UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                                   FORM 10-KSB
                          Annual or Transitional Report
(Mark One)
   (X)           ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2001
                                       OR
   ( )         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934

                        Commission File Number 2-95836-NY

                               EGAN SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

                                   ----------

         Delaware                                         13-3250816
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

4904 Waters Edge Drive, Suite 160, Suite 160, Raleigh, NC              27606
(Address of principal executive offices)                             (Zip Code)

       Registrant's telephone number, including area code: (919) 851-2239

                                   ----------

       Securities registered under Section 12(b) of the Exchange Act: NONE

       Securities registered under Section 12(g) of the Exchange Act: NONE

Check whether the issuer(1)filed all reports required to be filed by Section 13
or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days Yes X  No
        ---   ---

Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB (X)

Revenues for the most recent fiscal year were $557,927.

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 5, 2002 based upon the average bid and asked prices of
such stock on that date was $160,827.

The number of shares of the registrant's Common Stock outstanding as of March 5,
2002 was 19,646,652.



<PAGE>



                       DOCUMENTS INCORPORATED BY REFERENCE
                                     PART I

ITEM 1-BUSINESS

General

Egan Systems, Inc. (the Company) was incorporated under the laws of the state of
Delaware in 1987. In late 1987, the Company acquired ENVYR Corporation as a
wholly owned subsidiary.

The Company is engaged in the business of developing, selling and supporting
computer software products, particularly products related to the COBOL computer
language. The company's main business has been and continues to be the creation
and sale of COBOL language dialects that permit programs written in heretofore
proprietary versions of COBOL to move (migrate) to inexpensive high performance
systems available from a variety of suppliers without the need to rewrite the
programs.

Much of the Company's existing business is with firms who at one time or another
enjoyed a relationship with Data General Corp. (D.G.) and employed one or more
versions of D.G.'s COBOL products. In providing an alternative to D.G.'s
proprietary products the Company was able to gain customers that had been D.G.'s
but also, by the quality of Egan's product offerings, to make D.G. both a
distributor of one of the Company's products, Interactive COBOL, and in December
of 1996 to become an Accredited Service Provider to D.G. for the Company's VX
COBOL product.

Products

In 1998, the Company introduced upgraded Year 2001 compliant versions of its
existing COBOL languages which are available and necessary for users of these
dialects worldwide. Many existing customers, with current licenses, have
received these upgrades at no charge but other, first time customers, have had
to purchase them. The growth in new customers increased in 1999. Additionally,
support for the increasingly popular Linux operating system was added.

Sales of the services were strong through the first half of 1999 and then
inexplicably fell off. Several opportunities to bid Y-2K or Migration contracts
appeared but none were awarded. The flow of referral business from D.G. was
interrupted when EMC announced their intention to purchase D.G. and then
proceeded to do so in the 4th Quarter of 1999. The anticipated restructuring
appears to have de-focused elements of the D.G. Sales force with whom Egan
enjoyed a co-operative arrangement. Since the completion of this purchase and
the resultant closure of almost all of D.G.'s offices throughout the world, the
flow of referral business has gone to zero. Now D.G. customers must find Egan on
their own.

In late 2000, the Company introduced an upgraded version of its ICOBOL product,
ICOBOL 3. This version was the first version to move away from the D.G. type
architecture. This next generation product offers substantially more features
than ICOBOL 2 as well as vastly larger program sizes. ICOBOL 3 will allow the
Company to attack other COBOL dialects and to more fully compete with other
COBOL vendors. ICOBOL 3 is the underlying language on which the Company's
attempt to substantially broaden its market is based. In mid-2001, a GUI-based
Integrated Development Environment (ICIDE) was added to the ICOBOL

                                        2

<PAGE>



3 Windows platform. Based on the Company's existing compiler technology and
incorporating aspects of the G-2K tool suite as well as a GUI editor, developers
who chose ICOBOL 3 with the ICIDE will experience a substantial productivity
gain in a user friendly graphical environment. Many of these users will no
longer be required to go out and purchase additional tools from other vendors
for their developers resulting in substantial savings. The Company expects this
to further encourage migration from its older ICOBOL 2 to its ICOBOL 3 version.
There is an upgrade fee involved in moving from ICOBOL 2 to ICOBOL 3 and 2001
has seen some growth in this area. Still, over 70% of the installed ICOBOL
systems are running ICOBOL 2 and it is anticipated that 2002 will see much more
growth in upgrades as these customers upgrade their systems.

Also in 2001, the Company continued to increase its Linux support by offering
support for both the older more stable Linux kernel and the newer Linux kernel
with its enhanced features. As more UNIX hardware vendors move to increase their
offerings of Linux on their platforms, the Company is trying to be positioned to
offer its products and services on those offerings.

New Products

The Company introduced its cgiCOBOL product in the first quarter of 2000. This
COBOL language product allows both the Company's existing customers and users of
certain other COBOL dialects to create Internet web server solutions using
existing COBOL software and permits the estimated 3 million COBOL programmers
worldwide to create web sites without the need to learn a new, web specific
language. cgiCOBOL is available for Linux and Windows NT servers as well as
other popular Unix operating systems. In the second Quarter of 2000, Egan
received a contract to web enable one of its customer's programs by employing
cgiCOBOL. cgiCOBOL has provided the Company with a number of new leads in 2001.

In addition in Q2 of 2001, the Company, in cooperation with its GUI-partner,
introduced a ThinClient version of its runtime product. This product allows
increased Internet and WAN use of the Company's products with a much decreased
cost of ownership and support for the customers since the majority of the
software is server-based.

Released in Beta format in the 1st Quarter of 2002, is a newer version of ICOBOL
3 that provides R/M COBOL compatibility. With this addition, the Company hopes
to win new customers who are currently using other COBOL dialects that provide
R/M COBOL compatibility.

Joint Venture

The Joint Venture entered into with Shenzhen China based Intermost Corp.
resulted in no Year 2001 related business, nor in any business at all. The
Company has written off and/or expensed all investments in the venture.

Analysis of Customers

The Company has always focused its sales on current or prior users of D.G.
hardware and software and most particularly on a category of customer known as a
reseller or VAR. Resellers create programs which are sold, modified, improved
and sold again. Beginning in 2002 with the release of the ICOBOL 3 product

                                        3

<PAGE>



version with R/M compatibility the Company will focus more of its sales effort
to resellers running other COBOL dialects to allow it to broaden and grow its
customer base. In general resellers purchase multiple copies of COBOL every year
and require a level of ongoing support that decreases with time, a consideration
of some importance given the need to devote valuable programmer skills to new
products and features. The Company deals directly with approximately 118
resellers and indirectly through distribution with another 80.

In 2001, sales to three customers comprised approximately 30% of the Company's
sales. One of these customers accounted for approximately 17% of sales and
functions as a distributor for the Company. Other than those three, no customer
provided more than 5% of the Company's sales.

The Company's software is in use in North and South America, Europe, Africa,
Asia and Australia.

Inventory, Supplies and Manufacturing

The Company maintains sufficient quantities of material on hand to satisfy
normal shipping requirements. The Company is not forced to rely on any single
vendor or group of vendors to satisfy its materials requirement.

Competition

The computer software industry is very highly competitive and populated by many
large and medium size companies and subject to rather rapid technological
advance. There is no assurance that the Company will continue to grow or even to
maintain a competitive position. The Company will continue to seek to develop
successful products that address market niches that provide appropriate
opportunity but are small enough to avoid determined penetration by larger,
better funded competitors.

Intellectual Property

All of the Company's products and source codes are protected by copyright.
Furthermore all delivered executable code for MS-DOS, Novell, Windows and the
various Unix versions that execute on systems employing Unix is protected from
illicit duplication by the requirement for the presence of a unique mechanical
security device available only from the Company.

Research and Development Expenditures

For the years ended December 31, 2001 and 2000, research and development
expenditures amounted to approximately $242,000 and $620,000, of which
approximately $143,000 and $374,000 was capitalized as of December 31, 2001 and
2000, respectively.

Employees

At the end of 2001, Egan Systems has 2 full time employees, 1 of which is
engaged in software development or support and 1 involved in sales,
administration and support. The Company has also engaged outside contractors to
enhance the Company's software development activities.


                                        4

<PAGE>


ITEM 2-PROPERTIES

The Company occupies part of a building at 4904 Waters Edge Drive, Raleigh,
North Carolina containing 2,000 square feet used for sales, administration and
research and product development. The lease expires December 31, 2002, and
requires future minimum payments of approximately $27,000. During the year ended
December 31, 2001, the Company paid approximately $45,000 for the rental of
properties.

ITEM 3-LEGAL PROCEEDINGS

No material legal proceedings are pending by or against the Company, or to the
knowledge of the Company, are contemplated against the Company.

ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None


                                        5

<PAGE>



                                     PART II


ITEM 5-MARKET FOR COMMON EQUITY AND RELATED MATTERS

The table below sets forth the high and low closing bid prices of the Company's
Common Stock for the last two calendar years. Since the shares are not listed on
NASDAQ, but on the Eastern Regional "Pink Sheets" and on the NASDAQ Electronic
Bulletin Board (Symbol EGNS), the Company can only supply a general estimate of
the price range of its shares on a quarterly basis.

Calendar Years                                Bid Prices

         2001                       High                      Low
         ----                       ----                      ---
First Quarter                       $0.05                    $0.04
Second Quarter                      $0.04                    $0.02
Third Quarter                       $0.02                    $0.01
Fourth Quarter                      $0.01                    $0.01

         2000
         ----
First Quarter                       $0.47                    $0.10
Second Quarter                      $0.47                    $0.12
Third Quarter                       $0.30                    $0.10
Fourth Quarter                      $0.12                    $0.05

On March 5, 2002, the high bid and asked quotations for the Company's Common
Stock were $0.010 and $0.010 per share, respectively.

The Company believes that on December 31, 2001, there were approximately 850
shareholders of record of the Company's stock.

The Company has not paid any dividends on its Common Stock and has determined,
for the foreseeable future, to retain earnings, if any, to fund additional
development and to take advantage of any opportunities that might become
apparent.


                                        6

<PAGE>



ITEM 6.  MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 2001 AND 2000

RECENT EVENTS:

In September 2001, the Company's Chairman Mr. Edward Egan passed away. At this
time, the Company's current management does not plan to change the strategic
direction of the Company.

NET SALES:

For the years ended December 31, 2001 and 2000, total revenue approximated
$558,000 and $771,000, respectively. Revenue has declined for the years ended
December 31, 2001 versus the same period in the prior year due to the current
poor climate in the economy for technology spending by customers. In addition,
the Company performed no custom service work for customers in 2001 versus
approximately $133,000 in custom service revenue for the prior year. The Company
expects increases in technology spending by customers in future periods to
benefit the Company.

The Company is continually evaluating new opportunities that management hopes
will substantially contribute to revenue. However, the Company is quite small
and remains subject to technological obsolescence and competitive market
conditions.

COST AND EXPENSES:

Cost of goods sold for the years ended December 31, 2001 and 2000 were
approximately $26,000 and $42,000 and gross profit percents were approximately
95% and 93%, respectively. The higher gross profit margin in 2001 versus 2000
results from the Company's product mix whereby software products have limited
direct costs attributed to them versus custom service income which involves
higher direct costs.

Research and development costs were approximately $99,000 and $246,000 for the
years ended December 31, 2001 and 2000, respectively. The decrease is due to the
reduction of employees and expenditures related to research and development in
2001 in conjunction with the reduction in revenues. The Company continues to
expend funds developing new software and to remain competitive in its specific
field of expertise. The Company has engaged outside consultants and has expended
approximately $12,000 in 2001 to facilitate these research and development
projects.

Selling, shipping and general and administrative expenses (SG&A) for the years
ended December 31, 2001 and 2000 were approximately $370,000 and $873,000
respectively. The capitalization of computer software development costs for the
years ended December 31, 2001 and 2000 reduced SG&A expenses by approximately
$143,000 and $374,000 respectively. The decrease in SG&A expenses was attributed
primarily to the reduction in employees and expenditures in the Company's
software development facility in conjunction with the reduction in revenues.


                                        7

<PAGE>



ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 2001 AND 2000 (Cont'd)

INTEREST INCOME:

Interest income for the years ended December 31, 2001 and 2000, was
approximately $-0- and $12,000, respectively, and was related to cash invested
by the Company in short-term financial instruments.

DEPRECIATION AND AMORTIZATION:

Depreciation and amortization expense for the years ended December 31, 2001 and
2000 was approximately $496,000 and $689,000, respectively. The decline in
depreciation and amortization expense in the current year is due to the decline
in amortization expense related to the decline in capitalized computer software
development costs. Management is currently amortizing capitalized computer
software costs over a two year period.

LIQUIDITY:

As of December 31, 2001, the Company's net cash provided by operations was
approximately $141,000 and is substantially comprised of the net loss of
$(344,000), a reduction of accounts receivable of $36,000, a decrease in accrued
expenses of $(59,000) and depreciation and amortization of $496,000. This
compares to the years ended December 31, 2000 where net cash used in operations
was approximately $(56,000) and was substantially comprised of a net loss of
$(856,000), an increase in accrued expenses $71,000 and depreciation and
amortization of $689,000.

Net cash used in investing activities during the years ended December 31, 2001
and 2000 was approximately ($143,000) and ($381,000), respectively. This was
attributed to purchases of new computer hardware and software of approximately
$0 and $(7,000) to support the Company's ongoing research and development
activities and to the capitalization of computer software development costs of
$(143,000) and $(374,000) for the years ended December 31, 2001 and 2000,
respectively.

Management believes that the Company has sufficient cash resources to meet its
expected cash needs in the present fiscal year. Management does not anticipate
additional large capital expenditures in the current year except for the ongoing
research and development activities discussed above. At present the Company does
not maintain a line of credit facility with a lending institution.

INFLATION AND SEASONALITY:

The Company does not anticipate inflation will be significantly impact its
business. The Company does not believe its business is subject to fluctuations
due to seasonality.


                                        8

<PAGE>



ITEM 7-FINANCIAL STATEMENTS

The financial statements are presented on F1 through F14.

ITEM 8-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      None


                                        9

<PAGE>



                                    PART III

ITEM 9-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The executive officers and directors of the Company are as follows:

Name                    Age           Position
----                    ---           --------
Ralph Jordan            48            President/Secretary of Egan Systems, Inc.,
                                      President of Envyr Corp. Subsidiary,
                                      Director

Jack Laskin             73            Director

Ralph Jordan became the President of Egan Systems, Inc. upon the death of Edward
J. Egan in September 2001. Mr. Jordan became a Director of the Company when the
Company acquired Envyr Corp., of which Mr. Jordan was President, in December of
1987. Mr. Jordan left Data General Corp. where he had headed the Languages
Department, in November of 1986 to found Envyr Corp. Mr. Jordan is still
President of the Company's Envyr subsidiary.

Jack Laskin has been a Director of the Company since its inception in March of
1987. Prior to his retirement in 1986, Mr. Laskin was President of Diplomat
Electronics Corp. from 1983 through 1986 and Vice President for Marketing at
Schweber Electronics until 1983.

Each director is elected by the shareholders at the annual meeting of
shareholders and hold office until the next annual meeting of shareholders.


                                       10

<PAGE>



                                    PART III


ITEM 10-EXECUTIVE COMPENSATION

Compensation of Edward J. Egan for the year ended December 31, 2001 amounted to
approximately $90,000. Compensation of Ralph Jordan for the year ended December
31, 2001 amounted to approximately $122,000.

ITEM 11-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Class            Name                             Number of         Percent
of Shares        of Beneficial Owner             Shares Owned      Of Class
---------        -------------------             ------------      --------

Common           Nancy Egan                        1,542,000         8.3%

Common           Ralph Jordan                        500,000         2.7%

Common           Jack Laskin                       1,340,000         7.2%

Common           All beneficial owners,
                 executives and
                 directors as a group              3,382,000        18.1%

Unless otherwise noted, the addresses of all persons listed above are in care of
the Company.

ITEM 12-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.


                                       11

<PAGE>



ITEM-13 EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits required by Item 601 of Regulation S-B

      3A    Articles of Incorporation (1)
      3B    ByLaws of Registrant (1)
      11    Computation of per share earnings
      21    List of subsidiaries of the registrant

(b)   Reports on Form 8-K:

      On November 14, 2001, we filed a report on Form 8-K announcing the passing
      of the Company's Chairman and President, Edward J. Egan, the closing of
      the Company's office in Holbrook, NY and the moving of it's headquarters
      from Holbrook, NY to it's facility in Raleigh, NC.

----------
(1) Filed as an exhibit to the Registration Statement on Form S-18 (File No.
2-95836-NY) of the Registrant and incorporated by reference herein.


                                       12

<PAGE>


PART III, ITEM 13, EXHIBIT 11.

Computation of per share earnings:

The following data show the amounts used in computing earnings per share and the
effect on loss and the weighted average number of shares of dilutive potential
common stock.

                                       2001            2000            1999
                                   ------------    ------------    ------------

Loss available to
 common stockholders used
 in basic EPS                      $   (343,589)   $   (856,215)   $   (997,784)
                                   ============    ============    ============

Weighted average number
 of Common shares used in
 basic EPS                           19,646,652      19,396,652      18,646,652

Effect of dilutive
 securities Stock
 Options/warrants                        35,890         225,000       3,764,593
                                   ------------    ------------    ------------

Weighted average number
 of common shares and
 dilutive potential
 common stock used in
 diluted EPS                         19,682,542      19,621,652      22,411,245
                                   ============    ============    ============

Net loss per common share:

  Basic                            $      (0.02)   $      (0.04)   $      (0.05)
                                   ============    ============    ============

  Fully diluted                    $         --      $       --      $       --
                                   ============    ============    ============

For 2001, 2000 and 1999, fully diluted earnings per share amounts are not
presented because they are anti- dilutive.


                                       13

<PAGE>



PART III, ITEM 13, EXHIBIT 21


                               EGAN SYSTEMS, INC.
                     LIST OF SUBSIDIARIES OF THE REGISTRANT



Envyr Corp. (incorporated in Delaware)



                                       14

<PAGE>


              SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS

               FILED PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT
                             BY NON-REPORTING ISSUES


No Proxy material or annual report has been sent to security-holders. Proxy
material to be furnished to security- holders subsequent to the filing of this
form shall be furnished to the Commission when it is sent to security- holders.

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, duly authorized at Holtsville, New York on the 15th
day of March, 2002.


                                              EGAN SYSTEMS, INC.



                                              By /s/Ralph Jordan
                                                 -------------------------------
                                              Ralph Jordan, President

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated:

       Signature                             Title                     Date
       ---------                             -----                     ----

/s/Ralph Jordan                  President/Secretary/Director     March 15, 2002
-----------------------
Ralph Jordan

/s/Jack Laskin                   Director                         March 15, 2002
-----------------------
Jack Laskin

                                       15

<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                        CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999







<PAGE>



                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                                DECEMBER 31, 2001


                                TABLE OF CONTENTS


                                                                      Page No.



REPORT OF INDEPENDENT AUDITORS                                           F-2

FINANCIAL STATEMENTS:

  Consolidated balance sheets at December 31, 2001 and 2000              F-3

  Consolidated statements of operations for the years ended
   December 31, 2001, 2000 and 1999                                      F-4

  Consolidated statements of changes in stockholders' equity
   for the years ended December 31, 2001, 2000 and 1999                  F-5

  Consolidated statements of cash flows for the years ended
   December 31, 2001, 2000 and 1999                                      F-6

  Notes to consolidated financial statements for the years ended
   December 31, 2001, 2000 and 1999                                  F-7 - F-14



                                       F-1


<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders
Egan Systems, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of Egan Systems,
Inc. and Subsidiary as of December 31, 2001 and 2000, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Egan Systems, Inc.
and Subsidiary as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years ended December 31,
2001, 2000 and 1999 in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
consolidated financial statements, the company has suffered recurring losses and
current liabilities exceed current assets, which raise substantial doubt about
their ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 6. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.



New York, New York
March 5, 2002

                                       F-2


<PAGE>



                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2000
<TABLE>
<CAPTION>
ASSETS                                                                  2001                    2000
                                                                     -----------             -----------
<S>                                                                  <C>                     <C>
Current Assets
  Cash (Note 2)                                                      $    10,643             $    12,688
  Accounts receivable                                                     41,486                  77,937
  Inventory (Note 2)                                                       3,500                   6,415
  Prepaid expenses and other current assets                                   --                   5,543
                                                                     -----------             -----------

      Total Current Assets                                                55,629                 102,583
                                                                     -----------             -----------

Property and Equipment (Notes 2 and 3)                                    83,808                 137,969
                                                                     -----------             -----------

Other Assets
  Computer software development costs - net (Notes 2 and 4)              247,515                 545,863
  Security deposits                                                           --                   3,126
                                                                     -----------             -----------

      Total Other Assets                                                 247,515                 548,989
                                                                     -----------             -----------

      Total Assets                                                   $   386,952             $   789,541
                                                                     ===========             ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Accounts payable (Note 10)                                         $   175,917             $   175,917
  Accrued expenses and other current liabilities                          62,341                 121,341
                                                                     -----------             -----------

      Total Current Liabilities                                          238,258                 297,258
                                                                     -----------             -----------

Commitments and Contingencies (Note 6)

Stockholders' Equity
  Common stock - $0.05 par value; shares authorized -
   30,000,000, shares issued and outstanding -
   19,646,652 in 2001 and 2000                                           982,333                 982,333
  Additional paid-in capital                                           4,827,201               4,827,201
  Deficit                                                             (5,298,340)             (4,954,751)
                                                                     -----------             -----------
                                                                         511,194                 854,783
  Notes receivable - stock purchase (Note 8)                            (362,500)               (362,500)
                                                                     -----------             -----------

      Total Stockholders' Equity                                         148,694                 492,283
                                                                     -----------             -----------

      Total Liabilities and Stockholders' Equity                     $   386,952             $   789,541
                                                                     ===========             ===========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                       F-3


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                                         2001                    2000                    1999
                                                      -----------             -----------             -----------
<S>                                                   <C>                     <C>                     <C>
Net product sales                                     $   557,927             $   638,759             $ 1,339,440
Custom services                                                --                 132,717                 442,030
                                                      -----------             -----------             -----------

                                                          557,927                 771,476               1,781,470
                                                      -----------             -----------             -----------

Cost and expenses:

  Cost of goods sold                                       26,184                  41,618                 230,651
  Selling, shipping, general and
   administrative expenses                                370,155                 872,957               1,020,384
  Interest income                                              --                 (12,271)                (28,672)
  Royalty expense                                           9,184                  29,966                  34,153
  Advertising and promotion expense                            --                   3,940                  27,711
  Interest expense                                             --                      --                     338
  Depreciation and amortization                           495,558                 689,434                 386,810
  Acquired technology (Note 5)                                 --                      --               1,106,550
                                                      -----------             -----------             -----------

                                                          901,081               1,625,644               2,777,925
                                                      -----------             -----------             -----------

Loss before provision for income taxes                   (343,154)               (854,168)               (996,455)

Provision for income taxes
 (Notes 2 and 12)                                             435                   2,047                   1,329
                                                      -----------             -----------             -----------

Net loss                                              $  (343,589)            $  (856,215)            $  (997,784)
                                                      ===========             ===========             ===========



Net loss per common share (Note 2)

 Basic                                                $     (0.02)            $     (0.04)            $     (0.05)
                                                      ===========             ===========             ===========

 Fully diluted                                        $        --             $        --             $        --
                                                      ===========             ===========             ===========

 Cash dividends per common share                         None                    None                    None
                                                      ===========             ===========             ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                       F-4


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                 Common Stock
                                           -----------------------     Additional                    Notes Receivable
                                             Shares        Amount    Paid In Capital      Deficit     Stock Purchase       Total
                                           ----------     --------   ---------------    -----------   --------------    -----------
<S>                                        <C>            <C>          <C>              <C>              <C>            <C>
Balance December 31, 1998                  18,646,652     $932,333     $ 4,877,201      $(3,100,752)     $(362,500)     $ 2,346,282

Net loss for 1999                                  --           --              --         (997,784)            --         (997,784)
                                           ----------     --------     -----------      -----------      ---------      -----------

Balance December 31, 1999                  18,646,652      932,333       4,877,201       (4,098,536)      (362,500)       1,348,498

Stock issued to director                    1,000,000       50,000         (50,000)              --             --               --

Net loss for 2000                                  --           --              --         (856,215)            --         (856,215)
                                           ----------     --------     -----------      -----------      ---------      -----------

Balance December 31, 2000                  19,646,652      982,333       4,827,201       (4,954,751)      (362,500)         492,283

Net loss for 2001                                  --           --              --         (343,589)            --         (343,589)
                                           ----------     --------     -----------      -----------      ---------      -----------

Balance December 31, 2001                  19,646,652     $982,333     $ 4,827,201      $(5,298,340)     $(362,500)     $   148,694
                                           ==========     ========     ===========      ===========      =========      ===========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                       F-5


<PAGE>



                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

                           INCREASE (DECREASE) IN CASH

<TABLE>
<CAPTION>
                                                            2001                2000                  1999
                                                         ---------           ---------           -----------
<S>                                                      <C>                 <C>                 <C>
Cash flows from operating activities:
  Net loss                                               $(343,589)          $(856,215)          $  (997,784)
  Adjustments to reconcile net loss to net cash
     provided (used in) by operating activities:
    Depreciation and amortization                          495,558             689,434               386,810
    Accounts receivable                                     36,451              33,900               288,018
    Inventory                                                2,915               2,495                 9,110
    Acquired technology                                         --                  --                40,000
    Prepaid expenses and other current assets                5,543               3,222                17,762
    Security deposits                                        3,126                  --                    --
    Accounts payable                                            --                  --               175,916
    Accrued expenses and other
     current liabilities                                   (59,000)             70,797                (5,526)
                                                         ---------           ---------           -----------

      Net cash provided by (used in) operating
       activities                                          141,004             (56,367)              (85,694)
                                                         ---------           ---------           -----------


Cash flows from investing activities:
  Purchase of property and equipment                            --              (6,987)              (81,197)
  Computer software development costs                     (143,049)           (373,948)             (419,548)
                                                         ---------           ---------           -----------

      Net cash used in investing activities               (143,049)           (380,935)             (500,745)
                                                         ---------           ---------           -----------


Net decrease in cash                                        (2,045)           (437,302)             (586,439)


Cash - beginning of year                                    12,688             449,990             1,036,429
                                                         ---------           ---------           -----------


Cash - end of year                                       $  10,643           $  12,688           $   449,990
                                                         =========           =========           ===========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                       F-6


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 and 1999

NOTE 1.  GENERAL BUSINESS DESCRIPTION/CONCENTRATION OF CREDIT RISK:

The Company develops and markets proprietary computer software to programmers,
resellers and computer users. The Company's sales are made on credit to
customers who are primarily based in the United States of America. In 2001 and
2000, sales to two customers comprised approximately 25% and 30% of the
Company's sales and approximately 8% and 13% of the Company's accounts
receivable at December 31, 2001 and 2000, respectively.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include Egan Systems, Inc. ("the Company")
and Envyr Corp., its wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.

CASH:

Cash includes all cash balances and highly liquid investments with a maturity of
three months or less. The Company maintains its cash in various bank accounts
and one stock brokerage institution which, at times, may exceed federally
insured limits. The Company has not experienced any losses in such accounts.

INVENTORY:

Inventory, which consists primarily of computer peripherals, is stated at the
lower of cost or market. Cost is determined by the first-in, first-out method.

PROPERTY AND EQUIPMENT:

Property and equipment is stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets, or in the
case of leasehold improvements, over the life of the lease, if shorter.

REVENUE RECOGNITION:

Product revenues are recognized at the time of shipment. Service revenues are
recognized as services are performed.

In October 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position
(SOP)97-2, "Software Revenue Recognition." The effective date of this SOP has
been amended by SOP 98-4 and SOP 98-9 to apply to fiscal years beginning on or
after March 15, 1999. The Company's adoption of this SOP did not have a material
effect on the Company's consolidated financial position or results of
operations.

In December 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP 98-9 "Software Revenue
Recognition, with respect to certain transactions". This statement is effective
for fiscal years beginning after March 15, 1999. The Company's adoption of this
SOP did not have a material effect on the Company's consolidated financial
position or results of operations.


                                       F-7


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.):

ADVERTISING:

Advertising costs are charged to operations when incurred. There were no
capitalized advertising costs as of December 31, 2001 and 2000 and 1999.

EARNINGS PER SHARE:

Basic net income per common share is computed based on the weighted average
number of outstanding common shares. The number of shares used in the
computation of basic net income per common share were 19,646,652, 19,396,652 and
18,646,652 in 2001, 2000 and 1999, respectively. Fully diluted net income per
common share is computed based on the weighted average number of outstanding
common shares plus the shares that would be outstanding assuming conversion of
the outstanding options and warrants. In 2001 and 2000, for purposes of the
fully diluted computations, the number of shares that would be issued from the
exercise of stock options has been reduced by the number of shares that could
have been purchased from the proceeds at the average market price of the
Company's stock. The number of shares used in the computations of fully diluted
earnings per share were 19,682,542, 19,621,652 and 22,411,245 in 2001, 2000 and
1999, respectively (Note 13). Fully diluted earnings per share amounts are not
presented for 2001, 2000 and 1999 because it is anti-dilutive (Note 13).

COMPUTER SOFTWARE DEVELOPMENT COSTS:

Computer software development costs for products are capitalized subsequent to
the establishment of technological feasibility. Capitalization ceases when the
products are available for general release to customers at which time
amortization of the capitalized costs begins on a straight-line basis over the
estimated economic life of the products, which is currently estimated at two
years (Note 4).

It is reasonably possible that the remaining estimated economic life of the
products can be reduced significantly in the near term as a result of many
factors in the marketplace. As a result, the carrying amount of the capitalized
computer software costs may be reduced materially in the near term.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. Actual
results could differ from those estimates.


                                       F-8


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.):

INCOME TAXES:

The Company complies with Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes," which requires the use of the
liability method of accounting for income taxes. The liability method measures
deferred income taxes by applying enacted statutory rates in effect at the
balance sheet date to the differences between the tax base of assets and
liabilities and their reported amounts in the financial statements. The
resulting deferred tax asset or liability is adjusted to reflect changes in tax
laws as they occur.

Deferred income taxes reflect temporary differences in reporting assets and
liabilities for income tax and financial accounting purposes. These temporary
differences arise from net operating loss carryforwards (Note 12) and the
capitalization of computer software development costs (Note 4).

NOTE 3.  PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

                                                         2001             2000
                                                       --------         --------
Office furniture and equipment                         $ 51,007         $ 51,007
Computer software                                       173,494          173,494
Computer hardware                                       222,606          222,606
Leasehold improvements                                    3,975            3,975
                                                       --------         --------
                                                        451,082          451,082
Accumulated depreciation                                367,274          313,113
                                                       --------         --------
                                                       $ 83,808         $137,969
                                                       ========         ========

Depreciation expense charged to operations in each of the years ended December
31, 2001, 2000 and 1999 amounted to $54,161, $58,319 and $57,232, respectively.

NOTE 4.  COMPUTER SOFTWARE DEVELOPMENT COSTS:

Computer software development costs consist of the following:

                                                        2001             2000
                                                     ----------       ----------

Computer software development costs                  $2,488,025       $2,344,976
Accumulated amortization                              2,240,510        1,799,113
                                                     ----------       ----------

                                                     $  247,515       $  545,863
                                                     ==========       ==========

Amortization expense charged to operations in 2001, 2000 and 1999 amounted to
$441,397, $631,115 and $329,578, respectively.


                                       F-9


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999

NOTE 5.  ACQUIRED TECHNOLOGY:

In 1999 and 1998, the company purchased rights for the use of certain software
to be utilized in the Company's year 2000 assessment and remediation services.
Certain of these software costs were charged in 1999 and 1998 to cost of goods
sold based on revenues from customers contracting with the company for the use
of the technology.

At December 31, 1999, the Company wrote off the remaining costs approximately
$1,107,000 based on its assessment of the software's net realizable value at
that time. However, the Company is attempting to negotiate with the software
vendor to apply these costs to other software with application to the Company's
products and services. If the Company is ultimately successful in its
negotiations and is able to apply the costs to new software, the Company will
recognize income in the future period to the extent of the applicable credits.

NOTE 6.  COMMITMENTS AND CONTINGENCIES:

OPERATING LEASES:

The Company leases its office and warehouse facility under a noncancellable
operating lease expiring in December 2002. Minimum future annual rental payments
under this lease for the year ending December 31, 2002 is approximately $27,000.
Rent expenses charged to operations in the years ended December 31, 2001, 2000
and 1999 amounted to $44,803, $54,313 and $62,711, respectively.

GOING CONCERN:

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company has
sustained substantial operating losses in recent years. In addition, the Company
has used substantial amounts of working capital in its operations. Further, as
of December 31, 2001, current liabilities exceed current assets by $182,629.

Management of the Company has taken certain steps to reduce operating expenses
and restore the Company to a positive cash flow from operations. The ability of
the Company to continue as a going concern is dependent upon the continued
success of these actions. The consolidated financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.

NOTE 7.  RESEARCH AND DEVELOPMENT COSTS:

Research and development costs are charged to operations when incurred and are
included in operating expenses. The amounts charged to operations for the years
ended December 31, 2001, 2000 and 1999 were approximately $99,000, $246,000 and
$292,000, respectively.


                                      F-10


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999


NOTE 8.  COMMON STOCK:

ISSUANCE OF COMMON STOCK:

In 1993, in order to assist the Company in raising additional capital by the
sale of the Company's common stock, a director voluntarily surrendered 1,000,000
of his shares of the Company's $.05 par value common stock to the treasury in
order to comply with certain financial requirements imposed on the Company under
the terms of the new stock sale agreement. In March 2000, since the financial
terms and conditions imposed on the Company had expired, the Company reissued
the 1,000,000 shares previously surrendered by the director. The 1,000,000
shares of the Company's $.05 par value common stock issued to this director in
2000 was not previously disclosed in the calculation of fully diluted earnings
per share. The Company has determined that had this disclosure been made it
would have had no material affect upon the calculation of basic and fully
diluted earnings per share.


NOTES RECEIVABLE - STOCK PURCHASE:

In October and December 1997 and June 1998, the Company entered into agreements
whereby it issued 20,000, 1,400,000 and 30,000 shares, respectively, of the
Company's $.05 par value common stock to certain employees of the Company for
consideration of $.25 per share or $362,500. Payment for the stock consisted of
the issuance of non- interest bearing notes receivable in the amount of $362,500
payable within 20 days of the sale by the employee of the common stock related
to these notes receivable or immediately upon the employee leaving the
employment of the Company. If the employee elects not to pay the note receivable
upon leaving the Company, then the employee must return the common stock to the
Company. The notes receivable are secured by the common stock related to these
notes receivable. The transaction has been recorded as a sale of common stock
with the notes receivable reflected as a reduction of stockholders' equity.

As of December 31, 2001, certain former employees, holding 850,000 shares of the
Company issued $.05 par value common stock, are no longer employed by the
Company. These former employees have not returned the outstanding shares to the
Company as of March 5, 2002. The Company is currently in the process of
cancelling the shares from these former employees, which were issued in exchange
for $212,500 of notes receivable, as discussed above. As of December 31, 2001,
no adjustments to the equity accounts have been made as a result of this pending
issue. The Company has determined that had this adjustment been made it would
have had no material affect upon the calculation of basic and fully diluted
earnings per share or on the Company's consolidated financial position.


                                      F-11


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999


NOTE 8. COMMON STOCK (Cont'd.):


STOCK OPTIONS/WARRANTS:

The following table provides information regarding stock option and warrant
activity for the years ended December 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                          Exercise Price Per Share
                                                      ---------------------------------
                                 Number Of Shares        Range         Weighted Average
                                 ----------------     -----------      ----------------
<S>                                 <C>               <C>   <C>                <C>
Balance - December 31, 1999         250,000           0.250-0.500              0.320

  Rescinded                         (50,000)                0.360              0.360
                                   --------           -----------        -----------

Balance - December 31, 2000         200,000           0.250-0.375              0.313

  Expired                           200,000           0.250-0.375              0.313
                                   --------           -----------        -----------

Balance - December 31, 2001              --                    --                 --
                                   ========           ===========        ===========
</TABLE>


NOTE 9.  SUPPLEMENTAL CASH FLOW INFORMATION:


CASH TRANSACTIONS:

During the years ended December 31, 2001, 2000 and 1999, the Company paid cash
in each year for interest expense in the amount of $-0-, $-0- and $338,
respectively.

During the years ended December 31, 2001, 2000 and 1999, the Company paid cash
for corporate income tax payments in each year in the amount of $425, $2,047 and
$2,753, respectively.


NOTE 10.  ACCOUNTS PAYABLE:

Accounts payable consists of the remainder of an amount due to a vendor for
acquired technology purchased (Note 5). On February 16, 2001, this vendor filed
a cause of action against the Company to collect the amount owed. On April 11,
2001, the vendor discontinued this action, without prejudice. As a result, the
vendor is not pressing the Company to pay the outstanding balance due to the
poor financial condition of the company. However, because the discontinuance was
without prejudice, the vendor has the right to reinstate the cause of action and
demand payment of the outstanding amount at any time prior to the expiration of
the statute of limitations.



                                      F-12


<PAGE>



                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999

NOTE 11.  401(k) SAVINGS PLAN:

In March 2000, the Company adopted a 401(k) savings Plan that covers all
employees of the Company. The Plan is effective March 1, 2000. Contributions to
the Plan may be made by all eligible employees up to fifteen percent of their
salary. The Company will match twenty-five percent of the employee's
contribution up to four percent of each employees base salary.

For the years ended December 31, 2001 and 2000, the Company incurred
contribution expense of approximately $6,000 and $11,000, respectively, related
to this Plan.

NOTE 12.  INCOME TAXES:

The components of the deferred tax asset and liability are as follows:

                                                      2001             2000
                                                  -----------       -----------
                                                   Noncurrent        Noncurrent
                                                  -----------       -----------
Total deferred tax asset                          $ 2,041,000       $ 1,927,000
Total deferred tax liability                         (102,000)         (278,000)
Valuation allowance                                (1,939,000)       (1,649,000)
                                                  -----------       -----------
Net deferred tax asset (liability)                $        --       $        --
                                                  ===========       ===========

The provision for income taxes for the years ended December 31, 2001, 2000 and
1999 consists of the following:

                                                 2001        2000        1999
                                              ---------    --------    --------

Current tax expense                           $     435    $  2,047    $  1,329
Deferred tax expense                            176,000      19,000      12,000
Benefit of net operating loss carryforwards    (176,000)    (19,000)    (12,000)
                                              ---------    --------    --------
Total                                         $     435    $  2,047    $  1,329
                                              =========    ========    ========

Reconciliations of the differences between income taxes computed at Federal
statutory rates and consolidated provisions for income taxes are as follows:

                                                      2001       2000       1999
                                                      ----     ------     ------

Income taxes computed at Federal statutory
 tax rate                                             $ --     $   --     $   --
Income tax benefit of capitalized cost1s
 deducted for tax purposes                              --         --         --
Surtax exemption                                        --         --         --
State tax provisions                                   435      2,047      1,329
Benefit of operating loss carryforwards                 --         --         --
                                                      ----     ------     ------
Provision for income taxes                            $435     $2,047     $1,329
                                                      ====     ======     ======

As of December 31, 2001, the Company has a net operating loss carryforward
available for Federal and State income tax purposes in the amount of
approximately $5,100,000, expiring from 2002 through 2021.


                                      F-13


<PAGE>


                        EGAN SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999


NOTE 13. COMPUTATION OF EARNINGS PER SHARE:

The following data show the amounts used in computing earnings per share and the
effect on loss and the weighted average number of shares of dilutive potential
common stock.

                                        2001            2000           1999
                                    ------------    ------------   ------------

Loss available to common
 stockholders used in basic EPS     $   (343,589)   $   (856,215)  $   (997,784)
                                    ============    ============   ============

Weighted average number of common
 shares used in basic EPS             19,646,652      19,396,652     18,646,652

Effect of dilutive securities
  Stock options/warrants                  35,890         225,000      3,764,593
                                    ------------    ------------   ------------

Weighted average number of common
 shares and dilutive potential
 common stock used in diluted EPS     19,682,542      19,621,652     22,411,245
                                    ============    ============   ============


For 2001, 2000 and 1999, the effect of dilutive securities were not included in
computing EPS because their effects are anti-dilutive.


                                      F-14