<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                  FORM 10-QSB

     (X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the quarterly period ended September 30, 2001
          OR
     (_)  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934
          For the transition period from _________ to ___________.

COMMISSION FILE NUMBER:  0-29205
                         -------

                          LIGHTHOUSE FAST FERRY, INC.
           ------------------------------------------------------
            (Exact name of small business issuer as in its charter)


        New Jersey                                   22-3241823
-------------------------------                  -------------------
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                   Identification No.)


        195 Fairfield Avenue, Suite 3C, West Caldwell, New Jersey 07006
       ----------------------------------------------------------------
                   (Address of principal executive offices)

                                (973) 618-9036
                               ----------------
                          (Issuer's telephone number)


                         ----------------------------
     (Former name, former address and former fiscal year, if changed since
                                  last report)

________________________________________________________________________________

Check whether the registrant (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
     ----        ----

The number of shares outstanding of the issuer's classes of common equity, as of
October 31, 2001 is 13,283,977 shares of Common Stock.

Transitional Small Business Disclosure Format (check one):
YES         NO  X
    -----      ----

                                      -1-
<PAGE>

                  LIGHTHOUSE LANDINGS, INC. AND SUBSIDIARIES

                              September 30, 2001
                                  (Unaudited)


                                   I N D E X


<TABLE>
<CAPTION>

                                                                             Page No.
                                                                             --------
<S>                                                                          <C>
Part I  - Financial Statements:

Item 1.   Financial Statements:
          Consolidated Balance Sheets
          At September 30, 2001 and December 31, 2000.........................   3

          Consolidated Statements of Operations
          For the Nine Months Ended September 30, 2001 and 2000...............   4

          Consolidated Statement of Changes in
          Stockholders' Capital Deficiency
          For the Nine Months Ended September 30, 2001........................   5

          Statements of Cash Flows
          For the Nine Months Ended September 30, 2001 and 2000...............  6-7

          Notes to Consolidated Condensed Financial
                Statements....................................................  8-26

          Item 2.  Management's Discussion and Analysis of
                   Financial Condition and Results of Operations..............  27-38

Part II  - Other Information:

          Item 2.  Changes in Securities......................................  39-41

          Item 6.  Exhibits and Reports on Form 8-K...........................   42

          Signatures..........................................................   43
</TABLE>

                                      -2-
<PAGE>

                 LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)



                                    ASSETS
                                    ------

<TABLE>
<CAPTION>
                                                                               September 30,         December 31,
                                                                                   2001                  2000
                                                                                   -----                 ----
<S>                                                                            <C>                   <C>
Current assets:
  Cash                                                                         $      1,491          $     66,578
  Inventories                                                                       120,223                59,306
  Net assets of discontinued operations                                             562,491               424,763
  Prepaid expenses and other current assets                                         118,375             1,706,351
                                                                               ------------          ------------
        Total current assets                                                        802,580             2,256,998

Property and equipment - at cost,
  less accumulated depreciation                                                  10,828,921            11,389,049

Goodwill net of accumulated amortization
  of $222,656 and $182,184, respectively                                            995,878             1,031,990

Other assets                                                                        301,856               304,404
                                                                               ------------          ------------

                                                                               $ 12,929,235          $ 14,982,441
                                                                               ============          ============

                                   LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY
                                   ------------------------------------------------

Current liabilities:
  Convertible promissory notes                                                 $  4,918,000          $  3,503,000
  Current maturities of long-term debt                                            1,536,452             1,597,510
  Notes payable - short term                                                         35,200
  Notes payable - stockholders                                                      267,255                85,755
  Accounts payable and accrued expenses                                           2,134,621             1,107,540
  Deferred revenues                                                                 117,607                86,618
  Due to officers                                                                   252,271               200,884
                                                                               ------------          ------------
        Total current liabilities                                                 9,261,406             6,581,307

Long-term debt - net of current maturities                                        9,073,754             9,452,295
                                                                               ------------          ------------
        Total liabilities                                                        18,335,160            16,033,602
                                                                               ------------          ------------

Stockholders' capital deficiency:
  Preferred stock - $.01 par value
    Authorized and unissued 10,000,000 shares
  Common stock - $.01 par value
    Authorized - 40,000,000 shares
    Issued and outstanding - 11,064,227 shares
      at September 30, 2001 and 8,185,087 at
      December 31, 2000                                                             110,642                81,851
  Additional paid-in capital                                                     13,105,244             8,891,266
  Additional paid-in capital - stock options                                        137,500               137,500
  Accumulated deficit                                                           (18,759,311)          (10,161,778)
                                                                               -------------         ------------
        Total stockholders' capital deficiency                                   (5,405,925)           (1,051,161)
                                                                               ------------          ------------

                                                                               $ 12,929,235          $ 14,982,441
                                                                               ============          ============
</TABLE>

         See  accompanying notes to consolidated financial statements.

                                      -3-
<PAGE>

                 LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)


<TABLE>
<CAPTION>
                                                                     For the Three                          For the Nine
                                                                     Months Ended                           Months Ended
                                                                     September 30                           September 30
                                                                     ------------                           ------------
                                                             2001                   2000                 2001            2000
                                                          -----------            -----------         -----------    -------------
<S>                                                       <C>                    <C>                 <C>            <C>

Revenues                                                   $1,116,829             $1,316,469          $2,966,377       $2,959,440
                                                          -----------            -----------         -----------     ------------

Costs of service:
  Ferry operations                                            840,498                824,837           2,251,605        2,127,745
  Depreciation                                                234,396                215,511             726,031          689,843
                                                          -----------            -----------         -----------     ------------
Total costs of service                                      1,074,894              1,040,348           2,977,636        2,817,588
                                                          -----------            -----------         -----------     ------------

                                                               41,935                276,121            ( 11,259)         141,852
                                                          -----------            -----------         -----------     ------------

Operating expenses:
  Selling, general & administrative                           469,660                420,412           1,198,505        1,089,782
  Marketing                                                     9,031                 18,682              33,832           60,608
  New site development costs                                  200,991                 18,070             469,467           51,402
  Amortization of goodwill                                     20,236                 20,236              60,708           60,708
                                                          -----------            -----------         -----------     ------------
Total operating expenses                                      699,918                477,400           1,762,512        1,262,500
                                                          -----------            -----------         -----------     ------------

Loss from operations                                       ( 657,983)              ( 201,279)        ( 1,773,771)     ( 1,120,648)

Other expenses:
  Interest and amortization
    of financing costs                                      2,928,566                753,934           6,823,762        1,481,942
                                                          -----------            -----------         -----------     ------------

Loss from continuing operations                           ( 3,586,549)             ( 955,213)        ( 8,597,533)     ( 2,602,590)

Loss on discontinued operations                                     -                      -                   -        ( 235,284)
                                                          -----------            -----------         -----------     ------------

Net Loss                                                  ($3,586,549)            ($ 955,213)        ($8,597,533)     ($2,837,874)
                                                          ===========            ===========         ===========     ============

Per share data:
 Basic and diluted:
 Loss from continuing operations                               ($0.33)                ($0.15)             ($0.92)          ($0.43)
 Loss from discontinuing operations                                 -                      -                   -           ( 0.04)
                                                          -----------            -----------         -----------     -------------
    Net loss                                                   ($0.33)                ($0.15)             ($0.92)          ($0.47)
                                                          ===========            ===========         ===========     ============

Weight average number of shares outstanding:
  Basic and diluted                                        10,928,744              6,493,008           9,332,291        6,016,263
                                                          ===========            ===========         ===========     ============
</TABLE>

         See  accompanying notes to consolidated financial statements.

                                      -4-
<PAGE>


                 LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY

                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                            Common Stock                  Additional           Additional
                                                   ------------------------------           Paid-In         Paid-In Capital
                                                       Number            Amount             Capital          Stock Options
                                                   --------------      ----------        ------------     -----------------
<S>                                                <C>                 <C>               <C>              <C>
Balance at January 1,  2001                             8,185,087        $ 81,851         $ 8,891,266           $137,500
Increase of shares for cash                               254,295           2,543             239,957                  -
Satisfaction of Liabilities to Officer                     10,602             106              11,561                  -
Shares issued and issuable for
  interest and financing                                2,392,880          23,928           3,761,120                  -
Shares issued for portion of minority interest of
  majority owned subsidiary                                16,363             164              20,290                  -
Shares issued for consulting services                      30,000             300              42,800                  -
Conversion of Notes Payable to
   common stock                                           175,000           1,750             138,250                  -
Net loss for the nine months
  ended September 30, 2001                                      -               -                   -                  -
                                                   --------------      ----------        ------------       ------------

Balance at September 30, 2001                          11,064,227        $110,642         $13,105,244           $137,500
                                                   ==============      ==========        ============       ============

<CAPTION>
                                                                              Total
                                                                           Stockholders'
                                                                              Equity
                                                        (Accumulated         (Capital
                                                          Deficit)          Deficiency)
                                                      ---------------   ---------------
<S>                                                   <C>               <C>
Balance at January 1,  2001                            ($10,161,778)       ($1,051,161)
Increase of shares for cash                                       -            242,500
Satisfaction of Liabilities to Officer                            -             11,667
Shares issued and issuable for
  interest and financing                                          -          3,785,048
Shares issued for portion of minority interest of
  majority owned subsidiary                                       -             20,454
Shares issued for consulting services                             -             43,100
Conversion of Notes Payable to
   common stock                                                   -            140,000
Net loss for the nine months
  ended September 30, 2001                               (8,597,533)        (8,597,533)
                                                      -------------        -----------

Balance at September 30, 2001                          ($18,759,311)       ($5,405,925)
                                                      =============        ===========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      -5-
<PAGE>

                  LIGHTHOUSE FAST FERRY, INC AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                                     For the Nine
                                                                                                     Months Ended
                                                                                                     September 30,
                                                                                           ---------------------------------
                                                                                               2001                 2000
                                                                                           -------------      --------------
<S>                                                                                        <C>                <C>
Cash flows from operating activities:
  Net loss continuing operations                                                             ($8,597,533)        ($2,602,590)
  Adjustments to reconcile net loss to net
      cash used in operating activities:
    Depreciation                                                                                 735,420             693,547
    Amortization of goodwill                                                                      60,708              60,708
    Amortization of deferred finance costs                                                     5,535,937             506,064
    Stock issued for service and interest                                                         76,775              50,000
    Deferred revenues                                                                             30,989              43,388
    Increase (decrease) in cash flows as a result of
        changes in assets and liabilities:
      Inventories                                                                               ( 60,917)              1,405
      Prepaid expenses and other current assets                                                   28,408              94,815
      Other assets                                                                                 2,548              28,629
      Accounts payable and accrued expenses                                                    1,013,981            ( 17,440)
      Due to officers/stockholders                                                                63,054            ( 36,044)
                                                                                           -------------        ------------

Net cash used in operating activities
      for continuing operations                                                              ( 1,110,630)        ( 1,177,518)

Net cash used in discontinued operations                                                       ( 137,729)          ( 288,424)

Net cash in used operating activities                                                        ( 1,248,359)        ( 1,465,942)
                                                                                           -------------        ------------

Cash flows used in investing activities:
  Acquisition of property and equipment                                                        ( 175,290)            ( 8,820)
  Purchase of Minority Interest in Subsidiary                                                    ( 4,140)          ( 287,500)
                                                                                           -------------        ------------

Net cash used in investing activities                                                          ( 179,430)          ( 296,320)
                                                                                           -------------        ------------

Cash flows from financing activities:
  Net proceeds from note payable - stockholders                                                  154,800            ( 43,756)
  Proceeds from convertible promissory notes                                                   1,405,000           2,165,000
  Repayments of long-term debt                                                                 ( 439,598)          ( 866,024)
  Proceeds from issuance of common stock                                                         242,500             482,600
                                                                                           -------------        ------------

Net cash provided by financing activities                                                      1,362,702           1,737,820
                                                                                           -------------        ------------

Net decrease in cash                                                                            ( 65,087)           ( 24,442)

Cash at beginning of period                                                                       66,578              97,957
                                                                                          --------------        ------------

Cash at end of period                                                                      $       1,491        $     73,515
                                                                                          ==============        ============
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      -6-
<PAGE>

                 LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                 For the Nine
                                                                                                 Months Ended
                                                                                                 September 30,
                                                                                         -----------------------------
                                                                                              2001           2000
                                                                                           ----------     ----------
<S>                                                                                        <C>            <C>
Supplemental Disclosures of Cash Flow Information:

  Cash paid during the period for:
    Interest                                                                               $  605,933     $  880,093
                                                                                           ==========     ==========
Supplemental Schedules of Noncash
  Operating and Financing Activities:

  Common stock issued as additional
    interest and financing                                                                 $3,785,049     $  644,465
                                                                                           ==========     ==========

  Common stock issued in payment of consulting fees                                        $   43,100     $   96,500
                                                                                           ==========     ==========

  Common stock issued in partial payment for
    Acquisition of minority owned subsidiaries' stock                                      $   20,454     $        -
                                                                                           ==========     ==========

  Common stock issued in payment of liabilities:
    Related parties                                                                        $   11,667     $  214,625
                                                                                           ==========     ==========
    Others                                                                                 $        -     $  125,000
                                                                                           ==========     ==========
    Convertible Notes Payable                                                              $  140,000     $        -
                                                                                           ==========     ==========

  Notes issued as payment of consulting fees                                               $  170,000     $  198,000
                                                                                           ==========     ==========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      -7-
<PAGE>

                 LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2001
                                   (Unaudited)



NOTE  1 - REALIZATION OF ASSETS - GOING CONCERN.

               The accompanying consolidated financial statements have been
          prepared in conformity with accounting principles generally accepted
          in the United States of America, which contemplate continuation of the
          Company as a going concern. Lighthouse Fast Ferry, Inc. (the
          "Company") has sustained substantial losses for the years ended
          December 31, 2000 and the nine months ended September 30, 2001. In
          addition, at September 30, 2001 the Company has working capital and
          capital deficiencies of $8,458,826 and $5,405,925, respectively.

               Future viability of the Company is dependent upon the Company's
          ability to obtain additional funding. Commencing January through
          September 2001, the Company received funds of $242,500 through the
          sale of its securities and $1,405,000 from convertible promissory
          notes. The proceeds were used for the payment of certain obligations
          and to fund ongoing operations.

               It is management's opinion that the funds to be raised by the
          sales of its securities and borrowings plus the funds anticipated to
          be raised through the sale of net assets of the discontinued segments
          (see Note 3 for subsequent sale) will be sufficient to meet the
          Company's obligations as they become due.

               The conditions previously mentioned raise substantial doubt about
          the Company's ability to continue as a going concern. The financial
          statements do not include any adjustments that might result from the
          outcome of this uncertainty.


NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

          (a)  Description of Business:

                    Lighthouse Fast Ferry, Inc. is a New Jersey corporation
          formed on May 12, 1993 under the name Drydock Cafe, Inc. On September
          21, 1994, the Company changed its name to Lighthouse Landings, Inc. On
          September 19, 2000, the Company changed its name to Lighthouse Fast
          Ferry, Inc. The Company, through its subsidiary New York Fast Ferry
          Holding Corp. ("NYFF"), is an operator of high speed, commuter
          passenger ferryboats in the New York City metropolitan region.

                                      -8-
<PAGE>

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.  (Continued)

          (b)  Principles of Consolidation:

                    The consolidated financial statements include the accounts
          of Lighthouse Fast Ferry, Inc. and its subsidiaries. The results of
          subsidiary companies' operations are included, in accordance with the
          "Purchase" method, from the dates of their respective acquisition. All
          significant intercompany balances and transactions have been
          eliminated in consolidation. As discussed more thoroughly in Note 3,
          the retail and marina segments are presented as discontinued
          operations.

          (c)  Basis of Presentation:

                    The accompanying consolidated financial statements have been
          prepared in accordance with accounting principles generally accepted
          in the United States of America for interim financial information and
          with the instructions for Form 10-QSB and Article 10 of Regulations S-
          X. Accordingly, they do not include all of the information and
          footnotes required by generally accepted accounting principles for
          complete financial statements. In the opinion of management, the
          statements contain all adjustments (consisting only of normal
          recurring accruals) necessary to present fairly the financial position
          as of September 30, 2001 and the results of operations and cash flows
          for the nine and three months ended September 30, 2001 and 2000. The
          results of operations for the nine and three months ended September
          30, 2001 and 2000 are not necessarily indicative of the results to be
          expected for the full year.

                    The December 31, 2000 balance sheet has been derived from
          the audited financial statements at the date included in the Company's
          annual report contained in Form 10-KSB. These unaudited financial
          statements should be read in conjunction with the financial statements
          and notes thereto included in the Company's annual report contained in
          Form 10-KSB, as amended.

          (d)  Use of Estimates:

                    The preparation of financial statements in conformity with
          accounting principles generally accepted in the United States of
          America requires management to make estimates and assumptions that
          affect certain reported amounts and disclosures. Accordingly, actual
          results could differ from those estimates.

          (e)  Inventories:

                    Inventories consist of parts inventory and cafeteria
          products and are stated at the lower of cost or market on the first-
          in, first-out method.

                                      -9-
<PAGE>

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.  (Continued)

          (f)  Property and Equipment:

                    Property and equipment is recorded at cost. The cost of the
          ferries obtained through the Fast Ferries Holding Corp. acquisition in
          December 1998 has been determined as an allocation of the purchase
          price of the business acquired based upon an independent appraisal.
          Depreciation is computed using the straight-line method. Depreciation
          on equipment, including the ferries, is calculated principally over
          their estimated useful lives of fifteen years.

                    Expenditures that substantially increase estimated useful
          lives are capitalized. Maintenance, repairs and minor renewals are
          expensed as incurred. When assets are sold or otherwise disposed of,
          their costs and accumulated depreciation are removed from the accounts
          and any resulting gain or loss is recorded in operations.


          (g)  Goodwill:

                    Goodwill arising from acquisitions initially represents the
          excess of the purchase cost over the fair value of identifiable assets
          less identifiable liabilities. Goodwill is reviewed on an ongoing
          basis to determine that the value has not been impaired. The goodwill
          arising from the acquisition of Fast Ferry Holding Corp. ("FHCC") and
          its wholly owned subsidiaries aggregating $1,238,758 is being
          amortized over 15 years. Amortization of goodwill is charged to
          operations and totaled $20,236 for the three months ended September
          30, 2001 and 2000 and $60,708 for the nine months ended September 30,
          2001 and 2000, respectively.

                    In June 2001, the Company acquired 3% of the 20% minority
          interest of FHCC for $4,140 in cash and 16,363 shares of its common
          stock whose fair value was $20,454. The entire purchase price of
          $24,468 was recorded as goodwill.


          (h)  Revenue Recognition:

                    Revenue is recognized when earned. The Company's ferry
          business sells the majority of commuter tickets in advance of use. The
          tickets, which expire ninety (90)days after issuance, are
          nonrefundable and nonextendable. Accordingly, the Company determines
          the unused portion of ticket sales and defers that value to future
          periods. Deferred revenues aggregated $117,607 and $86,618 at
          September 30, 2001 and December 31, 2000, respectively.

                    Other revenues generated by the Company, such as the sale of
          food through the ferries' concession stands, are recognized when the
          services have been rendered. To date, such revenues have not been
          significant.

                                      -10-
<PAGE>

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.  (Continued)

          (i)  Income Taxes:

                    The Company complies with Statement of Financial Accounting
          Standards No. ("SFAS 109"), "Accounting for Income Taxes", which
          requires an asset and liability approach to financial accounting and
          reporting for income taxes. Deferred income tax assets are computed
          for differences between financial statement and tax bases of assets
          and liabilities that will result in future taxable or deductible
          amounts, based on the enacted tax laws and rates in the periods in
          which differences are expected to affect taxable income. The principal
          asset and liability differences are deferred revenues, valuation
          allowances for long-term assets, the estimated loss on the disposal of
          discontinued operations, and utilization of the Company's tax loss
          carry forwards.

          (j)  Impairment of Long-lived Asset:

                    The Company accounts for impairment of long-lived assets in
          accordance with Statement of Financial Accounting Standards (SFAS) No.
          121, "Accounting for the Impairments of Long-Lived Assets and for
          Long-Lived Assets to be Disposed of" SFAS No. 121 requires that
          long-lived assets be reviewed for impairment whenever events or
          changes in circumstances indicate that the book value of the asset may
          not be recoverable. Due to significant losses incurred during 2000,
          the Company evaluated its long-term assets of its continuing
          operations, which at September 30, 2001 were comprised of property and
          equipment (principally two ferry vessels) with a depreciated cost of
          $10,604,012 and goodwill from the acquisition of Fast Ferry Holding
          Corp. with an unamortized value of $995,878. Based upon an estimate of
          the future undiscounted net cash flows of the related asset or asset
          grouping over the remaining life, it was determined that there was no
          impairment in the net book values of the ferry vessels and goodwill.


NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.  (Continued)

          (k)  Loss Per Common Share:

                    Loss per common share is based on the weighted average
          number of common shares outstanding including common shares issuable
          subject to certain convertible promissory note agreements and related
          extensions. Such common shares will be physically issued in the fourth
          quarter of 2001. In March 1997, the Financial Accounting Standards
          Board issued Statement No. 128 ("SFAS 128"), "Earnings Per Share,"
          which requires dual presentation of basic and diluted earnings per
          share on the face of the statements of operations, which the Company
          has adopted. Basic loss per share excludes dilution and is computed by
          dividing income available to common stockholders by the weighted-
          average common shares outstanding for the period. Diluted loss per
          share reflects the potential dilution that could occur if convertible
          debentures, options and warrants were to be exercised or converted or
          otherwise resulted in the issuance of common stock that then shared in
          the earnings of the entity.

                    Since the effect of outstanding options, warrants and
          convertible debenture conversions are antidilutive in all periods
          presented it has been excluded from the computation of loss per common
          share.

                                      -11-
<PAGE>

          (l)  Stock Based Compensation:

                    The Company accounts for employee stock options in
          accordance with Accounting Principles Board Opinion No. 25
          (APB25),"Accounting for stock issued to employees." Under APB 25, the
          Company recognizes no compensation expenses related to employee stock
          options, as no options are granted at price below the market price on
          the day of grant.

          (m)  Stock Issued to Non-employees for Services:

                    The Company accounts for stock issued to non-employees for
          services in accordance with Statement of Financial Accounting
          Standards (SFAS) No. 123. "Accounting for stock-based compensation".
          SFAS No. 123 requires that all transactions in which goods or services
          are the consideration received for the issuance of equity instruments
          shall be accounted for based on the fair value of the consideration
          received or the fair value of the equity instruments issued, which
          ever is more reliably measurable.

          (n)  New Accounting Pronouncements:

                    In June 2001, the Financial Accounting Standards Board
          issued Statement NO. 141, ACCOUNTING FOR BUSINESS COMBINATIONS, and
          Statement No. 142, GOODWILL AND OTHE INTANGIBLE ASSETS. These
          Statements modify accounting for business combinations after June 30,
          2001 and will affect the Company's treatment of goodwill at the start
          of fiscal year 2002. SFAS 142 requires that goodwill existing at the
          date of adoption be reviewed for possible impairment and the
          impairment tests be periodically repeated, with impaired assets
          written-down to fair value. Additionally, existing goodwill must be
          assessed and classified consistent with the Statements' criteria.
          Amortization of goodwill will cease on January 1, 2002. At this time,
          the Company has not determined the complete impact of these
          Statements. However, for the nine months ended September 30, 2001, the
          Company has recognized $60,708 of goodwill amortization.

                                      -12-
<PAGE>

NOTE 3 -  DISCONTINUED OPERATIONS.

               The net assets of discontinued operations, which have been
          segregated in the accompanying balance sheet, are summarized as
          follows:

                                                                September 30,
                                                                    2001
                                                                  --------
               Assets:
                 Inventory                                        $  2,000
                 Property assets, net (See Note 4)                 931,181
                                                                  --------
                                                                   933,181
               Liabilities:
                 Accounts payable                                   29,719
                 Secured mortgage payable                           14,472
                 Accrued real estate taxes                         326,499
                                                                  --------
                                                                   370,690

               Net assets of discontinued operations              $562,491
                                                                  ========



               Real estate taxes liens have been recorded by local governmental
          authorities because of non-payment of said property taxes arising from
          a dispute over property tax valuations. The Company is currently
          attempting to resolve the dispute.


NOTE 4 -  PROPERTY AND EQUIPMENT.

               Property and equipment is summarized as follow:

                                                                 September 30,
                                                                     2001
                                                                 ------------
               Continuing operations:
                 Ferry vessels                                    $13,300,000
                 Vessel equipment                                     258,030
                 Other                                                 70,802
                                                                  -----------
                                                                   13,628,832
                 Less:  Accumulated depreciation                    2,799,911
                                                                  -----------

                                                                  $10,828,921

               Discontinued operations:
                 Land and buildings                               $   931,181
                 Less:  Accumulated depreciation                            -
                                                                  -----------

                                                                  $   931,181
                                                                  ===========

                                      -13-
<PAGE>

NOTE  5 - CONVERTIBLE PROMISSORY NOTES.

                    During the months of January through September 30, 2001, the
          Company received proceeds from four senior convertible notes
          aggregating $1,300,000. These loans bear interest at 10% per annum
          payable quarterly, are payable four months from issuance. To obtain
          the loans, the Company issued to the loan holders 725,000 shares of
          restricted common stock of the Company with registration and unlimited
          piggyback rights. The fair value of the shares at issuance aggregating
          $1,095,250 will be charged to operations as additional interest over
          the life of the notes. The Company employed the services of two
          financial consultants to arrange two of these loans for which the
          consultants received payment of in the form of cash and a convertible
          promissory note aggregating $97,500.

                    The four senior convertible notes above may be repaid
          anytime within three months of issuance. However, the loans must be
          repaid out of the proceeds of a financing greater than $3,000,000.
          Initially, the notes are convertible into the Company's common stock
          at $1.50 per share.

                    During the months January through September 30, 2001 the
          company received proceeds from seven convertible promissory notes,
          (four for $5,000, two for $20,000, one for $25,000), totaling $85,000.
          Each convertible promissory note carries a simple interest rate of
          10.5%. Interest only is payable quarterly, and the notes mature one-
          year from date of issuance. In addition, the convertible promissory
          note holders were issued an aggregate of 5,000 shares of the company's
          common stock. These shares of stock are restricted securities. The
          fair market value of the common shares on the dates of issuance
          aggregated $6,390 and will be charged to operations as additional
          interest over the life of the notes.

                    During the months January through September 30,2001, holders
          of thirteen convertible promissory notes agreed to extend the maturity
          dates for an additional twelve months. The total value of notes
          extended is $245,000. Additionally, in consideration of the note
          extensions the Company issued a total of 5,875 shares of the Company's
          common stock having a market value of $8,825.

                    During the months January through September 30, 2001,
          holders of five convertible promissory notes elected to exercise the
          conversion rights of $140,000 of indebtedness into 175,000 shares of
          the Company's common stock, which contains a Rule 144 restriction.

                    The lenders have the right, at their sole and exclusive
          option, to convert the outstanding indebtedness to common shares (the
          Conversion Rights) of the company at any time prior to borrower making
          payment. Should such Conversion Rights be exercised, the Company shall
          issue such shares to the Lender at the rate of one share of common
          stock for each two ($2.00) dollars of the indebtedness then due and
          owing on all convertible promissory notes and at the rate of one share
          of common stock for each one dollar and fifty cents ($1.50) of the
          indebtedness then due and owing on all senior convertible promissory
          notes. As a result of the modification of certain senior convertible
          promissory notes, should such Conversion Rights be exercised, the
          Company shall issue such shares to the Lender at the rate of one share
          of common stock for each one dollar ($1.00) of the indebtedness due
          and outstanding. The shares issued by the company through the exercise
          of the Conversion Rights will be restricted securities. The option and
          conversion as provided herein shall be exercised by each lender
          issuing written notice to the borrower.

                                      -14-
<PAGE>

NOTE  5 - CONVERTIBLE PROMISSORY NOTES.  (Continued)

                    On February 26, 2001, the Company received from a
          stockholder proceeds of a loan aggregating $30,000. The loan bears
          interest at 14% per annum. The loan is secured by a secondary mortgage
          on real estate known as 52 Shrewsbury. The note was due on April 26,
          2001, but was extended to August 26, 2001. Subsequently, in July,
          2001, the Company paid the convertible promissory note in full,
          thereby releasing the $15,000 of mortgage held on the Company's
          property at 52 Shrewsbury Avenue, Highlands, N.J.

                    During the months of October through December 2000, the
          Company received proceeds from three senior convertible promissory
          notes, (one for $55,000, one for $200,000, and one for $300,000),
          totaling $555,000. Each senior convertible promissory note carries a
          simple interest rate of 10%. Principal and interest is payable at
          maturity, originally, three months from date of issuance. On December
          10, 2000, at the request of the Company, the above note holders agreed
          to modify the Notes so that the due date will be extended from
          December 10, 2000 to June 30, 2001. On June 30, 2001, at the request
          of the Company, the above note holders agreed to further modify the
          Notes so that the due date will be extended from June 30, 2001 to
          October 31, 2001. The company issued a total of 138,750 shares of its
          common stock to the note holders at the date of issuance.
          Additionally, the Company issued a total of 250,000 shares of its
          common stock to the note holders at the date of initial modification
          and a total of 250,000 shares at the date of secondary modification.
          These shares of stock are restricted securities. The fair value of the
          common shares on the dates of issuance aggregated $898,438 and will be
          charged to operations as additional interest over the life of the
          notes.

                    The lenders have the right, at their sole and exclusive
          option, to convert the outstanding indebtedness to common shares (the
          "Conversion Rights") of the company at any time prior to borrower
          making payment. Should such "Conversion Rights" be exercised, the
          Company shall issue such shares to the Lender at the rate of one share
          of common stock for each two ($2.00) dollars of the indebtedness then
          due and owing on all convertible promissory notes and at the rate of
          one share of common stock for each one dollar and fifty cents ($1.50)
          of the indebtedness then due and owing on all senior convertible
          promissory notes. As a result of the modification of certain senior
          convertible promissory notes, should such Conversion Rights be
          exercised, the Company shall issue such shares to the Lender at the
          rate of one share of common stock for each seventy-five cents ($.75)
          of the Indebtedness due and outstanding. The shares issued by the
          company through the exercise of the "Conversion Rights" will be
          restricted securities. The option and conversion as provided herein
          shall be exercised by each lender issuing written notice to the
          borrower.

                                      -15-
<PAGE>

NOTE  5 - CONVERTIBLE PROMISSORY NOTES.  (Continued)

                    The Company employed the services of a financial consultant
          to arrange for four convertible promissory loans, one dated July 10,
          and three dated July 14, 2000. The consultant received as payment for
          this service (i) a 10% interest bearing note payable on January 14,
          2001 in the amount of $88,000 (ii) 22,000 shares of the Company's
          restricted common stock, with a fair market value at date of issuance
          of $44,000, and (iii) the same default remedies as the bridge loan
          holders and (iv) warrants to acquire 5,000 common shares at $2.00 per
          share. On December 10, 2000, at the request of the Company, the above
          consultant agreed to modify the note so that the due date will be
          extended from January 14, 2001 to June 30, 2001. On June 30, 2001, at
          the request of the Company, the above note holder agreed to further
          modify the Note so that the due date will be extended from June 30,
          2001 to October 31, 2001. The consultant also received per the terms
          of the note modifications, 253,000 shares of the Company's restricted
          common stock, with a fair market value at date of issuance totaling
          $366,850.

                    On July 10, 2000, the Company received proceeds of one of
          these convertible notes aggregating $500,000. The loan, which bears
          interest at 10% per annum payable quarterly, is payable six months
          from issuance. To obtain the loan, the Company issued to the loan
          holder 125,000 shares of restricted common stock of the Company with
          registration and unlimited piggyback rights. The fair value of the
          shares at issuance aggregating $250,000 will be charged to operations
          as additional interest over the life of the notes. On December 10,
          2000, at the request of the Company, the above note holder agreed to
          modify the notes so that the due date will be extended from December
          10, 2000 to June 30, 2001. On June 30, 2001, at the request of the
          Company, the above note holder agreed to further modify the Note so
          that the due date will be extended from June 30, 2001 to October 31,
          2001. Additionally, the note holder received per the terms of the note
          modifications, 500,000 shares of the Company's restricted common
          stock, with a fair market value at date of issuance of $725,000.

                    On July 14, 2000, the Company received proceeds from three
          of these convertible notes aggregating $300,000. Additionally, the
          Company issued another $200,000 convertible promissory note to a
          stockholder in exchange for a $200,000 second mortgage on real
          property of the Company's discontinued operations. The notes, which
          bear interest at 10% per annum payable quarterly, were originally
          payable six months from issuance. On December 10, 2000, at the request
          of the Company, the above note holders agreed to modify the notes so
          that the due date will be extended from December 14, 2000 to June 30,
          2001. On June 30, 2001, at the request of the Company, the above note
          holders agreed to further modify the Notes so that the due date will
          be extended from June 30, 2001 to October 31, 2001. To obtain the
          notes, the Company issued a total of 125,000 shares of the Company's
          unregistered common stock with registration and unlimited piggyback
          rights. The fair value of the shares at issuance aggregating $250,000
          will be charged to operations as additional interest over the life of
          the notes. Additionally, the note holders received, per the terms of
          the note modifications, 500,000 shares of the Company's restricted
          common stock, with a fair market value at date of issuance of
          $725,000.

                                      -16-
<PAGE>

NOTE  5 - CONVERTIBLE PROMISSORY NOTES.  (Continued)

                    The four convertible notes above may be repaid anytime
          within three months of issuance. However, the loans must be repaid out
          of the proceeds of a financing greater than $3,000,000. Initially, the
          notes are convertible into the Company's common stock at $1.50 per
          share. As a result of the note modifications, the notes are
          convertible into the Company's common stock at the rate of $.75 per
          share.

                    On March 11, 2000, the Company received proceeds of two
          convertible promissory notes aggregating $1,000,000. The notes, which
          bear interest at 10% per annum payable quarterly, were originally
          payable nine months from issuance. On December 10, 2000, at the
          request of the Company, the above note holders agreed to modify the
          notes so that the due date will be extended from December 11, 2000 to
          June 30, 2001. On June 30, 2001, at the request of the Company, the
          above note holders agreed to further modify the Notes so that the due
          date will be extended from June 30, 2001 to October 31, 2001. To
          obtain the notes, the Company issued to each note holder 125,000
          shares of restricted common stock with registration and unlimited
          piggyback rights with a fair value at date of issuance of $125,000.
          Additionally, the note holders received, per the terms of the note
          modification, 1,000,000 shares of the Company's restricted common
          stock, with a fair market value at date of issuance of $1,450,000. The
          fair value of the shares will be charged to operations as additional
          interest over the life of the loans.

                    The notes may be repaid anytime within nine months of
          issuance; however, the notes must be repaid from the proceeds of a
          financing greater than $2,000,000. Initially the notes are convertible
          into common stock at $1.50 per share. As a result of the note
          modification, the notes are convertible into the Company's common
          stock at the rate of seventy-five cents ($.75) per share.

                    The Company employed the services of a financial consultant
          to arrange for the two March, 2000 convertible notes. The consultant
          received as partial payment for this service a 10% interest bearing
          note payable on December 10, 2000 in the amount of $110,000. On
          December 10, 2000, at the request of the Company, the above consultant
          agreed to modify the note so that the due date will be extended from
          December 10, 2000 to June 30, 2001. On June 30, 2001, at the request
          of the Company, the above note holder agreed to further modify the
          Note so that the due date will be extended from June 30, 2001 to
          October 31, 2001. The outstanding balance including accrued interest
          as of September 30, 2001 is $118,861. The consultant also has agreed
          to perform consulting services for the Company and will receive
          payment for his services in the form of warrants to acquire 50,000
          common shares at $2.00 per share for each three month period his
          services are required. The consultant was issued warrants to acquire
          50,000 common shares at $2.00 per share in 2001.

                                      -17-
<PAGE>

NOTE 6 -  LONG-TERM DEBT.

           Long-term debt is as follows:

<TABLE>
<CAPTION>
                                                                                              September 30,
                                                                                                  2001
                                                                                              -------------
<S>                                                                                    <C>    <C>
          Mortgage note payable, secured by the vessel "Finest" due in monthly
            install-ments of $56,719 through September 10, 2005, including
            interest at 9.25% per annum, with a final payment of $3,626,691 due
            October 10, 2005.                                                           (a)    $  4,823,974

          Mortgage note payable, secured by the vessel "Bravest" due in monthly
            installments of $56,719 through September 10, 2005, including
            interest at 9.25% per annum, with a final payment of $3,572,971 due
            October 10, 2005.                                                           (a)       4,806,913

          Note payable, secured by the vessel "Finest" and "Bravest", payable in
            fifteen monthly installments of $15,000 commencing in February 1999,
            payment of $343,333 on March 31, 2000 and a final payment of
            $919,319 on December 10, 2000 including imputed interest of 9.25%.         (a)(b)       919,319

          10% interest bearing obligation payable
            on July 13, 2001.                                                                        60,000
                                                                                               ------------
                                                                                                 10,610,206
          Portion due within one year                                                             1,536,452
                                                                                               ------------

          Long-term debt - less current maturities                                             $  9,073,754
                                                                                               ============
</TABLE>

          (a)  The two first mortgages on the ships and note payable are secured
               through (i) cross collateralization agreements; (ii) assignments
               of charter agreements and other personal property, (iii) a pledge
               of a potential receivable arising from a lawsuit against the City
               of New York and (iv) cross corporate guarantees.

          (b)  The Company is in default of this note and is in negotiations
               with the lender to restructure the debt. The secured debt
               obligations mature as follows:

                       Years Ending
                       September 30,
                       -------------
                           2001                 $ 1,406,127
                           2002                     546,555
                           2003                     557,146
                           2004                     610,924
                           2005                   7,489,454
                                                -----------

                                                $10,610,206
                                                ===========

                                      -18-
<PAGE>

NOTE  7 - CAPITAL STOCK.

          (a)  Stock Issued for Consideration Other Than Cash:

                    During the first quarter of 2001, the Company issued 199,550
          shares having a fair market value on the date of issuance of $261,811.
          Of the 199,500 shares, 179,550 shares were issued as additional
          interest, whose fair market value of $232,211 is being charged to
          operations over the life of the convertible promissory notes issued
          during the quarter. The remaining 20,000 shares were issued in payment
          for $29,600 of consulting services, which was charged to operations.

                    During the second quarter of 2001, the Company issued
          2,151,755 shares having a fair market value on the date of issuance of
          $3,459,995 as additional interest which is being charged to operations
          over the life of the promissory notes.

                    Additionally, 100,000 shares were issued to a note holder
          who elected to convert $80,000 of his convertible promissory notes.

                    The Company's vice-president was issued 6,602 common shares
          as payment for $6,667 of accrued wages owed to him.

                    The Company acquired an additional 3% of its majority owned
          subsidiary, FHCC, for cash of $4,140 and 16,363 shares of its common
          stock whose fair value was $20,454.

                    During the third quarter of 2001, the Company issued a total
          of 71,625 shares of its common stock with a fair market value on the
          date of issuance of $106,342. Of the 71,625 shares, 54,125 were issued
          as additional interest that is being charged to operations over the
          life of the promissory notes. Of the remainder, 10,000 shares were
          issued as payment for $13,500 of consulting services and 7,500 shares
          were issued in lieu of interest payments in the amount of $9,600, both
          of which were charged to operations.

                    Additionally, the Company issued 75,000 shares of common
          stock to a note holder who elected to convert promissory notes in the
          amount of $60,000.

                    The Company issued 4,000 shares of common stock to a vice-
          president as payment for $5,000 of accrued wages owed to him.

          (b)  Common Stock Issued for Cash:

                    During the first quarter of 2001, the Company sold 156,500
          shares of its common stock for $159,500 in cash.

                    During the second quarter of 2001, the Company sold 72,795
          shares of its common stock for $60,000 in cash.

                    During the third quarter of 2001, the Company sold 25,000
          shares of its common stock for $23,000 in cash.

                                      -19-
<PAGE>

NOTE 8 - STOCK OPTIONS AND WARRANTS.

              A summary of activity related to non-qualifying stock options and
         warrants granted by the Company is as follows:

                                                                  Exercise Price
                                           Options     Warrants      Per Share
                                          ---------   ---------   --------------

      Outstanding at January 1, 2001        620,000   2,736,167   $ .50 to $2.60
      Granted during 2001                   400,000     626,795   $1.00 to $2.20
                                          ---------   ---------
      Outstanding at September 30, 2001   1,020,000   3,362,962   $ .50 to $2.60
                                          =========   =========


         (a)  Stock Options:

              (i)   Stock Options Granted in 2001:

               The company has entered into new employment agreements with its
         Chief Executive Officer and its V.P., Secretary in May 2001. These
         officers received, as consideration for entering into the contracts,
         options to purchase an aggregate of 400,000 common shares at $1.10 per
         share, which was 110% of the fair value at date of grant. The contracts
         also provide that each officer is to receive additional annual grants
         of a minimum of 150,000 common shares on each June 30 through 2005 at
         the fair value on the date of grant.


         (b)  Warrants:

               As an inducement to purchase shares of the Company's common
         stock, warrants to purchase 254,295 shares were granted to individuals
         who purchased stock in 2001. The warrants are exercisable at various
         times through January 1, 2004 at prices ranging from $1.00 to $1.75.

               In addition, a financial consultant was issued warrants to
         acquire 100,000 common shares for services at $2.00 per share. The fair
         value of the warrants of $10,000 was charged to operations.


NOTE 9 - COMMITMENTS AND CONTINGENCIES.

         (a)  Leases:

          (i)   The Company's corporate offices are leased under a sublease
                agreement with Anthony Colasanti, a director of the Company, at
                a cost of $2,750 per month.

          (ii)  The NYFF Group operates from leased property in Highlands, NJ
                (the Aragon site). The lease is for five years and commenced May
                1998. Lease payments are calculated based on daily passenger
                volume from the leased property, and averaged approximately
                $35,600 per month during 2000. As the passenger volume departing
                the Aragon site increases, the lease payments will increase
                proportionately. In addition, the NYFF Group rents other
                facilities on short-term leases. Rents under the short-term
                leases aggregate approximately $2,500 per month.

                                      -20-
<PAGE>

          (iii) On December 15, 2000 the Company executed a Parking License
                Agreement, Docking Permit and Lease of Dock and Office Space
                (the Clam Hut Lease) for the Clam Hut site. Pursuant to the
                terms of the Clam Hut Lease, the Company has the right to use
                125 of the parking spaces at the Clam Hut site from Monday to
                Friday until December 31, 2001 for a fee of $1,250 per week plus
                5% of gross revenues of all excursions/charters originating
                and/or terminating at the landlord's pier. The Clam Hut Lease is
                renewable at the end of each period with terms to be decided at
                renewal and in keeping with the requirements of the
                municipality. In addition, pursuant to the terms of the Clam Hut
                Lease, the Company has the right to use the pier and to use the
                outbuilding at the foot of the pier as a ticket booth for a
                total of $400 per month. The terms of use for the pier and
                outbuilding are coincident with the terms of the parking space
                license. The Company began ferry service from the site on
                December 11, 2000.

          (iv)  In November 1999 the Company (tenant) concluded negotiations and
                executed a Lease for an approximate 4-acre waterfront parcel in
                Stamford, Connecticut. The parcel was to be used as the
                Company's Stamford ferry site and included approximately 450
                onsite parking spaces. In August 2000 a dispute arose between
                the Company and the Landlord relating to the issuance of various
                governmental permits and approvals required to operate a
                commuter ferry service from the site. Landlord took the position
                that the absence of the permits and approvals afforded Landlord
                the opportunity to cancel the lease. The Company argued that
                Landlord did not have the right to cancel the Lease and that the
                necessary permits and approvals from the various governmental
                agencies would be forthcoming.

                                      -21-
<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES.  (Continued)

         (a)  Leases:  (Continued)

          (v)   The Company filed an action to reaffirm the lease and to regain
                use, possession and occupancy of the premises. The Landlord
                filed an action for possession of the premises. In January 2001
                the dispute as between Landlord and the Company was resolved and
                a new Lease was negotiated between the parties, which provided
                the company with a five-year lease and three (3) five-year
                options to renew. In order for the Lease to take effect,
                however, both Landlord and the Company needed the consent of
                Landlord's contract purchaser of the parcel. It appeared in
                March 2001 that all of the parties had achieved resolution of
                this matter and that the Company would renew its permit
                applications and commence commuter ferry operation immediately
                upon the issuance of required permits. Before the agreement
                could be reduced to writing a misunderstanding arose between the
                contract purchaser and the Company, which prevented consummation
                of the tri parte settlement. Continued negotiations with the
                contract purchaser proved fruitless and the Company pursued its
                legal remedies against the Landlord. The complaints as between
                Landlord and the Company are presently being heard before the
                Connecticut Superior Court.
          (vi)  On June 12, 2001 the Company entered into an agreement with the
                Perth Amboy Redevelopment Agency to develop a fast ferry service
                to be operated from an approximately 5 acre site on the
                riverfront in Perth Amboy. The agreement includes the exclusive
                rights to operate a fast ferry service from Perth Amboy and an
                eight-year lease with renewal options for three additional
                consecutive terms of 5 years and a final term of a two-year
                period. At the end of the lease the Company has the option to
                purchase the leased property for $1,000,000.


         (b)  Employment Contracts:

                The Company in first quarter 2000 entered into three-year
         employment agreements with its Chief Executive Officer, Anthony F.
         Cappaze ("Cappaze"), and with its Vice President /Secretary / General
         Counsel, Anthony T. Colasanti ("Colasanti"). Cappaze's agreement
         provides for a base salary of $150,000, and warrants to purchase a
         total of 300,000 shares of common stock at $1.00 per share vesting as
         follows. Warrants to purchase 100,000 shares of common stock vest
         immediately and are exercisable through January 2003. Warrants to
         purchase 100,000 shares vest upon each of the second and third
         anniversary dates of the agreement and are exercisable from each
         vesting date through January 2007. Colasanti's agreement provides for a
         base salary of $120,000 and warrants to purchase a total of 250,000
         shares of common stock at a price of $1.00 per share. Warrants to
         purchase 50,000 shares vest immediately and are exercisable through
         January 2003. Warrants to purchase 100,000 shares vest upon each of the
         second and third anniversary dates of the agreement and are exercisable
         from each vesting date through January 2007.

                                      -22-
<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES.  (Continued)

         (b)  Employment Contracts:  (Continued)

                In May 2001 the Board of Directors of the Company reviewed the
         Employment Agreements of Mssrs. Colasanti and Cappaze and their job
         performance. The Board concluded, that as the result of efforts of
         Cappaze and Colasanti, the Company was achieving its growth objectives
         and had raised substantial capital and was poised to significantly
         expand service for calendar year 2001. The Board also found that both
         Cappaze and Colasanti often had foregone receipt of their base salary
         for up to two months at a time to afford the Company the opportunity to
         utilize its limited cash resources for operations and expansion. The
         Board also found that Cappaze and Colasanti personally guaranteed debt
         obligations of the Company totaling approximately $200,000. On the
         resolution of an independent Board member, with Cappaze and Colasanti
         abstaining, the Board agreed to enter into new contracts with both
         Cappaze and Colasanti. Said Contract runs from July 1, 2001 for a four-
         year period through June 30, 2005. All of the options and warrants
         provided under the previous contract were immediately vested to Cappaze
         and Colasanti, respectively, and the new contracts provide that on each
         anniversary date of the contract Cappaze and Colasanti receive a
         minimum of 150,000 cashless warrants. The new contract is to provide
         flexibility to both the Company and Cappaze and Colasanti, so as to
         minimize tax implication to Cappaze and Colasanti while at the same
         time minimizing charges to the Company's income statement. It further
         provides that effective July 1, 2001 Colasanti's base salary increases
         to $140,000.

                In May 2001, the Board of Directors of the Company also reviewed
         the performance of John Koenig in connection with his employment
         agreement dated 1998. The Board concluded that as a result of Koenig's
         efforts, New York Fast Ferry ridership continued to increase and his
         efforts were instrumental in implementing ferry service in Keyport. The
         Board awarded Koenig three-year warrants to purchase 75,000 shares at
         an exercise price of $1.00 per share.

         (c)  Litigation:

                On November 25, 1997 New York Fast Ferry Services, Inc. ("NY
         Fast Ferry") filed suit, in the Supreme Court of the State and County
         of New York, against the City of New York (the "City") alleging, among
         other things, breach of agreement by the City for a lease of a ferry
         franchise agreement (the "Agreement").

                In September 1993, based on NY Fast Ferry's response to the
         City's Request for Proposal ("RFP"), NY Fast Ferry was awarded the
         ferry route contemplated in the RFP. As part of the RFP process, the
         City solicited NY Fast Ferry to spend approximately $12,000,000 to
         build two ferries to serve the route. The City provided data to NY Fast
         Ferry related to the economic viability of the service. Continuation of
         the fundamental premises in the data was necessary for the service to
         be economical for NY Fast Ferry. The Agreement between NY Fast Ferry
         and the City stated that the City intended to construct landing and
         terminal facilities at one end of the route, and to make improvements
         to the terminals at the other end of the route. The City also agreed to
         use its "best efforts" to provide connecting transit links to one of
         the terminals on the route.

                                      -23-
<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES.  (Continued)

         (c)  Litigation:  (Continued)

                NY Fast Ferry claims that the City, for the most part, has not
         made the improvements on the terminals. NY Fast Ferry also claims that
         the City has breached its duty under the Agreement to act in good
         faith, and instead, has acted in a manner to undermine or destroy NY
         Fast Ferry's business. NY Fast Ferry is seeking $4,000,000 in
         compensatory damages or, alternatively, rescission of the Agreement.
         The proceeds, if any, of the suit are pledged 50% to the original
         shareholders of NY Fast Ferry and 50% to debis Financial Services, Inc.
         as a pledge of collateral against amounts owing to them pursuant to a
         note payable.

                On June 30, 2000, D. Weckstein & Co., Inc. ("Weckstein") filed
         suit against the Company in the Supreme Court of the State of New York.
         The Complaint alleges that the Company owes Weckstein $360,000 for
         services rendered by Weckstein in connection with the Company's
         purchase of The Cigar Box, pursuant to a letter agreement between
         Weckstein and the Company. In the alternative, if the Court finds that
         Weckstein is not entitled to damages for breach of the letter
         agreement, Weckstein seeks an award in quantum meruit for services
         rendered. Weckstein also seeks an award of its costs and disbursements.

                On July 28, 2000, the Company filed an answer, denying that the
         Company owes Weckstein damages for breach of contract or in quantum
         meruit; raising several defenses, including that Weckstein failed to
         perform its obligations under the letter agreement; and seeking
         dismissal of the Complaint and an award of the Company's attorney's
         fees, costs and further relief that the Court deems just and equitable.
         On July 28, 2000, the Company filed a Notice of Removal, and the case
         has been removed from the Supreme Court of the State of New York to the
         United States District Court for the Southern District of New York,
         based on the diversity jurisdiction of the Federal Court. Counsel for
         Weckstein has indicated a desire to end the litigation prior to trial
         by way of a negotiated settlement. No settlement proposals have been
         exchanged as of November 12, 2001. Management is of the opinion that
         the plaintiff's case is without merit. The company will not settle this
         action prior to trial unless the settlement amount is insignificant.

                On August 3, 2000, the Company received a notice from a
         subsidiary of The Connecticut Light & Power Co. (the "Landlord"),
         terminating its lease for the property that is the proposed site for
         the Company's Stamford, Connecticut ferry terminal. The Landlord based
         the termination of the lease on the failure of the Company (tenant) to
         get certain necessary permits for its use of the site. The Company
         disputes the Landlord's right to terminate the lease. In November 1999
         the Company concluded negotiations and executed a lease for an
         approximate 4-acre waterfront parcel in Stamford, Connecticut. The
         parcel was to be used as the Company's Stamford ferry site and included
         approximately 450 onsite parking spaces. In August 2000 the dispute
         arose between the Company and the Landlord relating to the issuance of
         various governmental permits and approvals required to operate a
         commuter ferry service from the site. Landlord took the position that
         the absence of the permits and approvals afforded the Landlord the
         opportunity to cancel the lease. The Company argued that Landlord did
         not have the right to cancel the lease and that the necessary permits
         and approvals from the various governmental agencies would be
         forthcoming.

                                      -24-
<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES.  (Continued)

         (c)  Litigation:  (Continued)

                The Company filed an action to reaffirm the lease and to regain
         use, possession and occupancy of the premises. The Landlord filed an
         action for possession of the premises. In approximately January 2001
         the dispute as between the Landlord and the Company was resolved and a
         new lease was negotiated between the parties, which provided for a
         five-year lease and three (3) five-year renewal options. In order for
         the lease to take effect, however, both the Landlord and the Company
         needed the consent of Landlord's contract purchaser of the parcel. It
         appeared in approximately March 2001 that all of the parties had
         achieved resolution of this matter and that the Company would renew its
         permit applications and commence commuter ferry operation immediately
         upon issuance of the required permits. Before the agreement could be
         reduced to writing a misunderstanding arose between the contract
         purchaser and the company, which prevented consummation of the tri
         parte settlement.

                Continued negotiations with the contract purchaser proved
         fruitless and the Company pursued its legal remedies against the
         Landlord. The complaints as between the Landlord and the Company are
         presently being heard before the Connecticut Superior Court.


NOTE 10 - SUBSEQUENT EVENTS.

                In October 2001, the Company received proceeds totaling $55,000
         five convertible promissory notes. Each convertible promissory note
         carries a simple interest rate of 10.5 % per annum. Interest is payable
         quarterly, and the note matures one year from date of issuance.
         Additionally, the Company issued to the note holders an aggregate of
         2,625 shares of its common stock having a fair market value of $4,560.

                Also in October 2001 the Company issued a $350,000 mortgage note
         secured by an interest in the Company's ferry vessels. The note matures
         six months from date of issuance and carries an annual interest rate of
         18 %. In lieu of a commitment fee, the Company issued to the note
         holder warrants to purchase 150,000 shares of its common stock with an
         exercise price of $1.50 per share and exercisable for a five-year
         period expiring on October 1, 2007. Principal and interest payments are
         payable monthly.

                In October and November, 2001 holders of two maturing
         convertible promissory notes totaling $25,000 extended the note's
         maturity dates for 12 months. In consideration of the note extensions,
         the note holders received a total of 625 shares of the Company's common
         stock having a fair market value of $1,000.

                Also in October 2001 the holders of maturing senior convertible
         promissory notes totaling $4,323,000 agreed to extend the maturity
         dates of such notes to February 28, 2002. In consideration for such
         extensions, the Company issued lenders a total of 2,136,500 shares of
         it common stock, the total number of shares based on one share for each
         $2.00 of outstanding loan balances. In connection with these
         extensions, the Company agreed to pay to a financial consultant a fee
         in the amount $100,000 in

                                      -25-
<PAGE>

         the form of a senior promissory note under the same terms and 50,000
         shares of its common stock having a fair market value of $62,500, which
         will be charged to operations as additional financing costs over the
         life of the note.

                In October 2001 the Company sold 30,000 share of its common
         stock for $24,000 in cash.

                Effective October 1, 2001 the Company entered into a two-year
         employment agreement with an individual to serve in the capacity of
         Chief Financial Officer. The agreement provides for an annual base
         salary of $125,000 and the issuance of three cashless warrants to
         purchase a total of 175,000 shares of the Company's common stock at an
         exercise price of $1.00 per share exercisable within a three-year
         period from the vesting date. The first stock warrant to purchase
         50,000 shares vests upon commencement of employment; the second warrant
         to purchase 50,000 shares vests on the one-year anniversary of
         employment, October 1, 2002; and the third warrant to purchase 75,000
         shares vests on the second anniversary of employment, October 1, 2003.

                                      -26-
<PAGE>

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

OVERVIEW - Lighthouse Fast Ferry Inc. (the "Company"), is a New Jersey
--------
corporation formed on May 12, 1993 under the name Drydock Cafe, Inc. On
September 21, 1994, the Company changed its name to Lighthouse Landings, Inc. On
September 19, 2000, the Company changed its name to Lighthouse Fast Ferry, Inc.
The Company, through its subsidiary New York Fast Ferry Holding Corp. ("NYFF"),
is an operator of high speed, commuter passenger ferry vessels in the New York
City metropolitan region.

     The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and the Notes to those statements, which are
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information, along with
other information included in this Form 10-QSB.

     Comparisons of the three and nine months ended September 30, 2001 compared
with the three and nine months ended September 30, 2000 are as follows:

REVENUES - The Company's consolidated revenues from operations decreased by
--------
15.2% to $1,116,829 for the three months ended September 30, 2001 compared to
$1,316,469 for the three months ended September 30,2000. For the nine months
ended September 30, 2001, consolidated revenues increased by about two-tenths of
1% to $2,966,377 compared to $2,959,440 for the comparable period in 2000. The
overall increase net of decreases are explained as follows:

     PASSENGERS TICKET SALES - Passenger ticket revenues declined by 3.5% to
$932,262 for the three months ended September 30, 2001 compared to $965,728 for
the three months ended September 30,2000. Ridership declined for the same three-
month period year on year by 9.5% or 7,592 passenger trips. The decrease in
revenue is attributable in part to ticket sales price mix. In September 2001 the
Company began offering 120-trip tickets, which carry a lower average daily price
than other ticket options. Moreover, due to the attack on the World Trade Center
on September 11, 2001, the New York harbor was closed for two full days and only
limited access was permitted on two other days, which had an adverse impact on
both ridership and revenues in the current period under review. The temporary
closing of businesses near the World Trade Center also adversely impacted the
number of commuters traveling to the Wall Street area.

     For the nine months ended September 30, 2001, earned passenger revenues
increased by 3.8% to $2,574,707 compared to $2,479,509 for the comparable period
in 2000. The year to year increase for the nine-month period is attributable to
a 5.2% increase in passenger ridership.

     GALLEY SALES - Galley sales increased by 23.6% to $76,874 for the three
months ended September 30, 2001 compared to $62,198 for the three months ended
September 30,2000. For the nine months ended September 30, 2001, galley sales
increased by 4.4% to $170,599 compared to $163,334 for the comparable period in
2000. The increase

                                      27
<PAGE>

in sales is attributable to the increase in ridership and the ability of the
Company to offer alcoholic beverages on the boats during the current three-month
period.

CHARTER SALES - Charter sales decreased by 63.1% to $106,616 for the three
months ended September 30, 2001 compared to $288,543 for the three months ended
September 30,2000. For the nine months ended September 30, 2001, charter sales
decreased by 31% to $214,613 compared to $310,930 for the comparable period in
2000.  In the three-month period ended September 30, 2000, the Company ran
additional excursions in connection with OpSail 2000 that took place in New York
harbor around the July 4th holiday.  The decrease in the current period is
primarily attributable to the reduction in excursions for July 4th activities in
2001. The Company continues to aggressively expand this line of its business
model.

COST OF SERVICES - Cost of services increased by 3.3% to $1,074,894 for the
----------------
three months ended September 30, 2001 compared to $1,040,348 for the three
months ended September 30,2000. For the nine months ended September 30, 2001,
cost of services increased by 5.7% to $2,977,636 compared to $2,817,588 for the
comparable period in 2000. The overall changes are detailed follows:

     SALARY and RELATED BENEFITS - Salary and related benefits increased by
28.3% to $254,518 for the three months ended September 30, 2001 compared to
$198,430 for the same period ended September 30,2000. For the nine months ended
September 30, 2001, salary and related benefits increased by 30.8% to $659,155
compared to $503,836 for the comparable period in 2000. During this period in
2001, the Company began operating a full schedule from its second site in
Highlands, NJ and increased its charter trips. This increase in regular and
charter services necessitated overtime and the addition of more crew members
required to operate the ferries. Further, certain salary increases were granted
in this period.

     FUEL and OIL RELATED COSTS - Fuel and oil related costs decreased by 13.4%
to $169,869 for the three months ended September 30, 2001 compared to $196,135
for the three months ended September 30,2000. The year-on-year decrease in the
three months under review is attributable to a decline in the cost of fuel. For
the nine months ended September 30, 2001, fuel and oil related costs increased
by 4.1% to $508,409 compared to $488,506 for the comparable period in 2000. The
increase is attributable to an increase in the cost of fuel, and increase in
charter activities.

     BOAT MAINTENANCE and RELATED SUPPLIES - Boat maintenance and related supply
costs decreased 26.1% to $82,981 for the three months ended September 30, 2001
as compared to $112,292 for the same period in 2000. For the nine months ended
September 30, 2001, boat maintenance and related supply costs increased by 5.9%
to $378,556 compared to $357,580 for the comparable period in 2000. The year to
year increase in cost in 2001 for the nine-month period being reported is
attributable primarily to the maintenance costs incurred in connection with the
steering control system of one of the vessels prior to the replacement of that
system.

     DOCKING and PARKING RELATED FEES - Docking and parking related fees
decreased by 18.3% to $125,978 for the three months ended September 30, 2001
compared to $154,285 for the three months ended

                                      28
<PAGE>

September 30, 2000. For the nine months ended September 30, 2001, docking
related fees decreased by 7.3% to $364,699 compared to $393,454 for the
comparable period in 2000. The decrease in docking and parking related fees, in
the third quarter of 2001 and the year-to-date decrease was the result of
switching passengers to a second location (Clam Hut) in Highlands, New Jersey.
This new location has a lower fixed parking cost than the Company's original
Oyster location. The costs at the original Oyster location are based on the
number of passengers, which has a higher parking fee calculation charged by the
owner of the parking facility in Highlands, New Jersey.

     INSURANCE - Insurance related costs increased by 108.5% to $41,946 for the
three months ended September 30, 2001 compared to $20,121 for the three months
ended September 30,2000. The increase is attributable to additional business
coverage that was acquired when the policies renewed in third quarter 2001.

     For the nine months ended September 30, 2001, insurance related costs
decreased by 10.4% to $104,360 compared to $116,418 for the comparable period in
2000. The decrease in insurance related costs is primarily the result of an
overall review of all insurance coverages in late 2000 resulting in a decrease
in business insurance premiums.

     GALLEY COST of GOODS SOLD - The galley cost of goods sold decreased by
20.3% to $40,469 for the three months ended September 30, 2001 compared to
$50,782 for the three months ended September 30,2000. For the nine months ended
September 30, 2001, galley cost of goods decreased by 9.5% to $106,231 compared
to $117,379 for the comparable period in 2000.

     OTHER DIRECT OPERATING COSTS - Other direct operating costs increased by
12.5% to $191,484 for the three months ended September 30, 2001 compared to
$170,195 for the three months ended September 30,2000. The increase is
attributable to an increase in passengers paying their tickets by credit cards.

     For the nine months ended September 30, 2001, other direct operating costs
decreased by 18.6% to $213,617 compared to $262,396 for the comparable period in
2000. The increase attributable to an increase in the credit card fees
associated with an increase in passengers paying their tickets by credit cards
is offset by a decrease in vessel charter expense and barge equipment rental.

     FERRY DEPRECIATION - Depreciation relating to the Company's ferries
     ------------------
increased by 8.8% to $234,396 for the three months ended September 30, 2001
compared to $215,511 for the three months ended September 30,2000. For the nine
months ended September 30, 2001, depreciation increased by 5.2% to $726,031
compared to $689,843 for the comparable period in 2000.


SELLING, GENERAL and ADMINISTRATIVE EXPENSES - The consolidated selling, general
--------------------------------------------
and administrative expenses increased by 46.6% to $699,918 for the three months
ended September 30, 2001 compared to $477,400 for the three months ended
September 30,2000. For the nine months ended September 30, 2001, selling,
general and administrative expenses increased by 39.6% to $1,762,512 compared to
$1,262,500 for the comparable period in 2000. The overall changes are detailed
as follows:

                                      29
<PAGE>

     FERRY ADMINISTRATION SALARY and RELATED BENEFITS - Salary and related
benefits for ferry administration increased by 7.6% to $93,810 for the three
months ended September 30, 2001 compared to $87,174 for the three months ended
September 30,2000. The increase for the three months under review is
attributable to salary increases and increased costs of health benefits.

     For the nine months ended September 30, 2001, salary and related benefits
for ferry administration decreased by 1.9% to $237,155 compared to $241,769 for
the comparable period in 2000. The overall year to date decrease is attributable
to realignment of administrative staffing levels resulting in an overall salary
decrease.

     CORPORATE ADMINISTRATION SALARY and RELATED BENEFITS - Salary and related
benefits for corporate administration decreased by 11.6% to $108,108 for the
three months ended September 30, 2001 compared to $122,345 for the three months
ended September 30,2000. The year-on-year decrease for the three-month period is
primarily a result in a temporary vacancy in an executive position.

     For the nine months ended September 30, 2001, salary and related benefits
for corporate administration increased by 26.1% to $384,482 compared to $304,885
for the comparable period in 2000.  The overall increase was the result of new
head count additions to the corporate structure, including the VP and Secretary
positions, the Chief Financial Officer, and an administrative assistant.

     PROFESSIONAL SERVICES - Professional services, which include legal,
accounting and consulting services, increased by 17.8% to $136,151 for the three
months ended September 30, 2001 compared to $115,570 for the three months ended
September 30, 2000. The increase for the period under review is attributable to
accountant's fees for federal and state tax filings.

     For the nine months ended September 30, 2001, professional services
decreased by 12% to $258,528 compared to $293,722 for the comparable period in
2000.  The decrease is related to the costs incurred in 2000 associated with the
completion of all of the Company's required SEC filings and amendments,
including the Company's 10SB, Forms 10-KSB, and Forms 10-QSB required for the
years 1998-2000.

                                      30
<PAGE>

MARKETING EXPENSES - Marketing expenses decreased by 51.7% to $9,031 for the
------------------
three months ended September 30, 2001 compared to $18,682 for the three months
ended September 30,2000. For the nine months ended September 30, 2001, marketing
expenses decreased by 44.2% to $33,832 compared to $60,608 for the comparable
period in 2000.  The decrease is related to better utilization of marketing
dollars resulting in lower costs.  Additionally, in July 2000, the Company
incurred additional marketing expense in connection with its OpSail 2000
excursions.

NEW SITE DEVELOPMENT COSTS - The consolidated company's new site development
--------------------------
costs increased by 1012.3% to $200,991 for the three months ended September 30,
2001 compared to $18,070 for the three months ended September 30,2000. For the
nine months ended September 30, 2001, new site development costs increased by
813.3% to $469,467 compared to $51,402 for the comparable period in 2000.  The
increase is attributable to the legal and engineering fees associated with
developing the Stamford, Conn. and Perth Amboy, N.J. sites.

GOODWILL AMORTIZATION - In each of the quarters ended September 30, 2001 and
---------------------
2000, the Company recorded amortization of goodwill expense of $20,236, which
was related to its acquisition of NYFF. For the nine months under review,
amortization of goodwill expense totaled $60,708 in both periods.

                                      31
<PAGE>

INTEREST EXPENSE - Interest expense primarily relates to funding obtained to
----------------
meet the current obligations of the NYFF, including the mortgages on the vessels
and debt financing of the Company's current operations and new business
development.

     Interest expense increased by 288.4% to $2,928,566 for the three months
ended September 30, 2001 compared to $753,934 for the three months ended
September 30,2000. For the nine months ended September 30, 2001, interest
expense increased by 360.5% to $6,823,762 compared to $1,481,942 for the
comparable period in 2000. The increase is attributable primarily to interest
and the amortization of deferred financing costs related to new bridge financing
and extension of certain convertible promissory notes entered into during later
half of 2000 and the first nine months 2001.

                                      32
<PAGE>

Liquidity and Capital Resources.
--------------------------------

     Since inception, the Company has funded its operations primarily through
cash generated from private placements of debt and equity securities and
institutional financing. In October 1998, the Company acquired 80% of the stock
of NY Fast Ferry and commenced operating fast ferry service from Highlands, New
Jersey. As part of the transaction, the Company guaranteed payment and
satisfaction of NY Fast Ferry's outstanding liabilities, which included
mortgages on its two ferry vessels and a line of credit. In July 2000, the
Company entered into an oral agreement with the holders of the remaining 20% of
issued and outstanding shares of Fast Ferry Holding Corporation for the purchase
by the Company of the remaining NY Fast Ferry shares for a combination of
$28,753 in cash and 102,271 restricted common shares of the Company. Management
executed a written stock purchase agreement and paid one of the minority share
holders for his three percent share. The parties mutually agreed to close on
or before December 31, 2001. The NY Fast Ferry operation generates sufficient
cash flow to cover its direct operating costs. However, the NY Fast Ferry
operation does not yet generate enough cash to make principal and interest
payments for both boat mortgages, carry its other debt, to fund the capital
improvements and capital expenditures necessary for the Company to expand its
operations and to implement its strategic business objectives.

     On March 11, 2000, the Company received proceeds of two convertible
promissory notes aggregating $1,000,000. The Company issued a $110,000 senior
convertible promissory note to a third investment fund as a finder's fee. The
notes, which bear interest at 10% per annum payable quarterly, were originally
payable nine months from issuance. On December 10, 2000, at the request of the
Company, the above note holders agreed to modify the notes so that the due date
would be extended from December 11, 2000 to September 30, 2001. On September 30,
2001, at the request of the Company, the above note holders agreed to further
modify the Notes so that the due date will be extended from September 30, 2001
to October 31, 2001.

     Each lender has the right at its sole and exclusive option to convert the
outstanding indebtedness under the notes to common stock of the Company at any
time prior to the Company making payment and should such conversion rights be
exercised, the Company shall issue common stock to the lender at the rate of one
share for each $1.00 of indebtedness then due and owing. The loans may be
prepaid at any time, but must be repaid out of the proceeds of any financing in
excess of $2,000,000.

                                       33
<PAGE>

     The line of credit held by debis Financial Services, Inc. ("Debis") and
assumed by the Company had an outstanding balance at December 31, 2000 of
$934,000 with the same financial institution that holds the preferred ship
mortgages. The line of credit, secured by the M/V Finest and the M/V Bravest,
required monthly payments of $15,000 through April 10, 2000, plus principal
payments of $45,000 in January 1999, $920,410 on May 1, 1999 and October 1,
1999, a payment of $343,333 on March 1, 2000, and originally required a final
payment of $934,000 on December 10, 2000. The Company and Debis negotiated to
restructure the payment of the debt, so that the remaining principal balance on
the line of credit would be paid through eight quarterly principal payments,
plus accrued interest. In consideration of negotiation of the restructuring of
the debt payment, Debis received a restructure fee from the Company of $50,000.
The Company was unable to make the first of such payments in the first quarter
of 2001, and negotiated with Debis to extend the first payment to September 30,
2001. The payment due September 30, 2001 is past due and the Company and Debis
agreed to address this situation either upon the Company obtaining capital
funding or December 31, 2001. If the Company is successful in these
negotiations, quarterly principal and interest payments will be equal. The note
carries no interest, but has been discounted to a net present value using a
discount rate of 9.25% per annum.

     During September 2000 the Company received proceeds from eight 10.5%
convertible promissory notes, (six for $20,000, one for $10,000 and one for
$5,000), totaling $135,000. During the months January through September 2001,
seven of the above convertible promissory noteholders, totaling $115,000 agreed
to extend the maturity date of the note for twelve months. One noteholder
totaling $20,000 was paid in full. Each convertible promissory note carries a
simple interest rate of 10.5%, interest only is payable quarterly, and matures
June, 2002, which is the extended maturity date. Additionally, in consideration
of the note extensions, the Company issued a total of 5,875 shares of its common
stock having a fair market value of $8,825.

     The lender has the right, at its sole and exclusive option, to convert the
outstanding indebtedness to common shares (the "Conversion Rights") of the
company at any time prior to borrower making payment.  Should such Conversion
Rights be exercised, the Company shall issue such shares to the Lender at the
rate of one share of common stock for each $2.00 of the indebtedness then due
and

                                       34
<PAGE>

owing. The shares issued by the company through the exercise of the Conversion
Rights will be restricted securities. The option and conversion will be
exercised by the lender issuing written notice to the borrower.

     In July 2000, the Company received a total of $1,000,000 in proceeds from
senior convertible promissory notes from four lenders, originally due January
14, 2001 with interest payable quarterly at 10% per annum, and paid a finder's
fee by issuance of an $88,000 note. One of these lenders exchanged a $200,000
note for its $200,000 mortgage note receivable. On December 10, 2000, at the
request of the Company, the above note holders agreed to modify the notes so
that the due date would be extended from January 14, 2001 to June 30, 2001. On
June 30, 2001, at the request of the Company, the above note holders agreed to
further modify the notes so that the due date will be extended from June 30,
2001 to October 31, 2001. Each lender has the right at its sole and exclusive
option to convert the outstanding indebtedness under the notes to common stock
of the Company at any time prior to the Company making payment and should such
conversion rights be exercised, the Company shall issue common stock to the
lender at the rate of one share for each $1.00 of indebtedness then due and
owing. The loans may be prepaid at any time, but must be repaid out of the
proceeds of any financing in excess of $2,000,000.

     In June 1999, the Company obtained financing in the net amount of $300,000
from a then unrelated third party that was secured by a second mortgage on the
property of the Shrewsbury River, subject to a real estate tax lien, and by a
personal guarantee of a major shareholder. The note carried an annual interest
rate of 18% and was payable in monthly installments of $10,000 per month,
applied first to interest, from July 10, 1999 through December 10, 1999. During
2000 the company paid principal of $161,641 and interest of $16,982 leaving a
principal balance of $28,575 at December 31, 2000. During 2001 the company paid
principal of $20,000 and interest of $2,116 leaving a principal balance of
$8,566 at June 30, 2001 and the parties extended the due date to September 30,
2001. Subsequently, the parties agreed to an additional extension to December
15, 2001. The Company has paid the interest on the note through that date.

                                       35
<PAGE>

     In October, 2000 the Company received a total of $500,000 in proceeds from
senior convertible promissory notes from two lenders, originally due January 30,
2001 with interest payable quarterly at 10% per annum, and issued a $55,000 note
as a finder's fee. On December 10, 2000, at the request of the Company, the
above note holders agreed to modify the Notes so that the due date would be
extended from January 30, 2001 to June 30, 2001. On June 30, 2001, at the
request of the Company, the above note holders agreed to further modify the
Notes so that the due date would be extended from June 30, 2001 to October 31,
2001. Each lender has the right at its sole and exclusive option to convert the
outstanding indebtedness under the notes to common stock of the Company at any
time prior to the Company making payment and should such conversion rights to
exercised, the Company shall issue common stock to the lender at the rate of one
share for each $1.00 of indebtedness then due and owing. The loans may be
prepaid at any time, but must be repaid out of the proceeds of any financing in
excess of $2,000,000.

     During the months of January through September 30, 2001, the Company
received proceeds from four senior convertible notes aggregating $1,300,000.
These loans bear interest at 10% per annum payable quarterly, are payable four
months from issuance. To obtain the loans, the Company issued to the loan
holders 725,000 shares of restricted common stock of the Company. The fair value
of the shares at issuance aggregating $1,095,250 will be charged to operations
as additional interest over the life of the notes. As part of arranging for two
of these loans, the Company employed the services of two financial consultants,
who received a total of $97,500 as payment for this service. The four senior
convertible notes may be repaid anytime within three months of issuance.
However, the loans must be repaid out of the proceeds of a financing greater
than $3,000,000. Initially, the notes are convertible into the Company's common
stock at $1.50 per share.

     During the months January through September 30, 2001 the Company received
proceeds from eight convertible promissory notes, (four for $5,000, three for
$20,000, one for $25,000), totaling $105,000. Each convertible promissory note
carries a simple interest rate of 10.5%. Interest only is payable quarterly, and
the notes mature one-year from date of issuance. In addition, the convertible
promissory note holders were issued 5,000 shares of the company's common stock.
These shares of stock are restricted securities. The fair market value of the
common shares on the dates of issuance aggregated $6,390 and will be charged to
operations as additional interest over the life of the notes.

     The lender has the right, at its sole and exclusive option, to convert the
outstanding indebtedness to common shares (the "Conversion Rights") of the
Company at any time prior to borrower making payment. Should such Conversion
Rights be exercised, the

                                       36
<PAGE>

Company shall issue such shares to the Lender at the rate of one share of common
stock for each $2.00 of the indebtedness then due and owing. The shares issued
by the Company through the exercise of the Conversion Rights will be restricted
securities. The option and conversion will be exercised by the lender issuing
written notice to the borrower.

     Also during the months January through September 30, 2001, holders of five
of the convertible promissory notes elected to exercise the conversion rights of
$140,000 of indebtedness into 175,000 shares of the Company's common stock,
which contains a Rule 144 restriction.

     In the nine months ended September 30, 2001, the Company raised proceeds of
$242,500 through the private placement of 229,295 shares of restricted common
stock to accredited investors. The Company issued 10,602 common shares to its
Secretary in satisfaction of unpaid compensation of $11,667 in the second and
third quarters of 2001.

     The Company, as of September 30, 2001, had a working capital deficiency of
$8,458,826. Furthermore, in the planned development of its commercial
operations, the Company's losses are expected to continue as the Company divests
its non-core assets and until it increases its ferry service when each of its
sites become fully operational. The Company's ability to meet its obligations in
the ordinary course of business is dependent upon its ability to continue to
obtain adequate financing and/or to successfully expand its ferry operations.
Furthermore, capital expenditures to acquire additional fast ferry vessels and
improve and expand its landside ferry facilities will require significant
funding.

     The Company has been successful to date in its efforts to raise funds and
believes that it will continue to be able to obtain interim financing on a
similar basis, which together with available funds and cash flows expected to
be generated by operations will be sufficient to meet its anticipated cash needs
for working capital and capital expenditures for at least the next twelve
months. During the first nine months of 2001, $1,405,000 was raised from the
sale of convertible promissory notes. Furthermore, the Company has negotiated
more favorable terms with certain creditors, and is negotiating more favorable
payment terms with other creditors, whose liabilities presently require
significant principal payments in the next twelve months. In the event the
Company's plans change, its assumptions change or prove to be inaccurate, or if
the proceeds of the interim financing or cash flows prove to be insufficient to
fund operations, the Company may find it necessary or desirable to reallocate
funds within the above described business strategies, seek additional financing
or curtail its activities. There can be no assurance that additional financing
will be available on terms favorable to the Company, or at all, or that the
Company will be able to negotiate more favorable payment terms with its existing
creditors. If adequate funds are not available or are not available on
acceptable terms, the Company may not be able to meet its current obligations,
take advantage of unanticipated opportunities, develop new services or otherwise
respond to unanticipated competitive pressures. Such inability could have a
material adverse effect on

                                       37
<PAGE>

the Company's business, financial condition and results of operations.

Subsequent Events
-----------------

     In October 2001, the Company received proceeds totaling $55,000 five
convertible promissory notes. Each convertible promissory note carries a simple
interest rate of 10.5 % per annum. Interest is payable quarterly, and the note
matures one year from date of issuance. Additionally, the Company issued to the
note holders an aggregate of 2,625 shares of its common stock having a fair
market value of $4,560.

     Also in October 2001 the Company issued a $350,000 mortgage note secured by
an interest in the Company's ferry vessels.  The note matures six months from
date of issuance and carries an annual interest rate of 18 %.  In lieu of a
commitment fee, the Company issued to the note holder warrants to purchase
150,000 shares of its common stock with an exercise price of $1.50 per share and
exercisable for a five-year period expiring on October 1, 2007.  Principal and
interest payments are payable monthly.

     In October and November, 2001 holders of two maturing convertible
promissory notes totaling $25,000 extended the note's maturity dates for 12
months.  In consideration of the note extensions, the note holders received a
total of 625 shares of the Company's common stock having a fair market value of
$1,000.

     Also in October 2001 the holders of maturing senior convertible promissory
notes totaling $4,323,000 agreed to extend the maturity dates of such notes to
February 28, 2002.  In consideration for such extensions, the Company issued
lenders a total of 2,136,500 shares of it common stock, the total number of
shares based on one share for each $2.00 of outstanding loan balances.  In
connection with these extensions, the Company agreed to pay to a financial
consultant a fee in the amount $100,000 in the form of a senior promissory note
under the same terms and 50,000 shares of its common stock having a fair market
value of $62,500, which will be charged to operations as additional financing
costs over the life of the note.

     In October 2001 the Company sold 30,000 shares of its common stock for
$24,000 in cash.

     The Board of Directors of the Company dismissed Weinick, Sanders, Leventhal
& Co. LLP, Certified Public Accountants effective October 16, 2001 and has
retained Rothstein, Kass & Company, P.C. as its independent auditor for the
fiscal year ended December 31, 2001 effective October 18, 2001. The Company
filed a report on Form 8-K on October 19, 2001 to report the change in auditors.

Forward-Looking Statements
--------------------------

     Discussions and information in this document, which are not historical
facts, should be considered forward-looking statements. With regard to forward-
looking statements, including those regarding the potential revenues from the
additional ferry operations from the Stamford Property, and the business
prospects or any other aspect of the Company, actual results and business
performance may differ materially from that projected or estimated in such
forward-looking statements. The Company has attempted to identify in this
document certain of the factors that it currently believes may cause actual
future experience and results to differ from its current expectations. In
addition to the risks cited above specific to the ferry business, differences
may be caused by a variety of factors, including but not limited to, adverse
economic conditions, entry of new and stronger competitors in the ferry
business, insufficient parking space for potential ferry customers, inadequate
capital and the inability to obtain funding from third parties, unexpected costs
and the inability to obtain or keep qualified personnel.

                                       38
<PAGE>

                          PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES
         ---------------------

(a)  Not Applicable
(b)  Not Applicable.

(c)  Unregistered Equity Securities of the Companies Sold During the Quarter
     -----------------------------------------------------------------------

                                       39
<PAGE>

   In September of 2001, the Company issued 1,000 shares, having a fair market
   value on the date of issuance of $1,170 to the following purchasers of the
   Company's 10.5% convertible promissory notes. Interest only is payable
   quarterly and the notes mature one year from the date of issuance.  The notes
   are convertible into shares of the Company's common stock at the rate of one
   share for each $2.00 of indebtedness due and owing. The sales were conducted
   in reliance on Section 4(2) of the Act and Rule 506 and were made only to
   accredited investors.

                                    Principal Amount
           Purchasers                   of Note      No. of Shares
           ----------                   --------     -------------

           Joseph Bruno                 $ 20,000          1,000
                                        --------        -------
                                        $ 20,000          1,000
                                        ========        =======


   During third quarter of 2001, the Company sold 25,000 shares of common stock
   having a fair market value of $23,000 to the following accredited investors.
   Each investor was also issued a warrant to acquire the same number of shares
   at $1.50 per share until 2004. The sales and issuances were conducted in
   reliance on Section 4(2) of the Act and Rule 506.

                                       Number of        Price Per
           Purchasers                    Shares           Share
           ----------                  ---------          -----
           James Drew                     10,000          $1.05
           Paul E. Bushnell               12,500            .80
           Donald Worster                  2,500           1.00
                                       ---------         ------
                                          25,000
                                       =========         ======

   During the third quarter of 2001, one financial consultant was issued 10,000
   shares of common stock having a fair value on the date of issuance of $13,500
   for services rendered. These securities were issued in reliance on Section
   4(2) of the Act.

   During the third quarter of 2001, the Company issued 3,000 shares having a
   fair market value of $4,368 to the following convertible promissory note
   holders in consideration of a twelve- month extension of the maturity date.
   These securities were issued in reliance on Rule 506 and Section 4(2) of the
   Act.


           Convertible Promissory                 Number of
               Note Holders                         Shares
           ----------------------                 ---------

           Charles Consagra                        1,000
           John Head                                 500
           Lynn & Raymond Flower                     250
           Gary Von Bargen                           375
           Lowell R. Kupfer                          250

                                       40
<PAGE>

           Arthur Klowden                            125
           Herman Vaden                              500
                                                   -----
                                                   3,000


   During the third quarter of 2001, the Company issued 75,000 shares of common
   stock having a fair market value of $60,000 to the following convertible
   promissory note holders who elected to exercise the conversion rites. These
   securities were issued in reliance on Rule 506 and Section 4(2) of the Act.


                Convertible                   Number of      Price per
           Promissory Note Holder               Shares         Share
           ----------------------             ---------     ---------

           Dorothy Bushnell                      75,000        $.80


   In the third quarter of 2001, the Company issued 7,500 shares of common stock
   to two unrelated third parties in lieu of interest payments due in the amount
   of $9,600. These securities were issued in reliance on Section 4(2) of the
   Act.

   In August 2001, the Company issued 50,000 of common stock having a fair
   market value $77,500 to the following note holder in consideration for a
   secured promissory note in an amount not to exceed $132,000 bearing interest
   at a rate of 18% per annum.  To date the Company has draw down $35,200 of the
   note.  The principal and interest are due and payable on December 27, 2001.
   The fair market value of the shares is being amortized over the life of the
   note.  These securities were issued in reliance on Rule 506 and Section 4(2)
   of the Act.

                                               Number of     Price per
           Promissory Note Holder                Shares        Share
           -----------------------              --------       -----

           The Removal Process Company           50,000        $1.55


   In the third quarter of 2001, the Company issued 4,000 shares of common stock
   to the Company's Vice President, Anthony Colasanti, in consideration of
   deferred salary.  The fair market value of the shares is $5,000.  These
   securities were issued in reliance on Section 4(2) of the Act.

                                       41
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------


3.1a      Certificate of Incorporation, as amended. (1)

3.1b      Certificate of Amendment effective September 19, 2000. (1)

3.2       Bylaws. (1)

__________
(1)  Incorporated by reference from the Company's Registration Statement on Form
     10-SB, as amended.


(b)  Reports on Form 8-K  - No reports on Form 8-K were filed for the quarter
     -------------------
ended September 30, 2001.

                                       42
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-QSB to be signed on its behalf by the
undersigned thereunto duly authorized.



                                             LIGHTHOUSE FAST FERRY, INC.




Date: November 19, 2001                  By:  /s/ Anthony Colasanti
                                             -----------------------
                                                  Anthony Colasanti, Vice
                                                  President, Secretary and
                                                  Director

                                       43