at the floating prime rate.

As of December 31, 1998, RHC had an outstanding receivable balance owed to the
Company of $671,140. The Company has imputed interest on this balance during
fiscal 1998 based in the amount of $83,658.

NOTE 4- COMMITMENTS

The Company leases its office facilities in Boca Raton, Florida under a
five-year lease agreement, which commenced in August 1997. Future annual
commitments are as follows:

<PAGE>

AMERICAN CORPORATE INVESTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
CONTINUED

The rent on the office facilities in the Abu Dhabi Emirate is prepaid on an
annual basis and is paid for through September 1999 and is recorded as a prepaid
expense in these consolidated financial statements.

In addition, RMC had entered into an agreement to provide financing for the
construction of 83 apartment and villa units in Al Ain City, Abu Dhabi, United
Emirates with the licensed owner of the land being developed. Under the terms of
the agreement, RMC was obligated to finance the total construction costs of the
project, including licensing fees, while in return receiving a mortgage on the
property developed. The contracted cost of the project is $11,475,410. The
Company has provided $2,000,000 in funding for this project through December 31,
1998. The agreement provides for a five-percent penalty payment of the full
contract value by the Company to the owner of the land in the event of
non-performance.

On April 20, 1999, the parties mutually agreed to cancel this financing
agreement whereby the Company is relieved of its financing obligation and has
received an unsecured promissory note for $2,000,000 payable at 12/31/2001 from
the owner of the land being developed.

NOTE 5- CONTINGENCIES

Substantially all the operations of the Company are conducted in Italy and the
United Arab Emirates. Such operations are affected by the domestic and political
developments occurring there. The degree of theses occurrences and their overall
affect on the Company cannot be predicted but could be material in nature.

In addition, all business activity of a foreign corporation in Abu Dhabi
requires the corporation to be sponsored by an Abu Dhabi national. As of
December 31, 1998, the Company's sponsorship agreements in effect will expire in
late 1999 and early 2000. Normally, the sponsorship agreement provides for an
annual fee to be prepaid to the sponsor and for the sponsor to share in the
proceeds of a completed project on a percentage basis. The agreements are
cancelable, at will, by the sponsor. Cancellation of the sponsorship agreements
could have a material adverse affect on the Company's ability to operate as a
going concern in the United Arab Emirates.

<PAGE>

AMERICAN CORPORATE INVESTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
CONTINUED

NOTE 6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

Certain statements made in this report on form 10Q are "forward looking'
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements involve known and unknown risks, uncertainties, and other
factors that may cause actual results, performance, or achievements of the
Company to be materially different from any future results implied by such
forward looking statements. Although the Company believes that the expectations
reflected in such forward looking statements are based upon reasonable
assumptions, the Company's actual results could differ materially from those set
in the forward-looking statements. Certain factors that might cause such a
difference might include the following: the securing of additional or the
renewal of existing construction contracts, the growth of the market for the
Company's services, the effects of the European economic unification upon the
Company's ability to secure additional business, the ability of the Company to
secure significant additional financing to meet the Company's financing
obligations of various real estate and construction projects the Company has
entered into in the UAE.

NOTE 7- LEGAL MATTERS

In May 1996, legal actions were filed against the Company and its principal
stockholder. A Russian entity has alleged that it is owed $12 million from a
former affiliated entity's failure to comply with the terms of an oil-trading
contract. The Company has vigorously defended itself against this action and it
is management's position that the eventual disposition of this matter will not
have a material adverse affect on the Company's financial position.

Accordingly, no provision for any loss as a result from the resolution of this
matter has been made.

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(A) AND (B) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.

The following identification of officers and directors, including biographies,
set forth the present officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD
- ---- --- --------------
<S> <C> <C>
Radulojub Radulovic 50 Chief Executive Officer, Chief Financial Officer,
Secretary and Chairman of the Board of Directors

Aleksandr Taflevich 54 President and a Director

Zarko Radulovic 46 Vice President and a Director

William Brown 59 Director
</TABLE>

Directors hold office until the next annual shareholders meeting or until their
death, resignation, retirement, removal, disqualification, or until a successor
has been elected and qualified. Vacancies in the Board are filled by majority
vote of the remaining Directors. Officers of the Company serve at the will of
the Board of Directors.

(D) FAMILY RELATIONSHIPS.

There are no family relationships among the Officers except for Rodoljub
Radulovic and Zarko Radulovic who are brothers. There are no arrangements or
understandings pursuant to which any person was elected as an officer of the
Company. All officers hold office for one year or until their successors are
elected and qualified, unless otherwise specified by the Board of Directors;
provided, however, that any officer is subject to removal with or without cause,
at any time, by a vote of the Board of Directors.

(E) 1. BUSINESS EXPERIENCE.

Principal occupations of directors and officers are as follows:

RODOLJUB RADULOVIC has been Chief Executive Officer and a Director of the
Company since June 1996, and has served as an officer and director of each of
its subsidiaries since their inception. Mr. Radulovic founded Ramoil Management
and Ramoil Engineering in 1992 and directed their business operations which,
until September 1996, involved various aspects of international trade, financial
services construction and engineering services, with a primary emphasis on
operations in Eastern Europe and Russia. From 1983 until 1992, Mr. Radulovic
served as president of Yox Austria, a private company which he founded. Yox
Austria specialized in trading aluminum, metals, minerals, synthetic yarns
various types of equipment and crude oil to

<PAGE>

Germany, Italy, Yugoslavia and Russia. From 1976 until 1983 he was employed as
General Manager for the chemical, leather and textile divisions of Hempro
Company in Belgrad. Previous to that employment, Mr. Radulovic served as Sales
Manager of the Department of Trade for the Yugoslavian Ocean Company in Kotor,
Yugoslavia. Mr. Radulovic graduated from Belgrad University with a degree in
Economics, specializing in International Business and Trade.

ALEKSANDAR TAFLEVICH, has served as director of the Company since his
appointment in June 1996. In 1998, Mr. Taflevich was appointed President of the
Company and currently serves in that capacity. Since 1992 Mr. Taflevich has also
served as Chief Executive Officer of Trinal, Inc., a company which he founded
and which provides railroad forwarding services primarily to major European
fertilizer and metal manufacturers. Mr. Taflevich oversees virtually all of that
company's operations, both in the US and overseas. In addition to his other
business ventures, since 1994 Mr. Taflevich has served as General Manager of
Cristal Ball, Inc., a privately held corporation formed under the laws of the
Cayman Islands, engaged in international trading. From 1989 until founding
Trinal, Inc. in 1992, he served as Marketing Director for DWT, a conglomerate of
international companies based in Toronto Canada where he was primarily
responsible for marketing. From 1986 until 1992, Mr. Taflevich was also the
founder and Chief Executive Officer of Association A Marks, also an association
of international companies specializing in the manufacture and transport of a
wide range of consumer goods, based in Moscow, Russia. Mr. Taflevich holds a
Masters of Business Administration from the Moscow College of Commerce.

ZARKO RADULOVIC has served as an officer and director of the Company since 1996.
He has also served as General Manager of Ramoil Engineering Spa since 1995.
Prior to 1995, however, Mr. Radulovic served as a special consultant to Ramoil
Engineering on various project in Russia and the Ukraine. From 1989 until 1993,
Mr. Radulovic was employed as General Manager of Trecom, Kotor, a company which
dealt with investments in tourist projects principally in Montengro. Beginning
in 1976 he was employed as an engineer at Yugopetrol, the Yugoslavian state
petroleum company, where he was promoted to chief engineer in 1989. He received
his engineering degree from Belgrad University, Department of Machinery
Production in 1976.

WILLIAM BROWN has served as a director of the Company since 1997. In addition,
since 1987 he has also served as Vice President and a director of Russo
Securities, Inc., a registered broker/dealer in New York. Mr. Brown's experience
in the investment banking community spans over thirty years among a wide range
of firms. From 1985 until joining Russo Securities, Mr. Brown was President of
the Bull & Bear Fund, a publicly held asset management firm, also located in New
York. Prior thereto, from 1983 until 1985, he was Vice President, Investment
Banking for Thomson McKinnon Securities, Inc. in Houston, Texas, having served
as Vice President of Investment Banking for Donaldson Lufkin & Jenerette for 7
years (1976 to 1983) where he headed institutional sales and investment banking
for the Southwestern United States. From 1973 to 1976 he was Vice President of
Paine Webber Capital Committee, a division of Paine Webber Inc. Before that, Mr.
Brown was Executive Vice President, Trading Division, for Domminick & Domminick
(1971-1973), a registered broker/dealer in Houston, Texas. From 1966 to 1971 Mr.
Brown served as President of Summit Securities, Inc., the trading division of
the Hedge Fund of America, the first publicly traded hedge fund in the United
States.

<PAGE>

2. Directorships.

None, other than listed above.

(f) Other Involvement in Certain Legal Proceedings.

There have been no events under any bankruptcy act, no criminal proceedings and
no judgements or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information relating to remuneration received by
officers and directors as of June 30, 1997, the end of the Company's most recent
fiscal year:

NAME AND PRINCIPAL ANNUAL COMP.(1) LONG TERM COMPENSATION
POSITION YEAR SALARY BONUS RESTRICTED STOCK ALL OTHER
AWARDS COMPENSATION .
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rodoljub Radulovic 1998 $ -0- $15,000(2)
Secretary, CEO,
CFO & Director 1997 $ -0- $15,000(2)

Aleksandr Taflevich 1998 $ -0-
President & Director 1997 $ -0-
- -----------------------------------------------------------------------------------------

1. The Company currently has no written compensation arrangements with any of
its executive officers. It should be noted that both Mr. Radulovic and Mr.
Taflevich currently serve as CEO and President, respectively, without
salary. It is expected that once commercial operations begin in the UAE, the
Company and Messrs. Radulovic and Taflevich will enter into formal written
employment agreements.

2. This payment represents payments made for automobile expenses with respect
to Mr. Radulovic's car.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.

None other than stated in (b) below.

<PAGE>

(B) SECURITY OWNERSHIP OF MANAGEMENT.

</TABLE>
<TABLE>
<CAPTION>
NAME RELATIONSHIP NUMBER OF SHARES PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Radoljub Radulovic CEO, CFO, Secretary
And Director 2,824,115(1)(2) 49.1%

Aleksandr Taflevich(2) President and Director 2,402,284(3)(4) 41.8%

OFFICERS & DIRECTORS AS
A GROUP (4 PERSONS) 5,226,399 90.9%
- -----------------------------------------------------------------------------------------------------
</TABLE>

(1) Based upon a total of 5,749,098 shares of Common Stock issued and
outstanding as of the date of this Report. However, at December 31, 1998
the Registrant only had a total of 3,715,299 shares issued and
outstanding. The Shares issued in cancellation of loans due to Mr.
Radulovic, Trinal Corp. and Crystal Ball, Inc. were issued following
December 31, 1998.

(2) Includes all shares of Registrant's Common Stock held by Mr. Radulovic,
including 732,667 Shares acquired through the conversion of certain
loans in the principal amount of $2,198,000 in September 1998 and
271,666 Shares acquired through the further conversion of loans in
the principal amount of $815,000 in December 1998. However, of the
Shares listed herein, 1,179,630 represent shares being transferred
by him to various other parties who are not affiliated with the
Registrant as follows:

A. 446,964 Shares to RCI, s.r.l.;
B. 651,466 Shares to GPR Corp.;
C. 43,000 Shares to Mimax Limited;
D. 22,200 Shares to Montehrima Limited; and
E. 16,000 Shares to BTTS, Inc.

Mr. Radulovic disclaims any affiliation with the above listed companies.

(3) Includes 1,372,818 Shares acquired pursuant to an Option granted to him
by Mr. Radulovic in June 1996.

(4) Also includes 1,029,466 Shares acquired in the conversion of $3,088,397
of loans to the Registrant in September 1998 by Trinal, Inc. and Crystal
Ball, Inc., over which shares Mr. Taflevich may be deemed to have
beneficial ownership.

None.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1. In June 1996, Mr. Radulovic granted an Option to Mr. Taflevich to acquire
1,372,818 shares of the Company's Common Stock. The shares subject to this
Option were originally acquired by Mr. Radulovic in the original share
exchange between Ramoil Management Co. and American Corporate Investors,
Inc. on June 10, 1996. The Option was granted in expectation of Mr.
Taflevich's agreement to serve as President of the Company. This Option was
exercised by Mr. Taflevich following his assumption of the duties of
President of the Company.

2. In the original; share exchange between the Ramoil Management Company and
American Corporate Investors, Inc., Mr. Radulovich was issued a total of
3,192,600 Shares, of which 446,964 Shares were beneficially owned by RCI,
s.r.l, an Italian company that owned an interest in Ramoil Management
Company prior to its acquisition by the Registrant in June 1996. This error
was subsequently discovered and these Shares have now been issued to RCI,
s.r.l. Mr. Radulovic continues to own a 1% interest in RCI, s.r.l.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

NONE.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, there unto duly authorized.

AMERICAN CORPORATE INVESTORS, INC.

DATE: MAY 17, 1999 BY: /S/ALEKSANDR TAFLEVICH
--------------------------------------
ALEKSANDR TAFLEVICH, PRESIDENT

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: May 17, 1999
Rodoljub Radulovich, Secretary /s/Rodoljub Radulovic
Chief Executive Officer --------------------------------------------
Chief Financial Officer & Director

Dated: May 17, 1999
Aleksandr Taflevich, /s/ Aleksandr Taflevich
President and Director --------------------------------------------

Dated: May 17, 1999
Zarko Radulovich /s/Zarko Radulovic
Vice President, Director --------------------------------------------

Dated: May 17, 1999
William Brown, Director /s/William Brown
--------------------------------------------