<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 March 31, 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
April 30, 2001 is 8,734,057 shares of Common Stock.

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

                                       1
<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 boats 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 months ended March 31, 2001 compared with the three
months ended March 31, 2000 are as follows.

REVENUES - NYFF's operations consolidated revenues increased by 21.92% to
--------
$831,905 for the three months ended March 31, 2001 compared to $682,325 for the
three months ended March 31, 2000. The increase is explained as follows:

     PASSENGERS TICKET SALES - Passenger ticket sales increased by 23.30% to
$788,529 for the three months ended March 31, 2001 compared to $639,517 for the
three months ended March 31, 2000.

     The increase is the result of adding additional scheduled runs with the M/V
Finest. The M/V Finest was originally chartered to the Massachusetts Steamship
Authority.

     GALLEY SALES - Galley sales increased by 1.33% to $43,376 for the three
months ended March 31, 2001 compared to $42,808 for the three months ended March
31, 2000.


COST OF SERVICES - NYFF's cost of services increased by 38.25% to $1,175,147 for
----------------
the three months ended March 31, 2001 compared to $850,029 for the three months
ended March 31, 2000. The overall changes are detailed follows:

     SALARY and RELATED BENEFITS - Salary and related benefits increased by
33.08% to $188,888 for the three months ended March 31, 2001 compared to
$141,940 for the three months ended March 31, 2000.

     The increase is the result of adding a crew for additional scheduled runs
with the Motor Vessel (M/V) Finest. The M/V Finest was originally chartered to
the Massachusetts Steamship Authority.

     FUEL and OIL RELATED COSTS - Fuel and oil related costs increased by 19.39%
to $168,270 for the three months ended March 31, 2001 compared to $140,941 for
the three months ended March 31, 2000.

                                       2
<PAGE>

     The increase is attributable to an increase in the cost of fuel, and an
increase in the scheduled runs of the M/V Finest.

     BOAT MAINTENANCE and RELATED SUPPLIES - Boat maintenance and related
supplies increased by 51.88% to $226,358 for the three months ended March 31,
2001 compared to $149,041 for the three months ended March 31, 2000.

     The increase in boat maintenance and related supplies, included an
unscheduled maintenance, and replacement of a steering control system, and an
increase in the scheduled runs with the M/V Finest.

     DOCKING and PARKING RELATED FEES - Docking and parking related fees
increased by 4.76% to $104,921 for the three months ended March 31, 2001
compared to $100,153 for the three months ended March 31, 2000.

     The increase in docking and parking related fees are the result of an
increase in the scheduled runs with the M/V Finest translating to more
passengers traveled.

     INSURANCE - Insurance costs decreased by 16.69% to $30,145 for the three
months ended March 31, 2001 compared to $36,183 for the three months ended March
31, 2000.

     The overall decrease in insurance related costs is primarily the result of
a review of all insurance coverages resulted in insurance premiums savings.

     GALLEY COST of GOODS SOLD - The galley cost of goods sold decreased by
4.12% to $26,242 for the three months ended March 31, 2001 compared to $27,369
for the three months ended March 31, 2000.

     The decrease is a result of better purchasing initiatives undertaken during
the first quarter of 2001.


     CHARTERS- The charter expenses increased by 100% to $35,751 for the three
months ended March 31, 2001 compared to $0 for the three months ended March 31,
2000.

     The increase is the result of chartering various vessels to replace the M/V
Finest which was undergoing an unscheduled replacement of a steering control
system.

     STAMFORD DIRECT OPERATING COSTS - Stamford direct operating costs increased
over 1,560% to $138,335 for the three months ended March 31, 2001 compared to
$8,333 for the three months ended March 31, 2000.

     The increase is attributable to an investment in start up costs associated
with a planned run from Stamford, CT. to Manhattan, N.Y.

     OTHER DIRECT OPERATING COSTS - Other direct operating costs increased by
79.24% to $29,849 for the three months ended March 31, 2001 compared to $16,653
for the three months ended March 31, 2000.

                                       3
<PAGE>

     The increase is attributable to an increase in the number of scheduled
runs.

DEPRECIATION - Depreciation decreased by 1.32% to $226,388 for the three months
ended March 31, 2001 compared to $229,416 for the three months ended March 31,
2000.

SELLING, GENERAL and ADMINISTRATIVE EXPENSES - The consolidated company's
--------------------------------------------
selling, general and administrative expenses increased over 49.75% to $418,532
for the three months ended March 31, 2001 compared to $279,478 for the three
months ended March 31, 2000. The overall changes are detailed as follows:

     FERRY ADMINISTRATION, SALARY and RELATED BENEFITS - Salary and related
benefits for the Ferry Administration decreased by 14.75% to $63,732 for the
three months ended March 31, 2001 compared to $74,755 for the three months ended
March 31, 2000.

     The decrease is attributable to the reduction of one employee.

     CORPORATE ADMINISTRATION, SALARY and RELATED BENEFITS - Salary and related
benefits for Corporate Administration increased by 131.82% to $159,298 for the
three months ended March 31, 2001 compared to $68,716 for the three months ended
March 31, 2000.

     The increase is related to the salary increases of the VP Secretary and the
new Chief Financial Officer.

     PROFESSIONAL SERVICES - Professional services, which include legal,
accounting and consulting services, increased by 455.24% to $103,281 for the
three months ended March 31, 2001 compared to $18,601 for the three months ended
March 31, 2000.

     The increase is related to the 10-KSB audits and 10-QSB reviews of the
company's financial statements, as well as various SEC filings requiring both
legal and accounting services.

     TRAVEL and RELATED AUTOMOBILE EXPENSES - Travel and related automobile
expenses increased by 161.60% to $20,460 for the three months ended March 31,
2001 compared to $7,821 for the three months ended March 31, 2000.

     The increase is related to an overall increase in travel within the
organization over the comparable period in 2000.

     OFFICE FACILITY RELATED EXPENSES- Office facility related expenses includes
rent, utilities, maintenance and general office expenditures for the Company's
corporate office in West Caldwell, New Jersey and the NYFF marina office in
Highlands, New Jersey.

     These office facility related expenses increased by 50.46% to $55,259 for
the three months ended March 31, 2001 compared to $36,726 for the three months
ended March 31, 2000.

     The increase primarily relates to the establishment of a new corporate
headquarters in West Caldwell, New Jersey as well as increased costs associated
with the maintenance of the marina office located in Highlands, New Jersey.

                                       4
<PAGE>

     DEPRECIATION EXPENSE - Depreciation expense increased over 619.71% to
$3,980 for the three months ended March 31, 2001 compared to $553 for the three
months ended March 31, 2000.

     The increase is related to new asset purchases related to the new corporate
office.

     CORPORATE EXPENSE - OTHER - Other corporate related expenses decreased by
82.68% to $12,522 for the three months ended March 31, 2001 compared to $72,306
for the three months ended March 31, 2000.

     The decrease is related to the expenses associated with filing the 10-KSB
and 10-QSB with the company's financials statements, as well as various other
SEC filings.

     MARKETING EXPENSES - Marketing expenses increased by 15.27% to $4,334 for
     ------------------
the months ended March 31, 2001 compared to $3,760 for the three months ended
March 31, 2000.

     The increase is related to increased efforts to attract new passengers.

     GOODWILL AMORTIZATION - In each of the quarters ended March 31, 2001 and
     ---------------------
2000, the Company recorded amortization of goodwill expense of $20,236, which
was related to its acquisition of NYFF.

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

     Interest expense increased by 327.32% to $1,423,530 for the three months
ended March 31, 2001 compared to $333,126 for the three months ended March 31,
2000.

     The increase primarily relates to new bridge financing entered into during
2000.

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
expects that the parties will finalize and execute a written stock purchase
agreement in the second quarter of 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

                                       5
<PAGE>

necessary for the Company to expand its operations and to implement its
strategic business objectives.

     On March 1, 2000 the company received a total of $1,000,000 in proceeds
from senior convertible promissory notes from two investment funds, originally
due December 11, 2000 with interest at 10% per annum, payable quarterly.  The
Company issued a $110,000 senior convertible promissory note to a third
investment fund a finder's fee.  In addition to the 10% interest, the Company
issued 250,000 common shares, which the Company valued at $0.50 per share, as
additional consideration. Further shares are issuable in the event of a default.
In December 2000 the Company and the investment funds agreed to extend the
maturity date of the notes to June 30, 2001 and in consideration therefor, the
Company agreed to issue to the investment funds shares of the Company's Common
Stock at a rate of one share for each $2.00 of the outstanding indebtedness then
due and owing.  Further, the Company agreed to reduce the conversion price from
$1.50 per share to $1.00 per share and upon a ninety day default, the conversion
price is reduced from $1.00 per share to $0.75 per share.  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.

     As of March 31, 2001, two outstanding notes payable and preferred ship
mortgages held by debis Financial Services, Inc. ("Debis"), one on the ferry M/V
Finest and one on the ferry M/V Bravest, were $4,938,368 and $4,921,788,
respectively, which bear interest at 9.25% per annum. Both ship mortgages each
require monthly payments of principal and interest in the amount of $56,719
through September 10, 2005, with final payments of $3,626,691 and $3,572,971,
respectively, due on October 10, 2005.  As of March 31, 2001 the Company was
behind one mortgage payment of $56,719 for the M/V Finest and two mortgage
payments totaling $113,438 on the M/V Bravest.

     The line of credit held by 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 is now
negotiating with Debis to extend the first payment to June 30, 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.  These two
preferred ship mortgages and the line of credit are further secured

                                       6
<PAGE>

by cross collateralization agreements, assignment of personal property, a pledge
of a potential receivable arising out of a lawsuit against the City of New York,
and a Company guarantee. Moreover, the financial institution was granted
warrants to purchase 200,000 shares of Company stock at $2.60 per share
exercisable through March 16, 2004.

     During June 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 July 2000 the Company received proceeds from two
10.5% convertible promissory notes (two for $40,000) totaling $80,000.  During
August 2000 the Company received proceeds from four 10.5% convertible promissory
notes (one for $40,000, one for $10,000, one for $15,000 and one for $5,000)
totaling $70,000.  During September 2000 the Company received proceeds from five
10.5% convertible promissory notes (three for $20,000 and two for $10,000)
totaling $80,000.  Each convertible promissory note carries a simple interest
rate of 10.5%, interest only is payable quarterly, and matures one-year from
date of issuance.

     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 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.

     On June 14, 2000, New York Fast Ferry Services Inc. received proceeds of
two bridge loans aggregating $60,000.  New York Fast Ferry Services Inc. has
since paid off the balance on the loans. The loans were paid with funds from
ferry operations.

     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 at 10% per annum, payable quarterly, 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.  In December 2000 the Company
and the lenders agreed to extend the maturity date of the notes to June 30, 2001
and in consideration therefor, the Company agreed to issue to the lenders shares
of the Company's common stock at a rate of one share for each $2.00 of
outstanding indebtedness then due and owing. Further, the Company agreed to
reduce the conversion price from $1.50 per share to $1.00 per share and upon a
ninety day default, the conversion price is reduced from $1.00 per share to
$0.75 per share. 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.

                                       7
<PAGE>

     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 $5,000 and interest of $1,305 leaving a principal balance of
$23,575 at March 31, 2001.  The parties have extended the due date to June 30,
2001.

     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 at 10% per annum, payable quarterly, and issued a $55,000
note as a finder's fee.  In December 2000 the Company and the lenders agreed to
extend the maturity date of the loans to June 30, 2001 and in consideration
therefor, the Company agreed to issue to the lenders shares of the Company's
common stock at a rate of one share for each $2.00 of outstanding indebtedness
then due and owing.  Further, the Company agreed to reduce the conversion price
from $1.50 per share to $1.00 per share and upon a ninety day default, the
conversion price is reduced from $1.00 per share to $0.75 per share.  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.

     In addition, during the month of October, 2000 the Company received
proceeds from four 10.5% convertible promissory notes (one for $5,000, two for
$40,000 and one for $10,000) totaling $95,000. During the month of November, the
Company received proceeds from three 10.5% convertible promissory notes (two for
$60,000 and one for $20,000) totaling $140,000.  During the month of December,
the Company proceeds from one 10.5% convertible promissory note for $50,000.
Each convertible promissory note carries a simple interest rate of 10.5%,
interest only is payable quarterly, and matures one-year from date of issuance.

     Additionally, during the month of December 2000, the Company employed the
services of a financial consultant to arrange for the modification of certain
senior convertible promissory notes. The consultant received as payment for this
service a 10% interest bearing note totaling $100,000.

     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 owing.  The shares issued by the company through the exercise of the
Conversion Rights will be restricted securities.  The option and

                                       8
<PAGE>

conversion will be exercised by the lender issuing written notice to the
borrower.

     In the twelve months ended December 31, 2000, the Company had raised
proceeds of $482,598 through the private placement of 712,667 shares of
restricted common stock to accredited investors. The Company also issued 252,500
shares of restricted common stock to three directors and officers in
satisfaction of unpaid compensation amounting to $214,625.  In addition, the
company issued 100,000 shares of restricted common stock on June 13, 2000 and
$25,000 on July 11, 2000 to a mortgage holder of the discounted operation in
satisfaction of $150,000 of debt.

     During the months of January through March 31, 2001, the Company received
proceeds from two senior convertible notes aggregating $325,000. These loans
bear interest at 10% per annum payable quarterly, are payable six months from
issuance.  To obtain the loans, the Company issued to the loan holders 175,000
shares of restricted common stock of the Company with on-demand registration and
unlimited piggyback rights. As part of arranging for one of these loans, the
Company employed the services of a financial consultant, the consultant received
$27,500 as payment for this service.

     The two 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.

     In January 2001, the Company received proceeds from one 10.5% convertible
promissory note totaling $20,000.  In February 2001, the Company received
proceeds from four 10.5% convertible promissory notes (one for $50,000, one for
$25,000, and two for $5,000) totaling $85,000.  During March 2001, the Company
received proceeds from one 10.5% convertible promissory note totaling $5,000 and
one 10% senior convertible promissory note totaling $275,000. Each convertible
promissory note carries a simple interest rate of 10.5%, interest only is
payable quarterly, and matures one year from date of issuance.  Each 10% senior
convertible promissory note carries a simple interest rate of 10%, interest only
is payable quarterly, and matures four months from date of issuance.

     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 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 the three months ended March 31, 2001, the Company had raised proceeds
of $159,500 through the private placement of 156,500 shares of restricted common
stock to accredited investors.

     The Company, as of March 31, 2001, had a working capital deficiency of
$5,966,220.  Furthermore, in the planned development of

                                       9
<PAGE>

its commercial operations, the Company's combined 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 proceeds from interim financing from convertible promissory notes
sold during the 2000, 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 quarter of 2001, $385,000 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, that 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 the Company's business, financial condition and results of
operations.

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

     In April, the Company received proceeds from one senior convertible
promissory note totaling $275,000.  The note carries a simple interest rate of
10%.  Principal and interest is payable at maturity, four months from issuance.
As part of arranging the loan, the Company employed the services of a financial
consultant, the consultant received $27,500 as payment for this service.

     Also in April, the Company received proceeds from one promissory note
totaling $150,000.  The note carries a simple interest rate of 14%.  Principal
and interest is payable at maturity, three months from issuance.  As part of
arranging the loan, the Company paid the note holder a fee of $15,000. The note
is secured by a Mortgage on the Company's property known as 52 Shrewsbury.

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

                                       10
<PAGE>

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.


                          PART II - OTHER INFORMATION


                                       11
<PAGE>

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

(a)  Not Applicable
(b)  Not Applicable.

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

     During January, February and March of 2001, the Company issued 4,550
     shares, having a fair market value on the date of issuance of $5,961 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

                                       12
<PAGE>

     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

           Herman & Danny Vaden      $20,000          1,000
           Lynn & Raymond Flower     $ 5,000            125
           Gary Von Bargen           $ 5,000            800
           Lowell Kupfer             $ 5,000            125
           Frederick Keifer          $25,000          2,500
                                     -------          -----
                                     $60,000          4,550
                                     =======          =====

           During the first quarter of 2001, the Company issued 175,000 shares
     having a fair market value of $226,250 to the following purchasers of the
     Company's senior convertible notes. These notes bear interest at 10% per
     annum, payable quarterly and may be repaid anytime within three months of
     issuance. However, the loans must be repaid out of the financing greater
     than $3,000,000. The notes are convertible into the Company's common stock
     at $1.50 per share. 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, Roselle    $ 50,000          25,000
           Lancer Offshore    $275,000         150,000
                              --------         -------
                              $325,000         175,000
                              ========         =======

     During January, February and March of 2001, the Company sold 156,500 shares
     of common stock 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
           ----------               ---------  -----

           Michael and
            Eileen Graham              16,000  $1.25
           Herbert and Lois Rake       30,000  $1.17
           Paul E. Bushnell            27,500  $1.09
           Dennis Mautone               5,000  $0.90
           Bob Notte                   22,500  $0.89
           Paul E. Bushnell            33,500  $0.90
           Paul E. Bushnell            22,000  $0.91
                                      -------  -----
                                      156,500
                                      =======  =====

     In March 2001, a financial consultant, was issued 20,000 shares of common
     stock having a fair value on the date of issuance of

                                       13
<PAGE>

     $29,600 for services rendered. These securities were issued in reliance on
     Section 4(2) of the Act.


ITEM 5.  OTHER INFORMATION
         ---------------------

     On March 26, 2001, the Company entered into an agreement (the "Agreement")
     with Highlands Waterfront, LLC for the purchase of the Company's real
     property located at 52 Shrewsbury Avenue, Highlands, New Jersey (the
     "Property"). The Property was acquired in September 1993 and is a mostly
     vacant parcel of land with 463 linear feet of waterfront and has on its
     premises a 4,000 square foot building on the water's edge and a small
     office building. The Property has preliminary zoning approval for a
     restaurant facility, retail building, bait and tackle shop, 23 slip marina,
     concrete parking area and deep water boat fueling pier. The purchase price
     of the Property is $1,150,000. The closing will take place on or before
     June 15, 2001.

                                       14
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 10-QSB
         -----------------------------------

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

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

 3.2     Bylaws (1)

10.12    Agreement for Sale of Highlands Property dated March 29, 2001. Filed
         herewith.

--------------
(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 during the last
     -------------------
     quarter of the fiscal year covered by this report.

                                      15
<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: May 15, 2001            By:   /s/ Anthony Cappaze
                                  ------------------------------------
                                        Anthony Cappaze, President
                                        Chief Executive Officer and
                                        Director


Date: May 15, 2001            By:   /s/ Anthony Colasanti
                                  ------------------------------------
                                        Anthony Colasanti, Vice
                                        President, Secretary and
                                        Director



Date: May 15, 2001            By:   /s/ John Ferreira, Jr.
                                  ------------------------------------
                                        John Ferreira, Jr., Chief
                                        Financial Officer

                                       16
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                  LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

                                 MARCH 31, 2001
                                  (Unaudited)



                         INDEX TO FINANCIAL STATEMENTS
                         -----------------------------


                                                               Page No.
                                                              ----------

Consolidated Balance Sheets
  As at March 31, 2001 and December 31, 2000...............     F-1


Consolidated Statements of Operations
  For the Three Months Ended March 31, 2001 and 2000.......     F-2


Consolidated Statements of Changes in
  Stockholders' Equity (Capital Deficiency)
  For the Three Months Ended March 31, 2001................     F-3


Consolidated Statements of Cash Flows
  For the Three Months Ended March 31, 2001 and 2000.......   F-4 - F-5


Notes to Consolidated Financial Statements.................   F-6 - F-23
<PAGE>

                  LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)


                                  A S S E T S
                                  -----------
<TABLE>
<CAPTION>
                                                                                          March 31,              December 31,
                                                                                            2001                     2000
                                                                                        -------------           -------------
<S>                                                                                     <C>                     <C>
Current assets:
  Cash                                                                                  $      22,896           $      66,578
  Inventories                                                                                  60,209                  59,306
  Net assets of discontinued operations                                                       456,154                 424,763
  Prepaid expenses and other current assets                                                   964,579               1,706,351
                                                                                        -------------           -------------
        Total current assets                                                                1,503,838               2,256,998

Property and equipment - at cost,
  less accumulated depreciation                                                            11,160,249              11,389,049

Goodwill net of accumulated amortization
  of $202,420 and $182,184, respectively                                                    1,011,754               1,031,990

Other assets                                                                                  289,489                 304,404
                                                                                        -------------           -------------

                                                                                        $  13,965,330           $  14,982,441
                                                                                        =============           =============

           LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
           ---------------------------------------------------------

Current liabilities:
  Convertible promissory notes                                                          $   3,888,000           $   3,503,000
  Current maturities of long-term debt                                                      1,644,478               1,597,510
  Notes payable - stockholders                                                                117,255                  85,755
  Accounts payable and accrued expenses                                                     1,499,917               1,107,540
  Deferred revenues                                                                           111,260                  86,618
  Due to officers                                                                             209,148                 200,884
                                                                                        -------------           -------------
        Total current liabilities                                                           7,470,058               6,581,307

Long-term debt - net of current maturities                                                  9,334,996               9,452,295
                                                                                        -------------           -------------
        Total liabilities                                                                  16,805,054              16,033,602
                                                                                        -------------           -------------

Stockholders' equity (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 - 8,541,137 shares
      at March 31, 2001 and 8,185,087 at
     December 31, 2000                                                                         85,411                  81,851
  Additional paid-in capital                                                                9,309,017               8,891,266
  Additional paid-in capital - stock options                                                  137,500                 137,500
  Accumulated deficit                                                                      (2,371,652)            (10,161,778)
                                                                                        -------------           -------------
        Total stockholders' equity
           (capital deficiency)                                                            (2,839,724)             (1,051,161)
                                                                                        -------------           -------------

                                                                                        $  13,965,330           $  14,982,441
                                                                                        =============           =============
</TABLE>


         See accompanying notes to consolidated financial statements.


                                      F-1
<PAGE>

                  LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                            For the Three
                                                                                            Months Ended
                                                                                              March 31,
                                                                                ------------------------------------
                                                                                    2001                    2000
                                                                                ------------            ------------
<S>                                                                             <C>                     <C>
Revenues                                                                        $    831,905                 682,325
                                                                                ------------            ------------

Costs of service:
  Ferry operations                                                                   948,759                 620,613
  Depreciation                                                                       226,388                 229,416
                                                                                ------------            ------------
Total costs of service                                                             1,175,147                 850,029
                                                                                ------------            ------------

                                                                                    (343,242)               (167,704)
                                                                                ------------            ------------

Operating expenses:
  Selling, general and administrative                                                418,532                 279,478
  Marketing                                                                            4,334                   3,760
  Amortization of goodwill                                                            20,236                  20,236
                                                                                ------------            ------------
Total operating expenses                                                             443,102                 303,474
                                                                                ------------            ------------

Loss from operations                                                                (786,344)               (471,178)

Other expenses:
  Interest and amortization of financing costs                                     1,423,530                 333,126
                                                                                ------------            ------------

Net loss from continuing operations                                             $ (2,209,874)           $   (804,304)
                                                                                ============            ============

Per share data:
  Basic and diluted:
    Loss from continuing operations                                             $      (0.27)           $      (0.15)
                                                                                ============            ============
    Net loss                                                                    $      (0.27)           $      (0.15)
                                                                                ============            ============

Weight average number of shares outstanding:
  Basic and diluted                                                                8,284,864               5,359,075
                                                                                ============            ============
</TABLE>


         See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>

                 LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)

                   FOR THE THREE MONTHS ENDED March 31, 2001
                                  (Unaudited)

<TABLE>
<CAPTION>
                                             Common Stock
                                       -----------------------       Paid-In       Paid-In Capital     (Accumulated      (Capital
                                         Number        Amount        Capital        Stock Options         Deficit)      Deficiency)
                                       ----------     --------     -----------     ---------------     ------------     -----------
<S>                                    <C>            <C>          <C>             <C>                 <C>              <C>
Balance at January 1,  2001             8,185,087     $ 81,851     $ 8,891,266     $       137,500     $(10,161,778)    $(1,051,161)
Increase of shares for cash               156,500        1,565         157,935                -                -            159,500
Shares issued and issuable for            199,550        1,995         259,816                                 -            261,811
  services rendered and financing
Net loss for the quarter
  ended March 31, 2001                       -            -               -                   -          (2,209,874)     (2,209,874)
                                       ----------     --------     -----------     ---------------     ------------     -----------

Balance at March 31, 2001               8,541,137     $ 85,411     $ 9,309,017     $       137,500     $(12,371,652)    $(2,839,724)
                                       ==========     ========     ===========     ===============     ============     ===========
</TABLE>


         See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                  LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                    For the Three
                                                                                                    Months Ended
                                                                                                      March 31,
                                                                                             ---------------------------
                                                                                                  2001          2000
                                                                                             ------------   ------------
<S>                                                                                          <C>            <C>
Cash flows from operating activities:
  Net loss continuing operations                                                             $ (2,209,874)  $   (804,304)
                                                                                             ------------   ------------
  Adjustments to reconcile net loss to net
      cash used in operating activities:
    Depreciation                                                                                  228,800        229,969
    Amortization of goodwill                                                                       20,236         20,236
    Amortization of deferred finance costs                                                      1,036,915         18,593
    Imputed interest                                                                                    -         28,790
    Stock issued for service                                                                       29,600              -
    Deferred revenues                                                                              24,642         41,501
    Increase (decrease) in cash flows as a result of
        changes in assets and liabilities net of assets
        and liabilities acquired in an acquisition:
      Inventories                                                                                    (903)           373
      Prepaid expenses and other current assets                                                   (62,931)        39,894
      Other assets                                                                                 14,915              -
      Accounts payable and accrued expenses                                                       393,877        (43,621)
      Due to officers/stockholders                                                                  8,264        (26,764)
                                                                                             ------------   ------------
  Total adjustments                                                                             1,693,415        308,971
                                                                                             ------------   ------------

Net cash used in operating activities
  of continuing operations                                                                       (516,459)      (495,333)

Net cash used in discontinued operations                                                          (31,392)       (39,518)
                                                                                             ------------   ------------

Net cash flows used in operating activities                                                      (547,851)      (534,851)
                                                                                             ------------   ------------

Cash flows used in investing activities:
  Acquisition of property and equipment                                                                 -        (19,452)
                                                                                             ------------   ------------

Cash flows from financing activities:
  Net Proceeds from note payable - stockholders                                                    15,000              -
  Proceeds from convertible promissory notes                                                      385,000      1,000,000
  Repayments of long-term debt                                                                    (55,331)      (356,450)
  Proceeds from issuance of common stock                                                          159,500        388,500
                                                                                             ------------   ------------
Net cash provided by financing activities
  of continuing operations                                                                        504,169      1,032,050
                                                                                             ------------   ------------

Net increase (decrease) in cash                                                                   (43,682)       477,747

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

Cash at end of year                                                                          $     22,896   $    575,704
                                                                                             ============   ============
</TABLE>


         See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                  LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                   (Unaudied)

<TABLE>
<CAPTION>
                                                                                              Months Ended
                                                                                                March 31,
                                                                                        ------------------------
                                                                                          2000            1999
                                                                                        --------        --------
<S>                                                                                     <C>             <C>
Supplemental Disclosures of Cash Flow Information:

  Cash paid during the period for:
    Interest                                                                            $131,474        $320,205
                                                                                        ========        ========

    Income taxes                                                                        $     -         $      -
                                                                                        ========        ========


Supplemental Schedules of Noncash
  Operating and Financing Activities:

  Common stock issued as additional interest                                            $232,211        $      -
                                                                                        ========        ========

  Common stock issued in payment of consulting fees                                     $ 29,600        $      -
                                                                                        ========        ========
</TABLE>


         See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                  LIGHTHOUSE FAST FERRY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 March 31, 2001
                                  (Unaudited)



NOTE  1 -  REALIZATION OF ASSETS - GOING CONCERN.

                 The accompanying consolidated financial statements have been
           prepared in conformity with generally accepted accounting principles,
           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 three months
           ended March 31, 2001. In addition, at March 31, 2001 the Company has
           working capital and stockholders' capital deficiencies of $5,966,220
           and $2,839,724, respectively.

                 Future viability of the Company is dependent upon the Company's
           obtaining additional funding. During 2000, the Company arranged
           private placements of its common stock for net cash proceeds of
           $482,598 and obtained short-term loans in the amount of $2,950,000
           for both its continuing and discontinued segments. The proceeds were
           used to provide funds for the payment of certain obligations and
           ongoing operations. Commencing January through March 2001, the
           Company received cash of $159,500 through the sale of its securities
           and $385,000 from convertible promissory notes.

                 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.

                                      F-6

<PAGE>

NOTE  2 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

           (a)  Description of Business:

                 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 boats in the New York City metropolitan
           region.


           (b)  Principles of Consolidation:

                 The consolidated financial statements include the accounts of
           Lighthouse Fast Ferry, Inc. and its subsidiaries. Inclusion of the
           results of subsidiary companies' operations is on 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-Q and Article 10 of Regulations S-
           X. Accordingly, they do not include all of the information and
           footnotes required by accounting principles generally accepted in the
           United States of America 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 March 31, 2001 and the results of
           operations and cash flows for the three months ended March 31, 2001
           and 2000. The results of operations for the three months ended March
           31, 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.

                                      F-7

<PAGE>

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

           (e)  Inventories:

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


           (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 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. and
           its wholly owned subsidiaries aggregating $1,214,174 is being
           amortized over 15 years. Amortization of goodwill charged to
           operations was $20,236 for the three months ended March 31, 2001 and
           2000.


           (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 $111,260 and $86,618 at March
           31, 2001 and December 31, 2000 respectively.

                 The other revenues generated by the Company, for example the
           sale of food through the ferries' concession stands, are recognized
           when the services have been rendered. To date, other revenues have
           not been significant.

                                      F-8

<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. Management has fully reserved the net
           deferred tax assets as it is more likely than not that the deferred
           tax asset will be utilized in the future.


           (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 March 31, 2001 were comprised of property and equipment
           (principally two (2) ferries) with a depreciated cost of $11,158,683
           and goodwill on the acquisition of the Fast Ferry Holding Corp. with
           an unamortized cost of $1,011,754. 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 either the net book value of the ferries or the
           goodwill.


           (k)  Concentrations of Credit Risk:

                 Financial instruments, which potentially subject the Company to
           concentrations of credit risk, consist primarily of cash. The Company
           places its cash with high credit quality financial institutions which
           at times may be in excess of the FDIC insurance limit.

                                      F-9

<PAGE>

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

           (l)  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 convertible promissory note agreements. Such common shares will be
           physically issued in the second 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.


           (m)  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.


           (n)  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.

                                      F-10

<PAGE>

NOTE 3 -   DISCONTINUED OPERATIONS.

                 On October 28, 1999, the Company adopted a plan to sell its
           real estate and retail/wholesale segments. Accordingly both segments
           have been accounted for as discontinued operations in the
           accompanying consolidated financial statements. The net assets to be
           disposed of as of March 31, 2001 aggregating $456,154 consists
           principally of real estate and its related secured indebtedness. The
           net assets are recorded as current assets in the accompanying
           consolidated balance sheet under the caption "Net assets of
           discontinued operations". Management on March 29, 2001 entered into
           an agreement to sell the real property for $1,150,000. The closing is
           to be on or before June 15, 2001, subject to the lawyer obtaining
           environmental and operational use permits.

                 In the second quarter of 2000 management became aware that its
           previous estimate of the time required to dispose of these segments
           was incorrect and accordingly the original estimate of the carrying
           charges of the real property - real estate taxes and interest - would
           have to be increased to reflect these charges through June 2001. The
           accompanying financial statements reflect a charge for $110,000 for
           these costs incurred through June 2000 plus an estimate of an
           additional $125,000 for interest and taxes through June 2001.

                 During the year ended December 31, 2000, $425,000 of these
           segments' liabilities was paid and a second mortgage was converted
           into a 10% interest bearing promissory note convertible into the
           Company's common stock initially at $1.50 per share.

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

                                                           March 31,
                                                             2001
                                                           ---------
                 Assets:
                  Inventory                                $   2,000
                  Property assets, net (See Note 4)          931,181
                                                           ---------
                                                             933,181
                                                           ---------
                 Liabilities:
                  Accounts payable                            32,000
                  Secured mortgage payable                    23,575
                  Accrued real estate taxes (a)              421,452
                                                           ---------
                                                             477,027
                                                           ---------
                 Net assets of discontinued operations     $ 456,154
                                                           =========

             (a)   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.

                                      F-11

<PAGE>

  NOTE 4 - PROPERTY AND EQUIPMENT.

                 Property and equipment is summarized as follow:

                                                                March 31,
                                                                   2001
                                                               ------------
                 Continuing operations:
                    Ferries                                    $ 13,300,000
                    Computers and office equipment                   47,622
                    Furniture and fixtures                          105,992
                                                               ------------
                                                                 13,453,614
                    Less: Accumulated depreciation                2,293,365
                                                               ------------

                                                               $ 11,160,249
                                                               ============

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


NOTE 5  -  CONVERTIBLE PROMISSORY NOTES.

                 During the months of January through March 31, 2001, the
           Company received proceeds from two senior convertible notes
           aggregating $325,000. These loans bear interest at 10% per annum
           payable quarterly, are payable six months from issuance. To obtain
           the loans, the Company issued to the loan holders 175,000 shares of
           restricted common stock of the Company with on-demand registration
           and unlimited piggyback rights. The fair value of the shares at
           issuance aggregating $226,250 will be charged to operations as
           additional interest over the life of the notes. As part of arranging
           for one of these loans, the Company employed the services of a
           financial consultant, the consultant received $27,500 as payment for
           this service.

                 The two 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.

                 Also during the months January through March 31,2001 the
           company received proceeds from five convertible promissory notes,
           (three for $5,000, one for $20,000, one for $25,000), totaling
           $60,000. 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 4,550 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 $5,961 and will be charged to operations as additional
           interest over the life of the notes.

                                      F-12

<PAGE>

NOTE 5  -  CONVERTIBLE PROMISSORY NOTES.  (Continued)

                 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.

                 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 has been extended to May 26 2001. The loan balance at March 31,
           2001 is $15,000.

                 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. 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 modification.
           These shares of stock are restricted securities. The fair value of
           the common shares on the dates of issuance aggregated $485,938 and
           will be charged to operations as additional interest over the life of
           the notes.

                 Additionally, during the month of December, 2000, the Company
           employed the services of a financial consultant to arrange for the
           modification of certain senior convertible promissory notes issued
           earlier in 2000. The consultant received as payment for this service
           (i) a 10% interest bearing note payable on June 30, 2001 in the
           amount of $100,000 (ii) 50,000 shares of the Company's restricted
           common stock, with a fair market value at date of issuance of
           $62,500, and (iii) the same default remedies as the bridge loan
           holders and (iv) warrants to acquire 50,000 common shares at $2.00
           per share. The balance of the promissory note and interest accrued,
           as of December 31, 2000 is $100,556. The payment was received as
           additional consideration for the modification of existing notes
           issued in 2000 and is in addition to the consideration the consultant
           received for arranging the original notes. (See F-16).

                                      F-13

<PAGE>

NOTE 5  -  CONVERTIBLE PROMISSORY NOTES.  (Continued)

                 Also during 2000 the company received proceeds from twenty
           seven convertible promissory notes, (three for $5,000, five for
           $10,000, one for $15,000, ten for $20,000, five for $40,000, one for
           $50,000 and two for $60,000) totaling $650,000. 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, each convertible promissory note holder was
           issued shares of the company's common stock for each $5,000 dollars
           of indebtedness owed to the convertible promissory note holder at
           date of issuance. Two of the debt holders were issued additional
           shares totaling 35,000 shares to reflect their level of investment in
           the Company. These shares of stock are restricted securities. The
           fair value of the common shares on the dates of issuance aggregated
           $72,809 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 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.

                 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. The consultant also
           received per the terms of the note modification, 126,500 shares of
           the Company's restricted common stock, with a fair market value at
           date of issuance of $158,125.

                                      F-14

<PAGE>

NOTE 5  -  CONVERTIBLE PROMISSORY NOTES.  (Continued)

                 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
           on-demand 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. Additionally, the
           note holder received per the terms of the note modification, 250,000
           shares of the Company's restricted common stock, with a fair market
           value at date of issuance of $312,500.

                 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 notes 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. To obtain the notes, the Company issued a total of
           125,000 shares of the Company's unregistered common stock with on-
           demand 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
           modification, 250,000 shares of the Company's restricted common
           stock, with a fair market value at date of issuance of $312,500.

                 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 modification, the notes are
           convertible into the Company's common stock at the rate of $1.00 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. To obtain the notes, the Company issued to each note
           holder 125,000 shares of restricted common stock with on-demand
           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, 500,000 shares of the Company's
           restricted common stock, with a fair market value at date of issuance
           of $625,000. The fair value of the shares will be charged to
           operations as additional interest over the life of the loans.

                                      F-15

<PAGE>

NOTE 5  -  CONVERTIBLE PROMISSORY NOTES.  (Continued)

                 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 $1.00 per share.

                 The Company employed the services of a financial consultant to
           arrange for the two March, 2000 convertible notes. The consultant
           received as payment for this service (i) a 10% interest bearing note
           payable on December 10, 2000 in the amount of $110,000, (ii) 25,000
           shares of the company's common stock whose fair market value at date
           of issuance was $12,500, and (iii) the same default remedies as the
           bridge note holders. 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.
           The outstanding balance including accrued interest as of December 31,
           2000 is $110,611. 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 the second and third quarters. The fair
           value of the warrants aggregating $10,000 was charged to operations.

                 In connection with the issuance of the convertible promissory
           notes the Company capitalized interest and financing expenses of
           $3,355,087 to be amortized over the life of the respective
           obligation. During the three months ended March 31, 2001 amortization
           was $1,036,915, with the balance of $869,765 included with prepared
           expenses and other current assets.

                                      F-16

<PAGE>

NOTE 6  -  LONG-TERM DEBT.

                 Long-term debt is as follows:

                                                                      March 31,
                                                                        2001
                                                                    ------------
           Mortgage note payable, secured by the vessel "Finest"
              due in monthly installments 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) $ 4,938,367

           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)   4,921,788

           Mortgage 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 $934,319 on December 10, 2000
              including imputed interest of 9.25.              (a)(b)    919,319

           10% interest bearing obligation payable on January
              15, 2001.                                          (a)     200,000
                                                                    ------------
                                                                      10,979,474
           Portion due within one year                                 1,644,478
                                                                    ------------
           Long-term debt - less current maturities                 $  9,334,996
                                                                    ============

           (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 these notes and is in negotiations
                 with the lender to restructure the debt. Additionally, the
                 lender and management are discussing renegotiations of the two
                 ship mortgages.

                 The secured debt obligations mature as follows:


                           Years Ending
                             March 31,
                           ------------
                                2001                $ 1,644,478
                                2002                    390,801
                                2003                    557,146
                                2004                    610,924
                                2005                  7,776,125
                                                    -----------
                                                    $10,979,474
                                                    ===========

                                      F-17

<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 as additional interest and $29,600 was charged to operations
           during the first quarter of 2001.


           (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.



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                 200,000      206,500    $1.00 to $2.20
                                         -------    ---------
     Outstanding at March 31, 2001       820,000    2,942,667    $ .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 2000. These
           officers received as a condition of their contract options to
           purchase 100,000 and 100,000, respectively in 2001, shares of common
           stock at $2.20 per share, the fair market value at the date of grant,
           through January 2007. Half of these options are exercisable in
           January 2002 and the officers are first able to exercise the other
           50% in January 2003.

                 Assuming the fair market value of the stock at the date of
           grant to be equal to option exercise price, the life of the options
           to be from 1.3 years to 2 years the expected volatility at 200%,
           expected dividends are none, and the risk-free interest rate of 10%,
           the Company would have recorded compensation expense of $83,908 and
           $19,677 for the three months ended March 31, 2001 and 2000,
           respectively, as calculated by the Black-Scholes options pricing
           model. As such, proforma net loss and loss per share would be as
           follows:

                                      F-18

<PAGE>

NOTE 8  -  STOCK OPTIONS AND WARRANTS.  (Continued)

           (a)  Stock Options:  (Continued)

                 Stock Options Granted in 2001:  (Continued)

                                                         For the Years Ended
                                                               March 31,
                                                      --------------------------
                                                          2001          2000
                                                       -----------    ---------
                 Net loss as reported                  ($2,209,874)   ($804,304)
                 Additional compensation                    83,908       19,677
                                                       -----------    ---------
                 Adjusted net loss                     ($2,293,782)   ($823,981)
                                                       ===========    =========

                 Loss per share as reported                $0.27        $0.15
                                                           =====        =====

                 Adjusted loss per share                   $0.28        $0.15
                                                           =====        =====

           (b)  Warrants:

                 (i)  Warrants Granted in 2000:

                 As an inducement to purchase shares of the Company's common
           stock, warrants to purchase 156,500 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 50,000 common shares for services at $2.00 per share.



NOTE 9  -  COMMITMENTS AND CONTINGENCIES.

           (a)  Leases:

                 (i)  The Company's corporate office is being occupied by the
           Company 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 dependent on daily passenger volume using
           the leased property, and averaged approximately $35,600 per month
           during 2000. As the passenger volume using 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.

                                      F-19

<PAGE>

NOTE 9  -  COMMITMENTS AND CONTINGENCIES.  (Continued)

           (a)  Leases:  (Continued)

                (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 upon 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 for $400.00 per month as a ticket booth. 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 completed negotiations and
                       executed a lease for a property in Stamford, CT as a base
                       for fast ferry service to and from Manhattan and
                       LaGuardia Airport. The site requires improvements and
                       government approvals. The Company has negotiated a
                       settlement of the Legal Proceeding with the Landlord,
                       which provides for a new Lease (the Landlord Lease) with
                       Landlord for the Stamford Property. The Landlord Lease
                       will be for a term of five (5) years, with three (3)
                       five-year options. The Landlord Lease will be subject to
                       an existing Contract of Sale for the entire 30 acre
                       parcel (the Parcel) of which the Stamford Property is a
                       small part. Further, the Company has negotiated a Lease
                       (the Contract Purchaser Lease) with the Landlord's
                       contract purchaser, which shall take effect immediately
                       upon the sale of the Parcel by Landlord to the contract
                       purchaser. The Contract Purchaser Lease will also be for
                       a term of five (5) years with three (3) five year options
                       and provides that the Company may utilize the Parcel for
                       parking, a ferry terminal and to operate its high speed
                       ferry service. The Contract Purchaser Lease will further
                       provide that upon development and construction of the
                       Parcel the contract purchaser will construct a parking
                       garage and allocate to the Company for its exclusive use
                       500 parking spaces. The Company is awaiting Lease
                       documents from both Landlord and the contract purchaser
                       and expects both Leases to be executed by June 1, 2001.

                                      F-20

<PAGE>

NOTE 9  -  COMMITMENTS AND CONTINGENCIES.  (Continued)

           (b)  Employment Contracts:

                 The Company has entered into new employment agreements with its
           executive officer Anthony Cappaze and its Secretary, Anthony
           Colasanti in 2000. The agreements provide for a base salary of
           $150,000 and $120,000 per year, respectively, for three years. Under
           these agreements Mr. Cappaze received 100,000 warrants and Mr.
           Colasanti 50,000 warrants to purchase a like number of the Company's
           common shares exercisable through January 2003 at the fair market
           value of the common stock on the date of grant of $1.00 per share.
           Messrs. Cappaze and Colasanti also received as a condition of their
           contract options to purchase 200,000 and 100,000, respectively,
           shares of common stock at $1.00 per share through January 2007. Half
           of these options are exercisable in January 2002 and the officers are
           first able to exercise the other 50% in January 2003. Mr. Colasanti
           also received a warrant to acquire 100,000 common shares for two
           years at $1.00 per share.

                 The Company entered into an employment agreement with John
           Ferreira on April 30, 2000. For the period from May 1, 2000 to
           December 31, 2000, Mr. Ferreira will receive a salary at the rate of
           $100,000 per annum. Beginning January 1, 2001, Mr. Ferreira's salary
           will be $125,000 per year.

                 The NYFF Group has entered into an employment contract with its
           President, which provides for a salary of $90,000 each year through
           October 4, 2003. Pursuant to the contract, the President is to be
           granted an option to purchase 10,000 shares of the Company's common
           stock each year at the fair market value on the grant date.

           (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.

                                      F-21

<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 March 19, 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 to
           get certain necessary permits for its use of the site. The Company
           disputes the Landlord's right to terminate the lease.

                                      F-22

<PAGE>

NOTE  9 -  COMMITMENTS AND CONTINGENCIES.  (Continued)

           (c)  Litigation:  (Continued)

                 The Company has negotiated a settlement of the Legal Proceeding
           with the Landlord, which provides for a new Lease (the Landlord
           Lease) with Landlord for the Stamford Property. The Landlord Lease
           will be for a term of five (5) years, with three (3) five-year
           options. The Landlord Lease will be subject to an existing Contract
           of Sale for the entire 30 acre parcel (the Parcel) of which the
           Stamford Property is a small part. Further, the Company has
           negotiated a Lease (the Contract Purchaser Lease) with the Landlord's
           contract purchaser, which shall take effect immediately upon the sale
           of the Parcel by Landlord to the contract purchaser. The Contract
           Purchaser Lease will also be for a term of five (5) years with three
           (3) five year options and provides that the Company may utilize the
           Parcel for parking, a ferry terminal and to operate its high speed
           ferry service. The Contract Purchaser Lease will further provide that
           upon development and construction of the Parcel the contract
           purchaser will construct a parking garage and allocate to the Company
           for its exclusive use 500 parking spaces. The Company is awaiting the
           Lease documents from both Landlord and the contract purchaser and
           expects both Leases to be executed by June 1, 2001.



NOTE 10 -  SUBSEQUENT EVENTS.

                 In April, the Company received proceeds from one senior
           convertible promissory note totaling $275,000. The note carries a
           simple interest rate of 10%. Principal and interest is payable at
           maturity, four months from issuance. As part of arranging the loan,
           the Company employed the services of a financial consultant, the
           consultant received $27,500 as payment for this service.

                 Also in April, the Company received proceeds from one
           promissory note totaling $150,000. The note carries a simple interest
           rate of 14%. Principal and interest is payable at maturity, three
           months from issuance. As part of arranging the loan, the Company paid
           the note holder a fee of $15,000. The note is secured by a Mortgage
           on the Company's property known as 52 Shrewsbury.

                                      F-23