U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

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

     For the fiscal year ended September 30, 2001

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

     For  the transition period from __________________ to ____________________

          Commission file number 000-032103

                              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.  $4,490
                                                          ------

Of the 4,343,200 shares of voting stock of the registrant issued and outstanding
as of December 14, 2001, 732,200 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
                                                   -----    -----






























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                                     PART I


Item 1.        Description of Business.
--------------------------------------

     (a)  Business Development.
     -------------------------

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

     During the period from May 8 through June 28,  2000,  we issued and sold an
aggregate of 501,200 shares of common stock to a total of fifty-two persons, all
of whom are  residents of the States of  California,  Colorado or Illinois,  for
cash  consideration  totaling  $125,300  ($.25 per share).  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.

     We issued and sold,  during the period from October 16 through  November 2,
2001,  an  aggregate of 50,000  shares of common stock to a total of  twenty-one
persons, all of whom are residents of the State of Colorado, for an aggregate of
$25,000 in cash ($.50 per share)  pursuant to a  Registration  Statement on Form
SB-2 that was declared  effective by the Securities  and Exchange  Commission on
October 4, 2001. We relied upon the exemption from  registration  provided under
Section  11-51-308(1)(p)  of the Colorado  Securities Act in connection with the
sales.

     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
$7,748,  and our net loss was $(75,653),  for the period from inception  through
September  30,  2001.  Our web site is  located  at  http://www.posteralley.com.
                                                     --------------------------
Information set forth on our web site does not constitute part of this report.




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     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,  Wheat
Ridge,  Colorado,  an online  auction  house  dealing in 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.  We have allocated the sum of $5,000 (28.1%) of the
net  proceeds  in the amount of $17,822  received  from our public  offering  of
common stock pursuant to a Registration Statement on Form SB-2 that was declared
effective by the Securities and Exchange  Commission on October 4, 2001, 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  received  from this  offering  that are  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,  two of our three  executive
officers,  directors and/or controlling shareholders,  have, personally, and, in
the case of Mr. Capra,  professionally,  in excess of twenty years of experience
in dealing in all types of fine art, antiques and  collectibles,  including fine
art posters. Both Messrs. Thornock and Capra are executive officers,  directors,
founders and controlling shareholders of Nicklebys.com,  Inc., an online auction
house dealing in fine art,  antiques and collectibles that realized net revenues
of $848,445 and a net loss of $(186,007) ($(.07) per share of common stock) from
online auctions,  live auctions and retail sales for the year ended December 31,
2000. 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 eleven
retail outlets that is today recognized as one of the largest wholesale fine art
publishing firms in the United States. 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 March 1999.



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

Inventory and Consigned Posters
-------------------------------

     Our web site on the Internet features only fine art posters, including, but
not limited to, vintage antique,  product advertising,  travel,  sporting event,
movie and theater  memorabilia and commemorative  posters.  In addition,  we are
marketing a limited inventory of original,  antique fine art paintings purchased
with a small  amount of proceeds  received  from our private  offering of common
stock  completed  in June  2000.  As of the  date of this  report,  our web site
features 40 fine art posters,  including 11 original,  antique  French  posters,
nine contemporary fine art posters, six movie posters, six sports posters,  four
southwestern fine art posters,  four  reproductions of antique fine art posters,
one  rock  and  roll  poster  and four  original,  antique  fine art  paintings,
including  four  oils on  canvas  and  two  watercolors.  Additionally,  we have
obtained  five  posters,  not  presently  featured on our web site,  for sale on
consignment.  We plan to offer these  consigned  posters for sale online at such
time as our  inventory  has been  depleted  by  sales.  We  intend  to  purchase
additional  inventory of originals and/or reproductions of fine art posters with
a portion  of the funds  received  from our  recently  completed  small,  public
securities offering. If we achieve profitable operations,  which is not assured,
or otherwise  obtain funding in addition to that received from our recent public
offering, we will  purchase  additional  poster  inventory.  The sources for our
inventory  are expected to include,  among  others,  estates,  private  parties,
collectors and original collections.  Additionally, both Messrs. Thornock, Capra
and Lee 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, Mr. Lee
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 and Club of
American  Collectors  of Fine  Arts,  Inc.,  for  sale on  consignment.  Both I.
Brewster and Club of American Collectors have been in business for approximately
forty  years  and Club of  American  Collectors  is the  largest  United  States
importer  of French  advertising  posters.  Each  company  is itself  capable of
satisfying  our  requirements  for  posters  for  the  foreseeable  future.  Our
consigned  inventory of original fine art posters includes,  primarily,  product
advertising posters for products such as liquor, ink, bicycles, chocolates, etc.
The four 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.



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Online Retailing of Posters
---------------------------

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

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

     Extensive  Product   Selection  Enables   One-Stop-Shopping.    We  provide
     -----------------------------------------------------------
consumers with  one-stop-shopping for their fine art poster needs, with delivery
direct to their door.  We offer a broad  selection  of fine art posters  that we
expect,  within  approximately  two  years  from  the  date of this  report,  to
transcend the limited  selection,  if any, of art galleries,  art and/or antique
brokers and dealers,  antique stores,  auction houses and others.  However,  our
ability to provide a selection of posters that exceeds the selection  offered by
the  aforementioned  sellers is limited by he fact that we have minimal  assets,
substantial net losses, negative working capital and going concern problems. 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, the title or caption of the poster,
its  dimensions,  price,  condition and  availability  and a description  of the
event,  if any,  commemorated  by the poster.  If the poster is an  original,  a
description of the original  work,  the technology of production,  the mounting,
whether the poster is signed and the identity and location of the  publisher are
also included.  Accompanying  each reproduction is a description of the paper on
which the poster is printed together with information on whether it is signed or
numbered.  In this manner,  we tightly  integrate  broad product  selection with
highly relevant content,  providing  consumers with the information they need to
make informed purchase decisions.



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

     Quality Customer  Service.  The typical online shopping  experience  begins
     -------------------------
with the search for products  that meet  specific  needs,  including  the online
ordering process and extends through product delivery and post-purchase support.
We believe that the ability to accurately fulfill orders,  ship products quickly
to a customer's door or efficiently handle customer inquiries is as important to
customer satisfaction as product selection. While we will not have the financial
resources as a result of our recently completed, small public offering of common
stock 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



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security  measures to offer network  protection  and business  continuity.  Many
development-stage  companies,  like  Posteralley.com,  lack the  capital  and/or
customer  demand to warrant the  investment  in electronic  security  protective
applications  and  technologies.  Further,  while many  companies  have a formal
security  policy,  we believe that nearly all are far from adequate and very few
companies educate all members of staff, conduct risk analysis on a regular basis
and regularly assess their software for security flaws.

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

Marketing
---------

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

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

     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



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

     Nicklebys.com. There is a link to our web site on Nicklebys.com's home page
     -------------
located on the Internet at  http://www.nicklebys.com.  Our  marketing  agreement
                            ------------------------
with Nicklebys.com  provides for Nicklebys.com to receive a referral fee of $.22
per web site "hit" or "click-through" generated by a new visitor to our web site
as a result of the link to the site on Nicklebys.com's web page. Because Messrs.
Thornock  and  Capra,  two of our three  executive  officers,  directors  and/or
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.

     Nicklebys.com  recently  discontinued its very limited online sales of fine
art posters.  However,  Nicklebys.com has offered,  and may in the future offer,
fine art posters  obtained as part of a collection of fine art,  antiques and/or
collectibles  that may have been, or may be, identical or similar to the posters
that we offer.  Also, to the extent that we wish to branch out and sell products
that Nicklebys.com  currently offers, there would be a conflict of interest. The
simultaneous  offer of fine art posters and/or other  products by  Nicklebys.com
and  Posteralley.com  could  jeopardize  our ability to establish  our brand and
increase our sales and revenues,  thus  negatively  impacting our operations and
prospective shareholders. Additionally, Mr. Capra would benefit more from a sale
on  Nicklebys.com's,  than our, web site because he has a larger equity interest
in Nicklebys.com.

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

Fulfillment and Distribution
----------------------------

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





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<PAGE>




Customer Service
----------------

     We believe that a high level of customer service and support is critical to
retaining  and  expanding  our customer  base. No portion of the proceeds of our
recently  completed  public  securities  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  management  members are  available via
telephone,  generally,  from 8:00 a.m. to 5:00 p.m.,  Mountain  time,  Monday to
Friday, and can also be reached by e-mail or facsimile.  Presently,  we provide,
by e-mail order and shipping confirmation (with tracking numbers),  notification
of customers regarding out-of-stock  situations and, for those orders,  frequent
updating of customers on order status.

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

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

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

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

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

Technology and Network Operations
---------------------------------

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

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

     o    Accepting, verifying, organizing and managing customer orders;

     o    Notifying and updating customers of order status; and

     o    Managing shipment of products.

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



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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.

Competition
-----------

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

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



                                       11


<PAGE>




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

     o    Web site recognition;

     o    Inventory selection;

     o    Streamlined shopping experience;

     o    Reliability and speed of order shipment;

     o    Customer service;

     o    Speed and accessibility of web site;

     o    Convenience; and

     o    Price.

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

Intellectual Property
---------------------

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



                                       12


<PAGE>




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

     Messrs.  Scott M. Thornock and Bruce A. Capra,  two of our three  executive
officers and directors,  have served as part-time  employees of  Posteralley.com
since our inception.  Mr. Jeffery H. Lee has been employed on a part-time  basis
since May 8, 2001. No cash  compensation  has been awarded to, earned by or paid
to  Messrs.  Lee or  Capra  for  all  services  rendered  in all  capacities  to
Posteralley.com  through  the date of this  report.  Except for the  seven-month
period from December 2000 through June 2001,  during which Mr. Thornock earned a
salary of $10,500 at the rate of $1,500 per month, no cash compensation has been
awarded to, earned by or paid to Mr.  Thornock for all services he has performed
for us in all capacities through the date of this report. We paid Mr. Thornock's
salary  totaling  $4,500 for his services during the months of December 2000 and
January and February  2001 and accrued the $6,000  balance of his salary for the
four months from March  through  June 2001.  Mr.  Thornock  has agreed to demand



                                       13


<PAGE>




payment of his  accrued  compensation  only from  profits,  if any,  realized by
Posteralley.com.  For the foreseeable future,  Messrs.  Thornock,  Lee and Capra
will receive no compensation in any form for their services  performed for us in
all capacities.

     On July  19,  1999,  we  issued  and sold to  Messrs.  Thornock  and  Capra
3,240,000  shares,  and  360,000  shares,  of  common  stock,  respectively,  in
consideration  for the  performance of services by each individual in connection
with the organization of  Posteralley.com  valued at $324 and $36,  respectively
($.0001 per share).  On May 8, 2001,  we issued and sold 10,000 shares of common
stock to Mr.  Jeffery H. Lee in  consideration  for his  performance of services
valued at $2,500 ($.25 per share).  We anticipate that at such time, if ever, as
our financial position permits,  Messrs.  Thornock,  Capra and Lee and any other
executive officers of Posteralley.com will receive reasonable salaries and other
appropriate  compensation,  such as bonuses,  coverage under medical and/or life
insurance  benefits plans and  participation in stock option and/or other profit
sharing or pension plans. Additionally,  directors,  including Messrs. Thornock,
Capra,  Lee and/or others,  may receive fees for their attendance at meetings of
the Board of Directors.  Further,  we may pay  consulting  fees to  unaffiliated
persons who perform  services for us, although we have no present plans to do so
and no such fees have been paid as of the date of this 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 and Development,  L.L.C.,  an affiliated
company, located at 650 South Cherry Street, Suite #310, Denver, Colorado 80246.
Mr. Scott M. Thornock, the  President/Treasurer,  director and approximate 74.6%
shareholder of Posteralley.com, is the sole owner and managing member of Paragon
Real Estate and  Development.  We anticipate the continued  utilization of these
facilities  on a  rent-free  basis  until  such  time,  if  ever,  as we  obtain
sufficient  funding from debt and/or equity financing and/or generate a level of
earnings  sufficient to enable us to pay rent for our present  offices or obtain
office space from an  unaffiliated  third  party.  The office space we currently
occupy is  expected to be adequate to meet our  foreseeable  future  needs.  The
office  space has been  valued at $250 per month based on the market rate in the
local  area  and  is  included  in  the  accompanying  financial  statements  of
Posteralley.com  as rent  expense  with a  corresponding  credit to  contributed
capital.  Our telephone  number is (303)  629-9751 and our  facsimile  number is
(303) 322-0036.


Item 3.        Legal Proceedings.
--------------------------------

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





                                       14


<PAGE>




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

     No matter was submitted  during the fourth quarter of the fiscal year ended
September  30,  2001,  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.
     -----------------------

     There has been no  established  public  trading market for the common stock
since our inception on July 19, 1999. We have  3,792,000  shares of common stock
that could be sold pursuant to Rule 144 under the Securities Act of 1933.

     (b)  Holders.
     ------------

     As of the date of this  report,  we have 58  shareholders  of record of our
4,343,200 outstanding shares of common stock.

     (c)  Dividends.
     --------------

     We have never paid or declared any dividends on our common stock and do not
anticipate paying cash dividends in the foreseeable future.

     (d)  Recent Sales of Unregistered Securities.
     --------------------------------------------

     On July 19, 1999, we issued 3,240,000 shares, and 360,000 shares, of common
stock (a total of 3,600,000 shares of common stock) to Messrs. Scott M. Thornock
and Bruce A. Capra,  respectively,  in consideration  for services  performed by
each  individual in  connection  with our  organization  valued at $324 and $36,
respectively (a total of $360), at the rate of $.0001 per share. On May 8, 2001,
we issued 10,000 shares of common stock to Mr.  Jeffery H. Lee in  consideration
for  services  performed  by him  valued at $5,000  ($.50  per  share).  Messrs.
Thornock,  Capra and Lee  serve as our  executive  officers  and  directors  and
together  own  of  record  and  beneficially   3,611,000  shares,   representing
approximately 83.1% of the total number of issued and outstanding shares, of our
common stock as of the date of this report.  We relied,  in connection  with the
sales of the shares,  upon the exemption from  registration  afforded by Section
4(2) of the Securities Act of 1933 and Section  11-51-308(1)(p)  of the Colorado
Uniform  Securities  Act. We relied upon the fact that our  issuance and sale of
the shares did not  constitute a public  securities  offering  together with the
fact that Messrs.  Thornock,  Capra and Lee were executive  officers,  directors
and/or controlling  shareholders of Posteralley.com at the time of the sales, to
make the exemptions available.




                                       15


<PAGE>




     On  July  26,  1999,  we  issued  and  sold  182,000  shares,  representing
approximately 4.2% of the aggregate number of issued and outstanding  shares, of
our common stock as of the date of this report, to Cudd & Associates, 12441 West
49th Avenue,  Suite #1-A, Wheat Ridge,  Colorado 80033, 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  these shares of common
stock  in  consideration  for the  performance  of  certain  legal  services  in
connection with our organization valued at $182 ($.001 per share). In connection
with the sale of the shares,  we relied  upon the  exemption  from  registration
provided  by  Section   4(2)  of  the   Securities   Act  of  1933  and  Section
11-51-308(1)(p)  of the Colorado Uniform  Securities Act. To make the exemptions
available,  we relied upon the fact that our  issuance and sale of the shares of
common stock did not constitute a public  securities  offering together with the
fact that Cudd & Associates was our legal counsel at the time of the sale.

     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 notes did not constitute a
public securities offering, to make the exemptions  available.  On May 31, 2000,
we paid the $14,500 principal balance of all of the outstanding promissory notes
together with accrued interest totaling $825.

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

     (i)       The  aggregate offering  price for  the offering of the shares of
common stock did not exceed  $1,000,000,  less the aggregate  offering price for



                                       16


<PAGE>




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 years ended September 30,
2001, and 2000, we realized total sales of $4,490 and $3,258, respectively,  and
a net loss of $(20,161) and $(29,492),  respectively,  which is less than $(.01)
per share.

     We expect,  for the foreseeable  future, to be partially  dependent for our
products upon fine art posters consigned to us by I. Brewster & Company, Club of
American  Collectors of Fine Arts or others.  We have no written  agreement with
either I.  Brewster  & Company  or Club of  American  Collectors  of Fine  Arts.
Accordingly,  neither  company  has any  obligation  to  consign  posters to us.
However,   we  intend  to  increase  our  limited  inventory  of  originals  and
reproductions of fine art posters.  The sum of $5,000 received from our recently
completed,  small public  offering of common stock has been  allocated  for this
purpose.  We have  plans to expand  our  marketing  efforts in order to obtain a
larger  customer base.  Funds in the amount of $4,000 received from our recently
completed, public common stock offering has 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



                                       17


<PAGE>




e-mails promoting Posteralley.com. We do not intend to hire any employees in the
foreseeable  future.  We have  delayed our plans to purchase  $5,000 of computer
equipment  because we did not  realize the maximum  proceeds  from our  recently
completed, public securities offering.

     The full  implementation of our business plan 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  approximately  one year after from the date of this report 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  approximately.  However,  we may need to
raise  additional  funds prior to the expiration of this period if, for example,
we pursue  business or technology  acquisitions or experience  operating  losses
that  exceed  our  current  expectations.  Although  we  intend to  explore  all
available  alternatives  for debt and/or equity  financing,  including,  but not
limited to, private and public securities  offerings,  there can be no assurance
that we will be able to generate  additional  capital for expansion and/or other
purposes.  In the event that only limited additional  financing is received,  we
expect our  opportunities  in the  secondary  market for fine art  posters to be
limited. Further, even if we succeed in obtaining the level of funding necessary
to increase  revenue through the expenditure of additional  funds for marketing,
advertising  and/or promotion in order to obtain a sizable customer base and, in
turn,  purchase  additional  inventory  and enhance our web site,  this will not
ensure the realization by us of profits from operations.

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,  except for
the  enhancement  and  improvement of our web site, with the net proceeds in the
amount of $17,822 raised from our public  offering of common stock  completed in
November 2001.  Five thousand  dollars and $4,000 of these funds will be used to
purchase  inventory  and initiate our proposed  integrated  marketing  campaign,
respectively,  with a view to  increasing  our sales.  We began selling fine art
posters shortly after our  organization  in July 1999 and have received  limited
revenues of $7,748 through September 30, 2001.

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

Year Ended September 30, 2001, Versus Year Ended September 30, 2000
-------------------------------------------------------------------

     Total revenue was $4,490 for the year ended September 30, 2001, as compared
to total revenue of $3,258 for the year ended  September 30, 2000. Our sale of a
limited number of posters  accounts for the limited revenue  realized during the
2000 and 2001 fiscal years.

     We incurred a net loss of $(41,779) for the year ended  September 30, 2001,
as compared to a net loss of $(29,492)  for the year ended  September  30, 2000,



                                       18


<PAGE>




because of the factors described below.  Total operating expenses increased from
$30,107 for the year ended  September  30,  2000,  to $44,150 for the year ended
September  30,  2001.  We   experienced   sizeable   increases  in   stock-based
compensation,  salaries and payroll taxes,  contributed services,  telephone and
depreciation  for the year ended  September  30,  2001,  as compared to the year
ended September 30, 2000.

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

     As of  September  30,  2001,  we had minimal  total assets in the amount of
$62,811,  including  $12,636  in  cash,  inventory  valued  at cost of  $28,549,
equipment  (less  accumulated  depreciation)  of $846 and  $20,780  in  deferred
offering  costs,  and total  liabilities  of  $4,008.  As a result of our having
minimal  assets  and a  deficit  accumulated  during  the  development  stage of
$(75,653)  as of  September  30,  2001,  our  total  shareholders'  equity as of
September 30, 2001,  was $58,803.  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,  two of our  three  executive
officers and  directors  and our principal  shareholders.  Messrs.  Thornock and
Capra   loaned  an   aggregate   of  $11,000   and  $3,500,   respectively,   to
Posteralley.com during the period from July 27, 1999, through March 3, 2000. Two
of the loans were  evidenced by  unsecured  promissory  notes dated  November 1,
1999, with each of Messrs.  Thornock and Capra, as the holders, in the principal
amounts of $9,500 and $3,500,  respectively,  bearing interest at the rate of 8%
per annum,  due  November 1, 2000.  A third loan was  evidenced  by an unsecured
promissory note dated March 3, 2000, with Mr.  Thornock,  as the holder,  in the
principal  amount of $1,500,  bearing  interest at the rate of 8% per annum, due
November 1, 2000. On May 31, 2000,  Posteralley.com repaid the $14,500 principal
balance  of  all of the  outstanding  promissory  notes  together  with  accrued
interest  totaling  $825 out of the  proceeds of our  offering  of common  stock
completed in June 2000. Additionally,  during the year ended September 30, 2001,
Messrs.  Thornock and Capra paid expenses and  purchased  inventory on behalf of
Posteralley.com  totaling  $4,260 and $3,500,  respectively,  and, in  September
2000,  Mr.  Thornock  paid expenses on our behalf  totaling  $375. We repaid all
amounts owed to Messrs. Thornock and Capra during the 2001 fiscal year.

     We successfully raised the minimum $25,000 in gross proceeds from our small
public  offering of common  stock  conducted  during the period from  October 16
through November 2, 2001, pursuant to a Registration Statement on Form SB-2 that
was declared  effective by the Securities and Exchange  Commission on October 4,
2001.  The  Registration  Statement  also  provides for the offer and sale of an
aggregate  of 501,200  shares of common  stock  being  offered by the  fifty-two
persons who  purchased  shares in our common  stock  offering  completed in June
2000, as selling shareholders.

     Net cash used in  operating  activities  was  $(29,032)  for the year ended
September 30, 2001,  because of the net loss of $(41,779) incurred and inventory
purchases  of  $(1,943),  offset by the  value of  services  contributed  by our
President  ($6,000),  common stock issued for services ($5,000) and office space
contributed by an affiliate ($3,000),  depreciation of $495 and accounts payable
and  accrued  expenses  of  $195.  Net cash  used in  operating  activities  was



                                       19


<PAGE>




$(45,740)  for the year ended  September  30,  2000,  because of the net loss of
$(29,492) incurred and inventory purchases of $(21,706),  offset by the value of
office space contributed by our President ($3,000), accounts payable and accrued
expenses of $2,313 and  depreciation  of $145. For the years ended September 30,
2001,  and 2000,  net cash used in investing  activities  was $-0- and $(1,486),
respectively,  and net cash  provided  by (used  in)  financing  activities  was
$(20,780) and $106,414,  respectively.  Cash decreased by $(49,812) from $62,448
at the beginning of the year ended  September 30, 2001, to $12,636 at the end of
the year, because of the factors described above. Cash increased by $59,188 from
$3,260 at the beginning of the year ended  September 30, 2000, to $62,448 at the
end of the year, because of the above-described factors.

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

                                                                        Page
                                                                        ----

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

Balance Sheet, September 30, 2001....................................    F-3

Statements of Operations, for the years ended September 30, 2001
  and 2000, and from July 19, 1999 (inception) through September
  30, 2001...........................................................    F-4

Statement of Shareholders' Equity, from July 19, 1999 (inception)
  through September 30, 2001.........................................    F-5

Statements of Cash Flows, for the years ended September 30, 2001
  and 2000, and from July 19, 1999 (inception) through September
  30, 2001...........................................................    F-6

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



                                       20


<PAGE>




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


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

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


                                    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*           42              President, Treasurer and Director

Jeffery H. Lee*              33              Vice President and Director

Bruce A. Capra*              48              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 each
devote  approximately  15%  of  their  time  to  the  business  and  affairs  of
Posteralley.com.   Mr.   Lee   devotes   approximately   10%  of  his   time  to
Posteralley.com's   business  and  affairs.  Set  forth  below  under  "Business
Experience" is a description of the business experience of Messrs. Thornock, Lee
and Capra.  Except as otherwise  indicated below, all  organizations  with which
each  individual  is or has been  previously  employed,  affiliated or otherwise
associated, are not affiliated with us.




                                       21


<PAGE>




Family Relationships
--------------------

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

Business Experience
-------------------

     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 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.,  a  privately-held,  Wheat  Ridge,
Colorado,  corporation  engaged in the marketing and sale of fine art,  antiques
and  collectibles  via  online  and  live  auctions  and  retail  sales.   Since
Nickleby.com's  organization  on January  13,  1999,  he has served as the Chief
Financial  Officer,  the Secretary and a director of the company.  Nicklebys.com
filed a  Registration  Statement on Form 10-SB with the  Securities and Exchange
Commission on November 14, 2001. He served as the Secretary, the Treasurer and a
director of JDLphotos.com,  Inc., from the date of the company's organization on
March 15, 2000,  through May 8, 2001,  when he resigned his positions  with, and
disposed of his entire equity interest in, JDLphotos.com.  From August 27, 1999,
through  April 18,  2001,  Mr.  Thornock  served as the  Secretary/Treasurer  of
Celebrity Sports Network, Inc., a privately-held,  Littleton,  Colorado, company
engaged  in the  online  promotion  of  professional  athletes  as  motivational
speakers and the  sponsorship of motivational  seminars,  which has since become
publicly-held.  On April 18, 2001,  he resigned  his  positions  with  Celebrity
Sports  Network and disposed of his entire  equity  interest in the company.  He
served as a director of Perseus Art Group, Inc. (now "Medgrup  Corporation"),  a
public Colorado  corporation,  from the date of Perseus Art Group's inception on
June 26, 1998, until his resignation on May 12, 1999, and as the Vice President,
the Chief Financial Officer and the Secretary of Perseus Art Group from June 30,
1998,  until his  resignation  from these positions on May 12, 1999. The company
files reports with the Securities  and Exchange  Commission and its common stock
trades   over-the-counter  and  is  quoted  on  the  electronic  Bulletin  Board
maintained by the National  Association  of  Securities  Dealers.  Mr.  Thornock
served as the  President,  the Chief  Executive  Officer,  the  Treasurer  and a
director of Triad Development Corp. (now "Zootech 2000,  Inc."), 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. The company does not file
reports with the  Securities  and Exchange  Commission.  Its common stock trades
over-the-counter  and is quoted in the Pink Sheets,  a  publication  that tracks
stock prices for the broker-dealer  community.  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 director of the company.  He served as the President,  the



                                       22


<PAGE>




Chief Executive Officer and a director of Pegasus  Development  Group, Inc. (now
"SpaceDev,  Inc."), a publicly-held  Colorado corporation,  from the date of its
organization  on December 23, 1996,  through October 22, 1997, on which date Mr.
Thornock resigned as executive officer and director of the company. Mr. Thornock
resigned his positions with Pegasus  Development Group before the company became
public in 2000.  The company  files  reports  with the  Securities  and Exchange
Commission  and its common  stock trades  over-the-counter  and is quoted on the
electronic  Bulletin Board maintained by the National  Association of Securities
Dealers.  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
March 1996. These  thirty-five  limited liability  companies,  including Paragon
Development  I-IV,  L.L.C.,   Paragon   Development  VI-XII,   L.L.C.,   Paragon
Development  XIV-XXXV,  L.L.C.,  32-5,  L.L.C., and Paragon Investment Group, I,
L.L.C.,  have raised capital from time-to-time over the past  approximately five
years for the purposes of acquiring,  developing,  constructing and/or brokering
multi-family,  residential properties located in Denver,  Boulder,  Longmont and
Vail, Colorado.  Twenty of these companies are operating currently. Mr. Thornock
has held a real estate  brokers  license in the State of Colorado since December
1995.  He received a Bachelor of Arts degree in history and a Masters  degree in
business management from the University of Colorado,  Boulder, Colorado, in 1982
and 1994, respectively.

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

     Bruce  A.  Capra  has   served  as  the   Secretary   and  a  director   of
     ----------------
Posteralley.com since our inception on July 19, 1999. Since October 16, 2000, he
has served as the President  and,  from the date of the  company's  inception on
January 13,  1999,  through  October 15,  2000,  Mr.  Capra  served as the Chief
Executive  Officer,  of  Nicklebys.com,  Inc.,  a  privately-held,  Wheat Ridge,
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.com  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,



                                       23


<PAGE>




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 is today
recognized  as one of the largest  wholesale  fine art  publishing  firms in the
United States.  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 Art
Group on May 12,  1999.  He was the  founder  and  served  as the  President,  a
director  and the  sole  owner  of  Nickleby's  Auction  Gallery  Ltd.,  Arvada,
Colorado,  an auction liquidation company specializing in fine art, antiques and
collectibles,  from 1992 through  January 15, 1999, on which date  Nicklebys.com
purchased all of the  outstanding  common stock of Nickleby's  Auction  Gallery,
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.

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,  Lee and Capra, our executive officers,  directors and/or 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, 2001.


Item 10.       Executive Compensation
-------------------------------------

     The following table sets forth  information  concerning the compensation of
our executive  officers,  including the dollar value of base salary and/or other
annual  compensation  earned,  and the  number of  securities  underlying  stock
options  granted,  during the 2001 and 2000 fiscal years and the period from our
inception on July 19, 1999, through September 30, 2001.







                                       24


<PAGE>




                           SUMMARY COMPENSATION TABLE

                                                          Long Term Compensation
                                Annual Compensation               Awards
                         -------------------------------  ----------------------
  (a)            (b)          (c)              (d)                 (e)
Name and                                    Other Annual        Securities
Principal                                   Compensation        Underlying
 Position        Year       Salary($)          ($)            Options/SAR's(#)
-------------------------------------------------------------------------------

Scott M.         2001        $9,000*            $-0-               $-0-
Thornock,        2000        $1,500             $-0-               $-0-
President,       1999        $  -0-             $-0-               $-0-
Treasurer,
Director

Jeffery H.       2001        $  -0-             $-0-               $-0-
Lee, Vice        2000        $  -0-             $-0-               $-0-
President,       1999        $  -0-             $-0-               $-0-
Director

Bruce            2001        $  -0-             $-0-               $-0-
A. Capra,        2000        $  -0-             $-0-               $-0-
Secretary,       1999        $  -0-             $-0-               $-0-
Director
------------------

     *Of this amount,  the sum of $6,000 has been accrued for services performed
during the four months from March through June 2001.

     Messrs.  Scott M. Thornock and Bruce A. Capra,  two of our three  executive
officers and directors,  have served as part-time  employees of  Posteralley.com
since our inception.  Mr. Jeffery H. Lee has been employed on a part-time  basis
since May 8, 2001. No cash  compensation  has been awarded to, earned by or paid
to  Messrs.  Lee or  Capra  for  all  services  rendered  in all  capacities  to
Posteralley.com  through  the date of this  report.  Except for the  seven-month
period from December 2000 through June 2001,  during which Mr. Thornock earned a
salary of $10,500 at the rate of $1,500 per month, no cash compensation has been
awarded to, earned by or paid to Mr.  Thornock for all services he has performed
for us in all capacities through the date of this report. We paid Mr. Thornock's
salary  totaling  $4,500 for his services during the months of December 2000 and
January and February  2001 and accrued the $6,000  balance of his salary for the
four months from March  through  June 2001.  Mr.  Thornock  has agreed to demand
payment of his  accrued  compensation  only from  profits,  if any,  realized by
Posteralley.com.  For the foreseeable future,  Messrs.  Thornock,  Lee and Capra
will receive no compensation in any form for their services  performed for us in
all capacities.

     On July 19,  1999,  we  issued  3,240,000  shares  of  common  stock to Mr.
Thornock for services performed by him in organizing  Posteralley.com  valued at



                                       25


<PAGE>




$324  ($.0001  per  share)  and  360,000  shares to Mr.  Capra for his  services
rendered in connection with Posteralley.com's organization valued at $36 ($.0001
per share).  On May 8, 2001,  we issued 10,000 shares of common stock to Mr. Lee
for services he performed for Posteralley.com valued at $5,000 ($.50 per share).
We anticipate  that, at such time, if ever, as our financial  position  permits,
Messrs.  Thornock,  Lee  and  Capra  and any  other  executive  officers  and/or
directors  of  Posteralley.com   will  receive  reasonable  salaries  and  other
appropriate  compensation,  such as bonuses,  coverage under medical and/or life
insurance  benefits plans and  participation in stock option and/or other profit
sharing or pension  plans,  for  services  as  executive  officers.  Neither Mr.
Thornock,  Mr. Lee nor Mr. Capra holds any option to purchase any  securities of
Posteralley.com.  Our executive  officers and directors 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 the
date of this report.  It is possible that in the future we may establish various
executive  incentive  programs and other benefits,  including  reimbursement for
expenses  incurred in connection  with our operations,  company  automobiles and
life and health insurance,  for our executive  officers and directors,  but none
has yet been granted.  The  provisions of such plans and benefits will be at the
discretion of our Board of Directors.

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

Compensation of Directors
-------------------------

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

Employment Agreements
---------------------

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





                                       26


<PAGE>




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.


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

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

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

Scott M. Thornock (2)                           3,241,000            74.62%
650 South Cherry Street, Suite #310
Denver, Colorado  80246

Bruce A. Capra (2)                                360,000             8.29%
6343 Umber Circle
Golden, Colorado  80403

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



                                       27


<PAGE>




All Directors and Executive                     3,611,000            83.14%
Officers as a Group (Three Persons)
-------------------

     *    Less than one per cent.

     (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
4,343,200  shares of our common stock issued and  outstanding  as of the date of
this report.

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


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

     On May 8, 2001, we issued  10,000 shares of common stock to Mr.  Jeffery H.
Lee, our Vice President and a director of Posteralley.com,  in consideration for
services performed by him for the company valued at $5,000 ($.50 per share).

     During the year ended September 30, 2001,  Messrs.  Scott M. Thornock,  the
President/Treaurer  and a director of  Posteralley.com,  and Bruce A. Capra, the
Secretary  and a  director  of  Posteralley.com,  paid  expenses  and  purchased
inventory  on our  behalf  totaling  $4,260  and  $3,500,  respectively.  During
September 2000, Mr. Thornock paid expenses on behalf of Posteralley.com totaling
$375.  We repaid all amounts owed to Messrs.  Thornock and Capra during the 2001
fiscal year.

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

     Since  October 1, 1999,  we have  maintained  our offices  rent-free at the
business offices of Paragon Real Estate and Development,  L.L.C.,  an affiliated
company of which Mr. Scott M. Thornock, the President/Treasurer,  a director and
an  approximate  74.6%  shareholder  of  Posteralley.com,  is the sole owner and
operating  manager.  The offices have been  located at 650 South Cherry  Street,
Suite #310, Denver,  Colorado 80246, since October 2000 and, prior to that time,
at 1422 Delgany Street, Suite #12, Denver,  Colorado 80202. From the date of our
inception  through  September 30, 1999, Mr.  Thornock  provided  office space to
Posteralley.com  at no  charge.  The $250 per month  value of the  office  space
provided by Paragon Real Estate and  Development and Mr. Thornock is included in



                                       28


<PAGE>




Posteralley.com's  Financial Statements that commence on page F-1 of this report
as rent expense with a corresponding credit to contributed capital.

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


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

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

 Item
Number                                      Description
------         -----------------------------------------------------------------

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

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

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

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

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



                                       29


<PAGE>




               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,  2001,  covered by this Annual  Report on Form
10-KSB.


                                   SIGNATURES

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

                                  POSTERALLEY.COM, INC.


Date:  December 19, 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:  December 19, 2001          By: /s/ Scott M. Thornock
                                      ------------------------------------------
                                      Scott M. Thornock, President, Treasurer
                                      and Director


Date:  December 19, 2001          By: /s/ Bruce A. Capra
                                      ------------------------------------------
                                      Bruce A. Capra, Secretary and Director









                                       30


<PAGE>




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

                          Index to Financial Statements
                          -----------------------------


                                                                      Page
                                                                      ----
Independent auditors' report....................................       F-2
Balance sheet, September 30, 2001...............................       F-3
Statements of operations, for the years ended
     September 30, 2001 and 2000, and from
     July 19, 1999 (inception) through September 30, 2001.......       F-4
Statement of shareholders' equity, from
     July 19, 1999 (inception) through September 30, 2001.......       F-5
Statements of cash flows, for the years ended
     September 30, 2001 and 2000, and from July 19, 1999
     (inception) through September 30, 2001.....................       F-6
Summary of significant accounting policies......................       F-7
Notes to financial statements...................................       F-10



































                                       F-1


<PAGE>






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

                          INDEPENDENT AUDITORS' REPORT


We have audited the balance sheet of Posteralley.com,  Inc. (a development stage
company) as of September 30, 2001,  and the related  statements  of  operations,
shareholders'  equity, and cash flows for the years ended September 30, 2001 and
2000,  and from July 19, 1999  (inception)  through  September  30, 2001.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of  Posteralley.com,  Inc. as of
September 30, 2001, and the results of its operations and its cash flows for the
years  ended  September  30, 2001 and 2000,  and from July 19, 1999  (inception)
through September 30, 2001, in conformity with accounting  principles  generally
accepted in the United States.




Cordovano and Harvey, P.C.
Denver, Colorado
November 2, 2001















                                       F-2


<PAGE>




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

                                  Balance Sheet
                                  -------------

                               September 30, 2001

Assets
Cash............................................................    $  12,636
Inventory, at cost..............................................       28,549
Equipment, less accumulated depreciation of $640................          846
Deferred offering costs.........................................       20,780
                                                                    ----------

                                                                    $  62,811
                                                                    ==========


Liabilities and shareholders' equity
Liabilities:
     Accounts payable...........................................    $     255
     Accrued liabilities........................................        3,753
                                                                    ----------
                                               Total liabilities        4,008
                                                                    ----------

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

Shareholders' equity (Notes B and D):
     Preferred stock, $.001 par value; 3,000,000
       shares authorized; -0- shares issued
       and outstanding..........................................          -
     Common stock, $.0001 par value; 30,000,000
       shares authorized; 4,293,200 shares issued
       and outstanding..........................................          429
     Additional paid-in capital.................................      134,027
     Deficit accumulated during development stage...............      (75,653)
                                                                    ----------
                                      Total shareholders' equity       58,803
                                                                    ----------

                                                                    $  62,811
                                                                    ==========


        See accompanying Summary of Significant Accounting Policies and
                         Notes to Financial Statements.

                                       F-3


<PAGE>




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

                             Statement of Operations
                             -----------------------
                                                                                                  July 19, 1999
                                                                  For The Years Ended               (Inception)
                                                                     September 30,                    Through
                                                              ---------------------------         September 30,
                                                                2001               2000                2001
                                                              --------           --------          ------------

<S>                                                        <C>                <C>                 <C>
Sales.............................................         $     4,490        $      3,258        $       7,748
Cost of goods sold................................              (4,057)             (2,585)              (6,642)
                                                           ------------       -------------       --------------
                                      Gross profit                 433                 673                1,106

Operating expenses:
     Stock-based compensation:
        Administrative (Note B)...................               5,000                 -                  5,542
     Salaries and payroll taxes...................               4,979                 -                  4,979
     Website and internet service.................                 735               3,275                4,910
     Professional fees............................              17,800              17,673               36,973
     Contributed rent (Note B)....................               3,000               3,000                6,500
     Contributed services (Note B)................               6,000                 -                  6,000
     Office.......................................               2,392               1,880                4,272
     Telephone....................................               1,658                 542                2,200
     Travel.......................................                 221               1,959                3,038
     Depreciation.................................                 495                 145                  640
     Other........................................               1,870               1,633                3,585
                                                           ------------       -------------       --------------
                          Total operating expenses              44,150              30,107               78,639
                                                           ------------       -------------       --------------
                                    Operating loss             (43,717)            (29,434)             (77,533)

Interest income...................................               1,938                 767                2,705
Interest expense (Note B).........................                 -                  (825)                (825)
                                                           ------------       -------------       --------------
                      Net loss before income taxes             (41,779)            (29,492)             (75,653)

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

                                          Net loss         $   (41,779)         $  (29,492)       $     (75,653)
                                                           ============       =============       ==============

Basic loss per common share.......................         $     (0.01)         $      *
                                                           ============       =============
Basic weighted average common
     shares outstanding...........................           4,286,533           3,949,067
                                                           ============       =============


 *   Less than $.01 per share
</TABLE>


        See accompanying Summary of Significant Accounting Policies and
                         Notes to Financial Statements.


                                       F-4


<PAGE>




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

                       Statement of Shareholders' Equity
                       ---------------------------------

              July 19, 1999 (inception) through September 30, 2001



                                                             Preferred stock                 Common Stock            Additional
                                                            -----------------         --------------------------      Paid-In
                                                           Shares       Par Value      Shares         Par Value        Capital
                                                        -----------    ----------      -------       -----------    ------------
<S>                                                          <C>        <C>           <C>             <C>            <C>
July 19, 1999, shares issued to founders for
   services related to organizing the Company,
   valued at the fair value of the services
   ($.0001/share) (Note B) ........................          -          $   -         3,600,000       $     360      $    -
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

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
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

June 1, 2001, common stock issued to officer
   in exchange for services ($.50/share) (Note B) .          -              -            10,000               1          4,999
Office space contributed by an affiliate (Note B) .          -              -              -                 -           3,000
Services contributed by an officer (Note B) .......          -              -              -                 -           6,000
Net loss for the year ended September 30, 2001 ....          -              -              -                 -            -
                                                     ------------      ------------  ------------     ------------   ------------

                        Balance, September 30, 2001          -          $   -         4,293,200       $     429      $ 134,027
                                                     ============      ============  ============     ============   ============


<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)

June 1, 2000, sale of common stock pursuant to
   a private placement, less offering costs of
   $8,886 ($.25/share) (Note D) ...................          -            116,414
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

June 1, 2001, common stock issued to officer
   in exchange for services ($.50/share) (Note B) .          -              5,000
Office space contributed by an affiliate (Note B) .          -              3,000
Services contributed by an officer (Note B) .......          -              6,000
Net loss for the year ended September 30, 2001 ....      (41,779)         (41,779)
                                                       ------------     -----------

                        Balance, September 30, 2001    $ (75,653)       $  58,803
                                                       ============     ===========
</TABLE>


        See accompanying Summary of Significant Accounting Policies and
                         Notes to Financial Statements.


                                       F-5


<PAGE>




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

                            Statements of Cash Flows
                            ------------------------

                                                                                                             July 19, 1999
                                                                           For The Years Ended                (Inception)
                                                                              September 30,                     Through
                                                                    -------------------------------------     September 30,
                                                                          2001                2000                2001
                                                                    ----------------    -----------------   ----------------
<S>                                                                  <C>                 <C>                 <C>
Cash flows from operating activities:
     Net loss......................................................  $  (41,779)         $  (29,492)         $   (75,653)
     Transactions not requiring cash:
        Depreciation...............................................         495                 145                  640
        Common stock issued for services...........................       5,000                -                   5,542
        Office space contributed by an officer (Note B)............        -                   -                     500
        Office space contributed by an affiliate (Note B)..........       3,000               3,000                6,000
        Services contributed by an officer (Note B)................       6,000                -                   6,000
        Changes in operating assets and operating liabilities:
            Inventory..............................................      (1,943)            (21,706)             (28,549)
            Accounts payable and accrued expenses..................         195               2,313                4,008
                                                                     ------------        ------------        ------------
Net cash used in operating activities..............................     (29,032)            (45,740)             (81,512)
                                                                     ------------        ------------        ------------

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               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...................................     (20,780)             (8,886)             (29,666)
                                                                     ------------        ------------        ------------
Net cash (used in) provided by financing activities................     (20,780)            106,414               95,634
                                                                     ------------        ------------        ------------

Net change in cash.................................................     (49,812)             59,188               12,636
Cash, beginning of period..........................................      62,448               3,260                 -
                                                                     ------------        ------------        ------------

                                               Cash, end of period   $   12,636          $   62,448          $    12,636
                                                                     ============        ============        ============

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


        See accompanying Summary of Significant Accounting Policies and
                         Notes to 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.  The Company had no cash  equivalents at
September 30, 2001.

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 and 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,  accounting  and  printing  fees  related  to the
preparation of offering  memorandums  during the periods presented (see Note D).
Costs  related to common stock  offerings  are recorded  initially as a deferred
asset  until the  offering  is  successfully  completed,  at which time they are
recorded  as a  reduction  of gross  proceeds  in  shareholders'  equity.  If an
offering is not successful, the costs are charged to operations at that time.

Year-end
--------

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



                                       F-7


<PAGE>




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

                   Summary of Significant Accounting Policies
                   ------------------------------------------

Website development
-------------------

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

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

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

Income taxes
------------

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

Revenue recognition
-------------------

In accordance with Securities and Exchange  Commission Staff Accounting Bulletin
No.  101,  "Revenue  Recognition,"  the  Company  recognizes  revenue  once  the
inventory is shipped and collectibility is reasonably assured.

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

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



                                       F-8


<PAGE>




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

                   Summary of Significant Accounting Policies
                   ------------------------------------------

Advertising and marketing costs
-------------------------------

Advertising and marketing costs,  including those marketing costs incurred under
its  marketing  agreement  with  Nicklebys.com,  are expensed as  incurred.  The
Company has not incurred any  advertising  or marketing  expenses in  connection
with the marketing agreement.

Earnings (loss) per share
-------------------------

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

Fair value of financial instruments
-----------------------------------

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

Stock-based compensation
------------------------

The Company  accounts for  stock-based  employee  compensation  arrangements  in
accordance with Accounting  Principles Board ("APB") Opinion 25, "Accounting for
Stock Issued to Employees" and complies with the  disclosure  provisions of SFAS
No.  123,   "Accounting  for  Stock-Based   Compensation."  Under  APB  No.  25,
compensation  expense is based on the difference,  if any, on the date of grant,
between  the fair  value of the  Company's  stock and the  exercise  price.  The
Company  accounts  for stock  issued to  non-employees  in  accordance  with the
provisions of SFAS No. 123.
















                                       F-9


<PAGE>




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

                          Notes to Financial Statements
                          -----------------------------

Note A: Background
------------------

The Company was  incorporated  under the laws of Colorado on July 19, 1999.  The
Company  plans to engage  in the  business  of  acquiring,  marketing,  selling,
trading  and  brokering  originals  and  reproductions  of fine art  posters and
paintings via an Internet website.  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 website.  Until May 31, 2000, the Company's inventory was limited to posters
for sale on  consignment.  The Company began  acquiring its own inventory  after
June 1, 2000.

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  years  ended
September 30, 2001 and 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.

The Company entered into an employment  agreement with its president in December
2000.  Under the agreement,  the president was to receive a salary of $1,500 per
month  commencing  December 1, 2000.  After  receiving  the salary for the first
three months of the agreement ($4,500),  the president contributed services from
March 2001 through June 2001 ($6,000).  The Company and its president terminated
the agreement on June 30, 2001.

On June 1, 2001,  the Company  issued  10,000  shares of its common  stock to an
officer in exchange for services  provided to the  Company.  On the  transaction
date, the Company's  common stock had no reliable market value.  The shares were
valued at $.50 per share based on the  concurrent  common stock  offering  under
review with the SEC.  Stock-based  compensation expense of $5,000 was recognized
in the accompanying financial statements for the year ended September 30, 2001.

During the year ended  September  30,  2001,  two  officers  paid  expenses  and
purchased  inventory  on behalf  of the  Company  totaling  $4,260  and  $3,500,
respectively. The Company also owed one officer $375 for expenses paid on behalf
of the Company prior to September 30, 2000.  During the year ended September 30,
2001, the Company repaid all balances owed to the officers.

On July 27,  1999,  two  officers  made  non-interest  bearing  working  capital
advances to the Company  totaling  $10,000.  Effective  October  31,  1999,  the
advances were converted to promissory  notes.  During January and March of 2000,
the officers loaned the Company an additional  $4,500 in exchange for promissory
notes.  On May 31,  2000,  the  Company  repaid  the notes and  related  accrued
interest  totaling $825.  Interest  expense totaled $-0-, $825, and $825 for the
years ended  September 30, 2001 and 2000,  and for the period from July 19, 1999
(inception) through September 30, 2001, respectively.




                                      F-10


<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 be
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 during the period ended September 30, 1999.

Note C: Income taxes
--------------------

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



                                                           September 30,
                                                       ---------------------
                                                         2001         2000
                                                       --------     --------
U.S. federal statutory graduated rate............       15.00%       15.00%
State income tax rate,
   net of federal benefit........................        3.94%        3.94%
Contributed rent.................................       -4.08%       -1.93%
Net operating loss for which no tax
   benefit is currently available................      -14.86%      -17.01%
                                                       --------     --------
                                                         0.00%        0.00%
                                                       ========     ========

At September 30, 2001,  deferred taxes  consisted of a net tax asset of $12,057,
due to operating loss carryforwards of $63,653,  which was fully allowed for, in
the  valuation  allowance of $12,057.  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 years ended  September 30, 2001 and 2000,  and
from July 19, 1999 (inception)  through  September 30, 1999 were $6,207,  $5,016
and $834,  respectively.  Net operating loss  carryforwards  will expire through
2021.

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.

Should the Company undergo an ownership  change as defined in Section 382 of the
Internal  Revenue  Code,  the Company's  tax net  operating  loss  carryforwards
generated prior to the ownership change will be subject to an annual limitation,
which could reduce or defer the utilization of these losses.







                                      F-11


<PAGE>


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

                          Notes to Financial Statements
                          -----------------------------

Note D: Shareholders' equity
----------------------------

Preferred stock
---------------
The Board of Directors  is  authorized  to issue  shares of  preferred  stock in
series  and  to fix  the  number  of  shares  in  such  series  as  well  as the
designation, relative rights, powers, preferences, restrictions, and limitations
of all such series.  The Company had no preferred  shares issued and outstanding
at September 30, 2001.

Common stock
------------
The Company filed a Registration  Statement on Form SB-2 with the Securities and
Exchange  Commission  ("SEC") in December of 2000 to offer for sale a minimum of
50,000  common  shares and a maximum of 100,000  common shares at $.50 per share
(see Note E).

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.

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.

Note E: Subsequent events
-------------------------

In December  2000,  the Company filed a  registration  statement with the SEC on
Form SB-2.  The Form SB-2 was declared  effective by the SEC on October 14, 2001
and offered for sale a minimum of 50,000 and a maximum of 100,000  shares of its
common stock at $.50 per share. After the Form SB-2 was declared effective,  the
Company  sold 50,000  shares of its common  stock for  $25,000 and  subsequently
closed the offering.  The Company  conducted the offering  through its executive
officers and directors.














                                      F-12