LEADING EDGE EARTH PRODUCTS INC, 10KSB40, 1999-07-26

LEADING EDGE EARTH PRODUCTS INC
10KSB40, 1999-07-26
CONCRETE PRODUCTS, EXCEPT BLOCK & BRICK

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FORM 10-KSB

U.S. Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-KSB

[X] 15, ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended April 30, 1999
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[ ] 15, TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]

For the transition period from___________ to ____________
Commission file number 93-67656-S

LEADING-EDGE EARTH PRODUCTS, INC.
(Name of small business issuer in its charter)

Oregon 93-1002429
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(State of incorporation or organization) (I.R.S. Employer ID No.)

319 Nickerson St. #186, Seattle, WA 98109
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 800-788-3599
------------------------
Securities registered under Section 12 (b) of the Exchange Act:

Title of each Class Name of each exchange on which registered
none none
-------- --------

Securities registered under Section 12 (g) of the Exchange Act:
none
--------------------------------------
(Title of class)

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

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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. [X]

State issuer's revenues for its most recent fiscal year: $71,413
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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 prices of such stock as of June 21, 1999: $8,066,247

State number of shares outstanding of the Registrants common stock as of June
21, 1999: 30,369,907
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LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

PART 1

ITEM 1. DESCRIPTION OF BUSINESS.

INTRODUCTION AND OVERVIEW: Leading-Edge Earth Products, Inc. ("LEEP"), an Oregon
Company, is the result of a merger on December 29, 1992, of Leading-Edge Earth
Products, a Washington corporation, and Crystal Asset Management, an Oregon
corporation. The merger was accounted for as a pooling of interest. The
objectives of LEEP are to develop, manufacture, market and profit from the sale
of its structural, lightweight, highly insulated, frameless, composite building
system. The LEEP Building System is pre-engineered and produced by joining LEEP
STRUCTURAL CORE(TM) components to form entire walls, roofs, floors, and
partitions for residential and non-residential building construction. LEEP's
product is designed to substitute for wood and other traditional materials and
building systems. LEEP believes its products will have major worldwide appeal
for non-residential (commercial) construction and single- and multi-family
residential construction, including housing in Emerging Nations. Highly
insulated, stand-alone offices, restaurants, retail stores, shops, and housing
for Emerging Nations constitute LEEP's initial target markets.

Between 1992 and 1996, LEEP conducted R&D at a series of three locations in
Washington State. In January 1996, LEEP shut down its R&D activities in
Washington and continued development in joint venture with a newly formed
joint-venture company, Agile Building Technology, Inc. ("Agile"), in
Pennsylvania. LEEP stopped development with Agile in October 1996 when Agile
source funding ceased. LEEP continued development of its LEEP STRUCTURAL CORE
product using third party financing and facilities. Agile retained interior and
exterior wall covering products and continued in existence. LEEP continues to
own its original 35% equity interest in Agile as of the date of this report and
Agile's majority shareholders own 4.3% of LEEP. LEEP signed a new definitive
agreement with Agile et al in February 1997. The February 1997 agreement gives
both Agile and LEEP autonomy to fund independently and to develop their
respective companies. (For additional historic information about Agile, see the
10-KSB/A report for period ending April 30, 1998.)

During late 1996 and early 1997, a shareholder, L/A Investors, Inc. ("L/A"),
agreed to fund operations in Pennsylvania to complete the LEEP STRUCTURAL CORE
R&D through the preliminary testing phase and establish an initial manufacturing
facility. This operation was accounted independently by L/A and later became
incorporated as LEEP Building Systems, Inc. ("LBS"). Grant Record, LEEP's CEO,
agreed to head up the development and to support himself financially over the
period. LEEP agreed to accrue Mr. Record's salary on the books over the period.
There was no initial written contractual agreement between L/A and LEEP, as the
parties could not determine the duration or financial impact of the project.
From the outset, there was a general understanding that L/A would sell its
position in the development program to LEEP for additional shares of LEEP's
stock and the return of some of L/A's invested cash. Mr. Record agreed to
itemize and track the expenditures for the parties. At that time, the product
began to be known as LEEP STRUCTURAL CORE or LEEP CORE. Sufficient development
and testing was completed on LEEP CORE to attract the interest of the City of
Twin Falls, Idaho, to assist LEEP

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to explore establishing a high-volume manufacturing operation in Idaho.
Manufacturing sites in Twin Falls County, Idaho, proved to be difficult to
develop, and LEEP found a more attractive site to develop in Shoshone, Idaho,
about 25 miles north of Twin Falls (see "Management Discussion and Analysis"
below). Overlapping and in tandem with the Idaho manufacturing site planning and
development activity, a LEEP CORE pilot manufacturing operation was begun in
Montgomery, Pennsylvania. L/A provided much of the cash to cover the costs of
establishing and operating the Montgomery, Pennsylvania facility and conducting
the Idaho activities until July 31, 1996. L/A formed LEEP Building Systems, Inc.
("LBS"), a Nevada corporation.. Accounting records of all expenses associated
with the Pennsylvania and Idaho operations were shifted into LBS. LEEP has
negotiated an option to buy the operations, equipment and contracts relating to
LEEP from L/A for $250,000 in cash plus preferred stock converting to 1,000,000
LEEP common shares. The option expiring on August 1, 1999 (see Exhibit 99.2) has
been extended until November 1999.

PRODUCT DEVELOPMENT CRITERIA: Wood, metal, and concrete products are the
predominant structural materials used in the building construction industry.
LEEP believes that substitutes for traditional wood structural elements will be
used for the future generations of building components because of the dwindling
supply of timber occasioned by regulatory and environmental considerations. LEEP
believes that the market will demand that future building materials be
lightweight, fire-resistant, water-resistant, sound abating, rot-resistant and
offer seismic and wind-resistant properties. LEEP believes that many future
requirements cannot be readily met with current metal, wood and/or concrete
products. LEEP's STRUCTURAL CORE product is believed to address the above
performance criteria while at the same time addressing the ever-important
competitive cost requirements.

ENVIRONMENTAL CONSIDERATIONS: A major emphasis of LEEP addresses developing and
manufacturing environmentally friendly products that are nontoxic at every level
from the manufacturing process through the end product, and environmentally
sound for long-term use. As a practical matter, other than compliance with OSHA
standards for manufacturing which is common to all U.S. manufacturing companies,
there are no major product-related environmental considerations known by LEEP
that are mandated by law at this time. LEEP's STRUCTURAL CORE product is capable
of practical insulation values ranging from 50% to 300% greater than standard
U.S. building code requirements, thereby promoting significant savings of fossil
fuels that are used for heating and cooling. Enough LEEP CORE can be shipped on
a 40-foot long truck trailer to build two medium size American houses, therefore
the product's compactness and light weight effect large savings of fuel required
for transportation purposes.

When fully implemented, LEEP believes its technology and product can effect
savings of substantial amounts of the planet's forest products and contribute to
the above major savings in transportation costs and attendant fossil fuel use.
In addition, there will be savings in both summer and winter fuel consumption
because LEEP's FRAMELESS Building System product offers thermal insulation
properties that are superior to those of conventional materials and frame-type
building systems.

All of LEEP's environmental features and benefits can make a material difference
in the building construction industry, if the technology and practical aspects
of producing the product are driven by large-scale manufacturing. A principle
focus of LEEP and its management is on developing products that lend themselves
naturally to high-volume production. The production machinery LEEP plans to use
is capable of producing enough LEEP CORE product to support construction

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of 27 medium size American houses (or equivalent sizes of commercial buildings)
each full production day, in each of LEEP's future large-scale manufacturing
facilities in the U.S.

ABOUT THE TECHNOLOGY: LEEP uses composite technology. Composite technology is
based on the principle that when two or more pieces of material (sheets or
beams) are laminated together, the two or more pieces become a unitized
composite member. The resulting member's structural strength-to-weight
relationship is greatly improved, when compared with the weight and
corresponding strength of non-composite materials. This composite technology is
the basis for LEEP's current and future anticipated patent and other proprietary
positions. Better strength/weight performance of products translates to less
material/less weight being required to construct buildings. This composite
technology can be applied so as to make products that weigh 200 pounds vs. 1,900
pounds, in the case of solid concrete, brick or block comparisons; and 200
pounds vs. 900 pounds, in the case of wood product comparisons. Specifically,
LEEP CORE weighs less than wood or concrete and offers exceptional strength to
weight (ratio) structural performance. This means that lighter weight LEEP CORE
can support greater wall, roof and floor loads than can solid materials of the
same weight.

RESEARCH AND DEVELOPMENT: In the year ending April 30, 1999, LEEP expended only
$17,966 performing research and development on its technology and products.
However, more than $500,000 has been expended through the L/A and LBS
organizations, between October 1996 and the present, to support LEEP's R&D,
pilot manufacturing and positioning to begin large-scale manufacturing. LEEP's
main focus between October 1996 and the present, has been to position to sell
and produce large quantities of its LEEP STRUCTURAL CORE product.

MANUFACTURING METHODS AND OUTLOOK: Prototype panels were initially fabricated
using rudimentary manual presses, conventional metal bending equipment and hand
mixed foam chemicals. These early LEEP panels were tested and the panel
configuration was evolved to meet higher and higher levels of performance
criteria up to the point that 5" thick panels met Commercial Floor Load and
Hurricane V Wind-load codes. To LEEP's knowledge, 5" foam/metal panels have
never before attained such advanced structural performance levels.

Subsequent to the testing phase, LEEP's initial manufacturing process was
perfected in early 1998. Based on earlier designs of a custom LEEP-proprietary
"Shuttle Press," the first press was put into operation during the first quarter
of 1998. Enough LEEP CORE product can now be produced in the Pennsylvania plant
to support construction of one 6-Family Complex every three weeks. Commercial
sheet metal fabricators, using numeric-controlled metal presses, are supplying
the custom metal parts to support this current pilot-manufacturing phase. LEEP
sponsored the lease of a modern computer-controlled foam generation system
manufactured by Linden Industries, Inc./EMB. This equipment is located at LBS in
Pennsylvania to enable LBS to supply LEEP with high-tolerance, commercial grade
LEEP CORE product, until LEEP exercises its option to purchase the Pennsylvania
manufacturing operation. LEEP is currently seeking $3 million to expend on
additional equipment, raw materials, operations, purchase of LBS, and G&A over a
six-month period. This expansion will bring the Pennsylvania LEEP CORE
production rate up to one 6-Family Housing Complex per day.

LEEP's large-scale manufacturing plant configuration is planned to consist of:
two metal roll forming machines which continuously pre-form the top and bottom
parts; two 10,000-lb. metal coil handlers; an automatic insulating chemical foam
generator; a 127-foot long custom laminator (which takes the place of the
present individual containment presses); a computer-controlled flying

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cut-off saw; a 100-foot cool-down/stabilizing chamber, a window/door opening
routing system and various other curing, handling, packaging and shipping
facilities. With this configuration, LEEP plans, under computer control, to
automatically cut the panels to custom lengths per construction job work order
instructions. LEEP plans to chemically bond these custom lengths together as
they come out of the stabilization chamber, to custom form specific
4'-to-10'-wide panel sections with which to construct walls, roofs and floors.
LEEP plans to have funding committed for this large-scale Automated Laminator
Production System by the time the earlier discussed Pilot Plant expansion is
complete. The longer lead-time metal forming machine tooling design has been
funded and completed, and the two metal forming production systems are on order
for interim use in the Pennsylvania plant. Achieving the goals and schedules is
dependent on LEEP's receipt of borrowings, Private Placement fundings and/or
equipment lease-line financing.

Site selection, site use permit, a site environmental phase I study, and all
tasks leading to LEEP's final building design and permit were completed on a
36.5-acre rail-side manufacturing building site in Shoshone, Idaho. The Union
Pacific Railroad agreed to sell the property to LEEP on attractive terms in
order to encourage LEEP's commercial development of the property. Formalities
concerning the title transfer were completed during 1998. Completing this
building site development and building construction is dependent on LEEP's
receipt of interim operating funds and funds to clear contingent liabilities on
the land's ownership. Bank and/or private construction loan and/or long term
mortgage financing and/or an IRB issue are under consideration for LEEP's
funding.

TESTING AND CODE APPROVALS: LEEP completed "distributed wall," "un-reinforced
and reinforced point-load" testing in October/November 1998 at the University of
Washington. These tests were certified and reported in a news release, and to
the SEC (see 8-K report filed on December 10, 1998). LEEP's STRUCTURAL CORE, has
been tested extensively using ASTM specified test criteria for wind force
resistance of walls, and floor loading capacities. These specific tests were
done internal to LEEP, using applicable ASTM standards. These internal tests
were not certified. Such certified testing is readily available and results can
be efficiently obtained at commercial labs and some universities, for reasonable
rates. LEEP plans to use the University of Washington for additional testing of
its 4" LEEP CORE product.

MARKETS AND MARKETING: LEEP believes that recent changes in the construction
industry create an increased desire by builders to buy pre-manufactured, or
fabricated, construction components. According to Automated Builders Magazine
(August 1996), panelized construction sales exceeded wood-frame construction for
the first time in history (39% vs.36%) in the United States in calendar year
1995. This trend continued in 1996, 1997 and 1998, and the trend is continuing
in 1999, according to US Government Economic Development Department
publications, Automated Builder publications, and other industry study groups.

LEEP abandoned its 1998 plan to build a series of sample buildings across
America, because the first such building did not produce the desired result of
exposing LEEP to volume sales of multiple units. The test and demonstration
building that LEEP built in Twin Falls, ID is serving LEEP's objectives:
numerous people traveled to Idaho in 1998 to see the building, and the
number of interested parties that are traveling to Idaho is increasing in
1999.

LEEP's current strategy is to continue to produce and stockpile LEEP CORE panels
to support prompt construction of buildings that represent the first of multiple
building orders. LEEP has

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designed a total of five different types of buildings to support this
marketing/sales objective, and is working on several such unit orders that
promote follow-on business.

LEEP's capability has increased greatly relative to Internet and other methods
of communicating its product's salient features and benefits, and detailed
experience about constructing LEEP buildings. LEEP's 1998 in-depth testing
certifications concerning the product's structural capabilities also helped lend
credibility to LEEP STRUCTURAL CORE FRAMELESS Building System construction.
FRAMELESS construction is described as follows:

To establish a basis for comparison of LEEP's FRAMELESS Building System, there
are three basic popular methods used today to construct insulated buildings: (1)
Component, (2) Modular, and (3) Panelized/frame:
1. Component construction (with thousands of masonry, wood and/or metal
components that are assembled by laborers at the job site) is time
consuming, complicated and relatively expensive.
2. Modular construction, on the other hand, offers the advantages of lower
cost and fast field erection. It is faster and more efficient than field
assembling thousands of components. Some disadvantages of Modular
construction are that factory-assembled modules are difficult to move to
the job sites, thus limiting the practical distances the modules can be
moved. More importantly, the types of structures that can be designed,
assembled and shipped is narrowly defined and highly restricted, compared
to the other two approaches; and a more specialized workforce is required.
3. Traditionally, Panelized/frame construction offers some of the advantages
of Component based construction, mainly design flexibility and ease of
shipping, and overcomes the design and shipping limitations of Modular
construction. Unfortunately, large specialized crews and heavy-duty
equipment are required, and large numbers of parts are involved. The result
is usually a conventional frame-structure building with a "metal building"
look.

Features and benefits of LEEP's freestanding FRAMELESS Building System include:
1. LEEP's freestanding FRAMELESS system is a breakthrough. Approximately 75%
of thermal losses in conventional buildings occur through frame members.
LEEP's FRAMELESS Building System avoids such losses; LEEP buildings can be
heated and cooled more efficiently than conventional buildings.
2. The standard two-foot-wide LEEP STRUCTURAL CORE component used to fabricate
the LEEP FRAMELESS Building System provides the ultimate in building design
flexibility and fast response. LEEP's FRAMELESS Building System structures
can be designed in short time cycles, efficiently fabricated, packaged,
shipped, and then erected by small crews. This building
"concept-to-completion" cycle is the fastest and most practical in the
history of building construction.
3. Redesign/pre-engineering/reconfiguration activities do not negatively
impact the LEEP manufacturing plants, because a LEEP plant produces and
uses only the one two-foot-wide LEEP STRUCTURAL CORE component. The
structural component is never modified, revised or customized. It comes out
of a machine at the rate of 80 sq.ft. per minute, round the clock. The
manufacturing operation simply puts the standard LEEP CORE components
together to form large sections of pre-engineered, structural walls, roofs,
floors, and/or partitions. All sections the plant assembles are flat, and
easily packaged and transported. A wide variety of small-to-medium-size
buildings can be designed, pre-fabricated in large flat sections, with
window and door openings, and shipped to job sites. Field erection is fast
and efficient because LEEP FRAMELESS buildings are pre-engineered and
freestanding, i.e., no wood, metal or concrete vertical frame/support
members are required.

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4. Computerized ("CAD") original designs and design revisions are extremely
efficient because LEEP uses only the one structural component of the same
width, strength and density, which is designed to support structural wall,
roof, floor and partition applications.
5. LEEP designed its manufacturing plant(s) to produce and ship up to 33,
pre-engineered, 2,000-sq.ft. buildings per day. These building systems will
ship, ready to field erect. This equates to a shipping capacity of
approximately 100,000 sq.ft. of pre-engineered wall, roof and floor
sections per day for each LEEP plant, which will build, on the average,
66,000 sq.ft. of building space.
6. LEEP STRUCTURAL CORE offers the largest strength to weight performance of
any material component ever offered to the industry; as such, design,
shipping, handling and erection tasks are all more efficient.
7. All of the above facts and considerations add up to make LEEP's
freestanding FRAMELESS Building System an extremely cost-effective building
system.

Summary of benefits of LEEP's freestanding FRAMELESS construction:
- - Provides maximum, practical thermal insulation value--four-inch-thick walls
offer practical insulation values well in excess of the values provided by
traditional frame systems
- - Provides the ultimate in architectural design and redesign flexibility
- - Allows the fastest building "concept-to-completion" cycle in history, for
high-performance buildings
- - Computerized designs can be instantly transmitted to any place in the world

LEEP's FRAMELESS Building System is the most cost/performance effective method
available to construct small-to-medium size high-performance buildings.

LEEP has identified four vertical markets, which have heavy demands for
cost-effective product that offers the advanced performance characteristics
provided by LEEP CORE:

1. 1,000 to 15,000-sq. ft. building size range, including highly insulated,
stand-alone commercial warehouses, office buildings, restaurants, and
retail goods stores.
2. Specialty buildings in the 500 to 2,000-sq. ft. size range requiring
ultra-high insulation, ultra-light weight, water-proof integrity,
insect-resistance, portability and/or ready assembly and disassembly
characteristics, and high strength-to-weight performance; this class of
buildings includes remote structures for communication equipment
maintenance and other back-country applications, freezer and cooler uses,
and very-hot or very-cold climatic situations.
3. Housing for Emerging Nations.
4. North American housing.

LEEP has three strategies to take advantage of the present industry trend to use
more pre-engineered/panelized building systems:

1. The first strategy is to enter the easiest markets using LEEP's current
pilot product to support construction of simpler buildings. LEEP intends to
accumulate orders during the balance of 1999 and into 2000, while ramping
up its current "one-shot" molding production capacity to one 6-Family
Housing Complex (Emerging Nation-style building) per day and then to 33
such buildings a day when "full-scale" production begins.
2. The second strategy is to identify the largest domestic and/or foreign
applications and available early orders for LEEP's products. Using the
initial documentation and experience gained in establishing the first
full-scale plant, LEEP is developing a computer-stored body of information
(a "template") that can be used to build additional plants. Once the
product acceptance and distribution methods are established, LEEP expects
to develop significant order

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backlog. As the order backlog begins to approach the capacity of LEEP's
first full-scale plant, the Company plans to position to construct
additional manufacturing plants in North America, in order to obtain the
earliest possible optimum market penetration and competitive capability.
3. Many smaller buildings within LEEP's specialty size range of 500 to 15,000
sq. ft. are not cost-effective for conventional methods. Builders of large
metal buildings, for example, have many applications for small buildings
within, around or attached to large metal buildings. In most of these
instances, the relatively inefficient cement block and wood-frame, and/or
metal-stud constructions have been the only methods of construction
available to the large metal building contractors. LEEP intends to contract
with selected large metal building companies to fulfill the needs discussed
above.

At present, the United States is one of the few remaining First-world countries
that still allows a large cross section of residential construction to continue
without well-defined wind, fire, and seismic resistance ratings. LEEP believes
that there are significant public-interest implications associated with
America's lack of stringent wind, fire and seismic resistance standards being
enacted by Congress and enforced by U.S. regulators; especially given the large
loss of life and property sustained in the U.S. each year; should laws be
enacted in the United States to tighten these standards, such are likely to
promote LEEP's products for their strength, fire, wind and prospective seismic
resistance features.

COMPETITION: There are a significant number of manufacturers in the U.S. who
produce residential building panels constructed of wood. LEEP believes, however,
that there are no practical building systems currently available to the building
construction industry which are cost-effective, integrally load-bearing and have
fire-resistance, waterproofing, insect- and rot-resistance, and thermal
insulating characteristics, which are competitive with LEEP's FRAMELESS
Construction technology.

Recently introduced wood-based pre-engineered building systems have come to be
"accepted technology" in this industry that has been slow to accept change. This
reluctance to change, historically, has made it difficult for a small company,
such as LEEP, to successfully enter the market with a new product. To further
illustrate this relatively new phenomenon, a significant sector of the
residential housing construction market has been penetrated by a group of
approximately 100 small manufacturers/builders over the last ten years. Using
wood-clad, stress-skin insulated panel technology (SIP), sales developed by this
group of companies are growing at a rate of 50% or more a year. This group of
companies' success establishes a precedent for acceptance of new technology
which serves adjacent and related vertical markets. None of these companies
offer FRAMELESS Construction technology.

The non-residential building construction industry is highly competitive and is
dominated by companies that are typically large enterprises who actively promote
their building construction products to designers and property owners. Such
competition from established competitors could adversely affect LEEP's
prospects. As discussed above, LEEP is going to offset the potential negative
impact of the situation by cultivating the large metal building companies as
customers for small structures that are uneconomical and troublesome for them to
build, but profitable to LEEP.

The principal non-residential panels on the current market are those made using
sheet metal/foam technology, often called, "foam/metal curtain panels." Unlike
LEEP STRUCTURAL CORE, these panels are not load-bearing. The market-dominant
traditional producers of curtain panels show no willingness or desire to develop
panels that are load-bearing and therefore competitive with LEEP's

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product. Although LEEP's main product is also a foam/metal panel, LEEP
STRUCTURAL CORE is load-bearing and can be used to construct structural floors
and roofs as well as load-bearing walls. LEEP expects the curtain panel
manufacturers and their clients to become customers for LEEP CORE. Historically,
the corporate strategy of these larger companies is to purchase suppliers and/or
competitors after significant sales volumes and market niches are established.
This traditional policy helps to ensure the larger companies that such suppliers
will not become competitive with them. LEEP will reserve judgement as to its
course of action with respect to such large company overtures, while it develops
its market share and market niches with the knowledge that the big companies
will not become competitive for a protracted period of time, until significant
markets are established. None of the large companies offer or have available
FRAMELESS Construction technology.

PATENTS AND LICENSES: LEEP has been patent intensive since 1992. LEEP received
notice from the U.S. Patent and Trademark Office in 1995 that a patent was
granted covering 47 claims LEEP considers important. A second patent was granted
by the Mexican government in 1996, covering 47 claims. The U.S. Patent and
Trademark Office granted LEEP's third patent in April 1999 (12 claims). (LEEP
filed an additional "unifying"-type patent with the U.S. Patent and Trademark
Office in May 1999 and is in the process of adding, by amendment, 12 more claims
to the patent granted in April 1999.)

All of LEEP's patent work is aimed at protecting LEEP's technology as it relates
to construction of a lightweight (typically 2.6# per sq.ft.) building
construction material, which holds in excess of 166# per sq.ft. of roof load
(assuming failure load is two times greater than the 166# per sq.ft. load
rating. 150# per sq.ft. of dead floor load can be held when LEEP CORE is clad
with a flooring cover and used for commercial and/or residential flooring. In
certified tests during 1998, LEEP achieved load factors in excess of twice the
above 166# sq.ft. objective. 1999/2000 testing is aimed at demonstrating how
these revolutionary "ultra-strength" properties and the flexibility of LEEP
STRUCTURAL CORE, will provide wind and earthquake force resistance beyond the
capabilities of masonry, wood, steel and concrete.

Exclusive rights to use the patented technology in the United States and
nonexclusive rights outside of the U.S. are assigned to LEEP by the inventor.
Non-domestic rights are subject to LEEP's paying for all costs associated with
developing foreign business and paying the costs of applicable foreign patent
work desired by LEEP. LEEP has not yet patented any of its technology abroad,
except in Mexico. All U.S. rights for subsequent related technology (patented or
not) are assigned to LEEP by LEEP's founder and early management.

LICENSOR TRANSACTIONS: An agreement dated February 28, 1997 provides for
autonomous and independent development and individual financing of LEEP and
former joint venture affiliate, Agile, respectively. LEEP maintains a passive
35% equity ownership position in Agile, however, LEEP has agreed to an early
buy-out under terms LEEP considers favorable to it (see Management Discussion
and Analysis).

CONTRACT EMPLOYEES. Mr. J. David Thorne, General Manager and Director of
Technology, who served Agile and LEEP during the development period, played a
major role in developing LEEP's STRUCTURAL CORE product and technology. Mr.
Thorne works for LEEP Building Systems, Inc., while working exclusively on LEEP
corporate objectives. He has expertise in:

- - Machine design and fabrication

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- - Polyisocyanurate (Mr. Thorne was a plant superintendent and technologist
for one of the companies that pioneered the American Polyiso-foam/metal
panel industry. He received his initial training with an early metal/foam
developer in Sweden. He subsequently supervised the importation of the
first foam/metal lamination machine from Sweden to the U.S.; he then stayed
on with the U.S. company for an additional 12 years, during which he held
various management positions at the company, which ultimately became the
well-known Overhead Garage Door Company.)
- - Quality control, plant planning, manufacturing systems and product testing
systems

OTHER ASSISTANCE: Treasurer and director James R. Medley, is acting in a near
full-time capacity as Financial Officer and Controller. Mr. Medley keeps the
books and records of LEEP, and is responsible for coordinating the annual audit
and all SEC reporting, including 10-K, 10-Q and 8-K reports.

In addition to Mr. Medley, there are several consultants assisting LEEP's
officers in the development of LEEP's products, processes, plans, equipment, and
corporate capabilities, who are assisting LEEP on a part-time basis until
anticipated financing permits them to begin full-time service.

L. Eugene Laughlin, Executive Vice President, is in charge of planning and
administration. Mr. Laughlin is also charged with developing LEEP's order
processing system. This system is intended to allow the client to submit a
concept, or working drawing, receive an estimate, add or revise features,
develop the sales contracts, and receive a delivery commitment; all on a secure
Intranet. LEEP's order system will schedule the production, track its progress
and report any variances to committed timing; track and report on progress of
recovery actions; and follow-up with customer satisfaction survey issues.

Pinnacle Consulting Group (Pinnacle), Snohomish, WA has agreed to become
responsible for tracking the overall design and implementation detail of LEEP's
automated plant. They are also responsible for fully documenting the production
machinery, vendors, manufacturing facility detail and associated services of the
Idaho plant. This documentation is planned to allow LEEP to duplicate the Idaho
model plant anywhere in the world.

ITEM 2. DESCRIPTION OF PROPERTY.

LEEP bought a 36.5-acre site in Shoshone, Idaho, from the Union Pacific Railroad
Company (see Form 8-K filed on February 10, 1999), for the purpose of developing
a facility to manufacture its products (see Item 6). LBS owns metal and finished
inventory sufficient to construct eight medium-sized commercial buildings (or
equivalent). A metal supplier is stocking a sufficient quantity of LEEP's
special-order custom metal to support manufacturing an additional 2,500 panels,
which, in turn, will support construction of approximately 18 medium-size
commercial buildings or 15 6-Family Housing units for the Emerging Nation
markets. This metal can be released and shipped in three 45,000-pound
increments.

ITEM 3. LEGAL PROCEEDING.

There are no legal proceedings in progress or pending at this time.

10
<PAGE> 11

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

On April 30, 1999, at the annual meeting of shareholders, votes and proxies
totaling 15.6 million were represented. The following were elected unanimously
to serve as Directors of LEEP until the next annual meeting:

- - Grant C. Record
- - Donald C. Bazemore
- - James R. Medley
- - Way W. Lee
- - William R. Nordstrom

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

LEEP's Common Stock is traded in the over-the-counter market and prices are
quoted on the NASDAQ Bulletin Board.

The following sets forth the high and low price information for each quarter
during the last two fiscal years, as provided by the NASDAQ Bulletin Board
quotations. The quotations provided reflect inter-dealer prices without retail
markup, markdown or commission and may not represent actual stock buyer costs.

<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Year Ended April 30, 1998

First Quarter 19/32 13/32

Second Quarter 5/8 3/8

Third Quarter 21/32 7/32

Fourth Quarter 21/32 7/16

Year Ended April 30, 1999

First Quarter 1/2 9/32

Second Quarter 5/16 7/32

Third Quarter 15/64 3/16

Fourth Quarter 1/2 3/16
</TABLE>

The number of holders of record of LEEP's Common Stock on June 21, 1999, is:
1,400. LEEP estimates that there are approximately 2,600 shareholders when those
who hold positions in LEEP's common stock in street names with stockbrokers are
added to the total.

LEEP has never paid a cash dividend.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.

PLAN OF OPERATION: The operations of LEEP, since inception, were focused on
research and development (R&D) until late 1997 when the focus was switched to
manufacturing. LEEP conducted R&D activities, directly, from 1992 to 1996. R&D
was done and paid for by an affiliate, Agile Building Technology, Inc., from
January through October 1996. Agile's and consequently LEEP's funding for
product development was unexpectedly halted in October 1996. Subsequent to
Agile's loss of developmental funding, on February 28, 1997, Agile, LEEP and

11
<PAGE> 12

related parties signed an agreement that gave Agile and LEEP future autonomy to
finance and develop independently. Agile returned approximately 5 million LEEP
shares it had held contingently against an earlier agreement. These outstanding
shares were immediately retired and removed from LEEP's outstanding shares. LEEP
retained its original 35% equity interest in Agile. More than $2 million in
Agile funding was invested by new investors since LEEP's direct involvement.
Depending on the structure of the next round of financing, LEEP's ownership in
Agile could be diluted as much as 50% in the event LEEP elects to maintain a
long-term ownership position in Agile. Agile occupies a leased 110,000 sq.ft.
custom manufacturing building in Williamsport, PA where it has completed a
substantial portion of a $100 million-capacity manufacturing plant.

LEEP, historically, has generated only minor revenue (approximately $300,000 in
fee income). Agile owes LEEP approximately $477,332, plus accrued interest. LEEP
is reserving $320,276 including interest, in the event of non-payment. LEEP's
realization of gain from its Agile ownership is dependent on Agile's receipt of
short- and long-term financing. As of this date, no investors have been
identified to take Agile forward. Should an investor not be found, LEEP does not
expect to recover any economic benefit from its 35% interest in Agile, nor would
LEEP collect on any loans, unpaid fees, accrued interest, or other receivables
due LEEP. Because LEEP has not recognized its interest in Agile, nor the
receivable from Agile, as assets in LEEP's financial statements, should Agile
not find a new investor, such will not materially affect LEEP's financial
statements.

Should Agile receive funding and continue its operations, LEEP is receptive to
converting its debt and/or equity interest to a longer-term growth-oriented
equity position. LEEP also desires to retire from its outstanding shares the
remaining approximately 1.6 million LEEP shares yet held by Agile's
shareholders.

By early 1998, based on LEEP's earlier developments, patented technology, and
interim funding support, LEEP had developed a viable, patent pending,
structural, panel and building construction system using LEEP STRUCTURAL CORE.
LEEP has applied for patent protection for more than 40 additional claims on
related additional products, configurations and aspects that were developed
between October 1996 and September 1997. Two additional patents have been filed
since 1997 covering an additional approximately 40 claims, and an additional
patent was granted by the U.S. Patent Office in May 1999. L/A Investors, Inc.,
who sponsored completing LEEP's 1996/1997 R&D, also developed a pilot
manufacturing facility in Pennsylvania, financially supported planning a major
large-scale manufacturing plant and preparing for the purchase of a rail-side
location in Shoshone, Idaho, to construct a plant to manufacture the LEEP
STRUCTURAL CORE product. Subsequent to April 30, 1998, L/A formed LEEP Building
Systems, Inc. (LBS) for the purpose of its becoming the operating company to
house all rights, title and interests to L/A's investments. LEEP has negotiated
an option to buy LBS from L/A. (Refer to Note 6 to the Financial Statements.)
Significant purchase of equipment and manufacturing facilities by LEEP and its
affiliates and/or subsidiaries is expected during fiscal 2000, as well as
expansion of personnel to support the launch of larger, expanded manufacturing
operations for LEEP STRUCTURAL CORE.

LEEP's primary focus for 1999/2000 is to manufacture and market its LEEP
STRUCTURAL CORE product. LEEP's strategy is to establish markets and build sales
backlog, and then to form, finance, control, and manage regional manufacturing
plants, worldwide. Assuming successful construction and operation of LEEP's
first full-scale manufacturing plant, and sufficient funding, LEEP plans to
establish additional plants in North America and abroad within the next five
years.

12
<PAGE> 13

Financial commitments are not in place at this time for these undertakings.
LEEP's immediate second and third quarter calendar 1999 focus is to use the
expanding production capacity Pennsylvania plant to create the sales backlog to
a level that justifies the funding and construction of LEEP's first full-scale
manufacturing plant. The initial target is to create sales-order backlog of at
least 15% of the full-scale plant capacity.

LBS has sufficient capacity to manufacture LEEP STRUCTURAL CORE product in the
Montgomery, PA facility to support construction of approximately one, Six-Family
Emerging Nation-style building per three-week period for each Shuttle
Containment Press. Equipment is on order to enable the Pennsylvania plant to
support manufacture of one Six-Family building every day, by the end of calendar
1999. Using the planned 127-foot Laminator based manufacturing plant, LEEP will
be capable of producing approximately 100,000 square feet of LEEP STRUCTURAL
CORE per 20-hour production day. This equates to 33 of the above Six-Family-type
buildings per day. In the interim, LBS will use its Shuttle Containment Presses
("one-shot" process) in Pennsylvania to produce the LEEP STRUCTURAL CORE
product. 23 metric tons (50,329 pounds) of custom sheet metal was purchased
initially by LEEP and shipped from Korea to Pennsylvania to support
manufacturing of LEEP STRUCTURAL CORE. Subsequent to this, an additional 40,000
pounds was shipped. An additional 140,000 pounds of LEEP's custom high-tech
metal is being held by LEEP's metal vendor to support expanded production.

LEEP is evaluating locating its first full-scale plant in Shoshone, Idaho,
because this location offers substantial transportation, work force, logistic
and economic advantages to encourage an aggressive outlook for manufacturing
there. Other location-candidates are a site close by the Montgomery, PA
facility, and a site in Houston, TX. In the interim, LEEP plans to obtain LEEP
CORE panels from the LBS facility and ship them to Idaho for assembly to develop
the Western states and any other markets that present themselves. Full-scale
manufacturing-plant construction can be completed and operational by
mid-calendar 2000, provided adequate capitalization (considered to be
approximately $15.5 million, from all sources) to cover all organizational,
equipment and start-up costs, is incrementally committed between June 1999 and
May 2000. Grant Record, CEO of LEEP, took up residence in Idaho in order to
administer the planning phase for the first manufacturing plant. LEEP completed
its land purchase in the City of Shoshone, in February 1999 and the city granted
a use permit for LEEP's planned first 90,000-sq. ft. plant. Building permits are
pending LEEP's completion of building plans. Meanwhile, LEEP's sales campaign is
focused on staged incremental increases of LEEP CORE production to sufficient
levels to support construction of one Six-Family building each day by November
1999.

ONGOING DEVELOPMENT: LEEP has successfully designed and built in Twin Falls, ID
a 32'long by 36'wide by 12'high demonstration building using independent
structural roof support members, which demonstrates, among other things, a very
large "span to load" capability of 12' between centers, i.e., LEEP's roof system
clear spans three 12'-sections without intermediate frame support. A second
demonstration building has been designed which uses LEEP STRUCTURAL CORE with
embedded point-load support members to construct larger buildings with
long-clear-span bar-joist style (large bay) construction. LEEP has discontinued
its plan to erect small demonstration buildings. LEEP's marketing emphasis is on
its FRAMELESS building construction.

13
<PAGE> 14

LEEP is developing a series of building designs for office, food storage,
motels, schools, worker housing, Emerging Nations housing, and other
applications. Two multiplex designs are completed that house six families per
building. LEEP also offers a structure to provide high-density living quarters
for up to 210 workers per building complex to support manufacturing, mining, oil
field, agricultural, and other similar activities.

These projects represent natural markets and applications for LEEP CORE
FRAMELESS construction, as the company's technology provides low-cost and
high-performance solutions not previously available to these vast worldwide
markets. LEEP STRUCTURAL CORE is especially well suited for building in
high-humidity, high-wind, earthquake and/or termite-prone areas.

LEEP management has been in contact with several developers and their
representatives in the Middle East and Southeast Asia. These contacts have
widened the market scope of LEEP to include large volume projects that,
potentially, match LEEP's large volume production plans, which the specific
production technology supports. Planning for these large volume markets
anticipates less order-to-order variation and corresponding savings in sales
fulfillment costs.

On November 25, 1998, LEEP entered into a funding services agreement with
Allegiance Capital Corporation of Dallas, TX, a significant U.S. middle-market
investment banking company. Allegiance had a goal to structure and bring
together a total of $18.5 million for LEEP during calendar 1999. This
relationship has been halted due to LEEP's current interest in seeking
operational entities having operational interests in financing LEEP, rather than
strictly third-party investor motives. LEEP's management believes these
companies' prospective operational motives with LEEP, its product and
technology, provide the highest available investment incentives. The contract
with Allegiance has been mutually terminated.

LEEP decided, during the fiscal year just ended, to focus on expanding the
production capacity of the LBS Pennsylvania operation. This expansion, planned
to support construction of one 6-Family Housing Complex per day, will enable
LEEP to obtain meaningful orders and develop sales backlog, which in turn,
justifies funding and construction of LEEP's first full-scale plant.

LEEP financed, contracted, closed and received title to a rail-side industrial
park site after it received notice from the Union Pacific Railroad and the Idaho
District Court that the "quiet title" procedure was successfully completed
(refer to the 8-K report filed by LEEP with the SEC on February 11, 1999). The
property includes a spur that connects to the Union Pacific's main north-south
rail line. The price to LEEP was especially attractive, as Union Pacific wishes
to develop additional rail customers in the region.

LEEP has retained the Pinnacle Consulting Group, Snohomish, WA, to assist with
completing and implementing the design of the full-scale manufacturing facility
planned for Shoshone, ID. Pinnacle's work will result in a set of drawings,
specifications, and equipment vendor lists. LEEP will be able to use Pinnacle's
documentation package, permanently, to duplicate LEEP's first full-scale
production facility anywhere in the world.

In October 1998, LEEP CORE was tested at the Structural Research Laboratory of
the University of Washington's Department of Civil Engineering. The University
report concluded that LEEP's 4" thick by 12' high by 4' wide wall system,
WITHOUT ANY FRAME SUPPORT, is five times stronger than required to support the
roof load of typical designs of American commercial buildings. The tests
certify, respectively, point-load--9,000 lbs.; distributed wall-load--14,000

14
<PAGE> 15

lbs.; and point-load internally reinforced--30,000 lbs. (See 8-KSB report filed
on December 10, 1998.) Non-certified testing to determine the product's
capability to withstand wind and floor loads was performed internally by LEEP.
These tests will be certified by university tests later this year.

LIQUIDITY AND CAPITAL RESOURCES: In recent years LEEP has been almost entirely
dependent on its CEO, Grant Record, arranging credit facilities, making personal
loans, procuring loans from other stockholders, and selling stock to investors
in order to meet the monthly cash needs of LEEP. LEEP has no revenue from
operations and does not have assets that can be liquidated to cover cash
requirements. Management, however, believes that LEEP is in the best position of
its life to raise the required capital to meet its published objectives. This is
owing to the fact that LEEP's R&D has been completed and LEEP has aggressively
moved through its final developmental phase. LEEP's STRUCTURAL CORE product is
actively being produced on a daily basis by LBS. Equipment is on order that will
increase current production capacity by more than tenfold. The product's
advanced performance characteristics have been tested by internally conducted,
U.S. Government approved, American Standard Testing Methods (ASTM). In addition,
the most demanding compressive vertical load bearing tests were certified during
1998 at the University of Washington. ASTM specified tests are planned to
certify LEEP STRUCTURAL CORE for use in high-wind and earthquake-prone regions.
Detailed designs and planning are complete for LEEP's first large-scale
production plant. Pending business to justify 5% to 20% of the plant's projected
manufacturing capacity, the company's management believes financing can be
readily implemented and the first full-scale plant made operational during
fiscal 2000. LEEP believes that the above basics enhance its ability to
accomplish the financing required to perfect its business plan and accomplish
its operational objectives herein described.

In the year ended April 30, 1997 LEEP raised $25,000 from the exercise of stock
options, borrowed $115,452 with demand notes, and issued stock in exchange for
$514,627 in Company obligations. In the year ended April 30, 1998, LEEP raised
$20,000 from the sale of stock, borrowed $51,562 from stockholders and $386,500
from a credit facility, and issued stock for $605,132 worth of Company
obligations. In the year just ended, LEEP received $46,816 from a credit
facility, sold stock for $170,000 in cash and payables, and increased notes
payable by $98,020.

Since there is no expectation of cash flow from operations in the short term,
LEEP will need to continue borrowing money and selling stock in order to
continue funding its corporate overhead, which is expected to be between
$250,000 and $300,000 for the ensuing year.

Stock market conditions and a lack of aggressive shareholder following,
augmented by the dismal and unstable performance of the NASDAQ Bulletin Board
over-the-counter marketplace, necessitate development of "non-equity emphasis"
funding models. LEEP is actively seeking and entertaining investor candidates
with the aim of investing $3 million into operations, which is calculated to
support LEEP through to larger financing commitments for the full-scale plant.
The intermediate term $3 million is proposed by LEEP's management to come into
the company as convertible-debt wherein the debt is structured for a 3-year
term, interest bearing and convertible into the stock of the company at prices
substantially above the current public share market price. Management believes
that this convertible debt-funding vehicle is attractive to investors because
of: (1) collateral security (senior creditor position on plant, subordinated to
bank debt, if any), (2) associated interest income, (3) upside value potential
on the conversion to common stock, (4) depth of technology owned by LEEP and its
large body of resident experience, and (5) current availability of an efficient
production plant and production level product. The presence of a

15
<PAGE> 16

standing commercial office building that is accessible for prospective customers
and investors to examine is also a major asset for LEEP.

As sales order backlog increases, and more ultra-high performance LEEP FRAMELESS
buildings are completed (supported by the current and expanding production
facility), management believes the $15 million required to purchase plant and
equipment for the first full-scale plant will come more readily than the
earlier-stage $3 million of current emphasis. $1.2 million worth of capital
equipment is required to increase the Pennsylvania plant capacity. Leasing
arrangements are pending, which, if satisfactorily completed, will increase the
LBS plant capacity to 2,000 sq.ft. of LEEP CORE per day by year-end calendar
1999. This production level supports construction of approximately one 2,000
sq.ft. commercial building each day, which equates to approximately $12 million
annually.

A $10,000 loan is outstanding to a director, which is convertible to 50,000
shares. LEEP anticipates either converting the debt to stock or extending the
note. A $72,000 note is due a third party in Idaho on July 31, 1999. LEEP
has extended the note for an additional 90 days. LEEP has an option to
purchase the LBS manufacturing operation in Pennsylvania for $250,000 in cash
and 1 million shares of convertible preferred stock. This option expires on July
31, 1999. LEEP is negotiating to extend this option for an additional 90 days.

RESULTS OF OPERATIONS: Nearly all of LEEP's revenue for the fiscal year just
ended consists of $65,200 in interest due on notes receivable which has been
accrued. At the present time LEEP does not have any license or consulting
revenue agreements.

For further analysis, see LEEP's Statement of Cash Flows.

RISK AND UNCERTAINTIES: Matters discussed herein contain forward-looking
statements that involve risk and uncertainties. LEEP's results may differ
significantly from results indicated by forward-looking statements. Factors that
might cause some differences from planned performance, include, but are not
limited to:

- - Changes in general economic conditions, including but not limited to
increases in interest rates, and shifts in domestic building construction
requirements;
- - Changes in government regulations affecting customers of LEEP;
- - Risks generally involved in the construction business, including weather,
fixed price contracts and shortages of materials or price competitive
labor;
- - Competition;
- - The ability of LEEP to successfully bring the product from its pilot
production stage into full and profitable production;
- - LEEP's ability to raise sufficient debt and equity capital to perfect its
business plans;
- - The occurrences of incidents, which could subject LEEP to liability or
fines.

16
<PAGE> 17

ITEM 7. FINANCIAL STATEMENTS.

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Leading-Edge Earth Products, Inc.:

We have audited the accompanying balance sheet of Leading-Edge Earth
Products, Inc. (A Development Stage Enterprise) as of April 30, 1999, and the
related statements of operations, stockholders' deficit, and cash flows for the
years ended April 30, 1999 and 1998 and the period from December 23, 1991
(inception) to April 30, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Leading-Edge Earth
Products, Inc. (A Development Stage Enterprise) as of April 30, 1999, and the
results of its operations and its cash flows for the years ended April 30, 1999
and 1998, and the period from December 23, 1991 (inception) to April 30, 1999 in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
Leading-Edge Earth Products, Inc. (A Development Stage Enterprise) will continue
as a going concern. There is substantial doubt about the Company's ability to
continue as a going concern as a result of recurrent losses and negative working
capital. Management's plans in regard to these matters are also described in
note 1 to the financial statements. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Jorgensen Telford Sadovnick, PLLC
Certified Public Accountants

June 30, 1999
Seattle, WA

17
<PAGE> 18

LEADING-EDGE EARTH PRODUCTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

FINANCIAL STATEMENTS

APRIL 30, 1999

18
<PAGE> 19

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Balance Sheet as of 4/30/99

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,124
Accounts receivable 7,083
Prepaids 40,451
-----------
TOTAL CURRENT ASSETS 48,659
LONG-LIVED ASSETS
Land and improvements 127,576
Investment in affiliate 322,074
-----------
TOTAL LONG-LIVED ASSETS 449,650
-----------
TOTAL ASSETS 498,309
-----------

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Credit line 46,816
Accounts payable 166,741
Accrued contract salary payable 440,343
Accrued royalties and interest payable 90,479
Loans from shareholders 366,120
Notes payable 73,020
-----------
TOTAL CURRENT LIABILITIES 1,234,419
-----------

CONTINGENT LIABILITIES --

SHAREHOLDERS' (DEFICIT)
Preferred shares
(10 million shares authorized, none issued) --
Common stock, no par value 5,478,862
(100 million shares authorized, 29,835,013 issued and
outstanding)
Note receivable from shareholders (355,000)
Deficit accumulated during developmental stage (5,859,773)
-----------
SHAREHOLDERS' DEFICIT (685,211)
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 498,309
-----------
</TABLE>

19
<PAGE> 20

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statement of Operations for years ending April 30, 1999
and 1998, and From December 23, 1991 (inception)
through April 30, 1999

<TABLE>
<CAPTION>
Dec. 23, 1991
---Year ended--- through
April 30, 1999 April 30, 1998 April 30, 1999
-------------- -------------- --------------
<S> <C> <C> <C>
INCOME
License and consulting revenues $ -- $ -- $ 497,000
Interest 65,200 50,435 151,354
Other 6,213 3,013 25,190
------------ ------------ ------------
TOTAL INCOME 71,413 53,448 673,544

RESEARCH AND DEVELOPMENT EXPENSES 17,966 26,923 980,237

GENERAL AND ADMINISTRATIVE EXPENSES
Contract salaries and incentives 62,890 125,240 1,540,473
Travel and entertainment 22,528 22,628 237,788
Legal and professional 118,860 439,637 1,522,457
Promotional and corporate development 67,468 72,400 601,936
Other general and administrative costs 80,272 51,791 502,087
------------ ------------ ------------
TOTAL GENERAL AND ADMINISTRATIVE 352,018 711,696 4,404,741

INTEREST AND OTHER EXPENSE
Interest 40,775 94,386 275,062
Adjustment for unpaid revenues from affiliate 52,181 45,345 320,276
Royalties and royalty buyout expense -- -- 553,000
------------ ------------ ------------
TOTAL INTEREST AND OTHER EXPENSE 92,956 139,731 1,148,338
------------ ------------ ------------

TOTAL EXPENSES 462,940 878,350 6,533,316
------------ ------------ ------------

NET LOSS $ (391,527) $ (824,902) $ (5,859,773)
------------ ------------ ------------
Net loss per share $ (0.01) $ (0.03) $ (0.30)
Weighted average shares outstanding 28,573,426 27,583,544 19,231,235
</TABLE>

20
<PAGE> 21

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statement of Cash Flows for years ending April 30, 1999
and 1998, and From December 23, 1991 (inception)
through April 30, 1999

<TABLE>
<CAPTION>
Dec. 23, 1991
---Year Ended--- Through
April 30, 1999 April 30, 1998 April 30, 1999
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss $ (391,527) $ (824,902) $(5,859,773)

ADJUSTMENTS TO RECONCILE NET LOSS
TO CASH USED IN OPERATING ACTIVITIES
Nonqualified stock options and grants 97,967 666,610 2,805,792
Depreciation and amortization -- 861 16,185
Write-off of long-term assets -- 23,814 170,903
Accrued royalty obligation -- (37,000) 200,000
Settlement of lawsuit 25,451 -- 25,451
Purchase option accrual -- -- --

CHANGES IN OPERATING ASSETS AND LIABILITIES
Receivables (14,687) (5,982) (24,739)
Inventory -- (30,724) (30,724)
Prepaid expenses and deposits 834 (18,283) (23,949)
Accounts payable 106,392 (127,834) 569,926
Accrued salary obligations 60,000 45,615 454,967
Accrued interest payable 2,607 28,211 292,514
----------- ----------- -----------
TOTAL ADJUSTMENTS TO OPERATING LOSS 278,563 545,288 4,456,325
----------- ----------- -----------
CASH USED IN OPERATING ACTIVITIES (112,964) (279,614) (1,403,448)
----------- ----------- -----------

INVESTING ACTIVITIES
Investment in affiliate (130,286) (88,788) (219,074)
Equipment purchases, disposals (73,020) -- (232,084)
Purchase of intangibles -- -- (26,822)
Payments on notes receivable from shareholders -- -- 6,500
----------- ----------- -----------
CASH USED BY INVESTING ACTIVITIES (203,306) (88,788) (471,480)
----------- ----------- -----------

FINANCING ACTIVITIES
Increase in line of credit 46,816 -- 46,816
Sale of common stock 170,000 20,000 560,000
Exercise of stock options -- -- 67,537
Exercise of Class A warrants -- -- 3,300
Contributed capital -- -- 100,910
Proceeds from notes payable 73,020 386,500 731,650
Proceeds - loans from shareholders 25,000 51,562 696,717
Payments from shareholder loan -- (30,000) (254,379)
Payments on notes payable -- (63,000) (76,500)
----------- ----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES 314,836 365,062 1,876,051
----------- ----------- -----------

Change in cash (1,434) (3,340) 1,124
Cash at beginning of period 2,557 5,897 --
----------- ----------- -----------
CASH AT END OF PERIOD $ 1,124 $ 2,557 $ 1,124
----------- ----------- -----------
</TABLE>

21
<PAGE> 22

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statement of Cash Flows for years ending April 30, 1999
and 1998, and From December 23, 1991 (inception)
through April 30, 1999

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
Dec. 23, 1991
---Year Ended--- Through
April 30, 1999 April 30, 1998 April 30, 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Fixed assets acquired under contract $4,976
Fixed assets acquired with a note payable 13,725
Notes receivable in exchange for common stock 607,599
Offset of notes receivable from shareholder with
related loans from shareholders 117,315
Cancellation of notes payable in exchange for common stock 457,725
Payables for services for common stock $108,137 $144,029 745,830
Cancellation of accounts payable in return of plant and
equipment 22,500
Common stock issued for payment of accrued royalties and
interest payable 62,973 120,984
Grant of stock options in payment for accrued salary 120,000
Shares in exchange for note payable 398,130 438,130
Increase in shareholder loan for accounts payable 43,107 65,209 195,443
Note exchange for option exercise, 500,000 shares issued 3,500
Shares in exchange for investment in affiliate 70,000 70,000
Exchange of accounts payable for land 53,568 53,568
Settle lawsuit for interest payable 30,949 30,949
Settle lawsuit in exchange for note receivable 128,784 128,784
Settle lawsuit in exchange for loan payable 103,333 103,333
Exchange inventory for investment in affiliate 30,724 30,724
Exchange receivable for investment in affiliate 11,718 11,718
</TABLE>

<PAGE> 23

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statements of Stockholders' Deficit

Net loss for fiscal 1992 -- -- -- (34,725) (34,725)
----------- ----------- ----------- ----------- -----------

Balances at April 30, 1992 11,936,830 42,039 -- (34,725) 7,314

Cash contributions and
unreimbursed expenditures
incurred on behalf of LEEP 5/92-4/93 -- 63,871 -- -- 63,871
Common stock issued for
payment of note payable 4/30/93 0.35 168,725 58,725 -- -- 58,725
Common stock issued for
payment of salary 4/30/93 0.12 40,000 4,654 -- -- 4,654
Excess of market price over
exercise price on options
granted during the year -- 332,710 -- -- 332,710
Net loss for fiscal 1993 -- -- -- (504,175) (504,175)
----------- ----------- ----------- ----------- -----------

Balances at April 30, 1993 12,145,555 501,999 -- (538,900) (36,901)
Common stock issued for cash 6/22/93 0.54 665,000 360,000 -- -- 360,000
Common stock issued for
payment of services 6/22/93 0.54 99,000 53,594 -- -- 53,594
Common stock issued for
payment of stockholder loan
and accrued interest 7/27/93 0.61 125,400 76,000 -- -- 76,000
Exercise of stock options 4/30/94 0.07 100,000 6,500 (6,500) -- --
Excess of market price over
exercise price on options
granted during the year -- 825,129 -- -- 825,129
Net loss for fiscal 1994 -- -- -- (1,559,781) (1,559,781)
----------- ----------- ----------- ----------- -----------

Balances at April 30, 1994
carried forward 13,134,955 $ 1,823,222 $ (6,500) $(2,098,681) $ (281,959)
</TABLE>

23
<PAGE> 24

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statements of Stockholders' Deficit

Balances at April 30, 1995 16,551,516 2,899,357 (246,099) (3,402,669) (749,411)
Common stock issued for
payment of accounts payable 9/28/95 0.63 20,800 13,000 -- -- 13,000
Common stock issued for cash 11/6/95 0.80 12,500 10,000 -- -- 10,000
Common stock issued in
exchange for investments in 12/4/95 11,884,615 -- -- -- --
affiliates
Common stock issued for
payment of accounts payable 12/10/95 0.50 150,000 75,000 -- -- 75,000
Exercise of options for cash 12/27/95 0.12 202,320 23,541 -- -- 23,541
Common stock issued for
payment of accounts payable 1/12/96 0.75 100,000 75,000 -- -- 75,000
Offset of notes receivable
from stockholders with
related loans from 2/28/96 -- -- 117,315 -- 117,315
stockholders
Common stock issued for
payment of accounts payable 3/11/96 0.75 100,000 75,000 -- -- 75,000
Common stock issued for
payment of accounts payable
and accrued interest and 4/29/96 1.03 250,000 258,011 -- -- 258,011
royalties
Excess of market price over
exercise price on options
granted during the year 4/30/96 -- 41,500 -- -- 41,500
Net loss for fiscal 1996 -- -- -- (402,536) (402,536)
------------ ------------ ------------ ------------ ------------
Balances at April 30, 1996
carried forward 29,271,751 $ 3,470,409 $ (128,784) $ (3,805,205) $ (463,580)
</TABLE>

<PAGE> 25

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statements of Stockholders' Deficit

25
<PAGE> 26

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statements of Stockholders' Deficit

<TABLE>
<CAPTION>
Deficit Total
Accumulated Stockholders'
Price Notes during the Equity
Per Common Stock Receivable- Development (Accumulated
Date Share Shares Amount Stockholders Stage Deficit)
---- ----- ------ ------ ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at April 30, 1997
brought forward 25,876,350 $ 4,140,333 $ (483,784) $(4,643,344) $ (986,795)
Common stock issued for
accounts payable for
services 5/15/97 0.40 62,500 25,000 -- -- 25,000
Common stock issued for
services 5/30/97 0.43 75,000 32,400 -- -- 32,400
Options on common for
accounts payable for
services 6/6/97 0.00 -- 5,000 -- -- 5,000
Common stock exchanged for
note payable 6/6/97 0.43 178,279 76,660 -- -- 76,660
Common stock exchanged for
loan from shareholder 6/6/97 0.43 37,272 16,027 -- -- 16,027
Common stock issued for
services 6/6/97 0.43 113,690 35,250 -- -- 35,250
Common stock issued for
account payable for services 6/6/97 0.60 81,977 48,887 -- -- 48,887
Common stock issued for
account payable for services 6/6/97 0.43 28,819 12,392 -- -- 12,392
Common stock issued for
account payable for services 6/6/97 0.52 200,000 104,000 -- -- 104,000
Common stock issued for
account payable for services 6/6/97 0.52 200,000 104,000 -- -- 104,000
Common stock issued for
account payable for services 6/6/97 0.52 200,000 104,000 -- -- 104,000
Returned shares 6/18/97 -- (433,056) -- -- -- --
Common stock issued for cash 6/26/97 0.18 114,133 20,000 -- -- 20,000
Common stock issued for note
payable 8/21/97 0.62 316,800 196,416 -- -- 196,416
Common stock issued for note
payable 10/15/97 0.25 424,000 106,000 -- -- 106,000
Common stock issued for
services 11/1/97 0.40 100,000 40,000 -- -- 40,000
Common stock issued for
accounts payable 12/1/97 0.40 6,250 2,500 -- -- 2,500
Common stock issued for
accounts payable 1/29/98 0.27 94,126 25,000 -- -- 25,000
Common stock exchanged for
note payable 3/10/98 0.38 176,000 66,000 -- -- 66,000
Net loss for fiscal 1998 -- -- -- (824,902) (824,902)
---------- ------------ ------------ ----------- ------------
Balances at April 30, 1998 27,852,140 $ 5,159,865 $ (483,784) $(5,468,246) $ (792,165)
---------- ------------ ------------ ----------- ------------
</TABLE>

26
<PAGE> 27

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)

Statements of Stockholders' Deficit

Common stock issued for
services 5/1/98 0.30 50,000 15,200 -- -- 15,200
Common stock issued for
services 5/1/98 0.30 50,000 15,200 -- -- 15,200
Common stock issued for
services 9/1/98 0.30 46,063 13,819 -- -- 13,819
Common stock issued for cash 9/29/98 0.15 300,000 45,000 -- -- 45,000
Common stock issued for
services 9/30/98 0.20 50,000 10,000 -- -- 10,000
Common stock issued for cash 10/15/98 0.20 125,000 25,000 -- -- 25,000
Common stock issued for
services 10/31/98 0.20 25,294 5,059 -- -- 5,059
Common stock issued for
services 10/31/98 0.20 25,850 5,170 -- -- 5,170
Common stock issued for cash 11/2/98 0.19 309,000 60,000 -- -- 60,000
Common stock issued for
services 11/4/98 0.20 25,000 5,000 -- -- 5,000
Settlement of lawsuit 12/31/98 -- -- 128,784 -- 128,784
Common stock issued for
services 12/31/98 0.22 25,000 5,500 -- -- 5,500
Common stock issued for
services 1/9/99 0.20 30,000 6,000 -- -- 6,000
Common stock issued for cash 1/21/99 0.15 333,333 50,000 -- -- 50,000
Common stock issued for
services 1/31/99 0.24 25,000 6,000 -- -- 6,000
Common stock issued for
services 2/21/99 0.19 30,000 5,625 -- -- 5,625
Common stock issued for
interest 3/9/99 0.19 25,000 4,750 -- -- 4,750
Common stock issued for cash 3/9/99 0.15 333,333 50,000 -- -- 50,000
Common stock issued for
services 3/21/99 0.22 30,000 6,564 -- -- 6,564
Common stock issued for
services 3/31/99 0.20 25,000 5,078 -- -- 5,078
Common stock issued for
services 4/21/99 0.22 30,000 6,564 -- -- 6,564
Common stock issued for
services 4/26/99 0.22 65,000 14,404 -- -- 14,404
Common stock issued for
services 4/30/99 0.39 25,000 9,765 -- -- 9,765
Net loss for fiscal 1998 -- -- -- (391,527) (391,527)
---------- ------------ ------------ ------------ ------------
Balances at April 30, 1999 29,835,013 $ 5,529,562 $ (355,000) $ (5,859,773) $ (685,211)
========== ============ ============ ============ ============
</TABLE>

27
<PAGE> 28

LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
APRIL 30, 1999

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND POOLING INTERESTS Leading-Edge Earth Products, Inc. (an Oregon
corporation) believes its products have applications for single-family,
multifamily residential, and low-rise commercial construction. The Company is
considered to be in the development stage. Significant revenues have not yet
been generated from research and development activities or planned operations.
The Company's business activities have been financed primarily through the
issuance of equity securities, outside loans, and loans from shareholders.

The Company was incorporated on December 23, 1991. On December 29, 1992,
Leading-Edge Earth Products, Inc., merged with an inactive public company,
Crystal Asset Management, Inc., which was incorporated in Oregon in 1968. This
business combination was accounted for as a pooling of interest. The newly
combined company was named Leading-Edge Earth Products, Inc. The stock began to
trade publicly in March 1993 under the trading symbol "LEEP".

GOING CONCERN The Company's ability to continue as a going concern is dependent
upon its success in transforming its building panel technology into a profitable
operations and additional funding commensurate with operating activity. The
accompanying financial statements have been prepared on the basis that the
Company will be able to continue as a going concern. These financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

RECLASSIFICATIONS Certain reclassifications have been made to the financial
information previously reported in order to conform to the 1999 presentation.
These classifications have no effect on loss from operations and net loss as
previously reported.

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

CASH AND CASH EQUIVALENTS The Company considers, and the financial statements
reflect, all highly liquid short-term investments with original maturity of
three months or less as cash.

RECEIVABLES As a result of an agreement with Agile Building Technology, Inc.
("Agile") and others in fiscal 1997, the Company does not expect to collect
license and consulting revenues and interest due from Agile until after Agile is
in production and is in a position to make payments on amounts owning to the
Company. Consequently the Company adjusted revenues and established a reserve
for totaling $320,276 and $268,095 for amounts due from Agile at April 30, 1999
and 1998. See Investment in Subsidiary note below.

28
<PAGE> 29

INVENTORY Inventory consisting of steel for fabrication (originally acquired in
fiscal 1998 for $30,724) has been transferred to LEEP Building Systems,
Inc., ("LBS") an affiliate of the Company. This transfer has been accounted for
as an Investment in Affiliate. See Investment in Affiliate note below.

INVESTMENT IN AFFILIATE Cash and other resources advanced to LBS under an option
agreement arrangement is accounted for at cost. The recoverability of this asset
depends on the successful marketing of the Company's products. Because the
nature of the relationship with LBS has evolved, the classification of
Investment in Affiliate has changed from a current asset in fiscal 1998 to a
Long Lived asset in 1999. See discussion under Related Party Transactions below.

PROPERTY AND EQUIPMENT In fiscal 1998 Management determined that the rights to
use certain technology (Magnesium Oxide Technology), which had been acquired in
fiscal 1997, no longer met the business needs of the Company. The original cost
of this asset was $25,822. This amount less amortization is included in Other
General and Administrative costs for fiscal 1998.

NET LOSS PER COMMON SHARE Net Loss per common share is computed based on the
weighted average number of common shares and common share equivalents
outstanding. When dilutive, stock options are included as common share
equivalents using the treasury stock method.

There was no difference between primary and fully diluted earnings per share for
all periods presented.

STOCK-BASED COMPENSATION In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 123 (SFAS 123)
which addresses the accounting for stock-based compensation arrangements. SFAS
123 permits a company to choose either a new fair-value-based method or the
current APB Opinion 25 intrinsic-value-based method of accounting for
stock-option-based compensation arrangements. The Company has adopted SFAS 123
for the year ending April 30, 1997 and thereafter. Management will continue to
record stock-based compensation using current APB Opinion 25
intrinsic-value-based method and, therefore, believes adoption of SFAS 123 will
not impact the Company's financial position and results of operations.

During 1999 options to purchase 200,000 shares of restricted rule 144 stock were
valued at $9,398. During fiscal 1998 options to purchase 600,000 shares of
restricted rule 144 stock were valued at $102,981. For fiscal 1999 and 1998 the
Black and Scholes method for valuing stock options was used with the following
assumptions:

<TABLE>
<CAPTION>
For fiscal year ended April 30, 1999 1999 1998
---- ---- ----
<S> <C> <C> <C>
Grant date 12/3/98 1/8/99 3/28/98
Number of shares under options granted 100,000 100,000 600,000
Stock price at date of issue $0.1875 $0.22 $0.47
Exercise price $0.25 $0.20 $0.375
Expected life 3 years 3 years 3 years
Volatility measurement 29.92% 29.92% 47.7%
Dividends none none none
</TABLE>

29
<PAGE> 30

The pro forma effect of valuing the options for financial reporting purposes
would be to increase the net loss for fiscal 1999 by $9,398 and for fiscal 1998
the net loss would be increased by $102,981. Assumptions for the Black and
Scholes model for fiscal 1999 pro forma calculations were consistent with those
used for fiscal 1998.
The effect on loss per share for both 1999 and 1998 would have been negligible.

INVESTMENTS The Company has a 35% interest in Agile. This investment is
accounted for using the equity method. Agile is a development stage enterprise
established in December 1995, to manufacture building panels using technology
developed jointly with the Company and/or independently. Agile has incurred
operating losses since its inception in through the period ended April 30, 1998.

The Company has recorded no value related to this investment due to the
indeterminable values related to the Company's common stock and technology given
or the common stock of Agile received in the investment transaction. The Company
has not recognized its proportionate share of Agile's net losses as the Company
has no obligation to fund any such losses and carries its investment in Agile at
zero.

NOTE 2: RELATED PARTY TRANSACTIONS

ARCHITECTURAL SERVICES AGREEMENT The Company has entered into an agreement with
the owner of DB Associates, a stockholder and member of the Board of Directors,
to provide architectural and sales services. In addition to normal hourly rates
for architectural services, DB Associates will be paid for sales and marketing
efforts at the rate of $1.00 per panel for each panel sold to persons or
companies for which DB Associates performs architectural work.

DB Associates will alternatively receive $0.25 per panel for providing
architectural review for compliance with the Company's standards on projects
with which DB Associates is not directly involved as architect.

PURCHASE OPTION From October 1996 until July 31, 1998, L/A Investors financially
supported establishing pilot production operations in Pennsylvania for LEEP's
STRUCTURAL CORE product. On or about July 31, 1998, the Company began
negotiations with L/A Investors, which culminated in a November 30, 1998
agreement whereby the Company obtained the right to buy L/A's operating company,
LEEP Building Systems, Inc. ("LBS"). The Principal of L/A Investors is a minor
shareholder of the Company's common stock. L/A Investors is the sole shareholder
of LBS. The financial records for LBS are reported to the CEO of the Company.
See note regarding investment in affiliate below. During fiscal 1999 significant
cash and other resources were advanced to LBS. The Company has an option to
purchase LBS. See discussion under Commitments below.

INVESTMENT IN AFFILIATE Since July 31, 1998, the Company advanced significant
cash to LBS. Additionally coils of steel have been transferred to LBS during the
fiscal year. The cash and other resources advanced by the Company under this
arrangement have been accounted for as "Investment in Affiliate". During fiscal
1999, the investment in LBS increased substantially and the relationship with
LBS has evolved. As a result, the investment is now considered a "long lived"
asset, and has been reclassified as such for fiscal 1999.

30
<PAGE> 31

STOCK OPTIONS During 1999 non qualified options to purchase 100,000 common
shares were granted at an exercise price of $0.25 per share to an officer of the
Company, and options to purchase 100,000 common shares were granted to an
affiliated person at an exercise price of $0.20 per share. Non qualified options
to purchase 200,000 shares of common stock at $0.40 per share were granted
during fiscal 1998 in exchange for legal services. Additionally, non qualified
compensatory options to purchase a total 600,000 shares of common stock for
$0.375 per share were granted to Management and Members of the Board of
Directors during fiscal 1998. These options expire September 3, 2001. At April
30, 1999 there were outstanding options to purchase 2,152,305 shares of the
Company's common stock at exercise prices ranging from $.20 to $2.00 per share
with the bulk of the shares exercisable in a range of $0.375 to $0.50 per share.
Options outstanding to purchase common shares which expire at different dates
from January 2000 through January 2002, with the bulk of the options expiring in
the year 2000. The weighted average exercise price of options outstanding was
$0.53 at April 30, 1999, and $0.56 at April 30, 1998, $0.225 for options granted
during fiscal 1999.

NOTES RECEIVABLE FROM STOCKHOLDERS During fiscal 1999 a lawsuit with a former
shareholder and officer of the Company was settled. As a result of this
settlement the accounts Note Receivable from Shareholders, Loans from
Shareholders and Interest Payable were reduced. A gain related to this
settlement of $5,498 was recognized as other income for fiscal 1999.

LOANS FROM STOCKHOLDERS At April 30, 1999, the Company owed $416,120, in
unsecured, demand notes payable to stockholders with interest accruing at 8% or
10% per annum. Also, as of April 30 about $78,000 in accrued interest was owed
to officers and directors of the Company.

LINE OF CREDIT At April 30, 1999 the unused portion of LEEP's $50,000 line of
credit was $3,184. The Company's CEO personally guaranteed this line of credit.

NOTE 3: PREFERRED AND COMMON STOCK

PREFERRED The Articles of Incorporation authorize issuance of up to 100,000,000
shares of common stock and up to 10,000,000 shares of preferred stock. No
preferred shares have been issued. The Board of Directors has the authority,
without further stockholder action, to determine the preferences, limitations,
and relative rights of the preferred stock, subject to the requirements on the
Oregon Business Corporation Act.

COMMON STOCK Only a portion of the Company's common stock outstanding at April
30, 1999, is freely tradable. The freely tradable shares include the 1,193,683
shares originally held by certain founding stockholders, 995,000 shares
registered on March 4, 1994 and subsequently sold, and those shares issued after
December 29, 1992 where the holding period and trading volume restrictions are
satisfied. The shares issued pursuant to the agreement of merger dated December
29, 1992 and any shares issued subsequent thereto, are "restricted securities"
under the Securities Act of 1933 and, therefor, are subject to limitations on
transferability.

All warrants to purchase shares of common stock have been called or have
expired.

NOTE 4: INCOME TAXES

31
<PAGE> 32

Deferred tax assets primarily consist of net operating loss carry forwards as
the Company has not generated taxable income since inception. There are no
significant deferred tax liabilities. As management of the Company cannot
determine that it is more likely than not that the Company will receive benefit
from these assets, a valuation allowance has been established to reduce the
deferred tax assets to zero at April 30, 1999. Differences between the
cumulative net loss for financial reporting purposes and that available for
income tax purposes arise primarily as a result of nondeductible expenditures
paid by the issuance of securities and capitalized start up costs.

At April 30, 1999, the Company had net operating loss carry-forwards available
to reduce taxable income in future years of approximately $4,513,000, which
begin to expire in 2009.

NOTE 5: FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash, receivables, accounts payable,
notes payable and loans from stockholders. Except for notes receivable from
stockholders and loans from stockholders, the Company believes that the fair
value of these financial instruments approximates their carrying amounts based
on current market indicators, such as prevailing market rates. It is not
practicable to estimate the fair value of notes receivable from stockholders and
loans from stockholders, due primarily to the uncertainty surrounding the timing
of cash flows.

NOTE 6: COMMITMENTS AND CONTINGENCIES

LBS PURCHASE OPTION Management has agreed in principle to acquire LBS,
including, among other things, the pilot production operation in Montgomery, PA
and certain other related assets from L/A Investors the sole shareholder of LBS.
The purchase price is for $250,000 cash, Company common shares and preferred
shares convertible into the Company's common stock. The purchase price will be
offset by any amount owed by LBS to the Company as of July 31, 1998.
Additionally, the Management has agreed to increase the purchase price by $9,500
per month for each month that the Company does not exercise its option to
purchase LBS. At April 30, 1999 six months had lapsed without exercise of the
purchase option for a commitment by the Company of $57,000 in additional cost to
acquire LBS.

YEAR 2000 ISSUE The Year 2000 Issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors when
using year 2000 dates is processed. In addition, similar problems may arise in
some systems, which use certain dates in 1999 to represent something other than
a date. However, management believes that at the Company's present level of
business activity that the Year 2000 Issue will not have an impact on its
operations.

32
<PAGE> 33

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

There were no disagreements with Accountants on Accounting and Financial
Disclosure.

There are no other reportable events under Item 304 of Reg. 229.304.

PART III

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

The directors and executive officers of LEEP are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Grant C. Record 63 Chief Executive Officer, Secretary, Director
Donald C. Bazemore 65 Director, Chairman of the Board
James R. Medley 59 Director, Treasurer
Way W. Lee 74 Director
William C. Nordstrom 57 Director
L. Eugene Laughlin 64 Executive Vice President
</TABLE>

GRANT C. RECORD is the Founder and Secretary, and served as Executive Vice
President and Chairman of the Board of Directors of LEEP from December 1992
until he became President on June 28, 1995. He relinquished the office of
President and became Chief Executive Officer on March 5, 1997. During 1991-1992,
he headed up development of LEEP's base technology and early patent positions.
From 1983 to 1991, Mr. Record was Executive Vice President of Magnum Technology,
a very early developer of advanced magnetic disks for the magnetic disk drive
industry. The vacuum deposition technology Magnum used is now the standard
computer disk manufacturing technology that is used throughout the industry.
Magnum's work helped set the high-density standards on which the "gigabyte" disk
drive generation is founded. Prior to Magnum, from 1971 to 1979, Mr. Record
founded and developed the Data I/O Corporation. Data I/O's technology and
international presence as the primary manufacturer of memory programming
components, enabled the early Intel microprocessor technology to gain rapid
worldwide use and acceptance. Data I/O is yet a world leader in semi-conductor
memory and logic device programming, after twenty-five years.

DONALD C. BAZEMORE is Chairman of the Board. Mr. Bazemore has been a director of
LEEP since 1995 and the primary architect for LEEP since 1992. Mr. Bazemore
founded the DB Associates firm in 1970. DB Associates is one of the oldest
architectural firms in Seattle. Prior to DB Associates, Mr. Bazemore was
Director of Architecture for Leo A. Daly Associates in Seattle, where he was
responsible for several major Boeing Aircraft construction projects. Leo A. Daly
is a well-known, internationally significant, architecture and engineering firm.

JAMES R. MEDLEY is Treasurer of LEEP. Mr. Medley was first elected director in
1995. Mr. Medley is founder of Laux Medley Norris, Inc., Investment Advisors in
Seattle since 1976. Until recently, Laux Medley Norris did business planning for
large and small companies and was

33
<PAGE> 34

responsible for portfolios up to $100,000,000 in value. Mr. Medley was King
County Republican Central Committee Chairman, 1979 to 1981, and King County
Chairman of the Reagan/Bush campaign for president in 1980.

WILLIAM C. NORDSTROM first became a director in 1998. Most recently, he served
as Executive Vice President-Finance and Administration for Newriders, Inc., of
Newport Beach, CA, a publicly held company. Prior to Newriders, Mr. Nordstrom
founded and managed the Growth Stock Newsletter, Newport Beach, CA.

WAY W. LEE has been a director of LEEP since December 1992. He served as
President of Fibertech Corporation from 1972 to 1985, and as President of
Crystal Asset Management, Inc., from 1985 to December 1992. He also was a
director of Crystal Asset Management, Inc., until its reverse merger with LEEP.
Mr. Lee is the President of Way W. Lee General Contractor and Acme Industries
Door and Millwork.

L. EUGENE LAUGHLIN became Executive Vice President of LEEP in April 1998 after
serving as a consultant for six months. Mr. Laughlin has extensive experience in
various marketing and sales management capacities with the Boeing Commercial
Airplane Company, Renton, WA. Prior to Boeing, Mr. Laughlin spent three years
with the Ford Motor Company in Dearborn, MI in various controllership
assignments. He is a graduate of the University of Pennsylvania, Wharton School
of Business.

ITEM 10. EXECUTIVE COMPENSATION.

The following table sets forth certain information concerning the compensation
paid by LEEP to Grant C. Record, CEO since 1995:

SUMMARY ANNUAL COMPENSATION TABLE

<TABLE>
<CAPTION>
Awards (accrued) Payouts
---------------- -------
<S> <C> <C> <C>
Grant C. Record CEO since 1995 $60,000 -0-
</TABLE>

NON-QUALIFIED STOCK OPTIONS. LEEP has issued non-qualified stock options to
selected employees, officers, directors, consultants and advisors. As of April
30, 1999, options to purchase 2,152,305 shares of Common Stock were outstanding
at an average exercise price of approximately $0.53 per share. (See Notes to
Financial Statements.)

Options to purchase 100,000 shares of Common Stock were granted to Grant C.
Record during the fiscal year just ended.

There were no options exercised during the year.

EMPLOYMENT AGREEMENTS. LEEP has entered into six employment agreements since
1992. One agreement was with former financial officer, Gary Nees. Mr. Nees
resigned during the fiscal year 1994/95 and his severance was amicable. LEEP
agreed to extend certain stock options for Mr. Nees (shown herein) for five
years. An employment agreement with Tim Metz, in dispute earlier, is now settled
with no penalties against the Company. Kirk Metz, a former employee (deceased),
is owed certain moneys from past services rendered. LEEP's current Management
believes the contract with Kirk Metz was abandoned during calendar year 1994.
Approximately

34
<PAGE> 35

$49,992 is accrued for Kirk Metz's estate (Kirk Metz died in early 1996). The
fourth employment agreement is with Grant C. Record, CEO. This contract is
current and active. The fifth employment contract was a consulting contract for
employment of Lennie H. Zallar as Vice-President and CFO. This contract was
terminated during the year ending April 30, 1997. The Company owes Mr. Zallar
$23,672 in back consulting pay. The sixth employment agreement, dated January 7,
1997, was with David C. Moran, President. This contract appears on Form 8-K
filed on March 27, 1997. Mr. Moran resigned from the employ of LEEP in November
1997. LEEP owes Mr. Moran $11,251 for past services rendered as of the fiscal
year ending April 30, 1998.

CONSULTING EXECUTIVE AGREEMENTS. LEEP is recruiting its mezzanine executive
team. Identified to date are candidates for (1) president, (2) vice president
and director of international operations, and (3) Systems Specialist. All
candidates have spent time, variously compensated between $0 and $75 per hour,
assisting LEEP to organize to begin large-scale manufacturing, marketing and
sales.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding beneficial
ownership of LEEP's Common Stock as of July 1, 1999, by (1) each person who is
known by LEEP to own beneficially more than 5% of the Common Stock, (2) each of
LEEP's primary investors and executive officers, and (3) all directors and
executives officers as a group. Each named beneficial owner has sole voting and
investment power with respect to the shares listed unless otherwise indicated.

<TABLE>
<CAPTION>
Title of Class (1) Name and Address of Beneficial Owner Amount % of Class
- ------------------ ------------------------------------ ------ ----------
<S> <C> <C> <C>
Common Stock Grant C. Record 5,400,065(2) 17.3%
616 Blue Lake Blvd., #139,
Twin Falls, ID 83301

Common Stock Donald C. Bazemore 339,939(3) 1.1 %
401 2nd Ave. So.
Seattle, WA 98104

Common Stock James R. Medley 320,125(3) 1.0%
10002 Aurora Ave. No., #3345,
Seattle, WA 98133

Common Stock Way W. Lee 381,762(3) 1.2%
5210 SE 26th
Portland, OR 97202

Common Stock William R. Nordstrom 427,100(4) 1.3%
567 San Nicolas Drive, Suite 400,
Newport Beach, CA 92660

Common Stock L. Eugene Laughlin 181,250 0.6%
P.O. Box 778, 12128 317 Place NE
Duvall, WA 98019

Common Stock Agile Building Technology, Inc. 1,300,168 4.2%
30 W. 3rd St., 3rd Floor,
Williamsport, PA 17701

Common Stock Agile Investment Corporation, Inc.
30 W. 3rd St., 3rd Floor,
80,000 0.3%
</TABLE>

35
<PAGE> 36

<TABLE>
<S> <C> <C> <C>
Williamsport, PA 17701

Common Stock All six executive officers and Directors as 7,050,241 22.5%
a group
</TABLE>

(1) No special note(s).
(2) The amount beneficially owned includes 350,000 shares of Common Stock
issuable upon the exercise of options.
(3) The amount beneficially owned includes 150,000 shares of Common Stock
issuable upon the exercise of options.
(4) The amount beneficially owned includes 100,000 shares of Common Stock
issuable upon the exercise of options.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

STOCK OPTIONS. In July 1996, Donald C. Bazemore, Chairman of the Board of
Directors of LEEP, exercised 150,000 non-qualified stock options. Payment was
made in the form of an $80,000, 8% note payable to LEEP. Existing shares of
LEEP's stock held by the optionee secure the note. As long as the optionee has
sufficient shares of LEEP's stock as collateral for the note based on the market
price of the stock, no interest will accrue and no amount will be due under the
note. LEEP holds the collateral stock and the shares issued against the note. No
transfers are permitted until the note is fully paid. LEEP also entered into an
agreement with Mr. Bazemore to provide architectural and sales services to LEEP.

L/A INVESTORS, INC. (L/A). L/A is a Tortola, British Virgin Islands company
which was formed by a foreign LEEP shareholder during the last quarter of 1996
to assist LEEP financially after the Agile investors discontinued supporting
LEEP's and Agile's developments. L/A specifically:
1. Financially supported LEEP to complete the development and initial test
phase and technical validation of LEEP's STRUCTURAL CORE product;
2. Financed the development, equipment fabrication and set-up of pilot
manufacturing operations in Montgomery, Pennsylvania, to manufacture LEEP's
STRUCTURAL CORE product;
3. Financially supported LEEP's efforts in selecting and establishing a
building site in Idaho to begin large-scale manufacturing of LEEP
STRUCTURAL CORE.

L/A holds less than 5% of LEEP's stock.

ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K.

(A) FINANCIAL STATEMENTS AND EXHIBITS

1. FINANCIAL STATEMENTS (see Item 7 above):

- - Independent Auditors' Report

- - Balance Sheets as of April 30, 1999 and 1998

- - Statements of Operations for years ended April 30, 1999 and 1998, and from
December 23, 1991 (inception) through April 30, 1999

36
<PAGE> 37

- - Statement of cash flows for years ended April 30, 1999 and 1998 and from
inception

- - Statements of Stockholders' Deficit for years ended April 30, 1999 and
1998, and from December 23, 1991 (inception) through April 30, 1999

- - Notes to Financial Statements

2. EXHIBITS

- - Exhibit 4, Instruments defining rights of holders

- - Exhibit 27, Financial Data Schedule

- - Exhibit 99.1, Consulting Contract with Aberdeen Capital Strategies Corp.

- - Exhibit 99.2, Option Agreement to Purchase LEEP Building Systems, Inc.

(B) REPORTS ON FORM 8-K

1. A news release describing LEEP's successful preliminary testing -- see Form
8-K filed on September 28, 1998.

2. A listing of certified documentation of LEEP STRUCTURAL CORE performance --
see Form 8-K filed on December 10, 1998.

3. A news release describing LEEP's purchase of a Shoshone, ID industrial park
site from Union Pacific Railroad Company -- see Form 8-K filed on February
10, 1999.

37
<PAGE> 38

SIGNATURES

In accordance with Section 13 or 15(d) or 15(d) of the Exchange Act, the
registrant causes this report to be signed on its behalf by the undersigned or,
their in duly authorized representatives, and in the capacities, and on the date
indicated.

LEADING-EDGE EARTH PRODUCTS, INC.

By: Grant C. Record, its CEO and Secretary

Date: July 15, 1999

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----

<S> <C> <C>
Grant C. Record Secretary and Director 7/15/99

Donald A. Bazemore Chairman of the Board 7/15/99
of Directors

James R. Medley Treasurer and Director 7/15/99

Way W. Lee Director 7/15/99

William R. Nordstrom Director 7/15/99
</TABLE>

<PAGE> 1

EXHIBIT 4

INSTRUMENTS DEFINING RIGHTS OF HOLDERS

There have been no changes in instruments defining the rights of holders of any
class of securities.

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1999
<PERIOD-END> APR-30-1999
<CASH> 1,124
<SECURITIES> 0
<RECEIVABLES> 327,359
<ALLOWANCES> 320,276
<INVENTORY> 0
<CURRENT-ASSETS> 48,659
<PP&E> 127,576
<DEPRECIATION> 0
<TOTAL-ASSETS> 498,309
<CURRENT-LIABILITIES> 1,234,419
<BONDS> 0
0
0
<COMMON> 5,478,862
<OTHER-SE> (6,214,773)
<TOTAL-LIABILITY-AND-EQUITY> 498,309
<SALES> 0
<TOTAL-REVENUES> 71,413
<CGS> 0
<TOTAL-COSTS> 352,018
<OTHER-EXPENSES> 17,966
<LOSS-PROVISION> 52,181
<INTEREST-EXPENSE> 40,775
<INCOME-PRETAX> (391,527)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (391,527)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)

</TABLE>

<PAGE> 1

EXHIBIT 99.1

CONSULTING CONTRACT

ABERDEEN CAPITAL STRATEGIES CORP. "ABR", of 700 West Pender Street, Vancouver,
BC. V6C 1G8, hereby enters into a Consulting Agreement with LEADING-EDGE EARTH
PRODUCTS, "LEEP" dated this first day of January 1999.

"ABR's" mission is to introduce "LEEP" to potentially interested
parties for the purpose of enlarging the public's awareness of the
future opportunities that are offered by "LEEP".

The above will be obtained by "ABR" agreeing to provide "LEEP" with the
following services:

Section 1
Initial introduction of "LEEP" to potentially interested parties will be sent
via E mail, fax or mail then followed upon a timely basis by telephone. "ABR"
will mail their Corporate Overview of "LEEP" to potentially interested parties
in Canada. "ABR" will assist "LEEP" in any way they can to accommodate and
follow up via Email, Fax and telephone contact with any overflow that "LEEP" may
experience from leads generated from the various forms of public exposure that
"LEEP" may undertake form time to time. These leads will be forwarded to "ABR"
by "LEEP". "ABR" will refer interested parties to management of "LEEP" with
respect to:
Sales of "LEEP" product
Financing
All other matters that "ABR" feels it is not qualified to address.

Section 2
"ABR" agrees that all information provided to the public, either by electronic
methods, written or verbally will be accurate corporate information that can be
obtained from "LEEP's" news releases and any other corporate information as
issued by "LEEP" and which fully complies with all current SEC rules and
regulations.

Section 3
"ABR" will undertake to accommodate third parties as agreed verbally between
"LEEP" and "ABR". "LEEP" will advise "ABR" in a timely manner (15 days) as to
termination of third parties and "ABR" will act accordingly.

Section 4
The terms of this contract are for 1 (one) year from the above date, subject to
a monthly performance review by "LEEP". Remuneration will be 10,000 shares of
"LEEP", Rule 144 stock, per month, deposited to "ABR's" nominated account prior
to the first day of each month plus expenses. Expenses:

These will include the cost of telephone calls, faxes and any other normal out
of pocket expenses. The out of pocket expenses would be pre approved by "LEEP"
prior to being incurred. For budgetary purposes telephone expenses will not
exceed $500.00 per month. "ABR" agrees to accrue the phone and other expenses,
if any, until "LEEP" can afford to pay (to a maximum of

40
<PAGE> 2

three (3) months only), however, this will be reviewed on a quarterly basis.
"ABR" will supply monthly itemized phone receipts to "LEEP".

The above is accepted and agreed to by:

Aberdeen Capital Strategies Corp. Leading-Edge Earth Products, Inc.
(signed by John Williams) (signed by Grant C. Record)
Dated: January 1, 1999 Dated: January 9, 1999

<PAGE> 1

EXHIBIT 99.2

OPTION TO PURCHASE

Wednesday, March 31, 1999(1)

PARTIES:

Leading-Edge Earth Products, Inc. (LEEP); L/A Investors, Inc. (L/A)

PREAMBLE:

WHEREAS L/A is willing to sell its investment and all rights in its
manufacturing operation in Montgomery, PA, and L/A has supported start-up
operations in Idaho; WHEREAS all of the ownership of the Pennsylvania
manufacturing operation has been transferred to LEEP Building Systems, Inc.
(LBS), and LBS is wholly owned by L/A; WHEREAS LEEP has supported the LBS
operation on an ad hoc basis since July 31, 1998; WHEREAS LEEP desires to buy
the PA manufacturing operation from L/A; WHEREAS the parties are in agreement
with the terms and conditions of sale, as defined in the attached agreement
drafted as of 11/1/98 (subsequently adjusted, as attached); WHEREAS LEEP does
not have the required cash at this time to complete the purchase; WHEREAS LEEP
expects to have the cash resources required to complete the purchase transaction
by July 15, 1999(2); WHEREAS LEEP desires to access LEEP CORE product from the
PA manufacturing facility until the purchase can be completed; WHEREAS L/A
requires $9,500 per month from LEEP to help support the cost of money previously
expended; WHEREAS L/A is willing to receive, or have accrued, as dictated by
LEEP's cash flow, $9,500/month to maintain LEEP's Option to Purchase L/A's
ownership of the Pennsylvania manufacturing operation; WHEREAS LEEP is willing
to pay, or accrue, from 11/1/98 , $9,500 per month until it exercises this
option; THEREFORE the parties agree as follows

AGREEMENT

L/A and LEEP hereby agree that LEEP will: continue ad hoc financing of LBS; have
access to all products produced in the PA facility; and have a contiguous,
exclusive, uninterrupted right to purchase LBS according to the terms and
conditions of the attached Purchase Agreement. LEEP further agrees to pay, or
accrue, $9,500 per month option money to L/A from November 1, 1998 until LEEP's
purchase of LBS is completed.

- ---------------------------------- ------------------------------------
L/A Investors, Inc. Leading-Edge Earth Products, Inc.

- --------
(1) Presented as subsequently adjusted after fiscal year close
(2) Subsequently adjusted to November 1, 1999

42
<PAGE> 2

AGREEMENT

Drafted on 11-1-98*

PREAMBLE

WHEREAS L/A Investors, Inc. (L/A), a BVI company, has successfully established a
pilot production operation in Montgomery, PA and funded operations in Idaho
aimed at buying property to build a plant to manufacture the Company's
STRUCTURAL CORE product; WHEREAS Leading-Edge Earth Products, Inc. (LEEP), owns
the LEEP CORE Proprietary technology; WHEREAS LEEP desires to finance, and
directly control all manufacturing, sales and marketing functions for it's LEEP
CORE product; WHEREAS LEEP desires to acquire from L/A the Pennsylvania
operation described above; WHEREAS L/A is willing to sell the subject operation
to LEEP; WHEREAS L/A expended substantial sums to establish the Pennsylvania
production operation for LEEP's Products, Idaho start-up operations and support
related programs until August 1, 1998; WHEREAS L/A will accept 10,000 LEEP
Series B Convertible Preferred shares, convertible to 1,000,000 shares of Rule
144 Common stock and $250,000, delivered at closing, in exchange for its total
prior expenditures and the resulting corporation, LEEP Building Systems, Inc.
(LBS), which owns the operational facilities specified herein; WHEREAS LEEP
Building Systems, Inc., a Nevada corporation, was incorporated to account the
subject expenditures and house the subject assets; WHEREAS L/A will sell LBS to
LEEP along with all rights and title to leases, equipment, and ongoing
operations it has financed as relate to LEEP, its product and/or operations;
WHEREAS LEEP has examined the Financial Statements of L/A and LBS; WHEREAS LEEP
is willing to purchase the founder shares and thus the control and ownership of
LBS from L/A, and take title and responsibility for the operations herein
described; WHEREAS L/A has 3,675,000 fully paid and unencumbered founder shares
set aside which represent the full ownership and all of the outstanding shares
of LBS, which it will transfer to LEEP upon closing; THEREFORE, the parties
agree as follows:

AGREEMENT

L/A owns LBS and LBS owns all rights and title to, assets, expenses, leases and
the ongoing operation in Pennsylvania and accounts all related financial and
vendor responsibilities since July 31, 1998. LEEP hereby agrees to purchase and
L/A does hereby agree to sell, 3,675,000 Common shares of LBS representing 100%
of the issued and outstanding shares of LBS in exchange for the following two
considerations:

1. Payment at closing of 10,000 shares of Series B Preferred Stock, each
convertible to 100 Common Rule 144 restricted shares for each Series B
Preferred Convertible share, convertible for 3 years from the date hereof,
at the option of L/A. During the 3 year term specified by the Preferred
Stock, LEEP may, at its option, redeem all or any portions of the Series B
Preferred stock by giving L/A 30 days notice and paying in cash $500,000,
plus a $50,000 premium (or pro rata portions of $500,000 and premium, if
less than all the shares are purchased). L/A shall have the right to
convert to common stock at any time prior to the end of the aforementioned
30 day notice period, all or any part of the common stock.

<PAGE> 3

2. Payment at closing of $250,000, subject to adjustments for any sums owed by
L/A to LEEP as of the close of business on July 31, 1998 and credits for
all accrued option purchase monies in favor or L/A.

SUMMARY

LEEP's 10,000 shares of Series B Preferred stock and the $250,000 payment
(subject to adjustments for monies owed by L/A at July 31, 1998 and monies owed
to L/A for LEEP's option to purchase) represent payment in full for all of L/A's
services, capital equipment, expenditures and administration with respect to
establishing the manufacturing operation in Pennsylvania and otherwise. All such
capital equipment owned by L/A, which is stored in the states of Pennsylvania,
Idaho, or elsewhere in the US, along with the full ownership, control and
responsibility for LBS, are hereby transferred to LEEP upon both L/A and LEEP
executing this Agreement and LEEP's payment to L/A as set forth herein.

The Parties hereby agree that they will effect any additional documentation
required to perfect the parties' performance to this Agreement.

- ----------------------------------- -----------------
Leading-Edge Earth Products, Inc. Date

- ----------------------------------- -----------------
L/A Investors, Inc. Date

* subsequently adjusted for grammar and accuracy as presented herein.