U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   Form 10-KSB

(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 State 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.  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.

                                        3
<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.

     The  bulk of our  products  are  fine  art  posters  obtained  for  sale on
consignment  from two  wholesalers,  including I. Brewster & Company and Club of
American  Collectors  of Fine Arts,  Inc. In addition,  we also 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.

     Messrs.  Scott M. Thornock and Bruce A. Capra, our two 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.  ("Nicklebys.com"),  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,  Ltd., by Nicklebys.com in February
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  Nicklebys.com  and  Posteralley.com,   whose  business  plan  would
contemplate  or involve the online sale of fine art,  antiques or  collectibles,
including  fine art posters.  Further,  with the  formation of  Posteralley.com,
Nicklebys.com  intends to diminish and  ultimately  abandon its present  limited
activities involving 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 February 16, 2001, our web
site  features  56 fine art  posters,  including  35  original,  antique  French
posters,  14 contemporary fine art posters,  seven reproductions of antique fine
art posters and five original, antique fine art paintings,  including three oils
on canvas and two watercolors.  Of the fine art posters,  five are being sold on
consignment.  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,  both Messrs.  Thornock and Capra 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
Nicklebys.com.

     The bulk of fine art posters  featured  on our web site have been  obtained
from two unaffiliated companies, including I. Brewster & Company ("I. Brewster")
and  Club  of  American  Collectors  of  Fine  Arts,  Inc.  ("Club  of  American
Collectors"),  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. The seven antique poster reproductions
are of fine art images by Louis Icart and Maxfield Parrish.  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.

                                        5
<PAGE>

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 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.  Our broad  selection  of fine art
posters transcends the limited selection,  if any, of art galleries,  art and/or
antique  brokers and dealers,  antique  stores,  auction houses and others.  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.

     Expert Information.
     -------------------
     Accompanying each poster featured on the web site is a detailed description
of the type of poster and, among other things, its dimensions,  price, condition
and  availability  and a description of the event,  if any,  commemorated by the
poster. 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.

                                        6
<PAGE>

     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:

o      A large installed base of personal computers;

o      Advances in the speed of personal computers and modems;

o      Easier and less expensive access to the Internet;

o      Improvements in network security, infrastructure and bandwidth;

o      A wider range of online offerings; and

o      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.
Nevertheless,  it is generally  known that few companies  have  implemented  the
security measures  available  utilizing  current  technology,  including,  among
others,  file  encryption  for  stored  information,  public  key  cryptography,
telecommunication encryption and digital signatures/sender authentication.  Many
development-stage  companies,  like  Posteralley.com,  lack the  capital  and/or
customer demand to warrant the investment in electronic security

                                        7
<PAGE>

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:

o    Local newspapers;

o    Trade journals;

o    Periodicals;

o    Local radio in the top markets with online shoppers;

o    Outdoor advertising;

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

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

                                        8
<PAGE>

     Nicklebys.com. We intend to place 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,  our  executive  officers,  directors  and
controlling  shareholders,  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.

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.

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.

                                        9
<PAGE>

     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:

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 our 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.

                                       10
<PAGE>

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,   including
Nickleby's.com (on a very limited basis), 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.

     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.

                                       11
<PAGE>

     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, like  Nicklebys.com  but 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.

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

                                       12
<PAGE>

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 our
only part-time  employees  through  February 16, 2001. No cash  compensation has
been  awarded  to,  earned  by or paid to  either  individual  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,  Mr.  Capra  will  receive no
compensation  in any  form  for  his  services  rendered  in all  capacities  to
Posteralley.com. Since January 1, 2001, Mr. Thornock has been receiving 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, 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).  Commencing  January 1, 2001, Mr.  Thornock is
receiving a salary of $18,000 per annum.  We  anticipate  that at such time,  if
ever,  as our financial  position  permits,  Messrs.  Thornock and Capra 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 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.  ("Paragon Real
Estate"), an affiliated company, located at 650 South Cherry Street, Suite #310,
Denver, Colorado 80246. Mr. Scott M. Thornock, the President/Treasurer, director

                                       13
<PAGE>

and  approximate  74.8%  shareholder of  Posteralley.com,  is the sole owner and
managing member of Paragon Real Estate. 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 February 16, 2001, we know
of no legal proceedings to which  Posteralley.com  is a party or to which any of
our property is the subject,  which are pending,  threatened or  contemplated or
any unsatisfied judgments against Posteralley.com.

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  February  16,  2001,  we had 55
shareholders of record of our 4,283,200  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.

                                       14
<PAGE>

     (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.
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 February 16, 2001. 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 and Capra were executive  officers,  directors and 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 4.3% of the aggregate number of issued and outstanding  shares, of
our common  stock as of February 16, 2001,  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 exemption 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.

     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.

                                       15
<PAGE>

     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 State 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

     (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 report.  For the year ended September 30,
2000, and for the periods from inception  (July 19, 1999) through  September 30,
2000,  and  1999,  we  realized   total  sales  of  $3,258,   $3,258  and  $-0-,
respectively, and a net loss of $(29,492), $(33,874) and $(4,382), 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,  Inc.,  or  others.  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

                                       16
<PAGE>

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.

     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 this  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 sizeable 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.

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 $3,258 through  September 30, 2000, of which $1,128  represents  sales to our
shareholders.

                                       17
<PAGE>


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

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

     Total revenue was $3,258,  including  sales of $1,128 to our  shareholders,
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  1,178% from $1,500 for the period from
inception  through  September 30, 1999, to $17,673 for the year ended  September
30, 2000.

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

     As of  September  30,  2000,  we had minimal  total assets in the amount of
$90,395,  including  $62,448 in cash,  inventory  valued at cost of $26,606  and
equipment (less  accumulated  depreciation) of $1,341,  and total liabilities of
$3,813. As of September 30, 1999, we had minimal total assets, including cash of
$3,260 and prepaid  expenses of $4,900 and total  liabilities  of $11,500.  As a
result of our  having  minimal  assets  and a  deficit  accumulated  during  the
development  stage of $(33,874) and $(4,382) as of September 30, 2000, and 1999,
respectively, our total shareholders' equity (deficit) as of September 30, 2000,
and 1999, was $86,582 and $(3,340), respectively. There can be no assurance that
our financial condition will improve.

     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,  our two  executive  officers,
directors  and  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.

                                       18
<PAGE>

     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  $(50,640)  for the year ended
September 30, 2000, primarily, because of the net loss of $(29,492) incurred and
accounts receivable,  prepaids and inventory of $(26,606), offset, primarily, by
the value of office  space  contributed  by our  President  $3,000 and  accounts
payable and accrued  expenses of $2,313.  For the year ended September 30, 2000,
net cash  used in  investing  activities  and net  cash  provided  by  financing
activities  was $(1,486) and $111,314,  respectively.  Cash increased by $59,118
from $3,260 at the  beginning of the period to $62,448 at the end of the period,
because of the above-described factors.

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 Auditors' Report.............................................   F-2

Balance Sheets, September 30, 2000 and 1999..............................   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 (Deficit), from July 19, 1999
  (inception) through September 30, 2000.................................   F-5

                                       19
<PAGE>

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-9


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.



                                    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

   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.  Set forth below under  "Business  Experience" is a
description of the business experience of Messrs.  Thornock 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.

                                       20
<PAGE>

Family Relationships

     There  is no  family  relationship  between  Mr.  Scott  M.  Thornock,  our
President/Treasurer  and a director of Posteralley.com,  and Mr. Bruce A. Capra,
our Secretary and a company director.

Business Experience

     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
has served as the  Secretary,  the  Treasurer  and a director of  JDLphotos.com,
Inc., since the company's organization on March 15, 2000. JDLphotos.com, Inc., 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,   Inc.   ("Nicklebys"),   a  publicly-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'
organization on January 13, 1999, he has served as the Chief Financial  Officer,
the Secretary and a director of the company.  Nicklebys commenced a common stock
offering  pursuant to Rule 504 of Regulation D under the  Securities Act of 1933
("Rule 504") on March 17, 2000, that was  successfully  completed.  Since August
27, 1999, Mr. Thornock has 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.  ("Perseus"),  a
public  Colorado  corporation,  from the date of Perseus'  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 from June 30, 1998,  until
his  resignation  from these  positions  on May 12, 1999.  Perseus  conducted an
offering of common stock pursuant to Rule 504 commencing July 10, 1998, that was
completed  successfully.  Mr.  Thornock  served  as  the  President,  the  Chief
Executive  Officer,  the  Treasurer  and a director of Triad  Development  Corp.
("Triad"), 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 commenced a common stock offering  pursuant to Rule 504
that was successfully completed. 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.  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

                                       21
<PAGE>

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 an executive  officer
and director of the company.  Commencing on January 16, 1997,  Pegasus conducted
an  offering  of  common  stock   pursuant  to  Rule  504  that  was   completed
successfully.  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
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.

     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 publicly-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, Ltd., 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.,
Arvarda,  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,  Ltd. 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.

                                       22
<PAGE>

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

     Messrs Scott M.  Thornock and Bruce A. Capra,  our  executive  officers and
directors,  have served as  part-time  employees  of  Posteralley.com  since our
inception. No cash compensation has been awarded to, earned by or paid to either
individual 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, Mr. Capra
will  receive  no  compensation  in any form for his  services  rendered  in all
capacities  to  Posteralley.com.  Since January 1, 2001,  Mr.  Thornock has been
receiving 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).  We anticipate  that,  at such time, if ever, as our financial  position
permits,  Messrs.  Thornock 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 nor Mr. Capra holds any option to purchase any  securities
of Posteralley.com. The executive officers and directors of Posteralley.com plan
to devote only such time to our business and affairs that each deems necessary.

     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
February 16, 2001. 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.

                                       23
<PAGE>

     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,  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.

                                       24
<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 February 16, 2001, 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              75.64%
650 South Cherry Street, Suite #310
Denver, Colorado  80246

Bruce A. Capra (2)                                360,000               8.41%
6343 Umber Circle
Golden, Colorado  80403

All Directors and Executive                     3,600,000              84.05%
Officers as a Group (Two Persons)

---------------------

(1)  Represents  the  number  of  shares of  common  stock  owned of record  and
beneficially  by each  named  person  or group,  expressed  as a  percentage  of
4,283,200  shares of our common stock issued and  outstanding as of February 16,
2001.

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


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.  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 February 16, 2001.

     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

                                       25
<PAGE>

the rate of 8% per annum, due November 1, 2000, and 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  75.6%  shareholder  of  Posteralley.com,  is the sole owner and
operating  manager,  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  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 is  reflected  in the  accompanying
Financial  Statements  as due to officer.  Because of their  present  management
positions  with,  organizational  efforts  on behalf of,  and  percentage  share
ownership in,  Posteralley.com,  Messrs.  Thornock and Capra 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 and Capra, 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 4.3% of the aggregate number of issued and outstanding  shares, of
our common  stock,  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:

                                       26
<PAGE>

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.)

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.

                                       27
<PAGE>

                                   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: February 16, 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: February 16, 2001          By:  /s/ Scott M. Thornock
                                      ------------------------------------------
                                      Scott M. Thornock, President, Treasurer
                                      and Director

Date: February 16, 2001          By:  /s/ Bruce A. Capra
                                      ------------------------------------------
                                      Bruce A. Capra, Secretary and Director

                                       28
<PAGE>

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

                          Index to Financial Statements

                                                                           Page
                                                                           ----

Independent auditors' report.............................................   F-2

Balance sheets, September 30, 2000 and 1999..............................   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 (deficit), 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-9



<PAGE>

                          INDEPENDENT AUDITORS' REPORT

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


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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of  Posteralley.com,  Inc. as of
September  30,  2000 and 1999,  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 generally accepted accounting principles.

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

                                      F-2
<PAGE>

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

                                 Balance Sheets

<TABLE>
<CAPTION>
                                                                                    September 30,
                                                                                 2000          1999
Assets

<S>                                                                          <C>             <C>
Cash.........................................................................$   62,448      $   3,260
Prepaid expenses.............................................................         -          4,900
Inventory, at cost...........................................................    26,606              -
Equipment, less accumulated depreciatio
    of $145 and $-0-, respectively...........................................     1,341              -
                                                                             ----------      ---------
                                                                             $   90,395      $   8,160
                                                                             ==========      =========
Liabilities and shareholders' equity (deficit)

Liabilities:
     Accounts payable........................................................$       50      $       -
     Accrued expenses........................................................     3,388          1,500
     Due to officer (Note B).................................................       375              -
     Notes payable to officers (Note B)......................................         -         10,000
                                                                             ----------       --------
                                                            Total liabilities     3,813         11,500
                                                                             ----------       --------
Commitment (Note D)..........................................................         -              -

Shareholders' equity (deficit) (Notes B and D):

     Preferred stock, $.001 par value; 3,000,000 shares authorized;
       -0- and -0- shares issued and outstanding, respectively...............         -              -
     Common stock, $.0001 par value; 30,000,000 shares authorized;
       4,283,200 and 3,782,000 shares issued and outstanding,
       respectively..........................................................       428            378
     Additional paid-in capital..............................................   120,028            664
     Deficit accumulated during development stage............................   (33,874)        (4,382)
                                                                             ----------       --------
                                         Total shareholders' equity (deficit)    86,582         (3,340)
                                                                             ----------       --------
                                                                             $   90,395        $ 8,160
                                                                             ==========       ========
</TABLE>
         See accompanying summary of significant accounting policies and
                       notes to the financial statements.

                                       F-3


<PAGE>


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

                            Statements of Operations
<TABLE>
<CAPTION>
                                                                         For The
                                                                       Year Ended           July 19, 1999 (Inception)
                                                                      September 30,           through September 30,
                                                                          2000                 1999           2000
Sales:
<S>                                                                  <C>                     <C>          <C>
   Sales, related parties (Note B)...................................$     1,128             $    -       $  1,128
   Sales, other......................................................      2,130                  -          2,130
                                                                     -----------             ------       --------
                                                          Total 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    (29,492)            (4,382)       (33,874)

Income taxes (Note C)................................................          -                  -              -
                                                                     -----------           --------      --------
                                                             Net loss  $ (29,492)        $   (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>

                          (A DEVELOPMENT STAGE COMPANY)
                   Statement of Shareholders' Equity (Deficit)

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


                                                                                                    Additional     Deferred
                                                     Preferred stock          Common Stock           Paid-In       Offering
                                                    Shares   Par Value     Shares     Par Value      Capital        Costs
                                                  --------------------   ----------------------   -------------    --------
<S>                                                   <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    $    36       $     -         $  -
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            -
Office space contributed by an officer (Note B)...     -          -               -           -          500            -
Net loss for the period ended September 30, 1999..     -          -               -           -            -            -
                                                   -----     ------      ----------     -------    ---------       ------
                        Balance, September 30, 1999    -          -       3,782,000         378          664            -

Offering costs deferred...........................     -          -               -           -            -       (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
Office space contributed by an affiliate (Note B).     -          -               -           -        3,000            -
Net loss for the year ended September 30, 2000....     -          -               -           -            -            -
                                                   -----     ------      ----------    --------   ----------        -----
                        Balance, September 30, 2000    -     $    -       4,283,200     $   428    $ 120,028         $  -
                                                   =====     ======      ==========    ========   ==========        =====
</TABLE>


<TABLE>
<CAPTION>

                                                         Deficit
                                                       Accumulated
                                                        During the
                                                        Development
                                                           Stage       Total
                                                       ------------    -----
<S>                                                     <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)........................        $   -      $  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
Office space contributed by an officer (Note B)...            -         500
Net loss for the period ended September 30, 1999..       (4,382)     (4,382)
                                                        --------    -------
                        Balance, September 30, 1999      (4,382)     (3,340)

Offering costs deferred...........................            -      (8,886)
June 1, 2000, sale of common stock pursuant to
   a private placement, less offering costs of
   $8,886 ($.25/share) (Note D)...................            -     125,300
Office space contributed by an affiliate (Note B).            -       3,000
Net loss for the year ended September 30, 2000....      (29,492)    (29,492)
                                                      ----------   --------
                        Balance, September 30, 2000   $ (33,874)   $ 86,582
                                                      =========    ========

</TABLE>

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

                                       F-5
<PAGE>

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

                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                        For The
                                                                       Year Ended        July 19, 1999 (Inception)
                                                                      September 30,        through September 30,
                                                                          2000             1999             2000
                                                                     --------------     --------------------------
Cash flows from operating activities:
<S>                                                                  <C>                 <C>            <C>
     Net loss........................................................$    (29,492)       $   (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...............     (26,606)           (4,900)       (31,506)
           Accounts payable and accrued expenses.....................       2,313             1,500          3,813
                                                                      -----------         ---------      ---------
Net cash used in operating activities................................     (50,640)           (6,740)       (57,380)
                                                                      -----------         ---------      ---------
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.....................................      (3,986)                -         (3,986)
                                                                      -----------         ---------      ---------
Net cash provided by financing activities............................     111,314            10,000        121,314
                                                                      -----------         ---------      ---------
                                                   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.

Internet and web site development

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

                                      F-7
<PAGE>
                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)


                   Summary of Significant Accounting Policies

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.

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.

Year-end

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

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-8


<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. The  promissory  notes  consisted of the
     following at September 30, 2000 and 1999:

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

Note payalbe to officer, interest rate at
8.00 percent, maturity on November 1, 2000,
unsecured......................................  $      -        $ 8,000

Note payable to officer, interest rate at
8.00 percent, maturity on November 1, 2000,
unsecured......................................  $      -        $ 2,000
                                                 --------        -------
                                                 $      -        $10,000
                                                 ========        =======


     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.

                                       F-9

<PAGE>
                              POSTERALLEY.COM, INC.
                          (A Development Stage Company)


                          Notes to Financial Statements

     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.

     During the nine months ended September 30, 2000, the Company realized sales
     totaling $1,128 to  shareholders of the Company.  The $1,128 is included in
     the accompanying financial statements as sales, related parties.

Note C: Income taxes

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

                                                        Setpember 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%
Offering costs....................................    0.95%        21.28%
Net operating loss for which no tax
  benefit is currently available..................  -19.99%       -40.32%
                                                  ---------      --------
                                                      0.00%         0.00%
                                                  =========      ========

     At  September  30,  2000,  deferred  taxes  consisted of a net tax asset of
     $8,140,  due to operating loss  carryforwards  of $42,759,  which was fully
     allowed for, in the valuation  allowance of $8,140. 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 $6,373 and $1,767, respectively. Net operating loss carryforwards
     will expire through 2020.



                                     F-10
<PAGE>


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


                          Notes to Financial Statements

     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 (deficit)

     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.

     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 Commission..........................        8,000
Enhancement of Internet web site....................        6,500
                                                      -----------
                                                       $  116,414



                                      F-11