U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  Form 10-KSB/A


(Mark One)

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

                  For the fiscal year ended September 30, 2000

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

   For the transition period from _______________________ to ________________


                Commission file no. 000-31469
                                    ---------


                              Posteralley.com, Inc.
                  ---------------------------------------------
                 (Name of small business issuer in its charter)


                    Colorado                                   84-15099500
          ------------------------------                    ------------------
         (State or other jurisdiction of                    (I.R.S. Employer
         incorporation or organization)                     Identification No.)


       650 South Cherry Street, Suite #310
       Denver, Colorado                                              80246
     ---------------------------------------                       ----------
     (Address of principal executive offices)                      (Zip Code)


Issuer's telephone number (303) 629-9751
                          --------------

Securities registered under Section 12(b) of the Exchange Act:

                                             Name of each exchange on
          Title of each class                which registered

                None
          -------------------                ---------------------------

Securities registered under Section 12(g) of the Exchange Act:

     Common Stock, $.0001 par value
     -----------------------------------------------------------------------
                                (Title of class)
<PAGE>

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  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. $3,258
                                                              -------

     Of the  4,283,200  shares  of voting  stock of the  registrant  issued  and
outstanding as of February 16, 2001,  683,200 shares are held by non-affiliates.
Because of the absence of an  established  trading  market for the voting stock,
the  registrant is unable to calculate the aggregate  market value of the voting
stock held by non-affiliates as of a specified date within the past 60 days.

Transitional Small Business Disclosure Format:  Yes     No  X
                                                   ----   -----

                                        2
<PAGE>



                                     PART I

Item 1. Description of Business.

(a)  Business Development.

     We  were  organized  on  July  19,  1999,  and are in the  early  stage  of
development.  In July 1999, we commenced  operations in the online retailing and
brokerage of originals and reproductions of fine art posters, including, but not
limited to, vintage antique, product advertising,  travel, sporting event, movie
and  theater  memorabilia  and  commemorative  posters.  We also  sell a limited
inventory of original,  antique fine art  paintings.  Our offices are located at
650 South Cherry  Street,  Suite #310,  Denver,  Colorado  80246.  Our telephone
number is (303) 629-9751 and our facsimile number is (303) 322-0063.

     During the period from May 8 through June 28,  2000,  we issued and sold an
aggregate of 501,200 shares of common stock to a total of fifty-two persons, all
of whom are  residents of the States of  California,  Colorado or Illinois,  for
cash  consideration  totaling  $125,300.  We made the sales in reliance upon the
exemption from registration with the Securities and Exchange Commission provided
under Rule 504 of Regulation D under Section 3(b) of the Securities Act of 1933,
and in reliance upon the  exemptions  from  registration  provided under Section
25102(f) of the California  Corporations  Code,  Section  11-51-308(1)(p) of the
Colorado Securities Act or Section 4.G. of the Illinois Securities Law of 1953.

     On December 29, 2000, we filed a  Registration  Statement on Form SB-2 with
the  Securities and Exchange  Commission  providing for the offer and sale of an
aggregate of 601,200 shares of common stock,  including 100,000 shares of common
stock being offered by  Posteralley.com  at an offering  price of $.50 per share
for total gross  proceeds of $50,000  and 501,200  shares of common  stock being
offered by the  fifty-two  persons  who  purchased  shares in our  common  stock
offering described in the preceding paragraph, as selling shareholders. On April
16, 2001, we filed Amendment No. 1 to the  Registration  Statement on Form SB-2.
The  Securities and Exchange  Commission  has not yet declared the  Registration
Statement effective.

     See (b) "Business of Issuer"  immediately  below for a  description  of our
current operations and future proposed activities.

     (b) Business of the Issuer.

General

     We commenced  operations in the online retailing and brokerage of originals
and  reproductions of fine art posters,  including,  but not limited to, vintage
antique,  product  advertising,   travel,  sporting  event,  movie  and  theater
memorabilia and commemorative posters, in July 1999. Our total sales were $3,258
for the period from inception  through  September 30, 2000, and our net loss was
$(33,874)    for   the   same    period.    Our   web   site   is   located   at
http://www.Posteralley.com.  Information  set  forth  on our web  site  does not
constitute part of this Annual Report on Form 10-KSB.

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<PAGE>

     Our  objective is to become a leading  online  retailer/broker  of fine art
posters. Key elements of our strategy include the following:

     o Offering the  broadest  possible  selection  of posters  available to our
customers at competitive prices;

     o Delivering  superior  customer  service and  promoting  repeat  purchases
through  continuous  enhancement of our technology,  web site  functionality and
inventory;

     o Fostering  consumer trust and  satisfaction  through  services  including
appraisal, authentication and money-back guarantee; and

     o Continuing to maintain our relationship with Nicklebys.com, Inc., Denver,
Colorado,  an online  auctioneer  of fine art,  antiques and  collectibles,  and
developing relationships with other companies that can help grow our business.

     We market a limited  inventory of originals and  reproductions  of fine art
posters  and  original,  antique  fine art  paintings  recently  purchased  with
proceeds  received  from our  offering of common  stock  pursuant to Rule 504 of
Regulation D under the  Securities  Act of 1933  completed in June 2000. We have
allocated the sums of $5,000 (28.1%) and $10,000  (23.4%) of the minimum and the
maximum  net  proceeds,  respectively,  anticipated,  without  assurance,  to be
received from our proposed  offering of common stock  pursuant to a Registration
Statement  on Form SB-2 filed with the  Securities  and Exchange  Commission  in
December 2000, for the  acquisition of originals and  reproductions  of fine art
posters and to make  reproductions of certain of the original posters purchased.
However,  because the funds  anticipated  to be received from this offering that
will be available to us for the purchase and/or reproduction of fine art posters
are very limited,  the number and/or  quality of posters that we will be able to
purchase  with those  funds will also be  limited.  Accordingly, the bulk of our
products are exptected to be fine art posters  obtained for sale on  consignment
from two  wholesalers,  including  I.  Brewster & Company  and Club of  American
Collectors of Fine Arts, Inc.

     Messrs.  Scott M. Thornock and Bruce A. Capra,  two of our three  executive
officers, directors and controlling shareholders,  have, personally, and, in the
case of Mr.  Capra,  professionally,  in excess of twenty years of experience in
dealing in all types of fine art, antiques and collectibles,  including fine art
posters.  Both Messrs.  Thornock and Capra are  executive  officers,  directors,
founders  and  controlling  shareholders  of  Nicklebys.com,   Inc.,  an  online
auctioneer   of  fine  art,   antiques  and   collectibles   that  has  realized
approximately  $631,807 in gross revenue (unaudited) from online auctions,  live
auctions and retail sales  during the period from  inception  (January 13, 1999)
through December 31, 1999. Despite its limited operating history,  Nicklebys.com
was  recognized  in the November  1999 edition of Yahoo!  Internet Life Magazine
with the Gold Medal Award for the best art auction site on the worldwide web. In
order to become employed full time by  Nicklebys.com,  Mr. Capra, our Secretary,
resigned on February 1, 1999, as the General  Manager and the Director of Sales,
Marketing  and  Advertising  for American  Design,  Ltd.,  an Aurora,  Colorado,
company with eight retail  outlets that  realized  gross sales of  approximately
$12,000,000 from the  publication,  auction and marketing of fine art during its
most recent fiscal year.  Additionally,  Mr. Capra owned and managed  Nickleby's
Auction  Gallery,  Ltd.,  Arvada,   Colorado,  an  auction  liquidation  company
specializing  in fine  art,  antiques  and  collectibles,  from  1992  until the
acquisition of Nickleby's Auction Gallery by Nicklebys.com in March 1999.

                                        4
<PAGE>

     Because of the contacts developed by Messrs. Thornock and Capra as a result
of investing in,  marketing,  selling,  trading  and/or  brokering many types of
artworks, antiques and collectibles for many years, we do not expect to have any
difficulty in obtaining quality fine art posters.  Neither individual  presently
contemplates the formation of, or affiliation or association  with, any company,
other than Posteralley.com, whose business plan would contemplate or involve the
online sale of fine art posters.

Inventory and Consigned Posters

     Our web site on the Internet features only fine art posters, including, but
not limited to, vintage antique,  product advertising,  travel,  sporting event,
movie and theater  memorabilia and commemorative  posters.  In addition,  we are
marketing a limited inventory of original,  antique fine art paintings  recently
purchased with a small amount of proceeds  received from our recently  completed
private  offering of common stock.  As of the date of this report,  our web site
features 41 fine art posters,  including 11 original,  antique  French  posters,
nine contemporary fine art posters, six movie posters, six sports posters,  four
southwestern fine art posters,  four  reproductions of antique fine art posters,
one rock and roll poster and six original, antique fine art paintings, including
four oils on canvas and two watercolors.  The four antique poster  reproductions
are of fine art images by Louis Icart and  Maxfield  Parrish.  Additionally,  we
have obtained five posters,  not presently featured on our web site, for sale on
consignment.  We plan to offer these  consigned  posters for sale online at such
time as our  inventory  has been  depleted  by sales.  If we achieve  profitable
operations,  which is not assured,  or otherwise  obtain  funding in addition to
that anticipated from this offering,  we intend to purchase additional inventory
of  originals  and/or  reproductions  of fine art posters  with a portion of the
funds.  The sources for our  inventory  are expected to include,  among  others,
estates,  private parties,  collectors and original  collections.  Additionally,
Messrs. Thornock, Capra and Jeffrey H. Lee, the Vice President and a director of
Posteralley.com,  may place originals and reproductions of fine art posters from
their own personal  collections on consignment with  Posteralley.com  to be sold
online. We can expect to receive a commission in the amount of 10% to 50% of the
sale price of all fine art  posters  sold for the account of Mr.  Thornock,  Mr.
Capra or Mr. Lee.

     Five fine art posters,  not presently  featured on our web site,  have been
obtained from two  unaffiliated  companies,  including I. Brewster & Company and
Club of American Collectors of Fine Arts, Inc., for sale on consignment. Both I.
Brewster and Club of American Collectors have been in business for approximately
forty  years  and Club of  American  Collectors  is the  largest  United  States
importer  of French  advertising  posters.  Each  company  is itself  capable of
satisfying  our  requirements  for  posters  for  the  foreseeable  future.  Our
consigned  inventory of original fine art posters includes,  primarily,  product
advertising posters for products such as liquor, ink, bicycles, chocolates, etc.


                                        5
<PAGE>

The various  posters and  reproductions  consigned  by I.  Brewster  and Club of
American Collectors have a retail value in a range from $35 to $25,000.  Because
of our  arrangements  with I.  Brewster and Club of American  Collectors to sell
these items on consignment, we have no cost of sales until we consummate a sale.
Despite  our  plans  to  purchase  additional   inventory  of  originals  and/or
reproductions  of fine art  posters  with a portion  of any  additional  capital
obtained from profitable operations or otherwise, we expect, for the foreseeable
future, to be partially dependent for product upon fine art posters consigned to
us by I. Brewster, Club of American Collectors or others.

Online Retailing of Posters

     As a small  online  retailer of posters,  we are  dedicated  to serving the
poster  enthusiast  with a wide variety of fine art posters  featured on our web
site  located at  http://www.Posteralley.com,  expert  information  and superior
customer service.  We seek to exceed the more limited selections of posters,  if
any, offered by art galleries,  art and/or antique brokers and dealers,  antique
stores, auction houses and others. We believe that we will be able to exceed the
poster collections of these traditional  stores,  because we will not be limited
with respect to display and storage area. We strive to provide  customers with a
convenient,  one-stop shopping experience by providing an organized, logical and
customer-friendly  Internet  site  designed  in an  attractive  manner  so as to
capture and  maintain  the interest of most  visitors.  The web site  includes a
high-resolution  photograph  of each poster or painting  together with a picture
and a biography of the artist, if relevant and available.  Payment  arrangements
can be made using credit cards and escrow accounts. We have implemented security
measures,  including  but not limited to layering,  locking and  encryption,  in
order  to  secure,  to our  best  ability  as of the  date of this  report,  the
commercial  transactions  conducted on our web site.  Detailed  instructions are
available  on our site to  enable  the  purchaser  to  consummate  the  purchase
transaction  with as much  ease and  simplicity  as is  possible.  We  expect to
compete on the basis of our reputation  among customers as a quality provider of
products that are "100% money-back guaranteed,  curated and appraised" and, to a
lesser extent, on the basis of price. We receive,  on average,  a listing fee in
the amount of approximately  20% of each item sold on consignment for management
or others.

     We attract and retain customers by emphasizing the following key factors:

     Extensive Product Selection Enables One-Stop-Shopping. We provide consumers
     -----------------------------------------------------
with  one-stop-shopping for their fine art poster needs, with delivery direct to
their  door.  We offer a broad  selection  of fine art  posters  that we expect,
within  two  years  from  the  date of the  report,  to  transcend  the  limited
selection,  if any, of art galleries,  art and/or  antique  brokers and dealers,
antique  stores,  auction  houses and others.  There are no  limitations  on our
ability to provide a selection of posters that exceeds the selection  offered by
the aforementioned  sellers. Our online business model enables us to aggregate a
diverse product  selection that is not generally found in a single retail outlet
and dynamically change our product mix to meet consumer needs and interests.

                                        6
<PAGE>

     Expert Information.  Accompanying each poster featured on the web site is a
     ------------------
detailed  description of the type of poster, the title or caption of the poster,
its  dimensions,  price,  condition and  availability  and a description  of the
event,  if any,  commemorated  by the poster.  If the poster is an  original,  a
description of the original  work,  the technology of production,  the mounting,
whether the poster is signed and the identity and location of the  publisher are
also included.  Accompanying  each reproduction is a description of the paper on
which the poster is printed together with information on whether it is signed or
numbered.  In this manner,  we tightly  integrate  broad product  selection with
highly relevant content,  providing  consumers with the information they need to
make informed purchase decisions.

     Superior  Shopping  Experience.  We believe  that we provide an  intuitive,
     ------------------------------
easy-to-use web site,  offering extensive product selection supported by tightly
integrated,   relevant  resource  information.   Each  product  presentation  is
supported by a  high-resolution  photograph of the poster  available for sale on
our web site.

     Quality Customer  Service.  The typical online shopping  experience  begins
     -------------------------
with the search for products  that meet  specific  needs,  including  the online
ordering process and extends through product delivery and post-purchase support.
We believe that the ability to accurately fulfill orders,  ship products quickly
to a customer's door or efficiently handle customer inquiries is as important to
customer satisfaction as product selection. While we will not have the financial
resources as a result of the proposed  offering of common stock  pursuant to our
recently filed Form SB-2  Registration  Statement to employ any customer service
personnel,  we intend to develop our own in-house  customer service operation in
the future.

     Money-Back   Guarantee   and  Guarantee  of   Authenticity.   Unlike  other
     ----------------------------------------------------------
competitors,  most of whose  inventory  is limited  exclusively  or primarily to
items offered on  consignment,  we guarantee the  authenticity  of each fine art
poster we sell with a written  appraisal of the value of the item at the time of
purchase.  Mr. Capra is a certified  personal property appraiser and a member of
the Certified Appraisers Guild of America, and examines each item sold to ensure
its  authenticity  and provide a written  appraisal  of value.  Furthermore,  we
provide each customer with a thirty-day  guarantee  permitting the return of the
poster within thirty days if the customer is not satisfied with its  genuineness
or authenticity.

The Internet and Electronic Commerce

     The   Internet   has  become  an   increasingly   significant   medium  for
communication,  exchange of information and commerce.  We believe this increased
usage is because of a number of factors, including the following:

     *    A large installed base of personal computers;

     *    Advances in the speed of personal computers and modems;

     *    Easier and less expensive access to the Internet;

     *    Improvements in network security, infrastructure and bandwidth;

                                        7
<PAGE>

     *    A wider range of online offerings; and

     *    Growing consumer awareness of the benefits of online shopping.

However,  there are many risks  associated  with the  conduct of business on the
Internet, including, among others, security, viruses and fraud. While hacking is
a serious threat to electronic commerce companies such as  Posteralley.com,  the
greatest threat to the security of our business  transactions on the Internet is
expected  to arise  from our own  employees.  Posteralley.com,  like most  other
online  retailers,  intends to  continuously  implement a wide range of hardware
security  measures to offer network  protection  and business  continuity.  Many
development-stage  companies,  like  Posteralley.com,  lack the  capital  and/or
customer  demand to warrant the  investment  in electronic  security  protective
applications  and  technologies.  Further,  while many  companies  have a formal
security  policy,  we believe that nearly all are far from adequate and very few
companies educate all members of staff, conduct risk analysis on a regular basis
and regularly assess their software for security flaws.

     With the wide range of security flaws  inherent in the Internet,  we can be
expected  to be at a  serious  disadvantage,  as  compared  to our  competitors,
especially  with regard to  electronic  commercial  transactions,  if we fail to
protect or minimize the risks to  Posteralley.com  from security threats.  While
the  Internet  represents  a new and highly  lucrative  market,  we expect to be
challenged by the necessity to become fully aware of new technologies so that we
can manage  the risks  associated  with  conducting  transactions  over the web.
Another  disadvantage to our conducting  business on the Internet is the lack of
physical representation enabling customers to inspect our merchandise in advance
of placing an order and obtaining  customer  services from  personnel  with whom
they are unable to interact in person. It is likely that,  because we will limit
our marketing activities to the Internet, we will be unable to generate business
from the type of  customer  unable to develop a comfort  level in the absence of
physical  representation.  Also,  we  will  likely  be  required  to  deal  with
dissatisfied customers believing that the poster ordered differs in its physical
appearance  from the  photographic  image  viewed on the  Internet.  Despite the
above-described  and other risks of online  retailing,  we intend to employ this
method of displaying and retailing fine art posters  exclusively  because of the
significantly  reduced cost to us of eliminating  the need for a retail facility
and a sizeable marketing staff.

Marketing

     Our marketing strategy is designed to attract customers most likely to shop
online, convert browsers to buyers, meet or exceed customer expectations,  drive
repeat  purchases and build  enduring  brand equity.  In order to implement this
strategy,  we intend to implement an integrated marketing campaign that includes
the following:

     Advertising.  We will design our advertising to build brand equity,  create
     -----------
awareness  and  generate  initial  purchases of fine art posters sold on our web
site.  Depending  on  the  availability  of  funds,  we  intend  to use a mix of
broadcast media, including:

                                        8
<PAGE>

     *    Local newspapers;

     *    Trade journals;

     *    Periodicals;

     *    Local radio in the top markets with online shoppers;

     *    Outdoor advertising;

     *    Online banners, text links and e-mail newsletters; and

     *    Mailings of brochures to, among  others,  interior  designers,  retail
          purchasers, past participants in live auctions hosted by Nicklebys.com
          and others.

     Nicklebys.com. There is a link to our web site on Nicklebys.com's home page
     -------------
located on the Internet at  http://www.nicklebys.com.  Our  marketing  agreement
with Nicklebys.com  provides for Nicklebys.com to receive a referral fee of $.22
per web site "hit" or "click-through" generated by a new visitor to our web site
as a result of the link to the site on Nicklebys.com's web page. Because Messrs.
Thornock and Capra, executive officers,  directors and controlling  shareholders
of Posteralley.com, also serve as executive officers,  directors and controlling
shareholders of Nicklebys.com,  the marketing agreement between  Posteralley.com
and Nicklebys.com cannot be considered to be an arm's-length transaction.  While
we believe that this marketing agreement will assist  Posteralley.com to develop
a  customer  base,  it is not  possible  to predict  the amount of revenue  that
Posteralley.com may realize from this arrangement.

     As of the date of this report, our proposed  integrated  marketing campaign
is in the design stage and,  except for placing a link to our  Internet  site on
Nicklebys.com's  home  page,  we have not yet taken any steps to  implement  the
campaign.

Fulfillment and Distribution

     We currently  fulfill all customer  orders from our  facilities  in Denver,
Colorado.  We receive  posters  from our  suppliers or on  consignment.  Our two
executive  officers and  directors  pick products to fill  customer  orders.  We
presently  manually  update  product  availability  on our web site. We pack the
items on location at our offices and then deliver them to UPS, the United States
Postal Service or other shipping trucks for  distribution to consumers  anywhere
in the United States. We are committed to shipping accurate orders,  efficiently
and  effectively.  Our  management  brings to  Posteralley.com  its expertise in
fulfillment  and   distribution   developed  as  a  result  of  experience  with
Nicklebys.com.  We intend to establish a distribution  center in warehouse space
separate  from our offices at such time, if ever, as the demand for our fine art
posters increases sufficiently.

                                        9
<PAGE>

Customer Service

     We believe that a high level of customer service and support is critical to
retaining and  expanding  our customer  base. No portion of the proceeds of this
offering  has  been  allocated  for  the  employment  of  any  customer  support
personnel.  Accordingly, we expect to be dependent upon the proceeds, if any, to
be received from future equity and/or debt  financing for this purpose.  Our two
management  members are available via  telephone,  generally,  from 8:00 a.m. to
5:00 p.m., Mountain time, Monday to Friday, and can also be reached by e-mail or
facsimile. Presently, we provide by e-mail order and shipping confirmation (with
tracking numbers),  notification of customers regarding out-of-stock  situations
and, for those orders, frequent updating of customers on order status.

     We are dedicated to customer satisfaction. We deliver on this commitment in
a number of ways, including:

     o Product guarantee, including a written appraisal of the value of the item
at the time of purchase and a 30-day refund if the shipment is not satisfactory;

     o Customer  service  guarantee of a one business day response  time for all
inquiries;

     o Privacy  guarantee to use  personal  information  exclusively  to process
orders and not to sell, trade or rent the information to other companies; and

     o Security  guarantee  ensuring  protection  of  personal  information  and
compensation to consumers for the amount of their  liability,  up to $50, in the
unlikely event of unauthorized interception and use of their credit card.

Technology and Network Operations

     We have implemented services and systems for site management, searching and
customer  interaction.  Our  system has been  custom-designed  and  written  for
performance, reliability and scalability using software applications for:

     o Displaying poster merchandise in an organized, logical and customer-
friendly way;

     o Accepting, verifying, organizing and managing customer orders;

     o Notifying and updating customers of order status; and

     o Managing shipment of products.

     These  systems and services  employ a  combination  of our own  proprietary
technologies and commercially available, licensed technologies.  Our proprietary
technologies are embodied in software that is exclusively  owned and implemented
by  Posteralley.com.  We have a  non-exclusive  license to use a  shopping  cart
commerce   application,   which  has  been  customized  for  us.  This  commerce
application is integrated with our custom  software,  enabling a fully automated
order  fulfillment  process.  We realize many benefits from the  integration  of
these systems, including:

                                       10
<PAGE>

     o Tracking customer orders through the entire supply chain in real-time;

     o Making rapid  changes to processes  such as a change in shipping  policy;
and

     o Efficiently expanding our infrastructure.

     Our  operating  system  is  RedHat  Linux 6.2 with  kernel  2.2.16  and our
software platform and architecture is integrated with Apache/1.3.12 Ben-SSL/1.41
(Unix)  mod_perl/1.24  web software  and database  software  mSQL  v2.0.11.  Our
production  system is located at or offices in Denver,  Colorado,  and  provides
24-hour engineering and monitoring support. We address the goals of performance,
reliability  and  scalability.  Our objective is to have fast download times and
make use of caching and load balancing at the web server and  application  level
for optimal performance.  We outsource  development work to outside consultants.
Our web site is up and running 24 hours a day,  seven days a week. We anticipate
that we will continue to devote significant  resources to product development in
the future as we add new features and functionality to our web site.

Competition

     The secondary market for originals and reproductions of fine art posters is
intensely competitive. Competition is expected to intensify in the future, which
may result in price reductions, fewer customer orders, reduced gross margins and
loss of market  share.  We  currently or  potentially  compete with a variety of
companies located both inside and outside the United States engaged in brokering
and/or  dealing in fine art  posters of every  character  and kind.  Many of our
current and potential traditional  store-based competitors have longer operating
histories,  larger  customer  or  user  bases,  greater  brand  recognition  and
significantly greater financial, marketing and other resources than we do. These
companies  include  artists,  art  galleries,  art and/or  antique  brokers  and
dealers, antique stores, auction houses and liquidation companies. Many of these
current and potential competitors can devote substantially more resources to web
site  and  systems   development  than  we  can.  In  addition,   larger,   more
well-established  and financed  entities  may  acquire,  invest in or form joint
ventures  with online  competitors  as the use of the  Internet and other online
services increases.

     We are aware of a  limited  number of other  companies  that are  presently
retailing fine art,  antiques and/or  collectibles,  including fine art posters,
online.  We believe that there will be an increasing  number of online retailers
of the fine art posters of the types being offered by us and, in the instance of
certain  reproductions,  identical to the  reproductions  we offer.  Some of our
competitors  may be able to secure  posters  from  suppliers  on more  favorable
terms,  fulfill  customer  orders  more  efficiently  and adopt more  aggressive
pricing or inventory availability policies than we can. Traditional  store-based
retailers also enable customers to see and feel products in a manner that is not
possible over the Internet.

                                       11
<PAGE>

     We believe that the  following  are  principal  competitive  factors in our
market:

     o Web site recognition;

     o Inventory selection;

     o Streamlined shopping experience;

     o Reliability and speed of order shipment;

     o Customer service;

     o Speed and accessibility of web site;

     o Convenience; and

     o Price.

     While we expect to compete on the basis of our reputation  among  customers
as a quality  provider of  products  and,  to a lesser  extent,  on the basis of
price,  we are not certain that this strategy will be successful.  Additionally,
we,  unlike many other  competitors,  will  guarantee the  authenticity  of each
poster and will furnish the  purchaser  with a written  appraisal at the time of
purchase.  We hope,  to the extent  practicable,  to  minimize  our  weaknesses,
including,  among others, our  undercapitalization,  cash shortage,  limitations
with respect to personnel, technological, financial and other resources and lack
of a customer  base and market  recognition,  through our focus on the Internet;
which eliminates the need for a retail facility and a sizeable  marketing staff.
However, our opportunity to obtain wholesale and other larger customers may also
be limited by our financial resources and other assets.

Intellectual Property

     We rely on a combination  of trademark,  trade secret and copyright laws to
protect our intellectual property. These afford only limited protection. Despite
our efforts to protect our proprietary rights,  unauthorized persons may attempt
to copy  aspects of our web site,  including  the look and feel of our web site,
posters  that we sell,  product  organization,  product  information  and  sales
mechanics.  Unauthorized  persons may also attempt to obtain and use information
that we regard as  proprietary,  such as the technology  used to operate our web
site and our content.  We have not filed an application  to secure  registration
for our trademarks, such as "Posteralley.com," in the United States or any other
country. Any encroachment upon our proprietary information, the unauthorized use
of our trademark,  the use of a similar name by a competing company or a lawsuit
initiated  against us for the infringement  upon another  company's  proprietary
information or improper use of their trademark, may affect our ability to create
brand name  recognition,  cause  customer  confusion  and/or have a  detrimental
effect on our business.  Litigation or  proceedings  before the U.S.  Patent and
Trademark  Office may be  necessary  in the future to enforce  our  intellectual
property  rights,  to protect our trade secrets and domain name and to determine
the validity and scope of the  proprietary  rights of others.  Any litigation or
adverse  proceeding could result in substantial costs and diversion of resources
and could  seriously  harm our business and operating  results.  Finally,  if we
operate  internationally,  the  laws  of  many  countries  do  not  protect  our
proprietary rights to as great an extent as do the laws of the United States.

                                       12
<PAGE>

Government Regulation

     We are not currently  subject to direct federal,  state or local regulation
other than regulations applicable to businesses generally or directly applicable
to  retailing  or  electronic   commerce.   However,  as  the  Internet  becomes
increasingly  popular,  it is possible that a number of laws and regulations may
be adopted  with  respect to the  Internet.  These laws may cover issues such as
user privacy,  freedom of expression,  pricing,  content and quality of products
and services, taxation,  advertising,  intellectual property rights and security
of information. Furthermore, the growth of electronic commerce may prompt demand
for more  stringent  consumer  protection  laws.  Several  states have  proposed
legislation to limit the uses of personal user  information  gathered  online or
require  online  services to  establish  privacy  policies.  The  Federal  Trade
Commission  has also  initiated  action  against  at least  one  online  service
regarding the manner in which  personal  information is collected from users and
provided  to  third  persons  and  has  proposed  regulations   restricting  the
collection  and use of  information  from  minors  online.  We do not  currently
provide individual personal information regarding our users to third persons and
we currently do not identify  registered users by age. However,  the adoption of
additional privacy or consumer protection laws could create uncertainty in usage
of the  Internet  and reduce the demand for our products and services or require
us to redesign our web site.

     We are not certain how our business may be affected by the  application  of
existing  laws  governing  issues  such  as  property   ownership,   copyrights,
encryption and other intellectual property issues,  taxation,  libel, obscenity,
qualification  to do business and personal  privacy.  The vast majority of these
laws were adopted prior to the advent of the Internet.  As a result, they do not
contemplate   or  address  the  unique   issues  of  the  Internet  and  related
technologies.  Changes in laws  intended to address  these  issues  could create
uncertainty in the Internet  marketplace.  This uncertainty  could reduce demand
for our posters,  increase the cost of doing  business as a result of litigation
costs and/or increase service delivery costs.

Employees and Consultants

     Posteralley.com  has had no  full-time  employees  since our  organization.
Messrs.  Scott M.  Thornock  and Bruce A.  Capra,  our  President/Treasurer  and
Secretary,  respectively,  and  directors  of  Posteralley.com,  have  served as
part-time  employees  through the date of this report.  Mr.  Jeffery H. Lee, the
Vice  President  and a  director  of  Posteralley.com,  has  been  employed on a
part-time  basis since May 8, 2001.  No cash  compensation  has been awarded to,
earned by or paid to any of these  individuals for all services  rendered in all
capacities  to   Posteralley.com   during  the  period  from  the  date  of  our
organization on July 19, 1999,  through  September 30, 2000, the end of our last
fiscal year. For the foreseeable future, neither Mr. Thornock, Mr. Capra nor Mr.
Lee will receive any compensation in any form for their services rendered in all
capacities to Posteralley.com. During the three months ended March 31, 2001, Mr.
Thornock  received  the  sum of $6,000  as  compensation  for  his  services  to

                                       13
<PAGE>

Posteralley.com  On July 19,  1999,  we issued and sold to Messrs.  Thornock and
Capra 3,240,000 shares,  and 360,000 shares, of common stock,  respectively,  in
consideration  for the  performance of services by each individual in connection
with the organization of  Posteralley.com  valued at $324 and $36,  respectively
($.0001 per share).  On May 8, 2001,  we issued and sold 10,000 shares of common
stock to Mr.  Jeffery H. Lee in  consideration  for his  performance of services
valued at $2,500 ($.25 per share).  We anticipate that at such time, if ever, as
our financial position permits,  Messrs.  Thornock,  Capra and Lee and any other
executive officers of Posteralley.com will receive reasonable salaries and other
appropriate  compensation,  such as bonuses,  coverage under medical and/or life
insurance  benefits plans and  participation in stock option and/or other profit
sharing or pension plans. Additionally,  directors,  including Messrs. Thornock,
Capra,  Lee and/or others,  may receive fees for their attendance at meetings of
the Board of Directors.  Further,  we may pay  consulting  fees to  unaffiliated
persons who perform  services for us, although we have no present plans to do so
and no such fees have been paid as of the date of this annual report.


Item 2. Description of Property.

     We maintain our offices, pursuant to a verbal arrangement, rent-free at the
business  offices of Paragon Real Estate &  Development,  L.L.C.,  an affiliated
company, located at 650 South Cherry Street, Suite #310, Denver, Colorado 80246.
Mr. Scott M. Thornock, the  President/Treasurer,  director and approximate 75.5%
shareholder of Posteralley.com, is the sole owner and managing member of Paragon
Real Estate &  Development.  We anticipate  the continued  utilization  of these
facilities  on a  rent-free  basis  until  such  time,  if  ever,  as we  obtain
sufficient  funding from debt and/or equity financing and/or generate a level of
earnings  sufficient to enable us to pay rent for our present  offices or obtain
office space from an  unaffiliated  third  party.  The office space we currently
occupy is  expected to be adequate to meet our  foreseeable  future  needs.  The
office  space has been  valued at $250 per month based on the market rate in the
local  area  and  is  included  in  the  accompanying  financial  statements  of
Posteralley.com  as rent  expense  with a  corresponding  credit to  contributed
capital.  Our telephone  number is (303)  629-9751 and our  facsimile  number is
(303) 322-0036.


Item 3. Legal Proceedings.

     From time to time,  we may be  involved  in  litigation  relating to claims
arising out of our ordinary  course of business.  As of the date of this report,
we know of no legal proceedings to which  Posteralley.com is a party or to which
any  of  its  property  is  the  subject,  which  are  pending,   threatened  or
contemplated or any unsatisfied judgments against Posteralley.com.

                                       14
<PAGE>


Item 4. Submission of Matters to a Vote of Security Holders.

     No matter was submitted  during the fourth quarter of the fiscal year ended
September  30,  2000,  covered by this  report,  to a vote of our  shareholders,
through our solicitation of proxies or otherwise.


                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

     (a) Market Information, Holders and Dividends.

     There has been no  established  public  trading market for our common stock
since our inception on July 19, 1999. As of the date of this report,  we have 56
shareholders of record of our 4,293,200  outstanding  shares of common stock. We
have never paid or  declared  any  dividends  on our common  stock and we do not
anticipate paying cash dividends in the foreseeable future.

     (b) Recent Sales of Unregistered Securities.

     On July 19, 1999, we issued and sold 3,240,000 shares,  and 360,000 shares,
of common stock (a total of 3,600,000  shares of common stock) to Messrs.  Scott
M.  Thornock and Bruce A. Capra,  respectively,  in  consideration  for services
performed by each individual in connection with our organization  valued at $324
and $36, respectively (a total of $360), at the rate of $.0001 per share. On May
8, 2001, we issued and sold 10,000 shares of common stock to Mr.  Jeffery H. Lee
in consideratin for services performed by him valued at $2,500 ($.25 per share).
Messrs.  Thornock,  Capra and Lee serve as our executive  officers and directors
and  together  own of record and  beneficially  3,610,000  shares,  representing
approximately 84.1% of the total number of issued and outstanding shares, of our
common stock as of the date of this report.  We relied,  in connection  with the
sales of the shares,  upon the exemption from  registration  afforded by Section
4(2) of the Securities Act of 1933 and Section  11-51-308(1)(p)  of the Colorado
Uniform  Securities  Act. We relied upon the fact that our  issuance and sale of
the shares did not  constitute a public  securities  offering  together with the
fact that Messrs. Thornock, Capra  and Lee were  executive  officers,  directors
and/or controlling  shareholders of Posteralley.com at the time of the sales, to
make the exemptions available.

     On  July  26,  1999,  we  issued  and  sold  182,000  shares,  representing
approximately 4.2% of the aggregate number of issued and outstanding  shares, of
our  common  stock as of the date of this  report,  to Cudd &  Associates,  1120
Lincoln Street,  Suite #1507,  Denver,  Colorado 80203, the sole  proprietorship
owned by Patricia  Cudd,  Esq.,  that has acted as our legal  counsel  since our
inception on July 19, 1999.  Cudd &  Associates  received  said shares of common
stock  in  consideration  for the  performance  of  certain  legal  services  in
connection with our organization valued at $182 ($.001 per share). In connection
with the sale of the shares,  we relied  upon the  exemption  from  registration
provided  by  Section   4(2)  of  the   Securities   Act  of  1933  and  Section
11-51-308(1)(p)  of the Colorado Uniform  Securities Act. To make the exemptions
available,  we relied upon the fact that our  issuance and sale of the shares of
common stock did not constitute a public  securities  offering together with the
fact that Cudd & Associates was our legal counsel at the time of the sale.

                                       15
<PAGE>

     Posteralley.com,  as the maker,  entered into  unsecured  promissory  notes
dated November 1, 1999, with each of Messrs. Thornock and Capra, as the holders,
in the principal amounts of $8,000 and $2,000, respectively, bearing interest at
the  rate  of 8% per  annum,  due  November  1,  2000.  These  promissory  notes
memorialized  non-interest  bearing,  working capital  advances in the identical
principal amount of each promissory  note, made by each of Messrs.  Thornock and
Capra  to us on July 27,  1999.  Posteralley.com,  as the  maker,  entered  into
unsecured promissory notes dated November 1, 1999, with each of Messrs. Thornock
and Capra,  as the holders,  in the  principal  amounts of $1,500 each,  bearing
interest at the rate of 8% per annum, due November 1, 2000. Posteralley.com,  as
the maker, entered into the unsecured  promissory note dated March 3, 2000, with
Mr. Thornock, as the holder, in the principal amount of $1,500, bearing interest
at the rate of 8% per annum,  due November 1, 2000.  We claimed  exemption  from
registration  under  Section  4(2) of the  Securities  Act of 1933  and  Section
11-51-308(1)(p)  of the Colorado  Uniform  Securities Act in connection with the
issuance of the promissory  notes described  above. We relied upon the fact that
Messrs.  Thornock and Capra were executive  officers,  directors and controlling
shareholders  of  Posteralley.com  at the time of the issuance of the promissory
notes together with the fact that our issuance of the  promissory  notes did not
constitute a public securities offering,  to make the exemptions  available.  On
May 31, 2000, we paid the $14,500  principal  balance of all of the  outstanding
promissory notes together with accrued interest totaling $825.

     During the period from May 8 through June 28,  2000,  we issued and sold an
aggregate of 501,200 shares of our common stock to a total of fifty-two persons,
all of whom are residents of the States of California, Colorado or Illinois, for
cash  consideration  totaling  $125,300.  We made the sales in reliance upon the
exemption from registration with the Securities and Exchange Commission provided
under  Section 3(b) of the  Securities  Act of 1933 and Rule 504 of Regulation D
under the  Securities  Act of 1933,  and in  reliance  upon the  exemption  from
registration  provided  under Section  25102(f) of the  California  Corporations
Code, Section  11-51-308(1)(p) of the Colorado Securities Act or Section 4.G. of
the Illinois  Securities Law of 1953. No underwriter  was employed in connection
with the offering and sale of the shares.  The facts that we relied upon to make
the Federal exemption available include, among others, the following:

     (i) The aggregate  offering  price for the offering of the shares of common
stock did not  exceed  $1,000,000,  less the  aggregate  offering  price for all
securities  sold  within  the twelve  months  before the start of and during the
offering in reliance on any exemption  under Section 3(b) of, or in violation of
Section 5(a) of, the Securities Act of 1933;

     (ii) The required number of manually executed  originals and true copies of
Form D were duly and timely filed with the Securities and Exchange Commission;

     (iii) We conducted no general  solicitation  or  advertising  in connection
with the offering of any of the shares;  and

                                       16
<PAGE>

     (iv) The fact that Posteralley.com has not been since its inception:

          (a) Subject to the  reporting  requirements  of Section 13 or 15(d) of
     the Securities Exchange Act of 1934;

          (b) An  "investment  company"  within the  meaning  of the  Investment
     Company Act of 1940; or

          (c) A development  stage company that either has no specific  business
     plan or purpose or has  indicated  that its business plan is to engage in a
     merger or acquisition with an unidentified  company or companies,  or other
     entity or person.


Item 6. Management's Discussion and Analysis or Plan of Operation.

General
-------

     Since  shortly  after our  inception,  we have  operated  a web site on the
Internet located at  http://www.posteralley.com  from which we retail and broker
fine art  posters,  including,  but not limited  to,  vintage  antique,  product
advertising,   travel,   sporting  event,  movie  and  theater  memorabilia  and
commemorative  posters. We have generated only minimal sales and a net loss from
this  business  through the date of this  prospectus.  For the six months  ended
March 31, 2001,  and the year ended  September 30, 2000, we realized total sales
of $4,306 and $3,258,  respectively,  and a net loss of $(20,161) and $(29,492),
respectively, which is less than $(.01) per share.

     We expect,  for the foreseeable  future, to be partially  dependent for our
products upon fine art posters consigned to us by I. Brewster & Company, Club of
American  Collectors of Fine Arts or others.  We have no written  agreement with
either I.  Brewster  & Company  or Club of  American  Collectors  of Fine  Arts.
Accordingly,  neither  company  has any  obligation  to  consign  posters to us.
However,   we  intend  to  increase  our  limited  inventory  of  originals  and
reproductions of fine art posters. The sums of $5,000 and $10,000 anticipated to
be received from the minimum and the maximum  offering  proceeds,  respectively,
from  our  proposed  offering  of  common  stock  pursuant  to the  Registration
Statement  on Form SB-2 filed with the  Securities  and Exchange  Commission  in
December 2000, have been allocated for this purpose. We have plans to expand our
marketing  efforts  in order to  obtain a  larger  customer  base.  Funds in the
amounts of $4,000 and $8,000 anticipated to be received from the minimum and the
maximum  proposed common stock offering,  respectively,  have been allocated for
these  marketing  efforts.   Our  marketing  efforts  will  include  traditional
marketing,  such as  advertising  on the radio and in  newspapers,  and Internet
marketing,  including enhancing our web site, placing banners on other web sites
and distributing e-mails promoting Posteralley.com. We do not intend to hire any
employees in the  foreseeable  future.  We intend to purchase $5,000 of computer
equipment  only in the event  that we  realize  the  maximum  proceeds  from our
proposed  offering of common stock pursuant to our recently  filed  Registration
Statement on Form SB-2.

                                       17
<PAGE>

     The  implementation  of these plans is dependent  upon our ability to raise
additional  capital from equity and/or debt financing and/or achieve  profitable
operations.  We believe that the revenue generated from our business will not be
sufficient  to finance all future  activities  and that it will be  necessary to
raise additional funds through equity and/or debt financing after the expiration
of one year after our proposed  common stock  offering as we do not expect to be
able to satisfy our cash  requirements  following the expiration of this period.
We do not believe that it will be necessary to raise additional funds within the
next  year.  However,  we may  need  to  raise  additional  funds  prior  to the
expiration  of this period if, for  example,  we pursue  business or  technology
acquisitions   or   experience   operating   losses   that  exceed  our  current
expectations.  Although we intend to explore all available alternatives for debt
and/or  equity  financing,  including,  but not limited  to,  private and public
securities offerings, there can be no assurance that we will be able to generate
additional  capital for expansion and/or other purposes.  In the event that only
limited  additional  financing is received,  we expect our  opportunities in the
secondary market for fine art posters to be limited. Further, even if we succeed
in  obtaining  the level of funding  necessary to increase  revenue  through the
expenditure of additional funds for marketing,  advertising  and/or promotion in
order to  obtain a  sizable  customer  base and,  in turn,  purchase  additional
inventory and enhance our web site,  this will not ensure the  realization by us
of profits from operations.

     It is possible that selling  shareholders  will sell their  shares,  but we
won't raise the minimum offering  proceeds,  in our proposed offering of 100,000
shares of common stock pursuant to our  Registration  Statement on Form SB-2. In
that  event,  we will not have  even the  minimum  anticipated  proceeds  of the
offering in the amount of $20,000  available for payment of the unpaid  expenses
of this offering, general and administrative expenses,  acquisition of a limited
inventory  of  posters,  marketing  and  working  capital.  If the  offering  is
unsuccessful,  we will employ our best efforts to limit administrative and other
operating expenses and endeavor to enhance and improve our web site and initiate
our proposed integrated  marketing campaign utilizing revenue from operations in
order to increase our sales. We believe that our possible inability to raise the
minimum proceeds will delay,  but not prevent us from  commencing,  the proposed
integrated  marketing  campaign.  To the extent to which our proposed  marketing
campaign is delayed and sales fail to increase in accordance  with  projections,
we will, in turn, be delayed in our efforts to realize profits from operations.

Milestones
----------

     In order to become  fully-operational  and  profitable,  we must expand our
fine art poster inventory,  thoroughly market the  "Posteralley.com"  brand name
and our  services as a provider of quality  and  authentic  fine art posters and
enhance our web site so that it is considered the premier web site in the poster
industry. We are currently in the process of pursuing these steps with the funds
raised during our recent offering of common stock completed in June 2000 and the
funds  expected to be received,  if any,  from our  proposed  offering of common
stock pursuant to our recently filed Registration  Statement on Form SB-2. Funds
generated  from the proposed  offering  pursuant to our recently filed Form SB-2
Registration Statement will be used for the above-described purposes in addition
to purchasing  inventory  and computer  equipment and enhancing our web site. We
have already begun selling fine art posters and have received  limited  revenues
of $7,564 through March 31, 2001.

                                       18
<PAGE>

Results of Operations
---------------------

Six Months Ended March 31, 2001, Versus Six Months Ended March 31, 2000
-----------------------------------------------------------------------

     Total  revenue  was $4,306  for the six months  ended  March 31,  2001,  as
compared to total  revenue of $-0- for the six months ended March 31, 2000.  Our
sale of a limited number of posters  accounts for the limited  revenue  realized
during the six months ended March 31, 2001.

     We  incurred a net loss of  $(20,161)  for the six months  ended  March 31,
2001,  as compared to a net loss of $(5,712)  for the six months ended March 31,
2000, because of the factors described below.  Operating expenses increased from
$5,349 for the six months  ended March 31,  2000,  to $22,443 for the six months
ended March 31,  2001.  We  experienced  a sizeable  increase  in all  operating
expenses  except web site  development  costs and  contributed  rent for the six
months ended March 31, 2001, as compared to the six months ended March 31, 2000.
The largest increase was in professional fees, which were $-0- in the six months
ended March 31, 2000,  and $12,483 in the six months ended March 31, 2001.

Year Ended  September  30, 2000,  Versus Period from  Inception  (July 19, 1999)
--------------------------------------------------------------------------------
through September 30, 1999
--------------------------

     Total revenue was $3,258 for the year ended September 30, 2000, as compared
to total revenue of $-0- for the period from  inception  (July 19, 1999) through
September 30, 1999. The limited revenue realized during the year ended September
30, 2000, is the result of our sale of a limited number of posters.

     We incurred a net loss of $(29,492) for the year ended  September 30, 2000,
as compared to a net loss of $(4,382)  for the period from  inception  (July 19,
1999)  through  September  30,  1999,  because of the factors  described  below.
Operating expenses increased from $4,382 for the period from inception (July 19,
1999) through  September  30, 1999, to $30,107 for the year ended  September 30,
2000.  We  experienced  a sizeable  increase in all  operating  expenses  except
stock-based  compensation  for the year ended September 30, 2000, as compared to
the period from inception  through  September 30, 1999. The largest increase was
in professional  fees,  which  increased  1,917% from $1,500 for the period from
inception  through  September 30, 1999, to $19,173 for the year ended  September
30, 2000.

Financial Condition, Liquidity and Capital Resources
----------------------------------------------------

         As of March 31,  2001,  we had  minimal  total  assets in the amount of
$69,262,  including  $39,302 in cash,  inventory  valued at cost of $28,869  and
equipment (less  accumulated  depreciation) of $1,091,  and total liabilities of
$5,548.  As of September 30, 2000, we had minimal total assets,  including cash,
inventory,  at cost, and equipment (less accumulated  depreciation),  of $90,395
and total  liabilities of $3,813. As a result of our having minimal assets and a
deficit  accumulated  during the development stage of $(54,035) and $(33,874) as
of March 31, 2001, and September 30, 2000, respectively, our total shareholders'
equity  (deficit) as of March 31, 2001,  and September 30, 2000, was $63,714 and
$86,582,  respectively.  There can be no assurance that our financial  condition
will improve.

                                       19
<PAGE>

     Until the  successful  completion  of our  offering of common stock in June
2000 for gross proceeds of $125,300,  we were funded exclusively with loans from
Messrs.  Scott M.  Thornock  and  Bruce A.  Capra,  two of our  three  executive
officers and  directors  and our principal  shareholders.  Messrs.  Thornock and
Capra   loaned  an   aggregate   of  $11,000   and  $3,500,   respectively,   to
Posteralley.com during the period from July 27, 1999, through March 3, 2000. Two
of the loans were  evidenced by  unsecured  promissory  notes dated  November 1,
1999, with each of Messrs.  Thornock and Capra, as the holders, in the principal
amounts of $9,500 and $3,500,  respectively,  bearing interest at the rate of 8%
per annum,  due  November 1, 2000.  A third loan was  evidenced  by an unsecured
promissory note dated March 3, 2000, with Mr.  Thornock,  as the holder,  in the
principal  amount of $1,500,  bearing  interest at the rate of 8% per annum, due
November 1, 2000. On May 31, 2000,  Posteralley.com repaid the $14,500 principal
balance  of  all of the  outstanding  promissory  notes  together  with  accrued
interest  totaling  $825 out of the  proceeds of our  offering  of common  stock
completed in June 2000.  Additionally,  during September 2000, Mr. Thornock paid
expenses on behalf of Posteralley.com totaling $375.

     On December 29, 2000, we filed a  Registration  Statement on Form SB-2 with
the  Securities and Exchange  Commission  providing for the offer and sale of an
aggregate of 601,200 shares of common stock,  including 100,000 shares of common
stock being offered by  Posteralley.com  at an offering  price of $.50 per share
for total  gross  proceeds of $50,000  and 501,200  shares of common stock being
offered by the  fifty-two  persons  who  purchased  shares in our  common  stock
offering  described in the preceding  paragraph,  as selling  shareholders.  The
Securities  and  Exchange  Commission  has not  yet  declared  the  Registration
Statement effective.

     Net cash used in  operating  activities  was  $(18,939)  for the six months
ended  March  31,  2001,  because  of the net  loss of  $(20,161)  incurred  and
inventory of $(2,263),  offset by the value of office space  contributed  by our
President  ($1,500),  accounts  payable  and  accrued  expenses  of  $1,735  and
depreciation  of $250.  Net cash used in operating  activities was $(45,740) for
the year ended September 30, 2000, because of the net loss of $(29,492) incurred
and inventory of $(21,706),  offset  by the value of office space contributed by
our  President  ($3,000),  accounts  payable and accrued  expenses of $2,313 and
depreciation  of $145.  For the six months  ended March 31,  2001,  and the year
ended  September 30, 2000,  net cash used in investing  activities  was $-0- and
$(1,486),  respectively,  and net cash  provided  by  financing  activities  was
$(4,207) and $106,414, respectively. Cash decreased by $(23,146) from $62,448 at
the  beginning of the six months ended March 31, 2001,  to $39,302 at the end of
the period,  because of the factors  described above.  Cash increased by $59,188
from $3,260 at the beginning of the year ended September 30, 2000, to $62,448 at
the end of the year, because of the above-described factors.

                                       20
<PAGE>


Inflation
---------

     We believe that inflation has not had a material impact on our business.

Seasonality
-----------

     We do not believe that our business is seasonal.


Item 7. Financial Statements.

     The Financial  Statements of Posteralley.com,  Inc., the Notes to Financial
Statements and the Independent  Auditors' Report of Cordovano and Harvey,  P.C.,
independent  certified public accountants,  required by this Item 7. commence on
page F-1 and are incorporated herein by this reference. The Financial Statements
filed as part of this  Annual  Report on Form  10-KSB are listed in the Index to
Financial Statements below:

                                                                           Page

Independent Auditor's Report .......................................        F-2

Balance Sheet, September 30, 2000 ..................................        F-3

Statements of Operations, for the year ended
  September 30, 2000, from July 19, 1999 (inception)
  through September 30, 1999, and from July 19,
  1999 (inception) through September 30, 2000 ......................        F-4

Statement of Shareholders' Equity, from July 19, 1999
 (inception) through September 30, 2000 ............................        F-5

Statements of Cash Flows, for the year ended
  September 30, 2000, from July 19, 1999 (inception)
  through September 30, 1999, and from July 19,
  1999 (inception) through September 30, 2000 ......................        F-6

Summary of Significant Accounting Policies .........................        F-7

Notes to Financial Statements ......................................        F-10


Item 8.  Changes  In  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

     We had no  independent  accountant  prior to the retention of Cordovano and
Harvey, P.C., 201 Steele Street, Suite #300, Denver, Colorado 80206, in December
1999. There has been no change in our independent  accountant  during the period
commencing with the retention of Cordovano and Harvey,  P.C.,  through  February
16, 2001.

                                       21
<PAGE>


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        With Section 16(a) of the Exchange Act.

Directors and Executive Officers

     Set forth below are the names,  ages,  positions with  Posteralley.com  and
business experience of our directors and executive officers.

       Name                       Age                      Title
-------------------              ----        ----------------------------------
Scott M. Thornock*                41         President, Treasurer and Director

Jeffery H. Lee*                   33         Vice President and Director

Bruce A. Capra*                   46         Secretary and Director
-----------------

     *The  individuals  named in the table may be deemed to be our "parents" and
"promoters,"  as those terms are defined in the  General  Rules and  Regulations
under the Securities Act of 1933.

General

     All directors hold office until the next annual meeting of our shareholders
and until their respective successors have been elected and qualified.  Officers
serve at the pleasure of the Board of Directors.  Messrs. Thornock and Capra are
each  expected to devote  approximately  15% of their time to the  business  and
affairs of Posteralley.com. We expect Mr. Lee to devote approximately 10% of his
time to Posteralley.com's  business and affairs. Set forth below under "Business
Experience" is a description of the business experience of Messrs. Thornock, Lee
and Capra.  Except as otherwise  indicated below, all  organizations  with which
each  individual  is or has been  previously  employed,  affiliated or otherwise
associated, are not affiliated with us.

Family Relationships

     There is no family relationship between or among Mr. Scott M. Thornock, our
President/Treasurer  and a director of Posteralley.com,  Mr. Jeffery H. Lee, the
Vice  President and a director of  Posteralley.com, and Mr. Bruce A. Capra,  our
Secretary and a company director.

Business Experience

                                       22
<PAGE>

     Scott M. Thornock has approximately fifteen years of experience in the real
     -----------------
estate  development  business and in the  management  of a number of private and
public, start-up companies. He has served as the President,  the Treasurer and a
director of  Posteralley.com  since its inception on July 19, 1999. Mr. Thornock
served as the Secretary,  the Treasurer and a director of  JDLphotos.com,  Inc.,
from the date of the company's  organization  on March 15, 2000,  through May 8,
2001.  JDLphotos.com,  a private  company  engaged in marketing,  online and via
juried art shows,  matted,  framed  prints of the  photographs  of Mr.  James J.
DeLutes, an award-winning  photographer,  recently filed a Regulation A Offering
Statement with the Securities and Exchange Commission for the purpose of raising
capital pursuant to Regulation A under the Securities Act of 1933. He has served
as the Chief  Executive  Officer,  since October 16, 2000, and as the President,
from the date of the company's  inception on January 13, 1999,  through  October
15, 2000, of Nicklebys.com,  a  privately-held,  Denver,  Colorado,  corporation
engaged in the marketing  and sale of fine art,  antiques and  collectibles  via
online and live auctions and retail sales. Since Nicklebys.com's organization on
January 13, 1999, he has served as the Chief  Financial  Officer,  the Secretary
and a director of the company.  Nicklebys.com  commenced a common stock offering
pursuant to Rule 504 of Regulation D under the  Securities  Act of 1933 on March
17, 2000, that was  successfully  completed on September 11, 2000.   From August
27, 1999, through April 14, 2001, Mr. Thornock served as the Secretary/Treasurer
of Celebrity  Sports  Network,  Inc.,  a  privately-held,  Littleton,  Colorado,
company  engaged in the  promotion  of  professional  athletes  as  motivational
speakers via the Internet and the sponsorship of motivational seminars, which is
seeking to raise capital publicly. He served as a director of Perseus Art Group,
Inc.,  a public  Colorado  corporation,  from the date of  Perseus  Art  Group's
inception on June 26, 1998,  until his  resignation  on May 12, 1999, and as the
Vice  President,  the Chief  Financial  Officer and the Secretary of Perseus Art
Group from June 30, 1998,  until his resignation from these positions on May 12,
1999.  Perseus Art Group  conducted an offering of common stock pursuant to Rule
504 commencing  July 10, 1998,  that was completed  successfully  on October 24,
1998. Mr. Thornock served as the President,  the Chief  Executive  Officer,  the
Treasurer and a director of Triad  Development  Corp., a publicly-held  Colorado
corporation,  from the date of its  inception on October 31,  1997,  through the
date  of his  resignation  on  April  2,  1999.  On  November  19,  1997,  Triad
Development  commenced  a common  stock  offering  pursuant to Rule 504 that was
successfully completed on October 1, 1998. He served as the President, the Chief
Executive Officer, the Treasurer,  the Chief Financial Officer and a director of
Perfection  Development  Corporation  from  April  18,  1997,  the  date  of the
organization of the company,  through October 2, 1998, on which date he resigned
as an  executive  officer and  director.  Perfection  Development  conducted  an
offering  pursuant to Rule 504 commencing on May 2, 1997, that was  successfully
completed.  Mr.  Thornock  served as the Vice  President,  the  Chief  Financial
Officer,  the Secretary and a director of Thor Management Group,  Inc., from the
date of that company's  inception on January 9, 1998,  through June 19, 1998, on
which date he resigned his positions as an executive officer and director of the
company. He served as the President,  the Chief Executive Officer and a director
of Pegasus Development Group, Inc., a publicly-held  Colorado corporation,  from
the date of its organization on December 23, 1996,  through October 22, 1997, on
which date Mr.  Thornock  resigned  as  executive  officer  and  director of the
company.  Commencing on January 16, 1997, Pegasus Development Group conducted an
offering of common stock pursuant to Rule 504 that was completed successfully on
March 6, 1997.  He has been the sole owner and  managing  member of Paragon Real
Estate and Development, L.L.C., a Denver, Colorado-based residential real estate
development,   brokerage  and  business   consulting  firm  that  has  performed
administrative  supervision,  financial management and other services for, among
others,  thirty-five  Colorado limited liability companies of which Mr. Thornock
has been the founder,  the manager and a member, since he founded the company in

                                       23
<PAGE>

February 1996. These thirty-five limited liability companies,  including Paragon
Development  I-IV,  L.L.C.,   Paragon   Development  VI-XII,   L.L.C.,   Paragon
Development  XIV-XXXV,  L.L.C.,  32-5,  L.L.C., and Paragon Investment Group, I,
L.L.C.,  have raised capital from time-to-time over the past  approximately five
years for the purposes of acquiring,  developing,  constructing and/or brokering
multi-family,  residential properties located in Denver,  Boulder,  Longmont and
Vail, Colorado.  Twenty of these companies are operating currently. Mr. Thornock
has held a real estate  brokers  license in the State of Colorado since December
1995.  He received a Bachelor of Arts degree in history and a Masters  degree in
business management from the University of Colorado,  Boulder, Colorado, in 1982
and 1994, respectively.

     Jeffery  H.  Lee  has  served  as the  Vice  President  and a  director  of
     ----------------
Posteralley.com  since May 8, 2001. Since January 1996, he has been the Director
of Operations and a member of Paragon Real Estate and Development,  L.L.C.,  the
Denver, Colorado, real estate brokerage and development firm co-owned by him and
Mr. Thornock,  the firm's manager and founder.  Mr. Lee's  responsibilities  for
Paragon  Real Estate and  Development  require his active  participation  in the
development  of  high-end  residential  townhomes  in the  Cherry  Creek area of
Denver,  Colorado.  As the zoning specialist for the firm, he works closely with
government agencies in the City and County of Denver,  Colorado. From March 1990
through  January 1996, Mr. Lee was employed by Grubb & Ellis, a commercial  real
estate company,  where he specialized in the sale of multi-family  dwellings and
vacant land.  Mr. Lee has been a licensed real estate broker since 1990. He sold
over  $16,000,000  in real estate for the 2000 calendar year. Mr. Lee received a
Bachelor of Arts degree in psychology  in 1990 and a Masters  degree in business
administration in 1997 from the University of Colorado, Boulder, Colorado. He is
a member of the National  Association of Realtors,  the Colorado  Association of
Realtors and the Denver Board of Realtors.

     Bruce  A.  Capra  has   served  as  the   Secretary   and  a  director   of
     ----------------
Posteralley.com since our inception on July 19, 1999. Since October 16, 2000, he
has served as the President  and,  from the date of the  company's  inception on
January 13,  1999,  through  October 15,  2000,  Mr.  Capra  served as the Chief
Executive Officer, of Nicklebys.com,  Inc., a privately-held,  Denver, Colorado,
corporation  engaged  in the  marketing  and  sale of  fine  art,  antiques  and
collectibles via online and live auctions and retail sales. He has served as the
Chairman of the Board of Directors of Nicklebys  since the  organization  of the
company on January 13, 1999. He was employed, from 1988 until his resignation on
February 1999, as the General  Manager and the Director of Sales,  Marketing and
Advertising  for  American  Design,  Ltd.,  an  Aurora,  Colorado,   corporation
specializing  in the  publication  of fine art that has  eleven  retail  outlets
located in California,  Colorado and New Mexico. American Design, which is today
recognized  as one of the largest  wholesale  fine art  publishing  firms in the
United States,  realized gross revenues of approximately  $12,000,000 during its
most recent fiscal year. Mr. Capra served as the President,  the Chief Executive
Officer and a director  of Perseus Art Group,  Inc.,  a  publicly-held  Colorado
corporation, from June 26, 1998, until his resignation from these positions with
Perseus on May 12,  1999.  He was the  founder  and served as the  President,  a
director  and the sole  owner  of  Nickleby's  Auction  Gallery,  Ltd.,  Arvada,
Colorado,  an auction liquidation company specializing in fine art, antiques and
collectibles,  from 1992 through  January 15, 1999, on which date  Nicklebys.com
purchased all of the outstanding  common  stock  of  Nickleby's Auction Gallery.

                                       24
<PAGE>

Mr. Capra founded and served as the  President,  from 1981 until the sale of the
business in 1988,  of Image Tech Inc.,  Denver,  Colorado,  a fine art serigraph
printing company specializing in printing and publishing fine art and commercial
signage and, during Mr. Capra's tenure,  printed limited edition fine art prints
for internationally  known artists such as Andy Warhol, Roy Liechtenstein,  Earl
Biss and  others.  Prior to that  time,  from 1979  through  1982,  he owned and
operated The Mushroom Gallery, Ltd., an art gallery located in Denver, Colorado.
Mr. Capra attended Missouri Auction School in 1988 and is a licensed  auctioneer
in the States of California,  Colorado, Nevada and Texas. He is also a certified
personal  property  appraiser and a member of the Certified  Appraisers Guild of
America.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section  16(a) of the  Securities  and  Exchange  Act of 1934  requires our
executive  officers  and  directors  and  persons  who own  more  than  10% of a
registered  class of our  equity  securities,  to file with the  Securities  and
Exchange  Commission  initial  statements  of beneficial  ownership,  reports of
changes in ownership and annual reports  concerning their  ownership,  of common
stock  and  other  equity  securities  of  Posteralley.com  on Forms 3, 4 and 5,
respectively.  Executive  officers,  directors and greater than 10% shareholders
are required by the Securities and Exchange Commission regulations to furnish us
with copies of all Section 16(a) reports they file.  To our  knowledge,  Messrs.
Thornock  and Capra,  our  executive  officers,  directors  and greater than 10%
beneficial  owners of our common stock,  have complied with Section 16(a) filing
requirements applicable to them during our fiscal year ended September 30, 2000.


Item 10. Executive Compensation

     The following table sets forth  information  concerning the compensation of
Posteralley.com's  executive  officers for the fiscal years ended  September 30,
2000, and 1999,  including  annual  compensation,  including the dollar value of
base salary (cash and  non-cash)  earned  during the 2000 and 1999 fiscal years,
and the sum of the number of securities  underlying stock options granted,  with
or without tandem SARs, and the number of freestanding SARs.

                                       25
<PAGE>

<TABLE>
<CAPTION>

                                           SUMMARY COMPENSATION TABLE

                                                                 Long Term Compensation
                                     Annual Compensation                 Awards            Payouts
                                     -------------------------------------------------------------
      (a)      (b)          (c)          (d)           (e)         (f)           (g)          (h)           (i)
                                                      Other                     Securities
   Name                                               Annual     Restricted       Under-                 All Other
   and                                                Compen-      Stock          lying       LTIP        Compen-
Principal                                             sation      Award(s)       Options     Payouts      sation
 Position       Year    Salary($)      Bonus($)         ($)          ($)         SAR's(#)      ($)          ($)
------------------------------------------------------------------------------------------------------------------


<S>             <C>       <C>            <C>           <C>          <C>           <C>         <C>           <C>
Scott M.        2000      $-0-           $-0-          $-0-         $-0-          $-0-        $-0-          $-0-
Thornock,       1999      $-0-           $-0-          $-0-         $-0-          $-0-        $-0-          $-0-
President,
Treasurer,
Director

Jeffery H.      2000      $-0-           $-0-          $-0-         $-0-          $-0-        $-0-         $-0-
Lee,            1999      $-0-           $-0-          $-0-         $-0-          $-0-        $-0-         $-0-
Vice
President,
Director

Bruce A.        2000      $-0-           $-0-          $-0-         $-0-          $-0-        $-0-         $-0-
Capra,          1999      $-0-           $-0-          $-0-         $-0-          $-0-        $-0-         $-0-
Secretary,
Director
</TABLE>

     Messrs.  Scott M. Thornock and Bruce A. Capra,  two of our three  executive
officers and directors,  have served as part-time  employees of  Posteralley.com
since our inception.  Mr. Jeffery H. Lee has been employed on a part-time  basis
since May 8, 2001. No cash  compensation  has been awarded to, earned by or paid
to either Mr. Thornock or Mr. Capra for all services  rendered in all capacities
to  Posteralley.com  during the period from the date of our organization on July
19, 1999,  through  September 30, 2000, the end of our last fiscal year. For the
foreseeable future, Messrs. Capra, Lee and Thornock will receive no compensation
in any form for their services  rendered in all  capacities to  Posteralley.com.
For the three-month  period ended March 31, 2001, Mr. Thornock received a salary
of $18,000 per annum.  On July 19, 1999, we issued and sold to Messrs.  Thornock
and Capra 3,240,000 shares, and 360,000 shares, respectively, of common stock (a
total of 3,600,000 shares) for services performed in organizing  Posteralley.com
valued at $324 and $36,  respectively  ($.0001  per share).  On May 8, 2001,  we
issued and sold 10,000 shares of common stock to Mr. Lee for services  performed
on behalf of  Posteralley.com  valued at $100 ($.001 per share).  We  anticipate
that, at the time, if ever, as our financial position permits, Messrs. Thornock,
Lee  and  Capra  and  any  other   executive   officers   and/or   directors  of
Posteralley.com   will  receive   reasonable   salaries  and  other  appropriate
compensation,  such as bonuses,  coverage  under medical  and/or life  insurance
benefits plans and  participation in stock option and/or other profit sharing or
pension plans, for services as executive  officers of  Posteralley.com.  Neither
Mr. Thornock,  Mr. Lee nor Mr. Capra holds any option to purchase any securities
of  Posteralley.com.  Messrs.  Thornock  and Capra devote 15% of their time and
effort,  and Mr. Lee devotes  approximately  10% of his time, to  Posteralley's
business and affairs.

                                       26
<PAGE>

     We  do  not  provide  our  officers  or  employees   with  pension,   stock
appreciation rights, long-term incentive or other plans and have no intention of
implementing any of these plans for the foreseeable  future.  In the future,  we
may offer  stock  options  to  employees,  non-employee  members of the Board of
Directors and/or  consultants;  however,  no options have been granted as of the
date of this report.  It is possible that in the future we may establish various
executive  incentive  programs and other benefits,  including  reimbursement for
expenses  incurred in  connection  with  Posteralley.com's  operations,  company
automobiles  and life and  health  insurance,  for our  executive  officers  and
directors,  but none has yet been  granted.  The  provisions  of such  plans and
benefits will be at the discretion of our Board of Directors.

     Under  Colorado law and pursuant to our Articles of  Incorporation,  we may
indemnify our officers and directors for various expenses and damages  resulting
from their acting in those capacities and as directors of a subsidiary.  Insofar
as indemnification  for liabilities arising under the Securities Act of 1933 may
be  permitted  to officers or  directors  of  Posteralley.com  pursuant to those
provisions,  our counsel has informed us that, in the opinion of the  Securities
and Exchange  Commission,  indemnification is against public policy as expressed
in the Securities Act of 1933, and is therefore unenforceable.

Compensation of Directors

     Our directors receive no compensation  pursuant to any standard arrangement
for their services as directors.

Employment Agreements

     We have no employment agreements with Mr. Scott M. Thornock, the President,
the Treasurer and a director of  Posteralley.com,  Mr.  Jeffery H. Lee, the Vice
President and a director of  Posteralley.com,  or Mr. Bruce A. Capra, a director
of  Posteralley.com  and  our  Secretary.  In  the  future,  we may  enter  into
employment  agreements with the foregoing  and/or future  executive  officers of
Posteralley.com.

Indemnification

     Our Articles of Incorporation  include provisions to indemnify our officers
and directors and other persons against expenses,  judgments,  fines and amounts
paid in settlement in connection with threatened,  pending or completed suits or
proceedings  against  those  persons by reason of  serving  or having  served as
officers,  directors or in other capacities,  except in relation to matters with
respect to which they shall be determined not to have acted in good faith and in
the best interests of  Posteralley.com.  With respect to matters as to which our
officers,  directors and others are  determined  to be liable for  misconduct or
negligence,  including gross  negligence,  in the performance of their duties to
Posteralley.com,  our Articles of Incorporation provide for indemnification only
to the extent  that the court in which the action or suit is brought  determines
that the person is fairly and reasonably  entitled to indemnification  for those
expenses that the court deems proper. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to officers, directors
or persons controlling us pursuant to the foregoing, we have been informed that,
in the opinion of the Securities  and Exchange  Commission,  indemnification  is
against  public  policy  as  expressed  in the  Securities  Act of 1933,  and is
therefore unenforceable.

                                       27
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

     The following table sets forth certain information  regarding the ownership
of our common stock as of the date of this report,  by each shareholder known by
us to be the  beneficial  owner of more  than 5% of our  outstanding  shares  of
common  stock,  each  director  and  executive  officer  and all  directors  and
executive  officers as a group.  Under the General Rules and  Regulations of the
Securities  and  Exchange  Commission,  a person is deemed to be the  beneficial
owner of a security  if the person has or shares the power to vote or direct the
voting, or dispose or direct the disposition,  of the security. Each shareholder
named in the table has sole  voting and  investment  power  with  respect to the
shares beneficially owned.

                                              Shares            Percentage
        Name and Address of                Beneficially             of
          Beneficial Owner                   Owned (1)           Class (1)
-----------------------------------        ------------         -----------

Scott M. Thornock (2)                        3,240,000            75.47%
650 South Cherry Street, Suite #310
Denver, Colorado  80246

Bruce A. Capra (2)                             360,000             8.39%
6343 Umber Circle
Golden, Colorado  80403

Jeffery H. Lee (2)                             10,000                *%
650 South Cherry Street, Suite #310
Denver, Colorado  80246

All Directors and Executive                  3,610,000            84.09%
Officers as a Group (Three Persons)
-------------------

     (1) Less than one per cent.

     (2)  Represents  the number of shares of common  stock  owned of record and
beneficially  by each  named  person  or group,  expressed  as a  percentage  of
4,293,200  shares of our common stock issued and  outstanding  as of the date of
this report.

     (3)   Executive   officer  and  member  of  the  Board  of   Directors   of
Posteralley.com.

                                       28
<PAGE>

Item 12. Certain Relationships and Related Transactions.

     On July 19, 1999, we issued and sold 3,240,000 shares,  and 360,000 shares,
of common stock (an  aggregate of 3,600,000  shares of common  stock) to Messrs.
Scott M.  Thornock  and  Bruce A.  Capra,  respectively,  in  consideration  for
services performed by each individual in connection with our organization valued
at $324 and $36,  respectively  (a total of  $360),  at the rate of  $.0001  per
share.  On May 8, 2001,  we issued and sold 10,000 shares of common stock to Mr.
Jeffery H. Lee in consideration  for services  performed by him valued at $2,500
($.25 per share).  Messrs.  Thornock  and Capra  serve as both of our  executive
officers and  directors  and together own of record and  beneficially  3,600,000
shares,  representing  approximately  84.1% of the total  number  of issued  and
outstanding shares, of our common stock as of the date of this report.

     Messrs.  Thornock  and Capra  loaned an  aggregate  of $11,000  and $3,500,
respectively,  to Posteralley.com  during the period from July 27, 1999, through
March 3, 2000;  which loans were evidenced by unsecured  promissory  notes dated
November 1, 1999, with each of Messrs.  Thornock and Capra,  as the holders,  in
the principal  amounts of $9,500 and $3,500,  respectively,  bearing interest at
the rate of 8% per annum, due November 1, 2000. The loans were also evidenced by
an unsecured  promissory  note dated March 3, 2000,  with Mr.  Thornock,  as the
holder,  in the principal  amount of $1,500,  bearing interest at the rate of 8%
per  annum,  due  November  1, 2000.  On May 31,  2000,  we repaid  the  $14,500
principal  balance of all of the  outstanding  promissory  notes  together  with
accrued  interest  totaling  $825 out of the  proceeds of our offering of common
stock completed in June 2000.

     Since  October 1, 1999,  we have  maintained  our offices  rent-free at the
business  offices of Paragon Real Estate &  Development,  L.L.C.,  an affiliated
company of which Mr. Scott M. Thornock, the President/Treasurer,  a director and
an  approximate  75.5%  shareholder  of  Posteralley.com,  is the sole owner and
operating  manager.  The offices have been  located at 650 South Cherry  Street,
Suite #310, Denver,  Colorado 80246, since October 2000 and, prior to that time,
at 1422 Delgany Street, Suite #12, Denver,  Colorado 80202. From the date of our
inception  through  September 30, 1999, Mr.  Thornock  provided  office space to
Posteralley.com  at no  charge.  The $250 per month  value of the  office  space
provided by Paragon  Real  Estate & Development and Mr.  Thornock is included in
Posteralley.com's  financial statements that commence on page F-1 of this Annual
Report on Form 10-KSB as rent expense with a corresponding credit to contributed
capital.

     During   September   2000,   Mr.   Thornock  paid  expenses  on  behalf  of
Posteralley.com  totaling  $375;  which sum was  repaid in  October  2000 and is
reflected in the accompanying financial statements as due to officer. During the
six months  ended  March 31,  2001,  Mr.  Thornock  paid  expenses  on behalf of
Posteralley.com  totaling  $1,825.  The company  repaid Mr.  Thornock the sum of
$1,850 against this amount and an additional $375 owed by Posteralley.com to Mr.
Thornock for expenses in the amount of $375 paid on behalf of the company  prior
to September 30, 2000. Accordingly, Posteralley.com owed Mr. Thornock the sum of
$350 at March 31, 2001,  which was repaid in April 2001,  and is included in the
accompanying financial statements as due to officer.

                                       29
<PAGE>

     Because of their present management positions with,  organizational efforts
on behalf  of, and  percentage  share  ownership  in,  Posteralley.com,  Messrs.
Thornock,  Capra and Lee may be deemed to be our "parents" and  "promoters,"  as
those terms are defined in the Securities  Act of 1933 and the applicable  Rules
and Regulations under the Securities Act of 1933. Because of the above-described
relationships,  transactions  between  and  among  Posteralley.com  and  Messrs.
Thornock,  Capra and Lee,  such as our sale of  common  stock to each of them as
described above, should not be considered to have occurred at arm's-length.

     On  July  26,  1999,  we  issued  and  sold  182,000  shares,  representing
approximately 4.2% of the aggregate number of issued and outstanding  shares, of
our  common  stock as of the date of this  report,  to Cudd &  Associates,  1120
Lincoln Street,  Suite #1507,  Denver,  Colorado 80203, the sole  proprietorship
owned by Patricia Cudd,  Esq., that has acted as our counsel since our inception
on July 19,  1999.  Cudd &  Associates  received  said shares of common stock in
consideration  for the  performance of certain legal services in connection with
our organization valued at $182 ($.001 per share).


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

     (a) The  exhibits  required  to be filed  with this  Annual  Report on Form
10-KSB by Item 601 of  Regulation  S-B, as described in the  following  index of
exhibits, are incorporated herein by reference, as follows:


Item
Number                         Description
------  ------------------------------------------------------------------------
3.1     Articles of Incorporation of Posteralley.com, Inc., filed July 19, 1999.
        (Incorporated  herein  by reference to  Exhibit 3.1 to the Registration
        Statement  on  Form S-3, File No.  333-53002,  filed December 29, 2000.)

3.2     Bylaws  of  Posteralley.com, Inc.  (Incorporated herein  by reference to
        Exhibit  3.2  to  the Registration  Statement  on  Form  S-3,  File  No.
        333-53002, filed December 29, 2000.)

4.0     Form of stock certificate.  (Incorporated herein by reference to Exhibit
        4 to the  Registration  Statement on Form S-3, File No. 333-53002, filed
        December 29, 2000.)

10.1    Internet   Marketing  Agreement   dated   December   29,  1999,  between
        Posteralley.com, Inc., and  Nicklebys.com, Inc.  (Incorporated herein by
        reference to Exhibit 10.3 to the  Registration  Statement on Form 10-SB,
        File No. 0-31469, filed September 5, 2000.)

                                       30
<PAGE>


10.2    Fund Escrow Agreement dated  December 11, 2000, between Posteralley.com,
        Inc.,  and  Citywide  Banks,  N.A.  (Incorporated herein by reference to
        Exhibit  3.2  to  the  Registration  Statement  on  Form  S-3,  File No.
        333-53002, filed December 29, 2000.)

10.3    Promissory Note dated  November 1, 1999, from Posteralley.com, Inc., as
        the maker, to Scott M.  Thornock, as the holder, in the principal amount
        of $8,000 due November 1, 2000,  bearing  interest at the  rate of eight
        per cent per annum.  (Incorporated herein  by reference  to Exhibit 10.1
        to the Registration  Statement on  Form  10-SB, File  No. 0-31469, filed
        September 5, 2000.)

10.4    Promissory Note dated  November 1, 1999, from  Posteralley.com, Inc., as
        the maker, to Bruce A.  Capra,  as the holder,  in the  principal amount
        of $2,000 due November 1, 2000, bearing  interest  at  the rate of eight
        per cent per annum.  (Incorporated herein by reference to  Exhibit  10.2
        to the Registration Statement on  Form  10-SB,  File No.  0-31469, filed
        September 5, 2000.)

          (b) No Reports on Form 8-K were filed  during the last  quarter of the
     fiscal year ended September 30, 2000, covered by this Annual Report on Form
     10-KSB.

                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                       POSTERALLEY.COM, INC.


Date:  June 4, 2001                    By: /s/ Scott M. Thornock
                                           ----------------------
                                           Scott M. Thornock,
                                           President and Treasurer

     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


Date:  June 4, 2001                    By: /s/ Scott M. Thornock
                                           ----------------------
                                           Scott M. Thornock,
                                           President, Treasurer and Director


Date:  June 4, 2001                    By: /s/ Bruce A. Capra
                                           ----------------------
                                           Bruce A. Capra,
                                           Secretary and Director

                                       31
<PAGE>


                              POSTERALLEY.COM, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          Index to Financial Statements

                                                                       Page
                                                                       ----

Independent auditors' report ........................................   F-2
Balance sheet, September 30, 2000 ...................................   F-3
Statements of operations, for the year ended September 30, 2000, from
     July 19, 1999 (inception) through September 30, 1999, and from
     July 19, 1999 (inception) through September 30, 2000 ...........   F-4
Statement of shareholders' equity, from July 19, 1999 (inception)
     through September 30, 2000 .....................................   F-5
Statements of cash flows, for the year ended September 30, 2000, from
     July 19, 1999 (inception) through September 30, 1999, and from
     July 19, 1999 (inception) through September 30, 2000 ...........   F-6
Summary of significant accounting policies ..........................   F-7
Notes to financial statements .......................................   F-10

                                       F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Posteralley.com, Inc.


We have audited the balance sheet of Posteralley.com,  Inc. (a development stage
company) as of September 30, 2000,  and the related  statements  of  operations,
shareholders' equity, and cash flows for the year ended September 30, 2000, from
July 19,  1999  (inception)  through  September  30, 1999 and from July 19, 1999
(inception)  through  September 30, 2000.  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.  Those  standards  require  that we plan and  perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of  Posteralley.com,  Inc. as of
September 30, 2000, and the results of its operations and its cash flows for the
year ended September 30, 2000, from July 19, 1999 (inception)  through September
30, 1999 and from July 19, 1999  (inception)  through  September  30,  2000,  in
conformity with accounting principles generally accepted in the United States.


/s/ Cordovano and Harvey, P.C
------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
October 27, 2000

                                       F-2
<PAGE>

                              POSTERALLEY.COM, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                  Balance Sheet

                               September 30, 2000

Assets
Cash ..............................................................   $  62,448
Inventory, at cost ................................................      26,606
Equipment, less accumulated depreciation of $145 ..................       1,341
                                                                      ---------
                                                                      $  90,395
                                                                      =========

Liabilities and shareholders' equity (deficit) Liabilities:
     Accounts payable .............................................   $      50
     Accrued expenses .............................................       3,388
     Due to officer (Note B) ......................................         375
                                                                      ---------
                                                  Total liabilities       3,813
                                                                      ---------

Commitment (Note D) ...............................................           -

Shareholders' equity (Notes B and D):
     Preferred stock, $.001 par value; 3,000,000 shares authorized;
       -0- shares issued and outstanding ..........................           -
     Common stock, $.0001 par value; 30,000,000 shares authorized;
       4,283,200 shares issued and outstanding, respectively ......         428
     Additional paid-in capital ...................................     120,028
     Deficit accumulated during development stage .................     (33,874)
                                                                      ---------
                               Total shareholders' equity (deficit)      86,582
                                                                      ---------

                                                                      $  90,395
                                                                      =========

         See accompanying summary of significant accounting policies and
                       notes to the financial statements.

                                       F-3
<PAGE>

<TABLE>
                       POSTERALLEY.COM, INC.
                   (A DEVELOPMENT STAGE COMPANY)

                      Statements of Operations
<CAPTION>


                                                                         For The       July 19, 1999 (Inception)
                                                                        Year Ended       through September 30,
                                                                       September 30,  ---------------------------
                                                                           2000           1999           2000
                                                                       -------------  -----------    ------------

<S>                                                                    <C>            <C>            <C>
Sales ..............................................................   $      3,258   $         -    $     3,258
Cost of goods sold .................................................         (2,585)            -         (2,585)
                                                                       -------------  -----------    ------------
                                                        Gross profit            673             -            673

Operating expenses:
     Stock-based compensation (Note B) .............................              -           542            542
     Web site development costs ....................................          3,275           900          4,175
     Professional fees .............................................         17,673         1,500         19,173
     Contributed rent (Note B) .....................................          3,000           500          3,500
     Travel ........................................................          1,959           858          2,817
     Depreciation ..................................................            145             -            145
     Other .........................................................          4,055            82          4,137
                                                                       -------------  -----------    ------------
                                            Total operating expenses        (30,107)       (4,382)       (34,489)
                                                                       -------------  -----------    ------------
                                                      Operating loss        (29,434)       (4,382)       (33,816)

Interest income ....................................................            767             -            767
Interest expense (Note B) ..........................................           (825)            -           (825)
                                                                       -------------  -----------    ------------
                                        Net loss before income taxes        (29,491)       (4,382)       (33,874)

Income taxes (Note C) ..............................................            -             -              -
                                                                       -------------  -----------    ------------

                                                            Net loss   $    (29,491)  $    (4,382)   $   (33,874)
                                                                       =============  ===========    ============

Basic loss per common share ........................................   $          *   $         *
                                                                       =============  ===========
Basic weighted average common shares outstanding ...................      3,949,067     3,764,784
                                                                       =============  ===========
</TABLE>

 *   Less than $.01 per share




         See accompanying summary of significant accounting policies and
                       notes to the financial statements.

                                       F-4
<PAGE>

<TABLE>
                              POSTERALLEY.COM, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                        Statement of Shareholders' Equity

              July 19, 1999 (inception) through September 30, 2000
<CAPTION>

                                                          Preferred         Common                               Deficit
                                                            stock           Stock                              Accumulated
                                                        -------------  ----------------  Additional  Deferred  During the
                                                                Par    Shares     Par     Paid-In    Offering  Development   Total
                                                        Shares  Value             Value   Capital    Costs       Stage
                                                        ------  ----   ---------  -----  ----------  --------  ----------- ---------
<S>                                                     <C>     <C>    <C>        <C>    <C>         <C>       <C>         <C>
July 19, 1999,  shares issued to founders for services
   related to organizing the Company, valued at the
   fair value of the services ($.0001/share) (Note B)...     -  $  -   3,600,000  $360   $       -   $     -   $       -   $    360
July 26, 1999, shares issued to attorney for
   services related to organizing the Company,
   valued at the fair value of the services
   ($.001/share) (Note D)...............................     -     -     182,000    18         164         -           -        182
Office space contributed by an officer (Note B).........     -     -           -     -         500         -           -        500
Net loss for the period ended September 30, 1999........     -     -           -     -           -         -      (4,382)    (4,382)
                                                        ------  ----   ---------  -----  ----------  --------  ----------- ---------

                             Balance, September 30, 1999     -     -   3,782,000   378         664         -      (4,382)    (3,340)

Offering costs deferred.................................     -     -           -     -           -    (8,886)          -     (8,886)
June 1, 2000, sale of common stock pursuant to
   a private placement, less offering costs of
   $8,886 ($.25/share) (Note D).........................     -     -     501,200    50     116,364     8,886           -    125,300
Office space contributed by an affiliate (Note B).......     -     -           -     -       3,000         -           -      3,000
Net loss for the year ended September 30, 2000..........     -     -           -     -           -         -     (29,491)   (29,491)
                                                        ------  ----   ---------  -----  ----------  --------  ----------- ---------

                             Balance, September 30, 2000     -  $  -   4,283,200  $428   $ 120,028   $     -   $ (33,874)  $ 86,582

                                                        ======  ====   =========  =====  ==========  ========  =========== =========
</TABLE>


      See accompanying summary of significant accounting policies and notes
                          to the financial statements.

                                       F-5
<PAGE>
<TABLE>
                       POSTERALLEY.COM, INC.
                   (A DEVELOPMENT STAGE COMPANY)

                      Statements of Cash Flows
<CAPTION>


                                                                    For The        July 19, 1999 (Inception)
                                                                   Year Ended       through September 30,
                                                                 September 30,     -------------------------
                                                                     2000            1999           2000
                                                                 -------------     ----------   ------------
Cash flows from operating activities:
<S>                                                              <C>               <C>          <C>
     Net loss ................................................   $    (29,491)     $  (4,382)   $   (33,874)
     Transactions not requiring cash:
        Depreciation .........................................            145              -            145
        Common stock issued for services .....................              -            542            542
        Office space contributed by an officer (Note B) ......              -            500            500
        Office space contributed by an affiliate (Note B) ....          3,000              -          3,000
        Changes in operating assets and operating liabilities:
           Accounts receivable, prepaids and inventory .......        (21,706)        (4,900)       (26,606)
           Accounts payable and accrued expenses .............          2,313          1,500          3,813
                                                                 ------------      ---------    -----------
Net cash used in operating activities ........................        (45,740)        (6,740)       (52,480)
                                                                 ------------      ---------    -----------

Cash flows from investing activities:
     Equipment purchases .....................................         (1,486)             -         (1,486)
                                                                 ------------      ---------    -----------
Net cash used in investing activities ........................         (1,486)             -         (1,486)
                                                                 ------------      ---------    -----------

Cash flows from financing activities:
     Proceeds from issuance of debt (Note B) .................          4,500         10,000         14,500
     Repayment of debt (Note B) ..............................        (14,500)             -        (14,500)
     Proceeds from sale of stock (Note D) ....................        125,300              -        125,300
     Payments for offering costs .............................         (8,886)             -         (8,886)
                                                                 ------------      ---------    -----------
Net cash provided by financing activities ....................        106,414         10,000        116,414
                                                                 ------------      ---------    -----------

                                            Net change in cash         59,188          3,260         62,448
Cash, beginning of period ....................................          3,260              -              -
                                                                 ------------      ---------    -----------

                                           Cash, end of period   $     62,448      $   3,260    $    62,448
                                                                 ============      =========    ===========

Supplemental disclosure of cash flow information:
Cash paid during the period for:
     Interest ................................................   $        825      $       -    $         -
                                                                 ============      =========    ===========
     Income taxes ............................................   $          -      $       -    $         -
                                                                 ============      =========    ===========
</TABLE>


      See accompanying summary of significant accounting policies and notes
                          to the financial statements.

                                       F-6
<PAGE>


                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)

                   Summary of Significant Accounting Policies

Development stage company

Posteralley.com,  Inc. (the "Company") is in the development stage in accordance
with Financial  Accounting  Standards Board  Statements of Financial  Accounting
Standards   (SFAS)  No.  7  "Accounting  and  Reporting  by  Development   Stage
Enterprises".

Use of estimates

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

Cash equivalents

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

Inventory

Inventory  consists of fine art posters and paintings and is stated at the lower
of cost or market. Cost is determined using the specific identification method.

Equipment and depreciation

Equipment is stated at cost.  Equipment is depreciated over its estimated useful
life using the straight-line method.

Upon  retirement or  disposition  of the furniture and  equipment,  the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations.  Repairs and maintenance are charged to expense
as incurred and expenditures for additions and improvements are capitalized.

Deferred offering costs

The Company  incurred legal and accounting fees related to the preparation of an
offering  memorandum during the periods presented (see Note D for details of the
offering).  Costs  associated  with the offering  were  deducted  from the gross
proceeds at its conclusion.

Year-end

The Company has adopted a fiscal year-end of September 30.

                                       F-7
<PAGE>

                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)

                   Summary of Significant Accounting Policies

Web site development

The Company has adopted EITF 00-2,  "Accounting for Web Site Development costs."
This EITF  requires  that costs of  developing  a web site  include the costs of
developing  services that are offered to visitors (chat rooms,  search  engines,
e-mail, calendars, and so forth), and should be accounted for in accordance with
AICPA Statement of Position 98-1 "Accounting For the Costs of Computer  Software
Developed for Internal Use" (SOP 98-1).

In  accordance  with the  provisions  of SOP 98-1  the  cost of  developing  and
implementing  a Company's  Internet  web site is expensed  until the Company has
determined  that the web  site  will  result  in  future  economic  benefit  and
management is committed to funding the project.  Any costs  incurred  during the
preliminary  project stage such as legal costs  associated  with the software or
web site agreements are expensed. Thereafter, all direct external implementation
and development  costs are  capitalized  and amortized  using the  straight-line
method over the remaining estimated useful live.

The Company has expensed all internal and external costs incurred to develop its
web site. As a development  stage company,  management has determined that there
is no assurance that the web site will provide  substantive service potential to
the Company.

Income taxes

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

Revenue recognition

In accordance with Securities and Exchange  Commission Staff Accounting Bulletin
No. 101, "Revenue  Recognition," the Company  recognizes revenue once all of the
following are met:

     a)   Persuasive evidence of an arrangement exists;
     b)   Delivery has occurred;
     c)   The buyer's purchase price is fixed; and
     d)   Collectibility is reasonably assured.

The  Company  offers a 30-day,  100  percent  refund to  unsatisfied  customers.
Because  the Company has a limited  operating  history  with which to estimate a
return allowance, no revenue is recognized until the 30-day period has lapsed.


                                       F-8
<PAGE>

                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)

                   Summary of Significant Accounting Policies

Revenue  from sales of the  Company's  owned  inventory is reported at the sales
price and the cost of obtaining the inventory is reported as cost of goods sold.
Revenue  from  sales  of  consigned  inventory  is  reported  at the net  amount
received. The Company has made no sales of consigned inventory since inception.

Advertising and marketing costs

Advertising and marketing costs,  including those marketing costs incurred under
its  marketing   agreement  with   Nicklebys.com,   are  expensed  as  incurred.
Advertising  and marketing  costs for the year ended  September 30, 2000 and for
the period from July 19, 1999 (inception)  through  September 30, 1999 were $-0-
and $-0-, respectively.

Earnings (loss) per share

The Company reports earnings (loss) per share using a dual presentation of basic
and diluted  earnings per share.  Basic  earnings  (loss) per share  exclude the
impact of common stock  equivalents.  Diluted  earnings (loss) per share utilize
the average  market price per share when  applying the treasury  stock method in
determining common stock equivalents.  However, the Company has a simple capital
structure for the period presented and, therefore,  there is no variance between
the basic and diluted earnings (loss) per share.

Fair value of financial instruments

SFAS 107,  "Disclosure  About Fair  Value of  Financial  Instruments,"  requires
certain  disclosures  regarding  the fair value of  financial  instruments.  The
Company has determined,  based on available  market  information and appropriate
valuation   methodologies,   the  fair  values  of  its  financial   instruments
approximate carrying values. The carrying amounts of cash, accounts payable, and
other current liabilities  approximate fair value due to the short-term maturity
of the instruments.

Stock-based compensation

SFAS No. 123,  "Accounting for Stock-Based  Compensation"  was issued in October
1995.  This  accounting  standard  permits the use of either a "fair value based
method" or the "intrinsic  value method" defined in Accounting  Principles Board
Opinion 25,  "Accounting  for Stock Issued to Employees" (APB 25) to account for
stock-based compensation arrangements.

Companies  that  elect to use the  method  provided  in APB 25 are  required  to
disclose pro forma net income and pro forma earnings per share  information that
would have  resulted  from the use of the fair value based  method.  The Company
adopted SFAS No. 123 during the period ended  September 30, 1999;  however,  the
Company  has  elected  to  continue  to  determine  the  value  of   stock-based
compensation  arrangements with employees under the provisions of APB 25. No pro
forma disclosures have been included with the accompanying  financial statements
as there was no pro forma effect to the Company's net loss or loss per share.

                                       F-9
<PAGE>

                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements

Note A: Background

     The Company was  incorporated  under the laws of Colorado on July 19, 1999.
     The  Company  plans to  engage in the  business  of  acquiring,  marketing,
     selling,  trading and  brokering  originals and  reproductions  of fine art
     posters and  paintings via an Internet web site.  Through May of 2000,  the
     Company's principal  activities since inception consisted of organizational
     matters,  the sale and  issuance  of shares of its $.0001 par value  common
     stock,  and the  development  of its web  site.  Until  May 31,  2000,  the
     Company's inventory was limited to posters for sale on consignment.  During
     the period from June 1, 2000 through  September 30, 2000, the Company began
     acquiring its inventory.

Note B: Related party transactions

     An officer  contributed  office  space to the  Company  from July 19,  1999
     (inception) through September 30, 1999. The office space was valued at $250
     per month based on the market rate in the local area and is included in the
     accompanying  financial  statements  as rent expense  with a  corresponding
     credit to contributed capital.

     An  affiliate  contributed  office  space to the Company for the year ended
     September 30, 2000.  The office space was valued at $250 per month based on
     the  market  rate in the local  area and is  included  in the  accompanying
     financial  statements  as  rent  expense  with a  corresponding  credit  to
     contributed capital.

     On July 27, 1999, two officers made  non-interest  bearing  working capital
     advances to the Company totaling  $10,000.  Effective October 31, 1999, the
     advances were  converted to promissory  notes.  During January and March of
     2000, the officers loaned the Company an additional  $4,500 in exchange for
     promissory notes. On May 31, 2000, the Company repaid the notes and related
     accrued  interest  totaling $825.  Interest  expense totaled $825, $-0- and
     $825 for the year ended  September 30, 2000, for the period ended September
     30, 1999 and from July 19, 1999  (inception)  through  September  30, 2000,
     respectively.

     On July 19, 1999, the Board of Directors approved the issuance of 3,600,000
     shares of the  Company's  $.0001 par value  restricted  common stock to two
     officers/directors  of the Company in exchange for services  related to the
     organization  of the  Company.  The  value  of the  transaction  could  not
     objectively  measured as the services were rendered by related parties. The
     transaction  was recorded at a nominal  value of $360 ($.0001 per share) as
     there was no market  price for the  Company's  common  stock on the date of
     issuance.  Stock-based  compensation  expense of $360 was recognized in the
     accompanying  financial statements for the period ended September 30, 1999.
     These shares are "restricted securities" and may be sold only in compliance
     with Rule 144 of the Securities Act of 1933, as amended.

     During September of 2000, an officer paid expenses on behalf of the Company
     totaling  $375. The Company repaid the balance in October of 2000. The $375
     is included in the accompanying financial statements as due to officer.

                                      F-10
<PAGE>

                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements

Note C: Income taxes

     A  reconciliation  of the U.S.  statutory  federal  income  tax rate to the
     effective rate is as follows:

                                                         September 30,
                                                       ------------------
                                                        2000       1999
                                                       -------   --------

       U.S. federal statutory graduated rate.......     15.00%    15.00%
       State income tax rate,
          net of federal benefit ..................      4.04%     4.04%
       Net operating loss for which no tax
          benefit is currently available...........    -19.04%   -19.04%
                                                       -------   --------
                                                         0.00%     0.00%
                                                       =======   ========

     At  September  30,  2000,  deferred  taxes  consisted of a net tax asset of
     $6,449,  due to operating loss  carryforwards  of $33,874,  which was fully
     allowed for, in the valuation  allowance of $6,449. The valuation allowance
     offsets  the net  deferred  tax asset for which  there is no  assurance  of
     recovery.  The  changes  in the  valuation  allowance  for the  year  ended
     September 30, 2000 and from July 19, 1999 (inception) through September 30,
     1999 were $5,615 and $834,  respectively.  Net operating loss carryforwards
     will expire through 2020.

     The  valuation  allowance  will  be  evaluated  at the  end of  each  year,
     considering  positive and negative evidence about whether the asset will be
     realized.  At that time, the allowance will either be increased or reduced;
     reduction  could result in the  complete  elimination  of the  allowance if
     positive evidence  indicates that the value of the deferred tax asset is no
     longer impaired and the allowance is no longer required.

Note D: Shareholders' equity

     On July 26,  1999,  the Company  issued  182,000  shares of its  restricted
     common stock to an attorney in exchange for legal  services  related to the
     organization  of the  Company.  The shares were valued at the fair value of
     the services.  On the transaction  date, the Company's  common stock had no
     reliable  fair  value.   Stock-based   compensation  expense  of  $182  was
     recognized in the  accompanying  financial  statements for the period ended
     September 30, 1999.  These shares are  "restricted  securities"  and may be
     sold only in  compliance  with Rule 144 of the  Securities  Act of 1933, as
     amended.

     During May and June of 2000,  the  Company  conducted  a private  placement
     offering of 500,000  shares of its $.0001 par value  common  stock for $.25
     per share pursuant to an exemption from registration claimed under Rule 504
     of  Regulation D of the  Securities  Act of 1933,  as amended.  The Company
     closed the offering after selling 501,200 shares.  The Company received net
     proceeds of $116,414 after deducting offering costs totaling $8,886.

                                      F-11
<PAGE>


                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)

                          Notes to Financial Statements

The Company is committed to use the net proceeds from the offering approximately
as follows:

              Application of                     Allocated
               Net Proceeds                       Amount
   -------------------------------------        -----------
   Working capital                                $ 41,914
   Acquisition of poster inventory                  24,000
   Marketing                                        22,000
   Purchase of computer equipment                   14,000
   Filing Form 10-SB with the Securities
      and Exchange Comission                         8,000
   Enhancement of Internet web site                  6,500
                                                -----------
                                                 $ 116,414
                                                ===========


                                      F-12