<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(MARK ONE)

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

Date of Report (For the quarterly period ended OCTOBER 31, 1998)

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

For the transition period from __________ to __________


                              2CONNECT EXPRESS, INC
             (exact name of registrant as specified in its charter)


         FLORIDA                                              65-0674664    
------------------------------                             -------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)


2055 LAKE AVENUE S.E., SUITE A, LARGO, FL                      33771-3738 
-----------------------------------------                      ----------
(Address of principal executive offices)                       (Zip Code)


Registrant's telephone number, including area code           (813) 584-7902 
                                                             ---------------

                                 NOT APPLICABLE
                                 --------------
              (Former name, former address and former fiscal year,
                          if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for 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 [ ]   No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, par value $.01 per share, 30,000 shares outstanding as of 
December 11, 1998.


<PAGE>   2


                             2CONNECT EXPRESS, INC.
                                      INDEX

<TABLE>
<CAPTION>

                                                                                                  PAGE
                                                                                                  ----
<S>                                                                                                 <C>

PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Balance Sheets of the Successor Company as of
              October 31, 1998 and of the Predecessor Company as of October
              26, 1998 and January 31, 1998                                                         1

         Condensed Statements of Operations of the Successor Company for the One
              Week Ended October 31, 1998 and for the Predecessor Company for
              the Twelve Weeks Ended October 26, 1998, the Thirty-Eight Weeks
              Ended October 26, 1998, and the Thirty-Nine Weeks Ended October
              31, 1997                                                                              2

         Condensed Statements of Cash Flows of the Successor Company for the
              One Week Ended October 31, 1998 and the the Predecessor Company for the
              Twelve Weeks Ended October 26, 1998, the Thirty-Eight Weeks Ended
              October 26, 1998, and the Thirty-Nine Weeks Ended October 31, 1997                    3

         Notes to condensed financial statements                                                   4-7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                                       8-13


PART II  OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K                                                            13

         Signatures                                                                                 14



</TABLE>




<PAGE>   3
                 PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                             2CONNECT EXPRESS, INC.
                            Condensed Balance Sheets
                  October 31, October 26, and January 31, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                               OCTOBER 31,      OCTOBER 26,      JANUARY 31,
                                                                                  1998             1998             1998
                                                                                SUCCESSOR       PREDECESSOR      PREDECESSOR
                                                                               -----------      -----------      -----------
<S>                                                                            <C>              <C>              <C>        
                                     ASSETS
Current Assets
  Cash                                                                         $        --      $        --      $   218,068
  Accounts Receivable, net of reserves                                                  --               --          350,296
  Inventory, net of reserves                                                            --               --        1,277,913
  Prepaid Expenses & Other Current Assets                                               --               --          118,086
                                                                               -----------      -----------      -----------
    Total Current Assets                                                                --               --        1,964,363

Property & Equipment, Net                                                          175,000          175,000          394,000
Other Assets                                                                         1,789            1,789           86,806
                                                                               -----------      -----------      -----------

TOTAL ASSETS                                                                   $   176,789      $   176,789      $ 2,445,169
                                                                               ===========      ===========      ===========


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts Payable - Prepetition                                               $        --      $        --      $ 1,001,158
  Accounts Payable - Postpetition  (See Note Below)                                     --               --           44,557
  Notes Payable                                                                         --               --          275,000
  Accrued Expenses & Other Current Liabilities                                          --               --          134,300
  Accrued Landlord Claims                                                               --               --          781,826
  Accrued Employee Contract Claims                                                      --               --          540,815
  Accrued Other Bankruptcy Claims                                                       --               --          149,546
  Current Maturities of long-term Debt                                               2,967            2,967           22,209
                                                                               -----------      -----------      -----------
    TOTAL CURRENT LIABILITIES                                                        2,967            2,967        2,949,411

OTHER LIABILITIES
  Long-term Debt & Capital Leases                                                    7,871            7,871            8,803
                                                                               -----------      -----------      -----------
    TOTAL LIABILITIES                                                               10,838           10,838        2,958,214
                                                                               -----------      -----------      -----------

SHAREHOLDERS' EQUITY
  Common Stock ($.01 par value. Authorized 25,000,000 Shares,                          300              300           37,525
    Issued & Outstanding 3,752,500 shares at January 31, 1998;
    Authorized 25,000,000 Shares, Issued & Outstanding 30,000 shares
    at October 31, 1998)
  Paid-In-Capital                                                                  165,651          165,651        8,667,451
  Retained Deficit                                                                      --               --       (9,218,021)
                                                                               -----------      -----------      -----------
    TOTAL SHAREHOLDERS' EQUITY                                                     165,951          165,951         (513,045)
                                                                               -----------      -----------      -----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                                       $   176,789      $   176,789      $ 2,445,169
                                                                               ===========      ===========      ===========



</TABLE>



See accompanying notes to condensed financial statements.






                                        1


<PAGE>   4
                             2Connect Express, Inc.
                       Condensed Statements of Operations
                For the 1 Week Ended October 31, 1998, the 12 and
                        38 Weeks Ended October 26, 1998,
                 And the 13 and 39 Weeks Ended October 31, 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Third Quarter                                         
                                                  -------------------------------------------------    
                                                  For the 1         For the 12         For the 13      
                                                  Week Ended       Weeks Ended        Weeks Ended      
                                                  October 31,      October 26,         October 31,     
                                                      1998             1998               1997         
                                                   Successor        Predecessor        Predecessor     
                                                  ------------      ------------       ------------    
<S>                                               <C>               <C>                <C>             

Net sales                                         $         --      $      6,515       $  1,163,694    
Cost of sales                                               --                28            972,836    
                                                  ------------      ------------       ------------    
  Gross profit                                              --             6,487            190,858    

General and administrative expenses:
  Selling, general and administrative
    expenses (excluding depreciation)                       --            99,596          1,372,303    
  Depreciation and amortization                             --                --            161,551    
  Preopening cost amortization                              --                --             (2,661)   
                                                  ------------      ------------       ------------    

    Operating Income (loss)                                 --           (93,109)        (1,340,335)   

Other income (expense):
  Interest income                                           --             5,276             53,839    
  Interest expense                                          --                --               (439)   
  Restructuring charges and reserves                        --           (42,659)          (158,188)   
  Other, net                                                --            (2,882)                --    
                                                  ------------      ------------       ------------    

     Net Income (loss) before
       extraordinary item                                   --          (133,374)        (1,445,123)   

 Extraordinary items:
   Cancel Common Stock and Eliminate Deficit                --         8,704,976                 --    
   Gain on Debt Discharge                                   --         1,708,738                 --    
                                                  ------------      ------------       ------------    

     Net Income (Loss)                            $         --      $ 10,280,340       $ (1,445,123)   
                                                  ============      ============       ============    

Income (loss) per share                           $         --      $       2.74       $      (0.39)   
                                                  ============      ============       ============    

Number of shares used in calculating
  Income (loss) per share                               30,000         3,752,500          3,752,500    
                                                  ============      ============       ============    


</TABLE>
<TABLE>
<CAPTION>
                                                                   Year to Date
                                                 -------------------------------------------------
                                                  For the 1        For the 38         For the 39
                                                 Week Ended       Weeks Ended        Weeks Ended
                                                 October 31,      October 26,         October 31,
                                                    1998              1998                1997
                                                  Successor        Predecessor        Predecessor
                                                 ------------      ------------       ------------
<S>                                              <C>               <C>                <C>      

Net sales                                        $         --      $    878,730       $  2,411,797
Cost of sales                                              --           790,544          1,947,765
                                                 ------------      ------------       ------------
  Gross profit                                             --            88,186            464,032

General and administrative expenses:
  Selling, general and administrative
    expenses (excluding depreciation)                      --         1,036,658          3,003,380
  Depreciation and amortization                            --            56,444            178,356
  Preopening cost amortization                             --            38,932             71,520
                                                 ------------      ------------       ------------

    Operating Income (loss)                                --        (1,043,848)        (2,789,224)

Other income (expense):
  Interest income                                          --            14,964            118,608
  Interest expense                                         --            (6,856)            (1,198)
  Restructuring charges and reserves                       --          (308,411)          (158,188)
  Other, net                                               --           148,458                 --
                                                 ------------      ------------       ------------

     Net Income (loss) before
       extraordinary item                                  --        (1,195,693)        (2,830,002)

 Extraordinary items:
   Cancel Common Stock and Eliminate Deficit               --         8,704,976                 --
   Gain on Debt Discharge                                  --         1,708,738                 --
                                                 ------------      ------------       ------------

     Net Income (Loss)                           $         --      $  9,218,021       $ (2,830,002)
                                                 ============      ============       ============

Income (loss) per share                          $         --      $       2.46       $      (0.75)
                                                 ============      ============       ============

Number of shares used in calculating
  Income (loss) per share                              30,000         3,752,500          3,752,500
                                                 ============      ============       ============
</TABLE>
See accompanying notes to condensed financial statements.

                                       2

<PAGE>   5

                             2Connect Express, Inc.
                        Condensed Statement of Cash Flows
   For the 1 Week Ended October 31, 1998, the 38 Weeks Ended October 26, 1998,
                     And the 39 Weeks Ended October 31, 1997
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                  For the 1 Week   For the 38 Weeks  For the 39 Weeks
                                                                       Ended           Ended               Ended
                                                                 October 31, 1998 October 26, 1998   October 31, 1997
                                                                     Successor      Predecessor        Predecessor
                                                                 ---------------- ----------------   ----------------
<S>                                                                  <C>            <C>                <C>          
Cash flows from operating activities:

Net Income (loss)                                                    $      --      $  9,218,021       $ (2,830,002)
Adjustments to reconcile net Income (Loss) to net cash
provided by (used in) operating activities:
  Depreciation and amortization                                             --            56,444            233,071
  Preopening cost amortization                                              --            38,932             16,805
  Changes in assets & liabilities:
     Accounts receivable                                                    --           350,296           (260,154)
     Inventory                                                              --         1,277,913         (1,920,731)
     Prepaid expenses & other assets                                        --           162,382           (319,071)
     Accounts payable - prepetition                                         --          (301,148)           640,897
     Accounts payable - postpetition                                        --           (61,267)                --
     Accrued expenses                                                       --           (95,136)           221,472
     Accrued landlord claims                                                --          (162,364)                --
     Accrued employee contract claims                                       --           (53,952)                --
     Accrued other bankruptcy claims                                        --           (16,541)                --
                                                                     ---------      ------------       ------------
       Net cash provided by (used in) operating activities                  --        10,413,580         (4,217,713)
                                                                     ---------      ------------       ------------

Changes due to reorganization activities:
  Extraordinary gain on debt discharge                                      --        (1,708,738)                --
  Cash transferred to escrow agent for claims settlement                    --          (262,105)                --
  Liabilities assumed by Sterne Agee and Leach                              --            10,838                 --
  Issuance of new Common Stock                                              --           165,951                 --
  Cancellation of Common Stock and Deficit Elimination                      --        (8,704,976)                --
                                                                     ---------      ------------       ------------
    Net changes due to reorganization activitues                            --       (10,499,030)                --
                                                                     ---------      ------------       ------------

Cash flows from investing activities:
  Capital expenditures                                                      --          (175,000)        (1,631,884)
  Loss on closed store assets and reserve for asset liquidations            --           337,556                 --
                                                                     ---------      ------------       ------------
    Net cash provided by investing activities                               --           162,556         (1,631,884)
                                                                     ---------      ------------       ------------

Cash flows from financing activities:
  Decrease in notes payable - DIP facility                                  --          (275,000)                --
  Net proceeds from issuance of common stock                                --                --          5,358,631
  Increase (decrease) in long-term debt                                     --           (20,174)            12,012
                                                                     ---------      ------------       ------------
    Net cash provided by (used in) financing activities                     --          (295,174)         5,370,643
                                                                     ---------      ------------       ------------

    Net increase (decrease) in cash and cash equivalents                    --          (218,068)          (478,954)

Cash and cash equivalents, beginning of period                              --           218,068          1,449,167
                                                                     ---------      ------------       ------------

Cash and cash equivalents, end of period                             $      --      $         --       $    970,213
                                                                     =========      ============       ============


</TABLE>


See accompanying notes to condensed financial statements.




                                        3
<PAGE>   6


                             2CONNECT EXPRESS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS


1) BASIS OF PRESENTATION

         The accompanying unaudited interim condensed financial statements have
been prepared in conformity with instructions to Form 10-QSB, and therefore, do
not include all the information and footnotes required by generally accepted
accounting principals for complete financial statements. Certain items included
in these statements are based upon management estimates. In the opinion of
management, the accompanying financial statements contain all adjustments
(consisting of normal recurring accruals, reserves and restructuring reserves)
necessary for fair presentation. The results of operations for the three months
and nine months ended October 31, 1998 are not necessarily indicative of the
operating results expected for the fiscal year ending January 30, 1999. These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the fiscal year ended January 31,
1998. Such financial statements for fiscal year ended January 31, 1998 have not
yet been issued, as the audit of such financial statements has not been
completed due to the Company's bankruptcy filing.

2) NET (PROFIT) LOSS PER COMMON SHARE

         Net loss per common share has been determined by dividing net loss by
the weighted average number of shares of common stock outstanding during the
respective periods. Common stock equivalents were not included due to their
antidilutive effect.

3) STORE PROPERTY AND DEVELOPMENT COSTS

         Costs incurred prior to the opening of a store and certain costs
related to the implementation of corporate sales programs are capitalized and
amortized over a period of twelve months starting with the month of commencement
of such programs and new stores. All such previously accrued "pre-opening" costs
have been written off to restructuring expense as part of the Company's
reorganization.

4) STOCK OFFERING

         On May 2, 1997, the Company's Board of Directors declared a one-for-two
reverse split of the Company's issued and outstanding shares of common stock
effective May 6, 1997. The par value of each common share remained $.01 and a
total of $27,100 were reclassified from common stock to paid-in capital.

         On May 9, 1997, the Company completed an initial public offering (the
"IPO") of 520,000 units of its Common Stock. Each unit consists of two shares of
Common Stock, par value $.01 per share (the "Common Stock"), and one Common
Stock Purchase Warrant (a "Warrant") of the Company. Each Warrant entitled the
holder to purchase one share of common stock at a purchase price of $6.00 per
share for a period of sixty days commencing one year from the date of the final
prospectus, May 9, 1997. Neither the share of Common Stock nor the Warrant
contained in the units were detachable or separately transferable from the units
until May 9, 1998, at which time the units automatically terminated. The units
were listed for quotation on the OTC Bulletin Board under the symbol CNTCU until
the units components were detached and then the Common Stock was listed for
quotation on the OTC Bulletin Board under the symbol CNTC until recently
qualified by the NASD Regulation, Inc. and given the symbol CNTCQ. The price to
the public was $12.50 per unit and the Company received gross proceeds of
$6,500,000 before underwriting discounts and offering expenses of approximately
$530,000 and $611,000, respectively.



                                       4

<PAGE>   7

5) LEASE OBLIGATIONS

         (a) Operating Leases:

         The Company had entered into eleven (11) non-cancelable operating
leases for store locations, corporate office and security equipment as of
January 31, 1998. The Company filed a voluntary petition for protection under
Chapter 11 of the U.S. Bankruptcy Code on January 12, 1998, and subsequent to
the filing closed all but one of its' retail stores, relocated its' corporate
office to smaller space on a month to month basis, terminated all leases for
security equipment except for the one store which continued to operate, and
rejected all such leases. Only the retail store at Coral Square Mall, Coral
Springs, Florida remains open, operating under a Management Agreement with Bobby
Allison Cellular Systems of Florida, Inc. ("Bobby Allison") effective June 18,
1998, whereby Bobby Allison is responsible for the operations of this store
including all expenses related thereto, and is entitled to all resulting profits
(losses).

Minimum future rental payments for all non-cancelable operating leases consist
of the following:

Year ending
the Saturday closest
to January 31
--------------------

1999....................................................... $   13,594
2000.......................................................     54,374
2001.......................................................     57,882
2002.......................................................     57,882
2003.......................................................     57,882
Thereafter.................................................    242,052
                                                            ----------
                                                            $  483,666
                                                            ==========


6) RESTRUCTURING AND BANKRUPTCY FILING
    ---------------------------------------------------------------

         On January 12, 1998, the Company filed a voluntary petition for relief
("the Filing") under chapter 11 ("Chapter 11") of title II of the United States
Code ("the Bankruptcy Code") in the United States Bankruptcy Court for the
Southern District of Florida ("the Bankruptcy Court"). In Chapter 11, the
Company managed its affairs and operated its business as a debtor-in-possession
and developed a reorganization plan that restructured the Company and allowed
its emergence from Chapter 11. As a debtor-in-possession in Chapter 11, the
Company did not engage in transactions outside of the ordinary course of
business without approval, after notice and hearing, of the Bankruptcy Court.

         In accordance with the Bankruptcy Code, the Company obtained court
approval for the rejection of executory contracts, including real property
leases. In connection with the Company's Chapter 11 proceeding, a review was
undertaken of all the Company's obligations under its executory contracts,
including real property leases. All store leases and executory contracts have
been rejected except for the Coral Square Mall (Coral Springs, Florida) store
lease and a related lease of electronic article surveillance equipment for that
store which were assumed prior to the Company's emergence from the Chapter 11
proceeding effective October 27, 1998. All re-seller agreements with service
providers were not rejected, except for an agreement with a telephone service
provider, which was terminated by mutual agreement between the parties.



                                       5
<PAGE>   8



         Subsequent to the bankruptcy filing, the Company reached an agreement
with Bay Tech Investments, Inc., to provide secured debtor-in-possession
financing in the form of a credit facility. The credit facility provided for
borrowings dependent upon the Company's level of inventory and accounts
receivable with maximum borrowings of $500,000. The agreement granted a security
interest in substantially all of the Company's assets. Advances under the
facility bore interest at 11%. The debtor-in-possession facility replaced a
Revolving Credit Facility provided by Bay Tech Investments, Inc. which had been
in existence pre-petition. At the time of the Chapter 11 petition, $275,000 was
borrowed on this facility, which balance rolled over to the debtor-in-possession
facility. The debtor-in-possession agreement was originally scheduled to
terminate on February 29, 1998. The Company requested and received a thirty-day
extension of the facility until March 28, 1998 unless further extended upon
request of the borrower with such extension to be at the option of the lender.
The interest rate on advances under the facility was changed to 12% for the
extension period only. On March 28, 1998 the Company voluntarily paid off the
balance owed on the debtor-in-possession facility plus accrued interest and did
not seek extension of the facility. The Company believed that cash raised
through liquidation of excess assets would provide sufficient liquidity through
the anticipated date that the Company expected to emerge from the proceeding.

         Subsequent to the bankruptcy filing, the Company announced on March 3,
1998 that it had executed a Letter of Intent whereby Bobby Allison Cellular
Systems of Florida, Inc. ("Bobby Allison") would merge with and into the
Company. The transaction was contingent upon completion of a Merger Agreement,
which would be incorporated into a Plan of Reorganization to be filed with the
Bankruptcy Court and subsequent confirmation of that Plan by the court. The
surviving entity of the merger was expected to be financed principally by Sterne
Agee & Leach, Inc., an investment banking firm that was the managing underwriter
of the Company's initial public offering in May 1997. The merger and related
financing was anticipated to take place following the Company's emergence from
the bankruptcy proceeding.

         The Company subsequently filed a Plan of Reorganization on April 14,
1998 and an accompanying Disclosure Statement. The Company also executed the
Merger Agreement with Bobby Allison on May 1, 1998. The Company executed a
Management Agreement with Bobby Allison on May 6, 1998, whereby Bobby Allison
would assume the operation of the Company's Coral Square Mall store and be
responsible for all expenses related thereto. The Court approved the Management
Agreement on June 16, 1998, which became effective June 18, 1998.

         On August 27, 1998 the Company entered into an agreement ("Agreement")
with Sterne Agee whereby Sterne Agee would, as of the Effective Date of the Plan
of Reorganization of the Company filed with the U.S. Bankruptcy Court, Southern
District of Florida, acquire out of bankruptcy 100% of the equity interests of
the Company and the Company would retain the Coral Square Mall store lease and
certain store fixtures. In consideration for such acquisition, Sterne Agee would
make a new value contribution to the bankruptcy estate for the benefit of the
Company's creditors in the amount of $175,000, which funds were placed in
escrow. To effect this transaction and in accordance with the Plan of
Reorganization, as amended on August 7, 1998, upon the Effective Date, all of
the current and existing Common Stock of the Company would be forever
extinguished and canceled and the Company would issue new shares of Common Stock
to Sterne Agee which would constitute 100% of the issued and outstanding shares.
The existing shareholders of Common Stock would not retain any interest in the
post-bankruptcy entity or receive any distribution from the bankruptcy estate
for their extinguished and cancelled interests. The Bankruptcy Court scheduled a
hearing to confirm the Plan of Reorganization for October 14, 1998 and issued an
Order confirming such plan on October 16, 1998. The Effective Date of the Plan
of Reorganization was October 27, 1998. Sterne Agee made the new value
contribution in accordance with the Agreement.

          Also pursuant to the terms of the Agreement and effective August 27,
1998, all of the members of the Company's Board of Directors, except for Marc D.
Fishman, resigned from the Board of Directors and Mr. Fishman, as the sole
remaining director, and in accordance with the Bylaws of the Company, appointed
James S. Holbrook, Jr., Craig R. Heyward and F. Eugene Woodham, each of whom are
employees of Sterne Agee, to fill three of the vacancies. The Board of Directors
has further resolved to appoint James S. Holbrook, Jr. as the Chairman of the
Board and, in accordance with the Bylaws of the Company, to designate that the
Chairman of the Board is the chief executive officer of the Company.


                                       6


<PAGE>   9

         The accompanying condensed financial statements have been prepared on a
limited going concern basis of accounting, after adjustments to inventory
valuation and asset values that are not anticipated to be included in the merger
described above, and also after adjustments to the assets to be included in the
merger. The assets included in the proposed merger, which was subject to
confirmation of the Plan of Reorganization by the Court, consist of one store
lease and its related store fixtures, certain fixtures from nine closed stores,
and a new value contribution made by Sterne, Agee & Leach, Inc. for the
business. The Company's historical losses from operations, which resulted in its
bankruptcy filing, partial liquidation, and the subsequent discontinuance of all
retailing operations, raise substantial doubt about its ability to continue as a
going concern. The appropriateness of using the limited going concern basis is
dependent upon, among other things, (i) confirmation of a Plan of Reorganization
under the Bankruptcy Code which was effective on October 27, 1998, (ii) the
ability to achieve profitable operations after such confirmation and under the
proposed merger with Bobby Allison, and (iii) the subsequent ability to generate
sufficient cash from operations to meet its obligations. The interim financial
information for the one week ended October 31, 1998 and as of October 26, 1998
and October 31, 1998 reflect application of the principles of "Fresh Start"
reporting in accordance with SOP 90-7, as discussed below.

(7)      REORGANIZATION

         On January 12, 1998 the Company filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). From that time
until October 27, 1998, the Company operated its business as
debtor-in-possession subject to the jurisdiction of the United States Bankruptcy
Court for the Southern District of Florida (the "Bankruptcy Court"). On October
27, 1998 (the "Effective Date"), the Company emerged from reorganization
proceedings under Chapter 11 pursuant to the confirmation order entered on
October 16, 1998 by the Bankruptcy Court confirming the Second Amended Plan of
Reorganization dated August 7, 1998 (the "Amended Plan").

        The condensed financial statements of the Company during the bankruptcy
proceedings (the "Predecessor Company financial statements") are presented in
accordance with American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7"). Pursuant to guidance provided by SOP 90-7, the
Company adopted fresh-start reporting as of October 27, 1998, the Effective
Date. Under "Fresh Start" reporting, a new reporting entity is deemed to be
created and the recorded amounts of assets and liabilities were adjusted to
reflect their estimated fair values at the Effective Date (hereinafter, the term
"Predecessor Company" refers to the Company prior to October 27, 1998 and the
"Successor Company" refers to the Company from and after October 27, 1998). A
black line has been drawn to separate the Successor Company financial statements
from the Predecessor Company financial statements because the respective
financial statements are those of different reporting entities which have not
been prepared on a comparable basis.

       The Amended Plan provided for, among other things, on the Effective Date,
settlement and payment of all allowed administrative, secured, priority tax,
priority claims. Immediately thereafter, the Company (Predecessor) has and will
make pro rata distribution of the remaining available cash to the holders of
allowed unsecured claims, to the extent applicable, in amounts equal to their
respective pro rata share of the monies, if any, after the debtor completes the
objections to the claims process, which monies shall be distributed within ten
days after the entry of a Final Order on the last objection to claims. The
Amended Plan also provided for the termination, cancellation and extinguishment
of all pre-petition equity securities in the Company (Predecessor) on the
Effective Date upon payment of the new value contribution by Sterne, Agee &
Leach, Inc., which would thereafter own 100% of the equity in the Company
(Successor).



                                       7

<PAGE>   10



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS.


OPERATIONS


General

       The Company adopted the principles of fresh-start reporting as of the
Effective Date to reflect the impact of the Chapter 11 reorganization. As a
result of the application of fresh-start reporting, the financial condition and
results of operations of the Company for dates and periods subsequent to the
Effective Date will not be comparable to those prior to the Effective Date.

       The Company's financial condition as of October 27, 1998, the Effective
Date, and the third quarter ended October 31, 1998 reflects the impact of the
recapitalization effected pursuant to the Amended Plan and the elimination of
all retailing operations with the exception of one store which is operated under
a Management Agreement by and between the Company and Bobby Allison.

       The Company anticipates that it will merge with Bobby Allison, although
there can be no assurance that this event will take place. Unless the merger
takes place the Company will have no on-going operations.

Fresh Start Reporting

       The interim financial information for the one week ended October 31, 1998
and as of October 26, 1998 and October 31, 1998 included in the financial
information herein reflects the effectiveness of the Amended Plan and the
application of the principles of "Fresh Start" reporting in accordance with SOP
90-7, which provides guidance for financial reporting by Chapter 11 debtors
during and upon emergence from Chapter 11 cases. SOP 90-7 is applicable because
the Company's pre-reorganization shareholders received none of the reorganized
Company's newly issued Common Stock and the enterprise value of the reorganized
Company is less than the total of all pre-petition allowed claims and
post-petition liabilities. Accordingly, such interim financial information is
not comparable to the Company's historical financial information included
elsewhere herein.

       In adopting "Fresh Start" reporting, the Company was required to
determine its enterprise value, which represents the fair value of the entity
before considering its liabilities. The enterprise, or reorganization, value
used as a basis for the "Fresh Start" reporting was determined to be $175,000,
the new value contribution, based on the assumptions that (a) the fixtures
acquired through the new value contribution have a market value as "used" retail
fixtures of approximately $175,000; (b) the assumed lease is at market rental
rates and has no incremental value; (c) the business has no on-going value
unless it is subsequently merged with another operating entity that can utilize
the assets of the Company.

       Estimates of value do not purport to be appraisals or necessarily reflect
the values which may be realized if the assets are sold. The estimates of value
represent hypothetical reorganization values of the Company as the continuing
owner of its business and assets. Such estimates reflect only the assumptions
above and do not purport to reflect or constitute appraisals, liquidation values
or estimates of the actual market value that may be realized through the sale of
any securities to be issued pursuant to the Amended Plan, which may be
significantly different than the amounts set forth herein.

       "Fresh Start" accounting adjustments have been made to reflect the
estimated adjustments necessary to adopt "Fresh Start" reporting in accordance
with SOP 90-7. "Fresh Start" reporting requires that the reorganization value of
the Company be allocated to its assets in conformity with Accounting Principles
Bulletin opinion No. 16, "Business Combinations", for transactions reported on
the basis of the purchase method. Any reorganization value greater than the fair
value of specific tangible or identified intangible assets is to be included on
the Balance Sheet as Reorganization Value in Excess of Amount Allocable to
Identifiable Assets and amortized over time.


                                       8

<PAGE>   11

        The effect of the Amended Plan of Reorganization and Fresh Start
reporting on the Company's balance sheet as of October 27, 1998 is as follows 
($ in thousands):

                             2CONNECT EXPRESS, INC.
                    Debt Discharge and Fresh Start Accounting
                      October 26, 1998 and October 27, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      ADJUSTMENTS TO REFLECT CONSUMMATION OF THE PLAN
                                                                          -----------------------------------------             
                                                           OCTOBER 26,       DEBT        CANCELLATION       FRESH      OCTOBER 27,
                                                              1998         DISCHARGE       OF STOCK         START         1998
                                                           PREDECESSOR        (A)            (B)             (C)        SUCCESSOR
                                                           ------------   ------------    ----------     ------------  ------------

<S>                                                        <C>            <C>             <C>            <C>           <C>         
                            ASSETS

Current Assets
  Cash                                                     $    262,105   $   (262,105)   $         --   $         --  $         --
  Accounts Receivable, net of reserves                               --             --              --             --            --
  Inventory, net of reserves                                         --             --              --             --            --
  Prepaid Expenses & Other Current Assets                            --             --              --             --            --
                                                           ------------   ------------    ------------   ------------  ------------
    Total Current Assets                                        262,105       (262,105)             --             --            --

Property & Equipment, Net                                            --             --              --        175,000       175,000
Other Assets                                                      1,789         (1,789)             --          1,789         1,789
                                                           ------------   ------------    ------------   ------------  ------------

TOTAL ASSETS                                               $    263,894   $   (263,894)   $         --   $    176,789  $    176,789
                                                           ============   ============    ============   ============  ============

             LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts Payable - Prepetition                           $    700,010   $   (700,010)   $         --   $         --  $         --
  Accounts Payable - Postpetition                                22,454        (22,454)             --             --            --
  Notes Payable                                                      --             --              --             --            --
  Accrued Expenses & Other Current Liabilities                   65,573        (65,573)             --             --            --
  Accrued Landlord Claims                                       619,462       (619,462)             --             --            --
  Accrued Employee Contract Claims                              486,863       (486,863)             --             --            --
  Accrued Other Bankruptcy Claims                                67,432        (67,432)             --             --            --
  Current Maturities of long-term Debt                            2,967         (2,967)                         2,967         2,967
                                                           ------------   ------------    ------------   ------------  ------------
    TOTAL CURRENT LIABILITIES                                 1,964,761     (1,964,761)             --          2,967         2,967

OTHER LIABILITIES
  Long-term Debt & Capital Leases                                 7,871         (7,871)                         7,871         7,871
                                                           ------------   ------------    ------------   ------------  ------------
    TOTAL LIABILITIES                                         1,972,632     (1,972,632)             --         10,838        10,838
                                                           ------------   ------------    ------------   ------------  ------------

SHAREHOLDERS' EQUITY
  Common Stock ($.01 par value.  Authorized 
       25,000,000 Shares, Issued & Outstanding 
       3,752,500 shares at January 31, 1998;                     37,525                        (37,525)           300           300
       Authorized 25,000,000 Shares, Issued & 
       Outstanding 30,000 shares at October 31, 1998)         8,667,451             --      (8,667,451)       165,651       165,651
  Paid-In-Capital                                             
  Retained Deficit                                          (10,413,714)     1,708,738       8,704,976             --            --
                                                           ------------   ------------    ------------   ------------  ------------
    TOTAL SHAREHOLDERS' EQUITY                               (1,708,738)     1,708,738              --        165,951       165,951
                                                           ------------   ------------    ------------   ------------  ------------

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                   $    263,894   $   (263,894)   $         --   $    176,789  $    176,789
                                                           ============   ============    ============   ============  ============


</TABLE>




                                       9














<PAGE>   12



Factors That May Affect Future Results

        As stated above, pursuant to the Agreement, Sterne Agee acquired out of
bankruptcy 100% of the equity interests of the Company (Successor) and all
previous Common Stock of the Company (Predecessor) was forever extinguished and
cancelled. Consequently, the previous shareholders did not participate in the
Company's (Successor) future, and the Company's (Successor) future results are
therefore immaterial to the previous shareholders. The Management Discussion and
Analysis below is primarily historical.

Results of Operations

        The Company (Predecessor) emerged from its Chapter 11 bankruptcy
proceeding on October 27, 1998, the Effective Date. As described above, at the
Effective Date the equity interest in the Company (Successor) was sold to Sterne
Agee in consideration for the new value contribution that will be disbursed to
creditors by the disbursing agent. The Company (Successor), after the Effective
Date, has no operations and only has retained a store lease, a lease on
electronic article surveillance equipment and store fixtures which are located
in the aforementioned store or in storage. The leased store is being operated
under a Management Agreement by Bobby Allison, which retains all profits and
losses related to the operations of that store.

         The day prior to the Effective Date, on October 26, 1998, the Company
(Predecessor) recorded an extraordinary gain on debt discharge comprised of the
following elements:

                      2Connect Express, Inc. (Predecessor)
                Analysis of Extraordinary Gain on Debt Discharge
                             As of October 26, 1998



Elements of Extraordinary Gain on Debt Discharge:               Amount

Cash transferred to Disbursing Agent                         $  (262,105)
Security deposits assumed by Successor                            (1,789)
Accounts payable - pre petition                                  700,010
Accounts payable - post petition                                 (16,710)
Accrued expenses                                                  39,164
Accrued landlord lease rejection claims                          619,462
Accrued employment contract claims                               486,863
Accrued other bankruptcy claims                                  133,005
Liabilities (capital lease) assumed by Successor                  10,838
                                                             -----------
  Extraordinary gain on debt discharge                       $ 1,708,738
                                                             ===========



           The Company (Successor) did not have any operating activity after the
Effective Date to the end of the third quarter ended October 31, 1998.
Consequently, to facilitate a meaningful discussion of results of operations of
the Company (Predecessor), the information presented below does not include the
period from October 27, 1998 through October 31, 1998.

         The Company's (Predecessor) net sales for the twelve weeks ended
October 26, 1998 were $6,515 versus $1,163,694 during the thirteen week third
quarter ended October 31, 1997. The Company (Predecessor) operated approximately
6.4 stores during the third quarter last year. The Company (Predecessor)
commenced operation of its first store on December 6, 1996 and subsequently
opened two stores in April 1997, three stores in August 1997, two stores in
September 1997 and two stores in November 1997. The Company (Predecessor) closed
its five worst performing stores immediately upon its bankruptcy filing on
January 12, 1998 and operated five stores at January 31, 1998. During the twelve
weeks ended October 26, 1998 the Company (Predecessor) did not operate any
stores. The Company's (Predecessor) only remaining leased store in Coral
Springs, Florida was operated starting June 18, 1998 by 



                                       10

<PAGE>   13

Bobby Allison under a Management Agreement in which Bobby Allison is responsible
for management and all resulting profits (losses).

           The Company's (Predecessor) net sales for the thirty-eight weeks
ended October 26, 1998 were $878,730 versus $2,411,797 during the nine months
(thirty-nine weeks) ended October 31, 1997. The Company (Predecessor) operated
1.5 equivalent full-time stores in the first thirty-eight weeks of 1998 versus
3.5 equivalent full-time stores during the thirty-nine 1997 period. In the first
nine months of 1998 the Company (Predecessor) conducted inventory clearance and
liquidation sales at steep discounts and then sold remaining inventory and
defective merchandise which had been returned by customers in two public
auctions conducted by Stampler Auctions in April 1998. The first such auction
consisted of first quality merchandise and generated proceeds of $300,000 while
the second auction, consisting of customer returns, generated proceeds of
$34,500.

         Gross profit for the twelve weeks ended October 26, 1998 was $6,487
(99% to sales) versus gross profit in the prior year third quarter (thirteen
weeks) ended October 31, 1997 of $190,858 (16.4% to sales). The gross profit in
the twelve weeks ended October 26, 1998 was due primarily to residual income on
previous sales of cellular plans and sales of small quantities of merchandise
taken as payment from vendors for credits issued by the vendors for returned
defective goods. The lower gross profit percent in the last year third quarter
ended October 31, 1997 was due to price driven promotional activity related to
new store openings and efforts to increase sales volume in previously opened
stores.

         Gross profit for the thirty-eight weeks ended October 26, 1998 was
$88,186 (10% to sales) versus $464,032 (19.2%) for the thirty-nine week period
last year ended October 31, 1997. The lower gross profit dollars and percent in
1998 was due to the aforementioned retail store clearance sales and public
auctions, and reduced store count. The auction sales returned approximately 30%
of the merchandise inventory cost value and enabled to Company (Predecessor) to
immediately eliminate expenses of operating the stores where the inventory was
housed and allowed the Company (Predecessor) to reject those store leases. The
gross margin of 19.2% for the nine months (thirty-nine weeks) ended October 31,
1997 was adversely affected by grand opening promotions in connection with
opening of two stores during April 1997 and four stores in the third quarter of
1997 and heavy promotional advertising intended to create store awareness and
garner market share. In the first nine months (thirty-nine weeks) of 1997 the
Company (Predecessor) priced its products at or below competition and used
customer incentives to increase sales, which lowered average selling price per
unit and gross margin.

         Selling, general and administrative expenses ("SG&A"), excluding
depreciation and amortization, for the twelve weeks ended October 26, 1998 was
$99,596 versus $1,372,303 (117.9% to sales) during the thirteen week third
quarter last year ended October 31, 1997. The decrease in SG&A expenses was due
to having no stores in operation during the twelve weeks ended October 26, 1998
and reduction of corporate expenses and personnel to skeleton levels. SG&A
expenses for the thirty-eight weeks ended October 26, 1998, excluding
depreciation and amortization, was $1,036,658 (118% to sales) versus $3,003,380
(124.5% to sales) for the last year thirty-nine weeks ended October 31, 1997.
The 1998 SG&A expenses included store closing expenses and expenses related to
the movement of merchandise from closed stores to operating stores and movement
of store fixtures and equipment to a warehouse awaiting subsequent sale. After
conducting the aforementioned auctions in April 1998, the Company (Predecessor)
reduced personnel headcount to five persons, including management, in its Coral
Springs store, prior to the effective date of the Management Agreement, and
initially to four and then to two in the corporate office. The 1997 SG&A
expenses included all management functions which had been anticipated for the
support of rapid store count growth and personnel used in the start-up of
telemarketing and direct outside sales functions.

         Depreciation, amortization and amortization of pre-opening costs for
the twelve weeks ended October 26, 1998 was -0- versus $158,890 for the prior
year thirteen week third quarter ended October 31, 1997. The decrease was due to
the sale and write-off of fixed assets and pre-opening expenses in connection
with the Company's (Predecessor) bankruptcy filing. Depreciation, amortization
and amortization of pre-opening costs for the thirty-eight weeks ended October
26, 1998 was $95,376 versus $249,876 for the thirty-nine weeks last year ended
October 31, 1997.



                                       11

<PAGE>   14

         Net interest income (expense) for the twelve weeks ended October 26,
1998 was $5,276 versus $53,400 in the thirteen week prior year third quarter
ended October 31, 1997. For the thirty-eight weeks ended October 26, 1998 net
interest income (expense) was $8,108 versus $117,410 in the thirty-nine week
period ended October 31, 1997. The net interest income was due to available cash
for short-term investments due to asset liquidations in 1998 and the excess
proceeds of the Company's (Predecessor) initial public offering versus
cumulative expenditures during first thirty-nine weeks of 1997.

         Restructuring charges and reserves in the twelve weeks ended October
26, 1998 were ($45,451) versus ($158,188) in the last year thirteen week third
quarter ended October 31, 1997. The net restructuring charges and reserve
adjustments included adjustments to previously established store closing
accruals, reserves for the disposition of assets and recoveries of accounts
receivable. Net restructuring charges, reserves and adjustments for the
thirty-eight weeks ended October 26, 1998 were ($159,953) versus ($158,188) in
the last year thirty-nine weeks ended October 31, 1997. The net expenses
recorded in 1998 included write-down to realized proceeds of merchandise
inventory and equipment sold to Bobby Allison under the aforementioned Merger
Agreement, assets (store selling fixtures) sold to Sterne Agee under the
Agreement dated August 27, 1998 and legal fees related to the Company's
(Predecessor) bankruptcy proceeding in excess of retainers previously paid to
the Company's (Predecessor) securities counsel, general and bankruptcy counsel
and professionals employed by the creditor's committee in the bankruptcy case.

        Net loss before extraordinary items for the twelve weeks ended October
26, 1998 was ($133,374) versus ($1,445,123) for the last year thirteen week
third quarter ended October 31, 1997. The net loss before extraordinary items
was due to the shutdown of the Company's (Predecessor) retailing operations.
Although the Company (Predecessor) closed all of its stores and reduced
corporate headcount to skeleton levels, the Company (Predecessor) incurred
costs, expenses and losses until it emerged from bankruptcy. Net loss before
extraordinary items for the thirty-eight weeks ended October 26, 1998 was
($1,195,693) versus ($2,830,002) for the last year thirty-nine weeks ended
October 31, 1997. The 1998 loss was primarily due to losses sustained in the
liquidation of assets in the bankruptcy proceeding, expenses to conduct the
liquidations and manage the affairs of the Company (Predecessor) during the
bankruptcy. The 1997 loss was primarily due to store operating losses,
promotional expenses and corporate expenses which had been established in
anticipation of future store count growth.

         The Company (Predecessor) recorded, at the Effective Date,
extraordinary items consisting of a gain on debt discharge and the cancellation
and extinguishment of common stock and elimination of deficit in the amounts of
$1,708,738 and $8,704,976, respectively, under Fresh Start reporting.

FINANCIAL CONDITION AND LIQUIDITY

         The Company (Predecessor) paid through its disbursing agent, or
transferred to its disbursing agent for the subsequent payment of claims, all of
the Company's (Predecessor) cash at the Effective Date, including the new value
contribution received from Sterne, Agee & Leach, Inc. for the Company's
(Predecessor) equity and selected assets remaining at the Effective Date, which
included one store lease, fixtures and leased electronic article surveillance
equipment in that store and fixed assets in storage from nine previously closed
stores.

         The Company (Successor) had no cash as of the Effective Date.

         The Company (Predecessor) decreased its cash position by $735,749
during the third quarter ended October 26, 1998 (the day prior to the Effective
Date) from quarter ended August 1, 1998, and by $218,068 for the thirty eight
weeks from fiscal year ended January 31, 1998 to October 26, 1998. During that
thirty-eight week period the Company (Predecessor) repaid its $275,000
borrowings under its debtor-in-possession credit facility and accumulated cash
primarily due to the liquidation of excess merchandise inventory and inventory
from stores which were closed during the bankruptcy proceeding, the sale of
excess 



                                       12
<PAGE>   15

corporate office furniture and fixtures no longer required due to downsizing and
cessation of operations, settlement of a contractual dispute with a previous
cellular service provider whose plans were sold in the Company's (Predecessor)
retail stores, the collection of accounts receivable and $175,000 from the new
value contribution of Sterne Agee under the aforementioned Agreement. All of the
Company's (Predecessor) excess cash at the Effective Date of the Plan of
Reorganization was paid to creditors by the disbursing agent after confirmation
of the Company's (Predecessor) Plan of Reorganization by the court or
transferred to the disbursing agent of the Company (Predecessor) for payment to
creditors after a Final Order is issued on the last objection to claims. Also,
at the Effective Date, all of the Common Stock of the Company (Predecessor) was
forever extinguished and cancelled and the Company (Successor) issued new shares
of Common Stock to Sterne Agee, which now constitutes 100% of the issued and
outstanding shares. The shareholders of Common Stock of the Company
(Predecessor) did not retain any interest in the post-bankruptcy entity or
receive any distribution from the bankruptcy estate for their extinguished and
cancelled interests.

          This form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical facts included in this
Form 10-QSB and located elsewhere herein regarding the Company's financial
position and business strategy may constitute forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable; it can give no assurance that such
expectations will prove to be accurate.


                           PART II - OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K.

         (a) Exhibits


          - Exhibit 1 - Debtor's Amended Plan of Reorganization filed June 24, 
                        1998

          - Exhibit 2 - Second Amended Disclosure Statement for Amended Plan of
                        Reorganization filed June 24, 1998

          - Exhibit 3 - First Modification to Amended Plan of Reorganization 
                        dated August 7, 1998

          - Exhibit 4 - First Modification to Second Amended Disclosure 
                        Statement dated August 7, 1998

          - Exhibit 5 - Second Modification to Amended Plan of Reorganization
                        filed August 28, 1998

          - Exhibit 6 - Amended and Restated Articles of Incorporation for 
                        2Connect Express, Inc., Filed December 1, 1998
     
          (b) Reports on Form 8-K. Reports on Form 8-K have been filed during 
              the quarter ended October 31, 1998:

<TABLE>
<CAPTION>
       Date of Report             Date of Filing         Description
       --------------             --------------         -------------
<S>                              <C>                     <C>   
       August 17, 1998            August 18, 1998        Debtor's Monthly Financial Report
                                                         (Business) for the period
                                                         from July 5, 1998 to August 1, 1998.

       August 27, 1998            September 1, 1998      Agreement by and between 2Connect
                                                         Express, Inc. and Sterne,
                                                         Agee & Leach, Inc. dated August 27, 1998

       September 15, 1998         September 25, 1998     Debtor's Monthly Financial Report
                                                         (Business) for the period from August 2, 1998 
                                                         to August 29, 1998.

</TABLE>


                                       13

<PAGE>   16


<TABLE>
<S>                              <C>                     <C>   


       October 12, 1998           October 26, 1998       Debtor's Monthly Financial Report
                                                         (Business) for the period
                                                         from August 30, 1998 to October 3, 1998.
 
       November 15, 1998          November 18, 1998      Debtor's Monthly Financial report (Business)
                                                         for the period from October 4, 1998 to
                                                         October 31, 1998.

</TABLE>



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       2CONNECT EXPRESS, INC.
                                       (Registrant)

Date: December 11, 1998                /s/ James S. Holbrook, Jr.
                                       ---------------------------------------
                                       James S. Holbrook, Jr., Chairman of the
                                       Board and Chief Executive Officer








                                       14