As filed with the Securities and Exchange
Commission on May 6, 2002
Commission File Number 333-58086

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 5 to FORM SB-2
REGISTRATION STATEMENT
Under The Securities Act of 1933

Pure Steel Custom Cycles, Inc.

<s> <c> <c>
ARIZONA 86-0788909
(State or other (Primary Standard Industrial (I.R.S. Employer)
jurisdictions Classification Code Number) Identification number)
of incorporation
or organization)

4010 Grand Avenue, Suite 16
Phoenix, Arizona 85019
Telephone: 602-841-2000
(Address and telephone number of registrant's
principal executive offices and principal place
of business)

Glenford F. Griffin
4010 Grand Avenue, Suite 16
Phoenix, Arizona 85019
Telephone: 602-841-2000
(Name, address and telephone number of
agent for service)

with copies to:
Jody M. Walker
Attorney At Law
South Garfield Way
Littleton, Colorado 80122
Telephone: 303-850-7637
Facsimile: 303-220-9902

If any of the securities being registered on this
Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: |x|

CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed Amount of
class of Amount to be offering aggregate registration
securities registered price offering price fee
- ------------ ------------ ------ -------------- -----------
<s> <c> <c> <c> <c>
Common stock 2,000,000 $1.00 $2,000,000 $478.00
Common stock(1) 488,500 $1.00 488,500 116.75
Common stock
Underlying warrants 300,000 $1.00 300,000 75.00
Common stock
Underlying warrants 100,000 $1.00 100,000 25.00

(1)To be registered on behalf of selling
shareholders.

The registrant amends this registration statement
on such date or dates as may be necessary to delay
its effective date until the registrant shall file
a further amendment, which specifically states that
this registration statement shall thereafter become
effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration
statement shall become effective on such date as
the Commission, acting pursuant to said Section
8(a), may determine.

PRELIMINARY PROSPECTUS Dated May 6, 2002
SUBJECT TO COMPLETION

Up to a maximum of 2,000,000 common shares
at $1.00 per common share

488,500 common shares on behalf of selling
security holders
400,000 common shares underlying warrants
on behalf of selling security holders

PURE STEEL CUSTOM CYCLES, INC.

We shall receive up to $1,939,037 of the proceeds
from the sale of the common shares after paying
offering expenses estimated at $60,963. This does
not include any amounts the selling security
holders may receive from the sale of their 488,500
common shares and 400,000 common shares issued when
the warrants are exercised.

The offering is on a self-underwritten basis with
no minimum offering amount. We have made no escrow
arrangements for any funds received.

Our directors arbitrarily determined the offering
price and the total offering amount without
considering any book or market value.

This is our initial public offering, and no public
market currently exists for our shares.

The offering terminates on June 30, 2003.

Consider carefully the risk factors beginning on
page 8 in the prospectus.

Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any
representation to the contrary is a criminal
offense.

The information in this prospectus is not complete
and we may change it. We may not sell these
securities until the registration statement filed
with the Securities and Exchange Commission is
effective.

This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy
these securities in any state where the
offer or sale is not permitted.

TABLE OF CONTENTS

PROSPECTUS SUMMARY 6
RISK FACTORS 8
- Sales may not meet our expectations
- We currently rely on a single line of products
- The cost of our motorcycles may deter sales
- We may have to raise additional financing
- We rely on a few large customers
- We have a limited manufacturing history
- We may experience potential recalls and
product liability
- There will be less due diligence done by
third parties
- We will be less likely to sell the common
shares
- There is no minimum offering amount and no
escrow account in this offering
- There is no market for our common stock
- We may never meet the requirements to be
quoted on NASDAQ
- The selling shareholders may have liability
because of their status as underwriters
- Our auditor has issued a going concern
DETERMINATION OF OFFERING PRICE 13
SELLING SECURITY HOLDERS 13
TERMS OF THE OFFERING 14
SOURCE AND USE OF PROCEEDS 17
DILUTION 18
PURE STEEL 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 27
MANAGEMENT 42
CERTAIN TRANSACTIONS 45
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES 46
PRINCIPAL SHAREHOLDERS 47
SHARES ELIGIBLE FOR FUTURE SALE 48
MARKET FOR COMMON SHARES
AND RELATED SHAREHOLDER MATTERS 49
DESCRIPTION OF SECURITIES 51
LEGAL MATTERS 52
LEGAL PROCEEDINGS 52
EXPERTS 52
INTERESTS OF NAMED EXPERTS AND COUNSEL 53
ADDITIONAL INFORMATION 54
AVAILABLE INFORMATION 54
FINANCIAL STATEMENTS 55

Prospectus Summary

The following summary contains basic information
about this offering. It likely does not contain
all the information that is important to you. For
a more complete understanding of this offering, we
encourage you to read this entire document and the
documents we have referred you to.

Pure Steel. Pure Steel designs, develops and
manufactures hand crafted custom motorcycles for
the high-end premium motorcycle market.

For the year ended March 31, 2001, we had revenues
of $1,476,927 and a net loss of $449,362. For the
nine month period ended December 31, 2001, we had
revenues of $662,423 and a net loss of $279,052.

Principal Executive Offices 4010 Grand Avenue, Suite 16
Phoenix, Arizona 85019
Telephone: 602-841-2000

The Offering Pure Steel is offering
up to 2,000,000 common
shares at $1.00 per
common share. There is
no minimum investment and
no minimum offering amount.

You will not get your money
back, even if we raise
insufficient capital to
accomplish the expansion of
our operations.

We are not engaging
underwriters to sell the
offering.

Common shares outstanding
prior to this offering
assuming exercise of all of the
warrants 8,188,500

Percent of common shares owned by
current shareholders after maximum
offering and assuming exercise
of warrants 64.72%

Gross proceeds after maximum offering $2,000,000

Use of proceeds from sale of
common shares Pure Steel intends to use
the funds from the sale of
our common shares primarily
for:

- clothing manufacturing,
- tooling,
- labor,
- parts inventory and
- working capital.
Market For the Common Stock
Prior to the date of this
prospectus, we have had no
trading market for our common
stock. We will apply for
the quotation of our common
stock on the OTC Bulletin
Board.

We cannot offer assurance that
the NASD will quote our common
stock, that an active trading
and/or a liquid market will
develop or, if developed, that
we can maintain it.

Sales by Selling
Security Holders We are registering common shares
on behalf of selling security
holders in this prospectus. We
will not receive any cash or other
proceeds in connection with the
subsequent sale. We are not
selling any common shares on
behalf of selling security holders
and have no control or affect on
these selling security holders.

Absence of Dividends; Dividend Policy We do not currently
intend to pay regular cash
dividends on our common stock.
Our board of directors will
review this policy from time
to time in light of,
among other things, our
earnings and financial

8
position. We do not
anticipate paying dividends on
our common stock in the
foreseeable future.

Transfer Agent We currently act as our own
transfer agent.

- -------------------------------------------
Risk Factors
- -------------------------------------------

In analyzing this offering, you should read this
entire prospectus and carefully consider, among
other things, the following risk factors:

Risks relating to Pure Steel

1. Sales may not meet our expectations and if
other sources of revenue are not available, our
growth and profitability could be delayed or
diminished. You may lose your entire investment.

We expect that the net proceeds from this offering
and the cash flow from operations will be
sufficient to allow us to meet the expected growth
in demand for our products and services. However,
we cannot be assured that our sales will meet our
growth expectations. Should either of these fail to
occur, we may elect to

- reduce the planned expansion of operations
or
- pursue other financing alternatives such as
a rights offering, warrant exercise or borrowings.

Our planned growth and profitability could be
delayed or diminished if we cannot implement the
two options listed above. You may lose your
entire investment.

2. We currently rely on a single line of
products. If these products are not successfully
commercialized, we may not reach profitability and
you may lose your entire investment.

We have concentrated our efforts primarily on the
development of our custom motorcycles and
accessories. We will be dependent to a significant
extent upon acceptance of these products to
generate additional revenues. We cannot assure
you that our custom cycles and accessories will be
successfully commercialized. We cannot assure
you that our competitors will not succeed in

developing or marketing technologies and products
that are more commercially attractive than our
custom cycles.

3. Lack of future customer deposits will have negative
consequences on our ability to complete our orders and
obtain or maintain profitability.

Customer deposits will be used to provide current
working capital to operate in a curtailed operation mode
and that this mode of operation will not allow for other
than single unit production but would allow Pure Steel
to meets its immediate working capital needs such as
purchasing of parts for production and office overhead,
primarily payroll. If we do not receive sufficient
future customer deposits, we will be unable to complete
current orders and obtain remaining payments on those
cycles.

4. The cost of our motorcycles may deter sales,
we may not reach profitability and you may lose
your entire investment.

Our motorcycles retail for prices substantially in
excess of retail prices for conventional
motorcycles. This significant difference in
pricing may deter potential purchasers from making
a monetary commitment in order to purchase our
custom motorcycles. The higher cost of the
product may deter sales, we may not reach
profitability and you may lose your entire
investment.

5. We may have to raise additional financing.
We may not be able to obtain the financing at
reasonable terms to continue operations and you may
lose your entire investment.

We cannot assure you that we will not be required
to seek additional equity or debt capital to
finance our operations in the future. In
addition, we cannot assure you that any financings,
if needed, will be available to Pure Steel or that
adequate funds for Pure Steel's operations, whether
from Pure Steel's revenues, financial markets,
collaborative or other arrangements with corporate
partners or from other sources, will be available
when needed or on terms attractive to Pure Steel.
Our inability to obtain sufficient funds may
require us to delay, scale back or eliminate some
or all of sales and marketing efforts and
manufacturing.

6. We rely on a few large customers. The loss
of any of these large customers will have a
negative affect on our profitability.

In the past, Pure Steel has made a significant
amount of sales to a few large customers.
Historically, the identity of Pure Steel's largest
customers and the volumes purchased by them has
varied. The loss of Pure Steel's largest customers
or a reduction of the volume purchased by these
customers would have had an adverse effect upon
Pure Steel's sales until a time, if ever, as
significant sales to other customers could have
been made.

During the year ended March 31, 2001, Pure Steel
had sales as a percentage of total revenues to
four customers of 29.3%, 26.0%, 11.1% and 10.6%,
respectively. During the year ended March 31,
2000, Pure Steel had sales as a percentage of
total revenues to three customers of 50.7%, 13.9%
and 10.7%, respectively. At December 31, 2001,
the Company had sales as a percentage of total
revenue to two customers of 40.6% and 10%,
respectively. At March 31, 2001 one customer owed
Pure Steel $68,017 representing 96% of accounts
receivable at that date.

7. We have a limited manufacturing history with
our custom motorcycles. Our operations could be
negatively affected if we cannot scale up our
production or hire and train sufficient personnel.

Pure Steel has limited experience with the
manufacture and assembly of our custom cycles in
the volumes that will be necessary for Pure Steel
to generate significant revenues from the sale of
our motorcycles. Pure Steel may encounter
difficulties in scaling up our production or in
hiring and training additional personnel to
manufacture our motorcycles. Future interruptions
in supply or other production problems could have a
material adverse effect on Pure Steel's business,
financial condition and results of operations.

8. We may experience potential recalls and
product liability. Our operations could be
negatively affected by increased costs relating to
recalls or product liability.

Any of Pure Steel's products may be subject to
recall for unforeseen reasons. As a result, Pure
Steel faces a risk of exposure to product
liability, errors and omissions or other claims in
the event that the use of our custom motorcycles,

accessories or other future potential products is
alleged to have resulted in injury and there can be
no assurance that Pure Steel will avoid significant
liability.

We cannot assure you that Pure Steel will be able
to retain our current insurance coverage or that
such coverage will continue to be available at an
acceptable cost, if at all. Consequently, these
claims could have a material adverse effect on the
business or financial condition of Pure Steel.

9. There will be less due diligence done by third
parties since we are not engaging underwriters.
You will have to rely on your own due diligence in
making the investment.

We are not going to engage an underwriter to assist
us in selling the offering. Less due diligence
will be conducted than in an underwritten offering.
In making your investment decision, you will have
to rely on your own due diligence without any
assurance that a third party has thoroughly
investigated the transaction.

10. We will be less likely to sell the common
shares we are offering than we would be if we
engaged an underwriter. We may not sell
sufficient common shares to expand our operations.
You could lose your entire investment.

Since we will be selling the offering without the
assistance of an underwriter, we will likely sell
less of the common shares than we would with an
underwriter's assistance. If we do not sell
enough common shares to ensure the necessary funds
to expand our operations, you could lose your
entire investment.

11. There is no minimum offering amount and no
escrow account in this offering. You will not
receive any of your investment back even if we
raise only a minimal amount.

We have not established an escrow account since
there is no minimum offering amount. We will have
immediate access to the proceeds of the offering.
We will not return any of your investment even if
we only raise a minimal amount from the sale of our
common shares.

12. There is no market for our common stock. If
our common stock has no active trading market, you
may not be able to sell your common shares at all.

We cannot assure you that a public market will ever
develop. We will have to obtain market makers in
our stock. This will be more difficult since we
are not engaging underwriters to sell the offering
and support the common stock. Consequently, you
may not be able to liquidate your investment in the
event of an emergency or for any other reason
except as required by law.

13. We may never meet the requirements to be
quoted on NASDAQ. You may not be able to sell your
common shares easily.

If the trading price of our common stock is less
than $5.00 per share, trading in the common stock
would also be subject to the requirements of Rule
15g-9 under the Exchange Act. Under this rule,
broker/dealers who recommend low-priced securities
to persons other than established customers and
accredited investors must satisfy special sales
practice requirements. The broker/dealer must make
an individualized written suitability determination
for the purchaser and receive the purchaser's
written consent prior to the transaction.

SEC regulations also require additional disclosure
in connection with any trades involving a "penny
stock", including the delivery, prior to any penny
stock transaction, of a disclosure schedule
explaining the penny stock market and its
associated risks. Such requirements severely limit
the liquidity of the common stock in the secondary
market because few brokers or dealers are likely to
undertake such compliance activities. Generally,
the term penny stock refers to a stock with a
market price of less than $5.00 per share. A
market in our stock may never develop due to these
restrictions.

14. The selling shareholders may have liability
because of their status as underwriters.

Under the Securities Act of 1933, the selling
security holders will be considered to be
underwriters of the offering. The selling security
holders may have civil liability under Section 11
and 12 of the Securities Act for any omissions or
misstatements in the registration statement because
of their status as underwriters.

15. Our auditors have expressed a going concern
issue that notes our need for capital and/or
revenues to survive as a business. You may lose
your entire investment.

Our auditors have expressed reservations concerning
our ability to continue as a going concern. We
have not yet received any significant revenues from
the sale of our licensed products and will continue
to incur losses. You may lose your entire
investment.

- -------------------------------------------------
Determination of Offering Price
- -------------------------------------------------

Our directors arbitrarily determined the offering
price and the total offering amount without
considering any book or market value. The
directors determined the amount of proceeds and
pricing based on the amount of funds necessary to
continue and expand our operations and the possible
dilution to existing and new shareholders.

- -----------------------------------------------
Selling Security Holders
- -----------------------------------------------

Pure Steel shall register pursuant to this
prospectus 488,500 common shares currently
outstanding for the account of the following
individuals or entities and 400,000 common shares
which may be issued upon exercise of currently
outstanding warrants. The percentage owned prior
to and after the offering reflects all of the then
outstanding common shares. The amount and
percentage owned after the offering assumes the
sale of all of the common shares being registered
on behalf of the selling security holders.

Amount Total Number % Owned Number of % Owned
Being Owned Prior to Shares Owned After
Name Registered Currently offering After offering offering
- ------- ---------- ----------- ---------- ---------------- -----------
<s> <c> <c> <c> <c> <c>
Don Allio 20,250 20,250 .35% 0 0%
Jim Cornett 2,400 2,400 .04% 0 0%
Correct Alliance, Inc. 117,000 117,000 2.02% 0 0%
Freel Performance, Inc. 30,000 30,000 .52% 0 0%
Bruce Garfunkel 20,000 20,000 .35% 0 0%
Glenford F. Griffen(1) 8,100 8,100 .14% 0 0%
Mary Hidalgo 50,000 50,000 .86% 0 0%

Brian Mazzacua 10,000 10,000 .17% 0 0%
Peter Mignion 80,750 80,750 1.40% 0 0%
Post Co., Inc. 75,000 75,000 1.30% 0 0%
David Schoelles 50,000 50,000 .86% 0 0%
Douglas Twineham 25,000 25,000 .43% 0 0%

(1) Glenford F. Griffen is an officer and director
of Pure Steel.

Pure Steel shall register pursuant to this
prospectus 400,000 common shares which may be
issued upon exercise of currently outstanding
warrants. The percentage owned prior to and after
the offering reflects all of the then outstanding
warrants. The amount and percentage owned after
the offering assumes the sale of all of the common
shares issued upon exercise of the warrants.

Amount of Total Number of % Owned Number of % Owned
Common Shares Warrants Owned Prior to Warrants Owned After
Name Being Registered Currently offering After offering offering
- ------- ---------------- ------------- ---------- --------------- --------
<s> <c> <c> <c> <c> <c>
David Schoelles 100,000 100,000 21.05% 0 0%
Bruce Garfunkel 100,000 100,000 21.05% 0 0%
Gerald Dente 100,000 100,000 21.05% 0 0%
Tsasnhos Image
Productions, LLC 100,000 100,000 21.05% 0 0%

- ----------------------------------------------
Terms of the Offering
- ----------------------------------------------

Plan of Distribution. Pure Steel is offering up to
2,000,000 common shares at the purchase price of
$1.00 per common share. We are offering the common
shares on a direct participation basis by our
officers and directors, and possibly selected
broker-dealers. Glenford Griffin, Oscar Coca and
Daniel Elzy, our officers and directors, will sell
the offering on our behalf. They will be relying
on the safe harbor in Rule 3a4-1 of the Securities
Exchange Act of 1934 to sell Pure Steel's
securities. None of these individuals are subject
to a statutory disqualification, are not an
associated person of a broker or dealer and meet
all of the following conditions of Rule 3a4-
1(a)(4)(ii).

- they each primarily perform or intend
primarily to perform at the end of the offering,
substantial duties for or on behalf of Pure Steel
otherwise than in connection with transactions in
securities; and

- they were not a broker or dealer, or an
associated person of a broker or dealer, within the
preceding twelve months; and

- They have not participated in selling an
offering of securities for any issuer more than
once in the last 12 months.

No sales commission will be paid for common shares
sold by Pure Steel. Selected broker-dealers shall
receive a sales commission of up to 10% for any
common shares sold by them.

Pure Steel reserves the right to withdraw, cancel
or reject an offer in whole or in part. The
common shares offered hereby will not be sold to
insiders, control persons, or affiliates of our
company.

We have made no plans, proposals, arrangements or
understandings with any potential sales agent with
respect to participating in the distribution of our
securities. When, in the future, assuming such
participation develops, the registration statement
will be amended to identify such persons.

Selling Security Offering. We are not selling any
common shares on behalf of selling security holders
and have no control or affect on the common shares
being registered on behalf of these selling security
holders.

The selling security holders will sell at a price of
$1.00 per common share until our common shares are
quoted on the OTC Bulletin Board and thereafter at
prevailing market prices or privately negotiated
prices.

Our common shares are not traded currently on the
over-the-counter market. The selling security
holders may sell their common shares in one or more
transactions. These may include "block"
transactions in the over-the-counter market, if one
develops, in negotiated transactions or in a
combination of such methods of sales.

The selling security holders may effect such
transactions by selling the common shares directly to
purchasers, or may sell to or through agents, dealers

or underwriters designated from time to time, and
such agents, dealers or underwriters may receive
compensation in the form of discounts, concessions or
commissions from the selling security holders and/or
the purchaser(s) of the common shares for whom they
may act as agent or to whom they may sell as
principals, or both.

The selling security holders and any agents, dealers
or underwriters that act in connection with the sale
of the common shares might be deemed to be
underwriters within the meaning of Section 2(11) of
the Securities Act, and any discount or commission
received by them and any profit on the resale of the
common shares as principal might be deemed to be
underwriting discounts or commissions under the
Securities Act.

We are not aware of any current or future plans,
proposals, arrangements or understandings by any
selling security holders to distribute their
registered shares of common stock of Pure Steel to
their respective outstanding shareholders or
partners.

We are not aware of any plans, arrangements or
understandings by any selling security holders to
sell their registered shares of common stock to any
particular individual(s) or to use such registered
shares to satisfy contractual obligations.

We will receive no portion of the proceeds from the
sale of the common shares by the selling security
holders and will bear all of the costs relating to
the registration of this offering (other than any
fees and expenses of counsel for the selling security
holders). Any commissions, discounts or other fees
payable to a broker, dealer, underwriter, agent or
market maker in connection with the sale of any of
the common shares will be borne by the selling
security holders.

Offering Period. Our offering will terminate on
June 30, 2003.

Subscription Procedure. The full amount of each
subscription will be required to be paid with a
check payable to Pure Steel in the amount of the
subscription. Purchasers or soliciting
broker/dealers should remit payment directly to
Pure Steel before 12:00 noon, on the following

business day, together with a list showing the
names and addresses of the person subscribing for
the offered common shares or copies of subscriber's
confirmations.

No Escrow Account. There is no minimum offering
amount and no escrow account. As a result, we will
deposit any and all offering proceeds directly into
our operating account.

We do not intend to use any means of distributing
or delivering the prospectus other than by hand or
the mails. We do not intend to use any forms of
prospectus other than the printed prospectus.

- -------------------------------------------------
Source and Use of Proceeds
- -------------------------------------------------

Assuming successful completion of the offering, we
shall receive net proceeds of $1,939,037 after
payment of offering expenses of $60,963. A
commission amount would only be payable if a
broker-dealer is engaged. There is no minimum
amount we will receive and we may receive none or a
small amount of proceeds.

If we raise significantly less than the maximum
amount, we will be able to pay operational expenses
but will have less working capital to expand
operations. We shall utilize the net proceeds
from the sale of our common shares as described
below. We intend to use the proceeds over a six-
month period.

$2,000,000 $1,500,000 $1,000,000 $500,000
Raised Raised Raised Raised
---------- ---------- ---------- ---------
<s> <c> <c> <c> <c>
Gross Proceeds $2,000,000 1,500,000 $1,000,000 $500,000
less offering expenses 60,963 60,963 60,963 60,963
---------- ---------- ---------- --------
Net Proceeds $1,939,037 1,439,037 939,037 439,037
---------- ---------- ---------- --------
Clothing manufacturing 90,000 67,500 45,000 22,500
Tooling 100,000 75,000 50,000 25,000
Labor 100,000 75,000 50,000 25,000
Parts 1,002,620 750,000 501,301 200,000
Working capital 646,417 471,537 292,736 166,537
---------- ---------- --------- --------
Net Proceeds used $1,939,037 $1,439,037 $ 939,037 $439,037
========== ========== ========== ========

In the event that the minimal amount is not
received, we will have to scale back operations and
may pursue other equity or debt offerings, not yet
determined.

- ----------------------------------------------
Dilution
- ----------------------------------------------

Dilution. Common shares outstanding will be a
total of 7,788,500, 7,288,500, 6,788,500 or
6,288,500 if $2,000,000, $1,500,000, $1,000,000 or
$500,000 is raised. The net tangible book value as
of December 31, 2001 is $(461,657) and the net
tangible book value per share as of December 31,
2001 is $(0.08) based on 5,788,500 common shares
outstanding.

The net tangible book value is the aggregate amount
of our tangible assets, less our total liabilities.
The net tangible book value per share represents
the total net tangible book value divided by the
number of common shares outstanding.

The following table illustrates the per share
dilution as of the date of this prospectus, which
investors may experience if we reach the various
levels listed below.

$2,000,000 $1,500,000 $1,000,000 $500,000
Raised Raised Raised Raised
---------- ---------- ---------- --------
<s> <c> <c> <c>
Offering price $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----

Net tangible book value per
share before offering (0.08) (0.08) (0.08) (0.08)
Increase per share
attributable to investors 0.27 0.21 0.15 0.08
----- ----- ----- -----
Pro Forma net tangible
book value per common
share after offering 0.19 0.13 0.07 0.00
----- ----- ----- -----
Dilution to investors
per common share $0.81 $0.87 $0.93 $1.00
----- ----- ----- -----
Dilution as a percent of
the offering price
Per common share 81% 87% 93% 100%

Further Dilution. We may issue additional
restricted common shares pursuant to private
business transactions. We do not currently have
any plans, arrangements or commitments regarding
any private business transactions. Any sales
under Rule 144 after the applicable holding period
may have a depressive effect upon the market price
of our common shares in this offering.

- --------------------------------------------
Pure Steel
- --------------------------------------------

Pure Steel was originally formed on March 10, 1995
as an Arizona corporation. Pure Steel filed
amended articles of incorporation on December 27,
1999 which increased the authorized common shares
to 25,000,000 and created 300,000 authorized Class
A preferred shares.

Properties. Our executive offices consist of
7,000 square feet and are located 4010 Grand
Avenue, Suite 16, Phoenix, Arizona 85019 -
telephone - 602-841-2000. The lease is from
January 1, 2001 to January 1, 2002 for the monthly
lease amount of $3,498.

Employees. Pure Steel currently has ten full time
employees and no part time employees. Pure Steel
does not foresee a change in the number of
employees in the next 12 months.

Business Activities. We develop and market custom
motorcycles. Pure Steel has designed new models
for specific market segments. Many of these
designs are limited edition and with limited
production runs.

Product License Agreement. On May 31, 2000,
Pure Steel entered into a product license
agreement with General Media Communications,
Inc. for an exclusive license of the Penthouse
marks in the production manufacture and
distribution of 90 limited edition "Penthouse
Magazine 30th Anniversary Motorcycles"
manufactured by Pure Steel and accessory items
that include leather jackets, gloves, goggles,
helmets and bandanas. As of March 31, 2001,
one motorcycle has been sold under this
production license agreement and we have sold no
accessory items.

Pure Steel paid a $150,000 license fee in 2000.
General Media Communications will earn a royalty of
5 percent, to be paid by the Company, of the gross
wholesale and/or retail selling price, based on an
average projected sales price of at least $30,000
per motorcycle.

The term of the agreement commenced on May 31, 2000
and expires 26 months after commencement.

Advertising and Promotion Agreement. On June 13,
2000, Pure Steel entered into an advertising and
promotion agreement with AZPB Limited Partnership,
a Delaware limited partnership, dba
Arizona Diamondbacks and AZPB REM Limited
Partnership, a Delaware limited partnership to
promote and advertise our motorcycle manufacturing
business at the ballpark and in connection with the
Arizona Diamondbacks professional baseball team.

Pure Steel may use the Diamondbacks name and logo
for marketing and promotional uses, subject to
prior review of all materials and written approval
by the Arizona Diamondbacks. Pure Steel will
receive one full page, four-color advertisement in
all issues of the Arizona Diamondbacks
Magazine/Program. Pure Steel will receive
exposure in conjunction with the mascot of the
Arizona Diamondbacks riding a Pure Steel motorcycle
during the games.

During the 2001, 2002 and 2003 seasons, the
motorcycle will be showcased at a minimum of 30
games during the regular season of play, as
determined by the Arizona Diamondbacks.
Additionally, the motorcycle will be displayed on
the main plaza of the ballpark at a minimum of 25
regular season games.

The term of the agreement commenced July 1, 2000
and terminates December 31, 2003. Pure Steel paid
$7,500 in the 2000 season and shall pay an annual
fee of:
2001 season $15,000
2002 season $20,000
2003 season $25,000

Pure Steel will provide one customized Arizona
Diamondbacks Pure Steel motorcycle for each
baseball season covered by the agreement or a
total of four motorcycles. As of March 31,
2001, Pure Steel has expensed $21,192
representing the cost of the motorcycle
contributed for the 2000 baseball season.

Product and Service Description. Pure Steel
entered the fiscal year 2001 with five models to
market. Each model is produced to meet exact
specifications, despite low volume. These models
are described as follows:

Scimitar

This bike offers what management believes is sleek
styling and comfortable, performance handling. The
rear turn signals are hidden in the taillight
assembly, leaving the fender struts clean. A 107"
S&S brand engine with Pure Steel's heads provide
the horsepower. Dealer Cost: $30,350. Retail
Cost: $34,350.

Dagger

The Dagger is styled with a contoured rear fender,
side mounted license plate and taillight. All
fenders, tanks and dashes are made of high quality
steel. Dealer Cost: $30,100. Retail Cost: $ 34,100.

Saber

The Saber is Pure Steel's cruiser. A low powerful
stance and our power train are cornerstones for
this bike. We use 18" diamond cut 40 or 80 spoke
wheels, matched with Avon brand tires. Dealer
Cost: $30,350. Retail Cost: $34,350.

Classic Motorcycle

The Pure Steel Classic is the most popular model.
The Classic Motorcycle features tightly contoured
fenders, trenched in taillights and floating brake
rotors highlight a few of this motorcycle's design
features. Additionally, this nostalgic machine
features a 7" tri-bar headlight, fat handlebars and
lace wheels. Dealer Cost: $32,950. Retail Cost:
$35,950.

Stiletto

The Stiletto uses a rigid frame. The struts are
hidden in the fender and the frame made by Daytec
is Pure Steel exclusive. Dealer Cost: $27,100.
Retail Cost: $30,100.

In conjunction with our marketing agreements with
the Arizona Diamondbacks baseball team and General
Media, we introduced two more special edition
models.

Penthouse Magazine Signature 30-Year Anniversary
Special

In conjunction with the General Media / Pure Steel
advertising campaign, we designed the Series 2
representing the Eighties era model. This bike
utilizes a stretched frame and 35-degree front
forks. Only 30 of these will be made. Pure Steel
has two more models developed for this campaign.
The Series 1 Representing the Seventies era is a
nostalgic chopper and the Series 3 representing the
Nineties era utilizes a one-piece tank, an inverted
front end and a twin cam rubber mounted engine.
Penthouse magazine featured the Series 2 on its
30th anniversary cover dated September 2000.
Dealer Cost: $39,850. Retail Cost: $46,300

The Arizona Diamondbacks Model

A special edition designed especially for the
Arizona Diamondbacks baseball team. We have
established an aggressive goal to sell 100 of these
limited edition bikes.

General Product Specifications. Pure Steel offers
a 48-month unlimited mileage warranty on all
models. Prior to delivery, each bike is run
through a break-in process, then road tested and
followed up with a comprehensive inspection for
durability and reliability for our customers.

The part content for our line of motorcycles is
99.5% American made. All of the Pure Steel
motorcycles use frames that are powder coated to
match custom paint manufactured by Daytec
Manufacturing, Inc. All transmissions feature
close ratio gears with cases made by Delkron, Inc.

Pure Steel maintains insurance for product
liability.

Manufacturing and Assembly. Pure Steel motorcycles
are assembled by hand by technicians who take pride
in the work and are experienced in the assembly
process craft these machines. The production of
Pure Steel motorcycles is primarily an assembly
process made more efficient with the use of sub
assemblers. The Phoenix area is home to a number
of motorcycle assemblers. Pure Steel hires and
trains mechanics who come from the industry and are
experienced in such assembly.

Each model possesses a complete component list that
is used as a checklist to acquire all the parts and
components necessary to build a Pure Steel bike.

The process requires coordination with our sales
and order book in order to purchase and acquire the
proper parts and accessories. After the parts are
received and inventoried, they are picked by parts
personnel and placed in order in the pre-assembly
area. Simultaneously, the engine and all of its
components are assembled in the engine machine
shop. Fenders, gas tanks and frames are sent out
to be painted. The entire build process takes
approximately one week. An additional two days are
required for break in and quality control. If any
problems arise, they are addressed with the
technician.

Our manufacturing expenses consist of amounts paid
to third parties for services such as engine
polishing and component painting. A significant
cost of our manufacturing expense consists of
materials and components. The cost of manufacturing
each of the bikes under our current capital
structure is approximately $22,200. We intend to
reduce this cost through volume discounts from our
suppliers.

One of the primary components of our motorcycles is
the 107" S&S brand engines. S&S Cycle, Inc. is an
American OEM manufacturer of V-twin engines that
has been in business for decades. We prepare the
unassembled engines and then we send them to a
third party where they are completely polished. In
our engine and machine shop, the cylinders are
finished by trained technicians to our rigid
specifications.

During the second quarter of fiscal year 2002, a
verbal agreement was entered into with Las Vegas
Harley-Davidson whereby LVHD would buy the parts
necessary for Pure Steel to build ten custom
motorcycles. Total cost of parts necessary to
build these motorcycles are estimated to be
approximately $20,000 to $22,000 per motorcycle.
Pure Steel is to repay LVHD at a rate of $22,000
per motorcycle as each motorcycle is built and
sold. Repayments to LVHD began in June 2001.

Distribution. We distribute our motorcycles
through a nationwide network of nine established
unaffiliated dealers who offer other brands of
motorcycles that do not directly compete with the
high end customized motorcycle market. Our dealers
operate in the states of Arizona, Florida, Georgia,
Indiana, Michigan, Nebraska, Nevada, New York and

Ohio. A majority of our dealers maintain a wait
list and we have had an increase in backorders for
our custom motorcycles.

Percentage of Sales By Customer-Greater than 10%

Year Ended Year Ended Nine Months Nine Months
3-31-01 3-31-00 12-31-01 12-31-00
<s> <c> <c> <c> <c>
Hacienda Harley Davidson 29.3% 50.7% 40.6% 29.0%
Las Vegas Harley Davidson 26.0% 10.7% 0.0% 24.3%
Werner Cycles 10.6% 0.0% 10.0% 12.0%
Easy Rider of Denver 0.0% 0.0% 0.0% 12.1%
Cycle Connection 11.1% 13.9% 0.0% 0.0%

Sourcing. We currently purchase several key
components including frames and engines from single
or limited sources. We purchase each of these
components on a purchase order basis and have no
long-term contracts for these components. Although
we believe there are alternate sources for each of
these components, we have elected not to sacrifice
on what we believe to be quality. We buy only
what we have found to be the highest quality parts.
Pure Steel has relationships with nearly 30
vendors, supplying a diverse and extensive list of
the necessary components used in building a Pure
Steel motorcycle.

S&S Cycles is our primary supplier for our engines.

Revenue recognition. We recognize revenue when
the product is shipped, provided a purchase order
or payment has been received.

Competition. Competition in the custom motorcycle
market is intense. We have five significant
competitors, Titan Motorcycles, Big Dog Cycles,
Borgett Custom Cycles, Ultra Motorcycles and
American Eagle Custom Cycles. Competition is based
by the design, paint schemes, workmanship, price of
the motorcycles, quality and availability.

Our motorcycles are one of the most expensive
manufactured motorcycles on the market, however, in
our six years of business, we have yet to supply
the demand.

Market Segmentation. We compete in the
heavyweight segment of the motorcycle market with
units that have an engine displacement of 751cc and
larger. This heavyweight market segment can be
segregated into four basic categories:

- standard,
- performance,
- touring and
- custom bikes.

The marketing for our motorcycles is directed at
buyers in the market for custom bikes who are
looking for the high-end components not associated
with mass production bikes, individuality and
style. Based on our past sales, the most ardent
Harley-Davidson riders are the most likely Pure
Steel buyers.

Industry Analysis. Motorcycles are recreation
vehicles and are categorized in the leisure and toy
industry. This industry segment is comprised of a
diverse amalgam of general industry participants.

- Motorcycle manufacturers,
- toy manufacturers,
- cruise lines,
- resorts and
- amusement parks

are all examples of participants in this diverse
industry competing for consumer leisure and
recreation dollars. Disposable income is a major
driver of economic activity in this sector. As the
economy weakens, spending in this industry may
slow.

The industry is further broken down by recreation
vehicle companies including Fleetwood Enterprises,
a mobile home manufacturer and Artic Cat, a
manufacturer of snowmobiles and personal
watercraft. Specifically, Motorcycle Industry
Magazine indicates that the motorcycle industry
segment structure is made up of a number of low
cost foreign manufacturers primarily sourced from
Japan and European manufacturers from Italy and
Germany. The Japanese bikes are priced much lower
than our motorcycles and maintain a large model
lineup ranging from small 50cc bikes all the way up
to the 1500cc Honda Goldwing.

Participants in the motorcycle manufacturing
industry include entrants from Japan. Honda,
Suzuki, Kawasaki and Yamaha are the largest and
offer lower cost machines. These companies also

sell a variety of other recreation vehicles ranging
from watercraft, mini-motorcycles, dirt bikes, 4-
wheelers and a host of street bikes and combination
on/off road bikes. Ducati, BMW and a number of
smaller low volume European manufacturers also
provide bikes to the US market.

Strategy and Implementation Summary. Pure Steel
plans to use the proceeds of this offering to

- manufacture clothing,
- tooling,
- parts and labor and
- working capital.

We are building our brand by targeting distribution
through high-end Harley Davidson dealers. This is
strategic for a number of reasons:

First, we believe these dealers already possess
a customer base of buyers with the financial
ability to purchase our product due to the high
cost nature of Harley Davidson motorcycles.

Second, we are positioned as a move up product
from a Harley Davidson motorcycle. Pure Steel is
able to complete the bike line up on a dealer's
showroom floor.

Third, based on in-house surveys, we targeted
dealers that are the most financially successful.
Therefore, we believe they are a lower credit risk.

Distribution is rather simple. Based on our in-
house surveys, we have more dealers interested in
putting Pure Steel motorcycles on their showroom
floor than we have bikes to fill them.

- Increase production to meet demand.

Increased production is directly related to our
capital position. Our challenge is to satisfy the
demand for Pure Steel motorcycles.

- Leverage our brand through an apparel line.

In conjunction with our contract to build the co-
branded Penthouse magazine limited series
motorcycles, General Media's Penthouse Magazine, in
cooperation with Bob Guccione, have verbally agreed
to co-brand Pure Steel apparel through apparel
market makers and design representatives in the
business. General Media Communications will earn a

royalty of 5%, to be paid by the Company, of the
gross wholesale and/or retail selling price of all
apparel sold.

The clothes would be placed in major department
stores around the country. Additionally, sales
and distribution would be made available on the
Penthouse website at Penthouse.com.

Seasonality. Pure Steel, in general, has not
experienced significant seasonal fluctuations in
motorcycle production. This has been primarily
the result of a strong demand for our motorcycles
and related products, as well as the availability
of floor plan financing arrangements for its North
American independent dealers which allows them to
build their inventory levels.

- -------------------------------------------------
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- -------------------------------------------------

Organization. Pure Steel was incorporated under
the laws of the State of Arizona in 1995. Our
principle business consists of the manufacture and
sale of custom motorcycles. The Company also
performs warranty repair work on motorcycles that
it sells through its dealers. Pure Steel designs,
develops and manufactures hand crafted custom
motorcycles for the high-end premium motorcycle
market. We are located in Phoenix, Arizona and
sales are made to various retailers located
throughout the United States. Sales and related
cost of sales are reported upon product shipment
provided that a purchase order or payment has been
received. Pure Steel does not directly sell its
motorcycles to the consumers.

Trends and Uncertainties

Demand for Pure Steel's products and services will
be dependent on, among other things, general
economic conditions that are cyclical in nature
and subject to volatility not in Pure Steel's
control. Inasmuch as a major portion of Pure
Steel's activities is the sale and marketing of
custom motorcycles and related products, Pure
Steel's business operations may be adversely
affected by its competitors and prolonged
recessionary periods. At this time, the Company
is experiencing a shortage of working capital to
inventory the parts necessary for continuous

production. Existing inventoried parts consist
primarily of warranty repair parts and
miscellaneous components used in ongoing
production. Many of Pure Steel's suppliers require
upfront payments when part orders are placed. As
orders are taken, deposits are required from the
customers so that parts to complete an entire unit
can be ordered from its suppliers. This shortage
of working capital limits our ability to inventory
finished Pure Steel Motorcycles and our ability to
be responsive to customer orders. Until
sufficient working capital funding is obtained the
Company intends to continue this mode of
operation.

Our marketing strategy is tailored to attract a
sophisticated high-end customer seeking a one of
kind custom motorcycle. Over the past 18 months,
the domestic economy has shown signs of a
recession that may lower discretionary income and
may result in lower future demand of high-end
custom motorcycles and related products and
services. The retail prices for our motorcycles
are in excess of the retail prices of conventional
motorcycles and other competitor brands of heavy
weight motorcycles. When coupled with a
recessionary economic trend this may deter sales
and shift demand for our products and services to
our competitors who may offer products that are
more economically attractive.

Results of Operations

Nine Month Periods Ended December 31, 2001 and
2000

For the nine month period ended December 31, 2001,
Pure Steel had sales of $662,423 as compared to
$1,045,679 for the same period of the previous
year. The decrease in sales is due to an overall
lower volume of units sold. Pure Steel sold 19
units during the nine month period ended December
31, 2001 compared to 32 units sold during the same
period of the previous year. The decrease in
units sold is due to a shortage of working capital
needed to fund the purchase of parts and to fund
manufacturing overhead. Customer deposits are
required to provide the funding necessary to
manufacture a majority of existing orders. This
arrangement delays the delivery to our customers
since finished motorcycles are not readily
available for immediate delivery.

Cost of goods sold was $608,121 for the nine month
period ended December 31, 2001, or a gross margin
of 8.2%, as compared to cost of goods sold of
$813,029 for the same period of the previous year,
or a gross margin of 22.2%. The significant
decrease in gross margin was due to a higher per
unit allocation of overhead to cost of
manufacturing due to a lower number of units
produced. During the nine month period ended
December 31, 2001 there were 19 units manufactured
compared to 32 units during the same period of the
previous year. Certain cost of manufacturing are
fixed thus as more units are manufactured these
fixed costs on a per unit basis are reduced.

Selling, general and administrative expenses were
$311,552 for the nine month period ended December
31, 2001 compared to $612,816 for the same period
of the previous year. The decrease in SG&A was
due a reduction in advertising expenses of
approximately $118,000, lower consulting expenses
of approximately $60,000 and lower travel and
travel related expenses of approximately $26,000.
During the nine months ended December 31, 2000 the
Company increased its marketing activities to
create brand recognition and awareness which
resulted in higher overall marketing costs. As
cash resources became limited during the nine
months ended December 31, 2001 marketing
activities were curtailed. The remaining net
decrease in SG&A of approximately $97,000 during
the nine month period ended December 31, 2001
compared to the same period of the previous year
is attributable to a Company-wide focus on cost
reduction.

Other Income (Expense) for the nine month period
ended December 31, 2001 was a net expense of
$21,802 compared to a net expense of $7,127 for
the same period of the previous year. The
significant increase in other expense was due to
an increase in interest expense of $18,642
attributable to higher overall weighted average
debt and interest rate for the nine month period
ended December 31, 2001 compared to the same
period of the previous year. Interest expense of
$29,906 for the nine month period ended December
31, 2001 was offset by a gain of $6,179 resulting
from the disposal of equipment. There was no such
gain recorded during the same period of the
previous year.

The Years Ended March 31, 2001 and 2000

During the year ended March 31, 2001, Pure Steel
had sales of $1,476,927 as compared to $1,464,592
for the same period of the previous year. The
slight increase in revenue during the year ended
March 31, 2001 is due to an overall increase in
the average sales price of each unit sold. The
decrease in sales is due to a reduction in the
volume of units sold of which 45 units were sold
during the year ended March 31, 2001 compared to
46 units sold during the same period of the
previous year.

Cost of Goods Sold was $1,133,212 for the year
ended March 31, 2001, or a gross margin of 23.3%
as compared to cost of goods sold of $1,056,564
for the same period of the previous year, or a
gross margin of 27.9%. The decrease in gross
margin was due to a higher per unit allocation of
overhead to cost of manufacturing due to a lower
number of units produced. During the year ended
March 31, 2001 there were 45 units manufactured
compared to 46 units during the same period of the
previous year. Certain cost of manufacturing are
fixed thus as more units are manufactured these
fixed costs on a per unit basis are reduced.

SG&A was $770,087 for the year ended March 31,
2001 compared to $572,963 for the same period of
the previous year. The $197,000 increase in SG&A
for the year ended March 31, 2001 was due to a
significant increase in advertising expense of
approximately $121,000, an increase in consulting
expense of $60,000, an increase in amortization of
licensing fees of approximately $66,000 and higher
costs associated with insurance, printing and
travel which increased by $103,000, offset by a
decrease of payroll expenses of approximately
$123,000. The decrease in payroll expenses for
the year ended March 31, 2001 compared to the year
ended March 31, 2000 results from Pure Steel
having issued 125,000 shares of common stock for
compensation valued at $125,000 during the year
ended March 31, 2000 which did not recur during
the year ended March 31, 2001. During the year
ended March 31, 2000 Pure Steel had bad debt
expense of approximately $30,000 relating to one
unit sold to a single customer with no bad debt
expense recorded during the year ended March 31,
2001.

Other Income (Expense) for the year ended March
31, 2001 was a net expense of $22,990 compared to
a net expense of $8,669 for the same period of the

previous year. The increase was due to an
increase in interest expense of $19,837
attributable to higher overall weighted average
debt for the year ended March 31, 2001 compared to
the same period of the previous year. Interest
expense for the year ended March 31, 2001 was
offset by $5,516 of interest income earned on
overnight invested funds on a $75,000 certificate
of deposit. There was no such interest income
earned during the year ended March 31, 2000.

Liquidity and Capital Resources

As of December 31, 2001 Pure Steel had negative
working capital of $(649,153) compared to negative
working capital of $(455,780) at March 31, 2001.
The decrease in working capital is due to
additional funding obtained to maintain operations
and cover general corporate overhead.

Cash flows from operations for the nine month
period ended December 31, 2001 was $160,784
compared to cash flows used in operations of
$(51,501) for the same period of the previous
year. This increase in cash flows from operations
was due to a decrease in overall net working
capital assets and liabilities of $362,164 offset
by a lower net loss for the nine month period
ended December 31, 2001 compared to the same
period of the previous year.

The decrease in net working capital assets and
liabilities for the nine month period ended
December 31, 2001 compared to the same period of
the previous year is due to an increase in
inventory of $13,201 offset by a decrease in
accounts receivable of $60,617 resulting from a
lower overall sales volume. Due to a lack of cash
resources, Pure Steel relied on advances from a
customer and on vendors to supply parts to fill
back orders resulting in an increase in accounts
payable and accrued liabilities of $108,570.
Customer deposits during the nine month period
ended December 31, 2001 increased by $200,662
compared to $132,600 for the same period of the
previous year resulting from a higher volume of
sales orders in process for which customer
deposits were required.

Cash flow provided by investing activities for the
nine month period ended December 31, 2001 was
$31,120 as a result of proceeds generated from the

disposal of equipment compared to cash flow used
by investing activities of $124,536 for the nine
month period ended December 31, 2000.

The majority of the cash used in investing
activities during the nine month period ended
December 31, 2000 was due to $100,000 of
expenditures required under the product licensing
agreement with Penthouse. The remaining $24,536
of cash flow used in investing activities for the
nine month period ended December 31, 2000 was due
to the purchase of certain operating equipment.

Cash flow used in financing activities for the
nine month period ended December 31, 2001 was
$(191,904) compared to cash flow provided by
financing activities of $154,232 for the nine
month period ended December 31, 2000. The
increase in cash flows used in financing
activities during the nine month period ended
December 31, 2001 was due to Pure Steel receiving
proceeds from borrowings from its stockholders of
$45,622 and proceeds from borrowings from a
related party of $185,000.

Total borrowings were offset by Pure Steel
repaying $415,262 previously borrowed of which
$81,734 was repaid to its stockholders, $45,125
was repaid under its note payable-line of credit,
$81,879 was repaid under long-term debt, $8,674
was repaid on a loan owed to a related party and
$197,850 was repaid under the Company's floor plan
financing arrangement. Of the amount repaid under
the floor plan arrangement, $81,600 was required
as a result of a dealer defaulting on its floor
plan obligation. The majority of payments made on
long term debt were comprised of $40,000 paid on a
10% note to an investor and $28,196 paid on a 10%
note to Navistar Financial Corporation.

Cash flows from operations for the year ended
March 31, 2001 was $12,916 compared to cash flows
used in operations of $(158,525) for the previous
year. This increase in cash flows from operations
is due primarily to a significant decrease in
accounts receivable of $106,700 resulting from
lower sales and improved collections. Cash flows
from operations were further increased by a
reduction of inventory of $90,343 due to lower
levels of available cash to purchase inventory.
As sales occurred, parts were not replaced unless
sales orders were accompanied by a customer
deposit.

Customer deposits contributed $27,000 to cash
flows from operations during the year ended March
31, 2001 compared to a use of cash of $40,000
during the same period a year ago. Lower levels
of available funds increased accounts payable by
$106,560 which was necessary to sustain ongoing
operations. These increases in cash flows from
operations were offset by a higher net loss which
increased to $(449,362) compared to a net loss of
$(173,604) for the previous year.

Cash flow used by investing activities for the
year ended March 31, 2001 was $157,248 compared to
cash flow used by investing activities of $145,798
for the previous year. Purchases of property and
equipment for the year ended March 31, 2001 were
$57,248 compared to $20,798 for the previous year.
The increase in the purchase of property and
equipment was due to the purchase of a customized
trailer and awning during the year ended March 31,
2001 for approximately $56,000 compared to the
purchase of truck accessories and certain special
purpose equipment for approximately $21,000 during
the year ended March 31, 2000.

During the year ended March 31, 2000 Pure Steel
was required to purchase a $75,000 certificate of
deposit as security for a $75,000 letter of credit
required by the floor plan financing agreement
entered into with a financial institution. During
the year ended March 31, 2000, Pure Steel entered
into a $150,000 product licensing agreement of
which $100,000 was expended during the year ended
March 31, 2001 and $50,000 was expended during the
year ended March 31, 2000.

Cash flow provided by financing activities for the
year ended March 31, 2001 was $122,527 compared to
cash flow provided by financing activities of
$325,517 for the previous year. The majority of
the decrease in cash flow provided by financing
activities is attributable to cash proceeds
generated from the sale of Preferred Stock of
$100,000 and a capital contribution by a
stockholder of $52,101 during the year ended March
31, 2000 compared to cash proceeds generated from
the sale of Preferred Stock of $25,000 during the
year ended March 31, 2001.

During the year ended March 31, 2001, Pure Steel
received $307,669 of proceeds from borrowings
under various available sources of debt and or
financing arrangements which were used entirely to
fund the ongoing operations of the Company. Pure
Steel received proceeds from borrowings of $67,067

from its two founding stockholders, $7,875 under
its note payable line - of credit, $133,767 from
long-term debt and $98,960 of net proceeds under
its floor plan financing agreement. During the
year ended March 31, 2001 Pure Steel repaid
$224,347 of amounts previously borrowed, including
$123,978 to its founding stockholders, $7,314
under its note payable-line of credit and $93,055
under its long-term debt. The majority of
payments made on long-term debt were comprised of
$60,000 paid on a 10% note to an investor, $12,442
paid on a 12.5% note payable to Sunnen Products
Company and $12,110 paid on a 10% note to Navistar
Financial Corporation.

During the year ended March 31, 2000, Pure Steel
borrowed $50,000 under its note payable-line of
credit and $193,410 under its floor plan financing
agreement which were both used to fund the ongoing
operations of the Company. Pure Steel repaid
$69,994 of amounts previously borrowed, including
$41,206 to the founding stockholders of Pure
Steel, $5,436 under its note payable-line of
credit and $23,352 under its long-term debt. The
majority of payments made on long-term debt were
comprised of $10,987 paid on a 12.5% note to
Sunnen Products Company and $8,439 paid on a 10%
note to Navistar Financial Corporation.

Available Capital Resources

Historically working capital requirements have
been funded by cash flows from operations, private
placements of preferred stock, issuance of common
stock for goods and services, floor plan financing
for its dealers, borrowings from its major
shareholders, and borrowings and advances from
related parties and customers. There is no
assurance that working capital will continue to be
made available from these sources or under similar
terms in amounts adequate to ensure that Pure
Steel will be able to continue its operations.

In the event Pure Steel is unable to secure such
additional funding and/or under reasonable terms,
management would attempt to downsize the business
so as to enable Pure Steel to survive and grow at
a slower pace. If not successful Pure Steel may be
required to discontinue its operations.

Until such time as Pure Steel has successfully
secured additional funding arrangements, and is
cash flow positive from operations, it remains at
significant risk from its lack of capitalization.

It is highly likely that our stockholders will
incur additional dilution as a result of future
fundings involving issuance of common stock,
common stock warrants and class A preferred stock.

Note Payable - Line of Credit

Pure Steel had a $50,000 line of credit
established at Bank of America, N.A. with interest
payable monthly at the prime rate plus 2% (10.5%
and 10.75% as of March 31, 2001 and 2000,
respectively) with no maturity date. The maximum
amount borrowed on the line of credit in both
years was $50,000 and the minimum amount borrowed
was $42,125 and $44,564 for the years ended
March 31, 2001 and 2000, respectively. The line of
credit was secured by the personal guarantees of
the founding stockholders of Pure Steel. During
the nine month period ended December 31, 2001 this
line of credit was fully repaid from proceeds
received from an advance from a related party.
Subsequently, management of Pure Steel elected to
cancel this line of credit.

Floor Plan Financing

During November 1999, the Company executed a
floor plan financing agreement (floor plan) with
a reputable financial institution. Pure Steel
receives advances on inventory floored at its
participating dealers equal to the sales price
of each unit delivered to the dealer. The
Company guarantees the collection from the
dealers of amounts advanced by the financial
institution under the floor plan. Proceeds
generated from the sale of Pure Steel
motorcycles by participating dealers are paid
directly to the financial institution equal to
the advances received by the Company for each
unit delivered, plus any interest that may have
accrued. The Company records revenue and cost
of sales when the motorcycle is ultimately sold
by the participating dealer. As of December 31,
2001, the Company has three customers that use
the floor plan. The outstanding balances of
amounts advanced to the Company under the floor
plan were $194,220, $292,370 and $193,410 at
December 31, 2001, March 31, 2001 and 2000,
respectively.

There is no limit to the amounts available under
the floor plan financing agreement. As a
condition of the floor plan financing agreement,
Pure Steel was required to provide a $75,000

irrevocable letter of credit. The bank providing
the LOC required that it be secured by a $75,000
certificate of deposit. In the event of default
by a dealer, the financial institution has the
option of repossessing the motorcycles sold to the
dealers subject to the floor plan or requiring
repayment of the outstanding amount in full from
Pure Steel. Accordingly, should the latter occur,
Pure Steel would repossess the motorcycles from
the dealer that had been funded under the floor
plan and be obligated to repay any amounts owed to
the financial institution. Any motorcycle(s)
repossessed would be resold by Pure Steel in the
ordinary course of its business.

In June 2001, Pure Steel received notice from
the financial institution that a dealer had
defaulted on its floor plan financing agreement.
This dealer contributed approximately 6.4% of
Pure Steel's total sales during each of the
years ended March 31, 2001, and 2000. The
Company had no sales to this dealer during the
nine month period ended December 31, 2001 but
this dealer accounted for 12.1% of sales during
the nine month period ended December 31, 2000.
The financial institution requested immediate
reimbursements of $130,000 from Pure Steel for
the four motorcycles, which had been covered by
the floor plan. Pure Steel took possession of
the four motorcycles, and as of December 31,
2001, two have been resold resulting in revenues
of $62,400 being recorded The amount collected
was reimbursed to the finance company to reduce
the total amount owed.

In addition, Pure Steel repaid approximately
$19,200 from cash flows from operations and
delivered one of the repossessed motorcycles,
valued at approximately $30,300, to the
financial institution which they are currently
trying to resell. The financial institution
also took possession of the $75,000 certificate
of deposit which will be released to Pure Steel
when the remaining motorcycles secured by the
floor plan have been sold. At December 31,
2001, there remains $18,100 due to the financial
institution as a result of the default by this
dealer. Pure Steel does not believe that the
three remaining dealers covered by the floor
plan will default on their obligations to the
financial institution.

On January 2, 2002 the financial institution
terminated its floor plan financing agreement
thus providing no future financing to Pure
Steel's dealers or advances to Pure Steel.
Existing advances provided under the floor plan
will not be affected by this termination and
will allow for repayment terms under the
original agreement as if it remained in effect.
Total sales covered by a floor plan for the
years ended March 31, 2001 and 2000 were
$253,980 and $93,860, respectively. Total sales
covered by the floor plan for the nine month
periods ended December 31, 2001 and 2000 were
$33,850 and $285,245, respectively. Despite the
lack of this source of financing available to
our dealers at this time, sales to these dealers
will continue in the future. The Company is
currently evaluating other floor plan financing
alternatives that can be made available to its
dealers.

As of March 31, 2002, there remains $87,747
outstanding under the floor plan and the amount
due resulting from the dealer default has been
repaid in full to the financial institution.

Stockholder Advances

In order to satisfy the working capital needs of
Pure Steel, the founding stockholders, who are
also officers and management of Pure Steel, have
made periodic advances to Pure Steel. These
advances are on an as needed basis and are random
in amount and timing. No physical note agreements
exist and repayment terms are unspecified.
Accordingly, loans from stockholders have been
recorded as a current liability. As of March 31,
2001 and 2000 the total amounts owed to these
stockholders were $217,195 and $274,106,
respectively. At December 31, 2001 the total
amount owed to these stockholders was $181,083.
Although these founding shareholders have elected
to make advances to Pure Steel in order to fund a
majority of its working capital requirements, the
shareholders are not legally obligated to fund the
working capital needs of Pure Steel.

Related Party Advances

During the nine month period ended December 31,
2001, Pure Steel received an advance totaling
$185,000 from a related party with unspecified
repayment terms. Accordingly, this related party
advance has been recorded as a current liability.
The advance is unsecured and is being repaid by

Pure Steel in monthly installments of $1,735. As
of December 31, 2001, there is $176,326
outstanding.

Dealer Advances

Subsequent to March 31, 2001, Pure Steel entered
into an agreement with a customer to provide
advances, not to exceed $200,000, to fund the
production of ten motorcycles. These funds are
restricted to the purchase of parts only.
Advances are to be repaid at a rate of $22,000 per
motorcycle as the units are sold. These
motorcycles are not intended to be purchased by
this customer but are to be made available to the
general public through Pure Steel's several
distributors. As of December 31, 2001, $65,417 is
owed to this customer which is included as a
current liability within accounts payable and
accrued liabilities. Although this customer has
elected to make available these funds to provide
Pure Steel with working capital, this customer is
not obligated to fund the working capital needs of
Pure Steel.

Exercise of Warrants

As of December 31, 2001, Pure Steel has
outstanding 475,000 warrants to acquire an equal
number of shares of common stock of Pure Steel
having an exercise price of $1.50 to $2.50 per
warrant. These warrants expire three years from
any registration of Pure Steel's common stock with
the Securities and Exchange Commission. The
exercise of all warrants would result in total
additional proceeds to Pure Steel, before
expenses, of $1,087,500. There is no assurance
that these warrants will be exercised in the
future or that they will be exercised at the
prices currently established.

Plan of Operation

Management possesses the experience to expand
marketing and distribution of its products and it
is anticipated that marketing and sales
expenditures in the future will increase as Pure
Steel grows and expands its domestic market
demographics.

Capital expenditures in the near term are not
expected to be significant as Pure Steel appears
to have sufficient production and delivery
capacity to accommodate projected production
volumes.

Pure Steel is focused on maintaining a low cost
operating environment while increasing operating
revenues. It is expected that as production
increases, SG&A will also increase in absolute
dollars while decreasing as a percentage of
revenue as Pure Steel takes advantage of economies
of scale.

Dependence on a Few Large Customers

A majority of Pure Steel's sales are concentrated
with a few large customers. During the year ended
March 31, 2001, Pure Steel had sales as a
percentage of total revenues to four customers of
29.3%, 26.0%, 11.1% and 10.6%, respectively.
During the year ended March 31, 2000, Pure Steel
had sales as a percentage of total revenues to
three customers of 50.7%, 13.9% and 10.7%,
respectively. At December 31, 2001, Pure Steel
had sales as a percentage of total revenue to two
customers of 40.6% and 10.0%, respectively. At
March 31, 2001 one customer owed Pure Steel
$68,017 representing 96% of accounts receivable at
that date. A loss of one or all of these large
customers or a reduction of the volumes purchased
by these customers could have a materially adverse
effect on the future operations of Pure Steel.
There is no assurance that sales to other
customers could be made in volumes comparable to
those volumes sustained by one or both of these
customers in a time period sufficient to prevent a
curtailment of operations.

Going Concern

Pure Steel's auditors issued a going concern
opinion in connection with the audit of Pure
Steel's financial statements as of March 31, 2001
due to substantial doubt that Pure Steel can
continue as a going concern unless Pure Steel
obtains additional working capital to fund its
ongoing operations. The accompanying financial
statements have been prepared in conformity with
accounting principles generally accepted in the
United States of America, which contemplate
continuation of Pure Steel as a going concern.
However, for the year ended March 31, 2001, Pure
Steel had a net loss of $449,362, negative working
capital of $455,780, stockholders' deficit of

$153,754, and has experienced a shortage of
working capital which has greatly affected
operations.

In view of this, realization of a major portion of
the assets in the accompanying balance sheet is
dependent upon continued operations of Pure Steel,
which in turn is dependent upon the success of
Pure Steel's future operations. Management is
attempting to obtain new capital funding which
will strengthen its balance sheet and is revising
its operating requirements which will result in
increased operating cash flows. At this time, the
two founding shareholders have forgone
compensation and overhead expenses have been
reduced to minimize cash uses. Customer deposits
are most often required at the time an order is
taken. These deposits are used to supply parts as
needed and fund minimal overhead expenses.
Management believes that these actions presently
being taken will provide the opportunity for Pure
Steel to continue as a going concern.

Historically, working capital needs have been
funded by cash flows from operations, private
placements of preferred stock, issuance of
common stock for goods and services, floor plan
financing and borrowings from major shareholders
of Pure Steel and, from time to time, by
advances from related parties and customers.
There is no assurance that working capital will
continue to be made available from these sources
or under similar terms in amounts sufficient
enough to ensure that Pure Steel will be able to
continue its operations. Should Pure Steel not
be able to find new capital funding and/or under
reasonable terms, management would attempt to
downsize the business so as to enable the
Company to survive and grow at a slower pace or
may be required to discontinue its operations.

As referred to above, a majority of customer
orders are being taken where a substantial
portion of the sales value is received in the
form of a deposit prior to the motorcycle being
produced. This will not provide working capital
sufficient to produce a significant number of
motorcycles at any one time but does provide a
means of generating cashflow to meet a
substantial portion of its current operational
obligations as they come due; such as production
parts and office overhead, primarily payroll.

New Accounting Standards

In July 2001, the Financial Accounting Standards
Board issued SFAS 141, "Business Combinations",
and SFAS 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires that the purchase
method of accounting be used for all business
combinations initiated or completed after June 30,
2001. SFAS 141 also specifies criteria that
intangible assets acquired in a purchase method
business combination must meet to be recognized
and reported apart from goodwill. SFAS 142
requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized,
but instead tested for impairment at least
annually in accordance with the provisions of SFAS
142. SFAS 142 also requires that intangible
assets with definite useful lives be amortized
over their respective estimated useful lives to
their estimated residual values, and reviewed for
impairment in accordance with SFAS 121,
"Accounting for the Impairment of Long-Lived
Assets and for long-Lived Assets to be Disposed
Of".

The provisions of SFAS 141 are effective
immediately. The provisions of SFAS 142 are
effective for fiscal years beginning after
December 15, 2001. Earlier adoption is permitted
for entities with fiscal years beginning after
March 15, 2001 but not required.

SFAS 141 will require that upon adoption of SFAS
142, Pure Steel evaluate its existing intangible
assets and make any necessary reclassifications in
order to conform with the new criteria in SFAS
141. Upon adoption of SFAS 142, Pure Steel plans
to reassess the useful lives and residual values
of all recorded intangible assets, and make any
necessary amortization period adjustments by April
1, 2002. In addition, to the extent an intangible
asset is identified as having an indefinite useful
life, Pure Steel will be required to test the
intangible asset for impairment in accordance with
the provisions of SFAS 142 by June 30, 2002. Any
impairment loss will be measured as of the date of
adoption and recognized as the cumulative effect
of a change in accounting principle. Upon
adoption of SFAS 141 and SFAS 142, Pure Steel does
not anticipate a material impact on its financial
statements.

In October 2001, the FASB also issued SFAS
No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," applicable to

financial statements issued for fiscal years
beginning after December 15, 2001. The FASB's new
rules on asset impairment supersede SFAS No. 121
and portions of Accounting Principles Bulletin
Opinion 30, "Reporting the Results of Operations."
SFAS No. 144 provides a single accounting model
for long-lived assets to be disposed of and
significantly changes the criteria that would have
to be met to classify an asset as held-for-sale.
Classification as held-for-sale is an important
distinction since such assets are not depreciated
and are stated at the lower of fair value and
carrying amount. SFAS No. 144 also requires
expected future operating losses from discontinued
operations to be displayed in the period(s) in
which the losses are incurred, rather than as of
the measurement date, as presently required. The
Company does not expect the provisions of SFAS
No. 144 to have a significant effect on its
financial position or operating results.

Forward Looking Statements

Except for historical information contained
herein, certain other matters discussed herein are
forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. All statements,
other than statements of historical facts, that
address future activities, events or developments,
including such things as future revenues, product
development, market acceptance, responses from
competitors, capital expenditures (including the
amount and nature thereof), business strategy and
measures to implement strategy, competitive
strengths, goals, expansion and growth of Pure
Steel's business and operations, plans, references
to future success and other such matters, are
forward-looking statements. The words
"anticipates," "believes," "estimates," "expects,"
"plans," "intends," "should," "seek," "will," and
similar expressions are intended to identify these
forward-looking statements, but are not the
exclusive means of identifying them. These
statements are based on certain historical trends,
current conditions and expected future
developments as well as other factors we believe
are appropriate in the circumstances. However,
whether actual results will conform to our
expectations and predictions is subject to a
number of risks and uncertainties that may cause
actual results to differ materially, our success
or failure to implement our business strategy, our

ability to successfully market our products,
changes in consumer demand, changes in general
economic conditions, the opportunities (or lack
thereof) that may be presented to and pursued by
us, changes in laws or regulations, changes in
technology, many of which are beyond our control.
Consequently, all of the forward-looking
statements made in this Report are qualified by
these cautionary statements and there can be no
assurance that the actual results we anticipate
will be realized or, even if substantially
realized, that they will have the expected
consequences to or effects on us or our business
or operations. We assume no obligation to update
publicly any forward-looking statements, whether
as a result of new information, future events or
otherwise.

- -----------------------------------------------
Management
- -----------------------------------------------

Officers and Directors. Pursuant to our articles
of incorporation, each director shall serve until
the annual meeting of the stockholders, or until
his successor is elected and qualified. Pure
Steel's basic philosophy requires the inclusion of
directors who will be representative of management,
employees and the minority shareholders of Pure
Steel. Directors may only be removed for cause.
The term of office of each officer of Pure Steel is
at the pleasure of Pure Steel's board.

The principal executive officers and directors of
Pure Steel are as follows:

Name Position
------- --------
<s> <c>
Glenford F. Griffin, age 63 Chief Executive Officer
Director
Secretary/Treasurer

Oscar Coca, age 41 President
/Director

Daniel Elzy, age 41 Vice President
/Director

Mary A. Hidalgo, age 31 Corporate Secretary

All of the above officers and directors began their
term at inception.

Glenford F. Griffin. Mr. Griffin has been a
partner of Interim Management Services since 1976,
a 1099 contract management firm that provide longer
1099 contract executive management for startup
ventures, project management, reorganizations,
strategic planning, transitions and turnarounds.
We do not pay a fee to Interim Management Service
in return for Mr. Griffin's services as CEO of Pure
Steel. As a partner of Interim Management
Service, Mr. Griffin has served as president and
CEO of corporations with start-up, turnaround or
growth opportunities including, Inland Northwest
Biotechnology Alliance; Inland Northwest Technology
Council; Darius Technology, Inc., an international
manufacturer of high performance computers; AirTN,
Inc., an international electronic financial
transaction and document delivery network; Retail
Automation, Inc., a developer of integrated data
capture systems; Consolidated Electronics, Inc., an
engineering research and development firm of
microprocessor monitoring devices for the
semiconductor, electric utility and marine
industries and 3iInc., an international Internet
middleware developer for fax, voice, data and video
over IP and worldwide wireless banking financial
transaction processing.

Mr. Griffin obtained a bachelor of arts degree in
business administration with minors in human
behavior and graphic arts from the United States
Armed Forces Institute in 1960 by extension while
service on active duty in the U.S. Navy from the
University of Oregon. In 1970, Mr. Griffin
completed a twelve month program for management
development conducted by the Harvard Graduate
School of business administration.

Oscar Coca. Mr. Coca has been president of Pure
Steel since 1995. Mr. Coca attend Pima College
from 1980-1981 and Triton College from 1979-1980
attending classes in engineering at each college.
From 1990 to 1993, Mr. Coca was president of
general construction for Z Restoration, a
corporation that refurbished houses. From 1993 to
present, Mr. Coca has been president of Z
Restoration.

Daniel Elzy. Mr. Elzy has been vice president of
Pure Steel since 1995. From 1990-1993, Mr. Elzy
ran the Acid Department at Phillips Dodge in

Tucson, Arizona. From 1989 to 1993, Mr. Elzy was
a professional musician. Mr. Elzy graduated from
Mechanics Motorcycle Institute in 1995.

Mary A. Hidalgo. Ms. Hidalgo has been corporate
secretary since 1995. From 1993 to 1998, Ms.
Hidalgo worked at Standard Printing Company where
she shot customer artwork, cut and positioned print
and logos. In 1999, Ms. Hidalgo attended Mesa
Community College and took accounting and
bookkeeping classes.

EXECUTIVE COMPENSATION

Annual Compensation
Name and -------------------------- Long-term
Principal Position Year Salary(1) Bonus Awards Compensation Other
- ------------------ ---- ------ ----- ------ ------------ -----
<s> <c> <c> <c> <c> <c> <c>
Glenford Griffin 2000 $ -- -- -- -- --
Secretary and CEO 1999 $ -- -- -- -- --
1998 $ -- -- -- -- --

Oscar Coca 2000 $ 4,972 -- -- --
President 1999 $ -- -- --
1998 $ -- -- -- -- --
Mary Hidalgo
Corporate Secretary 2000 $14,400 -- -- -- --
1999 $ -- -- -- -- --
1998 $ -- -- -- -- --
Daniel Elzy
Vice President 2000 $ -- -- -- -- --
1999 $ -- -- -- -- --
1998 $ -- -- -- -- --

Board of Directors Compensation. Members of the
board of directors will receive a yet to be
determined compensation amount per meeting if these
directors are not separately compensated by Pure
Steel. Each board member will be required to
attend a minimum of four board meetings per fiscal
year. All expenses for meeting attendance or out
of pocket expenses connected directly with their
board representation will be reimbursed by Pure
Steel.

Director and officer liability insurance may be
provided to all members of the board of directors.
Pure Steel has not yet obtained such insurance.
Pure Steel does not have a specific time frame to
obtain this insurance. No differentiation is made
in the compensation of "outside directors" and
those officers of Pure Steel serving in that
capacity.

Conflicts of Interest Policy. Pure Steel has
adopted a policy that any transactions with
directors, officers or entities of which they are
also officers or directors or in which they have a
financial interest, will only be on terms
consistent with industry standards and approved by
a majority of the disinterested directors of Pure
Steel's board of directors.

The bylaws of Pure Steel provide that no such
transactions by Pure Steel shall be either void or
voidable solely because of such relationship or
interest of directors or officers or solely because
such directors are present at the meeting of the
board of directors of Pure Steel or a committee
thereof that approves such transactions, or solely
because their votes are counted for such purpose
if:

- - the fact of such common directorship or
financial interest is disclosed or known by the
board of directors or committee and noted in the
minutes, and the board or committee authorizes,
approves or ratifies the contract or transaction in
good faith by a vote for that purpose without
counting the vote or votes of these interested
directors; or

- - the fact of the common directorship or
financial interest is disclosed to or known by the
shareholders entitled to vote and they approve or
ratify the contract or transaction in good faith by
a majority vote or written consent of shareholders
holding a majority of the common shares entitled to
vote (the votes of the common or interested
directors or officers shall be counted in any such
vote of shareholders), or

- - the contract or transaction is fair and
reasonable to Pure Steel at the time it is
authorized or approved. In addition, interested
directors may be counted in determining the
presence of a quorum at a meeting of the board of
directors of Pure Steel or a committee thereof that
approves such transactions.

- ------------------------------------------------
Certain Transactions
- ------------------------------------------------

Advances from stockholders. In order to satisfy
the working capital needs of Pure Steel, Oscar
Coca and Daniel Elzy have made periodic advances
to Pure Steel. These advances are on an as

needed basis and are random in amount and
timing. No physical note agreements exist and
repayment terms are unspecified. During the
year ended March 31, 2001, Pure Steel received
proceeds of $67,067 of which $66,741 was
received from Oscar Coca and $326 was received
from Daniel Elzy. During the year ended March
31, 2001, Pure Steel repaid prior borrowings of
$123,968 of which $120,968 was to Oscar Coca and
$3,010 was to Daniel Elzy. During the year
ended March 31, 2000, Pure Steel repaid prior
borrowings of $41,206 to Oscar Coca. As of
March 31, 2001 and 2000, $217,195 ($191,195 to
Oscar Coca and $26,000 to Daniel Elzy) and
$274,106 ($245,422 to Oscar Coca and $28,689 to
Daniel Elzy), respectively, was owed to the two
founding stockholders. During the nine month
period ended December 31, 2001 Pure Steel
received proceeds of $45,622 from Oscar Coca and
repaid prior borrowings of $81,734 to Oscar
Coca. At December 31, 2001, $181,083 ($155,083
to Oscar Coca and $26,000 to Daniel Elzy) was
owed to the two founding stockholders.

During the nine month period ended December 31,
2001, Pure Steel received an advance totaling
$185,000 from the mother of Oscar Coca with
unspecified repayment terms. The advance is
unsecured and is being repaid by Pure Steel in
monthly installments of $1,735. At December 31,
2001, $176,326 was outstanding and is recorded
as a current liability due there being no
specified repayment terms.

- ------------------------------------------------
Changes In and Disagreements with Accountants
on Accounting and Financial Disclosures
- ------------------------------------------------

On May 1, 2001, Pure Steel dismissed its
independent accountants, Sapp & Sapp, P.C. The
board of directors of Pure Steel recommended that
Pure Steel would be better served by a different
firm of independent auditors. On July 3, 2001,
Pure Steel engaged Pannell Kerr Forster of Texas,
P.C. to replace Sapp & Sapp, P.C. as its
independent accountants to audit the financial
statements of Pure Steel as of and for the years
ended March 31, 2001 and 2000.

The auditor's report on the financial statements
for either of the past two years did not contain an
adverse opinion or disclaimer of opinion. It also
was not modified as to uncertainty, audit scope, or
accounting principles.

During Pure Steel's last two fiscal years to the
date hereof, there were no disagreements between
Pure Steel and Sapp & Sapp, P.C. on any matters of
accounting principles or practices, financial
statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to
the satisfaction of Sapp & Sapp, P.C. would have
caused them to make reference to the subject matter
of the disagreements in connection with their
report on the financial statements for such years.

During the last two fiscal years Pure Steel did not
consult PKF regarding any of the matters or events
set forth in Item 304 (a) (2) (i) or (ii) of
Regulation S-B.

- ------------------------------------------------
Principal Shareholders
- ------------------------------------------------

There are currently 5,788,500 common shares
outstanding. After the offering, a total of
8,188,500 common shares will be outstanding
assuming the exercise of the warrants. The
following tabulates holdings of shares of Pure
Steel by each person who, at the date of this
prospectus, holds of record or is known by
management to own beneficially more than 5.0% of
the common shares and, in addition, by all
directors and officers of Pure Steel individually
and as a group.

Shareholdings at Date of
This Prospectus

Percentage of
Outstanding
Shares as
Adjusted
to Reflect
Percentage Shares Conclusion
Number Prior to Owned After of the
Name and Address of Shares(1) Offering Offering(2) Offering
- ----------------- ------------ --------- ------------- ---------
<s> <c> <c> <c> <c>
Glenford F. Griffin
1022 W. 30th Avenue
Spokane, WA 99203 8,100 .14% 0 0%

Daniel Elzy
4010 Grand Avenue
Suite 16
Phoenix, AZ 85019 2,650,000 45.78% 2,650,000 32.36%

Oscar Coca
4010 Grand Avenue
Suite 16
Phoenix, AZ 85019 2,650,000 45.78% 2,650,000 32.36%

Mary Hidalgo
4656 S. Parkside Dr.
Tempe, Arizona 85282 50,000 .86% 0 0%

Officers and
Directors 5,358,100 92.56% 5,300,000 64.72%
As a Group (4 persons)

Pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, beneficial ownership of a
security consists of sole or shared voting power,
including the power to vote or direct the voting,
and/or sole or shared investment power, including
the power to dispose or direct the disposition,
with respect to a security whether through a
contract, arrangement, understanding, relationship
or otherwise.

Unless otherwise indicated, each person indicated
above has sole power to vote, or dispose or direct
the disposition of all shares beneficially owned
except if applicable community property laws apply.

- ------------------------------------------------
Shares Eligible for Future Sale
- ------------------------------------------------

Pure Steel currently has 5,788,500 shares of common
stock outstanding. Of these, 5,300,000 common
shares will be restricted securities after the
offering and may be sold in compliance with Rule
144 adopted under the Securities Act of 1933. Other
securities may be issued, in the future, in private
transactions pursuant to an exemption from the
Securities Act. Rule 144 provides, in essence,
that a person who has held restricted securities
for a period of one year may sell every three
months in a brokerage transaction or with a market
maker an amount equal to the greater of 1% of Pure
Steel's outstanding shares or the average weekly
trading volume, if any, of the shares during the
four calendar weeks preceding the sale.

The amount of restricted securities that a person
who is not an affiliate of Pure Steel may sell is
not so limited. Non-affiliates may each sell
without limitation shares held for two years. Pure
Steel will make application for the listing of our
shares in the over-the-counter market. Sales under
Rule 144 may, in the future, depress the price of
Pure Steel's shares in the over-the-counter market,
should a market develop. Prior to this offering
we have not had a market for our common shares. The
effect, if any, of a public trading market or the
availability of shares for sale at prevailing
market prices cannot be predicted. Nevertheless,
sales of substantial amounts of shares in the
public market could adversely effect prevailing
market prices.

- -----------------------------------------------
Market for Common Shares and
Related Stockholder Matters
- ----------------------------------------------

Prior to this offering, we have had no market for
our common stock. Subsequent to successful
completion of this offering, we will apply to have
our common stock quoted on the OTC Bulletin Board.
If Pure Steel is not accepted on the OTC Bulletin
Board, Pure Steel will apply to have our common
shares traded on the pink sheets.

Dividends. Holders of Pure Steel's common stock
are entitled to receive such dividends as may be
declared by our board of directors.

Broker-Dealer Sales of Pure Steel Securities. If
the trading price of our common stock is less than
$5.00 per share, trading in the common stock would
also be subject to the requirements of the penny
stock rules pursuant to Rule 15g-9 under the
Exchange Act. Rule 15g-2 imposes additional sales
practice requirements on broker-dealers who sell
such securities to persons other than established
customers and accredited investors. Accredited
investors are generally institutions with assets in
excess of $5,000,000 or individuals:

- with net worth in excess of $2,000,000
or
- annual income exceeding $200,000 or
- $300,000 jointly with their spouse

For transactions covered by Rule 15g-2, the broker-
dealer must make a special suitability
determination of the purchaser and have received
the purchaser's written agreement to the
transaction prior to the sale.

In order to approve a person's account for
transactions in designated securities, the broker
or dealer must

- obtain information concerning the person's
financial situation, investment experience and
investment objectives;

- reasonably determine, based on the
information required by the first paragraph that
transactions in designated securities are suitable
for the person and that the person has sufficient
knowledge and experience in financial matters that
the person reasonably may be expected to be capable
of evaluating the rights of transactions in
designated securities; and

- deliver to the person a written statement
setting forth the basis on which the broker or
dealer made the determination required by the
second paragraph in this section, stating in a
highlighted format that it is unlawful for the
broker or dealer to effect a transaction in a
designated security the provisions of the second
paragraph of this section unless the broker or
dealer has received, prior to the transaction, a
written agreement to the transaction from the
person; and stating in a highlighted format
immediately preceding the customer signature line
that the broker or dealer is required to provide
the person with the written statement and the
person should not sign and return the written
statement to the broker or dealer if it does not
accurately reflect the person's financial
situation, investment experience and investment
objectives and obtain from the person a manually
signed and dated copy of the written statement.

A designated security means any equity security
other than a security

- registered, or approved for registration
upon notice of issuance on a national securities
exchange that makes transaction reports available
pursuant to 17 CFR 11Aa3-1

- authorized or approved for authorization
upon notice of issuance, for quotation in the
NASDAQ system;

- that has a price of five dollars or more
or

- whose issuer has net tangible assets in
excess of $2,000,000 demonstrated by financial
statements dated less than fifteen months
previously that the broker or dealer has reviewed
and has a reasonable basis to believe are true and
complete in relation to the date of the transaction
with the person.

Consequently, the rule may affect the ability of
broker-dealers to sell Pure Steel's securities and
also may affect the ability of purchasers in this
offering to sell their shares in the secondary
market.

Pure Steel's securities will likely trade below
$5.00 and the penny stock rules of Rule 15g-2
discussed above will apply.

As of the date of the prospectus, there are 15
shareholders.

- ----------------------------------------------
Description of Securities
- ----------------------------------------------

Our articles of incorporation authorize the
issuance of up to 25,000,000 common shares, no par
value and 300,000 Class A preferred shares, no par
value. Currently, Pure Steel has 5,788,000 common
shares outstanding and no preferred shares
outstanding. During the year ended March 31,
2001, holders of 37,500 Class A preferred shares
executed their right to convert their shares, 1 for
8, to common shares of Pure Steel. Accordingly,
300,000 common shares were issued in exchange for
all outstanding Class A preferred shares.

Common Stock. Each record holder of common stock
is entitled to one vote for each share held on all
matters properly submitted to the stockholders for
their vote. Cumulative voting for the election of
directors is not permitted by the articles of
incorporation. The holders of outstanding shares
of common stock are entitled to such dividends as
may be declared from time to time by the board of
directors out of legally available funds; and, in
the event of liquidation, dissolution or winding up
of the affairs of Pure Steel, holders are entitled
to receive, ratably, the net assets of Pure Steel

available to stockholders after distribution is
made to the preferred stockholders, if any, who are
given preferred rights upon liquidation.

To the extent that additional common shares are
issued, the relative interest of then existing
stockholders may be diluted.

Preferred Stock. The board of directors of Pure
Steel is authorized to issue the preferred stock
from time to time in series and is further
authorized to establish such series, to fix and
determine the variations in the relative rights and
preferences as between series, to fix voting
rights, if any, for each series, and to allow for
the conversion of preferred stock into common
stock.

There are currently no preferred shares
outstanding.

Warrants. Pure Steel has issued 475,000 warrants
to purchase an equal number of common shares. The
warrants can be exercised at prices ranging from
$1.50 to $2.50 per common share and expire three
years from any registration of Pure Steel's common
stock with the Securities and Exchange Commission.
The exercise of all the warrants would result in
total additional proceeds of $1,087,500 to Pure
Steel.

Transfer Agent. Pure Steel, Inc. currently acts as
its own transfer agent.

- -----------------------------------------------
Legal Matters
- -----------------------------------------------

Certain legal matters with respect to the issuance
of the securities offered in this prospectus will
be passed upon by Jody M. Walker, Attorney-At-Law,
Littleton, Colorado.

- -----------------------------------------------
Legal Proceedings
- -----------------------------------------------

We are not involved in any legal proceedings as of
the date of this prospectus.

- -----------------------------------------------
Experts
- -----------------------------------------------

The financial statements as of March 31, 2001 and
2000 included in this prospectus, have been audited
by Pannell Kerr Forster of Texas, P.C., independent
auditors, as stated in their report appearing
herein and have been so included in reliance upon
the report of such firm given upon their authority
as experts in accounting and auditing.

- ----------------------------------------------
Interests of Named
Experts and Counsel
- ----------------------------------------------

None of the experts or counsel named in the
prospectus is affiliated with Pure Steel.

- ----------------------------------------------
Additional Information
- ----------------------------------------------

Until ____, 2002 (90 days after the date of the
prospectus), all persons making transactions in the
registered securities, whether or not participating
in the offering, may be required to deliver a
prospectus. This is in addition to the obligation
of these persons to deliver a prospectus when
acting as underwriters and when utilizing their
unsold allotments or subscriptions.

No dealer, salesman, agent or any other person has
been authorized to give any information or to make
any representation other than those contained in
this prospectus. If given or made, this
information or representation must not be relied
upon as having been authorized by Pure Steel, or
the underwriter, if an underwriter assists in the
sale of the securities.

This prospectus is not an offer or a solicitation
by anyone to any person in any state, territory or
possession of the United States in which an offer
or solicitation is not authorized by the laws of a
state, territory or possession of the United
States, or to any person to whom it is unlawful to
make an offer or solicitation.

Neither the delivery of this prospectus or any sale
made hereunder shall, under any circumstances,
create an implication that there has not been any

change in the facts set forth in this prospectus or
in the affairs of Pure Steel since the date of this
prospectus.

- -----------------------------------------
Available Information
- -----------------------------------------

Pure Steel has filed with the Securities and
Exchange Commission a registration statement
including all amendments and required exhibits
under the Act with respect to the securities
offered by Pure Steel. This prospectus does not
contain all of the information set forth in the
registration statement. Some parts of the
registration statement are omitted pursuant to the
rules and regulations of the Commission.

For further information with respect to Pure Steel
and the securities offered by Pure Steel,
shareholders should examine the registration
statement. Copies of such materials may be
examined without charge at, or obtained upon
payment of prescribed fees from, the Public
Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, telephone number
1-800-SEC-0330, at the Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511.

Pure Steel will voluntarily file periodic reports
in the event our obligation to file such reports is
suspended under Section 15(d) of the Exchange Act.

Pure Steel will provide without charge to each
person who receives a prospectus, upon written or
oral request of such person, a copy of any
of the information that was incorporated by
reference in the prospectus not including exhibits
to the information that is incorporated by
reference unless the exhibits are themselves
specifically incorporated by reference. Requests
for copies of said documents should be directed to
Glenford Griffin at Pure Steel.

The Commission maintains a Web site --
//www.sec.gov -- that contains reports, proxy and
information statements and other information
regarding issuers that file electronically with the
Commission.

- ----------------------------------------------
Financial Statements
- ----------------------------------------------

Index to Financial Statements Page
<s> <c>
Independent Auditors' Report F-1

Balance Sheets as of March 31, 2001 and 2000
and December 31, 2001 (Unaudited) F-2

Statements of Operations for the Years ended
March 31, 2001 and 2000 and for the nine month periods
ended December 31, 2001 and 2000 (Unaudited) F-3

Statements of Changes in Stockholders' Equity (Deficit)
for the years ended March 31, 2001, and 2000 and the
nine month period ended December 31, 2001 (Unaudited) F-4

Statements of Cash Flows for the Years Ended
March 31, 2001 and 2000 and for the nine month periods
ended December 31, 2001 and 2000 (Unaudited) F-5

Notes to Financial Statements F-6

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders,
Pure Steel Custom Cycles, Inc.

We have audited the accompanying balance sheets
of Pure Steel Custom Cycles, Inc. (an Arizona
corporation), as of March 31, 2001 and 2000, and
the related statements of operations, changes in
stockholders' equity (deficit), and cash flows
for the years then ended. These financial
statements are the responsibility of management.
Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial position of
Pure Steel Custom Cycles, Inc. as of March 31,
2001 and 2000, and the results of its operations
and its cash flows for the years then ended, in
conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been
prepared assuming that the Company will continue
as a going concern. As discussed in Note 13 to
the financial statements, the Company had a net
loss for the year ended March 31, 2001 of
$449,362, negative working capital of $455,780,
stockholders' deficit of $153,754, and has
experienced severe shortages of working capital
which have greatly affected operations, all of
which raise substantial doubt about its ability
to continue as a going concern. Management's
plans regarding those matters also are described

in Note 13. The financial statements do not
include any adjustments that might result from
the outcome of this uncertainty.

/s/ PANNELL KERR FORSTER OF TEXAS, P.C.
- ---------------------------------------
PANNELL KERR FORSTER OF TEXAS, P.C.

Houston, Texas
October 23, 2001
Except for Note 12 to which
the date is January 2, 2002

F-1

PURE STEEL CUSTOM CYCLES, INC.
BALANCE SHEETS

March 31, December 31,
----------------------- -----------
2001 2000 2001
-------- ----------- ----------
(Unaudited)
<s> <c> <c> <c>
ASSETS

CURRENT ASSETS:
Cash $ - $ 21,805 $ -
Accounts receivable, less allowance
for doubtful accounts of $0 and
$34,100 at March 31, 2001 and 2000,
respectively 70,813 143,413 10,196
Inventories 409,906 500,249 492,507
Other current assets 16,834 - 11,318
-------- -------- --------
Total current assets 497,553 665,467 514,021
-------- -------- --------
PROPERTY AND EQUIPMENT, net 150,052 134,070 93,172
-------- -------- --------

OTHER ASSETS:
Certificate of deposit 75,000 75,000 75,000
Inventories 43,700 43,700 43,700
Licensing fees, net of accumulated
amortization of $69,228 and $0 at
March 31, 2001 and 2000, respectively 80,772 50,000 28,851
-------- -------- --------
Total other assets 199,472 168,700 147,551
-------- -------- --------
TOTAL ASSETS $847,077 $ 968,237 $754,744
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Bank overdraft $ 14,205 $ - $ 6,941
Accounts payable and accrued
liabilities 246,702 140,142 324,972
Customer deposits 36,000 9,000 236,662
Floor plan financing 292,370 193,410 194,220
Income taxes payable - 2,300 -
Note payable - line of credit 45,125 44,564 -
Current portion of long-term debt 101,736 37,240 42,970
Loan from related party - - 176,326
Loans from stockholders 217,195 274,106 181,083
-------- -------- ---------
Total current liabilities 953,333 700,762 1,163,174

DEFERRED TAX LIABILITY 3,300 3,300 3,300

LONG-TERM DEBT, net of current
portion 44,198 58,317 21,076
-------- -------- ---------
Total liabilities 1,000,831 762,379 1,187,550

COMMITMENTS AND CONTINGENCIES - - -

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - no par value;
300,000 shares authorized; 0
and 35,000 shares issued and
outstanding at March 31, 2001
and 2000, respectively - 100,000 -

Common stock - no par value;
25,000,000 shares authorized;
5,788,500 and 5,425,000 shares
issued and outstanding at March
31, 2001 and 2000, respectively 393,500 205,000 393,500

Additional paid in capital 53,351 52,101 53,351
Accumulated deficit (600,605) (151,243) (879,657)
-------- -------- --------
Total stockholders' equity
(deficit) (153,754) 205,858 (432,806)
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $847,077 $ 968,237 $ 754,744
======== ========= =========

See Accompanying Notes to the Financial Statements.

F-2

PURE STEEL CUSTOM CYCLES, INC.
STATEMENTS OF OPERATIONS

Nine Months Ended
Year Ended March 31, December 31,
------------------------- ---------------------
2001 2000 2001 2000
------ ------ ------ ------
(Unaudited) (Unaudited)
<s> <c> <c> <c> <c>
SALES $1,476,927 $1,464,592 $ 662,423 $1,045,679

COST OF GOODS SOLD 1,133,212 1,056,564 608,121 813,029
--------- --------- --------- ---------
GROSS PROFIT 343,715 408,028 54,302 232,650

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 770,087 572,963 311,552 612,816
--------- --------- --------- ---------
LOSS FROM OPERATIONS (426,372) (164,935) (257,250) (380,166)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 5,516 - 1,925 4,137
Interest expense (28,506) (8,669) (29,906) (11,264)
Gain on disposal of equipment - - 6,179 -
--------- --------- --------- ---------
Other income
(expense), net (22,990) (8,669) (21,802) (7,127)
--------- --------- --------- ---------
LOSS BEFORE PROVISION
FOR INCOME TAXES (449,362) (173,604) (279,052) (387,293)

PROVISION FOR INCOME TAXES - - - -
--------- --------- --------- ---------
NET LOSS $(449,362) $(173,604) $ (279,052) $(387,293)
========= ========= ========= =========
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.08) $ (0.03) $ (0.05) $ (0.07)
========= ========= ========== ==========
WEIGHTED AVERAGE NUMBER OF
BASIC AND DILUTED COMMON
SHARES OUTSTANDING 5,534,529 5,338,699 5,788,500 5,453,547
========== ========= ========== =========

See Accompanying Notes to the Financial Statements.

F-3

PURE STEEL CUSTOM CYCLES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT)

Class A Accumulated Total
Preferred Common Additional Retained Stockholders'
------------ ----------- Paid In Earnings Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
------- ------- -------- ------- ------- ---------- ----------
<s> <c> <c> <c> <c> <c> <c> <c>
Balance at
March 31, 1999 - $ - 5,300,000 $ 80,000 $ - $ 22,361 $ 102,361

Issuance of 35,000
shares of Class A
Preferred; 10,000
shares for cash and
25,000 shares for
offering costs
valued at $250,000 35,000 100,000 - - - - 100,000

Issuance of 125,000
shares of common
stock for compensation
and services - - 125,000 125,000 - - 125,000

Capital contribution - - - - 52,101 - 52,101

Net loss - - - - - (173,604) (173,604)
------- ------- --------- ------- ------ -------- --------
Balance at
March 31, 2000 35,000 100,000 5,425,000 205,000 52,101 (151,243) 205,558

Issuance of 2,500
shares of Class A
Preferred for cash 2,500 25,000 - - - - 25,000

Conversion of 37,500
shares of Class A
Preferred to 300,000
shares of common
stock (37,500) (125,000) 300,000 125,000 - - -

Issuance of 60,000
shares of common stock
for services - - 60,000 60,000 - - 60,000

Issuance of 3,500 shares
of common stock as a stock
dividend to Class A
Preferred Stockholders - - 3,500 3,500 (3,500) - -

Issuance of 475,000 warrants
to purchase common stock
for compensation and
services - - - - 4,750 - 4,750

Net loss - - - - - (449,362) (449,362)
------- ------- ------- ------- ------ ------- --------
Balance at
March 31, 2001 - - 5,788,500 393,500 53,351 (600,605) (153,754)

Net loss (unaudited) - - - - - (279,052) (279,052)
------- ------- --------- ------- ------ -------- --------
Balance at December 31,
2001 (unaudited) - $ - 5,788,500 $393,500 $53,351 $(879,657) $(432,806)
======= ======= ========= ======== ======= ======== =========

See Accompanying Notes to the Financial Statements.

F-4

STATEMENTS OF CASH FLOWS

Nine Months Ended
Year Ended March 31, December 31,
----------------------- -------------------------
2001 2000 2001 2000
--------- --------- ---------- ----------
(Unaudited) (Unaudited)
<s> <c> <c> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(449,362) $(173,604) $(279,052) $(387,293)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 120,159 26,967 83,851 89,850
Gain on disposal of equipment - - (6,179) -
Allowance for doubtful accounts (34,100) 29,600 - (34,100)
Common stock issued for compensation
and services 60,000 125,000 - 60,000
Warrants issued for compensation
and services 4,750 - - -
Changes in operating assets
and liabilities
Accounts receivable 106,700 (86,975) 60,617 74,651
Inventories 90,343 (137,616) (13,201) (66,249)
Other current assets (16,834) 17,865 5,516 (10,463)
Accounts payable and accrued
liabilities 106,560 79,238 108,570 91,803
Customer deposits 27,000 (40,000) 200,662 132,600
Income taxes payable (2,300) 1,000 - (2,300)
--------- -------- --------- ---------
Net cash provided by (used in)
operating activities 12,916 (158,525) 160,784 (51,501)
--------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (57,248) (20,798) - (24,536)
Purchase of certificate of deposit - (75,000) - -
Proceeds from the disposal of
equipment - - 31,120 -
Licensing fees (100,000) (50,000) - (100,000)
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities (157,248) (145,798) 31,120 (124,536)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft 14,205 - (7,264) 34,202
Issuance of class A preferred
stock 25,000 100,000 - 25,000
Capital contribution - 52,101 - -
Proceeds from stockholder loans 67,067 - 45,622 41,050
Proceeds from note payable
- line of credit 7,875 50,000 - 14
Proceeds from long-term debt 133,767 - - -

Proceeds from loan from
related party - - 185,000 -

Floor plan financing, net 98,960 193,410 (197,850) 162,615

Repayment of loans from
stockholders (123,978) (41,206) (81,734) (100,569)
Repayment of note payable
- line of credit (7,314) (5,436) (45,125) -
Repayment of long-term debt (93,055) (23,352) (81,879) (8,080)
Repayment of loan from
related party - - (8,674) -
--------- --------- -------- --------
Net cash provided by (used in)
financing activities 122,527 325,517 (191,904) 154,232
--------- --------- -------- --------

NET INCREASE (DECREASE) IN CASH (21,805) 21,194 - (21,805)

CASH, beginning of period 21,805 611 - 21,805
--------- --------- -------- --------
CASH, end of period $ - $ 21,805 $ - $ -
========= ========= ======== ========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 21,433 $ 9,982 $ 35,666 $ 9,951

NON CASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of Class A
Preferred Stock $ 125,000 $ - $ - $ -
Equipment purchased under
capital lease 9,665 - - 9,665
Common stock issued for
compensation and services 60,000 125,000 - 60,000
Warrants issued for compensation
and services 4,750 - - -
Notes payable assumed to
acquire equipment - 28,350 - -
Inventory delivered in exchange
for a portion owed on the floor plan
- in default - - 30,300 -

See Accompanying Notes to the Financial Statements.

F-5

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Organization

Pure Steel Custom Cycles, Inc. (the "Company")
was incorporated under the laws of the State of
Arizona in 1995. The Company's principle
business consists of the manufacture and sale of
custom motorcycles. Pure Steel designs,
develops and manufactures hand crafted customer
motorcycles for the high end premium motorcycle
market. The Company is located in Phoenix,
Arizona and sales are made to various retailers
located throughout the United States.

Interim Financial Information

The financial statements as of December 31, 2001
and for the nine month periods ended December 31,
2001 and 2000 are unaudited. In the opinion of
the Company's management, such unaudited
financial statements include all adjustments
necessary, which include only normal recurring
items, to present fairly the information set
forth therein. Results for interim periods are
not necessarily indicative of the results that
may be expected for any other interim period of a
full year.

Statement of Cash Flows

For purposes of the statement of cash flows, the
Company considers all highly liquid debt
instruments purchased with an original maturity
of three months or less to be cash equivalents.

Concentration of Credit Risk

The Company maintains its cash with a major U.S.
domestic bank. The amounts held in this bank
exceed the insured limit of $100,000 from time to
time. The terms of these deposits are on demand
to minimize risk. The Company has not incurred
losses related to these deposits.

The Company is subject to risks common to
companies in early stages of development
including, but not limited to, development of new
products, development of markets and distribution

F-6

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)

channels, and the ability to obtain additional
capital as needed to fund its operating plan. To
date, the Company has been funded by the issuance
of debt to both financial institutions and
private individuals and private equity financings
for cash and for services. The Company's
ultimate success is dependent upon its ability to
raise additional capital and to successfully
develop and market its products.

The Company is currently dependent on a few large
customers who have provided a majority of the
revenue recognized in the last two years (see
Note 11). A loss of the Company's largest
customer(s) or a reduction of the volume
purchased by these customers would have an
adverse near-term effect upon the Company's
future revenues.

The Company currently purchases several key
components including frames and engines from
single or limited sources. The Company purchases
these components on a purchase order basis and
has no long term contracts for these components.
The Company believes that there are alternative
sources for each of these components and design
specifications can be replicated if needed.

Inventories

Inventories, consisting of motorcycle parts, are
stated at the lower of average cost or market as
determined on a specific identification basis.

At March 31, 2001 and 2000, inventories of
approximately $43,700, determined by management
to be slow-moving, have been presented as
noncurrent assets in the accompanying financial
statements.

Property and Equipment

Property and equipment is stated at cost.
Depreciation is provided using the straight-line
and accelerated methods over the following
useful lives:

F-7

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)

Property and Equipment (Continued)

Machinery and equipment 7 years
Vehicles 5 years
Furniture and fixtures 7 years

Licensing Fees

The Company has incurred licensing fees of
$150,000 to produce 90 special edition custom
motorcycles. The fees are being amortized at
$5,769 per month over the 26-month life of the
agreement starting April 2000 (see Note 10).

Income Taxes

Income taxes are provided for the tax effects of
transactions reported in the financial
statements and consist of taxes currently due
plus deferred taxes related primarily to
differences between the tax basis of assets for
financial and income tax reporting. The deferred
tax assets and liabilities represent the future
tax return consequences of those differences,
which will either be taxable or deductible when
the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for
operating losses that are available to offset
future taxable income and tax credits that are
available to offset future federal income taxes.

Use of Estimates

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

F-8
69

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)

Advertising Costs

Advertising costs are charged to operations when
the advertising first takes place. Advertising
expense was $243,841 and $122,840 for the years
ended March 31, 2001 and 2000, respectively, and
is included in selling, general and
administrative expenses in the accompanying
financial statements.

Included within advertising expense for the year
ended March 31, 2001 is $72,111 representing the
cost of three motorcycles exchanged for
advertising and promotions required under
certain advertising and promotion agreements
(see Note 10).

Revenue Recognition

The Company recognizes revenue when the
motorcycle is shipped provided that a purchase
order or payment has been received. For sales
covered under the floor plan (see Note 2),
revenue and corresponding cost of sales are
recorded when the motorcycle is ultimately sold
by the participating dealer.

Product Warranty

Each motorcycle sold is backed by a 48 month
unlimited mileage warranty. Estimated future
warranty obligations are charged to operations
in the period in which the related revenue is
recognized. To minimize exposure from future
warranty claims the Company purchases extended
warranty insurance on each motorcycle sold from
a reputable insurance carrier which is expensed
as incurred and covers the last 42 months of the
48 month warranty period.

Customer Deposits

From time to time, the Company requests that its
customers provide a deposit on new motorcycle
orders. When a customer deposit is received it
is recorded as a liability until such time that
the motorcycle is shipped or the customer takes
possession. The amount is then applied to the
final purchase price.
F-9
70

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)

New Accounting Standards

In July 2001, the Financial Accounting Standards
Board issued SFAS 141, "Business Combinations",
and SFAS 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires that the purchase
method of accounting be used for all business
combinations initiated or completed after June 30,
2001. SFAS 141 also specifies criteria that
intangible assets acquired in a purchase method
business combination must meet to be recognized
and reported apart from goodwill. SFAS 142
requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized,
but instead tested for impairment at least
annually in accordance with the provisions of SFAS
142. SFAS 142 also requires that intangible
assets with definite useful lives be amortized
over their respective estimated useful lives to
their estimated residual values, and reviewed for
impairment in accordance with SFAS 121,"Account-
ing for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of".

SFAS 141 will require that upon adoption of SFAS
142, the Company evaluate its existing intangible
assets and make any necessary reclassifications in
order to conform with the new criteria in SFAS
141. Upon adoption of SFAS 142, the Company plans
to reassess the useful lives and residual values
of all recorded intangible assets, and make any
necessary amortization period adjustments by April
1, 2002. In addition, to the extent an intangible
asset is identified as having an indefinite useful
life, the Company will be required to test the
intangible asset for impairment in accordance with
the provisions of SFAS 142 by June 30, 2002. Any
impairment loss will be measured as of the date of
adoption and recognized as the cumulative effect
of a change in accounting principle. Upon
adoption of SFAS 141 and SFAS 142, the Company
F-10
71

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

New Accounting Standards (Continued)

does not anticipate a material impact on its
financial statements.

In October 2001, the FASB also issued SFAS
No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," applicable to
financial statements issued for fiscal years
beginning after December 15, 2001. The FASB's new
rules on asset impairment supersede SFAS No. 121
and portions of Accounting Principles Bulletin
Opinion 30, "Reporting the Results of Operations."
SFAS No. 144 provides a single accounting model
for long-lived assets to be disposed of and
significantly changes the criteria that would have
to be met to classify an asset as held-for-sale.
Classification as held-for-sale is an important
distinction since such assets are not depreciated
and are stated at the lower of fair value and
carrying amount. SFAS No. 144 also requires
expected future operating losses from discontinued
operations to be displayed in the period(s) in
which the losses are incurred, rather than as of
the measurement date, as presently required. The
Company does not expect the provisions of SFAS
No. 144 to have a significant effect on its
financial position or operating results.

NOTE 2 - INVENTORIES

Components of current inventories consist of the
following at March 31, 2001 and 2000:

2001 2000
---------- ---------
Raw materials $ 183,556 $ 309,803
Finished goods floored
at dealers (see Note 7) 226,350 139,527

Finished goods - 50,919
--------- --------
Total inventories $ 409,906 $ 500,249
========== =========
F-11

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following
at March 31, 2001 and 2000:
2001 2000
-------- --------

Machinery and equipment $164,082 $98,743
Vehicles 89,637 89,637
Furniture and fixtures 9,516 7,943
-------- -------
263,235 196,323
Less: accumulated depreciation (113,183) (62,253)
-------- --------
Property and equipment, net $150,052 $134,070
======== ========

Equipment under capital lease has been included
in property and equipment at a total cost of
$9,665 as of March 31, 2001. Accumulated
depreciation related to this equipment was
$2,416. The Company had no equipment under
capitalized leases as of March 31, 2000.

Depreciation expense was $50,931 and $26,967 for
the years ended March 31, 2001 and 2000,
respectively.

NOTE 4 - LONG-TERM DEBT

Long-term debt consists of the following at
March 31, 2001 and 2000:

2001 2000
-------- --------
<s> <c> <c>
Capital Lease

Capital lease obligation payable to Wells Fargo Financial
Leasing; original amount of $9,665; payable in monthly
installments of $236, including interest at 16.89%,
through April 2005; secured by equipment. $ 8,288 $ -

Less: current portion (1,539) -
-------- --------
Capital lease - long-term 6,749 -
-------- --------

F-12

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 4 - LONG-TERM DEBT (CONTINUED)

Notes Payable

Note payable to Navistar Financial Corporation; original
amount of $50,726; payable in monthly installments of
$1,078, including interest at 10%, through December 2003;
secured by vehicle. 28,196 40,306

Note payable to Bank One; original amount of
$11,075; payable in monthly installments of $358,
including interest at 10.21%, through February 2002;
secured by equipment. 3,869 7,459

Note payable to Ford Motor Credit; original amount of
$28,971; payable in monthly installments of $618,
including interest at 9.95%, through February 2005;
secured by vehicle. 24,814 28,350

Note payable to Hacienda Harley-Davidson, Inc.;
original amount of $33,767; principal and interest
at 18%; originally due March 2001 and has been
extended for an unspecified period of time; unsecured. 33,767 -

Note payable to dealer; original amount of $7,000;
non-interest bearing; repayment terms unspecified;
unsecured. 7,000 7,000

Note payable to investor; original amount of $100,000;
interest payable at 10%; repayment terms unspecified;
unsecured. 40,000 -

Note payable to Sunnen Products Company; original amount
of $49,267; payable in monthly installments of $1,108,
including interest at 12.5%; paid in full March 2001;
secured by equipment. - 12,442
------- --------

Total notes payable 137,646 95,557
Less: current portion (100,197) (37,240)
-------- --------
Notes payable - long-term 37,449 58,317

-------- --------
Total long-term debt $ 44,198 $ 58,317
======== ========

The following is a schedule of the future
minimum lease payments required under the
capital lease. The capital lease obligation

F-13

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 4 - LONG-TERM DEBT (CONTINUED)

reflects the present value of future rental
payments, discounted at the interest rate
implicit in the lease.

Year Ending
March 31,
- -----------
2002 $ 2,832
2003 2,832
2004 2,832
2005 2,832
2006 236
------
Total minimum lease payments 11,564
Less: amount representing interest (3,276)
------
Present value of minimum lease payments $ 8,288
=======
The aggregate principal payments due on the
notes payable are as follows:

Year Ending
March 31,
- -----------
2002 $ 100,197
2003 17,187
2004 12,935
2005 7,327
---------
$ 137,646
=========

NOTE 5 - NOTE PAYABLE - LINE OF CREDIT

The Company has a $50,000 line of credit
established at Bank of America, N.A. with
interest payable monthly at the prime rate plus
2% (10.5% and 10.75% as of March 31, 2001 and
2000, respectively) with no maturity date. The
maximum amount borrowed on the line of credit in
both years was $50,000 and the minimum amount
borrowed was $42,125 and $44,564 for the years
ended March 31, 2001 and 2000, respectively. The
line of credit is secured by the personal
guarantees of the founding stockholders of the
Company (see Note 12).

F-14

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 6 - LOANS FROM STOCKHOLDERS

In order to satisfy the working capital needs of
the Company, the founding stockholders, who are
also officers and management of the Company,
have made periodic advances to the Company. The
advances are on an as needed basis and are
random in amount and timing. No physical note
agreements exist and repayment terms are
unspecified. Accordingly, loans from
stockholders have been recorded as a current
liability.

Loans from stockholders are detailed as follows
for the years ended March 31,:

Oscar Coca Daniel Elzy
----------------------- ---------------------
2001 2000 2001 2000
-------- -------- -------- --------
<s> <c> <c> <c> <c>
Beginning balance $ 245,422 $ 286,628 $ 28,684 $ 28,684
Borrowings 66,741 - 326 -
Repayments (120,968) (41,206) (3,010) -
-------- -------- -------- --------
Ending balance $ 191,195 $ 245,422 $ 26,000 $ 28,684
========== ========== ======== ========

These shareholders each own 45.78% (or 91.56% in
total) of the Company's outstanding common
stock.

NOTE 7 - FLOOR FINANCING PLAN

76
PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 7 - FLOOR FINANCING PLAN (CONTINUED)

2001, the Company has three customers that use
the floor plan. The outstanding balances of
amounts advanced to the Company under the floor
plan were $194,220, $292,370 and $193,410 at
December 31, 2001, March 31, 2001 and 2000,
respectively.

There is no limit to the amounts available under
the floor plan financing agreement. As a
condition of the floor plan financing agreement,
Pure Steel was required to provide a $75,000
irrevocable letter of credit ("LOC"). The bank
providing the LOC required that it be secured by a
$75,000 certificate of deposit. In the event of
default by a dealer, the financial institution has
the option of repossessing the motorcycles sold to
the dealers subject to the floor plan or requiring
repayment of the outstanding amount in full from
Pure Steel. Accordingly, should the latter occur,
Pure Steel would repossess the motorcycle(s) from
the dealer that had been funded under the floor
plan and be obligated to repay any amounts owed to
the financial institution. Any motorcycles
repossessed would be resold by Pure Steel in the
ordinary course of its business (see Note 12).

NOTE 8 - INCOME TAXES

Deferred taxes in the accompanying balance
sheet includes the following amounts as of
March 31, 2001 and 2000:

2001 2000
------------------------- ----------------------------
Federal State Total Federal State Total
-------- -------- -------- --------- -------- --------
<s> <c> <c> <c> <c> <c> <c>
Deferred long-term tax asset $225,408 $49,837 $275,245 $ 59,025 $13,888 $ 72,913
Deferred long-term tax
liability (2,500) (800) (3,300) (2,500) (800) (3,300)
------- ------- ------- -------- ------- -------
Net long-term deferred tax
asset 222,908 49,037 271,945 56,525 13,088 69,613
Deferred tax asset valuation
allowance (225,408) (49,837) (275,245) (59,025) (13,888) (72,913)
-------- ------- -------- -------- ------- -------
Net deferred tax liability $ (2,500) $ (800) $ (3,300) $ (2,500) $ (800) $ (3,300)
======== ======= ======== ======== ======= ========

F-15
77

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 8 - INCOME TAXES (CONTINUED)

At March 31, 2001, the Company has a deferred
tax asset of $275,245 reflecting the benefit of
$622,966 in net operating loss carryforwards,
which expire beginning 2020. Realization is
dependent on generating sufficient taxable
income prior to expiration of the loss
carryforwards. Management believes it is more
likely than not that the deferred tax relating
to the Company's tax asset will not be realized.
The amount of the deferred tax asset considered
realizable, however, could be increased in the
near term if estimates of future taxable income
during the carryforward period are increased.

The deferred tax liability results primarily
from the use of accelerated methods of
depreciation for tax purposes.

NOTE 9 - STOCKHOLDERS' EQUITY

In order to fund ongoing operations of the
Company, during the year ended March 31, 2000, a
majority stockholder contributed $52,101 of
capital to the Company. No shares of stock,
common or preferred, were issued in conjunction
with this transaction.

Common Stock

From time to time the Company may issue common
stock in exchange for goods and services or as
compensation to employees. During the year
ended March 31, 2001, the Company issued 60,000
shares of common stock in exchange for goods and
services valued at $60,000. During the year
ended March 31, 2000, the Company issued 125,000
shares of common stock to employees and other
individuals as compensation and consulting
services having a combined total value of
$125,000.

F-16

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)

Class A Preferred Stock

In order to provide working capital, during the
years ended March 31, 2001 and 2000, the Company
issued 2,500 and 10,000 shares of Class A
Preferred Stock ("Preferred Stock"),
respectively, to non-employees at $10 per share
generating cash proceeds of $25,000 and
$100,000, respectively.

Additionally, during the year ended March 31,
2000, 25,000 shares of Preferred Stock were
issued to non-employees in exchange for
consulting services relating to the offering of
Preferred Stock. The consulting services were
value at $250,000 based on a value of $10 per
share.

At December 1, 2000, all 37,500 outstanding
shares of Preferred Stock were converted into
300,000 shares of common stock, plus 75,000
warrants expiring three years from any
registration of the Company's common stock with
the Securities and Exchange Commission. Each
share of Preferred Stock was entitled to one
vote and was redeemable into eight shares of
common stock plus two warrants to purchase two
additional shares of common stock at $2.50 per
share. The Preferred Stock had a 10% cumulative
preferred dividend payable by issuance of one
share of common stock for each ten shares of
Preferred Stock. Upon conversion, the Company
also paid dividends to the holders of the
Preferred Stock by issuance of 3,500 shares of
common stock. After the conversion, the shares
of Preferred Stock were retired.

Warrants

As of and during the year ended March 31, 2001,
the Company issued and has outstanding 475,000
warrants to purchase an equal number of shares
of common stock. No warrants were issued during
the year ended March 31, 2000. Of the warrants
issued, 100,000 warrants were for compensation
to an employee, 300,000 warrants were for

F-17

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)

Warrants (Continued)

consulting services and 75,000 warrants were
issued relating to the conversion of Preferred
Stock referred to above. These warrants are
immediately exercisable at prices ranging from
$1.50 to $2.50 per share and expire three years
from any registration of the Company's common
stock with the Securities and Exchange
Commission. The weighted average exercise price
of these warrants is approximately $2.29 per
warrant. The exercise of all warrants would
result in total additional proceeds to the
Company, before expenses, of approximately
$1,087,500.

The fair value of warrants at the dates of grant
were estimated using the Black Scholes option
price calculation model using the following
assumptions: expected life of three years, a
risk free interest rate of 5%, a volatility of
...0001 and a dividend yield of 0%. The weighted
average fair value of warrants granted during
the year ended March 31, 2001 was approximately
$0.01 per warrant.

During the year ended March 31, 2001, the fair
market value of these warrants when granted was
determined to be approximately $4,750.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Advertising and Promotion Agreements

On May 31, 2000, the Company entered into a
product license agreement with General Media
Communications, Inc. ("General Media") for an
exclusive license of the Penthouse marks in the
production, manufacture and distribution of 90
limited edition "Penthouse Magazine 30th
Anniversary Motorcycles" by the Company and
related accessory items that include leather
jackets, gloves, goggles, helmets and bandanas.
As of March 31, 2001 one motorcycle has been
sold under this production license agreement and
we have sold no accessory items.

F-18
80

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 10 - COMMITMENTS AND CONTINGENCIES
(CONTINUED)

Advertising and Promotion Agreements (Continued)

Upon execution of the agreement, the Company
agreed to a $150,000 license fee, which was
fully paid during the year ended March 31, 2001,
and to provide one limited edition Penthouse
custom motorcycle which was delivered to General
Media at a cost of $24,487. General Media will
earn a royalty fee to be paid by the Company of
5% of the gross wholesale and/or retail selling
price, based on an average projected sales price
of at least $30,000 per motorcycle. The term of
the agreement commenced on May 31, 2000 and
expires 26 months after commencement.
Additionally, a consultant assisting with the
execution of this product license agreement was
provided a Pure Steel custom motorcycle valued
at $26,432 in exchange for services.

On June 13, 2000, the Company entered into an
advertising and promotion agreement with AZPB
Limited Partnership, (a Delaware partnership) to
promote and advertise the Company's motorcycle
manufacturing business at the ballpark and in
connection with Arizona Diamondbacks (the
"Diamondbacks") professional baseball team. The
Company may use the Diamondback's name and logo
to promote the sale of its products. The
agreement expires December 31, 2003 and the
Company shall pay an annual per season fee of
$15,000 for 2001, $20,000 for 2002 and $25,000
for 2003. Additionally, the Company will
provide one new customized Arizona Diamondback's
Pure Steel motorcycle for each baseball season
covered by the agreement, or a total of four
motorcycles. Total cost to the Company of these
motorcycles is expected to be approximately
$100,000 over the life of the agreement. As of
March 31, 2001, the Company has expensed $21,192
representing the cost of the motorcycle
contributed for the 2000 baseball season.

Leases

The Company leases office space under a
noncancelable operating lease expiring in
January 2002. The lease requires monthly

F-19

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 10 - COMMITMENTS AND CONTINGENCIES
(CONTINUED)

Leases (Continued)

payments of $3,498, plus applicable tax. The
Company has an option to renew the lease for an
additional one-year period under the same terms.
The Company leases equipment under noncancelable
operating leases expiring in various years
through 2003. The aggregate monthly lease
payments are $569.

Future minimum payments under these commitments
are as follows:

Year Ending
March 31,
-----------
2002 $44,921
2003 2,623
-------
$47,544
=======

Lease expense was $65,222 and $69,797 for the
years ended March 31, 2001 and 2000,
respectively, and is included in selling,
general and administrative expenses in the
accompanying financial statements.

NOTE 11 - ECONOMIC DEPENDENCY

A majority of Pure Steel's sales are concentrated
with a few large customers. During the year ended
March 31, 2001, the Company had sales as a
percentage of total revenues to four customers of
29.3%, 26.0%, 11.1% and 10.6%, respectively.
During the year ended March 31, 2000, the Company
had sales as a percentage of total revenues to
three customers of 50.7%, 13.9% and 10.7%,
respectively. At December 31, 2001, the Company
had sales as a percentage of total revenue to two
customers of 40.6% and 10.0%, respectively. At
March 31, 2001 one customer owed Pure Steel
$68,017 representing 96% of accounts receivable at
that date. A loss of one or all of these large
customers or a reduction of the volumes purchased

F-20

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 11 - ECONOMIC DEPENENCY (CONTINUED)

by these customers could have a materially adverse
effect on the future operations of Pure Steel.
There is no assurance that sales to other
customers could be made in volumes comparable to
those volumes sustained by one or more of these
customers in a time period sufficient to prevent a
curtailment of operations.

NOTE 12 - SUBSEQUENT EVENTS

Dealer Advance

Subsequent to March 31, 2001, a verbal agreement
was entered into with Las Vegas Harley-Davidson
("LVHD") whereby LVHD would buy the parts
necessary for the Company to build ten custom
motorcycles. Total cost of parts necessary to
build these motorcycles are estimated to be
approximately $200,000. The Company is to repay
LVHD at a rate of $22,000 per motorcycle as each
motorcycle is built and sold. Repayments to LVHD
began in June 2001.

Floor Plan Financing

In June 2001, the Company received notice from
the financial institution that a dealer had
defaulted on its floor plan financing agreement
(see Note 7). This dealer contributed
approximately 6.4% of Pure Steel's total sales
during each of the years ended March 31, 2001,
and 2000. The Company had no sales to this
dealer during the nine month period ended
December 31, 2001 but the dealer accounted for
12.1% of sales during the nine month period
ended December 31, 2000. The financial
institution requested immediate reimbursements
of $130,000 from the Company for the four
motorcycles, which had been covered by the floor
plan. The Company took possession of the four
motorcycles, and as of December 31, 2001, two
have been resold resulting in revenues of
$62,400 being recorded. The amount collected
was reimbursed to the finance company to reduce
the total amount owed.

F-21

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 12 - SUBSEQUENT EVENTS (CONTINUED)

Floor Plan Financing (Continued)
In addition, the Company repaid approximately
$19,200 from cash flows from operations and
delivered one of the repossessed motorcycles
valued at approximately $30,300 to the financial
institution which they are currently trying to
resell. The financial institution also took
possession of the $75,000 certificate of deposit
which will be released to the Company when the
remaining motorcycles secured by the floor plan
have been sold. At December 31, 2001, there
remains $18,100 due to the financial
institution as a result of the default by this
dealer. The Company does not believe that the
three remaining dealers covered by a floor plan
will default on their obligations to the
financial institution.

On January 2, 2002 the financial institution
terminated its floor plan financing agreement
thus providing no future financing to the
Company's dealers or advances to the Company.
Existing advances provided under the floor plan
will not be affected by this termination and
will allow for repayment terms under the
original agreement as if it remained in affect.
Total sales covered by a floor plan for the
years ended March 31, 2001 and 2000 were
$253,980 and $93,860, respectively. Total sales
covered by a floor plan for the nine month
periods ended December 31, 2001 and 2000 were
$33,850 and $285,245, respectively. Despite the
lack of this source of financing available to
our dealers, sales to these dealers will
continue in the future. The Company is
currently evaluating other floor plan financing
alternatives that can be made available to its
dealers.

As of December 31, 2001, there remains
outstanding $194,220 of advances received by the
Company under the floor plan.

Related Party Advance

During the nine month period ended December 31,
2001, the Company received an advance totaling
$185,000 from a related party with unspecified
repayment terms. Accordingly, this related party
F-22

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

Related Party Advances (Continued)

advance has been recorded as a current
liability. The advance is unsecured and is
being repaid by the Company in monthly
installments of $1,735. As of December 31, 2001
the total amount outstanding is $176,326.

Note Payable - Line of Credit

During the nine month period ended December 31,
2001 this line of credit was fully repaid from
proceeds received from an advance from a related
party. Subsequently, management of the Company
elected to cancel this line of credit.

NOTE 13 - GOING CONCERN

The Company's auditors issued a going concern
opinion in connection with the audit of the
Company's financial statements as of March 31,
2001 due to substantial doubt that the Company can
continue as a going concern unless the Company
obtains additional working capital to fund its
ongoing operations. The accompanying financial
statements have been prepared in conformity with
accounting principles generally accepted in the
United States of America, which contemplate
continuation of Pure Steel as a going concern.
However, for the year ended March 31, 2001, Pure
Steel had a net loss of $449,362, negative working
capital of $455,780, stockholders' deficit of
$153,754, and has experienced a shortage of
working capital which has greatly affected
operations.

In view of this, realization of a major portion
of the assets in the accompanying balance sheet
is dependent upon continued operations of Pure
Steel, which in turn is dependent upon the
success of Pure Steel's future operations.
Management is attempting to obtain new capital
funding which will strengthen its balance sheet
and is revising its operating requirements which
will result in increased operating cash flows.
At this time, the two founding shareholders have
forgone compensation and overhead expenses have
been reduced to minimize cash uses. Customer
deposits are most often required at the time an

F-23

PURE STEEL CUSTOM CYCLES, INC.
Notes to Financial Statements

NOTE 13 - GOING CONCERN (CONTINUED)

order is taken. These deposits are used to
supply parts as needed and fund minimal overhead
expenses. Management believes that actions
presently being taken will provide the
opportunity for Pure Steel to continue as a
going concern.

Historically, working capital needs have been
funded by cash flows from operations, private
placements of preferred stock, issuance of
common stock for goods and services, floor plan
financing and borrowings from major shareholders
of the Company and, from time to time, by
advances from related parties and customers.
There is no assurance that working capital will
continue to be made available from these sources
or under similar terms in amounts sufficient
enough to ensure that the Company will be able
to continue its operations. Should the Company
not be able to find new capital funding and/or
under reasonable terms, management would attempt
to downsize the business so as to enable the
Company to survive and grow at a slower pace or
may be required to discontinue its operations.

F-24

PART II
INFORMATION NOT REQUIRED BY PROSPECTUS

Item 24. Indemnification of Officers and
Directors.

The bylaws of Pure Steel provides that a director
of the registrant shall have no personal liability
to the Registrant or its stockholders for monetary
damages for breach of a fiduciary duty as a
director, except for liability (a) for any breach
of the director's duty of loyalty to the Registrant
or its stockholders, (b) for acts and omissions not
in good faith or which involve intentional
misconduct or a knowing violation of law, and (c)
pursuant to Arizona law for any transaction from
which the director derived an improper personal
benefit. Registrant's bylaws exculpates and
indemnifies the directors, officers, employees, and
agents of the registrant from and against certain
liabilities. Further the bylaws also provides that
the Registrant shall indemnify to the full extent
permitted under Delaware law any director, officer
employee or agent of Registrant who has served as a
director, officer, employee or agent of the
Registrant or, at the Registrant's request, has
served as a director, officer, employee or agent of
another corporation, partnership, joint venture,
trust or other enterprise.

INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING
PURE STEEL FOR LIABILITIES ARISING UNDER THE
SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND
EXCHANGE COMMISSION AND IS THEREFORE UNENFORCEABLE.

Item 25. Other Expenses of Issuance and
Distribution.

Other expenses in connection with this offering
that will be paid by Pure Steel are estimated to be
substantially as follows:
Amount Payable
Item By Pure Steel
<s> <c>
SEC Registration Fees $ 809.85
Printing and Engraving Fees $2,500.00
Legal Fees and Expenses $18,000.00
Accounting Fees and Expenses $35,700.00
Transfer Agent's Fees $1,500.00
Miscellaneous $2,452.65
----------
Total $60,962.50
==========

Item 26. Recent Sales of Unregistered Securities.

In the second quarter of fiscal year 2000, Pure
Steel issued 10,000 shares of Class A preferred
stock to Peter Minion, a non-affiliate for
consideration of $10 per Class A preferred share.

The above issuance of Class A preferred stock was
made to a sophisticated individual pursuant to an
exemption from registration under Sec. 4(2) of the
Securities Act of 1933.

Additionally, in the third quarter of fiscal year
2000, 24,000 Class A preferred shares were issued
to Correct Alliance, an unaffiliated consultant for
services rendered related to the private placement
of Pure Steel securities, and 1,000 Class A
preferred shares to Glenford Griffin. These Class
A Preferred Shares were issued under section 4(2)
to a sophisticated investor that had an ongoing
relationship with Pure Steel.

The above issuance of Class A preferred stock was
made to sophisticated individuals pursuant to an
exemption from registration under Sec. 4(2) of the
Securities Act of 1933.

In the third quarter of fiscal year 2000 and the
first quarter of 2001, 145,000 common shares were
issued to the following employees and other
individuals for services rendered to Pure Steel.

David Schoelles 50,000
Mary Hidalgo 50,000
Douglas Twineham 25,000
Bruce Garfunkel 20,000

The above issuances of common shares were made to
sophisticated individuals pursuant to an exemption
from registration under Sec. 4(2) of the Securities
Act of 1933.

In the first quarter of fiscal year 2001, Pure
Steel issued 2,500 Class A Preferred shares at $10
per Class A preferred share to Donald Allio.

The above issuance of Class A preferred stock was
made to a sophisticated individual pursuant to an
exemption from registration under Sec. 4(2) of the
Securities Act of 1933.

In December 2000, Pure Steel issued 300,000 common
shares upon conversion of all of the outstanding
Class A preferred stock.

During the second quarter of the year ended March
31, 2001, the Company issued 475,000 warrants to
purchase an equal number of shares of common stock.
Of the warrants issued, 100,000 warrants were for
compensation to David Schoelles, an employee,
300,000 warrants were for consulting services by
Gerard Dente, Tsanhos Image Productions, LLC and
Bruce Garfunkel, and 75,000 warrants were issued
relating to the conversion of preferred stock
referred to above. These warrants are immediately
exercisable at prices ranging from $1.50 to $2.50
per share and expire three years from any
registration of Pure Steel's common stock with the
Securities and Exchange Commission.

Item 27. Exhibit Index.

(1) Not Applicable
(2) Not Applicable
(3.1) Articles of Incorporation
(3.2) Bylaws
(4) Specimen certificate for common stock
(5) Consent and Opinion of Jody M. Walker regarding
legality of securities registered under this
Registration Statement and to the
references to such attorney in the prospectus filed
as part of this Registration Statement
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10) Product License Agreement between Pure Steel and
General Media Communications, Inc. dated May 31,
2000
(10.1) Advertising and Promotion Agreement between Pure
Steel, AZPB Limited Partnership and AZPB REM
Limited Partnership dated June 13, 2000
(10.2) Floor Plan Financing Agreement
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Letter on change in certifying
accountant
(17) Not Applicable
(18) Not Applicable
(19) Not Applicable
(20) Not Applicable
(21) Not Applicable
(22) Not Applicable

(23) Consent of Pannell Kerr Forster
of Texas, P.C., Certified
Public Accountants
(24) Not Applicable
(25) Not Applicable
(26) Not Applicable
(27) Not Applicable
(28) Not Applicable
(99) Private placement memorandum
dated December 7, 1999 and
corresponding subscription
agreement

Item 28. Undertaking.

The undersigned registrant undertakes:

(a)(1) To file, during any period in which offers
or sales are being made, a post-effective amendment
to this Registration Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the formation set forth in the registration
statement.

(iii) To include any additional or changed material
information on the plan of distribution.

(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be
a new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(3) To remove from registration by means of a
post-effective amendment any of the securities
being registered that remain unsold at the
termination of the offering.

(b) Delivery of Certificates. The undersigned
registrant undertakes to provide to the Transfer
Agent at the closing, certificates in such
denominations and registered in such names as are
required by the Transfer Agent to permit prompt
delivery to each purchaser.

(c) Indemnification. Insofar as indemnification
for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to
the provisions set forth in Pure Steel's articles
of incorporation or otherwise, the registrant has
been advised that in the opinion of the Securities
and Exchange Commission, 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 securities being registered, 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.

SIGNATURES

In accordance with the requirements of the
Securities Act of 1933, the registrant certifies
that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-
2 and authorized this registration statement to be
signed on its behalf by the undersigned, in the
City of Phoenix, State of Arizona on the 15th day
of April, 2002.

Pure Steel Custom Cycles, Inc.

/s/ Glenford Griffin
- -----------------------------
By Glenford Griffin
President

In accordance with the requirements of the
Securities Act of 1933, this registration statement
was signed by the following persons in the
capacities and on the dates stated.

Signature Capacity Date

/s/Glenford Griffin Chief Executive Officer April 15, 2002
- ----------------------- Chief Financial Officer,
Glenford Griffin Controller, Director

/s/Oscar Coca Vice President/Director April 15, 2002
- -----------------------
Oscar Coca

/s/Daniel Elzy Director April 15, 2002
- -----------------------
Daniel Elzy