Edgar Filing: USCORP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2 TO
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934

April 2, 2002
Date of Report
(Date of Earliest Event Reported)

USCORP
------------------
(Exact Name of Registrant as Specified in its Charter)

Nevada 000-19061 87-0403330
------ --------- ----------
(State or Other Jurisdiction (Commission (IRS Federal Employer's
of Incorporation) File Number) Identification Number)

Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102
(Address of Principal Executive Offices)

(702) 933-4034
(Registrant's Telephone Number)

Not Applicable
(Former Name or Former Address, If Changed Since Last Report)

TIME FOR FILING REPORT.

USCorp, a Nevada corporation (the "Registrant"), as the result of the
occurrence of certain extraordinary events, is required to file certain
extraordinary events on Form 8-K pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"). However, the Registrant
was unable to timely file this report, or to file a report indicating its
incapability to file this report in a timely manner, due to costs associated
with the preparation of this report and due to the Registrant's incapability to
gather and assemble the documents and exhibits required to be filed with this
report in the time permitted, until the filing date hereof.

APPLICATION OF GENERAL RULES.

This report has been prepared in accordance with the rules and regulations
in effect as of the date of this report applicable to "small business issuers,"
as such term is defined under 17 CFR 240.12b-2; the Registrant is preparing this
report in reliance on the applicability of the version of this form, which
expires on March 31, 2003.

INFORMATION INCORPORATED BY REFERENCE.

Any statement contained in any document, all or a portion of which may be
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this report, to the extent that a statement contained herein, or
in any subsequently filed document, that is also, or that is deemed to be
incorporated by reference, modifies or supersedes any such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this report.

In addition, all reports and other documents filed by the Registrant, if
any, pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act, prior
to the date of this report, shall be deemed to be incorporated by reference
herein and to be a part hereof from the filing date of this report.

Moreover, the Registrant further incorporates consents contained in
previously filed reports or statements, to the extent that the use and
applicability of such consent or consents are permitted by 17 CFR 230.439.

INFORMATION UNKNOWN OR NOT REASONABLY AVAILABLE TO REGISTRANT;
DISCLAIMER OF CONTROL.

This report contains summaries of material terms of certain documents,
which the Registrant believes to be accurate; however, reference is made to the
actual documents, copies of which may be attached hereto or contained in a
schedule or exhibit hereto and made a part hereof by reference thereto. Such
summaries are qualified in their entirety by reference to any such documents.

Similarly, the Registrant has relied on information that it believes to be
accurate and that was reasonably available to it. The Commission should be
informed that certain information contained in this report may be unknown to the
Registrant or that such certain information was not reasonably available to the
Registrant without considerable effort or undue expense by the it to obtain such
information, or, because such information rests peculiarly within the knowledge
of another person not directly affiliated with the Registrant. To that extent,
the Registrant disclaims the existence of control and any admission thereof;
however, the Registrant believes that it has stated all of the material facts
necessary for the Commission to make an informed decision pertinent to the
possible existence of control.

Table of Contents

Description of Item Page Number
------------------- -----------
Time for Filing Report 2
Application of General Rules 2
Information Incorporated by Reference 2
Information Unknown or Not Reasonably Available to Registrant;
Disclaimer of Control 2

Table of Contents 3

Item 1. Changes in Control of Registrant 4

Item 2. Acqusition or Disposition of Assets 8

Item 5. Other Events and Regulation FD Disclosure 29

Item 7. Financial Statements and Exhibits 51

Exhibit Index 54

ITEM 1. CHANGES IN CONTROL OF REGISTRANT.

As the result of the principal and resultant extraordinary events reported
to the Commission in this report, the senior executive management of the
Registrant has determined that a change in control of the Registrant has
occurred of even date on the effect of the transaction discussed in this item
first.

A. Persons(s) Acquiring Control; Resultant Percentage of Ownership.

On or about April 2, 2002, the Registrant acquired USMetals, Inc., a Nevada
corporation ("USMetals"), which, by virtue of the satisfactory conclusion to a
share exchange transaction, became a wholly owned subsidiary of the Registrant.
That certain share exchange transaction was entered into between the Registrant
and the holders of USMetals' common voting equity securities on March 14, 2002.
(The exchange of the Registrant's and USMetals' securities, the prevailing
transaction, and the resultant effects to the Registrant as the direct result of
the share exchange transaction are more fully described hereinbelow. The details
regarding USMetals' formation and organization, plan of operations, business,
and properties are more fully described in Item 2 hereof.)

Consequently, two predominant stockholders of USMetals became principal
stockholders of the Registrant. The table below sets forth the name of the
principal holders of greater than 10% (ten per cent) of the Registrant's total
authorized issued and outstanding Common Stock, which is correct as of the date
of this report. (All percentages have been rounded off to the nearest tenth of
one percent.)

Percentage of Shares as Total Number of
the Result of the Shares Subject to Shares Held in
Name of Principal Stockholder(s) Acquisition Options (1) Registrant
------------------------------- ----------------------- ----------------- ----------------

Robert Dultz (2) 78.0% 650,000 19,997,000

U. S. Metals and Minerals, Inc. 10.5% - 2,700,000

--------------
(1) Information on the Registrant's newly adopted 2002 Directors and
Officers Stock Option Plan is more fully described in Item 5 of this report.

(2) The majority stockholder of the Registrant is Robert Dultz, who, as the
result of the acquisition (without offsets or inclusions for other stockholder
activity, activity as the result of certain relationships and related
transactions, as the result of existing or recently-adopted qualified or
non-qualified stock options, or, as the result of increases or decreases due to
the Registrant's proposed limited offering under Rule 506 of Regulation D),
directly owns approximately 78.0% of the Registrant's common stock.

B. Basis of Control; Effects upon the Registrant's Stockholders.

The Registrant's majority stockholder now owns approximately 78.0% of the
Registrant's duly authorized, issued, and outstanding Common Stock. As long as
he holds a majority of the Registrant's total issued and outstanding Common
Stock, he will be able to elect the Registrant's entire Board of Directors and
to remove any director, with or without cause, without calling a special
meeting. New and existing stockholders of the Registrant will not be able to
affect the outcome of any stockholder vote. As a result, the Registrant's
principal stockholder will control all matters affecting the Registrant and its
wholly-owned subsidiaries, including: (i) the composition of the Registrant's
Board of Directors and, through it, any determination with respect to the
Registrant's business direction and policies, including the appointment and
removal of officers; (ii) the allocation of business opportunities that may be
suitable for the Registrant; (iii) any determinations with respect to future
mergers or other future business combinations; (iv) the Registrant's acquisition
or disposition of assets; (v) the Registrant's financing objectives; (vi) the
payment of dividends on the Registrant's Common Stock; and (vii) determinations
with respect to the Registrant's tax returns.

Moreover, new and existing stockholders of the Registrant will not have an
opportunity to evaluate the specific merits or risks of any prospective
acquisition initiated by the Registrant. As the result, new and existing
stockholders will be dependent on the judgment of the Registrant's management,
and on the judgment of the Registrant's majority stockholder, in connection with
the selection of the properties or businesses to be acquired or developed. There
can be no assurance that determinations ultimately made by the Registrant's
management, or by the Registrant's majority stockholder, will permit the
Registrant to achieve its business objectives, to become or to remain
profitable, or to pay dividends (regardless the profitability of the
Registrant).

Furthermore, in the event all of the Registrant's stockholders, with the
exception of the majority stockholder - or control person - were to vote on any
matter, including the votes cast by the other principal stockholder of the
Registrant, U.S. Metals and Minerals, Inc., all of those stockholders
collectively would be unable to influence the vote in favor of or opposing any
matter contrary to the desires and resulting influence of the majority
stockholder.

C. Description of Transaction That Resulted in Change of Control.

On March 14, 2002, the Registrant tendered an offer to the shareholders of
USMetals, Inc. (USMetals); whereby, the Registrant exchanged one share of the
Registrant's common stock for one share of USMetals' common stock, both of
which, respectively, were issued and outstanding as of the closing date of the
transaction. The transaction was exempt from the Securities and Exchange
Commission's reporting and compliance requirements under and in accordance with
Regulation T-O and Regulation M-A, as the target company (USMetals) was a
privately held corporation organized under NRS (Nevada Revised Statutes)
78A.020.

That certain share exchange agreement provided for an exchange of one (1)
share of the Registrant's common stock for each one (1) share of USMetals'
common stock. As the result of this transaction, the control parties, and
certain other principal stockholders, of USMetals succeeded to becoming the
control parties and principal stockholders of the Registrant.

D. Consideration Offered by Acquired Control Parties.

The consideration offered by the Registrant to the holders of USMetals'
common stock was limited to the value of the shares of the Registrant's common
stock (and for such other implied valuable non-cash consideration which is
recognizable by law to validate and enforce the terms and provisions of any like
agreement).

E. Identity of Former Control Person(s).

Immediately prior to the acquisition of USMetals by the Registrant, the
stock transfer ledger of USMetals indicated that 24,200,000 shares of its common
stock were issued and outstanding.

The table below sets forth the names of each individual or entity that were
deemed to have been former control persons of USMetals, and the amount of stock
held by them in USMetals, immediately prior to the acquisition by the Registrant
thereof. (All percentages have been rounded off to the nearest tenth of one
percent.)
Amount and Percent of
Name and Address Nature of Class Before
Title of Class of Beneficial Owner Beneficial Ownership Acquisition
-------------- ------------------- -------------------- -------------
Common Robert Dultz 19,347,000 79.9%
Direct Beneficial Owner

F. Information Required by Item 403(c) of Regulation S-K.

1) Security Ownership of Certain Beneficial Owners.

The following table sets forth the security ownership of certain
beneficial owners of the Registrant as of May 27, 2002. (All percentages have
been rounded off to the nearest tenth of one percent.)

Amount and
Title Name and Address Nature of Percent
of Class of Beneficial Owner Beneficial Ownership of Class
-------- ------------------- -------------------- --------
Common Robert Dultz 19,997,000 78.0%
c/o USCorp Direct Beneficial Owner
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common U. S. Metals and Minerals, Inc. 2,700,000 10.5%
4706 North Thirty-first Drive Direct Beneficial Owner
Phoenix, Arizona 85017

2) Security Ownership of Management.

The following table sets forth the security ownership of management as
of May 27, 2002. (All percentages have been rounded off to the nearest tenth of
one percent, except for those persons or entities whose shareholdings are less
than one percent, in which case, such shareholdings are rounded off to the
nearest one one-hundredth of one percent.)
Amount and
Title Name and Address Nature of Percent
of Class of Beneficial Owner Beneficial Ownership of Class
-------- ------------------- -------------------- --------
Common Robert Dultz 19,997,000 78.0%
c/o USCorp Direct Beneficial Owner
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common Larry Dietz
c/o USCorp 51,000 0.20%
Suite 204 Direct Beneficial Owner
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common Spencer Eubank 230,750 0.90%
c/o USCorp Direct Beneficial Owner
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common Carl O'Baugh 50,250 0.20%
c/o USCorp Direct Beneficial Owner
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common Don Brown 50,000 0.20%
c/o USCorp Direct Beneficial Owner
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common Tom Owens 10,000 0.04%
c/o USCorp Direct Beneficial Owner
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common Michael Love 50,000 0.20%
c/o USCorp Direct Beneficial Owner
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Common Officers, as a group 20,329,000 79.36%
Common Directors, as a group 20,329,000 79.36%
Common Officers, as proposed to be a group 20,429,000 79.75%
Common Directors, as proposed to be a group 20,339,000 79.40%

3) Change in Control.

As of the date of this report, the Registrant does not anticipate the
occurrence of any event that would compel a change in control of the Registrant.
However, if Robert Dultz was to make an assignment of his shares in the
Registrant, a change in control of the Registrant would likely occur.

To the best of the Registrant's knowledge, no principal stockholder or
control person has pledged, hypothecated, or in any way encumbered any of their
shares, the failure of performance of which would result in a change in control
of the Registrant.

No loans or other forms of evidences of indebtedness were utilized by
any party in order to perform and consummate the acquisition described herein.
Moreover, no securities of the Registrant were hypothecated in the performance
of the acquisition described in this report.

4) No person disclosed in any of the tables set forth hereinabove or named
in this section of this report is subject to disqualification by the provisions
of Rule 230.263(b).

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

The Registrant, as the result of a special meeting of its stockholders and
directors on March 14, 2002, adopted certain resolutions that directly relate to
the Registrant's existing and proposed business operations; namely, the
Registrant is engaging in the mining of precious metals business, through its
acquisition of USMetals (as more fully described in Item 1 hereinabove), in the
oil and gas and oil and gas royalty speculation businesses, and to pursue other
acquisitions that will complement the Registrant's existing business
opportunities.

For this reason, the Registrant will describe each segment of its existing
and proposed businesses and plan of operations by segment hereinbelow.

A. USMETALS, INC.

The consummation of the share exchange transaction described in this report
has resulted in the acquisition by the Registrant of a wholly-owned subsidiary,
USMetals, Inc., a Nevada corporation, of which the assets and limited operations
of said subsidiary will comprise 10% (ten per cent) or greater of the
Registrant's current business and assets as of the date of this report.

1) The Transaction.

a) Consideration for the Transaction.

The consideration offered by the Registrant to the holders of
USMetals' common stock was limited to the value of the shares of the
Registrant's common stock (and for such other implied valuable non-cash
consideration which is recognizable by law to validate and enforce the terms and
provisions of any like agreement).

b) Principles of Valuation.

No traditional principles of valuation were applied to the
determination of the share purchase and/or exchange price for USMetals. The
valuation of the transaction is limited solely to the explanation provided as
the consideration for the transaction in the above paragraph.

2) The Target Company and Its Shareholders.

USMetals, Inc. (USMetals) was formed and organized under the laws of
the State of Nevada on May 5, 2000 as "Deco Tek, Inc." The original purpose of
USMetals was to engage in the business of general contracting, interior and
exterior design, and landscaping. Thereafter, on March 14, 2002, USMetals' Board
of Directors changed the name to "USMetals, Inc." and restated its business
purpose as that of intending to engage in the business of acquiring and
developing mineral properties, exploring for gold, silver, and other non-ferrous
metals and minerals within the contiguous United States. It is the further
intention of USMetals to mine and to process any commercially proven resources
developed at its properties.

3) Certain Relationships and Related Transactions.

The Registrant discloses the following information relative to Robert
Dultz, Larry Dietz, Spencer Eubank, Carl O'Baugh, Donald Brown, and U. S. Metals
and Minerals, Inc. In addition, as the result of Mr. Brown's nomination to serve
as a member of the Registrant's board, the Registrant is disclosing certain
relationships between USMetals, the Registrant, and International Energy and
Resources, Inc.

a) Related Party Transactions.

International Energy and Resources, Inc. ("IERI"). IERI's former
President, Donald E. Brown, resigned from that firm on April 2, 2002, and is
designated to serve as a proposed director of the Registrant. Mr. Brown's former
company was responsible for preparing the majority of the exploratory and
development work related to the Mining Claims. Mr. Brown's company received in
excess of $60,000 for work performed on the Mining Claims during his previous
association with his Company.

b) Conflicts of Interest.

Insofar as the officers and directors are engaged in other
business activities, management anticipates they will not devote full time to
the Registrant's affairs. The officers and directors of the Registrant may in
the future become stockholders, officers, or directors of other companies, which

may be formed for the purpose of engaging in business activities similar to
those conducted by the Registrant. The Registrant does not currently have a
right of first refusal pertaining to opportunities that come to management's
attention insofar as such opportunities may relate to the Registrant's proposed
business operations.

The officers and directors are, so long as they are officers or
directors of the Registrant, subject to the restriction that all opportunities
contemplated by the Registrant's plan of operation which come to their
attention, either in the performance of their duties or in any other manner,
will be considered opportunities of, and be made available to the Registrant and
the companies that they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the officer or director.
Unless otherwise provided in the next paragraph, if a situation arises in which
more than one company desires to merge with or acquire that target company and
the principals of the proposed target company have no preference as to which
company will merge or acquire such target company, the Registrant of which the
President first became an officer and director will be entitled to proceed with
the transaction. Except as set forth above, the Registrant has not adopted any
other conflict of interest policy with respect to such transactions.

c) Certain Relationships.

Robert Dultz, the Registrant's Chairman, Chief Executive Officer,
and Principal Stockholder, and the President of USMetals, the Registrant's
wholly owned subsidiary as the result of the transaction discussed hereinabove,
has been involved with USMetals' properties by and through his association in
several previous ventures over the past 28 years. Mr. Dultz (or each of his
representative designees) has contributed significant amounts of capital and has
provided significant funds to develop USMetals' mining properties throughout his
term of association with the properties. It has been Mr. Dultz's principal
effort to develop the properties, through the course of his association with
them in previous ventures, in a manner that would provide value to the holders
of any voting or non-voting equity securities held by them in the Registrant in
developing USMetals' properties and assets. In most every instance, Mr. Dultz
has foregone payment for his services in his respective capacities with the
previous companies, in order to permit the development of those companies'
objectives, which, in almost every case, was the development of USMetals'
principal mining properties.

Larry Dietz, the Registrant's President and a Director, has been
involved with USMetals' principal mining properties by and through his
association with the claims in several previous ventures over several years
prior to the date of this report.

Carl O'Baugh, the Registrant's Vice-President and a Director, has
been involved with USMetals' principal mining properties by and through his
association with the claims in several previous ventures over several years
prior to the date of this report.

Spencer Eubank, the Registrant's Secretary, Treasurer, and a
Director, has been involved with USMetals' principal mining properties by and
through his association with said properties in several previous ventures. In
addition, Mr. Eubank held evidentiary title to a portion of said properties in
1996 and 1997, prior to the transfer or assignment of the mining claims to a
prior owner.

4) Source of Funds Related to Acquisition.

5) Properties of USMetals.

The principal mining properties and assets of USMetals (the "Mining
Claims") are located in West-Central Arizona, in the Eureka Mining District of
Yavapai County, Arizona, approximately 5 miles southeast of the town of Bagdad,
population 1,800. Within the boundaries of USMetals' Mining Claims, more
commonly referred to as the "Twin Peaks Mine," are the historic sites of the
Crosby, Hayes and Glory Hole Mines, past producers of gold and silver.

The airport at Bagdad is 42 miles west by air from Prescott, the county
seat, but by road the distance is 68 miles.

The Bagdad area is geographically located in the southwestern division
of the Eureka Mining District, and includes most of the significant mines and
prospects of that district. The exceptions are the tungsten mines in the Camp
Wood area, to the northeast, the existing historic gold mines and prospects,
which abut USMetals' property to the southeast along the Santa Maria River, and
tungsten, copper, and zinc mines to the south and southeast from Bagdad. Bagdad
has a long history of mining activities and offers mining companies and
prospectors experienced labor, affordable housing, equipment repair, and mining
services.

An excellent road, Highway 96, connects Bagdad with Hillside, 26 miles
to the southeast. The nearest railroad spur is located to the east in Hillside.
The Crosby area of the claims group is reached by dirt road that runs north
westward from Highway 96 from a point about 400 yards north of the Santa Maria
River. The distance from Highway 96 to the Crosby area is approximately 2 miles.
The Hayes area of the claims group is reached by a good dirt road that follows
the Santa Maria River in a southwestern direction from Highway 96. This road is
just south of where the Highway crosses the river. About 4 miles from the
Highway, a jeep trail runs northwest approximately one mile to the area.

The Santa Maria River traverses the Mining Claims and USMetals is the
only company that holds water rights to that section of the river, a valuable
asset for a mining company in this arid country.

a) Location of USMetals' Properties.

The full and complete list of USMetals' claims (all of USMetals'
Mining Claims are located within Township 13 North, Range 8 West, in Yavapai
County, Arizona) is contained in Schedule 4.10 of Exhibit 2.1, Share Exchange
Agreement dated March 14, 2002, filed with the Form 8-K on June 13, 2002, and is
incorporated herein by this reference.

b) USMetals' Water Rights.

USMetals presently owns the water rights that will be required in
order to be able to conduct mining operations at USMetals' claims. The water
rights to Sections 3, 4, 7, 8, 9, 10, 16, 17, 18, 20, and 21, all of which are
located in Township 13 North, Range 8 West, in Yavapai County, Arizona, were
transferred from the prior owner to USMetals, Inc. on March 27, 2002, and
recorded in Book 3912, Page 897 of the Yavapai County Recorder.

c) Limitation on Ownership.

All of USMetals' mining properties are unpatented mining claims;
consequently, USMetals has only possessory title with respect to such
properties. The claims set forth hereinabove were duly transferred by official
deed from the prior owner to USMetals, Inc. on March 22, 2002 and recorded in
Book 3912, Page 896 of the Yavapai County Recorder's Office on March 27, 2002.

Moreover, the real property upon which USMetals' claims are
located, is subject to a paramount lien by the United States of America; all of
USMetals' claims are subject to the applicable rules and regulations of the
United States Department of the Interior, Bureau of Land Management, which
administers USMetals' use and activities on said Mining Claims.

USMetals has paid all of the required fees in order to maintain
the 141 Mining Claims, which USMetals owns, for the current periods. All of the
necessary documents and affidavits have been filed with the Yavapai County
Recorder, as was mentioned hereinabove.

6) Former Use of Assets Prior to Acquisition.

Early Exploration Conducted and Valuations Determined by California
Core Drilling Company. Beginning in 1981, R. W. Barnes, a geologist for
California Core Drilling Company, performed certain exploratory drillings in
order to obtain samples of the contents from the Crosby Mine Site No. 6, located
in Township 13 North, Range 8 West, Section 4 in Yavapai County, Arizona
(included in USMetals' Twin Peaks Mine grouping). (The Commission should note
that at the time these studies were conducted, some mining extraction, recovery,
sampling, milling, and refining techniques available now were not available at
that time; however, the results of the samplings fully affirm the presence of
significant deposits on USMetals' properties.)

Mr. Barnes drilled 28 core drill holes on the Crosby Mine site. His
report was based on 200-foot depth cores. (As per operator lease footage 50'W x
50'L x 200' Depth.) This area was 18,519 cubic yards, or approximately 20,000
tons of ore reserve. The total area that was drilled was 1,500' x 600' x 200'. A
total of 744 core samples were taken from the 6,000-foot of core hole drillings.
The samples were assayed for gold and silver.

The results - then - were .14 ounces of gold per ton and .595 ounces
of silver per ton. Moreover, this ground value was before processing.

The core samples also revealed quartz monzonite porphyry formations
throughout the area of sampling. (The gold is held in the pegmatites, mica, and
quartz veins, and also in mineralized fractures forming the stock.)

The many faults located in this area were of considerable importance in
controlling supergene enrichment; the largest quantity and highest grade of ore
occurs when these faults intersect or are closely spaced. There was significant
evidence of this enrichment recorded from the samples taken from the Crosby Mine
site area. And, the gold and silver that was found is natural to the formations
of the enrichment zone.

In Mr. Barnes' report, his qualified and professional conclusion was
that the sampling area at the Crosby Mine site (which consisted of 1,800,000
tons) contained 252,000 ounces of gold and 1,260,000 ounces of silver in the
form of proven reserves. Mr. Barnes certified these figures as total ground
production values.

Subject to the Registrant's reservation of its reserves (in its defense
of certain statements made by its wholly-owned subsidiary, USMetals) (and
certain disclaimers that are set forth in the section entitled "Important Note
About Reserves" contained herein below), at the average New York Spot Prices of
gold and silver as at April 30, 2002, respectively, the proven reserves of gold
would be worth $77,716,800 and the proven reserves of silver would be worth
$5,733,000. Of course, these figures reflect the recovery of the then proven
reserves at only the Crosby Mine site; further reports by other professionals
that follow this section rely on broader samplings and more detailed analysis
from a number of different sites throughout USMetals' Mining Claims.

Even this early report demonstrates reasonable evidence of USMetals'
decision to explore, develop, and mine its properties.

a) Recent Exploration and Samplings by International Energy and
Resources, Inc.

Through extensive recent geological surveys, the Registrant and
USMetals are gratified by the results of such surveys provided by International
Energy and Resources, Inc., one of USMetals' principal advisors.

It was determined that the Twin Peaks Mine is on the same
structure and flat zone as the Phelps-Dodge Cypress deposit. The claims and
previous producing mines are on the Jasper Peak, with gold carrying
mineralization in the Jasperoid.

To the date of the report (circa 2001), numerous geological,
geochemical, and geophysical studies were conducted in order to confirm
historical assays and to establish estimated reserves at USMetals' properties.

IERI reported, "over 10,000 feet of core drillings were performed
and over 1,500 fire assays were conducted. These assays showed an overall
average of .14 ounces of gold per ton and .595 ounces of silver per ton, which,
at today's mining capability, proves over 652,000 ounces of gold and 2,488,000
ounces of silver in reserve using only 1 area of 3 claims. The dimensions of
this area were 300'W x 500'L x 100'D. At today's prices, this study represents
over $191,000,000. If we were to have extended the depth to 400 feet, the total
amount of gold and silver would increase four times giving a total of 2,608,000
ounces of gold and 9,952,000 ounces of silver. (It should be noted that early
miners tunneled to a depth of 400 feet and the drilling results verified ore at

this depth.) If we were to have extended the same areas to a depth of 2,000
feet, which is the depth of the Phelps-Dodge Mine in Bagdad, the increase in
estimated reserves would be 13,040,000 ounces of gold and 49,760,000 ounces of
silver. (Once again, the Commission should read the section entitled "Important
Note about Reserves" contained herein below for the Registrant's position on
proven or estimated reserves on its Mining Claims.)

The geological, geophysical, and geochemical studies stated
above were reviewed and evaluated by Nicholas H. Carouso, the President of
Geo-Processing, Inc., which was an independent mining, consulting, and geologic
firm. Mr. Carouso was engaged to evaluate the commercial feasibility of the
claims. Mr. Carouso's report and economic study recommended the continuation of
exploration and the start of production."

In January 2001, International Energy and Resources, Inc. hired
Spooner & Associates, Inc. to conduct further, more extensive, geological
studies on USMetals' properties. After Scott Spooner, the Senior Geologist of
the firm, and CAD Drawing Survey Specialist Eric C. Monk reviewed the
abovementioned geological studies, they visited the Twin Peaks Mine. In March
2002, upon the recommendation of Spooner & Associates, International Energy and
Resources mobilized a crew to build approximately 10 miles of road to gain
access to the historic Hayes Mining area. This would enable Spooner's firm to
conduct further, more conclusive and substantiating, geological studies.

The results, conclusions, and estimates of Spooner & Associates,
Hillbrands and Western Mining Company, and International Energy and Resources
are as follows.

They drilled approximately 30 holes that each measured 100 feet in
depth for a total of 3,000 feet of drilling cuttings. Spooner & Associates
retained over 200 samples for assaying. In conjunction with the drilling
operation, Spooner & Associates also took numerous rock chip samples from two
different locations surrounding the historic Hayes Mine. These samples were also
assayed. The result of the geological studies can best be summarized by
information from the report, as follows:

"Drill Hole #30. This drill hole was subject to a standard fire
assay as well as oxidation prior to standard fire assaying. This assay and
oxidation process was conducted on cuttings taken at a depth of 40 - 50 feet.
The standard fire assay results revealed gold values of .2 ounces per ton of
ore, while oxidation followed by fire assaying showed gold values of 1.16 ounces
per ton of ore. This structure is approximately 3,400 feet long by 100 feet wide
by 100 feet deep.

Our conclusion gives us estimated reserves of 2,014,815 tons of
ore multiplied by 1.16 ounces of gold per ton of ore, which equals 2,337,185
ounces of gold at this site.

Rock material from the hanging wall and footwall of the quartz
vein were subject to crushing, screening, and fire assaying. The results from
the quartz dike revealed an average of .57 ounces per ton of ore from fire
assaying and 5.8 times or 3.31 ounces per ton of ore using the oxidation method.
That gives us estimated reserves of 16,694,056 ounces of gold.

Rock chips were taken from the red conglomerate located just south
of the Hayes Mine and just west of the volcanic plug. The fire assays revealed
..2 ounces of gold per ton of ore. As stated hereinabove, oxidation prior to fire
assaying should increase the gold amount by 5.8 or 1.16 ounces per ton of ore.
This area has ore reserves of 2,395,477 ounces of gold.

These three areas give us a combined total of 9,138,687 tons of
ore, which may yield a total of 21,426,718 ounces of gold.

b) Recommendation on Method of Assaying by Metallurgical Services, Inc.

In August 2001, Russell M. Dugdale, the Senior Metallurgical
Engineer for Metallurgical Services, Inc., in the course of defining an assay
procedure, recommended to International Energy and Resources, Inc. to proceed
with a process that requires the roasting of the samples prior to assaying.
Oxidation of the samples, provided in the roasting process, will remove sulfur,
arsenic, and halides, which can interfere with the fire assay procedures. Mr.
Dugdale recommended that all samples should be roasted prior to the fire assay
procedure.

c) Supporting Exploratory Reports by Third Parties.

In 1997, Golden West Mining Services conducted an update report to
confirm the earlier core drills and assays. Remarkably, Golden West's report
also showed indications of rare and valuable cores from beryllium to uranium in
significant quantities.

USMetals senior executive management is evaluating the merits of
extracting these precious metals to determine whether or not it would be
feasible to conduct all-out operations for recovery; these metals would need to
be recovered using plasma reactor processing. Several 55-gallon barrels have
been sent to one of the few facilities that recover metals using the plasma
reactor process, and, if the results are positive, the indication of these rare
and precious metals in nominal and feasible amounts could significantly increase
USMetals' reserves' estimates.

d) Important Note about Reserves.

The ore reserve figures presented herein are estimates, and the
Registrant and USMetals can provide no assurance to the Commission that the
indicated levels of recovery of gold and silver will be realized. Such estimates
should not be relied upon as being indicative of estimates of USMetals' total
reserves at other gold prices, nor should the Commission deem the gold prices
quoted in this report to be accurate, unless the Registrant or USMetals quotes
such figures from identified and reliable sources.

Changes in the various assumptions on which the reserve estimates
are based, such as the cutoff grade, may result in increases or decreases in the
reserve estimates from year to year. Reserve estimates for properties that have
not yet commenced production may require revision based on actual production
experience. Also, sustained market price fluctuations of gold and silver, as
well as increased production costs or reduced recovery rates, may ultimately
result in an adjustment of ore reserves. Moreover, many factors relating to each

mine, such as the design of the mine plan, unexpected operating and processing
problems, problems with ground stability, changes in the recovery ratio and the
complexity of the metallurgy of an ore body, may adversely affect production and
operating costs of a project. Neither reserves nor projections of future
operations should be interpreted as assurances of the economic life or
profitability of future operations.

Exploration for, and, if warranted, production of minerals is
highly speculative and involves greater risks than many other businesses. Many
exploration programs do not result in the discovery of any minerals and, any
minerals that may be discovered may not be of sufficient quantity or quality to
be profitably mined. Uncertainties as to the metallurgical amenability of any
minerals discovered may not warrant the mining of these minerals on the basis of
available technology. Moreover, short-term factors relating to the ore reserves,
such as the need for orderly development of ore bodies or the processing of new
or different grades, may impair the profitability of a mine in any particular
accounting period. Mining operations are also subject to a number of other
hazards and risks such as encountering unusual or unexpected formations,
environmental pollution, industrial accidents, and rock movements and flooding,
many of which cannot be insured against.

From time to time, USMetals may engage in the development of new
ore bodies. The ability of USMetals to sustain or increase its level of gold
production is dependent in part on the successful development of such new ore
bodies or the expansion of existing mining operations. The economic feasibility
of any such development project, and all such projects collectively, is based
on, among other things, estimates of reserves, metallurgical recoveries, capital
and operating costs of such projects and future gold prices. Development
projects are also subject to the successful completion of feasibility studies,
issuance of necessary permits and receipt of adequate financing.

Development projects have no operating history upon which to base
estimates of future cash operating costs and capital requirements. In
particular, estimates of reserves, metal recoveries and cash operating costs are
to a large extent based on the interpretation of geologic data obtained from
drill holes and other sampling techniques and feasibility studies which derive
estimates of cash operating costs based on anticipated tonnage and grades of ore
to be mined and processed, the configuration of the ore body, expected recovery
rates of metals from the ore, comparable facility and equipment costs,
anticipated climate conditions and other factors. As a result, it is possible
that actual cash operating costs and economic returns of any and all development
projects may materially differ from the costs and returns initially estimated.

With regard to estimates of reserves processed by standard fire
assaying, it is important to note that the lower results from the standard fire
assaying, where indicated in the respective geologists' and assayers' opinions,
are due to the presence of sulfides and arsenides that tend to drive the gold
and silver into the slag phase during the standard fire assaying process.
Consequently, it can be assumed that all previous standard fire assays that were
completed would increase 5.8 times through oxidation prior to fire assaying.

7) Registrant's Plan of Operations Respective to Business and Assets of
USMetals.

USMetals intends to submit a Phase I Mining Plan of Operations to the
Bureau of Land Management in 2002. However, it first must obtain adequate
financing or receive the portion of proceeds from the Offering (described more
fully in Item 5 hereinbelow, which has been allocated to USMetals in order to
pay for the cost of such Plan of Operations.

Based on the extensive reports and studies conducted by the mining
team, it is the present intention of USMetals in consort with International
Energy and Resources, Inc. to conduct further drilling to further support these
findings and to determine the best area to commence production and operations.
Spooner & Associates are currently designing the mill, which will be constructed
in order to start processing the ore.

a) Spooner & Associates' Report on Specific Field Work to be Performed.

Spooner & Associates, Inc. prepared an estimate for USMetals
relative to the costs associated with the preparation of a Mining Notice for a
five acre mining site in Arizona required by the Bureau of Land Management in
accordance with 43 CFR 3809. Additionally, Mr. Spooner made provisions for three
persons involved in this first-stage permitting project, which included himself,
Tom Couste, and Eric C. Monk. Mr. Spooner recommended an initial pilot operation
of 100 tons per day to evaluate the best method of recovery.

The intended Mining Notice will provide for an area of disturbance
of less than five acres. Mr. Spooner recommended that USMetals start with this
area under the initial Mining Notice and then expand into the formal Plan of
Operations for disturbances exceeding five acres. This would permit USMetals to
be in production while in the process of obtaining the necessary Bureau of Land
Management permits and licenses required to conduct full-scale operations.

The initial scope of work is to submit a Mining Notice to the
Bureau of Land Management for a five-acre mining pilot project in Bagdad,
Arizona. This involves the preparation of a separate mining notice report and
coordination with the Havasu City, Arizona office of the Bureau of Land
Management and with the State of Arizona. In addition, air and groundwater
permit applications will be submitted to the Arizona Department of Environmental
Quality.

Certain assumptions were presumed in preparing these estimates.
They are: (1) Title V Air Quality Permit: the exact specification for equipment
is unknown, as is the number of expected tons emissions; and (2) there may be a
Wetland Delineation or Section 404 permit required to be obtained by USMetals by
the U.S. Army's Corp of Engineers.

Task 1 - Bureau of Land Management Notice for Five Acre Site Cost Estimate
--------------------------------------------------------------------------------
1. Field Inspection of the Mining Site
a. Collect Field Data Required for Mining Notice
2. Coordination with Bureau of Land Management Phoenix Office and
State of Arizona
3. Develop Mining Plan
a. Site Plan and Location Maps
b. Description of Operation
c. Process Description
d. Site geology (Groundwater Area)
e. Reclamation Plans
4. Submit Mining Notice to Bureau of Land Management
5. CAD Drawings
6. Coordinate Cultural, Threatened, and Endangered Species Surveys
--------------------------------------------------------------------------------
Cost Estimate, this Task First $6,900.00
--------------------------------------------------------------------------------

Task 2 - Groundwater Protection Permit Cost Estimate
--------------------------------------------------------------------------------
1. Prepare and Submit a Groundwater Protection Application
2. Develop BADCT Report and Support Data
3. Coordinate with the Arizona Department of Environmental Quality
4. CAD Drawings
--------------------------------------------------------------------------------
Cost Estimate, this Task Second $10,500.00
--------------------------------------------------------------------------------

Task 3 - Air Quality Permit for Mining and Furnace Cost Estimate
--------------------------------------------------------------------------------
1. Title V Permit Application
2. Prepare and Submit Air Quality Permit Application
3. Develop Supporting Chemical Data
4. Coordination with Arizona Department of Environmental Quality
5. CAD Drawings
--------------------------------------------------------------------------------
Cost Estimate, this Task Third $26,000.00
--------------------------------------------------------------------------------

Task 4 - Travel Cost Estimate
--------------------------------------------------------------------------------
1. per diem, $95.00 per day for 10 days for three people
2. Rental Car and Fuel, 10 days at $90.00 per day
3. Air fare for three persons
4. Miscellaneous Expenses, Maps, Field Equipment, etc.
--------------------------------------------------------------------------------
Cost Estimate, this Task Second $5,750.00
--------------------------------------------------------------------------------
Total Cost Estimate $49,150.00
================================================================================

B. THE REGISTRANT'S PROPOSED OIL AND GAS OPERATIONS.

The Registrant, by and through a subsidiary to be formed for the business
purpose hereafter stated (the "Development Subsidiary"), intends to engage in
the business of oil and gas exploration and development and, also, intends to
speculate on oil and gas royalties associated with oil and gas properties that
the Development Subsidiary will not own or control.

1) Development Subsidiary's Plan of Operations and Proposed Business
Strategy.

The Development Subsidiary's ability to develop and maintain a
meaningful level of revenues from its contemplated oil and gas exploration,
drilling, and production operations is dependent on its ability to successfully
drill exploration and development wells and complete producing property
acquisitions.

The Development Subsidiary's exploration efforts will be focused in the
Texas and Louisiana region. The Registrant will target selected, negotiated
acquisitions of proved properties. Presently, the Registrant does not have any
firm targets, as it will require the immediate expense of capital to develop its
prospects.

The Development Subsidiary's goal will be to achieve and maintain
profitability and to create value for the Registrant's stockholders through
natural gas and oil exploration and development and through the acquisition of
proved properties. The Development Subsidiary's strategy will be to achieve its
goals including:

a. Funding exploration prospects developed by talented geoscientists;

b. The negotiated acquisitions of proved properties;

c. Strict control of general and administrative and geological and
geophysical costs;

d. Using creative deal structures to access acreage, seismic, prospects
and capital;

e. Using equity ownership incentives to align the interests of the
Registrant's management and of its alliance partners with that of the
Registrant's stockholders; and

f. Investing in other energy industry entrepreneurial opportunities.

The Registrant's principal focus is on the funding and drilling of
exploratory wells in the Louisiana area and, beyond that, in Texas. The
Registrant's strategy, through that of the Development Subsidiary, is to control
overhead costs by keeping employee levels low and outsourcing geological,
geophysical, engineering, land, and operating activities and as much of the
Development Subsidiary's administrative activities as possible. In particular,
the Development Subsidiary intends to outsource all of the Development
Subsidiary's natural gas and oil prospect generation and evaluation functions to
its alliance partners.

Natural gas and oil exploration is an exceptionally high-risk business
that requires significant outlays of capital. The Development Subsidiary's goal
will be to enhance the Development Subsidiary's chances for success by using 3-D
seismic technology, keeping its cost structure low and managing financial risk.

In addition to exploration activities, the Development Subsidiary's
intention will be to target negotiated acquisitions and thereby avoid more
competitive bidding situations. Nonetheless, the Development Subsidiary
anticipates to always face competition from companies that in many instances are
well established, successful and frequently may be willing to pay more for
properties than what the Development Subsidiary may consider to be prudent or,
otherwise, which it may be able to pay for. Thus, the Development Subsidiary's
success will depend on its ability to quickly identify promising opportunities,
prioritize these opportunities to focus on situations where it will have the
most potential for success, and then negotiate creative deal structures that,
whenever possible, avoid the payment of more up-front cash than competitors are
willing to pay.

Anticipated Competition.

The Development Subsidiary expects to compete with a broad range of
natural gas and oil companies in its exploration and property acquisition
activities. Many of the Development Subsidiary's competitors will have
substantially greater financial and other resources. In addition, the
Development Subsidiary's larger competitors may be able to absorb the burden of
changes in Federal, state and local laws and regulations more easily than will
be able the Development Subsidiary, which could adversely affect the Development
Subsidiary's competitive position. Many of the Development Subsidiary's
competitors are also expected to be able to pay more for exploratory prospects
and productive natural gas and oil properties and will be able to identify,
evaluate, bid for and purchase a greater number of properties and prospects than
the Development Subsidiary may be able to do. In addition, it is anticipated
that most of the Development Subsidiary's competitors will have been operating
for a much longer time than the development Subsidiary will have been operating
and will be able to demonstrate the ability to operate through industry cycles.
It is expected that the Development Subsidiary's competitors may also have
greater access to equipment and materials than will the Development Subsidiary
(or the Registrant in support of its subsidiary), which could adversely affect
the Development Subsidiary's day-to-day operations.

The Development Subsidiary's ability to explore for natural gas and oil
and to acquire proved properties in the future will depend upon its ability to
evaluate and select suitable prospects and properties and to consummate
transactions in this highly competitive industry and the surrounding
environment. It is expected that the Development Subsidiary will also be
dependent upon the ability of its alliance partner(s), to identify prospects and
secure leases in, what will be then, the current competitive environment.

2) Anticipated Government Regulations.

a) Federal Regulation of Sales and Transportation of Natural Gas.
Historically, the transportation and sale for resale of natural gas in
interstate commerce have been regulated pursuant to the Natural Gas Act of 1938,

the Natural Gas Policy Act of 1978 and the regulations promulgated thereunder by
the Federal Energy Regulatory Commission. In the past, the Federal government
has regulated the prices at which natural gas could be sold. Deregulation of
natural gas sales by producers began with the enactment of the Natural Gas
Policy Act. In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act,
which removed all remaining Natural Gas Act and Natural Gas Policy Act price and
non-price controls affecting producer sales of natural gas effective in 1993.
Congress could, however, reenact price controls in the future.

It is expected that the Development Subsidiary's sales of natural
gas will be affected by the availability, terms, and cost of pipeline
transportation. The price and terms for access to pipeline transportation remain
subject to extensive Federal regulation. Commencing in April 1992, the Federal
Energy Regulatory Commission issued Order No. 636 and a series of related
orders, which required interstate pipelines to provide open-access
transportation on a basis that is equal for all natural gas suppliers. The
Federal Energy Regulatory Commission has stated that it intends for Order No.
636 to foster increased competition within all phases of the natural gas
industry. Although Order No. 636 will not directly regulate the Development
Subsidiary's production and marketing activities, it is not expected to affect
how buyers and sellers gain access to the necessary transportation facilities
and how the Development Subsidiary's and its competitors will sell natural gas
in the marketplace. The courts have largely affirmed the significant features of
Order No. 636 and the numerous related orders pertaining to individual
pipelines, although some appeals remain pending and the Federal Energy
Regulatory Commission continues to review and modify its regulations regarding
the transportation of natural gas.

For example, in February 2000, the Federal Energy Regulatory
Commission concluded a broad review of its transportation regulations by
revising its regulations in Order No. 637 (and subsequent, related orders), with
the goal of improving competition in the interstate transportation markets and
to remove a perceived bias in existing policies toward encouraging short-term
transportation arrangements. Order No. 637 eliminates (for a two-year period)
rate caps in the secondary market for transportation arrangements of less than
one year's duration. Order No. 637 also requires pipelines to provide greater
comparability of service between secondary market sales and pipeline sales,
requires pipelines to increase the rights and options of transportation
customers, requires expanded reporting requirements regarding (among other
information) interstate capacity and its utilization, and imposes other
regulatory changes. In addition, Order No. 637 permits, but does not require,
pipelines to file new types of rates, including differing rates for peak and
off-peak periods, term-differentiated rates, and rates established by voluntary
auctions - although the Order does not depart from current policies as to
cost-based rates for long-term or pipeline-provided transportation services. The
Federal Energy Regulatory Commission has also commenced a proceeding
characterized as a "discussion" with the industry on the potential for more
fundamental changes in its ratemaking policies, but has not yet proposed any
specific further changes. The Development Subsidiary will not be able to predict
what action the Federal Energy Regulatory Commission will take on these matters,
nor will the Development Subsidiary be able to accurately predict whether the
Federal Energy Regulatory Commission's actions will achieve the goal of
increasing competition in markets in which the Development Subsidiary's natural
gas will be sold. However, the Registrant does not believe that any action taken
will affect it in a way that materially differs from the way it affects other
natural gas producers, gatherers and marketers.

Commencing in May 1994, the Federal Energy Regulatory Commission
issued a series of orders that, among other matters, slightly narrowed its
statutory tests for establishing gathering status and reaffirmed that, except in
situations in which the gatherer acts in concert with an interstate pipeline
affiliate to frustrate the Federal Energy Regulatory Commission's transportation
policies, it does not have pervasive jurisdiction over natural gas gathering
facilities and services and that such facilities and services located in state
jurisdictions are most properly regulated by state authorities. This Federal
Energy Regulatory Commission action may further encourage regulatory scrutiny of
natural gas gathering by state agencies. The Registrant does not believe that
the Development Subsidiary will be affected by the Federal Energy Regulatory
Commission's gathering policy any differently than other natural gas producers,
gatherers and marketers.

Additional proposals and proceedings that might affect the natural
gas industry are pending before Congress, the Federal Energy Regulatory
Commission and the courts. The natural gas industry historically has been very
heavily regulated; therefore, the Registrant, through this report, cannot assure
the Commission that the less stringent regulatory approach recently pursued by
the Federal Energy Regulatory Commission and Congress will continue.

b) Federal Leases. The Registrant and the Development Subsidiary in the
future expect to have operations located on Federal natural gas and oil leases,
which are administered by the Minerals Management Service. Such leases are
issued through competitive bidding, contain relatively standardized terms and
require compliance with detailed Minerals Management Service regulations and
orders pursuant to other acts, which are subject to interpretation and change by
the Minerals Management Service. The Minerals Management Service also has
regulations restricting the flaring or venting of natural gas and has proposed
to amend such regulations to prohibit the flaring of liquid hydrocarbons and oil
without prior authorization. Similarly, the Minerals Management Service has
promulgated other regulations governing the plugging and abandonment of wells
and the installation and removal of all production facilities. To cover the
various obligations of lessees, the Minerals Management Service generally
requires that lessees have substantial net worth or post bonds or other
acceptable assurances that such obligations will be met. The cost of these bonds
or other surety can be substantial, and the Registrant cannot assure the
Commission that it will be able to obtain bonds or other surety in all cases.

In March 2000, the Minerals Management Service amended its
regulations governing the calculation of royalties and the valuation of crude
oil produced from Federal leases. This rule modifies the valuation procedures
for both arm's length and non-arm's length crude oil transactions to decrease
reliance on oil posted prices and assigns a value to crude oil that better
reflects its market value. The Registrant cannot predict how this regulation
will affect it.

c) State and Local Regulation of Drilling and Production. The
Registrant expects that the Development Subsidiary will own interests in
properties located in Texas and Louisiana. These states regulate drilling and
operating activities by requiring, among other things, drilling permits and
bonds and reports concerning operations. The laws of these states also govern a
number of environmental and conservation matters, including the handling and

disposing of waste materials, unitization and pooling of natural gas and oil
properties and establishment of maximum rates of production from natural gas and
oil wells. Some states prorate production to the market demand for natural gas
and oil.

Oil Price Controls and Transportation Rates. The Development
Subsidiary's anticipated sales of crude oil, condensate, and natural gas liquids
are not currently regulated and are made at market prices. This situation may
change by the time, if at any time, the Registrant or the Development Subsidiary
begins to sell crude oil, condensate, and/or natural gas liquids. Effective as
of January 1, 1995, the Federal Energy Regulatory Commission implemented
regulations establishing an indexing system for transportation rates for oil
that could increase the cost of transporting oil to the purchaser. In July 2000,
the Federal Energy Regulatory Commission commenced a proceeding to determine
whether to change the index, but initially proposing to retain the existing
index. Other factors being equal, the indexing system, and any orders amending
the index, may tend to increase transportation costs or reduce wellhead prices
for crude oil. However, the Registrant does not believe that these regulations
affect it any differently than other natural gas producers, gatherers, and
marketers.

d) Environmental Regulations.

The anticipated operations by the Development Subsidiary (or by
the Registrant through its subsidiary(ies)) will be subject to numerous laws and
regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection. Public interest in the
protection of the environment has increased dramatically in recent years.
Offshore drilling in some areas has been opposed by environmental groups and, in
some areas, has been restricted or eliminated. To the extent laws are enacted or
other governmental action is taken that prohibits or restricts offshore drilling
or imposes environmental protection requirements that result in increased costs
to the natural gas and oil industry in general, the Development Subsidiary's
anticipated business and activities could be adversely affected.

The Comprehensive Environmental Response, Compensation, and
Liability Act, also known as the "Superfund" law, imposes liability, without
regard to fault or the legality of the original conduct, on some classes of
persons that are considered to have contributed to the release of a hazardous
substance into the environment. These persons include the owner or operator of
the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of the hazardous substances found at the
site. Persons who are or were responsible for releases of hazardous substances
under the Superfund law may be subject to joint and several liability for the
costs of cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment.

The contemplated operations of the Development Subsidiary will
also be subject to regulation of air emissions under the Clean Air Act, and
comparable state and local requirements. Implementation of these laws could lead
to the gradual imposition of new air pollution control requirements on the
Development Subsidiary's future operations. Therefore, the Registrant or the
Development Subsidiary may incur capital expenditures in the future to upgrade
air pollution control equipment. The Registrant does not believe that its
operations would be materially affected by any such requirements, nor does the
Registrant expect such requirements to be any more burdensome to us than to
other companies involved in natural gas and oil exploration and production
activities.

In addition, legislation has been proposed in Congress from time
to time that would reclassify some natural gas and oil exploration and
production wastes as hazardous wastes, which would make the reclassified wastes
subject to much more stringent handling, disposal and clean-up requirements. If
Congress were to enact this legislation, it could increase the Development
Subsidiary's operating costs, as well as those of the natural gas and oil
industry in general. Initiatives to further regulate the disposal of natural gas
and oil wastes are also pending in some states, and these various initiatives
could have a similar impact on the Development Subsidiary. The Registrant
believes that it will be able to substantially comply with all current and
future applicable environmental laws and regulations.

In accordance with industry practice, the Registrant intends to
maintain insurance against some, but not all, potential risks and losses.
Presently, because the Registrant does not actively conduct oil or gas
operations, it does not carry business interruption insurance for this industry.
In the future, should the Registrant, through its Development Subsidiary, engage
in oil and gas exploration and development, in the case of some risks, the
Registrant or the Development Subsidiary may not be able to obtain insurance if
the cost of available insurance is excessive relative to the risks presented. In
addition, pollution and environmental risks generally are not fully insurable.
If a significant accident or other event occurs and is not fully covered by
insurance, it could adversely affect the Development Subsidiary and, possibly,
the Registrant.

3) Acquisitions of Prospective Oil and Gas Properties; Operations
Alliances.

The Registrant intends that a proposed "Development Subsidiary" will be
an independent natural energy provider and distributor which explores, develops,
drills, and produces, including wholesale and retail sales of oil (and
petroleum-related products and byproducts) and gas, in selected domestic
markets.

The Registrant, by and through the Development Subsidiary, will seek to
pursue acquisition opportunities in the rapidly changing global energy markets,
with the Development Subsidiary focusing on the operating segments of oil and
gas exploration and development, by seeking to make significant financial
investments in these industries using a portion of the proceeds from the
Offering (See Item 5. describing the Registrant's limited offering pursuant to
Rule 506 of Regulation D).

In general, the Registrant expects to gather assets in the Development
Subsidiary that will support both long-term growth and near-term earnings. The
Registrant seeks to balance risk, return, timing of cash flow, and growth
objectives by creating a complementary blend of operating assets in the
Development Subsidiary. The Registrant is hopeful that Development Subsidiary's
assets generate cash flow and earnings in the near term, while operating and
administrative investments generally have a longer time to develop and mature
before achieving expected cash flow and earnings. Also, the Development
Subsidiary's passive lower-risk assets, such as its proposed plan to engage in
royalty speculation from proven oil or gas reserves, serve to balance the higher
risk associated with operating assets such as field oil and gas exploration,
drilling, and production activities.

Deregulation and new technologies that are available (and will continue
to improve) for exploration and development, as well as growth in the demand in
the United States (as the direct result of changing political climates and
increased usage created by a bettering economy), will provide the opportunity
for the Registrant to advance in the implementation and development of it
operations. The development Subsidiary, once organized, will concentrate its
acquisition activities in markets where it believes most of the best exploration
and development opportunities will be in the next five years. All of the
Development Subsidiary's contemplated acquisitions will have an established
presence in their respective markets in order to access and better evaluate
potential investment opportunities.

When assessing acquisition opportunities, the Registrant (through its
proposed Development Subsidiary) will identify oil and gas properties that
demonstrate a need for executive, administrative, and operations infrastructure,
including prospects for incremental growth that the Registrant believes will
withstand potential short-term economic and capital turbulence. The Registrant
expects that much of its new acquisition activity will be in domestic markets
due to the current and anticipated growth in required oil and gas consumption in
the regions in which it anticipates it will maintain a presence.

Generally, the Registrant will seek to minimize risk in its acquisition
projects by selecting alliance operatives with complementary skills, structuring
long-term oil or gas sales contracts, arranging financing prior to the
commencement of operations and contracting for adequate equipment and supplies.
As the Development Subsidiary grows, its objective will evolve from being an
equal partner to seeking to be the majority or sole owner of many or all of its
properties.

The Development Subsidiary will attempt to limit its financial exposure
to each project and to mitigate development risk, interest rate risk, and
operating risk, through the active use and application of contracts. In
addition, project loan agreements are generally structured on a non-recourse
basis. Further, the Development Subsidiary will structure its project financings
and operations so that a default under one project's loan or operating agreement
will have no effect on the loan or operating agreements of other projects or the
Development Subsidiary's debt.

It is expected that the Development Subsidiary's analysis of
acquisition opportunities will be based on an in-depth assessment of the

regulatory environment, expected growth in the exploration and development area,
and related oil and gas opportunities. The only disadvantage will be the
Development Subsidiary's lack of experience in the technical and operating
aspects following its acquisition of each oil or gas property. When required,
the Registrant or the Development Subsidiary will contract with its qualified
advisors and operations alliance partners or consultants to assist in the
acquisition and investment evaluation and project assessment and provide
facility management and operation services, respectively.

The Registrant, through the Development Subsidiary, will focus on
multiple project acquisitions and development in a particular geographic area in
order to minimize development and operating costs and maximize the value of
existing and planned acquisitions. The development Subsidiary will seek to
balance revenue and cost volatility associated with the development of oil and
gas properties by an inexperienced operator with the stability of knowledge and
experience to be provided by the development Subsidiary's operating alliance
partners.

As time progresses, after the Development Subsidiary maximizes on the
use of any oil and gas property it acquires, or, if any oil or gas property that
the Development Subsidiary proves to be unyielding and unprofitable, the
Development Subsidiary (or the Registrant, in the event the Development
Subsidiary fails to act) will seek opportunities to divest assets which are no
longer strategically important or do not achieve profitability objectives.

C. THE REGISTRANT'S PROPOSED ACQUISITION STRATEGY.

As a part of the Registrant's overall restated business purpose and overall
plan of operations, the Registrant intends to aggressively pursue an acquisition
strategy to enhance its position in its current markets and acquire business
entities and operations in new markets. The Registrant will focus its
acquisition strategy on candidates that either fit into or complement the
Registrant's current or contemplated operations. This will include the
acquisition of other companies in the United States or internationally that are
engaged in the Registrant's lines of business or proposed business and that can
be efficiently consolidated into the Registrant's current operations.

The Registrant's present strategy is to (i) acquire additional companies
that are intended to supplement the Registrant's existing market presence as
"tuck-in" acquisitions; and (ii) establish a significant presence in new markets
or geographic areas through the acquisition of established regional competitors
as "platform" acquisitions to be followed by additional "tuck-in" acquisitions.

1) Platform Acquisitions. A "platform acquisition" is defined by the
Registrant's senior executive management as one that creates a significant
presence for the Registrant in a new geographic market or market segment. The
Registrant intends, where possible, to make platform acquisitions by acquiring
established companies that are engaged in business similar to those that are
being conducted or planned to be conducted by the Registrant. In general, the
Registrant intends to retain the management as well as the operating and
administrative personnel of a platform acquisition in order to maintain
continuity of operations and performance. The Registrant will seek to increase
an acquired company's revenues and improve its profitability by integrating the

acquired company into the Registrant's network. The Registrant believes that
these acquisitions could provide significant inter-company cross-marketing
opportunities by providing national and international services and support to
what then would be subsidiaries on a more competitive and cost-effective basis.
These acquisitions are also intended to provide a significant market presence
from which additional "tuck-in" acquisitions can be undertaken.

2) Tuck-In Acquisitions. A "tuck-in" acquisition will more likely occur in
an existing market, will be smaller than a platform acquisition and will enable
the Registrant to offer additional services, support, or expand into secondary
markets within a region that is already served by the Registrant. In most
instances, management believes that the operations acquired by tuck-in
acquisition can be integrated into the Registrant's existing operations,
resulting in the elimination of duplicative overhead, administrative, and
operating costs and ultimately increasing operating margins and/or price
competitiveness.

3) Sustaining and Managing Growth. The Registrant proposes to undergo a
period of rapid growth and there can be no assurance the Registrant will be
sustained or managed successfully. This proposed growth would result in, or is
expected to create, the need for additional capacity, new and increased
responsibilities for management personnel, and added pressures on the
Registrant's proposed operating and financial systems. While the Registrant
believes it will have adequate personnel and management systems to manage its
operations for the foreseeable future, there can be no assurances that these
levels of facilities, personnel, and management systems would be sufficiently
adequate to manage and sustain its proposed future growth. The Registrant's
ability to manage its projected future growth effectively and to accomplish its
overall proposed goals will depend on its ability to hire and retain qualified
management and technical personnel. Competition for such personnel in the
Registrant's respective industries is not high. If the Registrant is unable to
manage growth effectively, or to hire and to retain qualified personnel, the
Registrant's prospective business and projected operating results could be
materially and adversely affected.

4) Maintaining Independent Contacts To Develop Businesses. The Registrant's
strategy for the development and commercialization of its business depends, in
large part, upon the formation of collaborative arrangements with several
collaborative partners. The Registrant must enter into these collaborations to
successfully develop and commercialize its business. Such collaborations are
necessary in order for the Registrant to: (a) fund the Registrant's existing
subsidiary and operations; (b) fund the Registrant's new acquisitions; (c) seek
and obtain regulatory approvals; and (d) successfully commercialize existing and
future operations candidates.

Only a limited number of acquisition candidates have been generated
following the Registrant's proposed collaborations. None of these proposed
collaborative product candidates have demonstrated that it can develop, or be
commercially successful, with regard to their respective industries. Future and
proposed collaborative arrangements may not be successful. If the Registrant
fails to maintain its proposed collaborative arrangements or to enter into
future additional collaborative arrangements, the Registrant's business,
financial condition, and results of operations will be materially adversely
affected.

The Registrant's dependence on collaborative arrangements with third
parties subjects it to a number of risks. Such collaborative arrangements may
not be on terms favorable to the Registrant. Agreements with collaborative
partners will typically allow partners significant discretion in electing
whether to pursue any of the planned activities. The Registrant cannot control
the amount and timing of resources its collaborative partners may devote to the
product candidates. The Registrant's proposed partners may not perform their
obligations as expected. Business combinations or significant changes in a
collaborative partner's business strategy may adversely affect a partner's
willingness or ability to complete its obligations under the arrangement. Even
if the Registrant fulfills its obligations under any such proposed collaborative
agreement, the Registrant's proposed partner can terminate the agreement at any
time following proper written notice. If any collaborative partner were to
terminate or breach the Registrant's agreement with it, or otherwise fail to
complete its obligations in a timely manner, the Registrant's business,
financial condition, and results of operations may be materially adversely
affected. If the Registrant is not able to establish further collaborative
arrangements or any or all of the Registrant's existing collaborative
arrangements are terminated, the Registrant may be required to seek new
collaborative arrangements or to undertake product development and
commercialization at the Registrant's expense. Such an undertaking may: (a)
limit the number of candidates that the Registrant will be able to develop and
commercialize; (b) reduce the likelihood of successful business introduction;
(c) significantly increase the Registrant's capital requirements; and (d) place
additional strain on management's time.

Existing or future collaborative partners may pursue alternative
technologies, including those of the Registrant's competitors. Disputes may
arise with respect to the ownership of rights to any technology or systems
developed with any current or future collaborative partner. Lengthy negotiations
with potential new collaborative partners or disagreements between the
Registrant and its collaborative partners may lead to delays or termination in
the research, development, or commercialization of product candidates or result
in time consuming and expensive litigation or arbitration. If any of the
Registrant's collaborative partners were to pursue alternative technologies or
fail to develop or commercialize successfully any business candidate to which
they have obtained rights from the Registrant, its business, financial
condition, and results of operations may be materially adversely affected.

5) Internal Growth and Increased Operating Efficiencies. The senior
executive management and directors of the Registrant are currently evaluating
potential acquisitions and are considering the implementation of a formalized
arrangement that requires prospective candidates or prospective collaborative
partners to operate within strict quality controlled procedures utilizing the
Registrant as the monitoring system, creating an additional revenue source for
the Registrant. Management is considering creating a clearinghouse arrangement
that would utilize a system of debits and credits to collect and disburse fees
from and to its subsidiaries in order to equalize the economic benefits among
the subsidiaries.

The senior executive management of the Registrant believes that
accurate and centralized accounting is critical to maintaining consistent
margins. These aspects, finance and accounting, of the Registrant's proposed
operations would be largely controlled by the Registrant as opposed to turning
over such responsibilities to independent contractors or collaborative partners.
The management of the Registrant believes that dedicated attention to detail by
the Registrant is essential to the efficient operation of the Registrant.

ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.

A. Directors, Proposed Directors, Officers, and Proposed Officers of Registrant;
New Committees of the Registrant's Board of Directors.

As the result of acquisition of USMetals, the Registrant's stockholders
have elected certain individuals to become directors and executive officers and
the Registrant's shareholders have nominated certain individuals to serve as
proposed executive officers and proposed directors. (The Registrant's existing
directors and officers are included in the table below, in addition to the newly
elected directors and newly appointed officers. Individuals identified as
proposed officers and proposed directors will begin to serve the Registrant as
soon as is practicable.)

The following table sets forth, for the directors, executive officers,
proposed directors, and proposed executive officers of the Registrant, (i) their
names, addresses and ages at May 27, 2002, (ii) their respective positions with
the Registrant, (iii) the number of shares of Common Stock the Registrant
expects to be beneficially owned by its directors and executive officers, (iv)
the percentage of outstanding shares such number will represent, and (v) the
number of shares subject to warrants and options the Registrant may expect the
officers and directors to receive.

Percentage of Shares Before
Name and Address of Acquisition/After Shares Subject to Total Number
Individual and Position Age Acquisition Options of Shares
----------------------- --- --------------------------- ----------------- ------------

Robert Dultz 60 0%/ 650,000(1) 19,997,000
c/o USCorp 78.0%
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Larry Dietz 48 .22/ - 51,000
c/o USCorp .20
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Spencer Eubank 50 .17/ - 230,750
c/o USCorp .90
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Carl O'Baugh 71 .05/ - 50,250
c/o USCorp .20
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Don Brown 51 0/ - 50,000
c/o USCorp .20
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Tom Owens 50 0/ - 10,000
c/o USCorp .04
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

Michael Love 50 0/ - 50,000
c/o USCorp .20
Suite 204
4535 West Sahara Avenue
Las Vegas, Nevada 89102

(1) Non-Offering Options. The options granted to the individuals identified
by this reference are options related to the issuance of the Registrant's stock
to be issued under the Registrant's 2002 Directors and Officers Stock Option
Plan.

The following are brief biographical summaries of each of the Registrant's
directors, proposed directors, executive officers, and proposed executive
officers.

1) Executive Officers and Directors.

a) Robert Dultz, age 60, is Chairman of the Board, Chief Executive
Officer, and the Principal Stockholder of the Registrant. Mr. Dultz is
responsible for coordinating and directing the Registrant's Board of Directors,
and chairing the direction of the Registrant. Specializing in finance, Mr. Dultz
has acted as an investor and consultant for longer than the past 10 years. He
has served on the boards of a number of publicly traded companies and on the
boards of a number of privately held companies nationally and internationally.
Mr. Dultz has worked with multi-million dollar budgets. He has been responsible
for over $150 million dollars in real estate development and investment.

b) Larry Dietz, age 48, is President and Director of the Registrant.
Mr. Dietz is in charge of Land Management and Development. Mr. Dietz brings to
the Registrant a seasoned expertise in the field of mining, as well as an
extensive knowledge of the entire mining industry in the western United States

and especially in the State of Arizona. He is responsible for managing the
properties owned or under the control of the Registrant as well as identifying
additional properties for the Registrant to acquire and/or lease for the purpose
of developing their mineral resources. While in the U.S. Navy he had a Top
Secret/Crypto security clearance. He attended the University of Nebraska School
of Technology and Agriculture where he earned a degree in Drafting, Surveying
and Soil Science. He has been a consultant to the mining industry since 1982 as
President of Dietz and Associates. He authored and released the updated,
corrected and expanded versions of the Arizona Mineral Industry Location System
(MILS) which is a database system for use on micro computers identifying all
known mineral occurrences in Arizona. Mr. Dietz also developed and released
Mineral Databases from the U.S. Bureau of Mines for the western U.S., as well as
a program called DLG1-2 which consists of the Digital Line Graph (DLG) data at a
scale of 1:250,000 for the entire U.S. providing graphic displays of the mineral
data for use on micro computers. Mr. Dietz is approved by the U.S. Department of
Justice to provide title evidence and abstracts for both surface and mineral
rights to lands located in the State of Arizona, and his Land Status Reports are
recognized by the Vancouver Stock Exchange. He is registered as an Expert
Witness with the Technical Advisory Services for Attorneys. He is currently an
associate member of the Society of Mining Engineers of the American Institute of
Mining, Metallurgical and Petroleum Engineers. Mr. Dietz is also proficient in
the use of computers, database, word-processing, CAD, graphics and
communications software.

c) Carl W. O'Baugh, age 71, is Vice President and Director of the
Registrant. Mr. O'Baugh is a past President of American Metals and Minerals,
Inc., a Nevada Company which owned mining claims in central Arizona. He was
President of Golconda Gems, Inc., from 1973 to 1985, a wholesale gem cutting,
importing and distribution company with operations in the United States and
Mexico. Mr. O'Baugh has served on the Boards of several public Companies and
brings to the Registrant his knowledge and experience concerning gems, minerals
and metals, as well as his wholesale, retail marketing and import-export
expertise. Mr. O'Baugh has demonstrated his capabilities in effective senior
corporate management and, in general, in business, by employing over 200 persons
and directing the affairs of a corporation capable of sustaining that number of
employees.

d) Spencer Eubank, age 50, is Secretary, Treasurer and Director of the
Registrant. Mr. Eubank is responsible for maintaining the records of the
Registrant and works closely with the senior executive management of the
Registrant in day-to-day operations. Mr. Eubank has served on the boards of
several public, private and not-for-profit companies as an officer and director
including Pla.Net.Com, Inc. (February 1997 to July 1999) and EssxSport Corp.
(January 1996 to March 1998). Mr. Eubank is the owner of an independent research
and consulting service. Mr. Eubank has degrees in Theology (B.Th., 1985) and
Sociology (B.A., 1988). For 10 years, Mr. Eubank worked in various capacities
for not-for-profit organizations, which served disadvantaged and developmentally
disabled adults in the greater Los Angeles area, and for over 10 years
participated in the general employ and management of retail grocery and
department stores.

2) Proposed Directors.

a) Tom Owens, age 50 is a Director for the Registrant. Mr. Owens is the
owner of a private company that provides investigation services throughout the
country. In the Los Angeles area he conducted investigations for Rodney King's
defense and most recently for several victims of the Rampart Division scandal.
Mr. Owens served four tours of duty in Vietnam with the U.S. Marines. He most
recently served his country as the Army's Communications Officer in the
occupation of Bosnia-Herzegovina. Mr. Owens is a retired Captain in the US Army.
He is also a retired Captain in the Los Angeles Police Department. While with
the LAPD Mr. Owens was involved in every major case from the Charles Manson
Tate-LaBianca murders to O.J. Simpson's trial. Mr. Owens is the author of the
book "Lying Eyes." Mr. Owens will serve the Registrant as an independent
Director and on the Registrant's Audit Committee.

3) Proposed Officers.

a) Michael Love, age 50, is proposed to serve as a Vice-President of
the Registrant. Mr. Love has demonstrated his capabilities as a corporate
executive with more than 25 years of progressive high-level professional
domestic and international business experience. Mr. Love has demonstrated a
proven ability to develop new business and maintain existing business using
thorough industry knowledge. From 1976 to 1983 Mr. Love was an Account Executive
with MuniciCorp of California, Merrill, Lynch, Pierce, Fenner & Smith and Smith
Barney, Harris & Upham trading municipal bonds and equities with annual gross
volume from $200 million to over $800 million. From 1983 to 1988 Mr. Love was
the CEO of North Star Metals and North Star Metals Development Corp. in Los
Angeles. While with North Star Metals, he traded in minor metals, negotiated
international contracts in amounts of $200 million, raised $25 million to fund a
development project and developed an investment sales training program for
account executives. From 1988 to 1992 he was the CEO of CML Promotions. Mr. Love
promoted boxing, 6 world title fights, including Tubbs vs. Tyson in Tokyo. He
also negotiated contracts for fights in the U.S. and internationally in the
amount of $40 million. In 1997 and 1998 Mr. Love served as Chairman of The
African Times Newspaper. As Chairman he was able to increase worldwide
distribution by 300%, increase advertising revenue by 200%, increase circulation
by 100% within the first six months, and he raised $2 million through
international events. Mr. Love has been an exceptional producer, raising more
than a billion dollars and generating revenue in excess of $10 million for
various projects in the fields of fundraising, municipal bonds, commodity
trading, marketing of investment and high tech products, real estate sales and
acquisitions, sports promotions and newspaper operations. Mr. Love is a board
member of The African Times Newspaper, a member of the Minor Metals Trader
Association (Western Europe), and a former board member of Archie Moore's "Any
Body Can" Foundation. In addition, Mr. Love will serve on the Registrant's Audit
Committee.

b) Donald Brown, age 51, is proposed to serve as a Vice-President of
the Registrant. Mr. Brown's primary area of responsibility will be to manage and
direct the proposed oil and gas development subsidiary and to advise the Board
of Directors regarding oil and gas business matters. Mr. Brown most recently
served as President of International Energy and Resources, Inc. ("IERI") from
January 2001 through March 2002. From April 1999 to January 2001, Mr. Brown

served PetroQuest Exploration, Inc. as Vice President. Mr. Brown founded two
successful construction companies: D.E. Brown Construction in Buffalo, New York,
which he ran from 1971 until its sale in 1981, and Custom Cabinets & Interiors,
Inc., in Dallas, Texas, which he ran from 1982 until 1989. From 1989 to 1991, he
worked in sales for B & R Builders, Inc. In 1991, Mr. Brown entered the oil and
gas industry, working for Kinlaw Petroleum Company, Inc., until 1992, and for
Gibraltar Securities, Inc. as Vice President of Investor Relations until the end
of 1992. While with Gibraltar Securities Mr. Brown held Series 22 and Series 63
licenses. Also in 1992, he started H. Moon Resources, Inc., which drilled
wildcat and development wells, primarily in West Texas, until its sale in 1995.
After the sale of his company, he joined TBX Resources, Inc. as Vice President
from 1996 to 1997, and Thor-Max Resources, Inc. as Vice President from 1997 to
1999. Mr. Brown has also been involved in music, having a successful career
since 1971, which included performing and music production and engineering for
several albums. Mr. Brown enjoys performing and recording music in his home
studio as a hobby. He has also been a licensed fitness and nutritional
consultant since 1994.

4) Committees of the Board of Directors.

The Registrant has established the following committee. Other
committees may be established as needed, depending on the progress and extent of
the Registrant's operations.

5) Audit and Compliance Committee.

The Registrant's Audit and Compliance Committee will recommend to the
Board of Directors the independent public accountants to be selected to audit
the Registrant's annual financial statements and will approve any special
assignments given to them. The Committee will also review the planned scope of
the annual audit, any changes in accounting principles, and the effectiveness
and efficiency of the Registrant's internal accounting staff. Additionally, the
Committee will provide oversight to the Registrant's compliance staff for
adherence with regulatory rules and regulations. The Committee will also
establish appropriate levels of directors and officers insurance and blanket
bond insurance. The members of the Committee will include Mr. Eubank, Mr. Dultz,
Mr. Owens, and Mr. Love. The members of the Committee will be compensated at the
rate of $1,000.00 per meeting, regardless of the method that was used to conduct
the meeting (i.e., in person, by mail, by telecopier, electronically, or by
telephone).

B. Registrant's Election to Change its Standard Industrial Classification Code.

As the result of the Registrant's recently adopted and diversified plan of
operations (including the acquisition of USMetals discussed hereinabove), the
Registrant has elected to change its Standard Industrial Classification Code
from 7829 to 6719.

At the present time, the Registrant believes itself exempt from the
Investment Holding Company Act of 1940 and the corresponding Nevada statutes by
relying on certain exemptions. The Registrant intends on maintaining its exempt
status, however, there is no guarantee it will do so. The exemptions may be
modified and/or abolished by government agencies responsible for rule making,
though the Registrant is not aware of any attempts to do so.

In the event that the Registrant loses its exempt status, the Registrant's
plan will be to correct the problem either by modifying the corporate structure
or by applying for the appropriate licenses. If the Registrant shall be required
to comply with the Investment Company Act of 1940, it will significantly
increase the legal, accounting, and administrative expenses of the Registrant,
and, thus, may materially and adversely affect the business and financial
position of the Registrant.

C. Registrant's Adoption of a Stock Option Plan; Issuance of Shares to Officers
and Directors.

At a special meeting of the Registrant's Stockholders and Board of
Directors on May 1, 2002, the Registrant adopted a stock option plan that
provides it with the flexibility to grant stock incentives described in this
section of this report to its key employees, officers, directors, consultants,
and advisers for the purpose of giving them a proprietary interest in, and to
encourage them to remain in the employ or service of, the Registrant. The
Registrant's Board of Directors has reserved up to 2,045,356 shares of its
Common Stock for issuance through options that may be granted under the 2002
Directors and Officers Stock Option Plan (the "Stock Option Plan"). However, the
number of shares of the Registrant's Common Stock reserved for issuance under
the Stock Option Plan will never exceed 10% of the Registrant's then outstanding
shares.

(It should be noted; the Registrant is also conducting a limited offering
under Rule 506 of Regulation D, which is more fully described hereinbelow. The
limited offering would significantly effect the number of shares the Registrant
would be eligible to reserve under its 2002 Directors and Officers Stock Option
Plan. However, unless otherwise stated in the Registrant's limited offering
circular, it is presently contemplated that only 2,045,356 shares of the
Registrant's Common Stock will be reserved for issuance if the Registrant only
attains the minimum Offering of $5,000, (5,000 shares) while 3,145,356 shares of
the Registrant's Common Stock will be reserved for issuance if the maximum
Offering of 11,000,000 Shares is attained. The number of shares reserved for
issuance may change in the event of a stock split, recapitalization or similar
event as described in the Stock Option Plan.)

Administration. It is expected that a committee of the Registrant's Board
of Directors, which will be comprised of at least one non-employee director,
will administer the Stock Option Plan. The Registrant's Board of Directors will
consider the standards contained in both Section 162(m) of the Internal Revenue
Code of 1986, as currently in effect and Rule 16b-3 under the Securities
Exchange Act, when appointing members to the committee. The Committee and the
Registrant's Board of Directors will have the authority to grant awards under
the Stock Option Plan, to determine the terms of each award, to interpret the
provisions of the Stock Option Plan, and to make all other determinations that
they may deem necessary or advisable to administer the Stock Option Plan.

The Stock Option Plan permits the Committee of the Registrant's Board of
Directors, to grant stock options to eligible persons. Options may be granted on
an individual basis or to a group of eligible persons. Accordingly, the
Committee or the Registrant's Board of Directors, will determine, within the
limits of the plan, the number of shares of the Registrant's Common Stock

subject to an option, to whom an option is granted and the exercise price and
forfeiture or termination provisions of each option. A holder of a stock option
generally may not transfer the option during his or her lifetime.

The committee or the Registrant's Board of Directors will determine the
exercise price of an option. The exercise price of an incentive stock option may
not be less than the fair market value of the Registrant's Common Stock on the
date of the grant, or less than 110% of the fair market value if the participant
owns more than 10% of the Registrant's outstanding Common Stock. When the
incentive stock option is exercised, we will be entitled to place a legend on
the certificates representing the shares of Common Stock purchased upon exercise
of the option to identify them as shares of Common Stock purchased upon the
exercise of an incentive stock option. The exercise price of non-qualified stock
options may be greater than, less than or equal to the fair market value of the
Common Stock on the date that the option is awarded, based upon any reasonable
measure of fair market value. The committee may permit the exercise price to be
paid in cash or by the delivery of previously owned shares of Common Stock, and,
if permitted in the applicable option agreement, through a cashless exercise
executed through a broker or by having a number of shares of Common Stock
otherwise issuable at the time of exercise withheld.

The committee or the Registrant's Board of Directors will also determine
the term of an option. The term of an incentive stock option or non-qualified
stock option may not exceed ten years from the date of grant, but any incentive
stock option granted to a participant who owns more than 10% of the Registrant's
outstanding Common Stock will not be exercisable after the expiration of five
years after the date the option is granted. Subject to any further limitations
in the applicable agreement, if a participant's employment terminates, an
incentive stock option will terminate and become unexercisable no later than
three months after the date of termination of employment. If, however,
termination of employment is due to death or disability, one year will be
substituted for the three-month period. Incentive stock options are also subject
to the further restriction that the aggregate fair market value, determined as
of the date of the grant, of the Registrant's Common Stock as to which any
incentive stock option first becomes exercisable in any calendar year is limited
to $100,000 per recipient. If incentive stock options covering more than
$100,000 worth of the Registrant's Common Stock first become exercisable in any
one calendar year, the excess will be non-qualified options. For purposes of
determining which options, if any, have been granted in excess of the $100,000
limit, options will be considered to become exercisable in the order granted.

Termination of Options. The terms of particular options may provide that
they terminate, among other reasons, upon the holder's termination of employment
or other status with the Registrant, upon a specified date, upon the holder's
death or disability, or upon the occurrence of a change in control of the
Registrant. An agreement may provide that if the holder dies or becomes
disabled, the holder's estate or personal representative may exercise the

option. The committee or the Registrant's Board of Directors, may, within the
terms of the plan and the applicable agreement, cancel, accelerate, pay or
continue an option that would otherwise terminate for the reasons discussed
above.

Reorganizations. The plan provides for an appropriate adjustment in the
number and kind of shares subject to unexercised options in the event of any
change in the outstanding shares of the Registrant's Common Stock by reason of a
stock split, stock dividend, combination or reclassification of shares,
recapitalization, merger or similar event. In the event of some types of
corporate reorganizations, the committee or the Registrant's Board of Directors,
may, within the terms of the plan and the applicable agreement, substitute,
cancel, accelerate, cancel for cash or otherwise adjust the terms of an option.

Amendment and Termination of the Plan. Our Board of Directors has the
authority to amend or terminate the plan. Our Board of Directors is not required
to obtain shareholder approval to terminate the plan or, generally, to amend the
plan, but may condition any amendment or termination of the plan upon
shareholder approval if it determines that shareholder approval is necessary or
appropriate under tax, securities, or other laws. However, any action by the
Registrant's Board of Directors may not adversely affect the rights of a holder
of a stock option without the holder's consent.

Federal Income Tax Consequences. The following discussion outlines
generally the Federal income tax consequences of participation in the plan.
Individual circumstances may vary and each participant should rely on his or her
own tax counsel for advice regarding Federal income tax treatment under the
plan.

Incentive Stock Options. A participant will not recognize income upon the
grant of an incentive stock option, nor will he or she be taxed when exercising
all or a portion of their option. Instead, the participant will be taxed when he
or she sells the shares of Common Stock purchased upon exercise of the incentive
stock option. The participant will be taxed on the difference between the price
he or she paid for the Registrant's Common Stock and the amount for which he or
she sells the stock. If the participant does not sell the shares of the
Registrant's Common Stock prior to two years from the date of grant of the
incentive stock option and one year from the date the stock is transferred to
him or her, the gain will be a capital gain and we will not get a corresponding
deduction. If the participant sells the shares of the Registrant's Common Stock
at a gain before that time, the difference between the amount the participant
paid for the stock and the lesser of its fair market value on the date of
exercise or the amount for which the stock is sold will be taxed as ordinary
income and we will be entitled to a corresponding tax deduction. If the
participant sells the shares of the Registrant's Common Stock for less than the
amount he or she paid for the stock prior to the one or two-year period
indicated, no amount will be taxed as ordinary income and the loss will be taxed
as a capital loss. Exercise of an incentive stock option may subject a
participant to, or increase a participant's liability for, the alternative
minimum tax.

Non-Qualified Options. A participant will not recognize income upon the
grant of a non-qualified option or at any time before the exercise of the option
or a portion of the option. When the participant exercises a non-qualified
option or portion of the option, he or she will recognize compensation taxable
as ordinary income in an amount equal to the excess of the fair market value of
the Registrant's Common Stock on the date the option is exercised over the price
paid for the stock, and we will then be entitled to a corresponding deduction.

Depending upon the time period for which shares of the Registrant's Common
Stock are held after exercising an option, the sale or other taxable disposition
of shares acquired by exercising a non-qualified option generally will result in
a short or long-term capital gain or loss equal to the difference between the
amount realized on the disposition and the fair market value of such shares when
the non-qualified option was exercised.

Special rules apply to a participant who exercises a non-qualified option
by paying the exercise price, in whole or in part, by selling back to us shares
of the Registrant's Common Stock already held by the participant and to a
participant who is subject to the reporting requirements of Section 16 of the
Securities Exchange Act of 1934.

D. Registrant's Limited Offering Pursuant to Rule 506 of Regulation D.

The Registrant will be offering $20,000,000 of its Common Stock through a
dual platform integrated offering to be conducted in two stages. In the first
stage (the "First Offering"), the Registrant will be offering 5,000,000 shares
of its Common Stock at $1.00 per share (the "First Shares"). Although there is
no minimum amount to be sold, there is a minimum purchase of shares required in
the First Offering, which are 5,000 shares per prospective investor. In the
second stage (the "Successive Offering"), the Registrant will be offering
6,000,000 shares of its Common Stock at $2.50 per share (the "Second Shares").
(The First Shares and the Second Shares are referred to collectively as the
"Shares" throughout this report.) The Shares are being offered directly by the
Registrant and the Registrant does not expect to use the services of a
broker-dealer, however, the Registrant reserves the right to utilize any legal
means to offer the Shares hereby offered.

The entire offering (the "Offering," when hereinafter the First Offering
and the Successive Offering are referred to collectively) is a "best-efforts,"
no-minimum integrated Offering (other than the requirement by the Registrant for
prospective investors to purchase a minimum number of Shares in one purchase),
and will not be underwritten nor will any underwriter be engaged for the
marketing, distribution or sale of any shares registered in this report. The
Registrant contemplates closing the Offering on or about November 19, 2002.
However, the Registrant reserves the right to terminate the Offering without
notice at any time prior to the sale of all the Shares offered in the report.
The Registrant may sell Shares from time to time in one or more transactions, in
the First Offering, at a minimum price of $1.00 per share, and the Successive
Offering at $2.50 per share.

The Registrant may close the transaction at any time. No Shares will be
sold after the earlier of the sale of $20,000,000.00 of Shares or the Offering
Termination Date. The Offering may be extended for an additional 60 (sixty) days
by the Registrant, however the Registrant may terminate the Offering on any date
prior to the Offering Termination Date.

The Registrant is offering the Shares in reliance upon certain exemptions
from the registration and qualification requirements of Federal and various
states' securities laws. Utilization of these exemptions results in a lack of
liquidity. For this reason, offers and sales of the Shares will be made only to
a limited number of persons in accordance with Regulation D of the Securities
Act of 1933. The Offering is being made only to persons who satisfy the economic
prerequisites set forth below and who represent in writing that they have
(either alone or in conjunction with a Purchaser Representative) such knowledge
and experience in financial and business matters generally, and in investments
of this nature in particular, that they are capable of evaluating the merits and
risks of an investment in the Registrant, and are Suitable Investors (see
"Suitability of Investors"). The maximum number of subscribers who are not
Accredited Investors (as defined by Rule 501 of Regulation D as promulgated
under the Securities Act) will not exceed 35.

An investment in the Shares is suitable only for persons who have adequate
means of providing for their current needs and personal contingencies and have
no need for liquidity in their investments.

Shares will be sold only to Suitable Investors who represent that they are
purchasing the Shares for themselves, for investment purposes only, and not with
a view to resale or distribution.

There is no market for the Shares and there are significant restrictions on
their transferability, including the requirement imposed by 17 CFR 230.506. No
public market in the Shares is likely to develop. The Shares have not been
registered under the Securities Act of 1933 or the Securities Exchange Act of
1934, or under the securities' laws of any state, and, therefore, cannot be sold
by an investor unless either they are subsequently registered with the
Commission and pursuant to any applicable state laws or, in the opinion of
counsel acceptable to the Board of Directors, exemptions from such registration
requirements are available. Accordingly, purchasers of Shares must bear the
economic risk of an investment in the Shares for an indefinite period of time.

The Registrant must have reasonable grounds to believe that a prospective
investor satisfies the criteria described below and will require prospective
investors to submit information detailing their financial status and experience
in investments of this nature. The Shares are offered subject to prior sale and
to the right of the Registrant to accept or reject subscriptions in whole or in
part. Similar suitability standards will be applied to any resale of the Shares.

1) Use of Proceeds.

The Offering circular advises prospective investors that after
reviewing the portion of the Offering that allocates the payment of Offering
expenses, and to the immediate payment to the management of any salaries (either
current or accrued), reimbursements, past salaries, or similar payments, a
prospective investor should consider whether the remaining portion of his or her
investment, which would be that part available for future development of the
Registrant's business and operations, would be adequate.

Proceeds from the Offering will not be held in escrow. The Commission
should be aware that all funds received from the proceeds of this offering will
immediately be available for use by the Registrant, in its sole discretion.

The anticipated net proceeds from the Offering and their designated
uses and applications are the Registrant's estimates. The final expenses can
vary significantly from the actual amounts stated herein. If the actual expenses
exceed these projections, or the Registrant's estimates, then, and in such case,
the Registrant reserves the right, in its sole discretion, to apply a reasonable
percentage of the funds from the working capital reserve (that the Registrant
expects to set aside from the proceeds hereof) for any purpose it may deem
necessary in furtherance of the Registrant's overall objectives as they are set
forth herein.

In the event the Registrant is able to sell only the Minimum Total of
the Shares in the Offering, the Registrant will apply the proceeds to USMetals
thereupon.

Depending upon the amount of the proceeds received from the First
Offering or the Successive Offering, the Registrant will, in proportionate
percentages apply the funds from the Minimum Total to the Maximum Total, as
follows: the proceeds following the amounts provided for capital expenditures
for USMetals, then to the development of the Registrant's proposed oil and gas
operations (including speculation in oil and gas royalties), then to the
salaries and administrative fees and expenses, then to legal and accounting, and
then to acquisition development. The Registrant will reserve a reasonable
percentage of the proceeds from the Offering to working capital and
contingencies.

The Registrant anticipates immediately expending all proceeds from the
Offering. The actual amount expended to finance any category of expenses may be
increased or decreased by the Registrant's Board of Directors, in its
discretion, if required by the Registrant's operating expenses or if a
reapportionment or redirection of funds, including acquisitions consistent with
the Registrant's business strategy, is deemed to be in its best interest.

Pending the use or application of any part of the proceeds from the
Offering as set forth above, the Registrant may invest all or a portion of such
proceeds in short-term, interest-bearing securities, U.S. Government securities,
money market investments and short-term, interest bearing deposits in major
banks.

--------------------------------------------------------------------------------
It should be noted that the Registrant, in its sole discretion, may
accept lesser amounts from one or more investors.
--------------------------------------------------------------------------------

The following table shows the Registrant's intended application of the
Use of Proceeds as a percentage of the gross proceeds received from an adjusted
minimum of 10% of the First Offering to the maximum of 100% for the First
Offering.

Intended Use of Proceeds from the First Offering.
(Proceeds from the Offering Based on a Percentage of Shares Sold.)

10% 25% 50% 75% 100%
----------- ------------- ------------- ------------- -------------

Gross Proceeds $500,000.00 $1,250,000.00 $2,500,000.00 $3,750,000.00 $5,000,000.00

Commissions and Related $100,000.00 $ 250,000.00 $500,000.00 $750,000.00 $1,000,000.00
Selling Fees
USMetals' Funding $275,000.00 $ 812,500.00 $1,625,000.00 $2,437,500.00 $3,250,000.00
Salaries and $75,000.00 $ 187,500.00 $375,000.00 $562,500.00 $750,000.00
Administrative Fees
Legal and SEC Filings $50,000.00 -0- -0- -0- -0-

Total of Expenses $500,000.00 $1,250,000.00 $2,500,000.00 $3,750,000.00 $5,000,000.00

The following table shows the Registrant's intended application of the use
of proceeds as a percentage of the gross proceeds received from an adjusted
minimum of 10% of the Successive Offering to the maximum of 100% for the
Successive Offering.

Intended Use of Proceeds from the Successive Offering.
(Proceeds from the Offering Based on a Percentage of Shares Sold.)

10% 25% 50% 75% 100%
------------- ------------- ------------- -------------- --------------

Gross Proceeds $1,500,000.00 $3,750,000.00 $7,500,000.00 $11,250,000.00 $15,000,000.00

Commissions and Related $300,000.00 $937,500.00 $1,500,000.00 $2,250,000.00 $3,000,000.00
Selling Fees
USMetals' Funding $825,000.00 $1,375,000.00 $3,125,000.00 $5,000,000.00 $6,250,000.00
Oil and Gas Development -0- $500,000.00 $1,000.000.00 $1,200,000.00 $1,800,000.00
Salaries and $225,000.00 $562,500.00 $1,125,000.00 $1,687,500.00 $2,250,000.00
Administrative Fees
Legal and SEC Filings -0- -0- -0- -0- $200,000.00
New Acquisitions and $150,000.00 $375,000.00 $750,000.00 $1,112,500.00 $1,500,000.00
Corporate Development

Total of Expenses $1,500,000.00 $3,750,000.00 $7,500,000.00 $11,250,000.00 $15,000,000.00

The amounts set forth above represent the Registrant's best
estimate for the use of the net proceeds from the Offering, in view of current
circumstances. However, actual expenditures could vary considerably depending
upon many factors, including, without limitation, changes in economic

conditions, unanticipated complications, delays and expenses, or problems
relating to the development of additional businesses and/or market acceptance
for the Registrant's existing or contemplated business enterprises. The
"Salaries and Administrative Fees" section set forth in each of the above tables
represents sums that, in the case of salaries, will be paid for accrued and
current wages and for incentive and performance bonuses; and, in the case of
administrative fees, will be reserved for disbursement to the Registrant in
order to cover certain administrative expenses related to the Registrant's
subsidiaries. Any reallocation of the net proceeds of the Offering will be made
at the discretion of the Registrant's Board of Directors but will be a part of
its strategy to further develop its business(es) or its subsidiaries. The
Registrant's working capital requirements are a function of its future growth
and expansion, neither of which can be predicted with any reasonable degree of
certainty. The Registrant may need to seek funds through loans or other
financing arrangements in the future, and there can be no assurance that it will
be able to make these arrangements in the future should the need arise.

Pending the Registrant's use of the net proceeds from the Offering, the
funds will be invested temporarily in certificates of deposit, short-term
government securities, or similar investments. Any income from these short-term
investments will be used for working capital.

The net proceeds from the Offering, together with internally generated
funds and funds-on-hand at the time of the Offering are expected to be adequate
to fund the Registrant's working capital needs for at least the next six (6)
months.

The accounting and legal expense item includes the costs incurred for
outside professional services associated with the Offering. The amount of these
expenses the Registrant will expect to incur for such services rendered in
connection with the Offering is estimated at $250,000. These amounts will be
paid from the proceeds of the Offering. The miscellaneous expense item includes
the costs the Registrant expects to incur in establishing and conducting its
marketing program for the Shares, printing and copying of the Offering circular,
other miscellaneous costs including supplies and various costs associated with
offering the Shares. There are slight rounding differences between the sum of
the percentages and the actual percentage achieved from dividing the total
dollar amount of Offering expenses by the total dollar amount of the Offering
proceeds.

The maximum net proceeds the Registrant expects to realize from the
Offering, after allowance for estimated expenses the Registrant incurs and
disburses in connection with the Offering will be $16,000,000, if the maximum
numbers of shares are sold.

Although these are the Registrant's present intentions, the actual uses
may vary depending upon economic conditions and other factors, including the
results of future operations. Factors that could affect the application of
proceeds include charges for third party services that exceed the Registrant's
estimates, and/or initial results that reduce or increase the amount of services
that are necessary to execute the Registrant's strategies. Pending the specific
application of the net proceeds of the Offering, funds will be invested in
interest bearing certificates of deposit or treasury certificates and/or mutual
funds.

2) Determination Of Offering Prices.

The respective offering prices for the First Shares and Second Shares,
respectively, were determined arbitrarily by the Registrant's Board of
Directors.

3) Plan Of Distribution.

The Offering of the Shares will be made on a "self-underwritten" basis,
which means the Registrant will sell shares through its officers, directors, or
through qualified purchaser representatives, without an underwriter. The
Offering will be made on a continuous basis until approximately November 19,
2002, when the Offering will end. Any extensions to the Offering will be made by
the Registrant's Board of Directors. The gross proceeds from this offering will
be $20,000,000 if all the Shares offered are sold. The Registrant reserves the
right to pay commissions or other qualified and eligible fees directly or
indirectly to any person or firm in connection with the Offering.

If the Registrant elects to offer its Shares through one of its
officers or directors, then, and in such case: the officer or director will not
be paid a commission from the sale of any shares, nor will any such officer or
director register as a broker-dealer pursuant to Section 15 of the Securities
Exchange Act of 1934 in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those
conditions under which a person associated with an issuer may participate in the
offering of the Registrant's securities and not be deemed to be a broker-
dealer. The conditions are that:

a) The person will not be subject to a statutory disqualification, as
that term is defined in Section 3(a)(39) of the Act, at the time of his or her
participation; and,

b) The person will not be compensated in connection with his or her
participation by the payment of commissions or other remuneration based either
directly or indirectly on transactions in securities; and

c) The person will not, at the time of their participation, be an
associated person of a broker-dealer; and,

d) The person will meet the conditions of Paragraph (a)(4)(ii) of Rule
3a4-1 of the Exchange Act, in that he or she (1) primarily performs, or is
intended primarily to perform at the end of the Offering, substantial duties for
or on behalf of the issuer otherwise than in connection with transactions in
securities; and (2) is not a broker or dealer, or an associated person of a
broker or dealer, within the preceding twelve months; and (3) does not
participate in selling and offering of securities for any issuer more than once
every twelve months other than in reliance on Paragraphs (a)(4)(i) or
(a)(4)(iii).

None of the Registrant's officers or directors would be subject to
disqualification; they are not being compensated; and, they are not associated
with a broker-dealer. Each of them will continue to serve as an officer or
director, respectively, at the end of the Offering and have not been during the
last 12 months, and are currently not a broker-dealer or an associated person of

a broker-dealer. If the Registrant's officers or directors offer the Shares,
then they intend to contact persons with whom they have had a past, or they have
a current, personal or business relationship and solicit them to invest in the
Offering.

E. Amendment to Registrant's Capital Structure.

The Registrant adopted an amendment to its Articles of Incorporation;
whereby, the Registrant is authorized to issue preferred stock.

Therefore, the Registrant's Articles of Incorporation authorizes the
issuance of 100,000,000 shares of Common Stock, $0.01 par value per share, of
which 25,613,567 shares were outstanding as of the date of this report. The
holders of shares of common stock are (i) entitled to one vote for each share on
all matters to be voted on by the stockholders, (ii) have no cumulative voting
rights, (iii) are entitled to share ratably in dividends, if any, as may be
declared, from time to time by the Registrant's Board of Directors, in its
discretion, from funds legally available to be distributed. In the event of a
liquidation, dissolution or winding up of the Registrant, the holders of shares
of Common Stock are entitled to share pro rata all assets remaining after
payment in full of all liabilities. Holders of Common Stock have no preemptive
rights to purchase the Registrant's Common Stock. There are no conversion rights
or redemption or sinking fund provisions with respect to the common stock. All
of the outstanding shares of common stock are validly issued, fully paid, and
non-assessable.

1) Preferred Stock.

The Registrant's Articles of Incorporation now authorizes the issuance
of 10,000,000 shares of Preferred Stock, $0.10 par value per share, of which no
shares were outstanding as of the date of this report. The preferred stock may
be issued from time to time by the board of directors as shares of one or more
classes or series. The preferred stock is convertible into the Registrant's
common stock at the ratio of 1:8, and the Registrant's board of directors have
not yet designated the number of votes that holders of the Registrant's
preferred stock are entitled to per one share of Preferred Stock held by any
holder thereof.

a) Authorized Board Actions.

The Registrant's Board of Directors, subject to the provisions of
the Registrant's Articles of Incorporation, and limitations imposed by law, is
authorized to:

1. adopt resolutions;

2. to issue the shares;

3. to fix the number of shares;

4. to change the number of shares constituting any series; and

5. to provide for or change the following:

(a) the voting powers;

(b) designations;

(d) relative, participating, optional or other special
rights, qualifications, limitations or restrictions,
including the following:

(1) dividend rights (including whether dividends are
cumulative);

(2) dividend rates;

(3) terms of redemption (including sinking fund
provisions);

(4) redemption prices;

(5) conversion rights; and

(6) liquidation preferences of the shares constituting
any class or series of the Preferred Stock.

In each of the listed cases, the Registrant will not need any
further action or vote by the stockholders.

One of the effects of undesignated Preferred Stock may be to
enable the Board of Directors to render more difficult or to discourage an
attempt to obtain control of the Registrant by means of a tender offer, proxy
contest, merger, or otherwise, and thereby to protect the continuity of the
Registrant's management. The issuance of shares of Preferred Stock pursuant to
the Board of Director's authority described above may adversely affect the
rights of holders of Common Stock. For example, Preferred Stock issued by the
Registrant may rank prior to the Common Stock as to dividend rights, liquidation
preference or both may have full or limited voting rights and may be convertible
into shares of Common Stock. Accordingly, the issuance of shares of Preferred
Stock may discourage bids for the Common Stock at a premium or may otherwise
adversely affect the market price of the Common Stock.

2) Nevada Laws.

The Nevada Business Corporation Law contains a provision governing
"Acquisition of Controlling Interest." This law provides generally that any
person or entity that acquires 20% or more of the outstanding voting shares of a
publicly-held Nevada corporation in the secondary public or private market may
be denied voting rights with respect to the acquired shares, unless a majority
of the disinterested stockholders of the corporation elects to restore such
voting rights in whole or in part. The Control Share Acquisition Act provides

that a person or entity acquires "control shares" whenever it acquires shares
that, but for the operation of the control share acquisition act, would bring
its voting power within any of the following three ranges:

a) 20 to 33-1/3%,
b) 33-1/3 to 50%, or
c) more than 50%.

A "control share acquisition" is generally defined as the direct or
indirect acquisition of either ownership or voting power associated with issued
and outstanding control shares. The stockholders or Board of Directors of a
corporation may elect to exempt the stock of the corporation from the provisions
of the control share acquisition act through adoption of a provision to that
effect in the Articles of Incorporation or Bylaws of the Registrant. The
Registrant's Articles of Incorporation and Bylaws do not exempt the Registrant's
Common Stock from the Control Share Acquisition Act.

The Control Share Acquisition Act is applicable only to shares of
"Issuing Corporations" as defined by the Act. An Issuing Corporation is a Nevada
corporation, which;

a) has 200 or more stockholders, with at least 100 of such
stockholders being both stockholders of record and residents of Nevada; and

b) does business in Nevada directly or through an affiliated
corporation.

At this time, the Registrant maintains an office in Nevada and conducts
its business from a location in Nevada; therefore, the provisions of the Control
Share Acquisition Act apply to acquisitions of the Registrant's Shares but will
not at such time as these requirements can no longer be met. The provisions of
the Control Share Acquisition Act may discourage companies or persons interested
in acquiring a significant interest in or control of the Registrant, regardless
of whether such acquisition may be in the best interest of the Registrant's
stockholders.

The Nevada "Combination with Interested Stockholders Statute" may also
have an effect of delaying or making it more difficult to effect a change in
control of the Registrant. This Statute prevents an "interested stockholder" and
a resident domestic Nevada corporation from entering into a "combination,"
unless certain conditions are met. The Statute defines "combination" to include
any merger or consolidation with an "interested stockholder," or any sale,
lease, exchange, mortgage, pledge, transfer or other disposition, in one
transaction or a series of transactions with an "interested stockholder" having:

a) an aggregate market value equal to 5 percent or more of the
aggregate market value of the assets of the corporation;

b) an aggregate market value equal to 5 percent or more of the
aggregate market value of all outstanding shares of the corporation; or

c) representing 10 percent or more of the earning power or net income
of the corporation.

An "interested stockholder" means the beneficial owner of 10 percent or
more of the voting shares of a resident domestic corporation, or an affiliate or
associate thereof. A corporation affected by the Statute may not engage in a
"combination" within three years after the interested stockholder acquires its
shares unless the combination or purchase is approved by the Board of Directors
before the interested stockholder acquired such shares. If approval is not
obtained, then after the expiration of the three-year period, the business
combination may be consummated with the approval of the Board of Directors or a
majority of the voting power held by disinterested stockholders, or if the
consideration to be paid by the interested stockholder is at least equal to the
highest of;

a) the highest price per share paid by the interested stockholder
within the three years immediately preceding the date of the announcement of the
combination or in the transaction in which he became an interested stockholder,
whichever is higher;

b) the market value per common share on the date of announcement of the
combination or the date the interested stockholder acquired the shares,
whichever is higher; or

c) if higher for the holders of Preferred Stock, the highest
liquidation value of the Preferred Stock.

3) Material Voting Arrangements.

The Registrant does not presently utilize any form of material voting
arrangements, either by its stockholders or by any of its directors.

F. Determination of Eligibility in Reliance of Rule 701 Securities Issued by
USMetals.

Any employee, officer, or director of, or consultant to, the Registrant who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this report. In addition, non-affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144. Certain matters pertaining to the issuance of shares of USMetals'
common stock pursuant to an Employee Compensation Plan awarded to certain
officers and directors of USMetals prior to its acquisition by the Registrant
must be interpreted pursuant to an opinion of counsel to the Registrant.

Securities Act Rule 701. If no class of the Company's securities is
registered under Section 12 of the Exchange Act, then unless otherwise
determined by the Committee, grants of Incentive Awards to "Rule 701 Grantees"
(as defined below) and issuances of the underlying shares of Common Stock, if
any, on the exercise or conversion of such Incentive Awards are intended to
comply with all applicable conditions of Securities Act Rule 701 ("Rule 701"),
including, without limitation, the restrictions as to the amount of securities
that may be offered and sold in reliance on Rule 701, so as to qualify for an

exemption from the registration requirements of the Securities Act. Any
ambiguities or inconsistencies in the construction of an Incentive Award or the
Plan shall be interpreted to give effect to such intention. In accordance with
Rule 701, each Grantee shall receive a copy of the Plan on or before the date an
Incentive Award is granted to him, as well as the additional disclosure required
by Rule 701 (e) if the aggregate sales price or amount of securities sold during
any consecutive 12-month period exceeds $5,000,000 as determined under Rule
701(e). If Rule 701 (or any successor provision) is amended to eliminate or
otherwise modify any of the requirements specified in Rule 701, then the
provisions of this Section 7.8(b) shall be interpreted and construed in
accordance with Rule 701 as so amended. For purposes of this Section 7.8(b), as
determined in accordance with Rule 701, "Rule 701 Grantees" shall mean any
Grantee other than a director of the Company, the Company's chairman, chief
executive officer, president, chief financial officer, controller and any vice
president of the Company, and any other key employee of the Company who
generally has access to financial and other business related information and
possesses sufficient sophistication to understand and evaluate such information.

It is the opinion of Registrant's counsel, that, upon the occurrence of the
share exchange described in Item 1 of this report, whereby USMetals becomes
subject to the reporting requirements of Section 13 or 15(a) of the Securities
Exchange Act of 1934 (by becoming a wholly owned subsidiary of a reporting
company, and thus, becoming subject to Section 13 or 15(d) of the Exchange Act),
the shares issued under USMetals Employee Compensation Plan will be freely
tradable in the public market, subject to Rule 144 volume limitations applicable
to affiliates and lock-up agreements that may have been executed between the
Registrant's stockholders and the Registrant.

Under Rule 144(k), a person who is not deemed to have been one of the
Registrant's affiliates at any time during the 90 days preceding the
acquisition, and who has beneficially owned the shares proposed to be sold for
at least two years, including the holding period of any prior owner other than
an affiliate, is entitled to sell those shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule 144.

G. Employment Agreements Adopted by the Registrant and its Officers.

As the result of certain actions taken and adopted by the Registrant's
stockholders and directors at two special meetings of stockholders and
directors, the Registrant has adopted Employment Agreements for the officers
named hereinbelow. The following information describes the terms and conditions
of the employment agreements, and other relative terms and provisions applicable
to the employment of each officer, respectively, pursuant to each employment
agreement. The employment agreements, although different for each individual
officer, respectively, are substantially identical in form and substance and are
subject to adequate capitalization of the corporation.

1) Robert Dultz. Effective April 2, 2002, the Registrant entered into an
employment agreement with Robert Dultz regarding Mr. Dultz's employment as
chairman of the Registrant. Under the terms of the agreement, Mr. Dultz will
receive a base salary of $250,000 per year, subject to annual increases in an
amount the Registrant's Board of Directors shall determine appropriate of not
less than 5% per year. The agreement provides that at the end of each year, Mr.
Dultz will be entitled to receive a cash bonus, to be awarded by the

Registrant's Board of Directors, based on the Registrant's performance. The
agreement also provides that the Registrant will grant Mr. Dultz an incentive
stock option to purchase that number of shares of the Registrant's Common Stock
with such number not to exceed 5% of the number of shares outstanding following
completion of the Offering, at $0.50 per share. The option will vest over one
year, with 25% becoming exercisable on the one-year anniversary of Mr. Dultz's
employment, and with the remainder becoming exercisable over the next three
years of continued employment. Mr. Dultz will also be provided with an
automobile allowance of $1,000 per month and will be provided with initiation
fees and monthly dues for one country club. Mr. Dultz will also be reimbursed
for health, dental, and life insurance, in such amounts as Mr. Dultz and the
Registrant deem to be appropriate upon Mr. Dultz's election to receive such
coverage and to be reimbursed by the Registrant.

The initial term of the employment agreement commenced on April 2,
2002, and will continue for a period of five years. At the end of the initial
term of the agreement, and at the end of each year thereafter, the agreement
will be extended for a successive one-year period unless one of the parties to
the agreement notifies the other parties of his or its intent not to extend the
agreement. Employment under the agreement may be terminated:

a) by the Registrant for cause (as defined in the employment agreement);

b) by Mr. Dultz if the Registrant breaches any material provision of
the employment agreement or there is a material diminution in his duties or
responsibilities; and

c) in the event of Mr. Dultz's death or disability, in which all of his
eligible benefits and vestings would be succeeded by his legal heir(s) or
legatee(s).

If the Registrant terminates Mr. Dultz's employment without cause or if
Mr. Dultz terminates employment due to a material breach by the Registrant, the
Registrant will be required to pay the compensation and provide the health and
dental insurance coverage due under the agreement for a period of 24 months from
the date of termination.

In the event of a change in control of the Registrant, Mr. Dultz will
be entitled, for a period of 90 days after the change of control, and at his
election, to deliver notice to the Registrant of the termination of the
employment agreement, whereupon we will be required to make a lump sum payment
to Mr. Dultz in an amount equal to 20 times his then current compensation and
benefits, including salaries, bonuses and all perquisites.

2) Effective January 14, 2002, the Registrant entered into an employment
agreement with Spencer Eubank, regarding Mr. Eubank's service as Executive
Vice-President, Secretary, Treasurer, and a Director of the Registrant. Mr.
Eubank's employment agreement has an initial term of five years. Following the
expiration of its initial term, the employment agreement will be extended for
successive one-year terms unless one of the parties provides notice of his
intent not to extend the agreement. Under the employment agreement, Mr. Eubank
is entitled to receive an initial annual base salary of $75,000, subject to
annual increases in the discretion of the Registrant's Board of Directors. In

addition, under his employment agreement, Mr. Eubank will receive an option to
purchase shares of the Registrant's Common Stock. The options will
distributively vest equally over three years, with 33% of the aggregate option
becoming exercisable on each anniversary of continued employment. The remainder
of the terms and provisions of the employment agreement will be substantially
similar to the Registrant's employment agreement with Mr. Dultz. Mr. Eubank will
be provided with a car allowance of $500 per month in addition to being
reimbursed for health, dental, and life insurance.

3) Effective January 14, 2002, the Registrant entered into an employment
agreement with Larry Dietz, regarding Mr. Dietz's service as President and a
Director of the Registrant. Mr. Dietz's employment agreement has an initial term
of five years. Following the expiration of its initial term, the employment
agreement will be extended for successive one-year terms unless one of the
parties provides notice of his intent not to extend the agreement. Under the
employment agreement, Mr. Dietz is entitled to receive an initial annual base
salary of $75,000, subject to annual increases in the discretion of the
Registrant's Board of Directors. In addition, under his employment agreement,
Mr. Dietz will receive an option to purchase shares of the Registrant's Common
Stock. The options will distributively vest equally over three years, with 33%
of the aggregate option becoming exercisable on each anniversary of continued
employment. The remainder of the employment agreement will be substantially
similar to the Registrant's employment agreement with Mr. Dultz. Mr. Dietz will
receive a car allowance in the amount of $500 per month in addition to being
reimbursed for health, dental, and life insurance.

4) Effective January 14, 2002, the Registrant entered into an employment
agreement with Carl O'Baugh, regarding Mr. O'Baugh's service as Vice-President
and a Director of the Registrant. Mr. O'Baugh's employment agreement has an
initial term of five years. Following the expiration of its initial term, the
employment agreement will be extended for successive one-year terms unless one
of the parties provides notice of his intent not to extend the agreement. Under
their respective employment agreements, Mr. O'Baugh is entitled to receive an
initial annual base salary of $50,000, subject to annual increases in the
discretion of the Registrant's Board of Directors. In addition, under his
employment agreement, Mr. O'Baugh will receive an option to purchase shares of
the Registrant's Common Stock. The options will distributively vest equally over
three years, with 33% of the aggregate option becoming exercisable on each
anniversary of continued employment. The remainder of the terms and provisions
contained in the employment agreement will be substantially similar to the
Registrant's employment agreement with Mr. Dultz. Mr. O'Baugh will receive a car
allowance of $500 per month in addition to being reimbursed for health, dental,
and life insurance.

H. Indemnification Agreements Adopted by the Registrant in Defense of its
Officers and Directors.

As the result of certain actions taken and adopted by the Registrant's
stockholders and directors at a special meeting of stockholders and directors
held on May 1, 2002, the Registrant has adopted Indemnification Agreements for
each of its officers and directors. The following information describes the
nature of the indemnification agreements, and other relative terms and
provisions applicable to the indemnification offered to each officer and

director pursuant to each indemnification agreement, respectively. The
indemnification agreements, although different for each individual officer and
director, respectively, are substantially identical in form and substance.

1) Indemnification of Officers and Directors.

None of the Registrant's directors will have personal liability to the
Registrant or to any of the Registrant's stockholders for monetary damages for
breach of fiduciary duty as a director involving any act or omission of any such
director since provisions have been made in the Articles of Incorporation
limiting such liability. The foregoing provisions shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the Registrant or to the Registrant's stockholders, (ii) for acts or
omissions not in good faith or, which involve intentional misconduct or a
knowing violation of law, (iii) under applicable sections of the Nevada Revised
Statutes, (iv) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes or, (v) for any transaction from which the director
derived an improper personal benefit.

The Registrant's Bylaws provide for indemnification of the directors,
officers, and employees of the Registrant in most cases for any liability
suffered by them or arising out of their activities as directors, officers, and
employees of the Registrant if they were not engaged in willful misfeasance or
malfeasance in the performance of his or her duties; provided that in the event
of a settlement the indemnification will apply only when the Board of Directors
approves such settlement and reimbursement as being for the best interests of
the Registrant. The Bylaws, therefore, limit the liability of directors to the
maximum extent permitted by Nevada law (Section 78.751).

The Registrant's officers and directors are accountable to it as
fiduciaries, which means they are required to exercise good faith and fairness
in all dealings that may affect the Registrant. In the event that a stockholder
believes the officers and/or directors have violated their fiduciary duties to
the Registrant, the stockholder may, subject to applicable rules of civil
procedure, be able to bring a class action or derivative suit to enforce the
stockholder's rights, including rights under certain Federal and state
securities laws and regulations to recover damages from and require an
accounting by the Registrant's management. Stockholders, who have suffered
losses in connection with the purchase or sale of their interest in the
Registrant in connection with such sale or purchase, including the
misapplication by any such officer or director of the proceeds from the sale of
these securities, may be able to recover such losses from the Registrant.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer, or controlling person of the Registrant in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being offered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission that such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the Shares being
Offered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

2) Statement on the Securities and Exchange Commission's Position on
Indemnification.

I. Change of SIC Code.

The Registrant has changed its Standard Industrial Classification (SIC)
Code to "1040" (Mining - Gold and Silver Ores et al.).

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

A. Financial Statements of Acquired Business.

The Registrant is filing with this Form 8-K/A the audited financial
statements required to be provided.

Independent Auditors Report F-1

Consolidated Balance Sheets as of June 30, 2002 and
September 30, 2001 ........................................... F-2

Consolidated Statements of Operations for the three and nine
months ended June 30, 2002 and 2001 ......................... F-3

Consolidated Statement of Shareholders' Equity for the
period ended June 30, 2002 ................................... F-4

Consolidated Statements of Cash Flows for the
nine months ended June 30, 2002 and 2001 ..................... F-5

Notes to Consolidated Financial Statements .................... F-6 - F-16

B. pro forma Financial Information.

Not applicable.

C. Exhibits.

The following exhibits were filed with the Form 8-K filed on June 13, 2002:

The Registrant has provided the following exhibits in regard to the
extraordinary events disclosed in this report.

Exhibit 2.1 Share Exchange Agreement dated March 14, 2002.

Exhibit 3.1 Certificate of Amendment to Articles of Incorporation.

Exhibit 10.1 USMetals' Employee Compensation Plan

Exhibit 10.2 USCorp 2002 Directors and Officers Stock Option Plan

Exhibit 10.2.1 Form of Stock Option

Exhibit 10.3 USCorp Form of Employment Agreement

Exhibit 21.1 USMetals' Articles of Incorporation and Bylaws, as amended

Exhibit 23.1 Opinion and Consent of Roy C. Hopkins, Esq.

Exhibit 27.1 Financial Data Schedule (1)

Exhibit 99.1 USCorp Form of Indemnification Agreement.

(1) Not Available. Please refer to Item 7 of this report.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

The Shareholders
USCorp
4535 W. Sahara Ave. Suite 204
Las Vegas, Nevada 89102

I have audited the accompanying consolidated balance sheet of USCorp (formerly
Fantasticon, Inc.) and Subsidiary as of June 30, 2002 and the related
consolidated statements of income and changes in stockholders' equity, and cash
flows for the period ended June 30, 2002 and 2001. These financial statements
are the responsibility of management. My responsibility is to express an opinion
on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements presented are free from
material misstatement. The audit includes assessing the accounting principles
used and significant estimates made by the management, as well as evaluating the
overall financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.

In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of USCorp
and Subsidiary, a development stage company, for the dates indicated above and
the results of their consolidated operations, stockholders' equity and cash
flows for the year then ended in conformity with generally accepted accounting
principles consistently applied.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in the Notes to
the consolidated financial statements, the Company has suffered losses from
operations and has a lack of net capital that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Henry Schiffer, CPA
An Accountancy Corporation
Beverly Hills, California
August 16, 2002

F-1

USCORP AND SUBSIDIARY
(a Development Stage Company)
CONSOLIDATED BALANCE SHEET

June 30, September 30,
2002 2001
----------- -------------

ASSETS
Current Assets:
Cash $ 118 $ -
----------- -------------
Other Assets:
Mineral properties -- at cost based on successful
efforts method of accounting, net of accumulated
depletion and amortization 1975 to 2001 2,115,758 -

Annual Assessment Work and Lease Payments to the BLM
1975 to 2001 319,600 -
----------- -------------

Total Assets $ 2,435,476 $ -
=========== =============

LIABILITIES & STOCKHOLDERS' EQUITY

Shareholders' Equity:
Common stock, $.01 par value; authorized 100,000,000
shares; issued, and outstanding 25,571,067 at
June 30, 2002; 10,560,657 at September 30, 2001. 255,711 105,607
Additional paid in capital 5,417,693 2,567,777
Retained deficit (3,237,928) (2,673,384)
----------- -------------

Total Shareholders' Equity 2,435,476 -
----------- -------------

Total Liabilities & Shareholders' Equity $ 2,435,476 $ -
=========== =============

The accompanying notes are an integral part of these financial statements.

F-2

USCORP AND SUBSIDIARY
(a Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDING
JUNE 30,2002 AND JUNE 30, 2001

Nine Months Ended Three Months Ended
----------------------- -----------------------
June 30, June 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------

Net Sales $ - $ - $ - $ -
Less Cost Of Sales - - - -
---------- ---------- ---------- ----------
Gross Profit - - - -

Administrative Expenses:
Consulting 11,000 - 9,000 -
Public Relations 2,794 - 2,794 -
Accounting & Legal 40,179 - 14,275 -
Travel 2,354 - 869 -
Corporate Maintenance 2,248 - 877 -
Communications & Clerical 8,801 - 4,289 -
Transfer Agent 4,084 - 3,000 -
Bank Charges 60 - - -
Office Expenses 4,766 - - -
Officer Expenses 5,000 - - -
Printing 986 - - -
Utilities 774 - - -
Entertainment 1,500 - - -
---------- ---------- ---------- ----------
Total Administrative Expenses 84,544 - 35,104 -

Loss From Operations (84,544) - (35,104) -
Other Income (expenses):
Interest Income - - - -
Interest Expense - - - -
---------- ---------- ---------- ----------

Net Loss Before Income Tax Provision (84,544) - (35,104) -
Income Tax Expense - - - -
---------- ---------- ---------- ----------

Net Loss $ (84,544) $ - $ (35,104) $ -
========== ========== ========== ==========
Earnings Per Common Share:
Basic $ ( .00) - $ ( .00) -
========== ========== ========== ==========
Weighted Average Of Common Share:
Basic 25,337,083 - 10,560,657 -
========== ========== ========== ==========

The accompanying notes are an integral part of these financial statements.

F-3

USCORP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE PERIOD ENDED JUNE 30,2002

Common Stock
------------------------ Additional Retained
Shares Amount Paid-In Capital Deficit Total
---------- ---------- --------------- ----------- ----------

Balance at September 30 2001 10,560,657 $ 105,607 $ 2,567,777 $(2,673,384) $ 0
Combination of Retained Deficit and
Development Stage Deficit
---------- ---------- --------------- ----------- ----------

Balance at December 31, 2001 10,560,657 105,607 2,567,777 (2,673,384) 0

Cancellation of 6,025,000 common stock (6,025,000) (60,250) 60,250 0

Adjustment 1 for 10 split down (4,082,091) (40,821) 40,821 0

Issue 24,200,000 shares to acquire USMetals 24,200,000 242,000 (242,000) 0

Issue 650,000 shares per 2002 Employee
Compensation Plan 650,000 6,500 (6,500) (480,000) (480,000)

Increase in Paid in Capital 2,435,358 2,435,358

Expense 650,000 shares @ $.72 per share 480,000 480,000

Issue 310,000 shares to officers and directors 310,000 3,100 (3,100) 0

Cancellation of 42,500 common stock (42,500) (425) 425 0

Capital contributed by a stockholder 84,662 84,662

Loss from Operations (84,544) (84,544)
---------- ---------- --------------- ----------- ----------

Balance at June 30, 2002 25,571,067 $ 255,711 $ 5,417,693 $ (3,237,928) $2,435,476

The accompanying notes are an integral part of these financial statements.

F-4

USCORP AND SUBSIDIARY
(a Development Stage Company)
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDING
JUNE 30, 2002 AND JUNE 30, 2001

June 30, June 30,
2002 2001
--------- ---------
Operating Activities
Net Loss
Changes in Other Operating Assets & Liabilities: $ (84,544) $ -
Accrued Expenses - -
--------- ---------

Net Cash Provided By (used by) Operations (84,544) -
--------- ---------

Financing Activities:
Contributed Capital by Stockholders 84,662 -
--------- ---------

Net Cash Provided by Financing Activities 84,662 -
--------- ---------

Net Increase (decrease) in Cash During Fiscal Year 118 -
Cash Balance at beginning of Fiscal Year - -
--------- ---------
Cash Balance at End of Period $ 118 $ -
========= =========
Supplemental Disclosures of Cash Flow Information:
Interest Paid During the Fiscal Year - -
Income Taxes Paid During the Fiscal Year - -

The accompanying notes are an integral part of these financial statements.

F-5

USCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002

NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES

Nature of Operations

USCorp (the "Company") is a publicly held corporation formed on May 22, 1989 in
the state of Nevada as The Movie Greats Network, Inc. On August 4, 1992, The
Company changed its name to the Program Entertainment Group, Inc. and on August
5, 1997 the Company changed its name to Santa Maria Resources, Inc. In September
2000 the Company changed its name to Fantasticon, Inc. and in January 2002 the
Company changed its name to USCorp.

On October 15, 2000, pursuant to an agreement signed on September 1, 2000, the
Company's wholly owned subsidiary, Fantasticon.com, Inc., a Nevada corporation,
merged with Fantasticon.Com, Inc., a Delaware corporation, Madman Backstage
Productions, Inc., and Impact Interactive, Inc. Pursuant to the agreement, Santa
Maria Resources Inc. changed its name to Fantasticon Inc. and effected a 1:2
reverse split of its common stock. As a condition of the agreement, Santa Maria
divested itself of its business operations prior to the merger. The merger was
rescinded in its entirety by the shareholders in January 2002. 6,025,000 shares
issued to former management have been cancelled and returned to the Treasury. In
addition, effective March 6, 2002 the Company effected a 1:10 reverse split of
its common stock. Accordingly, equity has been restated to reflect the number of
shares outstanding after the cancellation of said shares and the subsequent
reverse split. The statement of operations presented for the three months ended
June 30, 2002 and 2001 and the balance sheet presented at June 30, 2002
represent the results of operations and financial position of USCorp and
USMetals.

In April 2002 USCorp acquired USMetals, Inc. ("USMetals"), a Nevada corporation
as a wholly owned subsidiary. All of the Company's mining business operations
are conducted at this time through USMetals. USMetals owns 141 Lode Mining
Claims near Bagdad, Arizona, called the Twin Peaks Mine.

Management Plans

The company has incurred a net loss of approximately $84,544 during 2002. At
June 30 2002, current assets are approximately $2,435,476.

In order to improve operations and liquidity and meet its cash flow needs, the
company has or intends to do the following:

o Raise $20,000,000 in a private placement.
o Resume and complete exploration and drilling on all claims of the
Twin Peaks mine.
o Build a test plant.
o Complete feasibility studies on the Twin Peaks mine.
o Bring the Twin Peaks mine to full-scale commercial mining.
o Obtain a credit facility based in part on the value of its proven
reserves when necessary and if appropriate given market
conditions.

F-6

As a result of these plans, management believes that it will generate sufficient
cash flows to meet its current obligations in 2002 and 2003.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, and
its wholly owned subsidiary, USMetals, Inc. ("USMetals"). All significant
intercompany accounts and transactions have been eliminated in consolidation.

The Company conducts all of its mining operations through its wholly owned
subsidiary, USMetals. International Energy Resources, Inc. ("IERI"), a
non-affiliated company, has agreed to continue to supervise and direct the work
of the mine Exploration and Development Team upon adequate funding of the
project.

Mineral Properties

The Company uses the successful efforts method of accounting for mineral
properties. Under this methodology, costs incurred to acquire mineral interest
in properties, to drill and equip exploratory sites within the Twin Peaks claims
groups are capitalized. Costs to conduct exploration and assay work that does
not find proved reserves, geological and geophysical costs and costs of carrying
and retaining unproved sites will be expensed.

Potential mineral properties that are individually significant will be
periodically assessed for impairment of value and a loss will be recognized at
the time of impairment by providing an impairment allowance. Other unproved
properties will be amortized based on the Company's experience of successful
drilling and historical lease expirations.

An impairment loss is indicated whenever net capitalized costs exceed expected
future net cash flow based on engineering estimates. In this circumstance, the
Company will recognize an impairment loss for the amount by which the carrying
value of the properties exceeds the estimated fair value (based on discounted
cash flow).

On the sale or retirement of a complete claim of proved property, the cost and
related accumulated depletion and amortization will be eliminated from the
property accounts, and the resultant gain or loss will be recognized. On the
retirement or sale of a partial claim of property, the cost will be charged to
accumulated depletion and amortization with a resulting gain or loss recognized
in earnings.

NOTE 2 MINING CLAIMS ACQUIRED AND PURCHASED -- APPRAISED VALUES:

The Company owns 141 unpatented contiguous mining claims totaling approximately
2,820 acres in Township 13, Yavapai County, Arizona. These claims have a history
of mining activity from the middle of the 19th century to the beginning of World
War II. Gold, silver, copper and other minerals were recovered in important
quantities. The previous owners started acquisition of this claim group in the
early 1940's and by 1978 the group totaled 134 claims. Exploration, drilling and
assessment work was done and several geological reports were completed
indicating the presence of economically viable deposits of precious metals and
complex ores.

F-7

Appraisal and Valuation

The Late Mr. N. H. Carouso, formerly President of Geo-Processing, Inc., was
retained in 1985 by the prior owners of these claims to prepare an Economic
Evaluation of the 134 claims in the group at that time. Mr. Carouso earned a
Bachelor of Arts and a Master of Science degree from the University of
California, College of Engineering, Department of Mineral Technology and Mining.
This report was for the recovery of gold and silver only.

The following is a statement from Mr. Carouso's report:

"The mining claims project area offers excellent economic potential. With the
gold and silver mineralization cropping out at the surface and the favorable
topography for surface mining techniques, it is felt that an early cash flow can
be expected. The gross dollar potential of the areas evaluated, which the writer
(Mr. Carouso) feels represents only about 30% of the potential of the entire
group of claims, if combined, could be $280,836,000.00. Even if one then takes a
50% confidence factor as to the grade of ore, the gross dollar potential would
be $115,418,000, and with an expected 70% recovery of precious metals, the
adjusted gross dollar potential would be $80,792,600.00 based on a spot price of
$325/oz, for gold and $6.00/oz. for silver, and mining to a depth of 100 feet."

Other minerals are available from these claims as reported from the United
States Geological Survey conducted in 1940. Of the minerals listed, one of the
most notable was a content of Uranium Ore, U308 (Yellow Cake) which has a
content ranging from .43% to 1.77% by volume. The Company has discussed the
potential of mining U308 Uranium Ore. Management intends upon receipt of
adequate funding to determine viability of economical recovery of uranium.

Additional minerals referred to as "Complex Ores" that have been identified on
these claims have been ignored due to the expensive and sophisticated process of
mining "Complex Ores." Management intends upon receipt of adequate funding to
determine the extent of "Complex Ore" deposits and the feasibility of their
economical recovery.

Revenue Recognition

Mineral sales result from undivided interests held by the Company in mineral
properties. Sales of minerals will be recognized when delivered to be picked up
by the purchaser. Mineral sales from marketing activities will result from sales
by the Company of minerals produced by the Company (or affiliated entities) and
will be recognized when delivered to purchasers. Mining revenues generated from
the Company's day rate contracts, included in mine services revenue, will be
recognized as services are performed or delivered.

F-8

Income Taxes

Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts based on enacted laws and statutory rates applicable to the
period in which the differences are expected to affect taxable income. Valuation
allowances are established when, in management's opinion, it is more likely than
not that a portion or all of the deferred tax assets will not be realized.

Use of Estimates

In preparing financial statements, generally accepted accounting principles
require management to make estimates and assumptions in determining 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.

Recent Accounting Pronouncements

On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 is effective for all business combinations completed after
June 30, 2001. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001; however, certain provisions of SFAS No. 142 apply to goodwill
and other intangible assets acquired between July 1, 2001 and the effective date
of SFAS No. 142.

Major provisions of SFAS Nos. 141 and 142 and their effective dates for the
Company are as follows:

o All business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited, except for transactions initiated before July 1, 2001.

o Intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, rented or exchanged, either individually or as part of a
related contract, asset or liability.

o Effective January 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator.

o All acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.

F-9

In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, and in August 2001, issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 143 requires entities to
record the fair value of liability for an asset retirement obligation in the
period in which it is incurred and a corresponding increase in the carrying
amount of the long-lived asset. Subsequently, the asset retirement cost should
be allocated to expense using a systematic and rational method. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002. SFAS No. 144 addresses
financial accounting and reporting for the impairment of long-lived assets and
for long-lived assets to be disposed of. It supersedes, with exceptions, SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed Of,
and is effective for the fiscal years beginning after December 15, 2001. The
Company is currently assessing the impact of SFAS Nos. 143 and 144. However, at
this time, the Company does not feel that the impact of these statements will be
material to its consolidated financial position or results of operations.

NOTE 3 - STOCKHOLDERS' EQUITY

On May 1, 2002, the Company adopted an employee stock option plan for certain
employees with a maximum of 2,045,357 shares, which may be issued and granted
exercisable at $.72 per share. During 2002, the Company issued and granted a
total of 650,000 options under the plan.

Option Terms. The plan provides for incentive stock options and non-qualified
stock options. The committee or the Registrant's Board of Directors will
determine whether an option is an incentive stock option or a non-qualified
stock option when it grants the option and the option will be evidenced by an
agreement describing the material terms of the option. The committee or the
Registrant's Board of Directors will determine the exercise price of an option.
The exercise price of an incentive stock option may not be less than the fair
market value of the Registrant's Common Stock on the date of the grant, or less
than 110% of the fair market value if the participant owns more than 10% of the
Registrant's outstanding Common Stock. When the incentive stock option is
exercised, we will be entitled to place a legend on the certificates
representing the shares of Common Stock purchased upon exercise of the option to
identify them as shares of Common Stock purchased upon the exercise of an
incentive stock option. The exercise price of non-qualified stock options may be
greater than, less than or equal to the fair market value of the Common Stock on
the date that the option is awarded, based upon any reasonable measure of fair
market value. The committee may permit the exercise price to be paid in cash or
by the delivery of previously owned shares of Common Stock, and, if permitted in
the applicable option agreement, through a cashless exercise executed through a
broker or by having a number of shares of Common Stock otherwise issuable at the
time of exercise withheld.

F-10

The committee or the Registrant's Board of Directors will also determine the
term of an option. The term of an incentive stock option or non-qualified stock
option may not exceed ten years from the date of grant, but any incentive stock
option granted to a participant who owns more than 10% of the Registrant's
outstanding Common Stock will not be exercisable after the expiration of five
years after the date the option is granted. Subject to any further limitations
in the applicable agreement, if a participant's employment terminates, an
incentive stock option will terminate and become unexercisable no later than
three months after the date of termination of employment. If, however,
termination of employment is due to death or disability, one year will be
substituted for the three-month period. Incentive stock options are also subject
to the further restriction that the aggregate fair market value, determined as
of the date of the grant, of the Registrant's Common Stock as to which any
incentive stock option first becomes exercisable in any calendar year is limited
to $100,000 per recipient. If incentive stock options covering more than
$100,000 worth of the Registrant's Common Stock first become exercisable in any
one calendar year, the excess will be non-qualified options. For purposes of
determining which options, if any, have been granted in excess of the $100,000
limit, options will be considered to become exercisable in the order granted.

The Company has decided to expense the value of the options when granted to
account for its employee option plan in which compensation is recognized at the
date of the grant. The fair market value exercise price of all options was the
average of the closing price of the Company's stock for the five day period
preceding the registration of the option shares. Accordingly, the compensation
cost has been recognized for the options issued.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

General Commitments

The company has secured various commitments related to development and
production of its mineral properties contingent upon receipt of adequate
funding. It is management's belief that such commitments will not have
significant adverse impact to the Company's financial position or results of
operations.

Leases

As of the date of this report, all office furniture and equipment has been
contributed by a shareholder. In March 2002, the 141 lode mine claims leases
were transferred to USMetals, Inc. These claims leases are renewable annually by
USMetals. Rent expense under these leases is $14,100 each year.

Litigation

The Company is not a party to any matters of litigation.

F-11

NOTE 5 - RELATED PARTY TRANSACTIONS

Joint Venture Agreements

USMetals, Inc. has no joint venture agreements at this time. Mining exploration
and development has been performed under the general supervision and direction
of International Energy and Resources, Inc., ("IERI") which was under agreement
with prior owners of the property. IERI has agreed to provide similar services
to the Company upon securing adequate financing. IERI will supervise and direct
third parties for the purpose of completing the exploration and development of
the Twin Peaks Mine claims group.

NOTE 6 - ACQUISITION OF BUSINESS

On April 2, 2002, the Company acquired USMetals, Inc. ("USMetals") for
24,200,000 shares of its common stock in a share-for-share exchange whereby
USMetals became a wholly owned subsidiary of USCorp. USMetals owns the 141 lode
mining claims known as the Twin Peaks mine near Baghdad, Arizona. The fair value
of the property is based upon the values that were estimated by field
personnel. The estimated fair market values of the assets acquired and
liabilities assumed in the acquisition of USMetals are as follows:

Estimated fair value of assets acquired
Property 319,600
Mine Development
Hayes Mining, Phillips Mining 400,000
American Metals and Minerals 297,758
Santa Maria Resources 600,000
International Energy and Resources 818,000
---------
Total fair value of assets 2,435,358

Liabilities assumed
Annual Lease Payment -
----------
Estimated fair value of acquisition $2,435,358
==========

The following summarizes pro forma unaudited projections of results of
operations for the first five years of full scale commercial production. These
estimates were prepared for a prior owner of the property by Ernst and Whinney.
Management believes these projections are a fair representation of the potential
of the Twin Peaks Mine. However, management cannot guarantee any particular
result in any given year, or that full scale commercial production will commence
in any given year or will continue in any succession of years. These pro forma
projections are not necessarily indicative of future results.

Please note that the price per ounce of Gold used by Ernst and Whinney in these
projections is $400. This price and the corresponding values in the projections
which follow should be reduced by 25% in order to reflect the current range of
prices per ounce of Gold.

F-12

PROJECTED
CASH FLOW
FIRST 5 YEARS

YEAR YEAR YEAR YEAR YEAR TOTAL
1 2 3 4 5
----------- ------------- ------------ ------------- ------------ -------------

Statistics
Tons of ore mined (000) 276 690 1,380 2,760 4,140 9,246
Ore reserve, beginning of year 3.6 million 10.8 million 25.1 million 48.7 million 95.9 million
New Proven Reserves (Tons) 7.5 million 15.0 million 25.0 million 50 million 100 million 191.8 million
Ore Grade - Gold (oz/ton) 0.12 0.12 0.12 0.12 0.12
- Silver (oz/ton) 0.57 0.57 0.57 0.57 0.57
Tons of Ore processed (000) 276 690 1,380 2,760 4,140 9,246
Recoverable oz - Gold 33,120 82,800 165,600 331,200 496,800 1,109,520
- Silver 157,320 393,300 786,600 1,573,200 2,359,800 5,270,220
Sales in oz - Gold 33,120 82,800 165,600 331,200 496,800 1,109,520
- Silver 157,320 393,300 786,600 1,573,200 2,359,800 5,270,220

------------------------------------ ----------- ------------- ------------ ------------- ------------ -------------
Revenue - Gold @ $400/oz. 13,248,000 33,120,000 66,240,000 132,480,000 198,720,000 443,808,000
- Silver @ $5/oz. 786,600 1,966,500 3,933,000 7,866,000 11,799,000 26,351,100
----------- ------------- ------------ ------------- ------------ -------------
Total Revenue 14,034,600 35,086,500 70,173,000 140,346,000 210,519,000 470,159,100

Operating Costs: Mining 1,290,000 1,770,100 2,760,000 4,560,000 5,904,000 16,284,100
Processing 2,021,800 2,692,200 4,162,700 6,517,600 8,805,600 24,199,900
G&A (site) 364,200 439,800 666,600 1,069,800 1,473,000 4,013,400
----------- ------------- ------------ ------------- ------------ -------------
Total Operating Expenses 3,676,000 4,902,100 7,589,300 12,147,400 16,182,600 44,497,400
Capital Expenditures 4,629,700 3,846,750 6,574,600 10,135,300 20,456,300 45,642,650
----------- ------------- ------------ ------------- ------------ -------------
Total Expenditures 8,305,700 8,748,850 14,163,900 22,282,700 36,638,900 90,140,050
Income Taxes 4,284,742 13,240,579 27,803,954 57,545,435 87,006,857 189,881,567
Net Cash Flow after Taxes 1,444,158 13,097,071 28,205,146 60,517,865 86,873,243
Accumulated Net Cash Flows 1,444,158 14,541,229 42,746,375 103,264,240 190,137,483 190,137,483
Present Value - Beginning of Year
10% 1,312,871 10,824,026 21,190,943 41,334,516 53,941,449 128,603,805
12% 1,289,427 10,440,904 20,075,865 38,460,197 49,294,211 119,560,604
14% 1,266,805 10,077,771 19,037,670 35,831,434 45,119,240 111,332,920
16% 1,244,964 9,733,257 18,069,843 33,423,478 41,361,482 103,833,024

F-13

PROJECTED
PROFIT/LOSS

FIRST 5 YEARS

YEAR YEAR YEAR YEAR YEAR
1 2 3 4 5
--------- ----------- ------------ ------------ -----------

Net Cash Flow Before Taxes 5,728,900 26,337,650 56,009,100 118,063,000 173,880,100

Add - Capital Expenditures 4,629,700 3,846,750 6,574,600 10,135,300 20,456,300
Less - Depreciation (462,970) (847,645) (1,505,105) (2,518,635) (4,564,265)
Less - Depletion (15% Gross) (2,105,190) (5,262,975) (10,525,950) (21,051,900) (31,577,850)
--------- ----------- ------------ ------------ -----------
Taxable Income 7,790,440 24,073,780 50,552,645 104,627,765 158,194,285

State Income Tax (10%) 779,044 2,407,378 5,055,265 10,462,777 15,819,429
7,011,396 21,666,402 45,497,381 94,164,989 142,374,857
federal Income Tax (50%) (3,505,698) (10,833,201) (22,748,690) (47,082,494) (71,187,428)

Net Income 3,505,698 10,833,201 22,748,690 47,082,494 71,187,428

The operations of USMetals are included in the accompanying consolidated
financial statements subsequent to the acquisition.

NOTE 7 - MINERAL RESERVE DATA (UNAUDITED)

The following estimates of proved reserve quantities and related standardized
measure of discounted net cash flows are estimated only, and do not purport to
reflect realizable values or fair market values of the Company's reserves. The
Company emphasizes that reserve estimates are inherently imprecise and that
estimates of new discoveries are more imprecise than those of producing mining
properties.

Accordingly, these estimates are expected to change as future information
becomes available. All of the Company's reserves are located in the United
States, in the State of Arizona.

The following is a quote from a report prepared by International Energy and
Resources, Inc. (The full report is available from the Company upon written
request). All references to "Exhibits" refer to Exhibits of IERI's Report.

F-14

"...The Twin Peaks Mine is on the same structure and flat zone as the Phelps
Dodge deposit. The claims and previous producing mines are on the Jasper Peak
with gold carrying mineralization ... To date, numerous geological, geochemical,
and geophysical studies have been conducted to confirm historical assays and
establish estimated reserves. In the 1980's over 10,000 feet of core drillings
were done and over 1,500 fire assays were conducted. These assays showed an
overall average of .14 ounces of gold per ton and .595 ounces of silver per ton,
which proves over 652,000 ounces of gold and 2,488,000 ounces of silver in
reserve using 1 area covering 3 claims. At $250 per ounce for gold and $5.00 per
ounce for silver this represents $175,440,000.00. If we extend the depth to 400
ft. (early miners tunneled to this depth and the drilling results verified ore
to this depth) the total amount would be multiplied by 4 and the value would be
$701,760,000.00. If we extend the same areas to a depth of 2,000 ft, which is
the depth that the Phelps Dodge Mine in Bagdad is being mined, the estimated
inferred reserves would be approximately: $3,508,800,000.000 (over 3.5 billion
dollars).

Some of the geological, geophysical, and geochemical studies listed above were
audited and evaluated by Nicholas H. Carouso, President of Geo-Processing, Inc.
which was an independent mining, consulting, and geology firm. Mr. Carouso's
report and economic study recommended the continuation of exploration and start
of production. (*Excerpts from Carouso's report and assays mentioned above are
part of exhibits #4, #5, and #6 [of IERI's Report])

In January 2001, International Energy and Resources, Inc. hired Spooner and
Associates to do further geological studies. Spooner and Associates have over
100 years of mining experience (*see Twin Peaks Mine Mining Team). After Spooner
and Associates' Senior Geologist Scott Spooner and Cad Drawing Survey Specialist
Eric C. Monk audited the geological studies previously mentioned they visited
The Twin Peaks Mine in late January 2001. In March of 2001, by recommendation of
Spooner and Associates, International Energy and Resources, Inc. mobilized a
crew to build approximately 10 miles of road to gain access to the historic
Hayes Mining area. This would enable them to conduct further geological studies.
(*see exhibit #1 [of IERI's Report]).

In late March 2001 International Energy and Resources, Inc. hired Hillbrands and
Western Mining Co. to drill holes so that ore samples could be collected and
assayed. They have currently drilled approximately 30 holes measuring 100 ft. in
depth for a total of 3,000 ft. of drill cuttings. Spooner and Associates
retained over 30 samples for assaying. In conjunction with the drilling
operation, Spooner and Associates have also taken numerous ground samples from
two different locations surrounding the historic Hayes Mine. These samples have
also been assayed. The results of the geological studies were as follows:

Drill hole #30 was subject to a standard fire assay as well as oxidation prior
to standard fire assaying. This assay and oxidation process was conducted on
cuttings taken at a depth of 40-50ft. The standard fire assay results revealed
gold values of .20 opt (ounces of ore per ton); while oxidation followed by fire
assaying showed gold values of 1.16 opt. This structure is approximately 3,400
ft. long x 100 ft. wide x 100 ft. in depth. This yields reserves of 2,014,815
tons of ore x 1.16 opt gold equaling 2,337,185 ounces of gold. The lower results
from the standard fire assaying are due to the presence of sulfides and
arsenides that tend to drive the gold and silver into the slag phase during
standard fire assaying (*see exhibit #2 [of IERI's Report]). With this in mind
it is reasonable to assume that all previous standard fire assays done would
increase 5.8 times through oxidation prior to fire assaying.

F-15

Rock material from the hanging wall and footwall of the quartz vein were subject
to crushing, screening, and fire assaying. The results from the quartz dike
revealed an average of .57 opt from fire assaying and 5.8 times or 3.31 opt
using the oxidation method. That yields reserves of 16,694,056 ounces of gold.
Rock chips were taken from the red conglomerate located just south of the Hayes
Mine and just west of the volcanic plug. The fire assays revealed .20 opt of
gold. As stated previously oxidation prior to fire assaying should increase the
gold amount by 5.8 times to 1.16 opt. This area has ore reserves of 2,395,477
ounces of gold. These three areas have a combined total of 9,138,687 tons of
ore, which yields a total of 21,426,718 reserves ounces of gold.

From these studies it is International Energy and Resources, Inc.'s and Spooner
and Associates' recommendation that USMetals, Inc...do a fly over to determine
areas of mineralization...a six month drilling program using reverse circular
and core drilling to depths of 500 ft. per hole in conjunction with a pilot mill
to further prove and develop reserves. It is important to note that
International Energy And Resources, Inc. hasn't done any work on the Crosby area
of the claims, and that history of this area is very favorable to further
development."

Potential ore reserves are estimated reserves of ore that geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known ore deposits under existing economic and operating
conditions.

Operating costs and production taxes are estimated with respect to production of
mineral properties. Future development costs are based on the best estimate of
such costs assuming current economic and operating conditions.

Income tax expense is computed based on applying the appropriate statutory tax
rate to the excess of future cash inflows less future production and development
costs over the current tax basis of the properties involved, less applicable
carryforwards, for both regular and alternative minimum tax.

The future net revenue information assumes no escalation of costs or prices,
except for mineral sales which may be made under terms of contracts which would
include fixed and determinable escalation. Future costs and prices could
significantly vary from estimated amounts and, accordingly, revisions in the
future could be significant.

F-16

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by the
undersigned hereunto duly authorized.

USCORP
(the Registrant)

Dated: October 8, 2002 /s/ Larry Dietz
---------------
Larry Dietz
President