SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                            Annual Report Pursuant to
                       the Securities Exchange Act of 1934

                         Fiscal Year Ended June 30, 2002

                        Commission file number 000-49667

                                  WARP 9, INC.
                            ------------------------
             (Exact name of registrant as specified in its charter)

        Delaware                                        77-0522115
        --------                                        ----------
(State of incorporation)                                (I.R.S. Employer
                                                        Identification No.)

               6144 Calle Real, Suite 200, Santa Barbara, CA 93117
              -----------------------------------------------------
               (Address of principal executive offices) (Zip Code)

            Registrant's telephone number, including area code: None

           Securities registered pursuant to Section 12(g) of the Act:

                                  Common Stock
                               Title of each class

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days. Yes X No

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X

State issuer's revenues for its most recent fiscal year. $0

There were 10,323,094 shares of the Registrant's common stock outstanding as of
June 30, 2002.

The aggregate market value of the 1,407,081 shares of voting common stock held
by nonaffiliates of the Registrant is approximately  $0 on June 30, 2002.


<PAGE>



                                TABLE OF CONTENTS

PART I

         Item 1. Description of Business
         Item 2. Description of Property
         Item 3. Legal Proceedings
         Item 4. Submission of Matters to a Vote of Security Holders

PART II

         Item 5. Market for Common Equity and Related Stockholder Matters
         Item 6. Management's Discussion and Analysis or Plan of Operation
         Item 7. Financial Statements
         Item 8. Changes in and Disagreements With Accountants on Accounting
                  and Financial Disclosure

PART III

         Item 9. Directors, Executive Officers, Promoters and Control Persons;
                   Compliance with Section 16(a) of the Exchange Act
         Item 10. Executive Compensation
         Item 11. Security Ownership of Certain Beneficial Owners and Management
         Item 12. Certain Relationships and Related Transactions
         Item 13. Exhibits and Reports on Form 8-K

SIGNATURES




<PAGE>



                                     PART I

Item 1.  DESCRIPTION OF BUSINESS
         -----------------------

         General


General

Warp 9, Inc. ("Warp 9" or the "Company") has developed a mobile data platform
designed to alter the way many forms of mobile transactions are conducted in the
future. The Warp 9 eCapsule(TM) Platform, based on the Company's proprietary
eCapsule technology (patent filed on January 2, 2001) can be used to rapidly
create, deploy and manage mobile data applications that connect desktop
computers, laptop computers, smart cell phones, personal digital assistants
(PDAs) and wireless transaction terminals. Applications for the Company's
proprietary technology include mobile messaging, mobile commerce, mobile access
to corporate and personal data and the mobile Internet.

                                 Company History

Warp 9 Technologies, LLC, a California limited liability company ("Warp 9 LLC"),
was founded in February 1996 by Jon Lei and Roger Endo to provide Internet
products and services. In May 1996, Warp 9 LLC launched SBnet, an Internet
service provider dedicated to providing high-quality Internet access and
customer service. Warp 9 LLC began developing its core e-commerce business in
late 1996 and introduced the Warp 9 Internet Commerce System to its first major
customer in March 1997. In July 1998, Warp 9 LLC sold its SBnet consumer dial-up
subscriber accounts to MindSpring Enterprises, Inc. (merged with Earthlink,
NASDAQ: "ELNK"), a national Internet service provider, in order to allow Warp 9
LLC to focus its resources on higher margin business accounts and on building
the Warp 9 ICS business. Warp 9 LLC retained approximately 200 business accounts
that the Company continues to service under the SBnet name.

On September 30, 1999, Warp 9 LLC was reorganized and merged into eCommerceland,
Inc. ("eCommerceland"), a Delaware corporation formed on August 27, 1999. As a
result of that reorganization, eCommerceland succeeded to all the rights,
assets, liabilities, and obligations of Warp 9 LLC. On December 21, 2000,
eCommerceland changed its corporate name to Warp 9, Inc.

<PAGE>


                             The Company's Business

The Company's strategy is to provide a breakthrough solution for the problem
posed by the mobile use of the wireless Internet.

The Problem

The wireless/mobile world is filled with challenges that impede the rapid
adoption of mobile data applications. For example, most devices have small
amounts of application memory, which means applications need to be lightweight
and transient - i.e. a coupon comes into a phone, stays in the phone, then it
should leave when it's redeemed. Another problem is that there are no
standardized operating systems for all devices - in order to deploy an
application you will need to support J2ME, BREW, PalmOS, PocketPC, and Symbian,
at least. In addition, coverage problems pose a big challenge to deploying
robust mobile data applications. On top of that, mobile devices sometimes
operate over the Internet, sometimes Bluetooth, and sometimes Infrared.

Existing client/server platforms approach this problem by simply trying to map
the Web experience onto mobile devices. Unfortunately, this approach falls short
in the areas of ad-hoc user interaction, operational scalability, security, and
cost. Most platforms require that every device be connected to a server on the
Internet - which is economically unattractive.

The Solution

Warp 9 offers the only solution that elegantly addresses these problems. The
Warp 9 eCapsule Platform relies on the use of lightweight mobile agent
technology to give the data intelligence to solve its own problems. eCapsules
can autonomously traverse through different networks with little or no help from
a central server while transparently addressing bad connectivity and security
issues on their own. eCapsules can migrate from device to device or server to
server and perform work without continuous interaction with the users. The end
result is a reduced number of clicks required to complete a transaction or task,
which will lead to faster adoption of mobile data services. With eCapsule
technology, paying a parking meter is as simple as parking the car -- the
parking meter doesn't even have to be connected to some wireless carrier - all
that is required is Infrared or Bluetooth. The eCapsule Platform's distributed
peer-to-peer architecture drastically reduces the cost for enterprises that
deploy mobile data applications. Warp 9 provides a universal platform that
essentially consolidates the problem of developing and deploying on a myriad of
devices and networks into a single task of creating eCapsules.

<PAGE>

Working Prototype

On September 19, 2001, Warp 9 demonstrated a working prototype of its
breakthrough eCapsule mobile data technology at the Santa Barbara Business
Alliance Executive Roundtable held at the Montecito Country Club, in Montecito,
California. Over 100 members of the business and technology community were able
to see an actual demonstration of an eCapsule containing a mobile message that
instantly roamed throughout the banquet hall from a laptop computer to an i85s
Nextel Java cell phone to a Palm V wireless PDA. The Company's prototype also
runs on a Jornada 540, RedHat Linux, and MSFT Windows.

On January 31, 2002, Warp 9, in conjunction with a strategic partner in the
vending industry, demonstrated a working prototype of a next generation vending
machine based on embedded eCapsule technology. An eCapsule was sent from a
user's handheld device to the vending machine's embedded computer that then
actuates all the proper switches to release a can of soda. Warp 9 intends to
explore and exploit application opportunities in the vending industry using
eCapsule technology.  This strategic partner is a start up company called
MachineTalker, Inc. located in Santa Barbara, CA.  There are no formal agree-
ments or contracts between the parties.  The parties are currently negotiating
an agreement.

Other Applications for Warp 9 eCapsule Mobile Data Technology

Warp 9 will use its eCapsule technology to facilitate the growth of the mobile
data economy. Despite the fall of the dot-com world, management believes the new
Internet economy will be far more mobile and will embody computer-to-Web,
wireless device-to-Web and wireless device-to-device transactions. Warp 9's
eCapsule mobile data technology is designed to serve an almost limitless number
of applications, including:

Mobile Roaming Messaging

Using eCapsule technology, a peer-to-peer roaming instant messaging application
can be deployed. A message in the form of e-mail, fax or voice can be
encapsulated in an eCapsule along with intelligence to roam through a network of
personal devices, such as smart cell phones, PDAs, computers and TV set-top
boxes, delivering a message to the recipient in real-time. Once the recipient is
located, a normal instant message session can take place with either text or
multimedia content. This mode of messaging is fundamentally different and
natural in that the message comes to the user.

Mobile Alerts

An eCapsuleAlert is an application based on the Warp 9 eCapsule Platform that
dramatically enhances the mobile auctioning experience by facilitating 1-click
interactive alerts using smart devices. An eCapsuleAlert contains all the data
and logic necessary to find and interact with the user in real time, securely
and over multiple devices. In short, eCapsuleAlerts are secure, mobile,
multi-channel, actionable alerts. The use of eCapsuleAlerts offers a highly
secure, mobile solution when a timely reaction to a particular event becomes a
critical part of a business or consumer process. Target customers include
auction systems, enterprise information technology and financial services.

Mobile Commerce

Large manufacturers and retail chains spend enormous sums of money advertising
their products. Their challenge is to turn prospects into buyers. To solve this
problem, the seller could mention a money saving coupon during its TV
commercials. A TV viewer with a Bluetooth or infrared-enabled set-top box could
use his or her Web-enabled cell phone to receive an eCapsule containing the
seller's digital coupon good for a discount on a specific item if presented at a
participating store within 48 hours. The eCapsule would be "saved" -- "sleeping"
in the user's device. At the checkout counter, the user could redeem the saved
eCapsule by pointing his or her Web-enabled cell phone at the Bluetooth or
infrared-enabled cash register and pay the reduced price.

<PAGE>

Mobile Vending

Wireless mobile vending solutions today require the physical machine to have a
live Internet connection that makes mass deployment very difficult and costly.
Using eCapsule technology, a purchase transaction can be completed with
end-to-end security by allowing the vending machine to share the connection on
the smart phone or PDA using an Infrared or Bluetooth connection. The eCapsule
can fully encapsulate the payment transaction from the vending machine, to the
handheld device, to the Internet and back. On debit account deployment, it would
simply debit the amount on the handheld device. This approach requires minimal
cost and modification to existing vending machines and allows for ubiquitous
mobile vending.

Mobile Corporate Data Access

Rather than force-fitting every mobile application into a client/server solution
such as enterprise portals, corporate information technology developers can
design autonomous eCapsule software agents to perform dedicated tasks securely
without compromising the integrity of existing systems. For example, an eCapsule
can be easily designed to allow a doctor to retrieve a patient's X-Ray from a
central server anywhere and forward it to a TV screen nearby; all with his or
her wireless handheld device.

Mobile Marketing

An advertiser can encapsulate a "10% off" coupon in an eCapsule and load it into
a Bluetooth access point on the side of a bus. A mobile user on the street could
save the coupon in his smart phone, then redeem it at a retail store by simply
pointing his or her phone at the cash register. Likewise, an advertiser can push
eCapsule coupons over a carrier's network directly into the user's smart phone.

Mobile Personal Information Manager (PIM)

An eCapsule containing a digital business card could be sent by an executive's
assistant into his or her cell phone's address book, even while the executive is
on the phone. After completing the first call, the executive could simply access
the contact needed and make the second call. Because the eCapsule business card
has intelligence, it can then roam through the executive's other PIM devices and
synchronize those contact databases as well with the new contact record.

Competitive Advantages

Unlike most competitive offerings that are strictly client/server based, the
Warp 9 eCapsule Platform has been built from the ground up based on distributed
and peer-to-peer architecture that mirrors the nature of mobile devices and
networks. The eCapsule Platform possesses the following distinct competitive
advantages:

o       Patent pending eCapsule approach to solving mobile data problems
o       Fewer number of clicks to complete transactions or tasks
o       Roaming feature gives an application inherent presence detection and
        management without extra hardware or software
o       High grade security through  digital signing of eCapsules with automatic
        establishment of secured trusted networks
o       Lower total cost of ownership by reducing device side software upgrades
        and allowing for almost zero-cost application version upgrades
o       Addresses both device-to-device as well as device-to-server transactions

<PAGE>

Revenue Model

The Company's management believes that most of the Company's revenues will come
from the license of its eCapsule Platform, customer training and support, and
software upgrades to Wireless Carriers, Enterprises, and Independent Software
Vendors. The Company's management has decided to use a deployment pricing model
based on the number of user devices. Customers will be asked to pay a one-time
license fee for each device that uses an eCapsule Plugin. The customer will
receive all software development and deployment software components associated
with the eCapsule Platform. Customers will then be invited to subscribe to an
ongoing service plan (optional) that would provide training, support,
maintenance and software upgrades, and payable monthly per device.

Business Development Opportunities

The Company's sales strategy is to develop relationships with channel partners
such as independent software vendors, systems integrators, information
technology consultants, device manufacturers (OEMs), wireless application
service providers and interactive agencies.

The eCapsule Platform is in the post-prototype phase and the Company is actively
pursuing business development opportunities with the following goals:

o     Get the eCapsule  technology into the  marketplace  in the  form of a high
      value application
o     Co-develop and co-invest in pilot application and deployments
o     Refine the eCapsule Platform through pilot programs and customer feedback
o     Establish strategic partners in key markets and countries


                             Proprietary Technology

Patent Application #1: Self-Contained Business Transaction Capsules was invented
by Jonathan Lei.  All rights to this patent were assigned to the Company under
the terms of Mr. Lei's employment agreement.  Mr. Lei did not receive compensa-
tion for the assignment.  Patent Application #2 - Utilizing Mobile Devices as a
Communication Proxy for Non-Connected Terminals was invented by Jonathan Lei and
Brian Fox.  All rights to this patent were assigned to the Company under the
terms of Mr. Lei's and Mr. Fox's employment agreements. Neither Mr. Lei nor Mr.
Fox received compensation for the assignment.

An application  for a U.S. patent in the name of Jonathan L. Lei and assigned to
Warp  9  for   Self-Contained   Business   Transaction   Capsules   (Docket  No.
23803-250394)  was filed on  January  2,  2001,  by the  Company's  intellectual
property counsel, Pillsbury Winthrop, LLP.

A self-contained business transaction capsule, or eCapsule, is a small
electronic capsule that contains all the necessary data and logic to complete a
business transaction. The eCapsule is a "thin" and "lightweight" small
computer-readable file that is device independent. The eCapsule allows an online
merchant, for example, to encapsulate an individual product or offer into an
intelligent object that is capable of completing entire transactions. The
eCapsule includes data about the product or service being provided, such as the
price, image, and a textual description of the product or service (a transaction
description). The eCapsule also includes transaction logic or business logic
capable of completing the transaction, such as billing and shipping information,
order routing information, order status information, shipping status
information, and any other transaction rules necessary to process the
transaction. Moreover, the eCapsule is adapted to be broadcasted to, and stored
on, a portable electronic device, such as a mobile wireless-enabled device, like
a cellular telephone, a personal digital assistant (PDA) or a laptop computer.

Patent  Application #2:  Utilizing  Mobile Devices As A Communication  Proxy For
Non-Connected Terminals

An application for a U.S. patent in the name of Jonathan L. Lei and Brian J. Fox
and assigned to Warp 9 for Utilizing Mobile Devices As A Communication Proxy For
Non-Connected  Terminals  (Docket No.  23803-277301)  was filed on February  21,
2002, by the Company's intellectual property counsel, Pillsbury Winthrop, LLP.

<PAGE>

This invention is a method and system in which terminals, appliances and
machines without dedicated Internet connections, can complete Internet based
transactions by using the connection on the user's handheld device. An example
of an application of this invention is a vending machine that can conduct
electronic payments without having an internal wireless device that communicates
with a server on the Internet. Existing solutions require the vending machine to
be equipped with an internal cell phone. Using this invention, the vending
machine can communicate with the consumer's handheld device via Infrared or
Bluetooth and simply uses the handheld device as the conduit to the Internet for
remote payment processing. This invention also covers many other applications
including secured doorways, factory floors and smart data acquisition sensors.
This invention can also be used in combination with eCapsule technology to
facilitate a number of eCapsule solutions.

                           Other Products and Services

Warp 9 ICS

The Company began developing its core e-commerce business in late 1996 and
introduced the Warp 9 Internet Commerce System ("Warp 9 ICS") to its first major
customer in 1997. The Warp 9 ICS is a proprietary and extensible system that
enables any business to expand its operation to the Internet with minimal
investment, overhead and risk. A business does not need to invest in new
hardware or software in order to utilize the Warp 9 ICS, because the product is
offered as a fully managed online catalog solution that includes hosting on the
Warp 9 Web server. It provides project management, development, and integration
into a company's existing business processes. The Company has packaged the
process and technology required for complete e-commerce site deployment.

Warp 9 EMS

Warp 9 EMS is a web-based e-mail campaign and list management system designed
for high performance and reliability. EMS's sophisticated technology will allow
marketers to send targeted e-mail campaigns that help grow, retain and maximize
the lifetime value of their customers. Through content personalization and list
segmentation, campaign efforts will result in higher response rates, higher
conversion rates and improved customer loyalty. Warp 9 EMS enables unprecedented
response rates that are not achievable through traditional forms of direct
marketing.

Revenue Model

The Company charges its customers a monthly subscription fee to the Warp 9 ICS
and Warp 9 EMS product using an application service provider (ASP) model. Warp 9
ICS is priced between $500/month to $5,000/month depending on the size of the
client's e-commerce website. Warp 9 EMS is priced between $100/month to
$2,000/month in addition to a price per email sent.

A customer has a high level of incentive to continue the Warp 9 ICS contract
because the Company retains ownership of the underlying technology, source code,
software programs and scripts that give the web site its functionality. A
customer's alternative is to start again from scratch, spending at least
$100,000 to build a comparable web site elsewhere (plus on-going maintenance),
or cancel its online presence altogether. The Company believes most customers
will renew. Likewise, a customer has a high level of incentive to continue the
Warp 9 EMS product, if marketing is part of its budget, because segmented e-mail
lists cannot be downloaded from EMS unless it pays the $2,000/month fee.
Periodic feature enhancements keep customers on the cutting edge of e-mail
marketing strategies.

Competitiors

The Company will be subject to intense competition. Several large companies,
with greater financial and managerial resources than the Company, and greater
name recognition are offering mobile data solutions, and the competition is
intense for such a lucrative market.

Warp 9 eCapsule mobile data technology is a very unique and innovative approach
to solving the problem of rapidly developing, deploying and managing mobile data
applications. Unlike most competitive platforms that are strictly client/server
based, the Warp 9 eCapsule Platform has been built from the ground up based on
distributed and peer-to-peer architecture that mirrors the nature of mobile
devices and networks. In fact, Warp 9's eCapsule technology extends the capabil-
ities of client/server solutions.

<PAGE>

The Company's management has not been able to identify any offerings from any
companies that can be considered direct competition to the Warp eCapsule
Platform. While certain market overlaps exist between the Company's eCapsule
technology and other solutions, the Warp 9 eCapsule Platform is dsigned to
provide unique competitive advantages.

Companies that Warp 9 may compete with in the mobile data market include:

ViaFone

ViaFone's flagship product, ViaFone OneBridge(TM), delivers voice and wireless
data applications across all popular communications devices -- land-line,
cellular and WAP-enabled phones, PocketPC and Palm handhelds, and RIM BlackBerry
pagers. ViaFone OneBridge, which integrates with e-business and legacy systems,
enables enterprises to extend workplace productivity beyond the arbitrary
boundaries of walls, buildings, and wires. ViaFone OneBridge has a
database-driven architecture that runs on any Java application server. It was
built on a solid foundation of industry software standards including Java,
Extensible Markup Language (XML), and Extensible Stylesheet Language (XSL). At
its core is an open, XML-based framework allowing automatic, device-specific
rendering over any mobile device.

Brience

Brience 3.0 - Mobile Processing Server is a highly scalable Java and XML based
software that operates on a wide range of hardware platforms and supports a
multitude of relational databases, legacy systems, packaged software or
infrastructure software from leaders such as Openwave, Nokia, Oracle, IBM, BEA,
Broadvision, Tibco, Siebel, PeopleSoft, SAP, ATG and several others. The
software platform has support for over 200+ mobile devices that are commercially
available and operate seamlessly across all major service provider networks.

BroadBeam

BroadBeam provides a wireless software platform called Axio with the following
components:

o       ExpressQ - Wireless messaging server.
o       ExpressWeb - Wireless content server.
o       Applications Connectors - The Axio platform offers a number of back-end
        connectors to enterprise applications.
o       Development Tools - Broadbeam offers Java, C++ and XML interfaces to
        enable rapid application development using familiar programming tools.

BroadBeam is a respected big player in "transcoding" technology. Its solution is
highly client/server based, very much like Brience with the exception of its
advanced store-and-forward messaging server, ExpressQ.

Bonita Software

Bonita Software is a startup, providing Java-based client/server technologies
and applications to wireless service providers and device manufacturers. Its
platform is composed of the following components:

o  ToGo Client Engine - A Java 2 software that provides data s haring and task
   switching features that enable greater functionality and ease-of-use than
   standalone J2ME/MIDP applications.

o  ToGo Server Engine - Java 2 Enterprise Edition software that sits on the
   server side and handles incoming commands to complete operations the client
   side requests.

<PAGE>

ThinAirApps

ThinAirApps offers a product called ThinAir Server Platform that is
client/server based over a real-time live connection between the client and the
server. The server provides a rich execution environment, capable of supporting
access from many different types of wireless devices, and allowing applications
to serve data and interact with the users of these devices.

ZyDant

ZyDant is a new start-up company working on a product called ZAD. ZAD is
currently running on the Palm OS, on the Palm Vx and VIIx devices. ZyDant is
working with a strategic partner preparing to enter the pilot project stage.
While ZAD is currently targeted at the rapidly growing wireless PDA marketplace,
Zydant may choose to extend ZAD to other remote or wireless devices in the
future, like selected cell phones, handheld computers, and the online desktop or
laptop PC.

MobileSys

MobileSys is a leading wireless infrastructure services provider that includes a
global wireless network and wireless messaging software and integrations for
major enterprise applications. This company's primary product offerings include:

o   MobileSys MX - an extremely reliable, highly scalable 2-way wireless messag-
    ing engine that can be integrated with mission-critical, enterprise applica-
    tions.

o   The MobileSys Network(TM) - a global wireless data network that links enter-
    prise applications, ASPs, and eBusinesses with employees, customers, and
    partners.

                               Marketing Strategy

The Company's marketing strategy is to create a favorable environment to sell
its Warp 9 eCapsule Platform. The Company intends to enhance, promote and
support the fact that the Warp 9 eCapsule mobile data technology is the most
complete and comprehensive solution available in the marketplace for mobile
transactions.

In order to create a favorable environment for sales, the Company plans to
undertake advertising and promotion efforts.  These efforts will be outsourced
and will require the services of an advertising firm and public relations firm.
The Company plans to interview various firms and select those most capable of
assisting the Company with comprehensive advertising and promotion plans. At
this time, the company does not intend to hire additional employees to undertake
these efforts.


                                 Sales Strategy

After creating a high level of perceived value and building significant demand
for sales through its marketing campaign, the Company intends to aggressively
sell the Warp 9 eCapsule Platform in the U.S. International sales will follow
after achieving initial success in the domestic marketplace.

In its marketing campaign, the Company plans to stress product and service
differentiation, value proposition, and position as follows:

Product and Service Differentiation
-----------------------------------

o  Mobile agent software can travel autonomously from device to device
o  Allows for the use of diverse types of wireless smart devices
o  Vast array of features to easily deploy mobile applications
o  Highly scalable due to peer-to-peer and mobile agent architecture
o  High-grade security

<PAGE>

Value Proposition
-----------------

The Company's value proposition is simple:  The Warp 9 eCapsule Platform allows
business to easily create, deploy, and manage data applications for mobile smart
devices at a reasonable cost.

Positioning
-----------

Warp 9 can be positioned as offering the superior solution for mobile data
transactions.  The company's unique advantage is that it can offer a complete
mobile data solution that is elegant, efficient, and scalable.  It is based on
the fundamental concept of "intelligent product encapsulation" combined with the
distributed nature of the wireless network.  The Company can reposition its
competitors by demonstrating that their offerings are inadequate, too costly,
and for the most part, simply based on old technology.

International Sales
-------------------

The Company does not plan to undertake international sales until approximately
January 1, 2004.  The Company will seek strategic partnerships to accomplish
international sales.

Sales Margin Structure

"Sales margin structure" represents the discounts from the list price that the
Company expects to offer through various channels of distribution.  These
channels of distribution are expected to be: A) Direct Sales to End Users
(executive sales and the Company's own sales force), B) Channel partners and/or
Certified Integration Partners, and C) Manufacturers' Representatives.  The
Company does not currently have any sales agreements in place.  The Company's
management intends to direct most of its selling efforts toward recruiting
channel partners and/or certified integration partners.  Accordingly, the
Company expects that a majority of its future sales will be derived from these
sources.

The Company's management believes that the majority of its sales will be derived
from channel partners and certified integration partners. As a result, the sales
margin structure must be these independent organizations.

Direct Sales

   o Direct Sales- Full suggested list price.

   o Channel Partners/Certified Integration Partners Sales - 40% off suggested
     list price.

   o Manufacturer's Representatives - 10% commission


<PAGE>

Target Market Segments

The Company has no customers at this time.

The Company's management has identified the following primary target market
segments for the Warp 9 eCapsule Platform:

        o   Wireless Carriers
        o   Enterprises
        o   Independent Software Vendors
        o   Device Manufacturers and Embedded Systems Integrators

The D&B/iMarket numbers provided for small, mid-sized, and large companies
include all companies in the U.S. with at least 50 employees, not just the four
types of companies described in the target aret bullet point list.  "Enterprise"
encompasses larger corporations, non-profit institutions, and government bodies.

In developing its sales  forecast the Company's  management has divided the U.S.
market into the following end user segments:

Small Customers

According to  D&B/iMarket  there are 448,311  companies in the U.S.  with 50-499
employees (derived fromt he D&B/iMarket Marketplace database of U.S. companies
as of October 2001.

Mid-Size Customers

According to D&B/iMarket  there are 25,925  companies in the U.S. with 500-4,999
employees.

Large Customers

According to D&B/iMarket  there are 913 companies in the U.S. with 5,000 or more
employees.


                              Distribution Channels

The Warp 9 eCapsule Platform is a software development and deployment system
with many applications.  The eCapsule Platform by itself is not a solution to
any particular vertical market problem.  The Company plans to create partner-
ships with system integrators in various vertical market segments and have them
license the eCapsule Platform for creating mobile data applications in the
respective industries they serve.  For example, the Company might work with a
vending machine systems integrator to deliver wireless vending solutions based
on eCapsule technology.

The Company plans to sell the Warp 9 eCapsule Platform through several channels
of distribution, including:

Direct Sales to End Users

The Company's policy is to sell directly to end-users only when other channels
of distribution are unavailable. The Company's management expects that direct
sales will occur most often with smaller customers.

<PAGE>

Channel Partners and/or Certified Integration Partners

The Company plans to identify a number of independent organizations that may
serve as channel partners and or certified integration partners. These
organizations are likely to have well-established relationships with mid-size to
large size customers. Many may also provide specific vertical market
applications.

The Company's requirements for channel partners and certified integration
partners include: established branding, established market segment, solid
reputation, high volume transactions and independent marketing and services
organizations.

Executive Sales

Because many of Warp 9's large customers will tend to be top corporate managers,
it is important that its Company president and senior managers present its
products and services to its customers.

Field Sales Force

The majority of the Company's selling efforts to large accounts will be handled
internally through its field sales force. Warp 9 has chosen to use a direct
sales force because its large accounts require considerable customer education
and post-sales support -- directly from the Company. The Company's price points,
pricing structure and profits are such that its cost of sales warrants a
"person-to-person" selling strategy.

Manufacturers' Representatives

The Company can supplement its own field sales force by entering into agreements
with manufacturers' representatives. Because manufacturers' representatives
carry several product/service lines that are compatible with the Company's
products and services, Warp 9 plans to select manufacturers representatives
carrying complementary and compatible products and services, as well as
manufacturers' representatives that sell dissimilar products and services yet
ones that are appropriate to their customers' customer.

Telemarketing

The Company plans to use a telemarketing service to perform the following
functions:

o       Provide outside sales support
o       Respond to inquiries
o       Generate new sales leads

The Company intends to use outbound telemarketing to sell directly to its target
market segments in the U.S. Specifically, the Company plans to hire outside
telemarketing service firms to offer its products and services to new accounts
within its reseller channel of distribution. The Company plans to test several
factors to determine the optimum telemarketing sales campaign.

<PAGE>

Selling Order

The Company plans to utilize the following marketing and selling order of events
for its direct selling activities:

o       First effort - mail to prospective customers
o       Second effort - telephone prospective customers
o       Third effort - visit prospective customers

Administrative Offices

        The Company currently maintains an office at 6144 Calle Real, Suite 200
Santa Barbara, CA 93117. Other than this mailing address, the Company does not
currently maintain any other office facilities, and does not anticipate the need
for maintaining other office facilities at any time in the foreseeable future.
The Company pays $7,218 per month for rent.


<PAGE>


Employees

        The Company currently employs 8 full-time individuals, all of whom are
working at the Company's offices at 6144 Calle Real, Santa Barbara, California.
Of those 8 full-time employees, 3 are employed in administrative, marketing, and
sales positions, and the remaining 5 are technical employees employed in
research, development, and technical product maintenance positions. The Company
projects that during the next 12 months, the Company's workforce is likely to
increase to 25, with 7 of the new positions being in the administrative, market-
ing, and sales areas and the remaining 10 of the new positions being in
research, development, and production positions.

        To support the Company's need for technical staffing, the Company has
close ties to the computer science department at the University of California at
Santa Barbara, where well-qualified programming technicians and software
engineers are available. Additionally, the Company has established relationships
with technical staffing organizations that continuously offer highly qualified
personnel to meet the Company's needs, both locally and from out of the area.

        All of the Company's employees have executed agreements that impose
nondisclosure obligations on the employee and in which the employee has assigned
to the Company (to the extent permitted by California law) all copyrights and
other inventions created by the employee during employment with the Company. The
rights underlying the application for the patent of the eCapsule technology have
been assigned to the Company. The software underlying the Company's Warp 9 ICS
product is protected by applicable copyright laws, and the Company owns all
copyrights applicable to the Company. The Company has in place a trade secret
protection policy that the Company's management believes to be adequate to
protect the Company's intellectual property and trade secrets.


Item 2.  PROPERTIES
         ----------

         Facilities

The Company has no property.  The Company currently maintains an office at 6144
Calle Real, Suite 200 Santa Barbara, CA 93117. Other than this mailing address,
the Company does not currently maintain any other office facilities, and does
not anticipate the need for maintaining other office facilities at any time in
the foreseeable future. The Company pays $7,218 per month for rent.

         Real Property

         None

         Mineral Properties

         None

Item 3.  LEGAL PROCEEDINGS
         -----------------

         As of June 30, 2002, the Company was neither a party nor were any of
its properties subject to any legal proceedings.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

        No matters were submitted during the period covered by this report to a
vote of security holders of the Company, through the solicitation of proxies or
otherwise.


<PAGE>


                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
         ---------------------------------------------------------------------

        As of the date of this report, there has been no trading or quotation of
the Company's common stock from inception to date.

         As of June 30, 2002, there were 51 record holders of the Company's
common Stock.

         The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying dividends for the foreseeable future.


Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        -----------------------------------------------------------------------
OF OPERATIONS
-------------


Results of Operations for Year ended June 30, 2002 Compared to Year Ended
-----------------------------------------------------------------------------
June 30, 2001.
------------------

     The Company had revenues of $811,289 in the fiscal year in 2002 and
$858,719 in 2001.  The Company incurred expenses of $1,380,271 in 2002 and
$1,215,292 in 2001. The Company experienced a loss on operations of ($568,982)
in 2002 and ($356,573) in 2001.  The net loss was ($586,630) in 2002 and
($395,527) in 2001.  The net loss per share was (0.06) in 2002 and (0.04) in
2001.

     The Company's auditor has issued its Report which contains a "going
concern" qualification.

         Liquidity and Capital Resources

     At year end, the Company had cash capital of $87,094 and other current
assets of $105,996. The Company had liabilities of $482,442 at year end.


ADDITIONAL FUNDING

        The Company sold 580,053 shares at $1.00 each for net proceeds of
$496,765 in a private placement pursuant to Regulation D, Rule 506 and Sec. 4(6)
of the Securities Act of 1933 in the year ended June 2002.  Funds were used for
operating capital.

PROJECTED RESEARCH & DEVELOPMENT COSTS

        The Company expects to expend, in the next year, approximately $700,000
to pay costs associated with completing development of the Warp 9 eCapsule
Platform and technology.

                                    Employees

        The Company currently employs 8 full-time individuals, all of whom are
working at the Company's offices at 6144 Calle Real, Santa Barbara, California.
Of those 8 full-time employees, 3 are employed in administrative, marketing, and
sales positions, and the remaining 5 are technical employees employed in
research, development, and technical product maintenance positions. The Company
projects that during the next 12 months, the Company's workforce is likely to
increase to 25, with 7 of the new positions being in the administrative, market-
ing, and sales areas and the remaining 10 of the new positions being in
research, development, and production positions.

<PAGE>

        To support the Company's need for technical staffing, the Company has
close ties to the computer science department at the University of California at
Santa Barbara, where well-qualified programming technicians and software
engineers are available. Additionally, the Company has established relationships
with technical staffing organizations that continuously offer highly qualified
personnel to meet the Company's needs, both locally and from out of the area.

        All of the Company's employees have executed agreements that impose
nondisclosure obligations on the employee and in which the employee has assigned
to the Company (to the extent permitted by California law) all copyrights and
other inventions created by the employee during employment with the Company. The
rights underlying the application for the patent of the eCapsule technology have
been assigned to the Company. The software underlying the Company's Warp 9 ICS
product is protected by applicable copyright laws, and the Company owns all
copyrights applicable to the Company. The Company has in place a trade secret
protection policy that the Company's management believes to be adequate to
protect the Company's intellectual property and trade secrets.


Item 7.  Financial Statements and Supplementary Data
         -------------------------------------------

      Please refer to pages F-1 through F-12.


Item 8.  Changes in and Disagreements on Accounting and Financial Disclosure
         -------------------------------------------------------------------

         In connection with audits of two most recent fiscal years and any
interim period preceding resignation, no disagreements exist with any former
accountant on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope of procedure, which disagreements if not
resolved to the satisfaction of the former accountant would have caused him to
make reference in connection with his report to the subject matter of the
disagreement(s).

         The principal accountants' reports on the financial statements for any
of the past two years contained no adverse opinion or a disclaimer of opinion
nor was qualified as to uncertainty, audit scope, or accounting principles
except for the "going concern" qualification.

<PAGE>


                                    PART III

Item 9.  Directors and Executive Officers of the Registrant and Compliance with
         ----------------------------------------------------------------------
         Section 16(a)
         -------------

The directors and executive officers of the Company as of June 30, 2002, are as
follows:

<TABLE>
<CAPTION>

 Name                               Age              Position                                    Term
-------                             ----             --------                                   ------
<S>                                 <C>              <C>                                         <C>
Jonathan L. Lei                     30               President, CEO, and Director                Annual
Roger Endo                          30               Director                                    Annual
Louie Ucciferri                     42               Director                                    Annual
</TABLE>


Jonathan L. Lei, Chairman, President, and Chief Executive Officer of the
Company. Mr. Lei, age 30, in 1996 co-founded Warp 9 Technologies, LLC, the
predecessor to the Company. He holds both a Bachelor's degree and a Master of
Science degree in Electrical and Computer Engineering from the University of
California at Santa Barbara, where he studied and worked in the fields of
computer aided design and development of application specific integrated
circuits. Before co-founding Warp 9 LLC in 1996, he had been employed by
Lockheed Martin (1993), Intel Corp (1995), and RC Electronics (1995-1996). While
at Lockheed, Mr. Lei worked in the Palo Alto Research Labs developing Lockheed's
next generation data acquisition systems used in structural testing of
spacecraft and missiles. At Intel, Mr. Lei worked in the engineering team of the
PCI Chipset Division, developing the motherboard chipset commonly known as
Triton II. Building on his PCI bus experience at Intel, Mr. Lei worked at RC
Electronics where he was the lead designer of a PCI data gathering board that
transferred data from a multi-channel data acquisition system to an SCSI
subsystem at sustained rates of over 4 Megasamples per second.

Under Mr. Lei's leadership and management, SBnet, the Company's consumer ISP
division, grew to over 1500 users before Mr. Lei negotiated a transaction with
MindSpring Enterprises to acquire the consumer dialup accounts in July of 1998.
During this same period, Mr. Lei acted as the co-developer and visionary of the
Company's flagship product, the Warp 9 Internet Commerce System. Following the
MindSpring acquisition, Mr. Lei redirected the Company's focus into e-commerce,
with sales, marketing, and further development of the Warp 9 ICS. Mr. Lei is the
inventor and visionary of the Company's Mobile Commerce System and eCapsule
technology and has directed the Company's efforts in wireless transactions. Mr.
Lei was an officer and is a lifetime member of Tau Beta Pi, a national
engineering honor society.

<PAGE>

Roger Endo, age 30. Mr. Endo was a co-founder of  the Company's predecessor.  He
currently serves as a software  architect for biotech leader Amgen Inc. Mr. Endo
is involved in the design and development of enterprise applications to automate
Amgen's drug discovery  process.  He has been employed at Intel  Corporation and
Sonatech,  Inc.  Mr.  Endo  holds a Bachelor  of Science  degree and a Master of
Science  degree in Electrical  and Computer  Engineering  from the University of
California at Santa Barbara.

Mr. Endo's experience during the past five years consists of serving as managing
member of Warp 9 LLC, the company's predecessor and currently serving as the
principal owner and operator of E-Business Direct Inc.  The primary customer of
E-Business Direct Inc. is Amgen Inc.

Louie Ucciferri, age 42. Mr. Ucciferri is founder and President of Private
Equities Group, an investment-banking firm formed in 1995 to provide financial
and investment advisory services to early stage companies. He has raised
investment capital for both private and public companies and has been
instrumental in creating liquidity for investors in the form of public
offerings. Since November 1998, he has also served as President of Camden
Financial Services, a NASD registered broker dealer that serves as the dealer
manager for a real estate company that has raised in excess of $150 million in
equity capital for the acquisition of commercial office properties in southern
California and Arizona.

         No appointee for a director position has been subject of any civil
regulatory proceeding or any criminal proceeding in the past five years.

         The term of office of each director and executive officer ends at, or
immediately after, the next annual meeting of shareholders of the Company.
Except as otherwise indicated, no organization by which any director or officer
has been previously employed is an affiliate, parent or subsidiary of the
Company.

         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership of equity securities of the
Company with the Securities and Exchange Commission and NASDAQ. Officers,
directors and greater-than 10% shareholders are required by the Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) filings.

         1. The following people did not file reports under Section 16(a) dur-
ing the most recent fiscal year:

         a.       Jonathan L. Lei           President, CEO, and Director
         b.       Roger Endo                Director
         c.       Louie Ucciferri           Director

<PAGE>

         2.   For each person, listed by subparagraph letter above:

Number of late                 Number of                 Known failures
reports                        transactions not          to file forms required
                               reported on a
                               timely basis
---------------                -----------------         ----------------------

a.       1                             none                      1

b.       1                             none                      1

c.       1                             none                      1


Item 10. Executive Compensation

         The Company accrued a total of $74,687 in compensation to an execu-
tive officer for services rendered to the Company in all capacities during the
fiscal year ended June 30, 2002 in addition to the salaries paid to him during
the year.

<TABLE>
<CAPTION>

                    SUMMARY COMPENSATION TABLE OF EXECUTIVES
                            Year Ended June 30, 2002

                                   Annual Compensation                         Awards
------------------------- ------------ -------------- ------------ ----------------------- -------------------- --------------------
Name and Principal       Year         Salary ($)     Bonus ($)    Other Annual            Restricted Stock     Securities
Position                                                          Compensation ($)        Award(s)             Underlying Options/
                                                                                          ($)                  SARs (#)
------------------------- ------------ -------------- ------------ ----------------------- -------------------- --------------------
<S>                      <C>          <C>            <C>          <C>                     <C>                  <C>
Jonathan L. Lei,         2000         138,000        0            0                       0                    0
President, CEO           2001         138,000        0            0                       0                    0
Director                 2002         138,000        0            0                       0                    0
------------------------- ------------ -------------- ------------ ----------------------- -------------------- --------------------
Brian Fox*               2000         0              0            0                       0                    0
Chief Technology Officer 2001         108,750        0            0                       0                    0
                         2002         145,000        0            0                       0                    0
------------------------- ------------ -------------- ------------ ----------------------- -------------------- --------------------

</TABLE>

* Date of employment - 3/26/2001


Brian J. Fox Employment Agreement. Brian Fox has an Option to purchase 479,000
shares at $1/share from Jon Lei. Such Option is vesting 1/36 per month from
march 26, 2001. Mr. Fox has an Option to purchase 479,000 shares at $1/share
from the Company's Stock Option Plan Vesting 1/48 per month from March 26, 2001.
If terminated by the Company without cause after $5,000,000 of institutional or
venture capital investment, then he's is entitled to 6 months of severance pay,
option vesting, and health insurance coverage. Mr. Fox's salary is
$12,083.33/month ($145,000/year).

Jonathan Lei Employment Agreement.  Mr. Lei is employed at $138,000 per year for
position of President, CEO, and Director.


<PAGE>

<TABLE>
<CAPTION>

                                                  Directors' Compensation
                                                  -----------------------
Name                             Annual  Meeting  Consulting      Number   Number of
                               Retainer  Fees     Fees/Other      of       Securities
                                 Fee ($) ($)      Fees ($)        Shares   Underlying
                                                                  (#)      Options
                                                                           SARs (#)
<S>                     <C>       <C>      <C>        <C>          <C>         <C>
A. Director             2002      0        0          0            0           0
   Jonathan L. Lei

B. Director
   Roger Endo           2002      0        0          0            0           0

C. Director
   Louie Ucciferri      2002      0        0          57,000       0           0

</TABLE>

         Option/SAR Grants Table (None)

Aggregated  Option/SAR  Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)

Long Term Incentive Plans - Awards in Last Fiscal Year (None)

The Company has an incentive stock option and retirement 401(K) plan
(non-matching) for the benefit of directors, officers or other employees, but
the Board of Directors may recommend adoption of one or more such programs in
the future.

Louie  Ucciferri  - Director  Compensation.  Mr.  Ucciferri  agreed to serve for
payment of Director  Compensation of $36,000 per year in 2001 and $57,000 in
2002.



<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth information, as of June 30, 2002, with
respect to the beneficial ownership of the Company's no par value common stock
by each person known by the Company to be the beneficial owner of more than five
percent of the outstanding common stock.

<TABLE>
<CAPTION>


                                                               NUMBER OF SHARES          OWNERSHIP
SHAREHOLDERS/BENEFICIAL OWNERS                                                           PERCENTAGE
-----------------------------------------------------------------------------------------------------------
<S>                                                           <C>                       <C>
Jonathan L. Lei (1)                                           7,837,002                 77%
c/o Warp 9, Inc.
6144 Calle Real, Suite 200
Santa Barbara, CA  93117

Roger Endo (2)                                                360,000                   3%
c/o Warp 9, Inc.
6144 Calle Real, Suite 200
Santa Barbara, CA  93117

Louie Ucciferri (3)                                           150,100                   1%
c/o Warp 9, Inc.
6144 Calle Real, Suite 200
Santa Barbara, CA  93117

Brian Fox(4)                                                  349,270                   3%
c/o Warp 9, Inc.
6144 Calle Real, Suite 200
Santa Barbara, CA  93117

All directors and executive
officers as a group (3 persons)                               8,696,272                 84%

</TABLE>

(1)  Jonathan L. Lei is Chairman of the Board of Directors, President, and Chief
     Executive Officer of the Company

(2)  Roger Endo is a director of the Company.

(3)  Louie Ucciferri is a director of the Company.

(4)  Options which may be exercised within 60 days from date hereof.

Each principal shareholder has sole investment power and sole voting power over
the shares.



<PAGE>


                                     PART IV

Item 12. Certain Relationships and Related Transactions.
         ----------------------------------------------

Jonathan Lei has been accruing parts of his salary since 1999. That amount is
reflected in the Company's Balance Sheet as a liability.

Jonathan Lei's accrued salary is booked as "Officer salaries payable" on the
balance sheet, a total of $251,849.

No officer, director, or affiliate of the Company has or proposes to have any
direct or indirect material interest in any asset proposed to be acquired by the
Company through security holdings, contracts, options, or otherwise.

The Company has adopted a policy under which any consulting or finder's fee that
may be paid to a third party for consulting services to assist management in
evaluating a prospective business opportunity would be paid in stock or in cash.
Any such issuance of stock would be made on an ad hoc basis. Accordingly, the
Company is unable to predict whether or in what amount such a stock issuance
might be made.

Transactions with Management and Others

There were no transactions or series of  transactions  during the Registrant's
last fiscal year or the current fiscal year, or any currently proposed.
transactions or series of transactions of the remainder of the fiscal year, in
which the amount involved exceeds $60,000 and in which to the knowledge of the
Registrant, any director, executive officer, nominee, future director, five
percent shareholder, or any member of the immediate family of the foregoing
persons, have or will have a direct or indirect material interest.


<PAGE>



Item 13. Exhibits and Reports on Form 8-K
         --------------------------------

                  The following documents are filed as part of this report:

                  1.       Reports on Form 8-K:

                           None.

                  2.       Exhibits:


                                     INDEX

Regulation
S-K Number      Exhibit                         Page Number
----------      -------                         -----------

3.1             Articles of Incorporation       Incorporated by reference
                                                from 10-SB filed
                                                November 2, 2000

3.2             Bylaws                          Incorporated by reference
                                                from 10-SB filed
                                                November 2, 2000


<PAGE>


                                   SIGNATURES

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

                                           WARP 9, INC.
                                           (Registrant)

Date: ________________, 2002

                                           ------------------------------------
                                           Jonathan L. Lei, President & Director



                                           DIRECTORS:



                                           ---------------------------------
                                           Roger Endo



                                           ---------------------------------
                                           Louie Ucciferri


<PAGE>

ROSE, SNYDER & JACOBS
---------------------
A Corporation of Certified Public Accountants



                          INDEPENDENT AUDITORS' REPORT


     Board of Directors
     Warp 9, Inc.



         We have audited the accompanying balance sheets of Warp 9, Inc. (a
     Delaware Corporation) (formerly Warp 9 Technologies, LLC) as of June 30,
     2002 and 2001 and the related statements of operations, shareholders'
     equity (deficit) and cash flows for the years then ended. These financial
     statements are the responsibility of the Company's management. Our
     responsibility is to express an opinion on these financial statements based
     on our audits.

         We conducted our audits in accordance with 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 also
     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 Warp 9, Inc. as
     of June 30, 2002 and 2001, 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 2 to the
     financial statements, the Company has suffered recurring losses from
     operations and has a net capital deficiency that raise substantial doubt
     about its ability to continue as a going concern. Management's plans in
     regard to these matters are also described in note 2. The financial
     statements do not include any adjustments that might result from the
     outcome of this uncertainty.


     /s/ Rose, Snyder & Jacobs
     Rose, Snyder & Jacobs
     A Corporation of Certified Public Accountants

     Encino, California

     September 19, 2002



                                      F-1


          ------------------------------------------------------------
          15821 Ventura Boulevard, Suite 490, Encino, California 91436
                 Phone: (818) 461-0600    Fax: (818) 461-0610



<PAGE>


                                  WARP 9, INC.
                              FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001


<PAGE>

                                  WARP 9, INC.


                                TABLE OF CONTENTS


                                                                        PAGE

INDEPENDENT AUDITORS' REPORT                                            F-1


BALANCE SHEETS                                                          F-2


STATEMENTS OF OPERATIONS                                                F-3


STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)                            F-4


STATEMENTS OF CASH FLOWS                                                F-5


NOTES TO  FINANCIAL STATEMENTS                                       F-6 - F-12



<PAGE>

<TABLE>
<CAPTION>

                                          WARP 9, INC.
                                         BALANCE SHEETS
                                     JUNE 30, 2002 AND 2001
                                             ASSETS

                                                                                       2002              2001
                                                                                      ------            ------
<S>                                                                                <C>               <C>
CURRENT ASSETS
Cash                                                                                 $ 87,094          $ 48,447
Accounts receivable, net of allowance for doubtful account of $0                       81,812           123,970
Advance to shareholder                                                                  5,250             7,065
Prepaid expenses                                                                       18,934             9,956
                                                                                      -------            ------

TOTAL CURRENT ASSETS                                                                  193,090           189,438
                                                                                     --------          --------
PROPERTY & EQUIPMENT, notes 3 and 4
Furniture, Fixtures & Equipment                                                        75,127            73,539
Computer Equipment                                                                    126,170           120,622
Commerce Server                                                                        50,000            50,000
Computer Software                                                                       3,535             3,036
Tenant Improvements                                                                    42,194            42,194
                                                                                      -------           -------
                                                                                      297,026           289,391
Less: Accumulated depreciation & amortization                                        (151,609)         (107,412)
                                                                                     ---------         ---------

NET PROPERTY & EQUIPMENT                                                              145,417           181,979
                                                                                     --------          --------
OTHER ASSETS
Lease deposit                                                                           7,029             7,029
Other assets                                                                            2,261             2,752
                                                                                       ------            ------
TOTAL OTHER ASSETS                                                                      9,290             9,781
                                                                                       ------            ------

 TOTAL ASSETS                                                                       $ 347,797         $ 381,198
                                                                                   ==========        ==========

               LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable                                                                     $ 97,988          $ 90,366
Accrued liabilities                                                                    29,878            31,744
Officer salaries payable                                                              251,849           177,182
Staff salaries payable                                                                 19,211            22,229
Note payable, note 4                                                                   50,000            50,000
Current portion - obligations under capitalized leases, note 3                         17,868            20,711
                                                                                      -------           -------

TOTAL CURRENT LIABILITIES                                                             466,794           392,232
                                                                                     --------          --------

LONG TERM LIABILITIES
Obligations under capitalized leases, note 3                                           15,648            33,746
                                                                                      -------           -------

TOTAL LONG TERM LIABILITIES                                                            15,648            33,746
                                                                                      -------           -------

 TOTAL LIABILITIES                                                                    482,442           425,978
                                                                                     --------          --------

COMMITMENTS & CONTINGENCIES, note 8

SHAREHOLDERS' EQUITY, note 6
Capital Stock                                                                          39,333            33,534
Additional Paid-in Capital                                                          1,343,955           769,802
Stock Issuance Costs                                                                 (285,715)         (202,528)
Accumulated deficit                                                                (1,232,218)         (645,588)
                                                                                   -----------         ---------

TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                                                 (134,645)          (44,780)
                                                                                     ---------          --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY DEFICIT                                  $ 347,797          $ 381,198
                                                                                    ==========         ==========
</TABLE>

                        See independent auditors' report
                       and notes to financial statements.

                                      F-2

<PAGE>

<TABLE>
<CAPTION>


                                  WARP 9, INC.
                            STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


                                                                                 2002               2001
                                                                                 ----               ----
<S>                                                                             <C>                <C>
Revenue, notes 2 and 9                                                          $   811,289        $   858,719

Cost of revenue, note 2                                                             176,608            123,027
Selling, general and administrative expenses, note 6                              1,014,025          1,014,207
Depreciation and amortization                                                        44,297             39,062
Research and development                                                            145,341             38,996
                                                                                    --------        -----------

TOTAL COST AND EXPENSES                                                           1,380,271          1,215,292
                                                                                  ----------        -----------

OPERATING LOSS                                                                     (568,982)          (356,573)
                                                                                   ---------          ---------
OTHER INCOME (EXPENSES)
Interest income                                                                       3,688              4,139
Loss on disposal of assets                                                                -            (25,366)
Interest expense                                                                    (21,336)           (17,727)
                                                                                    --------           --------

TOTAL OTHER INCOME (EXPENSES)                                                       (17,648)           (38,954)
                                                                                 -----------         ----------

NET LOSS                                                                         $ (586,630)        $ (395,527)
                                                                                 ===========        ===========

Basic and diluted loss per share                                                    $ (0.06)           $ (0.04)
                                                                                    ========           ========

Weighted average number of shares                                                10,033,494          9,620,114
                                                                                 ===========         ==========
</TABLE>


                        See independent auditors' report
                       and notes to financial statements.

                                      F-3

<PAGE>

<TABLE>
<CAPTION>


                                                  WARP 9, INC.
                                  STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


                                                                      Additional      Stock
                                                        Common          Paid-in      Issuance       Accumulated
                                        Shares          Stock          Capital        Cost            Deficit         Total
                                       --------         ------         --------       -----           --------        -----
<S>                                    <C>               <C>           <C>            <C>             <C>              <C>
Balance, June 30, 2000                    3,194,807       $ 31,948        $612,768    $ (172,117)      $ (250,061)      $ 222,538

Stock split, note 6                       6,389,614              -               -             -                -               -

Issuance of common stock, note 6            158,620          1,586         157,034       (30,411)               -         128,209

Net loss                                          -              -               -             -         (395,527)       (395,527)
                                       ------------      ---------     -----------    -----------      -----------       ---------

Balance, June 30, 2001                    9,743,041         33,534         769,802      (202,528)        (645,588)        (44,780)

Issuance of common stock, note 6            580,053          5,799         574,153       (83,187)               -         496,765

Net loss                                          -              -               -             -         (586,630)       (586,630)
                                       ------------      ---------     -----------    -----------        ---------       ---------

Balance, June 30, 2002                 $ 10,323,094       $ 39,333     $ 1,343,955    $ (285,715)     $(1,232,218)     $ (134,645)
                                       ============      =========     ===========    ===========     ============     ===========
</TABLE>


                        See independent auditors' report
                       and notes to financial statements.

                                      F-4

<PAGE>

<TABLE>
<CAPTION>


                                  WARP 9, INC.
                            STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 2002 AND 2001


                                                                                  2002              2001
                                                                                 ------            ------
<S>                                                                             <C>               <C>
OPERATING ACTIVITIES
Net loss                                                                        $ (586,630)       $ (395,527)
Adjustments to reconcile net loss to net
  cash used by operating activities:
Depreciation and amortization                                                       44,297            39,062
Consulting services paid with shares of common stock                               100,000                 -
Loss on disposal of fixed assets                                                         -            25,166
(Increase) in accounts receivable                                                   42,158            (1,368)
(Increase) in prepaid expenses                                                       6,022            (2,433)
Decrease in other assets                                                             2,206             5,842
Increase in officer salaries payable                                                74,667            62,946
Increase (Decrease) in accounts payable                                              6,033           (18,754)
Increase (Decrease) in staff salaries payable & other liabilities                   (4,884)            9,838
                                                                                    -------           -------

Net cash used by operating activities                                             (316,131)         (275,228)
                                                                                  ---------         ---------
INVESTING ACTIVITIES
Purchase of property & equipment                                                    (6,046)          (38,341)
                                                                                    -------          --------

Net cash used by investing activities                                               (6,046)          (38,341)
                                                                                    -------          --------
FINANCING ACTIVITIES
Issuance of common stock, net of costs                                             381,765            88,209
Payments on capitalized lease obligations                                          (20,941)          (22,860)
                                                                                   --------          --------

Net cash provided by financing activities                                          360,824            65,349
                                                                                   --------           ------

Net increase (decrease) in cash                                                     38,647          (248,220)

Cash at beginning of year                                                           48,447           296,717
                                                                                    -------          -------

Cash at end of year                                                              $  87,094          $ 48,497
                                                                                  =========         ========

Supplemental disclosure of cash flow information
  Cash paid during the years for:

Interest                                                                         $  21,336          $ 17,727
                                                                                  =========         ========

Income taxes                                                                      $  1,300               $ -
                                                                                  ========          ========
</TABLE>


                        See independent auditors' report
                       and notes to financial statements.

                                      F-5



<PAGE>


                                  WARP 9, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001


1.   ORGANIZATION

     Warp 9, Inc. (the "Company") was incorporated in the state of Delaware,
     under the name of eCommerceland, on August 27, 1999. The Company, based in
     Goleta, California, began operations October 1, 1999. Prior to October 1,
     1999, the Company was operated as WARP 9 Technologies, LLC, ("Warp 9") a
     California limited liability company. Warp 9 was merged with and into
     eCommerceland effective at its close of business, September 30, 1999, and
     on December 21, 2000 changed its name to Warp 9, Inc. For accounting and
     reporting purposes, the "merger" was considered a continuation of the same
     business, under a different type of entity. The operations and ownership of
     Warp 9, Inc. were substantially the same as Warp 9 Technologies, LLC. The
     Company's primary source of income is service of their Warp 9 contracts,
     which relates to Internet data service and fully hosted web based software
     products.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Going concern
     -------------
     The accompanying financial statements have been prepared on a going concern
     basis of accounting, which contemplates continuity of operations,
     realization of assets and liabilities and commitments in the normal course
     of business. The accompanying financial statements do not reflect any
     adjustments that might result if the Company is unable to continue as a
     going concern. The Company's losses, negative cash flows from operations
     and the working capital deficiency raise substantial doubt about the
     Company's ability to continue as a going concern. The ability of the
     Company to continue as a going concern and appropriateness of using the
     going concern basis is dependent upon, among other things, additional cash
     infusion. As discussed in note 11, the Company is contemplating a public
     offering as well as the sale of securities through a Private Placement
     Memorandum. Management believes these offerings will provide the additional
     cash needed to meet the Company's obligations as they become due, and will
     allow the development of its core of business.

     Revenue recognition
     -------------------
     The Company recognizes income when the service is provided. Most of the
     income is generated from monthly fees from clients who subscribe to the
     Company's fully hosted web products on terms ranging from six months to one
     year. When the term ends, clients normally go on a month-to-month basis or
     extend the contract for another six months to one year.

     Cost of Revenue
     ---------------
     Cost of revenue includes the direct costs of operating the Company's
     network, including telecommunications charges, and software related costs.

     Research and Development
     ------------------------
     Research and development costs are expensed as incurred. Total research and
     development costs were $145,341 and $39,996 for the years ended June 30,
     2002 and 2001, respectively.


     Cash and Cash Equivalent
     ------------------------
     The Company considers all highly liquid investments with an original
     maturity of three months or less to be cash equivalents.

     Use of Estimates
     ----------------
     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the amounts reported in the accompanying financial
     statements. Significant estimates made in preparing these financial
     statements include the allowance for doubtful accounts, the estimate of
     useful lives of property and equipment, the deferred tax valuation
     allowance, and the fair value of stock options. Actual results could differ
     from those estimates.


                       See independent auditors' report.

                                      F-6

<PAGE>


                                  WARP 9, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001



2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Fair value of financial instruments
     -----------------------------------
     The Company's financial instruments, including cash and cash equivalents,
     accounts receivable, accounts payable and accrued liabilities are carried
     at cost, which approximates their fair value, due to the relatively short
     maturity of these instruments. As of June 30, 2002 and 2001, the Company's
     capital lease obligations and notes payable have stated borrowing rates
     that are consistent with those currently available to the Company and,
     accordingly, the Company believes the carrying value of these debt
     instruments approximates their fair value.


     Property and Equipment
     ----------------------
     Property and equipment are stated at cost, and are depreciated or amortized
     using the straight-line method over the following estimated useful lives:


                Furniture, fixtures & equipment                 7 Years
                Computer equipment                              5 Years
                Commerce server                                 5 Years
                Computer software                           3 - 5 Years
                Tenant improvements                 Length of the lease


     Property and equipment includes assets leased under capitalized leases with
     an original cost of $67,474 and $77,739 at June 30, 2002 and 2001,
     respectively. Amortization of assets under capitalized leases is included
     in depreciation and amortization expense. During the years ended June 30,
     2002 and 2001, additions to fixed assets through capitalized leases totaled
     $0 and $35,960, respectively.

     Concentrations of Business and Credit Risk
     ------------------------------------------
     The Company operates in a single industry segment. The Company markets its
     services to companies and individuals in many industries and geographic
     locations. The Company's operations are subject to rapid technological
     advancement and intense competition in the telecommunications industry.

     Accounts receivable represent financial instruments with potential credit
     risk. The Company typically offers its customers credit terms. The Company
     makes periodic evaluations of the credit worthiness of its enterprise
     customers and other than obtaining deposits pursuant to its policies, it
     generally does not require collateral. In the event of nonpayment, the
     Company has the ability to terminate services.

     Advertising Costs
     -----------------
     The Company expenses the cost of advertising and promotional materials when
     incurred. Total advertising costs were $9,002 and $12,924 for the years
     ended June 30, 2002 and 2001, respectively.

     Stock-Based Compensation
     ------------------------
     The Company accounts for employee stock option grants in accordance with
     Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
     Employees and related interpretations (APB 25), and has adopted the
     "disclosure only" alternative described in Statement of Financial
     Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
     Compensation.

     Income Taxes
     ------------
     The Company uses the liability method of accounting for income taxes.
     Deferred tax assets and liabilities are recognized for the future tax
     consequences attributable to financial statements carrying amounts of
     existing assets and liabilities and their respective tax bases and
     operating loss and tax credit carryforwards. The measurement of deferred
     tax assets and liabilities is based on provisions of applicable tax law.
     The measurement of deferred tax assets is reduced, if necessary, by a
     valuation allowance based on the amount of tax benefits that, based on
     available evidence, is not expected to be realized.


                       See independent auditors' report.

                                      F-7


<PAGE>



                                  WARP 9, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001

<TABLE>
<CAPTION>

3.    OBLIGATIONS UNDER CAPITALIZED LEASES

        Lessor          Description                                       2002            2001
        ----------      -----------------------------                     ----            ----
<S>     <C>             <C>                                             <C>             <C>
        Bancorp         Payable in monthly installments of $362,        $     -         $ 1,049
                        interest at 20%, matured in November, 2001.

        C.I.T.          Payable in monthly installments of $166,          2,355           3,794
                        interest at 18%, matures in October, 2003.

        Amano           Payable in monthly installments of $285,          4,339           7,707
                        interest at 15%, matures in December, 2003.

        Avaya           Payable in monthly installments of $655,         16,698          20,978
                        interest at 16%, matures in December, 2004.

        First Federal   Payable in monthly installments of $463,          4,328           8,558
                        interest at 7%, matures in October, 2002.

        Advanta         Payable in monthly installments of $539,          5,796          12,371
                        interest at 11%, matures in February, 2003.     -------         -------

                                                                         33,516          54,457
                        Less current portion                             17,868          20,711
                                                                        -------         -------
                          Long-term portion of obligations under
                           capitalized leases                           $15,648         $33,746
                                                                        =======         =======
</TABLE>


      Minimum annual lease payments under capitalized lease obligations at June
      30, 2002 are as follows:

                                        Fiscal Year
                                        -----------

                                           2003                 $23,718
                                           2004                   9,950
                                           2005                   3,930
                                                                -------
                                                                 37,598

                        Less amounts representing interest        4,082
                                                                -------
                                                                 33,516

                        Less current portion                     17,868
                                                                -------

        Long term portion of capitalized lease obligations      $15,648
                                                                =======

                       See independent auditors' report.

                                      F-8

<PAGE>


                                  WARP 9, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001




4.   NOTE PAYABLE

     The Company has a note payable to a vendor in the amount of $50,000,
     bearing interest at 10%, with monthly interest payment only. The maturity
     date, which was originally October 15, 2001, was subsequently amended to
     March 15, 2002. The Company is currently renegotiating the terms (see note
     8). This note is secured by certain equipment of the Company.


5.   INCOME TAXES

     At June 30, 2002, the Company has available for federal and state income
     tax purposes, net operating loss carryforwards of approximately $1,034,000
     and $1,032,000, respectively, which begin to expire in 2020 and 2005,
     respectively.

     The primary difference between the Company's effective income tax rate and
     the statutory federal rate for the years ended June 30, 2002 and 2001
     relates primarily to losses incurred for which no tax benefit was
     recognized, due to the uncertainty of its realization. The valuation
     allowance was $560,000 and $327,000 at June 30, 2002 and 2001,
     respectively, representing an increase of $233,000 for the year ended June
     30, 2002.

     A reconciliation of income tax expense that would result from applying the
     domestic Federal statutory rate to pre-tax income, with federal income tax
     expense presented in the financial statements is as follows:

                                                        2002            2001
                                                       ------          ------
     Income tax benefit computed
     at U.S. federal statutory rate (34%)               198,000          97,000

     State income taxes, net of benefit federal taxes    35,000          17,000

     Less valuation allowance                          (233,000)       (114,000)
                                                       ---------       ---------

        Income tax expense                                    -               -
                                                       =========       =========


     The deferred income tax benefit at June 30, 2002, and 2001 and reflects the
     impact of temporary differences between the amounts of assets and
     liabilities recorded for financial reporting purposes and such amounts as
     measured in accordance with tax laws. The items, which comprise a
     significant portion of, deferred tax assets and liabilities are
     approximately as follows:


                                           2002            2001
                                          ------          ------
     Depreciation                       $  47,000       $  59,000
     Net operating loss carryforwards     413,000         198,000
     Officer salaries payable             100,000          70,000
                                        ----------      ----------
                                          560,000         327,000

        Less:  valuation allowance       (560,000)       (327,000)
                                        ----------      ----------
           Deferred income tax asset    $       -       $       -
                                        ==========      ==========


                       See independent auditors' report.

                                      F-9


<PAGE>

                                  WARP 9, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001



6.   CAPTIAL STOCK

     At June 30, 2002, the Company's $.01 par value common stock authorized is
     15,000,000.
     On January 8, 2001, the Company declared a 3 for 1 stock split of its
     common stock. Subsequently, through private offering, the Company sold an
     additional 118,620 shares of stock for a total of $88,209, net of $30,411
     of stock issuance costs. The Company also issued 40,000 shares of common
     stock to its landlord in exchange for $40,000 of improvements to the
     premises during the year ended June 30, 2001.

     At June 30, 2002, 1,800,000 shares were reserved for the shares to be
     issued under the Company's stock option plan (see note 7).

     During the year ended June 30, 2002, the Company sold an additional 465,053
     shares of stocks for a total of $381,765, net of $83,187 of stock issuance
     costs. The Company also issued 115,000 shares of common stocks to outside
     entities in exchange for $115,000 of consulting services for which $100,000
     was expensed during the year ended June 30, 2002. The additional balance
     was recorded as prepaid expense as of June 30, 2002.

     On June 20, 2002, the Company received $68,659 for issuance of 68,760
     common shares (included in the above 465,053 shares). The stock certificate
     was issued subsequent to in July 2002. However, the 68,760 shares were
     considered outstanding common shares and were included in the computation
     of the basic EPS at June 30, 2002.

     The weighted average number of share used for the calculation of diluted
     loss per share is the same as the one used for the basic loss per share.
     The inclusion of any potential shares to be issued would have had an
     anti-dilutive effect due to the Company generating a loss.


7.   STOCK OPTIONS

     The Company adopted a Stock Option Plan for the purposes of granting stock
     options to its employees and others providing services to the Company.
     Options granted under the Plan may be either Incentive Options or
     Nonqualified Options and shall be administered by the Company's Board of
     Directors ("Board"). Each option shall be exercisable in full or in
     installments and at such times as designated by the Board. Notwithstanding
     any other provision of the Plan or of any Option agreement, each Option
     shall expire on the date specified in the Option agreement, which date
     shall not be later than the tenth anniversary of the date on which the
     Option was granted (fifth anniversary in the case of an Incentive Option
     granted to a greater-than-10% stockholder). The purchase price per share of
     the Common Stock under each Incentive Option shall be no less than the Fair
     Market Value of the Common Stock on the date the Option is granted (110% of
     the Fair Market Value in the case of a greater-than-10% stockholder). The
     purchase price per share of the Common Stock under each Nonqualified Option
     shall be specified by the Board at the time the Option is granted, and may
     be less than, equal to or greater than the Fair Market Value of the shares
     of Common Stock on the date such Nonqualified Option is granted, but shall
     not be less than the par value of shares of Common Stock. The plan provides
     specific language as to the termination of Options granted hereunder.



                       See independent auditors' report.

                                      F-10

<PAGE>

                                  WARP 9, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001



7.   STOCK OPTIONS (Continued)

     SFAS 123, Accounting for Stock-Based Compensation, requires pro forma
     information regarding net income (loss) using compensation that would have
     been incurred if the Company had accounted for its employee stock options
     under the fair value method of that statement. The pro-forma net loss is
     the same as the net loss presented on the statements of operations. The
     fair value of options granted, which has been estimated at $0 at the date
     of grant was determined using the Black-Scholes Option pricing model with
     the following assumptions:


                                                      2002            2001
                                                     ------          ------
        Risk free interest rate                  4.57% to 4.97%   5.14% to 6.44%
        Stock volatility factor                       0.01            0.01
        Weighted average expected option life       10 years        10 years
        Expected dividend yield                       None            None

<TABLE>
<CAPTION>

     A summary of the Company's stock option activity and related information
     follows:

                                                        Year ended                    Year ended
                                                      June 30, 2002                 June 30, 2001
                                                      -------------                 -------------
                                                                Weighted                        Weighted
                                                                average                         average
                                                                excercise                       excercise
                                                Options         price           Options         Price
                                                -------         ----------      -------         ---------
<S>                                             <C>             <C>             <C>             <C>
        Outstanding-beginning of year           594,000         $1.00            22,500         $1.00
        Granted                                  56,000          1.00           571,500          1.00
        Exercised                                     -             -                 -             -
        Forfeited                               (15,375)         1.00                 -             -
                                                --------        ----------      -------         -----
        Outstanding-end of year                 634,625         $1.00           594,000         $1.00
                                                ========        ==========      =======         =====
        Exercisable at the end of year          196,479         $1.00             7,563         $1.00
                                                ========        ==========      =======         =====
        Weighted average fair value of
          options granted during the year                       $   -                           $   -
                                                                ==========                      =====
</TABLE>


     The weighted average remaining contractual life of options as of June 30,
     2002 was as follows:

                                              Weighted
                                              average
                        Number of             remaining
        Exercise        options               contractual             Options
        price           outstanding           life (years)          exerciseable
        --------        -----------           ------------          ------------
        $ 1.00          634,625                   8.69                 196,479





                       See independent auditors' report.

                                      F-11


<PAGE>

                                  WARP 9, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2002 AND 2001



8.   COMMITMENTS AND CONTINGENCIES

     Operating Leases
     ----------------
     The following is a schedule, by years, of future minimum rental payments
     required under operating leases for the facilities and equipment. The lease
     for the facilities expires in 2007, and has 3 options to renew for each an
     additional period of one year. The following is a schedule of minimum lease
     payments for the next five years.


                2003                    $ 113,500
                2004                      110,500
                2005                       90,400
                2006                       86,600
                2007                       57,700
                                        ---------

                Total                   $ 458,700
                                        =========


     Total lease expense for the years ended June 30, 2002 and 2001 was $117,075
     and $172,421, respectively.

     Loan Default
     ------------
     The note payable of $50,000 has a default clause that allows the lender to
     assess late payment charges in the amount of 10% of the delinquency. At the
     date of issuance of these financial statements, it was unknown whether the
     creditor would assess such delinquency charges, and if so, what the
     delinquency amount it would be based on.


9.   CONCENTRATIONS

     For the years ended June 30, 2002 and 2001, the Company had one major
     customer who represented 23% and 16% of total revenue, respectively.

     Total accounts receivable from this major customer represented 54% and 33%
     of total amounts due from customers at June 30, 2002 and 2001,
     respectively.


10.  RELATED PARTY TRANSACTIONS

     In May 2002, the Company entered into a four month agreement with one of
     the Company's directors. According to the agreement the director will try
     to raise funds for the Company and expand the Company's business
     opportunities. In return, as compensation for the service rendered under
     the agreement, the Company will pay the director $10,000 per month.


11.  SUBSEQUENT EVENTS

     The Company is in the process of launching another Private Placement
     Memorandum in March 2003, to promote the sale of securities, and is
     contemplating a Public offering for the sale of securities in the future.
     In addition, on September 2002, the Company has formed a strategic alliance
     with Industrial Electronic Engineers, Inc., a worldwide manufacturer of
     electronic display solutions. Management believes that this transaction
     should expand the Company access to additional customers and open new
     market opportunities.



                       See independent auditors' report.

                                      F-12